PK - Park Hotels & Resorts Inc. Reports Third Quarter 2023 Results and Announces Special Dividend of $0.77 Per Share

TYSONS, Va., Nov. 01, 2023 (GLOBE NEWSWIRE) -- Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE: PK) today announced results for the third quarter ended September 30, 2023, a special dividend and provided an operational update.

Selected Statistical and Financial Information

References to Park's "Current" hotels and "Current" financial metrics include all 41 consolidated hotels owned as of September 30, 2023, including the 1,921-room Hilton San Francisco Union Square and 1,024-room Parc 55 San Francisco – a Hilton Hotel (collectively, the "Hilton San Francisco Hotels"). References to Park's "Comparable" hotels and "Comparable" financial metrics exclude the Hilton San Francisco Hotels.

(unaudited, amounts in millions, except RevPAR, ADR, Total RevPAR and per share data)

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⁽¹⁾ Amounts are calculated based on unrounded numbers.


Thomas J. Baltimore, Jr., Chairman and Chief Executive Officer, stated, "I am very encouraged by our third quarter results, which were driven by continued RevPAR growth in our key urban markets as well as the continued acceleration of group business. Comparable RevPAR for the third quarter of 2023 increased approximately 3% compared to the third quarter of 2022, or nearly 5% excluding the Casa Marina Key West, Curio Collection, where operations were suspended throughout the third quarter for a comprehensive renovation. Highlights during the quarter include a 7% increase in Comparable RevPAR across our urban portfolio that was driven by the New York Hilton Midtown where RevPAR increased nearly 30% coupled with continued strength at our Hawaii hotels. Group performance also continues to accelerate, with Comparable group revenues for the third quarter of 2023 up 12% year-over-year and 2024 Comparable Group Revenue Pace up nearly 18% compared to the same time last year.

"In addition to our operating achievements, we executed important strategic capital allocation initiatives, including the repurchase of 5.8 million shares of our common stock under our existing repurchase program at a significant discount to our estimated net asset value, and reinvested over $70 million back into our current portfolio, nearly half of which was for the Casa Marina Key West, Curio Collection, where we began to welcome guests back in October. With approximately $1.7 billion of liquidity, we believe we are well-positioned to continue executing on our strategic initiatives, including reshaping our portfolio, investing in strategic ROI projects and opportunistically repurchasing stock and/or acquiring assets, to create long-term value for our shareholders.

"Finally, we have reached a significant milestone in exiting our two Hilton San Francisco Hotels. The hotels have been placed into a court-ordered receivership giving the receiver full authority and control over the hotels’ operations. Consequently, Park no longer has an economic interest in and will not financially support the hotels' operations. With San Francisco still facing an elongated recovery, we firmly believe our difficult but necessary decision to exit these assets and greatly reduce our market exposure is in the best interest of our shareholders.”

Additional Highlights

• In August 2023, repurchased a total of 5.8 million shares under the existing repurchase program at an average price of $13.00 per share, for approximately $75 million;

• In October 2023, the trustee for the $725 million non-recourse CMBS Loan ("SF Mortgage Loan") filed a lawsuit against the borrowers under the SF Mortgage Loan. In connection with the lawsuit, the court appointed a receiver to take control of the Hilton San Francisco Hotels, which serve as security for the SF Mortgage Loan, and their operations, and thus, Park has no further economic interest in the operations of the hotels. The receiver will operate and has authority over the hotels and, until no later than November 1, 2024, has the ability to sell the hotels. The lawsuit contemplates the receivership will end with a non-judicial foreclosure by December 2, 2024, if the hotels are not sold within the predetermined sale period;

• On October 27, 2023, Park's Board of Directors declared a special cash dividend of $0.77 per share in connection with the effective exit from the Hilton San Francisco Hotels, which results in a required additional distribution. The special dividend will be paid on January 16, 2024 to stockholders of record as of December 29, 2023; and
• Park participated in the 2023 Global Real Estate Sustainability Benchmark ("GRESB") assessment, ranking in the top third of all publicly listed GRESB participant companies in the Americas and registering a three-point increase over 2022, continuing the Company's trend of enhancing its overall Environmental, Social and Governance program and making meaningful improvements toward decarbonization.

Operational Update

Changes in Park's 2023 Current ADR, Occupancy and RevPAR compared to the same periods in 2022, and 2023 Current Occupancy were as follows:

Changes in Park's 2023 Current ADR, Occupancy and RevPAR for the three and nine months ended September 30, 2023 compared to the same periods in 2022, and 2023 Current Occupancy for the three and nine months ended September 30, 2023 by hotel type were as follows:

The Current Rooms Revenue mix for the three and nine months ended September 30, 2023 and 2022 were as follows:

Park continued to see improvements in demand as business travel accelerated and group demand continued to return to its urban hotels. During the third quarter of 2023, Comparable group bookings for 2023 increased by over $25 million, or over 110,000 room nights, as compared to the end of June 2023, of which approximately $10 million was recognized during the third quarter. As of the end of September 2023, Comparable Group Revenue Pace and room night bookings for 2023 were nearly 93% and over 86% of what 2019 group bookings were as of the end of September 2019, respectively, with average Comparable group rates exceeding 2019 average group rates by nearly 8% for the same time period. In addition, 2024 Comparable Group Revenue Pace increased nearly 18% compared to the same time last year.

Results for Park's Current hotels in each of the Company’s key markets are as follows:

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⁽¹⁾ Calculated based on unrounded numbers.
⁽²⁾ In mid-May 2023, operations at the Casa Marina Key West, Curio Collection, were suspended for a full-scale renovation.

San Francisco Market Update

In October 2023, the trustee for the SF Mortgage Loan filed a lawsuit against the borrowers under the loan. In connection with the lawsuit, the court appointed a receiver to take control of the Hilton San Francisco Hotels, which serve as security for the SF Mortgage Loan, and their operations, and thus, Park has no further economic interest in the operations of the hotels. Therefore, Park is providing the below Comparable results, which exclude these hotels.

Results for Park's Comparable hotels compared to its Current hotels for the three and nine months ended September 30, 2023 are as follows:

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⁽¹⁾ Calculated based on unrounded numbers.

Results for Park's Comparable urban hotels compared to its Current urban hotels for the three and nine months ended September 30, 2023 are as follows:

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⁽¹⁾ Calculated based on unrounded numbers.

Monthly RevPAR results for Park's Comparable hotels compared to its Current hotels are as follows:

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⁽¹⁾ Calculated based on unrounded numbers.
⁽²⁾ October 2023 Comparable and Current RevPAR are preliminary.

Balance Sheet and Liquidity

As of September 30, 2023, Park's Net Debt was $3.9 billion. Excluding the SF Mortgage Loan, $26 million of restricted cash associated with the Hilton San Francisco Hotels and the $162 million special dividend resulting from Park's effective exit from the Hilton San Francisco Hotels, Net Debt as of September 30, 2023 was $3.4 billion.

As of September 30, 2023, the weighted average maturity of Park's consolidated debt, excluding the SF Mortgage Loan, is 3.7 years. Park's current liquidity is approximately $1.7 billion, including approximately $950 million of available capacity under the Company's revolving credit facility ("Revolver").

Park had the following debt outstanding as of September 30, 2023:

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⁽¹⁾ The loan matures in August 2042 but is callable by the lender with six months of notice. As of September 30, 2023, Park had not received notice from the lender.
⁽²⁾ Calculated on a weighted average basis.
⁽³⁾ In June 2023, Park ceased making debt service payments toward the non-recourse SF Mortgage Loan, and Park has received a notice of default. The stated rate on the loan is 4.11%, however, beginning June 1, 2023, the default interest rate on the loan is 7.11%. Additionally, beginning June 1, 2023, the loan accrues a monthly late payment administrative fee of 3% of the monthly amount due. In October 2023, the trustee filed a lawsuit against the borrowers. In connection with the lawsuit, the court appointed a receiver to take control of the Hilton San Francisco Hotels and their operations, and thus, Park has no further economic interest in the operations of the hotels.
⁽⁴⁾ Park has approximately $950 million of available capacity under the Revolver.
⁽⁵⁾ Excludes $169 million of Park’s share of debt of its unconsolidated joint ventures.

Capital Investments

Through the third quarter of 2023, Park has spent $195 million on capital improvements at its hotels, with $71 million spent during the third quarter of 2023. Park expects to incur approximately $300 million to $325 million in capital improvements during 2023, consisting of $110 million to $120 million on return on investment projects and $190 million to $205 million on maintenance projects. Key current and upcoming projects are summarized below:

Dividends

Park declared a third quarter 2023 cash dividend of $0.15 per share to stockholders of record as of September 29, 2023. The third quarter 2023 cash dividend was paid on October 16, 2023.

The effective exit from the Hilton San Francisco Hotels in October 2023 results in a required additional distribution. Thus, Park's Board of Directors declared a special cash dividend of $0.77 per share on October 27, 2023, which will be paid on January 16, 2024 to stockholders of record as of December 29, 2023.

In addition to the $0.77 special cash dividend, Park plans to declare its fourth quarter dividend before the end of 2023 and currently expects such dividend to be in the range of $0.85 and $0.95 per share, subject to approval by its Board of Directors, consisting of a top-off component of between $0.70 and $0.80 per share and Park's recurring cash dividend of $0.15 per share.

Full-Year 2023 Outlook

Park is not providing a full year 2023 outlook for net income, net income attributable to stockholders, earnings per share, operating income and operating income margin and the accompanying reconciliations as all the information necessary for the calculation of the gain (loss) on derecognition of assets and income tax expense resulting from the Hilton San Francisco Hotels being placed into receivership is not yet available, and Park is unable to reasonably estimate such amounts without unreasonable burden or efforts. These amounts are expected to be material; however, they are not expected to materially affect Park’s outlook for Adjusted EBITDA, Hotel Adjusted EBITDA, Hotel Adjusted EBITDA margin, Adjusted FFO or Adjusted FFO per share. Park expects full-year 2023 operating results to be as follows:

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⁽¹⁾ Park did not provide Comparable metrics in its full year 2023 outlook as of August 2, 2023.
⁽²⁾ Amounts are calculated based on unrounded numbers.

Park's outlook is based in part on the following assumptions:

• Comparable RevPAR for the fourth quarter of 2023 is expected to be between $170 and $180;
• Comparable Hotel Adjusted EBITDA margin for the fourth quarter of 2023 is expected to be between 26.9% and 28.9%;
• Adjusted EBITDA includes Hotel Adjusted EBITDA for the two Hilton San Francisco Hotels of $3 million from January 2023 to October 2023, the period prior to the hotels being placed into receivership;
• Adjusted FFO excludes an incremental $20 million of default interest and late payment administrative fees associated with default of the SF Mortgage Loan beginning in June 2023, which is required to be recognized in interest expense until legal title to the Hilton San Francisco Hotels are transferred;
• Fully diluted weighted average shares for the full-year 2023 are expected to be 214 million, while fully diluted weighted average shares for the fourth quarter of 2023 are expected to be 210 million;
• Includes $15 million of Hotel Adjusted EBITDA disruption from a full-scale renovation at the Casa Marina Key West, Curio Collection, which is expected to be completed in the fourth quarter of 2023; and
• Comparable portfolio as of November 1, 2023 and does not take into account potential future acquisitions and dispositions, which could result in a material change to Park’s outlook.
  

Park's full-year 2023 outlook is based on a number of factors, many of which are outside the Company's control, including uncertainty surrounding macro-economic factors, such as inflation, increases in interest rates, supply chain disruptions and the possibility of an economic recession or slowdown, as well as the assumptions set forth above, all of which are subject to change.

Supplemental Disclosures

In conjunction with this release, Park has furnished a financial supplement with additional disclosures on its website. Visit www.pkhotelsandresorts.com for more information. Park has no obligation to update any of the information provided to conform to actual results or changes in Park’s portfolio, capital structure or future expectations.

Conference Call

Park will host a conference call for investors and other interested parties to discuss third quarter 2023 results on November 2, 2023 beginning at 10 a.m. Eastern Time. Participants may listen to the live webcast by logging onto the Investors section of the website at www.pkhotelsandresorts.com. Alternatively, participants may listen to the live call by dialing (877) 451-6152 in the United States or (201) 389-0879 internationally and requesting Park Hotels & Resorts’ Third Quarter 2023 Earnings Conference Call. Participants are encouraged to dial into the call or link to the webcast at least ten minutes prior to the scheduled start time.

A replay of the webcast will be available within 24 hours after the live event on the Investors section of Park’s website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements related to the anticipated effects of Park's decision to cease payments on its $725 million SF Mortgage Loan and the effects of the lender's exercise of its remedies, including placing such hotels into receivership, as well as Park’s current expectations regarding the performance of its business, financial results, liquidity and capital resources, including anticipated repayment of certain of the Company's indebtedness, the completion of capital allocation priorities, the expected repurchase of the Company's stock, the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts), the effects of competition and the effects of future legislation or regulations, the expected completion of anticipated dispositions, the declaration and payment of future dividends and other non-historical statements. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as the words “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “hopes” or the negative version of these words or other comparable words. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect its results of operations, financial condition, cash flows, performance or future achievements or events.

Forward-looking statements are based on current expectations of management and therefore involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements and Park urges investors to carefully review the disclosures Park makes concerning risk and uncertainties in Item 1A: “Risk Factors” in Park’s Annual Report on Form 10-K for the year ended December 31, 2022, as such factors may be updated from time to time in Park’s filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Except as required by law, Park undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Park presents certain non-GAAP financial measures in this press release, including Nareit FFO attributable to stockholders, Adjusted FFO attributable to stockholders, EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA, Hotel Adjusted EBITDA margin and Net debt. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of its operating performance. Please see the schedules included in this press release including the “Definitions” section for additional information and reconciliations of such non-GAAP financial measures.

About Park

Park is one of the largest publicly-traded lodging REITs with a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value. Park's portfolio currently consists of 43 premium-branded hotels and resorts (excluding the Hilton San Francisco Hotels) with over 26,000 rooms primarily located in prime city center and resort locations. Visit www.pkhotelsandresorts.com for more information.

PARK HOTELS & RESORTS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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PARK HOTELS & RESORTS INC.
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PARK HOTELS & RESORTS INC.
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⁽¹⁾ Included in other gain, net .

PARK HOTELS & RESORTS INC.
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