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CorePoint Lodging Inc. (CPLG)
Q3 2020 Earnings Call
Nov 5, 2020, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Thank you for standing by, and welcome to the Third Quarter 2020 CorePoint Lodging Inc. Earnings Conference Call. [Operator Instructions] I'd now like to hand the conference over to your speaker today, Ms. Becky Roseberry. Thank you. Please go ahead.
Becky Roseberry -- Senior Vice President-Finance
Thank you. Good afternoon, and welcome to CorePoint Lodging's third quarter 2020 earnings conference call. In a moment, we will have remarks from Keith Cline, our CEO; and Dan Swanstrom, our CFO. Rob Song, our SVP of Investments; and Howard Garfield, our CAO, are also on the line with us.
Before we start, I would like to remind everyone that our remarks today will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and forward-looking statements made today speak only to our expectations as of today. We do not undertake any duty to update forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. For more details on some of these risks, please refer to the Risk Factors section of the Company's most recent annual report on Form 10-K as supplemented by the Company's quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 10th, 2020.
In today's remarks, we will also refer to certain non-GAAP financial measures. Corresponding GAAP measures and a reconciliation of non-GAAP measures to GAAP metrics are provided in our earnings release, which is available on our website at corepoint.com.
Finally, for those listening to a replay of this call after November 5th, 2020, we remind you that this presentation will not be updated, and it is possible that the information discussed will no longer be current.
With that, I will now turn the call over to Keith.
Keith A. Cline -- President and Chief Executive Officer
Thank you, Becky. Good afternoon everyone and welcome to our third quarter call. We're pleased you could join us today. Today I would like to provide an operational update highlighting our continued COVID-19 response efforts, including reducing expenses and preserving liquidity and an update of our current cash burn levels. I will also provide a brief update on the system platform improvements under way with Wyndham and on our real estate disposition strategy. Dan will then review our operating results, liquidity profile, balance sheet and provide details on non-core hotel sales.
Starting with operations. We are pleased to report that we generated $12 million of positive hotel level adjusted EBITDAre. As we noted in our second quarter call, all of our hotels are fully open which compares favorably to when we had 30 hotels that were temporarily not accepting transient guests. Since that time in early second quarter we've experienced a marked improvement in operating results with a significant RevPAR Index outperformance, year-over-year RevPAR change for the third quarter that outperformed the broader industry and comparable occupancy of 52% for the third quarter. This recent performance is driven primarily by leisure travel, which currently represents approximately two-thirds of our bookings with weekends outperforming weekdays and relative outperformance in drive to destinations, including those in Florida, Arizona and California.
In addition to leisure, we continue to see some recovery in certain segments of corporate travel related to essential businesses such as construction, transportation and project-related businesses. All of our cost containment efforts at the property level remain in place and will continue to stay in place until we see a return to pre-pandemic operating levels. To remind everyone these cost containment efforts include reduced staffing levels, elimination of all non-essential amenities and the freezing of all spending at the hotels to only what is needed -- what is essential to run the hotel safely while serving our guests during this challenging time. Our revised labor standards reflect a significant reduction in housekeeping hours driven by lower occupancy as well as reductions in areas such as breakfast, maintenance, van drivers and guest service associates to better match our cost structure with the number of rooms sold. All of these cost containment efforts are designed to reduce our cash burn rate.
With an occupancy level of approximately 52% and RevPAR of approximately $37, we saw a positive $12 million of property level adjusted EBITDAre for the quarter. This positive hotel level performance drove us to an operating cash breakeven level for the total Company excluding capital expenditures.
Our total cash interest expense was approximately $8 million for the quarter and our cash corporate G&A was approximately $4 million for the quarter. Additionally, as Dan highlighted in our last few calls, we have significantly scaled back all non-essential capital expenditures to an estimated annual spend of $15 million to $20 million. Even with this significant recovery from the lows in April, we remain cautious about the uncertainty in the months ahead for the lodging industry as we navigate the ongoing global pandemic October revenue stats, typically the strongest month of the fourth quarter, were generally in line with our expectations. As we look ahead to the remainder of the fourth quarter of this year and the first quarter of next year and consistent with what we have noted in the past, these two quarters are historically part of our slower non-peak season. If those historical trends hold, we recognize that there is potential for a softening in operating metrics during these periods. But we are prepared to adjust our cost control initiatives as overall business conditions evolve.
As it relates to the systems platform improvements under way with Wyndham, the implementation of the enhanced dynamic best available rate-setting tool is required under the Wyndham settlement to be completed no later than the end of 2020. Wyndham continues to work toward meeting this remaining deliverable under our settlement.
Now to our real estate strategy. As we noted on our previous call, we experienced a recovery in the back half of the second quarter in the pace of our asset sales from a slowdown when the pandemic first hit and this recovery has continued to date. Our investments team has been very active on existing transaction closings, signing new deals and having dialog with prospective buyers, Dan will provide additional results on recent sales activity in a few moments.
As we continue to be encouraged by the significant buyer demand that we are seeing for our La Quinta branded hotels and the pace of our asset sales, we realize there could be some macro uncertainty and headwinds in the months ahead. But we are pleased with our results to-date in 2020 with 51 hotels sold for a combined gross sales price of approximately $233 million at an attractive multiple of 2.6 times 2019 revenue. As we have noted in the past, this is a multi-year process and we believe we can continue to generate significant value through this non-core disposition strategy.
Before I hand the call over to Dan, I want to extend a heartfelt thank you to all the frontline associates and field leadership working diligently to service guests during these unprecedented times and for all of their efforts related to cost containment and cash preservation goals at CorePoint. I also want to thank the corporate team at CorePoint for their hard work and dedication during these times.
With that I will turn the call over to our CFO, Dan Swanstrom. Dan?
Daniel E. Swanstrom -- Executive Vice President, Chief Financial Officer
Thank you, Keith, and good afternoon everyone. I will start today by providing a brief review of the third quarter operating results and recent trends. I will also provide updates on our liquidity position, balance sheet and non-core disposition strategy. The comparable RevPAR decline of approximately 42% during the third quarter was driven by a 24% decrease in ADR and a 1,650 basis point decline in occupancy. As expected, the decrease in year-over-year revenues is primarily due to the significant reduction in room demand resulting from the impact of COVID-19 as well as the impact of sold hotels. This contributed to the decline in adjusted EBITDAre to $8 million for the third quarter.
On a sequential basis, the positive $8 million of adjusted EBITDAre compares favorably to the negative $8 million generated in the second quarter of 2020. As we have highlighted on our recent calls, we continue to believe that our portfolio of select service hotels, predominantly focused on the midscale segments, is well positioned to capture the current levels of transient room demand. Hotel room demand was generally consistent during the third quarter with comparable occupancy of 52%. Our portfolio footprint is mostly in suburban markets near multiple demand generators and we are benefiting from leisure and other guest demand for drive-to destination and interstate adjacent hotels. These characteristics have proven to be favorable for the CorePoint portfolio relative to the broader industry's recent operating performance.
For the month of October, preliminary operating metrics were in line with the month of September with comparable Occupancy of 52% and comparable RevPAR of $36. These results were primarily driven by the continued strength of leisure oriented weekend travel room demand. From a liquidity perspective, our cash balance today is approximately $175 million, which excludes lender and other escrows of approximately $33 million. Our current liquidity reflects the operational cash breakeven position before capex for the total Company that we achieved in the third quarter. As we remain in a challenging lodging environment, our near-term priorities will continue to be focused on cost containment and capital preservation initiatives.
Now to our balance sheet. Since the end of the second quarter of this year, we have paid down over $100 million of total debt outstanding. As of today, we have paid down our CMBS debt to $761 million through the continued use of net proceeds from asset sales and we have paid down our revolver balance drawn to $95 million. As a reminder, as part of our recent revolver loan amendment, we are required to repay an additional $10 million of our revolver balance outstanding in $5 million per month increments later this month and in December. Our current weighted average interest rate is approximately 3.2%.
Turning to our disposition strategy. We continue to believe there is compelling strategic rationale for our non-core disposition program and narrowing our focus to a go-forward core portfolio of 105 hotels focused on our higher quality and growth potential assets that are primarily located in top 50 MSAs.
During the third quarter, we closed on the sale of 20 hotels for total gross proceeds of approximately $97 million. Subsequent to quarter-end, we have closed on the sale of one additional hotel for total gross proceeds of approximately $7 million. These transactions were completed at attractive valuations, an average 2019 revenue multiple of approximately 2.6 times, 2019 hotel adjusted EBITDAre multiple of approximately 18 times and about $41,000 on a price per key basis. We have -- also have an additional 22 hotels under contract with qualified buyers that are expected to generate total gross proceeds of approximately $110 million.
The successful execution of our non-core hotel disposition program continues to be a proven value creator. We will continue to be patient and thoughtful in our execution of this non-core disposition program to realize meaningful value for these hotels.
With that, we will open the line for your questions. Operator?
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from the line of Chris Woronka with Deutsche Bank. Your line is now open.
Chris Woronka -- Deutsche Bank -- Analyst
Hey. Good afternoon, guys. And --
Keith A. Cline -- President and Chief Executive Officer
Hey, Chris.
Chris Woronka -- Deutsche Bank -- Analyst
Congratulations on getting back to the positive EBITDA and the breakeven cash. Wanted to ask about the room rates, and I know a lot of this is just going to be mix shift. But is there any way to maybe give us an update on the channel mix of where the bookings are coming from and kind of where like-for-like rates are on say the leisure business you do have?
Keith A. Cline -- President and Chief Executive Officer
Well, obviously as you think about leisure travel, I mean right now that's about two-thirds of our booking. So with that, you can imagine that weekends on a relative basis are outperforming weekdays. You kind of combine that with a booking window that has become even shorter than it was right pre-pandemic because obviously before the pandemic, we experienced a fairly short booking window in a low level of typical GDS group business for quite some time. So I would characterize an increase in mix shift toward property direct, right, has seen the biggest benefit during this period of time, because that really is reflective of the strengthening transient room demand that we're seeing, primarily driven by leisure.
And as Dan mentioned in his prepared comments, you think about the locations of our properties primarily being kind of interstate adjacent with transient drive-through markets, we are -- given our market share gains, we are seeing more than our fair share of that business that's out there.
Chris Woronka -- Deutsche Bank -- Analyst
Okay. I appreciate that. And then on the asset sales, can you just maybe comment a little bit about the -- are the buyers, obviously they're well capitalized even though these are lower dollar -- lower dollars versus full-service hotels. But can you comment a little bit about the nature of the buyers? Are they planning to keep those as hotels?
Keith A. Cline -- President and Chief Executive Officer
Yeah. Obviously there -- Chris, as we've talked about over many years with this portfolio, there's always that opportunity where you have a redevelopment project, right, that could occur. But as I look at these hotels, the vast majority of these transactions, certainly are people that are interested in offering them as a hotel and keeping the La Quinta brand.
As we've talked about, within this disposition strategy there is real value to these hotels continuing to operate as a La Quinta. And we're certainly more than encouraged to see the pace of our properties kind of maintained after that slowdown that we talked about in our last call.
Now the typical buyer of these hotels are the typical owners of people of select service products at markets across the country. So it's a buyer that we know well. It's a buyer that in many cases is already a franchisee of Wyndham or certainly a franchisee at this price point out there in the industry.
Chris Woronka -- Deutsche Bank -- Analyst
Okay. Very helpful. And then just a housekeeping question, I guess, maybe for Dan. The $5 million in November and December that will be used to pay down the revolver, does that go away after December or is that going to continue for a period of time?
Daniel E. Swanstrom -- Executive Vice President, Chief Financial Officer
Yeah, Chris, it's just -- as part of our revolver amendment that we executed earlier this year, we agreed to repay $25 million on our revolver in totality. Those were in $5 million per month increments that started in August. So we have one remaining in November and one remaining in December. That will bring our revolver balance down to $85 million. And that's it in terms of the required paydowns through the maturity.
Chris Woronka -- Deutsche Bank -- Analyst
Okay. Very good. Thanks, guys.
Keith A. Cline -- President and Chief Executive Officer
Thanks, Chris.
Operator
As there are no further questions at this time, please proceed.
Keith A. Cline -- President and Chief Executive Officer
Well, I want to thank everybody for their time today and certainly thank you for your continued interest in CorePoint Lodging. Have a good day.
Operator
[Operator Closing Remarks]
Duration: 18 minutes
Call participants:
Becky Roseberry -- Senior Vice President-Finance
Keith A. Cline -- President and Chief Executive Officer
Daniel E. Swanstrom -- Executive Vice President, Chief Financial Officer
Chris Woronka -- Deutsche Bank -- Analyst
