Morningstar | Big Beat for Pebblebrook in the First Quarter, Though 2019 Guidance Remains Unchanged
Pebblebrook Hotel Trust reported first quarter results--the first full quarter following the completion of Pebblebrook's merger with LaSalle Hotel Properties--that were significantly ahead of our estimates. However, given that there were a lot of moving parts following the merger and that management's guidance is mostly unchanged, we don't plan any material changes to our $36 fair value estimate given that our full-year estimates still match management's updated 2019 guidance. Same-store revenue per available room was up 4.3% in the first quarter, well ahead of our 2.2% estimate. This was driven by San Francisco being up 23.7% thanks to additional business after the completion of renovations to the Moscone Convention Center. The revenue beat led to margins holding up better than anticipated at 27.6% compared with our 26.8% assumption. In addition to better fundamentals, lower general and administrative expenses, a one-time tax benefit and lower interest expense following the paydown of debt led to adjusted funds from operations coming in at $0.46, 5 cents ahead of our estimate.Despite the RevPAR and FFO beats, RevPAR guidance for 2019 remains in a range of 1.0% to 3.0% and FFO guidance only raised the low end by a penny to a new range of $2.60 to $2.67. Given that we are assuming 2.2% same-store RevPAR growth and a $2.66 FFO figure for 2019, we are still well within management's guidance range for 2019 despite the strong first quarter beat. While management teams typically set conservative guidance to start the year and are reluctant to raise guidance after just one quarter, the large seasonality present in hotel operations might just imply that the strong first-quarter results will be balanced out by lower growth through the rest of 2019. We will see how 2019 progresses before we make any material changes to our assumptions.
Pebblebrook Hotel Trust is an internally managed hotel investment company. Substantially all of the company's assets are held by, and all of the operations are conducted through its Operating Partnership, Pebblebrook Hotel, L.P. The company is engaged in acquisition and investment in hotel properties located primarily in U.S. cities, including Atlanta, Boston, Chicago, Key West, Los Angeles, Miami, Nashville, Naples, New York, Philadelphia, Portland, Santa Monica, San Diego, San Francisco, Seattle and Washington, D.C., with a focus on main gateway urban markets. The company targets investments in resort properties located near its primary target markets, as well as in select destination resort markets.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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