RLJ Lodging Trust

11/06/2025 | Press release | Distributed by Public on 11/06/2025 14:36

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as the information contained in our Annual Report, which is accessible on the SEC's website at www.sec.gov.
Statement Regarding Forward-Looking Information
The following information contains certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements generally are identified by the use of the words "believe," "project," "expect," "anticipate," "estimate," "plan," "may," "will," "will continue," "intend," "should," or similar expressions. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future
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events or guarantees of future performance and our actual results could differ materially from those set forth in the forward-looking statements.
Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. We caution investors not to place undue reliance on these forward-looking statements and urge investors to carefully review the disclosures we make concerning risks and uncertainties in the sections entitled "Special Note About Forward-Looking Statements," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report, as well as the risks, uncertainties and other factors discussed in this Quarterly Report on Form 10-Q and identified in other documents filed by us with the SEC.
Overview
We are a self-advised and self-administered Maryland REIT that owns primarily premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels located within heart of demand locations. We own a geographically diversified portfolio of hotels located in high-growth urban markets that exhibit multiple demand generators and attractive long-term growth prospects. We believe that our investment strategy allows us to generate high levels of Revenue per Available Room ("RevPAR"), strong operating margins and attractive returns. Our focused-service and compact full-service hotels typically generate most of their revenue from room rentals, have limited food and beverage outlets and meeting space, and require fewer employees than traditional full-service hotels. We believe these types of hotels have the potential to generate attractive returns relative to other types of hotels due to their ability to achieve RevPAR levels at or close to those achieved by traditional full-service hotels while achieving higher profit margins due to their more efficient operating model and less volatile cash flows.
As of September 30, 2025, we owned 95 hotel properties with approximately 21,200 rooms, located in 23 states and the District of Columbia. We owned, through wholly-owned subsidiaries, a 100% interest in 93 of our hotel properties, a 95% controlling interest in one hotel property, and a 50% non-controlling interest in an entity owning one hotel property. We consolidate our real estate interests in the 94 hotel properties in which we hold a controlling interest, and we record the real estate interest in the one hotel property in which we hold an indirect 50% non-controlling interest using the equity method of accounting. We lease 94 of the 95 hotel properties to our TRSs, of which we own a controlling financial interest.
For U.S. federal income tax purposes, we elected to be taxed as a REIT commencing with our taxable year ended December 31, 2011. Substantially all of our assets and liabilities are held by, and all of our operations are conducted through our Operating Partnership. We are the sole general partner of the Operating Partnership. As of September 30, 2025, we owned, through a combination of direct and indirect interests, 99.5% of the units of limited partnership interest in the OP units.
2025 Significant Activities
Our significant activities reflect our commitment to creating long-term shareholder value through enhancing our hotel portfolio's quality, recycling capital and maintaining a prudent capital structure. The following significant activities have taken place in 2025:
•Sold one hotel property for a sales price of $24.3 million.
•Refinanced a term loan to increase the term loan to $300.0 million and extend the initial maturity to April 2028.
•Paid off the $100.0 million outstanding balance on our Revolver using the incremental $100.0 million in proceeds from the refinanced term loan.
•Exercised the final one-year extension options on $181.0 million in mortgage loans to extend the maturities to April 2026.
•Approved a new share repurchase program to acquire up to an aggregate of $250.0 million of common and preferred shares from May 9, 2025 to May 8, 2026.
•Repurchased and retired approximately 3.3 million common shares for approximately $28.6 million.
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Our Customers
The majority of our hotels consist of premium-branded, focused-service and compact full-service hotels. As a result of this property profile, the majority of our customers are transient in nature. Transient business typically represents individual business or leisure travelers. The majority of our hotels are located in business districts within major metropolitan areas. Accordingly, business travelers represent the majority of the transient demand at our hotels. As a result, macroeconomic factors impacting business travel have a greater effect on our business than factors impacting leisure travel.
Group business is typically defined as a minimum of 10 guestrooms booked together as part of the same piece of business. Group business may or may not use the meeting space at any given hotel. Given the limited meeting space at the majority of our hotels, group business that utilizes meeting space represents a small component of our customer base.
A number of our hotel properties are affiliated with brands marketed toward extended-stay customers. Extended-stay customers are generally defined as those staying five nights or longer.
Our Revenues and Expenses
Our revenues are primarily derived from the operation of hotels, including the sale of rooms, food and beverage revenue and other revenue, which consists of parking fees, resort fees, gift shop sales and other guest service fees.
Our operating costs and expenses consist of the costs to provide hotel services, including room expense, food and beverage expense, management and franchise fees and other operating expenses. Room expense includes housekeeping and front office wages and payroll taxes, reservation systems, room supplies, laundry services and other costs. Food and beverage expense primarily includes the cost of food, the cost of beverages and the associated labor costs. Other operating expenses include labor and other costs associated with the other operating department revenue, as well as labor and other costs associated with administrative departments, sales and marketing, repairs and maintenance and utility costs. Our hotels that are subject to franchise agreements are charged a royalty fee, plus additional fees for marketing, central reservation systems and other franchisor costs, in order for the hotel properties to operate under the respective brands. Franchise fees are based on a percentage of room revenue and for certain hotels additional franchise fees are charged for food and beverage revenue. Our hotels are managed by independent, third-party management companies under long-term agreements pursuant to which the management companies typically earn base and incentive management fees based on the levels of revenues and profitability of each individual hotel property. We generally receive a cash distribution from the management companies on a monthly basis, which reflects hotel-level sales less hotel-level operating expenses.
Key Indicators of Financial Performance
We use a variety of operating, financial and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including industry standard statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisition opportunities to determine each hotel's contribution to cash flow and its potential to provide attractive long-term total returns. The key indicators include:
•Average Daily Rate ("ADR")
•Occupancy
•RevPAR
ADR, Occupancy and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel property level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only room revenue.
We also use non-GAAP measures such as FFO, Adjusted FFO, EBITDA, EBITDAreand Adjusted EBITDA to evaluate the operating performance of our business. For a more in depth discussion of these non-GAAP measures, please refer to the "Non-GAAP Financial Measures" section. In addition, we use Hotel EBITDA, a non-GAAP financial measure, to assess
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operating performance. For a more in depth discussion of Hotel EBITDA, please refer to Note 15, Segment Information, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. It is possible that the actual amounts may differ significantly from these estimates and assumptions. We evaluate our estimates, assumptions and judgments on an ongoing basis, based on information that is available to us, our business and industry experience, and various other matters that we believe are reasonable and appropriate for consideration under the circumstances. Our Annual Report contains a discussion of our critical accounting policies and estimates. There have been no significant changes to our critical accounting policies and estimates since December 31, 2024.
Results of Operations
At September 30, 2025 and 2024, we owned 95 and 96 hotel properties, respectively. Based on when a hotel property is acquired or sold, the operating results for certain hotel properties are not comparable for the three and nine months ended September 30, 2025 and 2024. The non-comparable properties include three hotel properties that were sold in 2025 and 2024 and one hotel property that was acquired in 2024.
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Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024
For the three months ended September 30,
2025 2024 $ Change
(amounts in thousands)
Revenues
Operating revenues
Room revenue $ 267,367 $ 283,614 $ (16,247)
Food and beverage revenue 36,884 36,983 (99)
Other revenue 25,794 25,147 647
Total revenues 330,045 345,744 (15,699)
Expenses
Operating expenses
Room expense 74,685 74,558 127
Food and beverage expense 29,314 29,348 (34)
Management and franchise fee expense 25,253 27,339 (2,086)
Other operating expenses 94,112 92,350 1,762
Total property operating expenses 223,364 223,595 (231)
Depreciation and amortization 46,996 44,892 2,104
Property tax, insurance and other 26,647 24,156 2,491
General and administrative 11,782 12,781 (999)
Transaction costs 128 209 (81)
Total operating expenses 308,917 305,633 3,284
Other income, net 670 791 (121)
Interest income 3,502 4,286 (784)
Interest expense (28,309) (28,643) 334
(Loss) gain on sale of hotel properties, net (141) 4,755 (4,896)
Loss on extinguishment of indebtedness, net - (129) 129
(Loss) income before equity in loss from unconsolidated joint ventures (3,150) 21,171 (24,321)
Equity in loss from unconsolidated joint ventures (307) (149) (158)
(Loss) income before income tax expense (3,457) 21,022 (24,479)
Income tax expense (341) (379) 38
Net (loss) income (3,798) 20,643 (24,441)
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership 52 (49) 101
Noncontrolling interest in consolidated joint ventures 10 8 2
Net (loss) income attributable to RLJ (3,736) 20,602 (24,338)
Preferred dividends (6,279) (6,279) -
Net (loss) income attributable to common shareholders $ (10,015) $ 14,323 $ (24,338)
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Revenues
Total revenues decreased $15.7 million to $330.0 million for the three months ended September 30, 2025 from $345.7 million for the three months ended September 30, 2024. The decrease was the result of a $16.2 million decrease in room revenue and a $0.1 million decrease in food and beverage revenue, offset by a $0.6 million increase in other revenue.
Room Revenue
Room revenue decreased $16.2 million to $267.4 million for the three months ended September 30, 2025 from $283.6 million for the three months ended September 30, 2024. The decrease was the result of a $14.3 million decrease in room revenue attributable to the comparable properties and a $2.0 million decrease in room revenue attributable to the non-comparable properties. The decrease in room revenue from the comparable properties was primarily due to a decrease in leisure, government, corporate and group travel.
The following are the quarter-to-date key hotel operating statistics for the comparable properties:
For the three months ended September 30,
2025 2024
Occupancy 73.0 % 75.4 %
ADR $ 189.45 $ 193.43
RevPAR $ 138.29 $ 145.77
Food and Beverage Revenue
Food and beverage revenue decreased $0.1 million to $36.9 million for the three months ended September 30, 2025 from $37.0 million for the three months ended September 30, 2024.
Other Revenue
Other revenue increased $0.6 million to $25.8 million for the three months ended September 30, 2025 from $25.1 million for the three months ended September 30, 2024.
Property Operating Expenses
Property operating expenses decreased $0.2 million to $223.4 million for the three months ended September 30, 2025 from $223.6 million for the three months ended September 30, 2024. The decrease was due to a $1.5 million decrease in property operating expenses from the non-comparable properties partially offset by a $1.2 million increase in property operating expenses from the comparable properties.
The components of our property operating expenses for the comparable properties were as follows (in thousands):
For the three months ended September 30,
2025 2024 $ Change
Room expense $ 74,313 $ 73,620 $ 693
Food and beverage expense 28,941 28,896 45
Management and franchise fee expense 25,177 27,002 (1,825)
Other operating expenses 93,232 90,909 2,323
Total property operating expenses $ 221,663 $ 220,427 $ 1,236
The increase in property operating expenses from the comparable properties was primarily due to increases in wages and benefits, as well as increases in room expenses and increases in other operating expenses, including increases in sales and marketing expenses and general liability insurance coverage. This was offset by a decrease in management and franchise fee expense, which was due to lower revenues as well as recently amended management and franchise agreements.
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Depreciation and Amortization
Depreciation and amortization expense increased $2.1 million to $47.0 million for the three months ended September 30, 2025 from $44.9 million for the three months ended September 30, 2024. The increase in depreciation and amortization expense was primarily related to recently renovated hotels.
Property Tax, Insurance and Other
Property tax, insurance and other expense increased $2.5 million to $26.6 million for the three months ended September 30, 2025 from $24.2 million for the three months ended September 30, 2024. The increase was primarily attributable to the beneficial impact of successful real estate tax appeals in the prior year, partially offset by a decrease in property insurance premiums.
General and Administrative
General and administrative expense decreased $1.0 million to $11.8 million for the three months ended September 30, 2025 from $12.8 million for the three months ended September 30, 2024. The decrease was primarily attributable to a decrease in non-cash compensation expense related to the departure of Company executives during the three months ended June 30, 2025.
Interest Income
Interest income decreased $0.8 million to $3.5 million for the three months ended September 30, 2025 from $4.3 million for the three months ended September 30, 2024. The decrease was attributable to the combination of lower interest rates and the Company holding less cash in 2025.
Interest Expense
Interest expense decreased $0.3 million to $28.3 million for the three months ended September 30, 2025 from $28.6 million for the three months ended September 30, 2024. The components of our interest expense for the three months ended September 30, 2025 and 2024 were as follows (in thousands):
For the three months ended September 30,
2025 2024 $ Change
Senior Notes $ 9,695 $ 9,695 $ -
Revolver and Term Loans 13,551 14,228 (677)
Mortgage loans 3,019 2,671 348
Amortization of deferred financing costs 1,900 1,663 237
Non-cash interest expense related to interest rate hedges 144 386 (242)
Total interest expense $ 28,309 $ 28,643 $ (334)
(Loss) Gain on Sale of Hotel Properties, net
During the three months ended September 30, 2024, we sold one hotel property for a sales price of approximately $12.7 million and recorded a net gain on the sale of approximately $4.8 million. There were no hotels sold during the three months ended September 30, 2025.
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Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024
For the nine months ended September 30,
2025 2024 $ Change
(amounts in thousands)
Revenues
Operating revenues
Room revenue $ 831,122 $ 853,896 $ (22,774)
Food and beverage revenue 116,331 113,515 2,816
Other revenue 73,814 72,040 1,774
Total revenues 1,021,267 1,039,451 (18,184)
Expenses
Operating expenses
Room expense 220,101 217,885 2,216
Food and beverage expense 88,978 88,279 699
Management and franchise fee expense 78,848 82,783 (3,935)
Other operating expenses 278,610 272,951 5,659
Total property operating expenses 666,537 661,898 4,639
Depreciation and amortization 139,147 134,045 5,102
Property tax, insurance and other 80,340 80,743 (403)
General and administrative 35,566 41,826 (6,260)
Transaction costs 240 299 (59)
Total operating expenses 921,830 918,811 3,019
Other income, net 2,706 4,669 (1,963)
Interest income 10,118 13,191 (3,073)
Interest expense (83,737) (83,150) (587)
Gain on sale of hotel properties, net 802 8,301 (7,499)
Loss on extinguishment of indebtedness, net (34) (129) 95
Income before equity in (loss) income from unconsolidated joint ventures 29,292 63,522 (34,230)
Equity in (loss) income from unconsolidated joint ventures (313) 239 (552)
Income before income tax expense 28,979 63,761 (34,782)
Income tax expense (974) (1,081) 107
Net income 28,005 62,680 (34,675)
Net (income) loss attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership (44) (216) 172
Noncontrolling interest in consolidated joint ventures 118 181 (63)
Net income attributable to RLJ 28,079 62,645 (34,566)
Preferred dividends (18,836) (18,836) -
Net income attributable to common shareholders $ 9,243 $ 43,809 $ (34,566)
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Revenues
Total revenues decreased $18.2 million to $1,021.3 million for the nine months ended September 30, 2025 from $1,039.5 million for the nine months ended September 30, 2024. The decrease was the result of a $22.8 million decrease in room revenue, offset by a $2.8 million increase in food and beverage revenue and a $1.8 million increase in other revenue.
Room Revenue
Room revenue decreased $22.8 million to $831.1 million for the nine months ended September 30, 2025 from $853.9 million for the nine months ended September 30, 2024. The decrease was the result of a $19.0 million decrease in room revenue attributable to the comparable properties and a $3.7 million decrease in room revenue attributable to the non-comparable properties. The decrease in room revenue from the comparable properties was primarily due to a decrease in leisure, government, corporate and group travel.
The following are the year-to-date key hotel operating statistics for the comparable properties:
For the nine months ended September 30,
2025 2024
Occupancy 72.6 % 73.9 %
ADR $ 199.55 $ 199.91
RevPAR $ 144.85 $ 147.72
Food and Beverage Revenue
Food and beverage revenue increased $2.8 million to $116.3 million for the nine months ended September 30, 2025 from $113.5 million for the nine months ended September 30, 2024. The increase in food and beverage revenue was primarily due to increases in outlet revenue and the ramping up of our recently converted and renovated hotels.
Other Revenue
Other revenue increased $1.8 million to $73.8 million for the nine months ended September 30, 2025 from $72.0 million for the nine months ended September 30, 2024. The increase in other revenue was primarily due to an increase in gift shop sales, parking and resort fees.
Property Operating Expenses
Property operating expenses increased $4.6 million to $666.5 million for the nine months ended September 30, 2025 from $661.9 million for the nine months ended September 30, 2024. The increase was due to a $7.2 million increase in property operating expenses from the comparable properties offset by a $2.6 million decrease in property operating expenses from the non-comparable properties.
The components of our property operating expenses for the comparable properties were as follows (in thousands):
For the nine months ended September 30,
2025 2024 $ Change
Room expense $ 218,738 $ 215,394 $ 3,344
Food and beverage expense 87,782 87,599 183
Management and franchise fee expense 78,529 81,749 (3,220)
Other operating expenses 276,246 269,327 6,919
Total property operating expenses $ 661,295 $ 654,069 $ 7,226
The increase in property operating expenses from the comparable properties was primarily due to increases in wages and benefits, as well as increases in room expenses and increases in other operating expenses, including increases in sales and marketing expenses, utilities and general liability insurance coverage. This was offset by a decrease in management and franchise fee expense, which was due to lower revenues as well as recently amended management and franchise agreements.
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Depreciation and Amortization
Depreciation and amortization expense increased $5.1 million to $139.1 million for the nine months ended September 30, 2025 from $134.0 million for the nine months ended September 30, 2024. The increase in depreciation and amortization expense was primarily related to our recently renovated hotels.
Property Tax, Insurance and Other
Property tax, insurance and other expense decreased $0.4 million to $80.3 million for the nine months ended September 30, 2025 from $80.7 million for the nine months ended September 30, 2024. The decrease was primarily attributable to a decrease in property insurance premiums offset by an increase in real estate tax expense due to the beneficial impact of successful real estate tax appeals in the prior year.
General and Administrative
General and administrative expense decreased $6.3 million to $35.6 million for the nine months ended September 30, 2025 from $41.8 million for the nine months ended September 30, 2024. The decrease was primarily attributable to a decrease in non-cash compensation expense, including the impact of a $1.6 million benefit as a result of the performance unit forfeitures related to the departure of Company executives during the three months ended June 30, 2025.
Other Income, net
Other income, net decreased $2.0 million to $2.7 million for the nine months ended September 30, 2025 from $4.7 million for the nine months ended September 30, 2024. The decrease was primarily attributable to the receipt of certain one-time COVID-19 relief awards during the nine months ended September 30, 2024.
Interest Income
Interest income decreased $3.1 million to $10.1 million for the nine months ended September 30, 2025 from $13.2 million for the nine months ended September 30, 2024. The decrease was attributable to the combination of lower interest rates and the Company holding less cash in 2025.
Interest Expense
Interest expense increased $0.6 million to $83.7 million for the nine months ended September 30, 2025 from $83.2 million for the nine months ended September 30, 2024. The components of our interest expense for the nine months ended September 30, 2025 and 2024 were as follows (in thousands):
For the nine months ended September 30,
2025 2024 $ Change
Senior Notes $ 29,070 $ 29,070 $ -
Revolver and Term Loans 40,841 37,075 3,766
Mortgage loans 7,761 10,939 (3,178)
Amortization of deferred financing costs 5,632 4,779 853
Non-cash interest expense related to interest rate hedges 433 1,287 (854)
Total interest expense $ 83,737 $ 83,150 $ 587
Gain on Sale of Hotel Properties, net
During the nine months ended September 30, 2025, we sold one hotel property for a sales price of $24.3 million and recorded a net gain on the sale of $0.8 million. During the nine months ended September 30, 2024, we sold two hotel properties for a combined sales price of approximately $20.8 million and recorded net gains on the sales of approximately $8.3 million.
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Non-GAAP Financial Measures
We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDAreand (5) Adjusted EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of our operating performance. FFO, Adjusted FFO, EBITDA, EBITDAre,and Adjusted EBITDA, as calculated by us, may not be comparable to FFO, Adjusted FFO, EBITDA, EBITDAreand Adjusted EBITDA as reported by other companies that do not define such terms exactly as we define such terms.
Funds From Operations
We calculate funds from operations ("FFO") in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss, excluding gains or losses from sales of real estate, impairment, the cumulative effect of changes in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company's operations. We believe that the presentation of FFO provides useful information to investors regarding our operating performance and can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. Our calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. Additionally, FFO may not be helpful when comparing us to non-REITs. We present FFO attributable to common shareholders, which includes our OP units, because our OP units may be redeemed for common shares. We believe it is meaningful for the investor to understand FFO attributable to all common shares and OP units.
We further adjust FFO for certain additional items that are not in NAREIT's definition of FFO, such as transaction costs, pre-opening costs, gains or losses on extinguishment of indebtedness, non-cash income tax expense or benefit, amortization of share-based compensation, non-cash interest expense related to discontinued interest rate hedges, derivative gains or losses in accumulated other comprehensive income reclassified to earnings, and certain other income or expenses that we consider outside the normal course of operations. We believe that Adjusted FFO 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.
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The following table is a reconciliation of our GAAP net (loss) income to FFO attributable to common shareholders and unitholders and Adjusted FFO attributable to common shareholders and unitholders for the three and nine months ended September 30, 2025 and 2024 (in thousands):
For the three months ended September 30, For the nine months ended September 30,
2025 2024 2025 2024
Net (loss) income $ (3,798) $ 20,643 $ 28,005 $ 62,680
Preferred dividends (6,279) (6,279) (18,836) (18,836)
Depreciation and amortization 46,996 44,892 139,147 134,045
Loss (gain) on sale of hotel properties, net 141 (4,755) (802) (8,301)
Noncontrolling interest in consolidated joint ventures 10 8 118 181
Adjustments related to consolidated joint venture (1) (50) (47) (147) (139)
Adjustments related to unconsolidated joint venture (2) 225 227 706 685
FFO 37,245 54,689 148,191 170,315
Transaction costs 128 209 240 299
Pre-opening costs (3) 69 888 520 1,088
Loss on extinguishment of indebtedness, net - 129 34 129
Amortization of share-based compensation 4,043 4,550 11,280 16,260
Non-cash interest expense related to discontinued interest rate hedges 144 386 433 1,287
Other (income) expenses (4) (526) 304 (14) 2,256
Adjusted FFO $ 41,103 $ 61,155 $ 160,684 $ 191,634
(1)Includes depreciation and amortization expense allocated to the noncontrolling interest in the consolidated joint venture.
(2)Includes our ownership interest in the depreciation and amortization expense of the unconsolidated joint venture.
(3)Represents expenses related to the brand conversions of certain hotel properties prior to opening.
(4)Represents income and expenses outside of the normal course of operations.
EBITDA and EBITDAre
EBITDA is defined as net income or loss excluding: (1) interest expense; (2) income tax expense; and (3) depreciation and amortization expense. We consider EBITDA useful to an investor in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization expense) from our operating results. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and disposals.
In addition to EBITDA, we present EBITDArein accordance with NAREIT guidelines, which defines EBITDAreas net income or loss excluding interest expense, income tax expense, depreciation and amortization expense, gains or losses from sales of real estate, impairment, and adjustments for unconsolidated joint ventures. We believe that the presentation of EBITDAreprovides useful information to investors regarding our operating performance and can facilitate comparisons of operating performance between periods and between REITs.
We also present Adjusted EBITDA, which includes additional adjustments for items such as transaction costs, pre-opening costs, gains or losses on extinguishment of indebtedness, amortization of share-based compensation, derivative gains or losses in accumulated other comprehensive income reclassified to earnings, and certain other income or expenses that we consider outside the normal course of operations. We believe that Adjusted EBITDA provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income, EBITDA, and EBITDAre, is beneficial to an investor's understanding of our operating performance.
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The following table is a reconciliation of our GAAP net (loss) income to EBITDA, EBITDAreand Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 (in thousands):
For the three months ended September 30, For the nine months ended September 30,
2025 2024 2025 2024
Net (loss) income $ (3,798) $ 20,643 $ 28,005 $ 62,680
Depreciation and amortization 46,996 44,892 139,147 134,045
Interest expense, net of interest income 24,807 24,357 73,619 69,959
Income tax expense 341 379 974 1,081
Adjustments related to unconsolidated joint venture (1) 382 331 1,182 998
EBITDA 68,728 90,602 242,927 268,763
Loss (gain) on sale of hotel properties, net 141 (4,755) (802) (8,301)
EBITDAre
68,869 85,847 242,125 260,462
Transaction costs 128 209 240 299
Pre-opening costs (2) 69 888 520 1,088
Loss on extinguishment of indebtedness, net - 129 34 129
Amortization of share-based compensation 4,043 4,550 11,280 16,260
Other (income) expenses (3) (526) 304 (14) 2,256
Adjusted EBITDA $ 72,583 $ 91,927 $ 254,185 $ 280,494
(1)Includes our ownership interest in the interest, depreciation, and amortization expense of the unconsolidated joint venture.
(2)Represents expenses related to the brand conversions of certain hotel properties prior to opening.
(3)Represents income and expenses outside of the normal course of operations.
Liquidity and Capital Resources
Our liquidity requirements consist primarily of the funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including:
•funds necessary to pay for the costs of acquiring hotel properties;
•redevelopments, conversions, renovations and other capital expenditures that need to be made periodically to our hotel properties;
•recurring maintenance and capital expenditures necessary to maintain our hotel properties in accordance with brand standards;
•interest expense and scheduled principal payments on outstanding indebtedness;
•distributions on common and preferred shares;
•share repurchases under our share repurchase programs; and
•corporate and other general and administrative expenses.
As of September 30, 2025, we had $404.1 million of cash, cash equivalents, and restricted cash reserves as compared to $433.3 million at December 31, 2024.
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Sources and Uses of Cash
Cash flows from Operating Activities
The net cash flow provided by operating activities totaled $180.9 million and $214.4 million for the nine months ended September 30, 2025 and 2024, respectively. Our cash flows provided by operating activities generally consist of the net cash generated by our hotel operations, the cash paid for corporate expenses and other working capital changes. Refer to the "Results of Operations" section for further discussion of our operating results for the nine months ended September 30, 2025 and 2024.
Cash flows from Investing Activities
The net cash flow used in investing activities totaled $88.1 million for the nine months ended September 30, 2025 primarily due to $111.7 million in capital improvements and additions to our hotel properties and other assets. The net cash flow used in investing activities was partially offset by $23.6 million in proceeds from the sale of a hotel property.
The net cash flow used in investing activities totaled $246.3 million for the nine months ended September 30, 2024
primarily due to a $122.8 million acquisition of a fee simple interest in our Wyndham Boston Beacon Hill hotel property, a
$35.9 million acquisition of a hotel property, and $107.0 million in capital improvements and additions to our hotel properties
and other assets. The net cash flow used in investing activities was partially offset by $19.5 million in proceeds from the sales
of two hotel properties.
Cash flows from Financing Activities
The net cash flow used in financing activities totaled $122.1 million for the nine months ended September 30, 2025 primarily due to $100.0 million in repayment of our Revolver, $28.6 million paid to repurchase common shares under our share repurchase programs, $87.9 million in distributions to shareholders and unitholders, $3.6 million paid to repurchase common shares to satisfy employee tax withholding requirements, and $2.1 million in deferred financing cost payments. The net cash flow used in financing activities was partially offset by $100.0 million in borrowings on a term loan.
The net cash flow used in financing activities totaled $99.1 million for the nine months ended September 30, 2024. The
sources of cash included $500.0 million in borrowings on a term loan and $200.0 million in borrowings on our Revolver. The
uses of cash included $400.0 million in repayment of a term loan, $200.0 million in repayment of a maturing mortgage loan,
$100.0 million in repayment of our Revolver, $19.0 million paid to repurchase common shares under our share repurchase
programs, $65.8 million in distributions to shareholders and unitholders, $9.0 million paid to repurchase common shares to
satisfy employee tax withholding requirements, and $5.3 million in deferred financing cost payments.
Capital Expenditures and Reserve Funds
We maintain each of our hotel properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements. The cost of routine improvements and alterations are paid out of FF&E reserves, which are funded by a portion of each hotel property's gross revenues. Routine capital expenditures may be administered by the property management companies. However, we have approval rights over the capital expenditures as part of the annual budget process for each of our hotel properties.
From time to time, certain of our hotel properties may undergo renovations as a result of our decision to upgrade portions of the hotels, such as guestrooms, public space, meeting space, and/or restaurants, in order to better compete with other hotels and alternative lodging options in our markets. In addition, upon acquisition of a hotel property we often are required to complete a property improvement plan in order to bring the hotel up to the respective franchisor's standards. If permitted by the terms of the management agreement, funding for a renovation will first come from the FF&E reserves. To the extent that the FF&E reserves are not available or sufficient to cover the cost of the renovation, we will fund all or the remaining portion of the renovation with cash and cash equivalents on hand, our Revolver and/or other sources of available liquidity.
With respect to some of our hotels that are operated under franchise agreements with major national hotel brands and for some of our hotels subject to first mortgage liens, we are obligated to maintain FF&E reserve accounts for future capital expenditures at these hotels. The amount funded into each of these reserve accounts is generally determined pursuant to the management agreements, franchise agreements and/or mortgage loan documents for each of the respective hotels, and typically ranges between 3.0% and 5.0% of the respective hotel's total gross revenue. As of September 30, 2025, approximately $29.2 million was held in FF&E reserve accounts for future capital expenditures.
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RLJ Lodging Trust published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 20:36 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]