Condor Hospitality Trust Reports 2016 Second Quarter Results

BETHESDA, MD--(Marketwired - August 08, 2016) - Condor Hospitality Trust, Inc. (NASDAQ: CDOR) (the "Company") today announced results for the second quarter ended June 30, 2016.

"Significant progress in the strategic repositioning of Condor was once again achieved in the second quarter of 2016 with the completion of the Series A and B preferred stock redemption, the sale of seven legacy assets, and the negotiation of a joint venture to acquire a high-quality asset meeting the new investment strategy of the Company," said Bill Blackham, Condor's Chief Executive Officer. "With over $20 million of liquidity at quarter-end, we announced a dividend to our common shareholders for the first time since 2009. Finally, the new investment platform hotels continue to outperform our underwriting with RevPAR of $87.91 for the second quarter 2016 as compared to $79.40 for the same period 2015, representing a 10.7% increase over the same period last year," Blackham continued.

2016 Second Quarter Highlights
The Company continues to make significant progress on its strategic repositioning. In the second quarter of 2016, the Company completed the redemption of its Series A and Series B preferred stock, closed on the disposition of seven non-core hotels, declared a common dividend for the first time since 2009, and announced a joint venture to acquire the Aloft Atlanta in downtown Atlanta, Georgia. These important accomplishments are highlighted below:

Preferred Stock Redemption: On April 15, 2016, the Company used a portion of the proceeds from the $30.0 million Series D capital raise completed in the first quarter of 2016 to redeem for cash all outstanding Series A and Series B Preferred Stock, including all unpaid accrued dividends. The aggregate redemption price was approximately $20.2 million. The Company plans to use the remaining $9.8 million of proceeds from the capital raise to acquire high-quality, premium branded select service hotels.

7 Non-Core Assets Sold: In the second quarter of 2016, the Company continued to successfully dispose of legacy assets at attractive valuations. In addition to the four hotels sold in the first quarter of 2016 with gross proceeds totaling $9.4 million, the Company sold one legacy asset in April 2016 for gross proceeds of $1.725 million, five legacy assets in May 2016 for gross proceeds totaling $12.759 million, and one legacy asset in June 2016 for gross proceeds of $2.15 million. The Company plans to dispose of 20 legacy hotels, including the 11 closed dispositions aforementioned, in 2016 and will to utilize the net proceeds to continue to strategically reposition the portfolio.

Common Dividend Declared: On July 11, 2016, the Board of Directors declared a common stock dividend of $0.01 per share. This dividend was paid on August 3, 2016 to shareholders of record on July 22, 2016. This represents the first common stock dividend declared by the Company since 2009.

Joint Venture Announced: Subsequent to the second quarter end, on July 26, 2016, the Company entered into a joint venture to acquire a 254-room Aloft hotel in downtown Atlanta, Georgia. Condor will own 80% of the joint venture, and its joint venture partner, Three Wall Capital LLC ("TWC"), will own the remaining 20% of the joint venture. The purchase price for the hotel is $43.55 million.

Summary Financial Results

RevPAR: For the second quarter, revenue per available room (RevPAR) for the four hotels considered the new investment platform hotels (includes the three hotels acquired in 2015 plus the Hilton Garden Inn acquired in 2012) increased 10.7% to $87.91 from $79.40 for the same period in 2015. The increase is attributable to both gains in ADR and occupancy. Occupancy rose to 74.49% for the second quarter 2016 as compared to 71.93% for the same period in 2015. Similarly, ADR rose to $118.02 for the second quarter 2016 as compared to $110.40 for the same period in 2015. For the six months ended June 30, 2016, RevPAR increased 9.2% to $86.45 as compared to $79.13 for the same period in 2015. The Company owned only one of the new investment platform hotels for the respective same periods in 2015 and believes the increase in RevPAR across the new investment platform hotels is indicative of the Company's ability to rigorously asset manage to achieve enhanced performance.

For the second quarter, revenue per available room (RevPAR) for the 14 same-store hotels not considered held for sale at June 30, 2016 declined 1.8% to $56.44. The decrease was attributed to a 1.5% reduction in occupancy to 65.86%, while average daily rate (ADR) remained fairly flat at $85.69. For the six months ended June 30, 2016, RevPAR for the 14 same-store hotels not considered held for sale at June 30, 2016 declined 1.6% to $52.09. The decrease was attributed to a 5.0% reduction in occupancy to 60.69%, which was partially offset by a 3.6% increase in ADR. In our legacy hotel portfolio, the decreases in occupancy between the periods were driven by market challenges facing these hotels as a result of declines in the oil and gas, rail, and fracking industries. This decrease in occupancy is most pronounced in the year to date results as the summer travel season, with its increased leisure, transient, and construction travel, favorably impacts our hotels beginning in the second quarter annually. Despite these occupancy challenges, in the latter half of 2015 and in 2016, the Company has focused on increasing ADR as is evident in the year to date ADR increase.

Revenue: Condor's second quarter 2016 revenue from continuing operations was $13.8 million compared to $16.4 million in the same 2015 period. Condor's year to date 2016 revenue from continuing operations was $26.0 million compared to $28.7 million in the same 2015 period. Revenue from newly acquired properties in the three months and six months ended June 30, 2016 totaled $3.3 million and $6.5 million, respectively, which was offset by revenue declines from properties considered held for sale or sold of $5.7 million and $9.0 million, respectively, for these same periods.

Net Earnings: Second quarter net earnings attributable to common shareholders was $7.1 million, or $1.44 per basic and $0.18 per diluted share, compared to a net loss of ($6.5) million, or ($1.32) per basic and diluted share for the same 2015 period. Year to date net loss attributable to common shareholders was ($3.3) million, or ($0.68) per basic and diluted share compared to ($4.2) million, or ($0.88) per basic and diluted share for the same 2015 period. The year to date 2016 results include dividends declared and undeclared and in kind distributions to preferred shareholders of $18.8 million which increased considerably over $1.8 million in the same period in 2015 as a result of the first quarter 2016 preferred stock transactions. Increased gains on the sale of assets and increased net gain on derivatives and convertible as well as decreased impairment charges also drove the differences in net income between the periods.

Funds From Operations (FFO): FFO for the three months ended June 30, 2016 increased to $0.9 million as compared to a loss of ($2.3) million for the same period prior year. FFO for the six months ended June 30, 2016 increased to $6.7 million as compared to $2.5 million for the same period prior year. These increases in FFO were primarily driven by an increase in net gains on derivatives and convertible debt which increased by $4.9 million between the second quarter periods and $6.2 million between the year to date periods.

Capital Reinvestment: The Company invested $1.2 million and $1.9 million in capital improvements throughout the portfolio in the three and six months ended June 30, 2016, respectively, to upgrade its properties and maintain brand standards.

Balance Sheet: The Company had cash and cash equivalents (including restricted cash) and available revolver of $22.3 million and $2.4 million, respectively, at June 30, 2016. As of June 30, 2016, the Company had total outstanding long-term debt of $70.3 million, with $53.7 million associated with assets held for use with a weighted average maturity of 2.6 years and a weighted average interest rate of 5.09%.

Dividends : On April 15, 2016, the Company completed the cash redemption of all of its outstanding shares of 8% Series A Cumulative Preferred Stock (NASDAQ: CDORP) (CUSIP No. 20676Y205) and 10% Series B Cumulative Preferred Stock (NASDAQ: CDORO) (CUSIP No. 20676Y304), including all accrued and unpaid dividends of $3.8 million. The aggregate redemption price was approximately $20.2 million, an amount that was funded using proceeds from the Company's previously announced $30.0 million private placement transaction with StepStone Real Estate, an affiliate of the StepStone Group.

On March 16, 2016, the Company entered into an Exchange Agreement with RES and IRSA Inversiones y Representaciones Sociedad Anónima pursuant to which all 3,000,000 outstanding shares of Series C Preferred Stock were exchanged for 3,000,000 shares of Series D Preferred Stock. Pursuant to the Exchange Agreement, in lieu of payment of accrued and unpaid dividends in the amount of $4.9 million on the Series C Preferred Stock, Condor (a) paid to RES an amount of cash equal to $1.5 million (b) issued to RES 245,156 shares of Series D Preferred Stock (such that RES, IRSA and their affiliates do not beneficially own in excess of 49% of the voting stock of Condor) and (c) issued to RES a promissory note, bearing interest at 6.25% per annum, in the principal amount of $1.0 million and convertible into a number of shares of Series D Preferred Stock that would have otherwise been issued on account of the remaining accrued and unpaid dividends but for the foregoing 49% limitation (the "Note").

Following the execution of the Stock Purchase Agreement and Exchange Agreement on March 16, 2016, there were 6,245,156 shares of Series D Preferred Stock outstanding. The Series D Preferred stockholders receive cumulative cash dividends at a rate of 6.25% per annum, payable quarterly. The Series D Preferred Stock is convertible, at the option of the holder, at any time into common stock at a rate of $1.60 per share of common stock, which is equal to a rate of 6.25 shares of common stock for each share of Series D Preferred Stock. Dividends totaling $1.1 million were declared and paid related to the Series D Preferred Stock in the second quarter of 2016.

On July 11, 2016, the Board of Directors declared a common stock dividend of $0.01 per share. This dividend was paid on August 3, 2016 to shareholders of record on July 22, 2016. This represents the first common stock dividend declared by the Company since 2009.

Subsequent Event:

Subsequent to the second quarter end, on July 26, 2016, the Company entered into a joint venture to acquire a 254-room Aloft hotel in downtown Atlanta, Georgia. Condor owns 80% of the joint venture, and its joint venture partner, Three Wall Capital LLC ("TWC"), owns the remaining 20% of the joint venture. The purchase price for the hotel is $43.55 million. The name of the joint venture is Spring Street Hotel Property II LLC ("Spring Street JV").

The Company contributed $1.0 million to Spring Street JV on July 26, 2016 and will contribute approximately $7.6 million to Spring Street JV upon the closing of the acquisition of the hotel, in exchange for an 80% equity interest in Spring Street JV. TWC contributed $0.25 million to Spring Street JV and will contribute approximately $1.9 million to Spring Street JV upon the closing of the acquisition of the hotel, in exchange for a 20% equity interest in Spring Street JV. The closing of the acquisition of the hotel is subject to customary closing conditions including accuracy of representations and warranties and compliance with covenants and obligations.

Outlook

"We continue to be invigorated by the significant progress accomplished in the strategic repositioning of Condor," said Jonathan Gantt, Condor's Chief Financial Officer. "As evidenced by the announcement of the common dividend for first time since 2009, we remain confident that our strategy will continue to result in increased shareholder value."

About Condor Hospitality Trust, Inc.
Condor Hospitality Trust, Inc. (NASDAQ: 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. The Company currently owns 31 hotels in 16 states. Condor's hotels are franchised by a number of the industry's most well-regarded brand families including Hilton, Marriott, InterContinental Hotels Group, Choice and Wyndham. For more information or to make a hotel reservation, visit www.condorhospitality.com.

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 results or performance to differ from those projected in the forward-looking statement. These risks are discussed in the Company's filings with the Securities and Exchange Commission.

SELECTED FINANCIAL DATA:

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"), Adjusted EBITDA, and Property Operating Income ("POI") 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 (loss) or operating income 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 and six months ended June 30 (in thousands). All amounts presented include both continuing and discontinued operations.

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 (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 shareholders, which is FFO excluding earnings or loss attributable to noncontrolling interests and preferred stock dividends. AFFO is FFO attributable to common shareholders adjusted to exclude items we do not believe are representative of the results from our core operations, such as non-cash gains or losses on derivative liabilities and convertible debt and cash charges for acquisition 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 and AFFO to be useful additional measures of performance for an equity REIT because they facilitate an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assume 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 and AFFO provide a meaningful indication of our performance.

EBITDA and Adjusted EBITDA

The following table reconciles net earnings (loss) to EBITDA and Adjusted EBITDA for the three and six months ended June 30 (in thousands). All amounts presented include both continuing and discontinued operations.

We calculate EBITDA and Adjusted EBITDA by adding back to net earnings (loss) certain non-operating expenses and certain non-cash charges which are based on historical cost accounting which 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 (loss) interest expense, loss on debt extinguishment, income tax expense, and depreciation and amortization expense. In calculating Adjusted EBITDA, we adjust EBITDA to add back net gain on disposition of assets and acquisition and terminated transactions expense, which are cash charges. We also add back impairment and gain or loss on derivatives and convertible debt, which are non-cash charges. Our current calculation of EBITDA varies from that presented in filings prior to the December 31, 2015 Form 10-K as EBITDA was historically calculated based on net earnings (loss) attributable to common shareholders with preferred dividends and noncontrolling interest added back only to Adjusted EBITDA. EBITDA and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

We believe that EBITDA and Adjusted EBITDA 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.

Property Operating Income

The following table reconciles operating income to POI for the three and six months ended June 30 (in thousands). All amounts presented include only continuing operations unless otherwise noted.

We calculate POI as room rentals and other hotel services revenue less hotel and property operating expenses. We believe POI is helpful to investors as it better communicates the comparability of our hotels' operating results for all of the Company's hotel properties. POI as presented above includes both continuing and discontinued operations.