february 2018 • nyse: inn · fye 2016 ebitda margin (1) top tier hotel ebitda margin 12 (1) based...
Post on 06-Jul-2020
0 Views
Preview:
TRANSCRIPT
Investor PresentationFebruary 2018 • NYSE: INN
Forward-Looking Statements
2
We make forward-looking statements in this presentation that are subject to risks and uncertainties. These forward-
looking statements include information about possible or assumed future results of our business, financial condition,
liquidity, results of operations, plans, and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,”
“plan,” “continue,” “intend,” “should,” “may,” or similar expressions, we intend to identify forward-looking statements.
Statements regarding the following subjects, among others, may be forward-looking by their nature:
• our ability to increase our dividend per share of common stock;
• the state of the U.S. economy generally or in specific geographic regions in which we operate, and the effect of
general economic conditions on the lodging industry and our business in particular;
• market trends in our industry, interest rates, real estate values and the capital markets;
• our business and investment strategy and, particularly, our ability to identify and complete hotel acquisitions and
dispositions;
• our projected operating results;
• actions and initiatives of the U.S. government and changes to U.S. government policies and the execution and
impact of such actions, initiatives and policies;
• our ability to manage our relationships with our management companies and franchisors;
• our ability to maintain our existing and future financing arrangements;
• changes in the value of our properties;
• the impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar
matters;
• our ability to satisfy the requirements for qualification as a REIT under the U.S. Tax Code;
• our ability to repay or refinance our indebtedness as it matures or becomes callable by lenders;
• the availability of qualified personnel;
• our ability to make distributions to our stockholders in the future;
• the general volatility of the market price of our securities; and
• the degree and nature of our competition.
Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into
account information currently available to us. You should not place undue reliance on these forward-looking statements.
These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which
are known to us. These factors are discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2016, and in other documents we have filed with the Securities and Exchange Commission. If a
change occurs, our business, financial condition, liquidity and results of operations may vary materially from those
expressed in our forward-looking statements. Any forward-looking statement is effective only as of the date on which it is
made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may
affect us. Except as required by law we are not obligated to, and do not intend to, publicly update or revise any forward-
looking statements, whether as a result of new information, future events or otherwise.
Additionally, this presentation contains certain unaudited historical and pro forma information and metrics which are based
or calculated from historical data that is maintained or produced by the Company or third parties. This presentation contain
statistics and other data that may have been obtained from, or compiled from, information made available by third-parties.
Investment Thesis
3
Focused and efficient operating model
Best in-class operators and unique revenue management platform
Targeted capital allocation through external growth and capital recycling
Conservative and prudently crafted balance sheet
Broad geographic diversification
99%
70%
-60%
0%
60%
120%
180%
Oct-2012 Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017
5-Year Total Shareholder Return (5)
Summit SNL U.S.REIT Hotel Index
Company Overview
4
(1) Based on hotels and guestrooms owned as of December 31, 2017. (5) Based on financial data and Summit’s diluted share count as of September 30, 2017, and Summit’s closing share(2) Based on the most recent renovation date weighted by guestroom count as of September 30, 2017. price as of December 31, 2017.(3) Based on pro forma financial data for the trailing twelve months ended September 30, 2017. (6) Based on pro forma hotel EBITDA for the trailing twelve months ended September 30, 2017.(4) Based on reported financial data for the trailing twelve months ended December 31, 2016.
Leading publicly-traded REIT focused on owning premium-branded hotels with efficient operating models
Corporate Overview
Headquarters: Austin, Texas
Ticker Symbol: NYSE: INN
Hotels (1): 83 hotels
Guestrooms (1): 12,242 keys
States (1): 26 states
Markets (1): 38 MSAs
Avg. Effective Age (2): 3.2 years
Financial Overview
RevPAR (1,3): $116
Hotel EBITDA per Key (1,3): $17,100
Adjusted FFO per share (4): $1.41
Total Enterprise Value (TEV) (5): $2.6 B
Market Capitalization (5): $1.6 B
Total Debt / TEV (5): 29.5 %
Total Debt + Pref. / TEV (5): 41.6 %
Dividend Yield (5): 4.5 %
Premium Franchisors (1,6)
Marriott International: 49.5 %
Hilton Worldwide: 24.8 %
Hyatt Hotel Corp: 18.4 %
IHG: 7.5 %
Other: 0.3 %
Top Markets (1,6)
New Orleans, LA: 6.7 %
Atlanta, GA: 6.4 %
San Francisco, CA: 6.2 %
Nashville, TN: 6.0 %
Minneapolis, MN: 4.8 %
Phoenix, AZ: 4.8 %
Miami, FL: 4.2 %
Baltimore, MD: 4.0 %
Dallas-Fort Worth, TX: 3.9 %
Chicago, IL: 3.9 %
Executive Background
Daniel P. Hansen
Chairman, President
& Chief Executive Officer
Prior to joining Summit, Mr. Hansen spent 11 years with Merrill Lynch in various leadership positions,
culminating as a Vice President and Regional Sales Manager in the Texas Mid-South Region. He served
previously as the President and Chief Financial Officer of the Company’s predecessor, Summit Hotel
Properties, LLC, after prior roles as Chief Development Officer and Vice President of Investor Relations.
Mr. Hansen holds a B.A. in Economics from South Dakota State University and serves on various boards
and advisory councils for the lodging industry and hotel brands.
Craig J. Aniszewski
Executive Vice President
& Chief Operating Officer
Prior to joining Summit, Mr. Aniszewski spent 13 years with Marriott International, Inc. (NYSE: MAR),
holding sales and operations positions in both select-service and full-service convention and resort hotels.
Mr. Aniszewski joined The Summit Group in January 1997 as Vice President of Operations and
Development. Mr. Aniszewski then served as Executive Vice President and Chief Operating Officer
overseeing the 1,800 employee management company and was responsible for all facets of owning and
operating US hotels in 19 states.
Greg A. Dowell
Executive Vice President
& Chief Financial Officer
Prior to joining Summit, Mr. Dowell held the position of Senior Executive Vice President and Chief
Operating Officer at American Campus Communities (NYSE: ACC). During his 13-year tenure, Mr. Dowell
managed all aspects of operations, facilities management, human resources, information technology and
various aspects of accounting and systems development. He played a key role in the development of
ACC’s specialized operating platform which facilitated American Campus Communities becoming the first
student housing REIT to be publicly traded in 2004. Prior to joining ACC, Mr. Dowell spent ten years in
progressive capacities with Century Development.
Jonathan P. Stanner
Executive Vice President
& Chief Investment Officer
Prior to joining Summit, Mr. Stanner was Chief Executive Officer at Strategic Hotels & Resorts. In this
role, Mr. Stanner was responsible for capital market transactions, corporate financial planning and
analysis. Before serving as Chief Executive Officer, Mr. Stanner held various senior positions with
Strategic Hotels, including Director of Corporate Finance, and as Senior Vice President - Capital Markets,
Acquisitions, and Treasurer, and Chief Financial Officer. Prior to his time at Strategic Hotels, Mr. Stanner
was an investment banking analyst for Banc of America Securities. Mr. Stanner holds both a B.S. in
Management and an MBA from the Krannert School of Management at Purdue University.
Experienced Leadership Driving Success
5
Diversified Portfolio
6
(1) Based on hotel EBITDA as of September 30, 2017, for the hotels owned as of December 31, 2017.
No single market contributes more than 7% to our portfolio hotel EBITDA, and
no single hotel contributes more than 4% to our portfolio hotel EBITDA (1)
6%
7%
6%
6%
5%
5%
4%4%
4%
3%
3%
3%
3%
2%
2%
2%
2%
2%
2%
1%2%
1%
1%1%
1%
1%
1%
2%
1%
1%
1%
2%
Minneapolis, MN
San Francisco, CA
Nashville, TN
Atlanta, GA
New Orleans, LA
2%
Phoenix, AZ
2%
4%
2%
2%
1%
Premium StandardsConsistency of exceptional
service, valued amenities,
and attractive design
result in a quality guest
experience
Global BrandsProvides access to over
268 million enrolled loyalty
members and nearly 50%
of room nights
Reservation SystemsGlobal booking systems
enable guests to easily
find and reserve
accommodations
Brand SegmentationFranchise partners operate a
diverse portfolio across multiple
chain scales
Customer LoyaltyCustomer loyalty
programs drive
recurring visits
We Believe in the Value of Loyalty
7
(1) Based on JD Power and Associates 2017 North America Hotel Guest Satisfaction Index Study.(2) Based on total number of hotels as of December 31, 2017.
Brand loyalty and distribution drive guest behavior
Brands Guests Trust
JD Power and Associates
Upscale Segment
Guest Satisfaction Rankings (1)
Brand Ranking Hotel Count
Over 56% of our portfolio is concentrated in brands
that rank in the top tier for guest satisfaction. (2)
6
16
15
9#1
#4
#3
#5
1#6
Evolving Guest Preference
8
From dark and stuffy
Hyatt Place Chicago Downtown-The LoopFull-Service Product
to high-quality efficient
menu & bar
From underutilized, costly amenities
to modern functionality
From full-service restaurant
to modern, guest-focused offerings
Guest preferences continue to shift toward newer, cleaner,
and more functional hotels that offer authentic experiences
Creating Value Through “Summitization”
9
Revenue and asset management expertise driven by nearly seven decades
of combined experience at Summit and an average of over 25 years in the industry
• Utilization of in-house Corporate Revenue Managers
• Consistent on-site presence and collaboration with local management
• Industry benchmarking and data analysis
• Intensive asset management process provides better oversight and accountability of management companies
• Exhaustive due diligence approach facilitates value creation
• Business intelligence tools facilitate real-time data analytics
• Data analytics used to implement revenue and asset management strategies designed to maximize hotel profitability
• Flexible and favorable management terms
• Utilization of eleven independent management companies
• Use of independent platforms eliminates conflicts of interest
Upscale Outperformance
10
(1) Based on Smith Travel Research Quarterly & Monthly Hotel Review for the applicable years.
An enhanced guest experience results in outperformance of the Upscale
segment and a continuing shift in guest preference to Upscale hotels
STR Upscale RevPAR (1) STR Upper-Upscale RevPAR (1)
$70
$102
$65
$85
$105
2000 2016
$113
$133
$105
$120
$135
2000 2016
+46% +18%
Track Record of Outperformance
11
(1) Based on Smith Travel Research Lodging Review and as reported pro forma RevPAR growth for the applicable years.
Pro forma portfolio RevPAR growth outperformance of the the STR Upscale RevPAR
growth benchmark by an average margin of 186 basis points every year for the past five years
RevPAR Performance: Summit Pro Forma Portfolio vs. STR Upscale (1)
9.7%
5.7%
10.9%
7.3%
3.8%
6.7%
5.3%
8.4%
5.6%
2.1%
7.5%
5.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2012 2013 2014 2015 2016
Summit Pro Forma STR Upscale Summit Pro Forma Average STR Upscale Average
186 bps
FYE 2016 EBITDA Margin (1)
Top Tier Hotel EBITDA Margin
12
(1) Based on data reported as of December 31, 2016, from each company’s Form 10-K. “Hotel EBITDA” is defined as total hotel revenues less hotel operating expenses, which include real estate taxes, insurance, and other expenses as applicable.
Excludes Park Hotels & Resorts (PK).
High-quality hotels with efficient operating models
and lower cost structures continue to drive superior margins
37.6%36.9%
30.3%
28.0%
30.0%
32.0%
34.0%
36.0%
38.0%
40.0%
Summit Select-Service Avg Full-Service Avg
+660
bps
+70
bps
Managing Through Supply Growth
(1) Data represents hotel performance for the trailing twelve months ended September 30, 2014.(2) Data represents hotel performance for the trailing twelve months ended September 30, 2017.(3) Market RevPAR data represents the downtown, upper-priced hotel submarket for Austin, Texas, for the year ended December 31, 2014 and 2016, respectively.
13
Sep 2014 (1) Sep 2017 (2) CAGR
Our RevPAR: $150 $161 2.4 %
Comp RevPAR: $131 $134 0.9 %
Market RevPAR (3): $178 $180 0.6 %
Total Revenue: $12.4 million $13.2 million 2.2 %
Hotel EBITDA: $ 5.1 million $ 5.7 million 4.0 %
Hotel EBITDA Margin: 41.0 % 43.2 %
EBITDA Yield on Cost: 9.5 % 10.1 %
Guestroom Supply: 31,204 rooms 37,885 rooms 6.7 %
Hampton Inn & Suites – Austin, TX
• Acquired the hotel in September 2014
• Austin CBD supply versus overall market has
increased 6.7% since the hotel was acquired
Growth Accomplishments:
• Invested nearly $3.5 million in guestroom and public
space enhancements
• Restructured management agreement resulting in
$0.2 million of annual savings and 125 basis points of
EBITDA margin expansion
• Implemented revenue and asset management
strategies that increased RevPAR index to 120% and
drove overall EBITDA margin expansion of nearly
220 basis points
• The hotel currently generates an EBITDA yield of
over 10%
$104.34
$139.85
$178.09
20%
24%
28%
32%
36%
40%
$0
$40
$80
$120
$160
$200
Acquisition Post-Conversion FYE 2016
Ho
tel E
BIT
DA
Mar
gin
Rev
PA
R
RevPAR Hotel EBITDA Margin
Brand Conversion
14
(1) Based on actual performance for the year, ended December 31, 2013.(2) Based on actual performance for the year ended December 31 2014..(3) Represents a post-renovation capitalization rate for the year ended December 31, 2014.(4) Based on actual performance for the year ended December 31, 2016, capitalized at an 8.0% capitalization rate.
Unique opportunity to create significant value by converting to a stronger and more valuable brand
DoubleTree by Hilton San Francisco Airport North
Acquisition (1) Post-Conversion (2) FYE 2016
Purchase Price $39.1 million $43.6 million $ 59.5 million (4)
Price Per Key $ 186,000 $ 207,400 $ 283,200
Capitalization Rate 5.6% 6.7% (3) 8.0%
RevPAR $ 104 $ 140 $ 178
Hotel EBITDA Margin 25.7 % 31.9 % 33.7 %
71% RevPAR growth796 bps margin growth
Strategic Renovation
15
(1) Based on actual performance for the year, ended December 31, 2013.(2) Based on actual performance for the year ended December 31 2014..(3) Represents a post-renovation capitalization rate for the year ended December 31, 2014.(4) Based on actual performance for the year ended December 31, 2016, capitalized at an 8.0% capitalization rate
Reconfigured public spaces and guestrooms to drive RevPAR increases of 38% as
compared to the Orlando MSA RevPAR increase of only 22%
Upside from Renovation – Hyatt Place Orlando, FL (Universal Studios & Convention Center) (1)
$79.67
$95.70
$109.59
25%
28%
31%
34%
37%
40%
$0
$25
$50
$75
$100
$125
Pre-Renovation Post-Renovation FYE 2016
Ho
tel E
BIT
DA
Mar
gin
Rev
PA
R
RevPAR Hotel EBITDA Margin
Pre-Renovation (1) Post-Renovation (2) FYE 2016
Purchase Price $24.1 million $27.6 million $ 50.4 million (4)
Price Per Key $ 80,300 $ 91,900 $ 168,000
Capitalization Rate 9.6% 12.4% (3) 8.0%
RevPAR $ 80 $ 96 $ 110
Hotel EBITDA Margin 29.2 % 35.2 % 36.1 %
38% RevPAR growth691 bps margin growth
Capturing Value
16
(1) Based on the 2017E SNL Mean EBITDA Estimate from SNL Financial as of October 31, 2017, and the Company’s total enterprise value as of October 31, 2017.(2) Represents 2017E forecasted performance as of September 30, 2017.
Converted six two-bedroom suites and a fitness center into 13 guestrooms
and repurposed a vacant outbuilding into a new fitness center
Before – 1 Two-Bedroom Suites After – 1 Studio and 1 Standard Room
Guestroom Conversion – Hyatt House Miami, Florida
Implied Value Creation
Miami Hyatt House Hotel EBITDA per Key (2) $16,400
Implied INN 2017E EBITDA Multiple (1) 15.5x
Implied Value per Key $242,700
Guestrooms Added 7 rooms
Implied Value Creation $1,698,900
Return on Investment
Miami Hyatt House Hotel EBITDA per Key (2) $16,400
Renovation Cost per Key $99,600
Implied Cash-on-Cash Return 16.5%
Capital Allocation Strategy
17
Acquisitions
• Locations in “Markets That Matter” with favorable supply/demand
dynamics and multiple demand generators
• Efficient operating models
• Value-add opportunities (i.e. property renovations, brand conversions,
management changes)
Dispositions
• Identify markets with unfavorable supply/demand dynamics
• Identify hotels with functional obsolescence or large capital needs that do
not meet return thresholds
• Opportunistic in response to unsolicited offers
Conservative Balance Sheet
• Target leverage of 3.5x to 4.5x Net Debt to EBITDA
• Maintain and grow sustainable dividends
• Maintain liquidity and flexibility for acquisitive growth
• Well-balanced maturity ladder spread across multiple years to limit near-
term liquidity risk
Opportunistic Development and Mezzanine Lending Activity
• Higher risk-adjusted returns
• Alternative pipeline for growth
Timeline
Sold 53 of 65 original hotels and averaged 1.6 hotel transactions per month
resulting in a $1.3 billion increase in our market capitalization over the past seven years
Note: Proceeds for both common and preferred equity are net proceeds and as such may include both issuances and redemptions within the applicable period.
18
FYE 2011
Hotels – Rooms: 70 – 7,095
Acquisitions: $50.1 million
Dispositions: N/A
Common Equity: $240.8 million
Preferred Equity: $47.9 million
FYE 2012
Hotels – Rooms: 84 – 9,019
Acquisitions: $265.4 million
Dispositions: $26.1 million
Common Equity: $106.4 million
Preferred Equity: $72.5 million
FYE 2013
Hotels – Rooms: 88 – 10,908
Acquisitions: $475.6 million
Dispositions: $50.3 million
Common Equity: $300.1 million
Preferred Equity: $81.7 million
FYE 2015
Hotels – Rooms: 87 – 11,420
Acquisitions: $237.8 million
Dispositions: $150.1 million
Common Equity: N/A
Preferred Equity: N/A
FYE 2014
Hotels – Rooms: 90 – 11,463
Acquisitions: $214.7 million
Dispositions: $19.8 million
Common Equity: N/A
Preferred Equity: N/A
FYE 2017
Hotels – Rooms: 83 – 12,242
Acquisitions: $586.0 million
Dispositions: $120.2 million
Common Equity: $163.8 million
Preferred Equity: $79.9 million
FYE 2016
Hotels – Rooms: 81 – 10,957
Acquisitions: $244.2 million
Dispositions: 147.3 million
Common Equity: $89.1 million
Preferred Equity: $22.3 million
$73
$116
50
65
80
95
110
125
Dispositions Pro formaPortfolio
RevPAR
Continuous Portfolio Transformation
19
(1) Based on the trailing twelve-month operating results prior to the sale of each of the 56 hotels sold since the Company’s IPO in February 2011.(2) Based on the pro forma trailing twelve-month operating results as of September 30, 2017, for the hotels owned as of December 31, 2017, as if each hotel had been owned by the Company since January 1, 2016.
As a result, these pro forma operating results may include data for certain hotels for periods prior to the Company’s ownership.
Continuously upgrading portfolio quality through the acquisition of hotels
with strong growth profiles while disposing of less-strategic hotels
$8,700
$17,100
$5,000
$8,000
$11,000
$14,000
$17,000
$20,000
Dispositions Pro formaPortfolio
Hotel EBITDA per Key
98
147
80
95
110
125
140
155
Dispositions Pro formaPortfolio
Average Guestrooms per Hotel
31.6%
37.5%
30%
32%
34%
36%
38%
40%
Dispositions Pro formaPortfolio
Hotel EBITDA Margin
(2)(2)
(2)
(1)
(1) (1)
(1)
+591
bps
+60%+51%
+97%
(2)
Conservative Capital Structure
20
(1) Debt balances are as of September 30, 2017. (5) SNL Financial data as of September 30, 2017. The Company’s data is as of September 30, 2017.(2) Calculated using 2017E consensus EBITDA as of October 31, 2017. (6) Based on financial data and Summit’s diluted share count as of September 30, 2017, and Summit’s closing price(3) Calculated by dividing 2017E consensus EBITDA by total debt then multiplied by the wt. avg. interest rate. as of December 31, 2017.(4) Based on 2017E S&P CapIQ Mean FFO per share estimate of $1.31 and assumes a common dividend of $0.68 per share.
Summit’s Credit Statistics and Debt Overview
Total Debt (1) $777.5 million
Total Debt / Total Enterprise Value (6) 29.5%
Net Debt / 2017E EBITDA (2) 4.1x
Weighted Average Term Debt Maturity (5) 4.1 years
Weighted Average Interest Rate (5) 3.78%
EBITDA Interest Coverage Ratio (3) 6.0x
2017E Dividend Payout Ratio (4) 52%
Summit’s Debt Maturity Schedule (1)
15%
24%
10%
15%
20%
25%
30%
Summit Lodging REIT Avg
$0 $0
$116
$47 $11
$148$150
$125
$140
$40
$0
$100
$200
$300
$400
2017 2018 2019 2020 2021 2022 2023+
Secured Non-Recourse Loans Unsecured Term Loan (5YR) Unsecured Term Loan (7YR) Unsecured Revolving Credit Facility
Percent of Total Debt Maturing Through 2019 (5)
80%
74% 73%69%
61% 60% 59% 57% 57% 54% 54% 52% 52%48%
40%35%
0%
20%
40%
60%
80%
100%
PK CHSP LHO APLE CLDT PEB RHP SHO RLJ HT XHR INN DRH HST AHP AHT
Well-Covered Dividend
21
(1) Based on the Company’s Q4 2013 annualized dividend of $0.45 per share and the current annualized dividend of $0.68 per share as of September 30, 2017.(2) SNL Financial data is based on the 2017E S&P CapIQ Mean FFO per share estimate for each individual company.(3) Sunstone Hotel Investors, Inc. (SHO) annual dividend is based on the full-year dividend and includes the special dividend paid within the year.
Strong free cash flow has allowed for multiple dividend
increases and a conservative payout ratio
Dividend Payout Ratio (2)
(3)
12.5% dividend CAGR since 2013 (1)
Over $250 million of capital returned to common shareholders since 2011
Superior Total Shareholder Return
22
(1) Based on SNL’s Total Shareholder Return (TSR) as of January 17, 2018.(2) Based on SNL’s TSR for the trailing five years ended January 17, 2018. Apple Hospitality REIT, Inc. (APLE), Ashford Hospitality Prime, Inc. (AHP), Park Hotels & Resorts (PK), and Xenia Hotels & Resorts, Inc. (XHR) have been excluded as the
companies were not publicly traded for the period represented.
143%
115%
97% 93% 93%
70%
57% 55%46%
40% 38%
14%
68%
0%
30%
60%
90%
120%
150%
RHP INN CLDT SHO PEB CHSP DRH HST LHO AHT RLJ HT
5-Year Total Shareholder Return (2)
6%
12%
0%
5%
10%
15%
INN SNL U.S. REIT Hotel
1-Year Total Shareholder Return (1)
37%
2%
0%
15%
30%
45%
INN SNL U.S. REIT Hotel
3-Year Total Shareholder Return (1)
NYSE: INN
top related