REITs work to mitigate COVID-19 impact

As of the end of last week, Chatham Lodging Trust President/CEO Jeffrey Fisher said the REIT's 134 hotels, including the Hampton Inn by Hilton Portland (Maine) Downtown Waterfront, remained open. Photo credit: Hilton

In the latter half of last week, three real estate investment trusts—Chatham Lodging Trust, Park Hotels & Resorts and Summit Hotel Properties—offered insight into the steps they have had to take to mitigate the financial impact of the COVID-19 pandemic.

Chatham Lodging Trust

Thursday afternoon, Chatham Lodging Trust provided an update on how its 134 hotels had been performing during the pandemic.

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“The hotel industry is in the midst of unprecedented disruption due to the extreme severity of the COVID-19 pandemic, and occupancy across the hotel industry has plummeted to levels never before experienced,” Jeffrey Fisher, Chatham’s president/CEO, said in a statement. “Our hotels are no different, but contrary to other hotel companies that are closing the majority of their hotels, our hotels are faring a bit better with occupancy over the last week of 19 percent across our portfolio. Thankfully, we have been able to provide accommodations to our nation’s military, infrastructure related workers, first responders and critical medical workers dedicated to ending this pandemic. Unfortunately, our hotels also have had to lay off, furlough or significantly reduce hours for thousands of team members over the last few weeks. Conditions may change that warrant closing certain locations, but as of today, all hotels are open.”

Chatham listed several actions it had taken to mitigate the operating and financial impact of COVID-19, including:

  • Suspending its monthly dividend, preserving approximately $5.3 million per month and approximately $64 million on an annual basis.
  • Reducing its 2020 capital expenditures budget by approximately $10 million, or 45 percent.
  • Drawing down cash on its unsecured credit facility, increasing its cash liquidity position to approximately $55 million.
  • Temporarily reducing compensations for its executive officers.
  • Lessening compensation for its board of trustees.

Park Hotels & Resorts

Thursday morning, Park Hotels & Resorts offered its update. Of its 60 hotels, it said nearly half had suspended or were suspending operations. The REIT said it expects to keep its remaining hotels open under reduced operations so long as incremental savings are achieved.

The REIT noted it and its hotel management companies were pursuing alternative sources of revenue from applicable government authorities and hospitals such as providing temporary lodging for first responders, other medical personnel, military personnel, displaced guests and local residents.

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As a precautionary measure, Park said it had drawn the remaining $650 million of its $1 billion unsecured revolving credit facility, bringing the REITs cash on hand to approximately $1.3 billion. On April 15, it plans to pay from these funds its previously announced quarterly dividend of $0.45 per share.

Summit Hotel Properties

Summit Hotel Properties, a REIT with 72 hotels in its portfolio, provided its own update Wednesday evening. The company outlined several steps it had taken to mitigate COVID-19’s financial impact:

  • It implemented comprehensive cost reduction initiatives, including the reduction of labor and elimination of certain services and amenities, at all hotels. Additionally, it said it will temporarily suspend operations at certain hotels in response to specific government mandates or as a result of adverse market conditions.
  • The REIT postponed all nonessential capital improvement projects planned for 2020 beyond those already completed or substantially complete, which it expected to reduce total capital expenditures by approximately $35 million.
  • It said it intends to suspend the declaration and payment of dividends on its common stock and operating partnership units beginning with the first quarter of 2020. This, it said, will conserve $19 million of cash quarterly, or $75 million on an annualized basis.
  • The REIT drew an additional $125 million on its $400 million unsecured revolving credit facility.