Strategic Hotels & Resorts Reports Third Quarter 2007 Financial Results

CHICAGO, Strategic Hotels & Resorts, Inc. (NYSE:BEE) today reported results for the third quarter ended September 30, 2007.

  Third Quarter Financial Highlights

  -- Comparable funds from operations (FFO) was $0.39 per diluted share, an
     increase of 11 percent compared with $0.35 in the prior year.  Included
     in third quarter 2007 Comparable EBITDA and FFO is a $1.4 million
     charge, or $0.02 per diluted share, for a lease termination related to
     the planned reorganization of the employees at the Paris Marriott.

  -- Quarterly Comparable EBITDA was $69.6 million, an increase of 25
     percent compared with $55.7 million in the prior year.

  -- North American same store total revenue per available room (Total
     RevPAR) increased 9.8 percent and revenue per available room (RevPAR)
     increased 9.3 percent driven by a 5.2 percent increase in average daily
     rate (ADR) and a 4.0 percent increase in occupancy.  Non-rooms revenues
     grew by 11.0 percent.

  -- Total North American Total RevPAR increased 8.8 percent and RevPAR
     increased 8.6 percent driven by a 4.7 percent increase in ADR and 3.7
     percent increase in occupancy.  Non-rooms revenues grew by 9.6 percent.

  -- European Total RevPAR increased 6.1 percent and RevPAR increased 5.9
     percent driven by a 9.5 percent increase in ADR and partially offset by
     a 3.3 percent decline in occupancy.  Non-rooms revenues grew by 6.8
     percent.

  -- Total North American gross operating profit margins expanded 210 basis
     points.  North American same store EBITDA margins expanded 150 basis
     points.

  -- Total North American gross operating profit per room increased 15.7
     percent.  North American same store EBITDA per room increased 16.9
     percent.

  -- Residential activity contributed $5.9 million in EBITDA and $2.6
     million of Comparable FFO, or $0.03 per diluted share.

  Nine-Month Financial Highlights

  -- Comparable funds from operations (FFO) was $1.20 per diluted share, an
     increase of 7 percent compared with $1.12 in the prior period.

  -- Comparable EBITDA was $205.1 million, an increase of 44 percent
     compared with $142.0 million in the prior year.

  -- Total RevPAR increased 7.4 percent and RevPAR increased 7.5 percent in
     the Total North American portfolio for the nine-month period of 2007.
     Growth was driven by a 5.7 percent increase in ADR and a 1.7 percent
     increase in occupancy. Non-rooms revenues grew by 7.6 percent.

  -- Total RevPAR increased 9.6 percent and RevPAR increased 9.2 percent in
     the North American same store portfolio for the nine-month period of
     2007. Growth was driven by a 6.1 percent increase in ADR and a 2.9
     percent increase in occupancy. Non-rooms revenues grew by 10.6 percent.

  -- Total North American hotel gross operating profit margins expanded 160
     basis points. North American same store property EBITDA margins
     expanded 10 basis points.

  -- Total North American gross operating profit per room increased 12.1
     percent.  North American same store EBITDA per room increased 10.2
     percent.

  Third Quarter Events

  -- The company reached an agreement for $143.0 million, net of deductible,
     with its insurers to settle its claim on the Hyatt Regency New Orleans,
     which was damaged by Hurricane Katrina in 2005.

  -- The company closed on the acquisition of the Hotel Le Parc in Paris,
     France on July 31, a 116-room, unbranded hotel for euro 66.5 million
     from Accor SA.  Concurrently, the company entered into a management
     agreement with Marriott International to operate the hotel under the
     Renaissance brand.

  -- The company closed its joint venture agreement with a real estate
     investment company affiliate of the Government of Singapore Investment
     Corporation Pte Ltd. (GIC RE).  Under the agreement, GIC RE's affiliate
     acquired a 49 percent interest in the company's InterContinental
     Chicago and Hyatt Regency La Jolla hotels.  Additionally, the joint
     venture entered into a long-term asset management agreement with the
     company. The transaction has a gross aggregate value of $450.0 million.

  -- The company defeased $199.5 million of debt previously encumbering the
     Hyatt Regency hotels in Phoenix, La Jolla and New Orleans.

  -- The company appointed Sir David Michels to the newly created consultant
     position of senior European strategist to coordinate and advance the
     company's European strategy.

  -- The company entered into $275.0 million of forward-starting U.S.
     interest rate swaps.

  Subsequent Events

  -- The company purchased approximately 60 acres of ocean front land near
     the Four Seasons Punta Mita Resort in Nayarit, Mexico for a mixed-use
     development. The effective purchase price of $45.8 million will be paid
     in installments through 2009.  The company intends to enter into a
     joint venture on part or all of the land prior to its development.

  -- The company announced it had signed an agreement to sell the Hyatt
     Regency New Orleans to Poydras Properties Hotel Holdings Co., LLC for
     $32.0 million, of which $3.0 million is in the form of a promissory
     note payable in six years. The transaction, subject to certain
     contingencies, is scheduled to close by year end.

  -- The company entered into $200.0 million of forward-starting U.S.
     interest rate swaps and a 77.3 million pounds Sterling swap on the
     mortgage loan secured by the Marriott London Grosvenor Square.

Laurence Geller, chief executive officer said, "Our management team is producing exceptional returns on capital invested under our individualized hotel master plans. Among these accomplishments are the sale of condominiums at the Hotel del Coronado at prices exceeding our expectations. In addition, we settled our insurance claim on, and entered into a contract to sell the Hyatt Regency New Orleans, and recycled capital by closing our joint venture with the Government of Singapore.

"Our future growth has been seeded with the continued investment in our research driven master plans, the opportunistic purchase of the Hotel Le Parc in Paris, and the addition of 60 acres of spectacular ocean front property in Punta Mita, Mexico."

Financial Results

The company reported net income available to common shareholders of $68.5 million, or $0.91 per diluted share for the third quarter of 2007, compared with net income available to common shareholders of $91.4 million, or $1.21 per diluted share for the third quarter of 2006.

For the nine-month period ending September 30, 2007, the company reported net income available to common shareholders of $33.6 million, or $0.45 per diluted share, compared with net income available to common shareholders of $101.7 million, or $1.54 per diluted share in the prior period.

Adjusted EBITDA for the third quarter of 2007 was $136.1 million compared with $143.7 million for the third quarter of 2006. Comparable EBITDA for the third quarter of 2007 was $69.6 million compared with $55.7 million in the third quarter of 2006. Comparable EBITDA for the third quarter of 2007 excludes:

  -- $84.8 million in gains related to the joint venture sale to GIC RE,

  -- $7.4 million write-off of previously deferred costs related to a
     contemplated European financing,

  -- $0.3 million in losses from foreign exchange, and

  -- $10.7 million loss on early extinguishment of debt.

Adjusted EBITDA for the nine-month period ending September 30, 2007 was $226.1 million compared with $218.5 million in the prior year period. Comparable EBITDA for the nine-month period ending September 30, 2007 was $205.1 million compared with $142.0 million in the prior year period. Comparable EBITDA for the nine-month period ending September 30, 2007 excludes:

  -- $84.8 million in gains related to the joint venture sale to GIC RE,

  -- $7.4 million write-off of previously deferred costs related to a
     contemplated European financing,

  -- Loss on early extinguishment of debt of $15.1 million,

  -- Loss on foreign exchange of $3.5 million,

  -- Planning costs related to the New Orleans Jazz District of $0.2
     million,

  -- Loss on sale of assets of $0.2 million,

  -- Impairment losses related to the Hyatt Regency New Orleans of $37.7
     million, and

  -- A benefit related to the previous termination of the management
     agreement at the Marriott Rancho Las Palmas of $0.4 million.

FFO for the third quarter of 2007 was $10.7 million, or $0.14 per diluted share, compared with $25.6 million, or $0.33 per diluted share in the third quarter of 2006. Comparable FFO for the third quarter of 2007 was $29.6 million, or $0.39 per diluted share, compared with $26.7 million, or $0.35 per diluted share in the third quarter of 2006. Comparable FFO for the third quarter of 2007 excludes:

  -- $7.4 million write-off of previously deferred costs related to a
     contemplated European financing,

  -- $10.7 million loss on early extinguishment of debt, and

  -- Loss on foreign exchange, net of tax, of $0.9 million.

FFO for the nine-month period ending September 30, 2007 was $28.3 million, or $0.37 per diluted share, compared with $67.1 million, or $0.99 per diluted share in the prior period. Comparable FFO for the nine-month period ending September 30, 2007 was $92.0 million, or $1.20 per diluted share, compared with $75.4 million, or $1.12 per diluted share for the nine-month period ending September 30, 2006. Comparable FFO for the nine-month period ending September 30, 2007 excludes:

  -- Net tax benefits of $0.2 million related to the previous termination of
     the management agreement at the Marriott Rancho Las Palmas,

  -- Planning costs, net of tax, related to the New Orleans Jazz District of
     $0.2 million,

  -- $7.4 million write-off of previously deferred costs related to a
     contemplated European financing,

  -- Impairment losses related to the Hyatt Regency New Orleans of $37.7
     million,

  -- Loss on foreign exchange, net of tax, of $3.5 million, and

  -- Loss on early extinguishment of debt of $15.1 million.

Residential Activity

The joint venture that owns the Beach Village development at the Hotel del Coronado, of which the company owns a 45 percent interest, closed on sales of 17 of the remaining 24 hotel condominium units generating $48.1 million of venture sales during the third quarter. The sales contributed $6.6 million of EBITDA and $3.4 million of FFO, or $0.05 per diluted share to the company's results. For the nine-month period ending September 30, 2007, 28 of the 35 total hotel condominiums were sold which generated $94.8 million of venture sales contributing $13.2 million of EBITDA and $7.5 million of FFO, or $0.10 per diluted share, to the company's results.

The joint venture that is developing the Four Seasons Residence Club Punta Mita, of which the company owns a 31 percent interest, contributed $0.5 million of EBITDA and $0.3 million of FFO to the company's third quarter results. For the nine-month period ending September 30, 2007, the venture contributed $0.1 million of EBITDA and had a negligible impact on the company's FFO results.

In the third quarter of 2007, the company recorded a $1.2 million charge for the write-off of costs related to exploration of residential conversions at the Fairmont Chicago.

Combined, residential activity contributed $5.9 million of EBITDA and $2.6 million of FFO, or $0.03 per diluted share for the third quarter 2007 and $12.1 million of EBITDA and $6.2 million of FFO, or $0.08 per diluted share for the nine-months ending September 30, 2007.

Quarterly Distribution

The Board of Directors previously declared on August 31, 2007 a quarterly dividend of $0.24 per share of common stock, payable to shareholders of record as of the close of business Wednesday, September 26, 2007. The dividend was paid on October 10, 2007. Additionally, for shareholders of record as of September 14, 2007, the Board declared a quarterly dividend of $0.53125 per share of 8.50 percent Series A Cumulative Redeemable Preferred Stock, $0.51563 per share of 8.25 percent Series B Cumulative Redeemable Preferred Stock, and $0.51563 per share of 8.25 percent Series C Cumulative Redeemable Preferred Stock. The preferred stock dividends were paid on September 28, 2007.

2007 Outlook

For the full year 2007, the company anticipates that Comparable EBITDA will be in the range of $270.3 million to $273.3 million, Comparable FFO will be in the range of $122.3 million to $125.3 million, and Comparable FFO per diluted share in the range of $1.60 to $1.64.

The company's full-year guidance includes the following assumptions:

  -- 2007 North American same store Total RevPAR and RevPAR growth in the
     range of 8.5 percent to 9.5 percent.

  -- 2007 total North American Total RevPAR growth in the range of 6.5
     percent to 7.5 percent, and RevPAR growth in the range of 7.0 percent
     to 8.0 percent.  The total North American portfolio includes all
     consolidated North American properties as of January 1, 2007.

  -- Residential sales contributing $13.8 million in Comparable EBITDA and
     $7.2 million in Comparable FFO, or approximately $0.10 per diluted
     share.  Residential sales contributed $12.1 million in Comparable
     EBITDA and $6.2 million in Comparable FFO, or $0.08 per diluted share
     in the first three quarters of 2007.

  -- Continued operating expenses at the Hyatt Regency New Orleans will
     reduce Comparable EBITDA by $3.5 million or $0.05 per diluted share in
     Comparable FFO.  In the third quarter, Hyatt Regency New Orleans
     operating expenses reduced Comparable EBITDA by $1.5 million and
     Comparable FFO by $0.02 per diluted share.  Guidance assumes closing on
     the sale of the property at the end of the year and does not include an
     assumption for a gain or loss on the sale.

The following tables reconcile projected 2007 net income available to common shareholders to projected Comparable FFO and Comparable EBITDA (in millions, except per share data):

                                               Low Range     High Range
  Net Income Available to Common Shareholders    $40.2          $43.1
  Depreciation and Amortization                  102.9          102.9
  Realized Portion of Deferred
   Gain on Sale Leasebacks                        (4.7)          (4.7)
  Deferred Tax on Realized
   Portion of Deferred Gain                        1.4            1.4
  Minority Interests                              (0.2)          (0.1)
  Adjustments from Consolidated Affiliates        (3.0)          (3.0)
  Adjustments from Unconsolidated Affiliates       6.9            6.9
  Loss on Early Extinguishment of Debt            15.1           15.1
  Gain on Sale of Minority Interests
   in Hotel Properties                           (84.8)         (84.8)
  Impairment Charges and Other Adjustments        48.5           48.5
    Comparable FFO                              $122.3         $125.3
    Comparable FFO per Diluted Share             $1.60          $1.64

                                               Low Range      High Range
  Net Income Available to Common Shareholders    $40.2          $43.1
  Depreciation and Amortization                  102.9          102.9
  Interest Expense                                87.4           87.4
  Income Taxes                                    11.2           11.2
  Minority Interests                              (0.2)          (0.1)
  Adjustments from Consolidated Affiliates        (5.7)          (5.7)
  Adjustments from Unconsolidated Affiliates      30.1           30.1
  Preferred Shareholder Dividends                 30.1           30.1
  Loss on Early Extinguishment of Debt            15.1           15.1
  Realized Portion of Deferred
   Gain on Sale Leasebacks                        (4.7)          (4.7)
  Gain on Sale of Minority Interests
   in Hotel Properties                           (84.8)         (84.8)
  Impairment Charges and Other Adjustments        48.7           48.7
    Comparable EBITDA                           $270.3         $273.3

Fourth Quarter 2007 Guidance

For the fourth quarter of 2007 the company anticipates that Comparable EBITDA will be in the range of $65.0 million to $68.0 million, Comparable FFO will be in the range of $30.4 million to $33.4 million, and Comparable FFO per diluted share in the range of $0.40 to $0.44. Guidance includes the contribution of $1.7 million in Comparable EBITDA, $0.9 million in Comparable FFO or $0.01 per diluted share from residential sales. Guidance additionally includes a reduction in Comparable EBITDA and Comparable FFO of $1.5 million or $0.02 per diluted share as a result of continued operating expenses related to the Hyatt Regency New Orleans.

The company expects fourth quarter 2007 North American Total RevPAR growth to be in the range of 5.0 percent to 6.0 percent, and fourth quarter 2007 RevPAR growth to be in the range of 7.0 percent to 8.0 percent. The company's same store and total North American portfolios are the same beginning in the fourth quarter of 2007.

Details available at www.strategichotels.com/