Condor Hospitality Trust Reports Fourth Quarter and Fiscal Year 2018 Results

Condor Hospitality Trust, Inc. (NYSE American:CDOR) (the “Company”) today announced results for the fourth quarter ended December 31, 2018.

FOURTH QUARTER AND FISCAL YEAR 2018 RELEASE FINANCIAL HIGHLIGHTS

• Revenue of $65.1 million in Fiscal Year 2018, a 17.3% Increase Over $55.5 million of Revenue in Fiscal Year 2017
• Revenue of $15.1 million, Comprised of $14.9 million from New Investment Platform Hotels and $0.2 million from Legacy Hotels, a 1% Decrease to Revenue of $15.3 million, Comprised of $12.8 million from New Investment Platform Hotels and $2.5 million from Legacy Hotels, in Last Year’s Fourth Quarter
• Same-Store RevPAR for the New Investment Platform Hotels Increased 1.9% and 2.6% in the Fourth Quarter and Full Year 2018, Respectively
• Net Earnings Attributable to Common Shareholders of $4.8 million, or $0.40 per Diluted Share, as Compared to a Net Loss of ($9.4) million, or ($1.00) per share, in Last Fiscal Year
• Adjusted Funds from Operations Increased to $12.2 million, or $1.02 per Diluted Share, a 4.1% per share Increase from $9.8 million, or $0.98 per Diluted Share, as Compared to Last Fiscal Year
• Hotel EBITDA Increased to $27.6 million from $22.0 million, a 25.9% Increase Over Last Fiscal Year
• Adjusted EBITDAre Increased to $21.9 million from $16.2 million, a 35.7% Over Last Fiscal Year

MANAGEMENT COMMENTARY

Bill Blackham, Condor’s Chief Executive Officer, commented:

“On September 27, 2018, Condor initiated a process to evaluate strategic alternatives to enhance shareholder value. Until the conclusion of this process, Condor is suspending the issuance of earnings guidance and the holding of earnings conference calls. The Quality Inn Solomons Island remains under contract for sale and has an expected closing in the first quarter of 2019; there can be no guarantee that this planned disposition will close. This final legacy asset sale will bring the total number of legacy assets sold to 55 since Condor launched the strategic repositioning of its portfolio in 2015. The New Investment Platform continued to perform well relative to our competitive sets and our publicly traded select-service peer group in terms of RevPAR change and operating margins.”

FINANCIAL SUMMARY
At December 31, 2018, the Company’s total portfolio included 16 hotels, representing 1,967 rooms.

NEW INVESTMENT PLATFORM
At December 31, 2018, the Company’s new investment platform included 15 hotels, representing 1,908 rooms.

LEGACY PLATFORM
At December 31, 2018, the Company’s legacy platform included one hotel, representing 59 rooms.

PORTFOLIO ACTIVITY
The Company’s investment strategy is to assemble a portfolio of premium-branded, select-service hotels in the top 100 Metropolitan Statistical Areas (“MSAs”) with a particular focus on MSAs ranked between 20 to 60. Since restarting its portfolio transformation in 2015, the Company has acquired 14 high-quality select-service hotels representing 1,808 rooms in its target markets for a total purchase price of approximately $277 million. Additionally, during this time, the Company has sold 54 legacy assets for a total gross sales price of approximately $166 million.

Acquisitions
During the fourth quarter of 2018, the Company did not acquire any hotels.

Dispositions
The Company’s final legacy hotel is currently under contract for sale.

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
As of December 31, 2018, the Company had cash and cash equivalents (including restricted cash) of $9.2 million and available revolver borrowing capacity of $7.4 million. As of December 31, 2018, the Company had total outstanding long-term debt of $138 million associated with assets held for use with a weighted average maturity of 2.1 years and a weighted average interest rate of 5.15%.

During the fourth quarter of 2018, the Company did not sell any shares of common stock under the ATM program.

CAPITAL INVESTMENTS
The Company invested $2.0 million in capital improvements throughout the portfolio in the twelve months ended December 31, 2018, to upgrade its properties and maintain brand standards.

OUTLOOK AND GUIDANCE
Due to the pursuit of Strategic Alternatives, the Company has suspended guidance until further notice.

DIVIDENDS
On December 11, 2018, the Board of Directors declared a quarterly cash common stock dividend of $0.195 per share for the fourth quarter of 2018. The common stock dividend represented an annualized yield of approximately 9.7% based on the closing price of the Company’s common shares on December 12, 2018. The fourth quarter dividend was paid on January 3, 2019 to shareholders of record as of December 26, 2018.

EARNINGS CALL
Due to the pursuit of Strategic Alternatives, the Company will not be conducting a fourth quarter earnings conference call.

About Condor Hospitality Trust, Inc.
Condor Hospitality Trust, Inc. (NYSE American:CDOR) is a self-administered real estate investment trust that specializes in the investment and ownership of upper midscale and upscale, premium-branded, select-service, extended-stay, and limited-service hotels in the top 100 Metropolitan Statistical Areas (“MSAs”) with a particular focus on the top 20 to 60 MSAs. The Company currently owns 16 hotels in 8 states. Condor’s hotels are franchised by a number of the industry’s most well-regarded brand families including Hilton, Marriott, and InterContinental Hotels.

Forward-Looking Statement
Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual events, results or performance to differ from those projected presented in the forward-looking statement. These forward-looking statements are based on assumptions that management has made in light of experience in the business in which the Company operates, as well as other factors management believes to be appropriate under the circumstances. As you read and consider this release, you should understand that these statements are not guarantees of events, performance or results. They involve risks, uncertainties (some of which are beyond the Company’s control) and assumptions. Although management believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect events, performance or results and cause them to differ materially from those anticipated in the forward-looking statements. These factors include among other things, risk factors described from time to time in the Company’s filings with the Securities and Exchange Commission. The Company cautions that any forward-looking statement included in this press release is made as of the date of this press release and the Company does not undertake to update any forward-looking statement.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

Non-GAAP financial measures are measures of our historical financial performance that are different from measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We report Funds from Operations (“FFO”), Adjusted FFO (“AFFO”), Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), EBITDA for real estate (“EBITDAre”), Adjusted EBITDAre, and Hotel EBITDA as non-GAAP measures that we believe are useful to investors as key measures of our operating results and which management uses to facilitate a periodic evaluation of our operating results relative to those of our peers. Our non-GAAP measures should not be considered as an alternative to U.S. GAAP net earnings as an indication of financial performance or to U.S. GAAP cash flows from operating activities as a measure of liquidity. Additionally, these measures are not indicative of funds available to fund cash needs or our ability to make cash distributions as they have not been adjusted to consider cash requirements for capital expenditures, property acquisitions, debt service obligations, or other commitments.

FFO and AFFO

The following table reconciles net earnings (loss) to FFO and AFFO for the three months and year ended December 31, 2018 and 2017 (in thousands). All amounts presented include our portion of the results of our unconsolidated Atlanta JV.

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net earnings or loss computed in accordance with GAAP, excluding gains or losses from sales of real estate assets, impairment, and the depreciation and amortization of real estate assets. FFO is calculated both for the Company in total and as FFO attributable to common shares and common units, which is FFO reduced by preferred stock dividends. AFFO is FFO attributable to common shares and common units adjusted to exclude items we do not believe are representative of the results from our core operations, including non-cash gains or losses on derivatives and convertible debt, stock-based compensation expense, amortization of certain fees, losses on debt extinguishment, and in-kind dividends above stated rates, and cash charges for acquisition and equity transaction costs. All REITs do not calculate FFO and AFFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO and AFFO for similar REITs.

We consider FFO to be a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful indication of our performance. We believe that AFFO provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and FFO, is beneficial to an investor’s understanding of our operating performance. We present FFO and AFFO per common share and common unit because our common units are redeemable for common shares. We believe it is meaningful for the investor to understand FFO and AFFO applicable to common shares and common units.

EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA

The following table reconciles net earnings (loss) to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA for the three months and year ended December 31, 2018 and 2017 (in thousands). All amounts presented our portion of the results of our unconsolidated Atlanta JV.

We calculate EBITDA, EBITDAre, and Adjusted EBITDAre by adding back to net earnings or loss certain non-operating expenses and certain non-cash charges which are based on historical cost accounting that we believe may be of limited significance in evaluating current performance. We believe these adjustments can help eliminate the accounting effects of depreciation and amortization and financing decisions and facilitate comparisons of core operating profitability between periods. In calculating EBITDA, we add back to net earnings or loss interest expense, loss on debt extinguishment, income tax expense, and depreciation and amortization expense. NAREIT adopted EBITDAre in order to promote an industry-wide measure of REIT operating performance. We adjust EBITDA by adding back net gain/loss on disposition of assets and impairment charges to calculate EBITDAre. To calculate Adjusted EBITDAre, we adjust EBITDAre to add back acquisition and terminated transactions expense and equity transactions expense, which are cash charges. We also add back stock –based compensation expense and gain/loss on derivatives and convertible debt, which are non-cash charges. EBITDA, EBITDAre, and Adjusted EBITDAre, as presented, may not be comparable to similarly titled measures of other companies.

We believe EBITDA, EBITDAre, and Adjusted EBITDAre to be useful additional measures of our operating performance, excluding the impact of our capital structure (primarily interest expense), our asset base (primarily depreciation and amortization expense), and other items we do not believe are representative of the results from our core operations.

The Company further excludes general and administrative expenses, other non-operating income or expense, and certain hotel and property operations expenses that are not allocated to individual properties in assessing hotel performance (primarily certain general liability and other insurance costs, land lease costs, and office and banking fees) from Adjusted EBITDAre to calculate Hotel EBITDA. Hotel EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

Hotel EBITDA is intended to isolate property level operational performance over which the Company’s hotel operators have direct control. We believe Hotel EBITDA is helpful to investors as it better communicates the comparability of our hotels’ operating results for all of the Company’s hotel properties and is used by management to measure the performance of the Company’s hotels and the effectiveness of the operators of the hotels.

Same-Store Revenue and Hotel EBITDA

The following tables present our same-store revenue, Hotel EBITDA, and Hotel EBITDA margin broken down by property type for the three months and year ended December 31, 2018 and 2017 (in thousands) and reconcile these same-store measures to total revenue and Hotel EBITDA as presented above. Same-store results include all our hotels owned at December 31, 2018, with the exception of the Austin TownePlace Suites (opened on January 3, 2017) and the Summerville Home2 Suites (opened on July 18, 2017), for which prior period results are not available for all periods presented, and reflect the performance of these hotels during the entire period, regardless of our ownership during the period presented. Results for the hotels for periods prior to our ownership were provided to us by prior owners and have not been adjusted by us or audited or reviewed by our independent auditors. All amounts presented include our portion of the results of our unconsolidated Atlanta Aloft JV. Results for periods prior to the Company’s ownership have not been included in the Company’s actual consolidated financial statements and are included here only for comparison purposes.

Condor Hospitality Trust, Inc. Operating Statistics

The following tables present our same-store occupancy, ADR, and RevPAR for all our hotels owned at December 31, 2018, with the exception of the Austin TownePlace Suites (opened on January 3, 2017) and Summerville Home2 Suites (opened on July 18, 2017), for which prior period results are not available for all periods presented. Same-store occupancy, ADR, and RevPAR reflect the performance of hotels during the entire period, regardless of our ownership during the period presented. Results for the hotels for periods prior to our ownership were provided to us by prior owners and have not been adjusted by us or audited or reviewed by our independent auditors. The performance metrics for the hotel acquired through our Atlanta JV, also presented below, reflect 100% of the operating results of the property, including our interest and the interest of our partner.

The following table presents RevPAR changes quarter-over-quarter for all new investment portfolio hotels: