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Pebblebrook (PEB) Extends Term Loan Maturity, Ups Flexibility
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Pebblebrook Hotel Trust (PEB - Free Report) recently extended around $357 million of its $460 million term loan that was set to mature in October 2024 to January 2028. The move significantly boosts the lodging real estate investment trust’s (REIT) liquidity position and financial flexibility, enabling it to better capitalize on long-term growth maturities. Shares of the company witnessed a marginal loss on the Jan 5 normal trading session on the NYSE.
PEB repaid around $157.6 million of existing term loans and unsecured private placement notes. This comprised the lowering of the outstanding balance on the October 2024 term loan to $400 million from $460 million and the October 2025 term loan to $410 million from $460 million. Along with this, maturing private notes aggregating $47.6 million were paid down, with only around $43 million of debt maturing in late 2024.
Encouragingly, as a result of this refinancing, Pebblebrook has no meaningful debt maturities until October 2025. Post these debt activities, the company has roughly $2.2 billion of outstanding debt and convertible notes at a weighted average interest rate of 4.6%. Taking into account the swap agreements, around 75% of the total outstanding debt and convertible notes bear interest at fixed rates.
It may be noted that there has been no alteration in the pricing of all the company’s term loans, and it is based on a pricing grid of 140 to 245 basis points over the applicable adjusted term secured overnight financing rate (SOFR).
In addition, Pebblebrook’s strategic dispositions totaling $330.8 million in 2023 enabled it to lower its debt. The lodging REIT’s strategic allocation objectives highlight its prudent capital management practices and bode well for long-term growth. The company is focused on acquisitions and capitalizing on development activities and aims to optimize the use of its dispositions’ proceeds.
The sales reflected a combined EBITDA multiple of 20.6X and a NOI capitalization rate of 4.1%. The rate is calculated assuming a capital reserve of 4% against total property revenues based on the trailing 12-month performance before each sale completion.
Per Raymond D. Martz, co-president and chief financial officer of Pebblebrook, “We will continue to utilize proceeds from additional property sales and operating cash flow to reduce our debt, enhance our liquidity, strengthen our balance sheet, and create value through the repurchase of common and preferred shares at very significant discounts to the underlying private market value of the Company’s properties.”
Amid the recovering lodging industry fundamentals, Pebblebrook is witnessing solid operating performance across its portfolio, mainly driven by the rebound in the business transient and group business demand, which is driving the urban portfolio’s growth.
Per the company’s November operating update, the same-property Hotel revenue per available room (RevPAR) for the overall portfolio exhibited year-over-year growth of 6.4%, mainly driven by an increase in occupancy and average daily rate. This was, in turn, led by a strong performance in the urban portfolio, moderate declines in resort rates from normalizing trends and significant share gains throughout the portfolio from redevelopment investments over the last few years.
Total revenues increased around 7% year over year. Same-property Hotel EBITDA rose more than 10% due to normalization in operating expense growth.
The company is also carrying out significant repositioning and transformational investments throughout the portfolio to generate better returns. With enhanced balance sheet strength and financial flexibility, PEB remains well-positioned to capitalize on various growth opportunities and further strengthen its portfolio.
Analysts seem bullish on the Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2023 funds from operations (FFO) per share has been raised marginally over the past month.
The company’s shares have gained 19.3% in the past three months compared with the industry’s growth of 17.8%.
However, macroeconomic uncertainty and a high interest rate environment pose key concerns for the company in the near term.
The Zacks Consensus Estimate for Rexford Industrial Realty’s 2023 FFO per share is pegged at $2.18, indicating a year-over-year increase of 11.2%.
The Zacks Consensus Estimate for Stag Industrial’s 2023 FFO per share stands at $2.28, suggesting year-over-year growth of 3.2%.
The Zacks Consensus Estimate for Park Hotels & Resorts’ 2023 FFO per share is pegged at $2.03, implying a year-over-year rise of 31.8%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Pebblebrook (PEB) Extends Term Loan Maturity, Ups Flexibility
Pebblebrook Hotel Trust (PEB - Free Report) recently extended around $357 million of its $460 million term loan that was set to mature in October 2024 to January 2028. The move significantly boosts the lodging real estate investment trust’s (REIT) liquidity position and financial flexibility, enabling it to better capitalize on long-term growth maturities. Shares of the company witnessed a marginal loss on the Jan 5 normal trading session on the NYSE.
PEB repaid around $157.6 million of existing term loans and unsecured private placement notes. This comprised the lowering of the outstanding balance on the October 2024 term loan to $400 million from $460 million and the October 2025 term loan to $410 million from $460 million. Along with this, maturing private notes aggregating $47.6 million were paid down, with only around $43 million of debt maturing in late 2024.
Encouragingly, as a result of this refinancing, Pebblebrook has no meaningful debt maturities until October 2025. Post these debt activities, the company has roughly $2.2 billion of outstanding debt and convertible notes at a weighted average interest rate of 4.6%. Taking into account the swap agreements, around 75% of the total outstanding debt and convertible notes bear interest at fixed rates.
It may be noted that there has been no alteration in the pricing of all the company’s term loans, and it is based on a pricing grid of 140 to 245 basis points over the applicable adjusted term secured overnight financing rate (SOFR).
In addition, Pebblebrook’s strategic dispositions totaling $330.8 million in 2023 enabled it to lower its debt. The lodging REIT’s strategic allocation objectives highlight its prudent capital management practices and bode well for long-term growth. The company is focused on acquisitions and capitalizing on development activities and aims to optimize the use of its dispositions’ proceeds.
The sales reflected a combined EBITDA multiple of 20.6X and a NOI capitalization rate of 4.1%. The rate is calculated assuming a capital reserve of 4% against total property revenues based on the trailing 12-month performance before each sale completion.
Per Raymond D. Martz, co-president and chief financial officer of Pebblebrook, “We will continue to utilize proceeds from additional property sales and operating cash flow to reduce our debt, enhance our liquidity, strengthen our balance sheet, and create value through the repurchase of common and preferred shares at very significant discounts to the underlying private market value of the Company’s properties.”
Amid the recovering lodging industry fundamentals, Pebblebrook is witnessing solid operating performance across its portfolio, mainly driven by the rebound in the business transient and group business demand, which is driving the urban portfolio’s growth.
Per the company’s November operating update, the same-property Hotel revenue per available room (RevPAR) for the overall portfolio exhibited year-over-year growth of 6.4%, mainly driven by an increase in occupancy and average daily rate. This was, in turn, led by a strong performance in the urban portfolio, moderate declines in resort rates from normalizing trends and significant share gains throughout the portfolio from redevelopment investments over the last few years.
Total revenues increased around 7% year over year. Same-property Hotel EBITDA rose more than 10% due to normalization in operating expense growth.
The company is also carrying out significant repositioning and transformational investments throughout the portfolio to generate better returns. With enhanced balance sheet strength and financial flexibility, PEB remains well-positioned to capitalize on various growth opportunities and further strengthen its portfolio.
Analysts seem bullish on the Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2023 funds from operations (FFO) per share has been raised marginally over the past month.
The company’s shares have gained 19.3% in the past three months compared with the industry’s growth of 17.8%.
However, macroeconomic uncertainty and a high interest rate environment pose key concerns for the company in the near term.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Rexford Industrial Realty (REXR - Free Report) , Stag Industrial (STAG - Free Report) and Park Hotels & Resorts (PK - Free Report) . While PK sports a Zacks Rank #1 (Strong Buy) at present, REXR and STAG carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Rexford Industrial Realty’s 2023 FFO per share is pegged at $2.18, indicating a year-over-year increase of 11.2%.
The Zacks Consensus Estimate for Stag Industrial’s 2023 FFO per share stands at $2.28, suggesting year-over-year growth of 3.2%.
The Zacks Consensus Estimate for Park Hotels & Resorts’ 2023 FFO per share is pegged at $2.03, implying a year-over-year rise of 31.8%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.