CorePoint withholds outlook, shares 2020 asset strategy
IRVING, Texas—Real estate investment trust CorePoint Lodging withheld 2020 guidance on a call Thursday to report fourth-quarter and full-year 2019 earnings as the industry is in “unprecedented times,” said President and CEO Keith Cline.
“As we’ve all seen, over the last few weeks, there’s been a sudden and rapid deterioration in the macro lodging environment due to the actual and anticipated impact of the COVID-19 environment,” he said.
While CorePoint did not provide formal guidance, EVP and CFO Dan Swanstrom gave an idea of how the REIT expected the year to play out “in a stable environment, unlike what we’re currently experiencing.”
“For 2020 as compared to 2019, we were expecting comparable (revenue per available room) to be down 2% to down 1% for the total portfolio, and down 1% to flat for the core portfolio,” he said. “Similar to others in the industry, we expected continued headwinds from operating expense growth, including labor and wages, real estate property taxes and property insurance. We would have expected this to translate to a year-over-year decline in hotel adjusted EBITDAre of slightly below 10% for the total portfolio, and about 5% for the core portfolio.
“Clearly, the current environment is creating uncertainty, significantly affecting these prior expectations given the current lack of visibility into future operations.”
The REIT is working closely with Wyndham Hotels & Resorts on the “appropriate cost-containment and mitigation initiatives to respond to this environment, as well as (deferring) nonessential capital expenditures,” Swanstrom added.
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In March 2019, CorePoint executives outlined a plan to sell 78 non-core assets for $250 million to $260 million, which Cline said is going well.
“To date for these phase one non-core hotel sales, we’ve sold 57 hotels for gross proceeds of approximately $235 million and have an additional 15 hotels under contract for gross proceeds of approximately $57 million,” he said. “This would bring total gross proceeds for 72 of the 78 phase-one assets well above our initial total range, and then an average revenue multiple of 2.5 times and the hotel adjusted EBITDAre multiple of approximately 36 times valuations, which have been highly accretive to our trading multiple.”
While Cline said the company will “remain vigilant and aggressively (respond) to any disruption to our business from this rapidly evolving environment,” it also has plans for a phase two of its disposition program to sell 132 hotels in 2020.
“This strategy will result in a core portfolio of 105 hotels that are focused on our higher-quality and growth-potential assets that are primarily located in top 50 MSIs,” he said.
So far, four of the 132 phase-two non-core hotels have been sold “for a combined gross sales price of approximately $16 million,” he said. Twenty seven of the phase-two hotels are under contract with qualified buyers, he added.
CorePoint recorded a 8.7% decrease in RevPAR during the fourth quarter of 2019, which was driven by a 3.3% decrease in average daily rate and a 5.6% decline in occupancy, Swanstrom said.
“The $11-million year-over-year decline in adjusted EBITDAre for the fourth quarter of 2019 is primarily due to decreases in revenue, which reflect continued declines in comparable RevPAR, including headwinds following the transition of our portfolio to the Wyndham platforms earlier this year, the impact of solid hotels and weakness in the oil and gas markets,” he said.
As of press time, CorePoint’s stock was trading at $3.40 a share, down 68.2% year to date. The Baird/STR Hotel Stock Index was down 69.2% for the same period of time.