Shares of convention center and resort real estate investment trust (REIT) Ryman Hospitality (RHP 4.64%) rose by an impressive 19% in February, according to data from S&P Global Market Intelligence. The company reported earnings on Feb. 26, but its share price had started to move higher earlier in the month, so clearly, there was something else afoot.
Those earnings were pretty bad. Fourth-quarter revenues were off by 71%, which left full-year revenues down by 67%. Adjusted funds from operations (FFO) -- a metric that REITs use similarly to the way industrial companies use earnings -- fell to a loss of $0.56 per share in the fourth quarter from a profit of $1.84 in the same period of 2019. The full-year numbers were equally rough, with an adjusted FFO loss of $2.71 per share compared to positive $6.86 per share in 2019. The stock dipped on the news, which is hardly shocking given the dismal numbers.
However, by the time that report was released, Ryman Hospitality's stock had already risen materially for the month. What drove the REIT's share price higher was probably a combination of factors that suggested an improving outlook for its future.
First off, vaccine deployment has investors thinking that we may soon be in a position to resume in-person activities that the pandemic required us to pause. And, in company-specific news, Ryman was able to sell debt early in the month. It started with plans to sell $500 million worth of bonds, but demand allowed it to up that figure to $600 million.
Even better, the interest rate it's paying on the new bonds is 4.5%, compared to the 5% rate on the $400 million in 2023 debt that it paid down with the proceeds from the new issuance. Some of the extra cash from the debt sale was put toward reducing the REIT's revolving debt, further strengthening its balance sheet. This sale also pushed out Ryman's debt maturities, since the new issuance doesn't mature until 2029. This buys it additional breathing space while it works toward a business recovery.
This is a tough time to be in the convention center and hospitality business. Until business travel rebounds and more organizations feel comfortable again with hosting large, in-person gatherings, Ryman Hospitality will have a difficult time getting its conference business back on its feet. And while management was pleased to report that it had rebooked nearly 60% of the room nights canceled due to the coronavirus, as of the end of the year, it was burning through $12 million of cash per month. Things are improving, but there's still a long way to go here.