LaSalle Hotel Properties Reports Third Quarter Results; RevPAR Increased 11.7 Percent for the Quarter
BETHESDA, Md. | LaSalle Hotel Properties (NYSE:LHO) today reported net income of $10.0 million, or $0.35 per diluted share for the quarter ended September 30, 2004, compared to net income of $3.3 million, or $0.15 per diluted share for the prior year period.
BETHESDA, Md. | LaSalle Hotel Properties (NYSE:LHO) today reported net income of $10.0 million, or $0.35 per diluted share for the quarter ended September 30, 2004, compared to net income of $3.3 million, or $0.15 per diluted share for the prior year period.
For the quarter ended September 30, 2004, the Company generated funds from operations ("FFO") of $17.8 million versus $12.1 million for the prior year period. FFO for the current quarter includes a contingent litigation expense of $0.9 million associated with the Company's ongoing litigation with Meridien and related affiliates. On a per diluted share/unit basis, FFO for the third quarter was $0.62 versus $0.56 a year ago.
The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for 2004's third quarter were $28.3 million, up from $18.9 million during the prior year period. The Company's net income and EBITDA for the current quarter include a $2.6 million gain on the sale of the Omaha Marriott, which was sold on September 15, 2004 and the contingent litigation expense of $0.9 million.
Room revenue per available room ("RevPAR") for the quarter ended September 30, 2004 increased 11.7 percent versus the same period in 2003. The average daily rate ("ADR") increased 5.0 percent from the prior year period to $161.11 and occupancy improved 6.3 percent to 75.1 percent. These RevPAR results exclude the Omaha Marriott for the current year and prior year periods as the hotel was sold during the third quarter.
"Our business-oriented hotels again led the portfolio's strong performance, generating an impressive 18.1 percent RevPAR gain," noted Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "Business and leisure demand remained solid throughout the summer."
The Company's hotels generated $27.7 million of EBITDA for the third quarter compared with $24.3 million for the same period last year. Third quarter portfolio-wide EBITDA margins improved 152 basis points ("bps") from the prior year. EBITDA margins in the quarter increased primarily due to the robust RevPAR growth driven by the five percent ADR improvement.
"The ability of our hotels to increase room rates during the quarter more than offset the continued cost pressures related to labor expenses, health benefits and insurance," advised Mr. Bortz. "While we believe that constraining these expenses will continue to be an ongoing challenge for our asset managers and hotel operators, we expect that future ADR increases and occupancy growth will more than compensate for these above inflationary cost increases, allowing margins to rise."
For the nine months ended September 30, 2004, net income applicable to common shareholders decreased to $11.0 million from $29.2 million for the prior year period. RevPAR improved 12.2 percent, as ADR increased 4.3 percent to $153.08, while occupancy improved 7.6 percent to 70.0 percent as compared to the same nine-month period in 2003.
For the first nine months of 2004, the Company's EBITDA was $61.7 million compared to $75.1 million for the same period in 2003. EBITDA and net income for the current year include the Company's $2.6 million gain on the sale of the Omaha Marriott and the $0.9 million contingent litigation expense with Meridien and related entities. EBITDA and net income for the prior year include the $37.1 million gain on sale related to the New Orleans Grande Hotel, which was sold during 2003's second quarter and the combined $2.7 million impairment charge and loss on sale for the Holiday Inn Beachside, which was sold during 2003's third quarter.
Year-to-date through September 30, 2004, FFO was $38.2 million compared with $19.1 million for the prior year period. The current year FFO includes the $0.9 million contingent litigation expense. The prior year FFO includes the $2.7 million non-cash impairment expense for the Holiday Inn Beachside and the $1.1 million non-cash expense related to the early extinguishment of debt attributable to the sale of the New Orleans Grande Hotel and Holiday Inn Beachside.
For 2004, the Company has plans for total capital investments in its current assets of approximately $40.0 million to $42.0 million, including $18.0 million at Lansdowne Resort (golf course, clubhouse, guestroom refurbishment, lobby and other resort repositioning enhancements), $4.0 million at the Westin City Center Dallas (guestroom bathroom refurbishment, lobby, public area and infrastructure enhancements) and $5.5 million at the Sheraton Bloomington hotel (brand conversion improvements, guestroom, lobby and public area refurbishments). This represents a $3.0 million to $5.0 million reduction from our prior forecast due to a slower pace of cash outflows, with redevelopment work proceeding on schedule.
"The capital investments we completed throughout our portfolio, and most recently at our Holiday Inn on the Hill in Washington, D.C. and the Hotel Viking in Newport, Rhode Island, continue to contribute to healthy increases in our earnings and cash flow," advised Mr. Bortz. "We continue to be positive about the future returns from our current repositioning programs at Lansdowne Resort, Westin Dallas and Sheraton Bloomington."
On August 26, the Company executed a $34.4 million secured loan with Wells Fargo Bank at a fixed rate of 4.98 percent. The term of the loan is five years and is collateralized by the Company's 241-room Hilton Alexandria Old Town Hotel that was purchased on May 28th of this year.
Also in August, the Company increased its senior unsecured credit facility to $300.0 million from $215.0 million and its affiliated lessee revolving credit facility to $25.0 million from $13.0 million.
On September 15, the Company announced the sale of the 299-room Omaha Marriott for $28.5 million. The cash proceeds from the sale were used to reduce the Company's outstanding debt. In connection with the sale, the Company recognized a gain on sale of $2.6 million which was recorded in the third quarter.
During the third quarter, the Company accrued a net $0.9 million for contingent legal fees relating to its ongoing litigation with Meridien and related affiliates. As a result of this accrual, the net contingent lease termination liability has a current balance of approximately $2.4 million as of September 30, 2004, which is included in accounts payable and accrued expenses in LaSalle's consolidated balance sheets. Based on the claims LaSalle has against Meridien, LaSalle is and will continue to seek damages and reimbursement of legal fees, and therefore, ultimately any contingent lease termination expense may be adjusted accordingly.
As of the end of the third quarter 2004, LaSalle Hotel Properties had total outstanding debt of $272.3 million, which includes its $13.9 million portion of the joint venture debt related to the Chicago Marriott. The Company's $300.0 million unsecured credit facility had no balance outstanding as of September 30, 2004. Interest expense for the quarter was $3.3 million, resulting in a trailing 12-month Corporate EBITDA to interest coverage ratio of 5.0 times. As of September 30, 2004, total debt to trailing 12-month Corporate EBITDA equaled 3.4 times, one of the lowest in the industry.
Subsequent Events
On October 15, 2004, the Company announced its monthly dividend of $0.08 per common share of beneficial interest for each of the three months of October, November and December 2004. The October dividend will be paid on November 15, 2004 to common shareholders of record on October 29, 2004; the November dividend will be paid on December 15, 2004 to common shareholders of record on November 30, 2004; and the December dividend will be paid on January 14, 2005 to common shareholders of record on December 31, 2004.
2004 Outlook
"We remain encouraged by the continuing improvements in the economy and travel demand," said Mr. Bortz. "Business transient travel continues to exhibit growth at a healthy pace and leisure travel remains solid. Supply growth remains near ten-year lows. Pricing power is growing and customer mix continues to improve."
As a result of LaSalle's strong third quarter performance, the Company now expects its 2004 portfolio RevPAR will increase 9.0 to 9.5 percent, up from the 8.0 to 9.0 percent increase provided in the Company's prior outlook. The Company's forecast for fourth quarter RevPAR growth remains at 1.0 to 2.0 percent, which is lower than prior quarter performance due to a number of quarter specific factors, including occupancy displacement associated with major capital projects at Lansdowne Resort, Westin Dallas, Sheraton Bloomington, Chicago Marriott Downtown and Le Montrose. The Company's forecast for full year 2004 FFO per diluted share/unit is $1.76 to $1.78. Embedded in this forecast is the better than expected third quarter results, offset by $0.03 related to the contingent litigation expense. Additionally, this assumes fourth quarter performance is in-line with the Company's prior FFO per share/unit forecast of $0.37 to $0.39.
The revised 2004 outlook assumes a steadily recovering economic and travel environment, continued improving performance from the Company's renovated and repositioned hotels, and no adverse geopolitical events or terrorist acts in the U.S.
Based upon these assumptions, the Company currently expects full year 2004 net income to range from $10.7 million to $11.1 million and EBITDA to range from $77.8 million to $78.2 million. The net income and EBITDA forecast include the $2.6 million gain on sale and $0.9 million contingent litigation expense.
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
For the three months ended
September 30,
---------------------------
2004 2003
------------- -------------
Revenues:
Hotel operating revenues:
Room revenue $ 44,590 $ 29,769
Food and beverage revenue 23,323 17,887
Other operating department revenue 6,918 6,035
------------- -------------
Total hotel operating revenues 74,831 53,691
Participating lease revenue 7,135 6,958
Other income 18 110
------------- -------------
Total revenues 81,984 60,759
------------- -------------
Expenses:
Hotel operating expenses:
Room 10,750 7,040
Food and beverage 15,954 12,396
Other direct 3,762 3,192
Other indirect 20,003 14,626
------------- -------------
Total hotel operating expenses 50,469 37,254
Depreciation and other amortization 9,977 7,891
Real estate taxes, personal property
taxes and insurance 2,980 2,517
Ground rent 1,111 1,147
General and administrative 2,238 1,915
Amortization of deferred financing costs 590 575
Contingent lease termination expenses 850 -
Other expenses 7 11
------------- -------------
Total operating expenses 68,222 51,310
------------- -------------
Operating income 13,762 9,449
Interest income 64 73
Interest expense (3,338) (3,550)
------------- -------------
Income before income tax benefit
(expense), minority interest, equity in
earnings of unconsolidated entities and
discontinued operations 10,488 5,972
Income tax benefit (expense) (558) 55
------------- -------------
Income before minority interest, equity in
earnings of unconsolidated entities and
discontinued operations 9,930 6,027
Minority interest in LaSalle Hotel
Operating Partnership, L.P. (158) (108)
------------- -------------
Income before equity in earnings of
unconsolidated entities and discontinued
operations 9,772 5,919
Equity in earnings of unconsolidated
entities 221 190
------------- -------------
Income before discontinued operations 9,993 6,109
Discontinued operations:
Income (loss) from operations of
property disposed of, including gain on
disposal of assets 3,286 (325)
Minority interest, net of tax (51) 7
Income tax benefit (expense) (56) 20
------------- -------------
Net income (loss) from discontinued
operations 3,179 (298)
Net income 13,172 5,811
Distributions to preferred shareholders (3,133) (2,557)
------------- -------------
Net income applicable to common
shareholders $ 10,039 $ 3,254
============= =============
Earnings per Common Share - Basic:
Income applicable to common shareholders
before discontinued operations and
after dividends paid on unvested
restricted shares $ 0.25 $ 0.17
Discontinued operations 0.11 (0.01)
------------- -------------
Net income applicable to common
shareholders after dividends paid on
unvested restricted shares $ 0.36 $ 0.16
============= =============
Earnings per Common Share - Diluted:
Income applicable to common shareholders
before discontinued operations $ 0.24 $ 0.16
Discontinued operations 0.11 (0.01)
------------- -------------
Net income applicable to common
shareholders $ 0.35 $ 0.15
============= =============
Weighted average number common shares
outstanding:
Basic 27,805,183 20,738,660
Diluted 28,351,296 21,197,051
LASALLE HOTEL PROPERTIES
FFO and EBITDA
(Dollars in thousands, except per share data)
(Unaudited)
For the three months ended
September 30,
---------------------------
2004 2003
------------- -------------
Funds From Operations (FFO):
Net income applicable to common
shareholders $ 10,039 $ 3,254
Depreciation 9,949 8,192
Equity in depreciation of joint venture 265 255
Amortization of deferred lease costs 11 11
Minority interest:
Minority interest in LaSalle Hotel
Operating Partnership, L.P. 158 108
Minority interest in discontinued
operations 51 (7)
Net (gain) loss on sale of property
disposed of (2,643) 295
------------- -------------
FFO $ 17,830 $ 12,108
============= =============
Weighted average number of common shares
and units outstanding:
Basic 28,223,539 21,163,346
Diluted 28,769,652 21,621,737
Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA):
Net income applicable to common
shareholders $ 10,039 $ 3,254
Interest 3,338 3,605
Equity in interest expense of joint
venture 130 148
Income tax (benefit) expense:
Income tax (benefit) expense 558 (55)
Income tax (benefit) expense from
discontinued operations 56 (20)
Depreciation and other amortization 9,977 8,222
Equity in depreciation/amortization of
joint venture 286 283
Amortization of deferred financing costs 590 836
Minority interest:
Minority interest in LaSalle Hotel
Operating Partnership, L.P. 158 108
Minority interest in discontinued
operations 51 (7)
Distributions to preferred shareholders 3,133 2,557
------------- -------------
EBITDA $ 28,316 $ 18,931
============= =============
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
For the nine months
ended September 30,
-----------------------
2004 2003
----------- -----------
Revenues:
Hotel operating revenues:
Room revenue $115,463 $66,132
Food and beverage revenue 63,101 39,294
Other operating department revenue 17,436 11,969
----------- -----------
Total hotel operating revenues 196,000 117,395
Participating lease revenue 15,562 17,454
Other income 110 906
----------- -----------
Total revenues 211,672 135,755
----------- -----------
Expenses:
Hotel operating expenses:
Room 28,755 17,510
Food and beverage 43,618 28,464
Other direct 10,193 6,637
Other indirect 54,765 34,375
----------- -----------
Total hotel operating expenses 137,331 86,986
Depreciation and other amortization 28,700 23,485
Real estate taxes, personal property taxes
and insurance 8,723 6,777
Ground rent 2,713 2,771
General and administrative 6,351 5,583
Amortization of deferred financing costs 1,657 1,731
Impairment of investment in hotel property - 2,453
Contingent lease termination expenses 850 -
Other expenses 590 91
----------- -----------
Total operating expenses 186,915 129,877
----------- -----------
Operating income 24,757 5,878
Interest income 223 197
Interest expense (9,909) (9,266)
----------- -----------
Income (loss) before income tax benefit,
minority interest, equity in earnings of
unconsolidated entities and discontinued
operations 15,071 (3,191)
Income tax benefit 807 2,857
----------- -----------
Income (loss) before minority interest, equity
in earnings of unconsolidated entities and
discontinued operations 15,878 (334)
Minority interest in LaSalle Hotel Operating
Partnership, L.P. (256) 1
----------- -----------
Income (loss) before equity in earnings of
unconsolidated entities and discontinued
operations 15,622 (333)
Equity in earnings of unconsolidated entities 235 307
----------- -----------
Income before discontinued operations 15,857 (26)
Discontinued operations:
Income from operations of property disposed
of, including gain on disposal of assets 4,745 37,748
Minority interest, net of tax (72) (806)
Income tax expense (180) (70)
----------- -----------
Net income from discontinued operations 4,493 36,872
Net income 20,350 36,846
Distributions to preferred shareholders (9,399) (7,672)
----------- -----------
Net income applicable to common shareholders $10,951 $29,174
=========== ===========
Earnings per Common Share - Basic:
Income (loss) applicable to common
shareholders before discontinued operations
and after dividends paid on unvested
restricted shares $0.24 $(0.41)
Discontinued operations 0.17 1.91
----------- -----------
Net income applicable to common shareholders
after dividends paid on unvested restricted
shares $0.41 $1.50
=========== ===========
Earnings per Common Share - Diluted:
Income (loss) applicable to common
shareholders before discontinued operations $0.24 $(0.39)
Discontinued operations 0.17 1.87
----------- -----------
Net income applicable to common shareholders $0.41 $1.48
=========== ===========
Weighted average number common shares
outstanding:
Basic 26,087,859 19,254,958
Diluted 26,714,754 19,657,100
LASALLE HOTEL PROPERTIES
FFO and EBITDA
(Dollars in thousands, except per share data)
(Unaudited)
For the nine months
ended September 30,
-----------------------
2004 2003
----------- -----------
Funds From Operations (FFO):
Net income applicable to common shareholders $10,951 $29,174
Depreciation 28,732 25,106
Equity in depreciation of joint venture 790 758
Amortization of deferred lease costs 34 38
Minority interest:
Minority interest in LaSalle Hotel Operating
Partnership, L.P. 256 (1)
Minority interest in discontinued operations 72 806
Net gain on sale of property disposed of (2,643) (36,796)
----------- -----------
FFO $38,192 $19,085
=========== ===========
Weighted average number of common shares and
units outstanding:
Basic 26,510,419 19,679,643
Diluted 27,137,314 20,081,786
Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA):
Net income applicable to common shareholders $10,951 $29,174
Interest 9,909 10,944
Equity in interest expense of joint venture 391 441
Income tax benefit:
Income tax benefit (807) (2,857)
Income tax expense from discontinued
operations 180 70
Depreciation and other amortization 28,813 25,193
Equity in depreciation/amortization of joint
venture 879 841
Amortization of deferred financing costs 1,657 2,843
Minority interest:
Minority interest in LaSalle Hotel Operating
Partnership, L.P. 256 (1)
Minority interest in discontinued operations 72 806
Distributions to preferred shareholders 9,399 7,672
----------- -----------
EBITDA $61,700 $75,126
=========== ===========
LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
(Unaudited)
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
--------------------- ----------------------
2004 2003 2004 2003
TOTAL PORTFOLIO
Occupancy 75.1% 70.6% 70.0% 65.0%
Increase/(Decrease) 6.3% 7.6%
ADR $161.11 $153.36 $153.08 $146.79
Increase/(Decrease) 5.0% 4.3%
REVPAR $120.95 $108.31 $107.13 $95.47
Increase/(Decrease) 11.7% 12.2%
Note:
This schedule includes the operating data for all properties leased to
LHL, and to third parties as of September 30, 2004, including the
Indianapolis Marriott and Hilton Alexandria Old Town for the
Company's period of ownership, and the Company's 9.9% interest in The
Chicago Marriott Downtown joint venture. The 2003 operating
performance is shown as though Lansdowne Resort and Hotel George were
owned for the entire quarter and year to date; The Indianapolis
Marriott and Hilton Alexandria Old Town are shown in 2003 for their
comparative period of ownership in 2004.
LASALLE HOTEL PROPERTIES
Hotel Operational Data
Schedule of Property Level Results
(unaudited, dollars in thousands)
For the Three For the Nine Months
Months Ended Ended
September 30, September 30,
------------------- --------------------
2004 2003 2004 2003
Revenues
Room 54,407 48,810 138,526 123,292
Food & beverage 26,255 25,052 71,898 67,519
Other 8,310 8,365 20,462 19,922
--------- --------- --------- ----------
Total hotel sales 88,972 82,227 230,886 210,733
Expenses
Room 12,145 10,774 33,193 29,919
Food & beverage 17,990 16,899 49,294 46,272
Other direct 4,294 4,198 11,448 11,047
General & administrative 19,093 18,211 54,015 50,368
Management fees 2,934 2,698 7,232 6,730
Fixed expenses 4,863 5,138 14,105 13,597
--------- --------- --------- ----------
Total hotel expenses 61,319 57,918 169,287 157,933
EBITDA 27,653 24,309 61,599 52,800
Note:
This schedule includes the operating data for all properties leased to
LHL, and to third parties as of September 30, 2004, including the
Indianapolis Marriott and Hilton Alexandria Old Town for the
Company's period of ownership, and the Company's 9.9% interest in The
Chicago Marriott Downtown joint venture. The 2003 operating
performance is shown as though Lansdowne Resort and Hotel George were
owned for the entire quarter and year to date; The Indianapolis
Marriott and Hilton Alexandria Old Town are shown in 2003 for their
comparative period of ownership in 2004.