CorePoint sees better results, continues asset sales
 
CorePoint sees better results, continues asset sales
11 NOVEMBER 2020 9:05 AM

CorePoint officials said the REIT saw performance improve during the third quarter and sold 21 noncore assets.

IRVING, Texas—CorePoint Lodging saw marked improvement in operating performance for the third quarter compared to the previous quarter, Keith Cline, president and CEO said on a call to discuss quarterly earnings with analysts.

Recent performance has primarily been driven 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,” he said.

CorePoint has also seen some improvement in the corporate travel segment from “essential businesses such as construction, transportation and project-related businesses,” he said.

Cost-containment initiatives
While performance is improving for some hotels, Cline said CorePoint’s cost-containment initiatives will stay in place until there is a return to pre-pandemic levels.

These cost-containment initiatives include “reduced staffing levels, elimination of all non-essential amenities and the freezing of all spending at the hotels to only what is needed,” he said.

The real estate investment trust has also implemented significant reductions in housekeeping “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,” he said.

CorePoint reported an occupancy level of 52.3% and revenue per available room of $37.35, which was down 42.2% year over year, according to the company’s earnings release.

The company reported $12 million of adjusted property level earnings before interest, taxes, depreciation and amortization for real estate, Cline said.

He added that the positive hotel level performance led to an operating cash break-even level for the company, excluding capital expenditures.

CorePoint’s total cash interest expense was $8 million for the quarter and cash corporate G&A was approximately $4 million, Cline said.

The company has also scaled back all “nonessential capital expenditures to an estimated annual spend of $15 million to $20 million,” he said.

Cautiously moving forward
CorePoint has seen “a significant recovery from the lows in April,” but remains “cautious about the uncertainty in the months ahead for the lodging industry as we navigate the ongoing global pandemic,” Cline said.

He added that the fourth quarter of 2020 and the first quarter of 2021 are expected to be slow as “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,” he said.

Asset sales
CorePoint is still in the process of selling its noncore hotels to focus on a core portfolio of 105 hotels going forward, said Dan Swanstrom, EVP and CFO.

During the third quarter, CorePoint closed on the sale of 20 hotels for total gross proceeds of approximately $97 million, he said.

To-date in 2020, the company has sold 51 hotels for a combined gross sales price of approximately $233 million for a multiple of 2.6 times 2019 revenue, Cline said.

Swanstrom added that CorePoint has “an additional 22 hotels under contract with qualified buyers that are expected to generate total gross proceeds of approximately $110 million.”

As of press time, CorePoint’s stock was trading at $6.03 per share, down 43.3% year to date. The New York Stock Exchange Composite was down 2.1% for the same period.

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