Investor Presentation. November 2014

Transcription

1 Investor Presentation November 2014

2 Investment Highlights Seasoned management team with proven track record of success Proven investment strategy focused on upscale, focused-service and compact full-service hotels Attractive platform with significant scale and high-quality portfolio Strong internal and external growth prospects, particularly brand conversions Active asset management with superior operational expertise Attractive dividend and compelling relative valuation Low levered, conservative balance sheet 2

3 Demonstrated Track Record as a Public Company RLJ has consistently met or exceeded its guidance, with more than three years of solid performance. Since going public, RLJ has: Acquired 27 properties in key high-growth markets totaling more than $1.1 billion Generated significant RevPAR growth (~30%) and Consolidated Hotel EBITDA of (~48%) (1) Recapitalized approximately $1.7 billion of mortgage debt Completed $255 million of renovations, including seven brand conversions (2) Maintained leverage level well below target of 5.0x Cumulative dividends totalling $2.675 per share and total return to shareholders of approximately 103% (3) Consistently met or exceeded RevPAR, Consolidated EBITDA, and EBITDA Margin guidance 1. Approximate growth over the three year period from fiscal 2010 to fiscal 2013 per Company financials. 2. Over the three year period from December 31, 2010, to December 31, Cumulative total return to shareholders and dividends calculated from May 10, 2011 through October 31,

4 Attractive Relative Valuation vs. Lodging REIT Peers TEV/2014E EBITDA (1) TEV/2015E EBITDA (1) 22.0x 20.0x 18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 20.3x 18.6x 18.0x 17.9x 16.5x 15.8x 15.8x 15.8x 15.8x 15.6x 14.9x 14.8x PEB BEE CLDT CHSP DRH FCH HST HT LHO RLJ SHO INN 20.0x 18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x 16.7x 16.1x 15.6x 14.7x 14.6x 14.6x 14.5x 14.2x 14.0x 13.6x 13.3x 13.1x PEB BEE CHSP LHO DRH HST FCH HT CLDT RLJ SHO INN Implied Cap Rate (2) Price per Key Valuation (3) 7% 6% 5% 4% 3% 4.8% 5.0% 5.2% 5.3% 5.6% 5.8% 5.8% 6.0% 6.1% 6.2% 6.3% 6.7% ($ in thousands) $700 $591 $600 $500 $400 $300 $569 $486 $405 $377 $375 $350 $318 $248 $244 $243 2% $200 $158 1% $100 0% PEB BEE CHSP CLDT DRH HST LHO RLJ FCH HT SHO INN $0 BEE PEB LHO CHSP HST HT DRH SHO FCH CLDT RLJ INN Source: Actual financials are based on public filings. For market capitalization purposes, fully diluted shares include shares, units, options using the treasury method and any convertible securities. Total Enterprise Value defined as Equity Market Capitalization + Debt (at share) + Preferred Stock + Minority Interest Cash., adjusted for post quarter transactions. Based on stock prices as of October 31, EBITDA estimates based on consensus data per FactSet as of October 31, Consensus NOI per FactSet and Wall Street Research. 3. Calculated as enterprise value divided by the pro rata number of rooms owned. Includes pro rata share of joint ventures. 4

5 Delivering Attractive Shareholder Total Returns Since its IPO, RLJ has delivered a total return of approximately 103% RLJ s prudent capital allocation, proactive balance sheet management and operational excellence continue to produce attractive returns to investors RLJ s strong performance and solid cash position generated meaningful returns to shareholders via cash dividends Total dividend distribution of approximately $320 million through 3Q 2014 Dividend Growth Dividend Yield (2) $1.00 $ % 3.6% 3.6% 3.5% $0.80 $0.60 $0.40 $0.60 $ % 2.0% $ % $0.00 (1) Q dividend annualized based on Q s $0.15/share. 2. Dividend yield based on share price as of year end for each respective period. 0.0% (2)

6 Attractive Relative Total Returns Absolute and Relative Performance vs. Peers Stock Price as of Relative Relative Ticker 5/10/ /31/2014 Total Returns to RMZ (%) to RLJ (%) RMZ 46.3% -- (57.2%) Public Lodging REITs CHSP $17.27 $ % 79.0% 21.9% PEB $21.31 $ % 71.0% 13.8% RLJ $18.00 $ % 57.2% -- BEE $6.87 $ % 40.8% (16.4%) CLDT $17.07 $ % 33.7% (23.4%) FCH $6.39 $ % 23.1% (34.0%) LHO $27.88 $ % 10.1% (47.1%) AHT $12.93 $ % 6.5% (50.6%) SHO $10.26 $ % 5.7% (51.5%) HST $17.48 $ % (2.3%) (59.4%) DRH $11.29 $ % (3.2%) (60.4%) HT $6.08 $ % (5.6%) (62.8%) INN $11.21 $ % (23.4%) (80.6%) Peer Average 65.9% 19.6% (37.5%) Source: FactSet/SNL as of October 31,

7 Experienced Management with Proven Track Record Deep and experienced senior management team that has worked together for over ten years and has over 150 years of combined lodging and real estate experience Strong platform with significant expertise in acquisitions, asset management and portfolio management Completed approximately $7 billion of acquisitions and dispositions since inception Robert L. Johnson Executive Chairman Thomas J. Baltimore, Jr. President and Chief Executive Officer Ross Bierken Chief Investment Officer Kate Henriksen SVP, Investment & Portfolio Analysis Howard Isaacson SVP, Asset Management Carl Mayfield SVP, Design & Construction Frederick McKalip SVP and General Counsel Leslie Hale Chief Financial Officer 7

8 Proven Investment Strategy Create shareholder value through prudent capital investments and aggressive asset management Investment Thesis Acquire premium branded focused-service and compact fullservice hotels with Marriott, Hilton and Hyatt flags Courtyard by Marriott, Hilton Garden Inn, Hyatt Place, Marriott and Embassy Suites Emphasis on urban markets with high barriers-to-entry and multiple demand generators Advantages of Focused-Service / Compact Full- Service Strategy RevPAR comparable to traditional full-service hotels with more efficient operating model Less square footage, fewer food and beverage outlets, limited meeting space and majority of revenue from rooms Higher margins / higher return on investment 8

9 Q and Other Recent Highlights Operational Pro forma RevPAR increased 9.6% year-over-year Pro forma Hotel EBITDA margin increased 201 basis points to 36.8% (1) Pro forma Consolidated Hotel EBITDA increased 16.0% to $109.4 million (1) Capital Allocation Acquired two hotels in attractive high-growth markets for more than $125 million during the quarter Reopened Residence Inn Atlanta Midtown/Georgia Tech after a comprehensive renovation Reinvested approximately $130 million from 15 non-strategic hotels sold in 2013 and 2014 Announced third quarter dividend of $0.30 per share, representing an 36.4% increase from the prior quarter Balance Sheet Successfully completed a $143.0 million secured financing and used the proceeds to retire five mortgage loans Further staggered debt maturities and unencumbered one additional property 1. Pro forma statistics assume properties had been owned for the full comparable period; RevPAR and Hotel EBITDA Margin are reported on a comparable basis and therefore exclude non-comparable hotels. Consolidated Hotel EBITDA includes non-comparable hotels. 9

10 Significant Value Creation Extensive experience creating significant value through complex renovations / conversions Create additional revenue opportunities through increased room count and rebrandings Humble Tower Apartments -> SpringHill Suites Vantaggio Suites Cosmo -> Courtyard Residence Inn Atlanta Midtown/Georgia Tech Room count 82 / 167 after renovations Purchase price $15.6M Capex spend $17.0M All-in/key $195K Key demand Houston CBD drivers 40M sq. ft. of office space and home to several Fortune 500 companies Healthcare and oil hub Growing convention center destination Room count 150 / 166 after renovations Purchase price $29.5M Capex spend $24.0M All-in/key $322K Key demand San Francisco Tourism drivers Prime location just blocks away from Union Square and other major tourist attractions Limited supply growth Room count 78 / 90 after renovations Purchase price $5.0M Capex spend $8.0M All-in/key $144K Key demand Strong corporate presence, home to drivers several Fortune 500 companies Major convention destination Cultural and sporting events 10

11 Recent Brand Conversion Ramp Up Ramp up of recent brand conversions has driven significant RevPAR growth RevPAR growth for the five recent conversions increased 13.3% in Q over prior year Acquiring opportunistic properties is part of core investment strategy Scale of RLJ portfolio and experience of in-house design and construction team provide platform for deep conversions and renovations RevPAR (1) Cap Rate (All-In Price) (1) $160 $140 $120 $100 $80 $60 $40 $82.46 $ $59.60 $ $76.06 $97.60 $32.87 $ % 10% 8% 6% 4% 2% 3.7% 10.5% 1.9% 7.8% 4.9% 8.3% 7.6% $20 0% HGI Hollywood ES WPB HGI Pittsburgh HGI Durham -2% (1.0%) HGI Hollywood ES WPB HGI Pittsburgh HGI Durham All-In / Per Key $37.3M / $233.1K $22.8M / $117.5K $30.3M / $150.0K $14.8M / $83.6K All-In / Per Key $37.3M / $233.1K $22.8M / $117.5K $30.3M / $150.0K $14.8M / $83.6K On Acq (TTM) RevPAR and cap rate on acquisition based on trailing twelve months data. Hotel Indigo New Orleans Garden District was closed prior to RLJ s acquisition. 11

12 Increasing West Coast Presence Hyatt Portfolio Acquisition of a 10-hotel portfolio from Hyatt significantly increases RLJ s presence on the West Coast Acquired a portfolio of 10 Hyatt, Hyatt Place and Hyatt House branded hotels totaling 1,560 rooms located primarily in California Exemplifies the ability to source off-market opportunities of significant scale Expands strategic relationship with Hyatt, a highly-recognized global lodging brand Acquisition price represents a significant discount to replacement cost High quality assets with significant growth potential RevPAR more than a 13% premium to RLJ s reported 2013 portfolio RevPAR More than doubles RLJ s presence on the West Coast Generated strong double digit RevPAR growth; increased 13.4% in Q

13 Hyatt Portfolio Transaction Hyatt House Emeryville SF Bay Area 234 rooms Hyatt Market Street, the Woodlands 70 rooms Hyatt House Santa Clara 150 rooms Hyatt House Charlotte / Center City 163 rooms Hyatt House San Jose / Silicon Valley 164 rooms Hyatt Place Madison / Downtown 151 rooms 13

14 Recent Acquisitions Continue to execute investment strategy in core urban markets Acquired Hilton Cabana Miami Beach for $71.7 million at a significant discount to replacement cost The hotel s RevPAR is expected to be more than a 60% premium to RLJ s reported 2013 RevPAR (1) Acquired newly renovated Hyatt Atlanta Midtown for $49.5 million and continued to expand strategic relationship with Hyatt Acquired DoubleTree Grand Key Resort in a supply constrained coastal market for $77.0 million at a significant discount to replacement cost and recent comparable transactions Hilton Cabana Miami Beach Hyatt Atlanta Midtown DoubleTree Grand Key Resort Year built 2014 Room count 231 Purchase price $71.7M ($310K/key) Key demand Miami Beach tourism drivers Robust convention center activity Strong ties to Latin America and international firms 1. Based on underwriting of first full year of ownership (2015). Year built 1987/2013 Room count 194 Purchase price $49.5M ($255K/key) Key demand drivers Atlanta CBD Major convention destination Cultural and sporting events Year built 2000 Room count 215 Purchase price $77.0M ($358K/key) Key demand drivers Key West tourism US Navy Limited supply (Rate of Growth Ordinance) 14

15 Active Capital Recycling Program Disciplined disposition process sold 15 assets for approximately $130M based on operating performance, market concentration, and pending capital requirements (1) $ $ $75.00 $50.00 $25.00 $ % 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% RevPAR Comparison $71.56 Disposed Assets 33% EBITDA Margin Comparison 30.5% 400bps $ RLJ Portfolio 34.5% ADR Comparison EBITDA / Key Comparison 0.0% $0 Disposed Assets RLJ Portfolio Disposed Assets RLJ Portfolio 1. RLJ Portfolio metrics based on December 31, 2013, as reported, and excludes the Fairfield Inn & Suites Memphis which was sold during Disposition assets metrics based on 14 hotels. 15 $ $ $ $75.00 $50.00 $25.00 $0.00 $17,500 $15,000 $12,500 $10,000 $7,500 $5,000 $2,500 $ Disposed Assets $9,754 26% 36% $ RLJ Portfolio $15,273

16 Strong Balance Sheet Limited Near Term Debt Maturities RLJ continues to strengthen its balance sheet by increasing the number of unencumbered assets, reducing interest rates, and staggering debt maturities Unencumbered asset pool of 117 assets, representing more than 70% of 2013 Pro forma Consolidated Hotel EBITDA As of September 30, 2014, RLJ s weighted average interest rate was 3.20% (1) ($ in millions) $700 $600 $500 $400 $300 $200 $100 $0 $ assets Debt Maturity Schedule (As of September 30, 2014) (2) 1. Pro forma for recent $143M refinancing and reflects executed interest rate hedges on $50M of the $143M. 2. Pro forma for recent $143M refinancing. Includes all extension options. 16 $ assets $225 $400 $400 First Mortgage 5-Yr Unsecured 7-Yr Unsecured $ assets $150 $ assets

17 Significant Cash From Operations RLJ s portfolio generates significant cash from operations to fund acquisitions, value-add renovations, and dividends Since going public, RLJ has conducted only two follow-on offerings with net proceeds of approximately $560 million Dividends (1) Free Cash Flow (2) Per Share $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.60 ($41M) $0.70 ($75M) $0.86 ($106M) $1.04 ($135ME) Free Cash Flow $70 $60 $50 $40 $30 $20 $10 22% $31M 12% $23M $63M 26% 30% 25% 20% 15% 10% 5% FCF as a % of Adjusted FFO $ E % of AFFO net of FF&E 37% 51% 51% N/A Dividend per share for 2011 has been annualized based on Q s $0.15/share dividend, corresponding dividend paid is based on $ dividend per share based on estimate free cash flow adjusted to reflect annualized $0.60 dividend per share. Free cash flow is adjusted funds from operations less principal payment, capital expenditures and dividends. 17

18 Guiding Principles Continue to execute proven investment strategies Drive operating performance Increase RevPAR premiums and operating margins through aggressive asset management and asset repositioning Prudent capital allocation Continue to enhance portfolio quality through selective acquisitions bias towards coastal and major urban markets Pursue off-market and limited-bid opportunities to acquire assets at attractive pricing outsized IRRs and discount to replacement cost Low leverage balance sheet Maintain a conservative balance sheet with a long term goal of achieving investment grade 18

19 Company Overview

20 Superior Focused-Service / Compact Full-Service Model Target premium branded focused-service and compact full-service hotels Strong Loyalty Programs J.D. Power & Associates 2014 North American Hotel Guest Satisfaction Guest Satisfaction Ranking Among Rank Brand Upper Extended Stay Segment Worldwide Reservation Systems Effective Brand Segmentation Upscale Segment Strong Customer Awareness Global Distribution Midscale Segment Upper Upscale Segment

21 Geographic Diversification and Strong Market Presence RLJ owns 150 properties, 148 hotels with approximately 23,300 rooms and two planned hotel conversions located in 21 states and the District of Columbia Approximately 98% of the portfolio is Marriott, Hilton or Hyatt branded (1) RLJ s top 50 hotels represents approximately 65% of the Company s Consolidated Hotel EBITDA (2) Portfolio Diversification Geographic Diversification 52% of EBITDA from Top 6 Markets (2) Midwest Northeast 16% 12% 14% 8% 9% 9% 8% 6% 6% West South HI Note: Pro forma for recent acquisitions. 1. Based on room count. 2. Reflects percentage of Pro forma Consolidated Hotel EBITDA for 148 hotels as of December 31, Pro forma includes results from prior ownership, as if all hotels had been owned since January 1, % 0% NYC Austin Chicago Denver DC Houston

22 Strong Platform with Significant Scale RLJ is the 2nd largest lodging REIT and the largest REIT in the focused-service category (1) ($ in millions) $1,331 $500 Adjusted Corporate EBITDA (TTM as of June 30, 2014) (2) $400 $333 $327 $333 $300 $276 $234 $220 $216 $200 $100 $185 $137 $149 $111 $63 $0 Host Ashford LaSalle Sunstone Strategic DiamondRock FelCor Pebblebrook Chesapeake RLJ Hersha Summit Chatham Source: Company filings. Primarily Full-Service 1. Based on Adjusted Corporate EBITDA over the trailing twelve months as of June 30, Peer data has been further adjusted to add back non-cash share compensation for comparability purposes. Primarily Focused-Service 22

23 Significant Growth Potential

24 Existing Portfolio Positioned for Outsized Growth Strong growth embedded within existing portfolio Portfolio Mix Change Acquired 51 assets for a total purchase price of approximately $2.2 billion over the past four years in core urban markets New York City, Washington D.C., Los Angeles, Boston, Houston, San Francisco Bay Area, and Hawaii Capital Investments Approximately $255 million was invested from 2011 through 2013 to primarily enhance 24 hotels acquired in 2010/2011; in aggregate, 118 hotels were renovated Seven premium-brand conversions were completed Returning to Peak Prior peak EBITDA margin still not reached for the samestore portfolio of 78 hotels in 2013 Hotel EBITDA margin growth of approximately 85 basis points needed in order to reach prior peak levels 24

25 Superior Asset Management Program RLJ has a proven asset management platform that supports investment efforts In-house operational expertise strengthens investment underwriting process Asset management expertise promotes effective utilization of capital Franchise requirements Asset preservation and life safety monitoring Revenue and efficiency enhancement Aggressive Asset Management Program Budgeting Daily Revenue Monitoring Monthly Reporting with Reforecasts Identification of ROI Opportunities Benchmarking Frequent Property Reviews Approval Rights on Critical Staffing Decisions 25

26 Value Add Complex Renovations In-house design and construction team with extensive experience navigating complex renovations Dedicated design and construction team performs thorough due diligence prior to any asset purchase Create additional revenue opportunities through increased room count or other value add upgrades Winner of 6 renovation awards in the last 2 years Brand Conversions Location Status Red Roof Inn Fairfield Inn & Suites DC Complete Wyndham Hilton New York Complete Wyndham Hilton Garden Inn Pittsburgh Complete Wyndham Hilton Garden Inn Durham Complete Crowne Plaza Embassy Suites West Palm Beach Complete Hollywood Heights* Hilton Garden Inn Los Angeles Complete Garden District* Indigo New Orleans Complete Vantaggio Suites* Courtyard by Marriott San Francisco Early-2015 Apartment Building SpringHill Suites Houston Early Renovation Award 2012 Best Conversion Award 2011 Best Conversion Award 2011 Best Conversion Award 2011 Best Conversion Award 2011 Design Excellence Award Hotel Indigo New Orleans Garden District * Independent hotels. Hilton Garden Inn Los Angeles / Hollywood Hilton Garden Inn Pittsburgh University Place Hilton Garden Inn Raleigh / Durham Research Triangle Park Embassy Suites West Palm Beach - Central Fairfield Inn & Suites, DC / Downtown 26

27 Attractive Focused-Service Acquisition Environment More targets with less competition: RLJ benefits from both a large universe of acquisition targets and a limited universe of competing public buyers Domestic System-Wide Hotels by Brand 2,000 1,896 Premium Branded Focused-Service 5,773 Hotels Upper Upscale Full-Service 1,238 Hotels 1,800 1,600 1,400 1,200 ~4.7x > 1, Source: Smith Travel Research, September Public REITs Targeting Category: RLJ Lodging Trust Chatham Lodging Trust Hersha Hospitality Trust Summit Hotel Properties Public REITs Targeting Category: Ashford Hospitality Trust Chesapeake Lodging Trust DiamondRock Hospitality FelCor Lodging Trust Host Hotels & Resorts LaSalle Hotel Properties Pebblebrook Hotel Trust Strategic Hotels & Resorts Sunstone Hotel Investors 27

28 Disciplined Investment Strategy Proven track record of completing attractive acquisitions Focus on limited bid and off-market transactions Leverage relationships with developers, owners, managers and lenders to access deals Strong balance sheet provides a significant advantage Continue to pursue selective high quality focused-service and compact full-service hotels in Top 30 markets Recently acquired a hotel in Miami Beach for $71.7 million, a hotel in Atlanta for $49.5 million, and a hotel in Key West for $77.0 million ($ in billions) $3.0 Domestic Acquisitions (January 2010 October 2014 YTD) (1) $2.5 $2.3 $2.2 $2.0 $1.5 $1.0 $0.5 $1.9 $1.9 $1.8 $1.6 $1.5 $1.2 $1.1 $1.1 $1.0 $0.6 $0.4 $0.0 PEB RLJ HST LHO SHO CHSP DRH AHT/AHP HT CLDT INN BEE FCH 1. Company filings. Reflects total purchase price of announced domestic hotel acquisitions from January 1, 2010 to October 31, 2014; includes pro rata share of joint venture acquisitions. 28

29 Forward-Looking Statements This presentation contains certain statements, other than purely historical information, including estimates, projections, statements relating to the Company s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the use of the words believe, project, expect, anticipate, estimate, plan, may, will, will continue, intend, should, may or similar expressions. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and the Company s actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the current global economic uncertainty, increased direct competition, changes in government regulations or accounting rules, changes in local, national and global real estate conditions, declines in the lodging industry, seasonality of the lodging industry, risks related to natural disasters, such as earthquakes and hurricanes, hostilities, including future terrorist attacks or fear of hostilities that affect travel, the Company s ability to obtain lines of credit or permanent financing on satisfactory terms, changes in interest rates, access to capital through offerings of the Company s common and preferred shares of beneficial interest, or debt, the Company s ability to identify suitable acquisitions, the Company s abilityto close on identified acquisitions and integrate those businesses and inaccuracies of the Company s accounting estimates. Given these uncertainties, undue reliance should not be placed on such statements. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future eventsor otherwise. The Company cautions investors not to place undue reliance on these forward-looking statements and urge investors to carefully review the disclosures the Company makes concerning risks and uncertainties in the sections entitled Risk Factors, Forward-Looking Statements, and Management s Discussion and Analysis of Financial Condition and Results of Operations in the Company s Annual Report, as well as risks, uncertainties and other factors discussed in other documents filed by the Company with the SEC. 29

30 Significant Growth Potential