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CorePoint Lodging Reports Second Quarter 2019 Results

Wednesday, August 14, 2019
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IRVING, TX--CorePoint Lodging Inc. (NYSE: CPLG) (“CorePoint” or the “Company”), a pure play select-service hotel owner strategically focused on the midscale and upper midscale segments, today reported operational and financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 and Subsequent Highlights

Net loss of $19 million, or $0.32 loss per fully diluted share
Comparable RevPAR of $59.88, a decrease of 6.1% from the same period in 2018 with 455 basis points of RevPAR Index market share decline
Adjusted EBITDAre of $46 million
Adjusted FFO attributable to common stockholders of $29 million, or $0.50 per fully diluted share
Sold four non-core hotels for a combined gross sales price of approximately $19 million. Subsequent to quarter end, sold seven non-core hotels for a combined gross sales price of approximately $29 million. As a result, the Company has sold 13 hotels for a combined gross sales price of approximately $53 million in 2019
An additional 27 hotels are under contract with qualified buyers, expected to generate over $100 million of gross proceeds, that the Company expects to close by the end of 2019
To date in 2019, the Company has repurchased 2.2 million shares of its common stock at an average price of $11.70 per share for an aggregate purchase price of approximately $26 million
Second quarter dividend of $0.20 per share of common stock was paid on July 15, 2019 to holders of record on June 28, 2019

“After a solid start to the year with comparable RevPAR growth in the first quarter, we experienced a material underperformance in our hotels during the second quarter of 2019,” said Keith Cline, President and Chief Executive Officer of CorePoint. “While we expected the second quarter to be our weakest comparable RevPAR quarter year-over-year in 2019, primarily due to the anticipated headwinds in our oil-impacted markets, we believe the underperformance of our hotels is well outside normal expectations and reflects the revenue disruption we experienced following the transition and integration of our hotels to our third-party manager’s platforms in April. We are pursuing all remedies at our disposal, including working with our third-party manager to address this continued disruption, to bring the performance of our hotels back in line with our expectations as quickly as possible.”

Mr. Cline added, “The pursuit of strategic initiatives to unlock the value in our portfolio through non-core asset sales has continued to generate interest among potential buyers and has reinforced our belief in the demand for these properties we originally anticipated. During the second quarter and to date in the third quarter, we have completed the sale of 11 hotels totaling 1,341 rooms for gross sales proceeds of $48 million. We have generated a total of $53 million in gross sales proceeds at strong valuation levels so far in 2019, and the sizable number of sales transactions we have under contract or in active negotiations gives us confidence this strategic initiative will enable us to continue to pay down debt and fund other value creation opportunities, including share repurchases.”

For the three and six months ended June 30, 2018, historical balance reflects, for accounting and financial reporting purposes, La Quinta as being spun-off from CorePoint as of January 1, 2018. With this presentation, the La Quinta franchise and management business is reported as discontinued operations.

For the three and six months ended June 30, 2018, amounts are calculated on a pro forma basis. Refer to “Pro Forma Financial Information” below and tables attached to this press release for a discussion and reconciliation of the Pro Forma financial information and adjusted results of operations.

Comparable hotel portfolio includes 298 hotels of the total 308 hotels owned as of June 30, 2019.

Second Quarter 2019 Financial and Operating Results

The Company reported net loss of $19 million, or $0.32 loss per fully diluted share, for the quarter ended June 30, 2019, compared to net loss of $48 million, or $0.82 loss per fully diluted share, for the quarter ended June 30, 2018. The year-over-year difference is primarily due to the loss on discontinued operations, loss on extinguishment of debt and spin-off and reorganization expenses incurred in the quarter ended June 30, 2018. These expense decreases were partially offset by a decrease in revenue and a full quarter of reported management and royalty fees for the quarter ended June 30, 2019 as compared to the same period in 2018.

Comparable RevPAR for the second quarter of 2019 decreased 6.1% over the same period of 2018, driven by a 4.5% decrease in comparable ADR and 120 basis points decrease in comparable Occupancy. Top performing markets included Long Island, Myrtle Beach, Orlando, and Phoenix.

Adjusted EBITDAre for the second quarter of 2019 was $46 million as compared to $58 million on a pro forma basis for the same period in 2018. Decreases in rooms revenue during the second quarter of 2019 were partially offset by a corresponding decrease in management, royalty, and other brand fees on a pro forma basis. Excluding the effect of all the assets sold over the trailing twelve months ended June 30, 2019, Adjusted EBITDAre for the second quarter would have decreased by approximately $11 million year-over-year on a pro forma basis. Additionally, further excluding the effect of the four properties that experienced displacement in the second quarter (see footnote 2 under Outlook), Adjusted EBITDAre for the second quarter would have decreased by approximately $9 million year-over-year on a pro forma basis.

Dispositions

In May 2019, the Company sold three hotels, totaling 395 rooms for a total gross sales price of approximately $16 million. Two of the properties sold were located in Savannah, Georgia and one property was located in Aurora, Colorado. The net proceeds from these sales were used to repay debt outstanding on the CMBS Loan.

In June 2019, the Company sold one 150-room hotel, in Oakbrook Terrace, Illinois, for a gross sales price of approximately $3 million. This hotel had been non-operational since 2016.

Subsequent to quarter end, in July and August 2019, the Company sold seven hotels, totaling 796 rooms for a total gross sales price of approximately $29 million. Two of the properties sold were located in Birmingham, Alabama, one property was located in Mobile, Alabama, one property was located in Gurnee, Illinois, one property was located in Jackson, Tennessee, one property was located in Memphis, Tennessee, and one property was located in Abilene, Texas. A portion of the net proceeds from these sales, totaling $10 million, was used to repay debt outstanding on the CMBS Loan.

As of August 13, 2019, the Company has 27 hotels under contract with qualified buyers, expected to generate over $100 million of gross proceeds, that it expects to close by the end of 2019. There can be no assurance as to the timing of any future sales, whether any approvals required from under applicable franchise agreements will be obtained, or whether such sales will be completed at all.

Capital Investments

The Company invested approximately $25 million in the second quarter of 2019 in capital improvements. As of June 30, 2019, all 54 hotels in the Company’s strategic repositioning program, except for one property in Los Angeles, California, have completed the construction phase of their renovations. The Company expects to complete construction on the one remaining repositioning hotel in the third quarter of 2019.
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