Condor Hospitality Trust Reports Third Quarter 2021 Results

Condor Hospitality Trust, Inc. (NYSE:CDOR) (the "Company") today announced results of operations for the third quarter 2021.

THIRD QUARTER 2021 FINANCIAL HIGHLIGHTS

• Portfolio Revenue Per Available Room (RevPAR): The 15 hotels Same-Store RevPAR in the third quarter 2021 increased 74.4% to $83.00 compared to $47.60 in the third quarter 2020. Same-Store Average Daily Rate (ADR) increased 31.5% to $117.79 and Same-Store occupancy increased 32.6% to 70.47% in the third quarter 2021 compared to the same period in 2020.
• Net Loss: Net Loss Attributable to Common Shareholders was ($6.1) million or ($0.44) per diluted share in the third quarter 2021 compared to ($5.0) million or ($0.42) per diluted share for the same period in 2020.
• Adjusted EBITDAre*: Adjusted EBITDAre increased in the third quarter 2021 by 514.6% to $4.2 million from $0.7 million for the same period in 2020.
• Adjusted Funds from Operations*: Adjusted Funds from Operations increased $2.8 million in the third quarter 2021 to $1.4 million or $0.10 per diluted share a 206% increase when compared to ($1.3) million or ($0.11) per diluted share in the same period in 2020.
• Same-Store Hotel EBITDA*: Same-Store Hotel EBITDA was $5.3 million in the third quarter 2021, an increase of 238.3% from the same period in 2020. Margin grew 1,680 bps to 34.5% in the third quarter 2021 compared to 17.7% in the same period in 2020.

MANAGEMENT COMMENTARY

Bill Blackham, Condor's Chief Executive Officer, commented: "Condor's investment strategy of acquiring premium branded high-quality newer hotels located primarily in secondary markets in locations attractive to both leisure and business transient customers has been the driver for continuing outstanding performance in the third quarter of 2021, similar to what was experienced in prior periods this year. Strong leisure demand combined with the modest levels of business transient demand enabled the Condor portfolio to achieve occupancy of over 70% with an ADR of almost $118 resulting in a $83 RevPAR. Our cost savings initiatives, combined with the improving market conditions that allowed aggressive ADR pricing, resulted in significantly improved bottom line results. Hotel EBITDA was approximately $5.3 million for the quarter with margins exceeding 34% and while a very good result, more importantly, this is an extremely large improvement to the third quarter in 2020. It represents 85.9% of the 2019 third quarter Hotel EBITDA, and in September 2021 80% of September 2019 Hotel EBITDA and the 34.5% margins comparable to 34.7% margins in the third quarter of 2019. The portfolio is experiencing cost pressures driven by lack of labor availability and to a lesser extent supply issues.

While net income is not a widely followed metric in the REIT space, it is important to point out that the $(6.1) million net (loss) in the quarter includes a $3.5 million charge for derivative valuation linked to the $10 million bridge loan with conversion rights to common stock and, because we did not close a rights offering a charge of $0.7 million for the 25% interest rate that accrues on the loan beginning July 1, 2021. Additionally noteworthy is that the sequential monthly portfolio improvement that began 17 months ago in May 2020 that accelerated in the second quarter continued into the third quarter. The third quarter portfolio performance was very respectable when compared to the third quarter 2019 occupancy of 78.1%, ADR of $120.81 and RevPAR of $94.31."

On June 21, 2021, the Company announced that its board of directors is evaluating strategic alternatives to enhance shareholder value and that a marketing process is being led by Hodges Ward Elliott. On September 23, 2021, the Company announced that it had signed a contract with Blackstone to sell the entire portfolio expected to close before year end. The Company does not intend to discuss or disclose developments with respect to the sale unless and until otherwise determined that further disclosure is appropriate or required by regulation or law.

The following table summarizes key hotel statistics during the third quarter of 2021 compared to the third quarter of 2020 and 2019:

*Please see the Reg. G reconciliation tables at the end of this release. Financial data presented above includes results from prior to our 100% ownership of Atlanta Aloft.

OPERATIONS UPDATE

• All Hotels Open: All of Condor's hotels remain open with expanded and repetitive health and sanitation measures in place. The Company in April 2020 had closed 2 of its hotels but resumed full operations in July 2020.
• Enhanced Asset Management Efforts: The Company working together with its third-party management companies expanded sales efforts to capture demand related to medical, hospital and university services and for the numerous disaster recovery and infrastructure improvement and reconstruction projects that create demand in our hotel markets. We continue to aggressively pursue leisure, government, athletic and local and regional business related to travel in our hotel markets. Since March 2020, the Company, working with our third-party management companies, have implemented cost elimination/cost reduction initiatives at our hotels through a variety of measures involving labor, services, amenities, contracts, and taxes. As a result of these initiatives, Hotel EBITDA has been positive and has, subject to seasonality affecting certain months, increased from May 2020 through the end of September 2021 and our hotel EBITDA margins have improved, subject to seasonality in certain months, from negative in April 2020 to 32.2% in September 2021.

CASH FLOW BEFORE CAPITAL EXPENDITURES

The Company's results from hotel operations significantly exceeded the amount required to cover debt service costs for the third quarter of 2021 and resulted in positive cash flow of $1.3 million.

CORPORATE LOAN FACILITY

On November 19, 2020 the Company amended the credit agreement for its $130 million revolving credit facility. The key modifications and enhancements include:

• Loan maturity was extended to January 2, 2023
• Financial covenant compliance was suspended until September 30, 2021
• Debt yield and leverage ratio covenants were eliminated and replaced with a borrowing base debt service coverage ratio
• The debt service and fixed charge covenants, when applicable on September 30, 2021, were eased from 1.5X to 1.0X and ramp up to 1.5X on September 30, 2022. Importantly, beginning with the September 30, 2021 calculations, quarterly figures are annualized until the quarter ending June 30, 2022 which will use the trailing 12 months figures
• Borrowing availability was increased to $13.4 million
• Dividends suspension was modified to allow the payment of common and preferred dividends when defined financial conditions are achieved.

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

As of September 30, 2021, the Company had cash and cash equivalents (including restricted cash) of $12.2 million and available revolver borrowing capacity of $8.3 million. As of September 30, 2021, the Company had total outstanding long-term debt of $169 million associated with assets held for use with a weighted average maturity of 1.4 years and a weighted average interest rate of 4.52%.

CAPITAL INVESTMENTS

The Company invested $0.2 million in capital improvements throughout the portfolio in the three months ended September 30, 2021 to upgrade its properties and maintain brand standards.

OUTLOOK AND GUIDANCE

The Company has suspended guidance until further notice.

DIVIDENDS

On November 19, 2020, the Company amended its credit facility to permit payment of cash dividends to common and preferred shareholder when defined financial conditions are achieved. The Company has not currently met the financial conditions permitting payment of cash dividends.

EARNINGS CALL

The Company will not be conducting a third quarter earnings conference call.

About Condor Hospitality Trust, Inc.

Condor Hospitality Trust, Inc. (NYSE:CDOR) is a self-administered real estate investment trust that specializes in the investment and ownership of upper midscale and upscale, premium-branded, select-service, extended-stay, and limited-service hotels in the top 100 Metropolitan Statistical Areas ("MSAs") with a particular focus on the top 20 to 60 MSAs. The Company currently owns 15 hotels in 8 states. Condor's hotels are franchised by a number of the industry's most well-regarded brand families including Hilton, Marriott, and InterContinental Hotels.

Forward-Looking Statement

This news release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "anticipate", "estimate", "believe", "continue", "project", "plan", the negative version of these words or other similar expressions. Readers are cautioned not to place undue reliance on any such forward-looking statements.

All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in economic conditions generally and the real estate market specifically, legislative/regulatory changes (including changes to laws governing the taxation of real estate investment trusts), availability of capital, risks associated with debt financing, interest rates, competition, supply and demand for hotel rooms in our current and proposed market areas, policies and guidelines applicable to real estate investment trusts, risks related to uncertainty and disruption in global economic markets as a result of COVID-19 (commonly referred to as the coronavirus), and other risks and uncertainties described herein, and in our filings with the Securities and Exchange Commission ("SEC") from time to time. These risks and uncertainties should be considered in evaluating any forward-looking statements.

The forward-looking statements represent Condor's views as of the date on which such statements were made. Condor anticipates that subsequent events and developments may cause those views to change. These forward-looking statements should not be relied upon as representing Condor's views as of any date subsequent to the date hereof. Condor expressly disclaims a duty to provide updates to forward-looking statements, whether as a result of new information, future events or other occurrences.

Additional factors that may affect the Company's business or financial results are described in the risk factors included in the Company's filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

SELECTED FINANCIAL DATA:

Reconciliation of Non-GAAP Financial Measures (Unaudited)

Non-GAAP financial measures are measures of our historical financial performance that are different from measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We report Funds from Operations ("FFO"), Adjusted FFO ("AFFO"), Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), EBITDA for real estate ("EBITDAre"), Adjusted EBITDAre, and Hotel EBITDA as non-GAAP measures that we believe are useful to investors as key measures of our operating results and which management uses to facilitate a periodic evaluation of our operating results relative to those of our peers. Our non-GAAP measures should not be considered as an alternative to U.S. GAAP net earnings as an indication of financial performance or to U.S. GAAP cash flows from operating activities as a measure of liquidity. Additionally, these measures are not indicative of funds available to fund cash needs or our ability to make cash distributions as they have not been adjusted to consider cash requirements for capital expenditures, property acquisitions, debt service obligations, or other commitments.

FFO and AFFO

The following table reconciles net loss to FFO and AFFO for the three and nine months ended September 30, 2021, 2020, and 2019. (in thousands). All amounts presented include our portion of the results of our unconsolidated Atlanta JV.

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net earnings or loss computed in accordance with GAAP, excluding gains or losses from sales of real estate assets, impairment, and the depreciation and amortization of real estate assets. FFO is calculated both for the Company in total and as FFO attributable to common shares and common units, which is FFO reduced by preferred stock dividends. AFFO is FFO attributable to common shares and common units adjusted to exclude items we do not believe are representative of the results from our core operations, including non-cash gains or losses on derivatives and convertible debt, stock-based compensation expense, amortization of certain fees, losses on debt extinguishment, and in-kind dividends above stated rates, and cash charges for acquisition and equity transaction and strategic alternatives costs. All REITs do not calculate FFO and AFFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO and AFFO for similar REITs.

We consider FFO to be a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful indication of our performance. We believe that AFFO provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and FFO, is beneficial to an investor's understanding of our operating performance. We present FFO and AFFO per common share and common unit because our common units are redeemable for common shares. We believe it is meaningful for the investor to understand FFO and AFFO applicable to common shares and common units.

EBITDA, EBITDAre, Adjusted EBITDAre, Hotel EBITDA and Hotel EBITDA Proforma

The following table reconciles net loss to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA for the three and nine months ended September 30, 2021, 2020, and 2019 (in thousands). All amounts present our portion of the results of our unconsolidated Atlanta JV.

We calculate EBITDA, EBITDAre, and Adjusted EBITDAre by adding back to net earnings or loss certain non-operating expenses and certain non-cash charges which are based on historical cost accounting that we believe may be of limited significance in evaluating current performance. We believe these adjustments can help eliminate the accounting effects of depreciation and amortization and financing decisions and facilitate comparisons of core operating profitability between periods. In calculating EBITDA, we add back to net earnings or loss interest expense, loss on debt extinguishment, income tax expense, and depreciation and amortization expense. NAREIT adopted EBITDAre in order to promote an industry-wide measure of REIT operating performance. We adjust EBITDA by adding back net gain/loss on disposition of assets and impairment charges to calculate EBITDAre. To calculate Adjusted EBITDAre, we adjust EBITDAre to add back acquisition and terminated transactions expense and equity transactions and strategic alternatives expense, which are cash charges. We also add back stock –based compensation expense and gain/loss on derivatives and convertible debt, which are non-cash charges. EBITDA, EBITDAre, and Adjusted EBITDAre, as presented, may not be comparable to similarly titled measures of other companies.

We believe EBITDA, EBITDAre, and Adjusted EBITDAre to be useful additional measures of our operating performance, excluding the impact of our capital structure (primarily interest expense), our asset base (primarily depreciation and amortization expense), and other items we do not believe are representative of the results from our core operations.

The Company further excludes general and administrative expenses, other non-operating income or expense, and certain hotel and property operations expenses that are not allocated to individual properties in assessing hotel performance (primarily certain general liability and other insurance costs, land lease costs, and office and banking fees) from Adjusted EBITDAre to calculate Hotel EBITDA. Hotel EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

Hotel EBITDA is intended to isolate property level operational performance over which the Company's hotel operators have direct control. We believe Hotel EBITDA is helpful to investors as it better communicates the comparability of our hotels' operating results for all of the Company's hotel properties and is used by management to measure the performance of the Company's hotels and the effectiveness of the operators of the hotels.

Same-Store Revenue and Hotel EBITDA

The following tables present our same-store revenue, Hotel EBITDA, and Hotel EBITDA margin broken down by property type for the three and nine months ended September 30, 2021, 2020, and 2019 (in thousands) and reconcile these same-store measures to total revenue and Hotel EBITDA as presented above. Same-store results include all our hotels owned at September 30, 2021. Results for the hotels for periods prior to our ownership were provided to us by prior owners and have not been adjusted by us or audited or reviewed by our independent auditors. All amounts presented include our portion of the results of our unconsolidated Atlanta Aloft JV. Results for periods prior to the Company's ownership have not been included in the Company's actual consolidated financial statements and are included here only for comparison purposes.

The following tables present our monthly results presented reconciling net income (loss) to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA, as well as Hotel EBITDA Same-Store and Hotel EBITDA Same-Store margins.