LaSalle Hotel Properties Reports Second Quarter Results; RevPAR Increases 11.7 Percent; EBITDA Rises 24 Percent
BETHESDA, Md. -- LaSalle Hotel Properties (NYSE:LHO) today reported net income to common shareholders of $10.3 million, or $0.34 per diluted share for the quarter ended June 30, 2005, compared to net income of $7.1 million, or $0.26 per diluted share for the prior year period.
BETHESDA, Md. -- LaSalle Hotel Properties (NYSE:LHO) today reported net income to common shareholders of $10.3 million, or $0.34 per diluted share for the quarter ended June 30, 2005, compared to net income of $7.1 million, or $0.26 per diluted share for the prior year period.
For the quarter ended June 30, 2005, the Company generated funds from operations ("FFO") of $20.8 million versus $17.2 million for the same period of 2004. On a per diluted share/unit basis, FFO for the second quarter was $0.68 versus $0.63 for the same period last year. The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for 2005's second quarter increased 24 percent to $32.2 million from $26.0 million during the prior year period. Excluding the impact of a $1.0 million contingent litigation expense, FFO per share/unit would have been $0.71 and EBITDA would have been $33.2 million.
Room revenue per available room ("RevPAR") for the quarter ended June 30, 2005 versus the same period in 2004 increased 11.7 percent to $130.77. Average daily rate ("ADR") rose to $173.40, an 8.7 percent improvement, while occupancy rose 2.7 percent to 75.4 percent from the prior year period.
"The dynamic growth in RevPAR we achieved in the quarter resulted from robust demand from business travelers, a strong recovery in international inbound travel and significant pricing power at the majority of our properties. As a result, rate growth represented over 70% of our increase in RevPAR for the second quarter," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "In addition, a number of our properties are benefiting from recent flag changes, renovations and repositionings, including the Westin City Center Dallas and Sheraton Bloomington Minneapolis South."
The Company's hotels generated $34.3 million of EBITDA for the second quarter compared with $29.5 million for the same period last year. Second quarter portfolio-wide EBITDA margins improved 197 basis points ("bps") from the prior year. EBITDA margins in the quarter increased primarily due to the strong RevPAR growth.
"We are very pleased with the increased portfolio-wide operating margins during the quarter," advised Mr. Bortz. "Despite greater than inflationary increases in a number of expense categories, including labor costs, health benefits, property taxes and energy, the portfolio continues to see margin improvement driven primarily from RevPAR growth."
During the second quarter, the Company accrued $1.0 million for contingent legal fees related 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 $2.0 million as of June 30, 2005, which is included in accounts payable and accrued expenses in its consolidated balance sheets. Based on the claims Lasalle Hotel Properties has against Meridien, the Company is and will continue to seek damages and reimbursement of legal fees, and therefore, ultimately any contingent lease termination expense may be adjusted accordingly.
On May 18, 2005, the Company acquired the 112-room Onyx Hotel for approximately $28.6 million. The hotel opened in May 2004 and is located in historic downtown Boston in an up and coming area called The Bullfinch Triangle. The hotel is also two blocks from the Fleet Center (TD Banknorth Garden) and within a short walk of historical landmarks such as Faneuil Hall and Bunker Hill. The Onyx Hotel has already received AAA's Four Diamond rating for outstanding amenities and high-level services. The hotel offers wireless high-speed internet access throughout, as well as other amenities and services including the Ruby Room, a 45-seat bar and lounge serving breakfast and dinner, valet parking, 24-hour room service and complimentary weekday morning town-car service.
"Boston continues to be one of our targeted urban markets," remarked Mr. Bortz. "With hotel occupancies in Boston surpassing 73% and with the demand generators in place, the Boston market should continue to see significant rate growth. As the Onyx Hotel ramps up to its stabilized rate and occupancy levels over the next several years, we expect it to outpace the strong rate growth of the market."
On June 8, 2005, the Company announced that it had successfully executed a $59.6 million secured loan at a fixed rate of 5.35 percent. The term of the loan is seven years and is collateralized by the Company's 282-room Hilton San Diego Gaslamp Quarter. Proceeds from the financing were used to reduce LaSalle's outstanding balance on its credit facility.
On June 9, 2005, the Company announced that it had successfully amended and restated its $300.0 million senior unsecured bank facility. The terms of the amended and restated facility are substantially the same as the prior credit facility, except for the pricing reduction and the extended maturity date of June 9, 2008, with an option to extend to June 9, 2009. Additionally, LaSalle Hotel Lessee, the Company's taxable REIT subsidiary, also amended and restated its $25 million revolver on similar terms as the amended and restated senior unsecured credit facility.
As of the end of the second quarter 2005, LaSalle Hotel Properties had total outstanding debt of $409.0 million, including its $14.4 million portion of the joint venture debt related to the Chicago Marriott. The Company's $300.0 million unsecured credit facility had $70.0 million outstanding as of June 30, 2005. Interest expense for the quarter, excluding amortization of financing fees, was $4.6 million resulting in a trailing 12-month Corporate EBITDA to interest coverage ratio of 5.1 times. As of June 30, 2005, total debt to trailing 12-month Corporate EBITDA equaled 4.3 times, one of the lowest debt to EBITDA ratios in the industry.
For the six months ended June 30, 2005, net income applicable to common shareholders increased to $7.3 million from $0.9 million for the prior year period. EBITDA was $45.7 million compared to $33.4 million for the same period in 2004. FFO was $29.1 million compared with $20.4 million for the prior year period. Net income, EBITDA and FFO for the current year include the Company's $1.0 million contingent litigation expense with Meridien and would be $1.0 million higher but for that expense. RevPAR improved 11.2 percent, as ADR increased 8.9 percent to $163.86, while occupancy improved 2.1 percent to 69.8 percent as compared to the same six-month period in 2004.
Subsequent Events
On July 15, 2005, the Company announced a 25.0 percent increase in its monthly dividend to $0.10 per common share of beneficial interest for each of the months of July, August and September 2005. This represents a 3.5 percent annualized yield based on the Company's closing share price on July 20, 2005.
The July dividend will be paid on August 15, 2005 to common shareholders of record on July 29, 2005; the August dividend will be paid on September 15, 2005 to common shareholders of record on August 31, 2005; and the September dividend will be paid on October 14, 2005 to common shareholders of record on September 30, 2005.
2005 Outlook
The Company's current 2005 outlook is as follows:
Net Income $18.7 million - $20.2 million ($0.62 -
$0.67 per diluted share);
FFO $62.5 million - $64.0 million ($2.04 -
$2.09 per diluted share/unit);
EBITDA $96.8 million - $98.3 million;
Capital Expenditures $60.0 million;
RevPAR 9.0% - 10.0% growth over prior year; and
Hotel Level Portfolio-Wide
EBITDA Margin Growth 150 - 180 basis points.
These forecasts assume a healthy economic environment and no unexpected events negatively impacting the economy or the travel industry. These forecasts for net income, FFO and EBITDA also include the reduction related to the $1.0 million contingent litigation expense with Meridien and would be $1.0 million higher but for that expense.
LaSalle Hotel Properties is a leading multi-tenant, multi-operator real estate investment trust, which owns interests in 22 upscale and luxury full-service hotels, totaling approximately 6,800 guest rooms in 14 markets in 10 states and the District of Columbia. The Company focuses on investing in upscale and luxury full-service hotels located in urban, resort and convention markets. LaSalle Hotel Properties seeks to grow through strategic relationships with premier internationally recognized hotel operating companies including, Westin Hotels and Resorts, Sheraton Hotels & Resorts Worldwide, Inc., Crestline Hotels and Resorts, Inc., Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Hilton Hotels Corporation, Benchmark Hospitality, White Lodging Services Corporation, Sandcastle Resorts & Hotels, Davidson Hotel Company, and the Kimpton Hotel & Restaurant Group, LLC.
This press release, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. Forward-looking statements in this press release include, among others, statements about the Company's business strategy, individual hotel performance, estimates of room demand, occupancy and ADR, industry trends, estimated revenues and expenses (including estimates of RevPAR, net income, EBITDA and FFO), expected liquidity needs and sources (including capital expenditures and the ability to obtain financing or raise capital), and anticipated outcomes and consequences of pending litigation. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, (i) the Company's dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly, (ii) risks associated with the hotel industry, including competition, increases in wages, energy costs and other operating costs, actual or threatened terrorist attacks and downturns in general and local economic conditions, (iii) the availability and terms of financing and capital and the general volatility of securities markets, (iv) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws, (v) interest rate increases, (vi) the possible failure of the Company to qualify as a REIT and the risk of changes in laws affecting REITs, (vii) the possibility of uninsured losses, and (viii) the risk factors discussed in the Company's Annual Report on Form 10-K. Accordingly, there is no assurance that the Company's expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
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LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
For the three For the six
months ended months ended
June 30, June 30,
----------------------- ----------------------
2005 2004 2005 2004
----------- ----------- ----------- ----------
Revenues:
Hotel operating
revenues:
Room revenue $53,962 $39,299 $94,502 $65,912
Food and beverage
revenue 25,267 20,645 46,046 35,080
Other operating
department revenue 5,728 4,599 10,089 7,818
----------- ----------- ----------- ----------
Total hotel
operating
revenues 84,957 64,543 150,637 108,810
Participating lease
revenue 5,490 4,854 9,415 8,427
Other income 196 11 617 92
----------- ----------- ----------- ----------
Total revenues 90,643 69,408 160,669 117,329
----------- ----------- ----------- ----------
Expenses:
Hotel operating
expenses:
Room 12,182 9,226 22,832 16,634
Food and beverage 16,345 13,561 31,413 24,033
Other direct 3,234 2,369 5,885 4,425
Other indirect 22,387 17,002 42,156 31,004
----------- ----------- ----------- ----------
Total hotel
operating
expenses 54,148 42,158 102,286 76,096
Depreciation and other
amortization 10,032 9,035 20,352 17,315
Real estate taxes,
personal property
taxes and insurance 3,100 2,742 6,435 5,238
Ground rent 971 831 1,769 1,602
General and
administrative 2,467 1,970 5,234 4,113
Lease termination
expenses 1,018 - 1,018 -
Other expenses 44 133 130 583
----------- ----------- ----------- ----------
Total operating
expenses 71,780 56,869 137,224 104,947
----------- ----------- ----------- ----------
Operating income 18,863 12,539 23,445 12,382
Interest income 105 81 205 155
Interest expense (5,209) (3,830) (9,832) (7,627)
----------- ----------- ----------- ----------
Income before income tax
benefit (expense),
minority interest,
equity in earnings of
unconsolidated
entities, and
discontinued
operations 13,759 8,790 13,818 4,910
Income tax (expense)
benefit (2,571) (1,187) (766) 790
Minority interest in
LaSalle Hotel Operating
Partnership, L.P. (138) (131) (157) (93)
Equity in income of
unconsolidated entities 475 262 186 14
----------- ----------- ----------- ----------
Income from continuing
operations 11,525 7,734 13,081 5,621
----------- ----------- ----------- ----------
Discontinued operations:
Income (loss) from
operations of
properties held for
sale 2,093 2,018 (163) (327)
Income (loss) from
properties sold - 973 (45) 1,459
Minority interest, net
of tax (23) (41) (7) (26)
Income tax (expense)
benefit (178) (452) 740 451
----------- ----------- ----------- ----------
Net income from
discontinued
operations 1,892 2,498 525 1,557
----------- ----------- ----------- ----------
Net income 13,417 10,232 13,606 7,178
Distributions to
preferred shareholders (3,133) (3,133) (6,266) (6,266)
----------- ----------- ----------- ----------
Net income applicable to
common shareholders $10,284 $7,099 $7,340 $912
=========== =========== =========== ==========
For the three For the six
months ended months ended
June 30, June 30,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Earnings per Common
Share - Basic:
Income (loss)
applicable to common
shareholders before
discontinued
operations and after
dividends paid on
unvested restricted
shares $0.28 $0.17 $0.23 $(0.03)
Discontinued
operations 0.06 0.10 0.01 0.06
----------- ----------- ----------- -----------
Net income applicable
to common
shareholders after
dividends paid on
unvested restricted
shares $0.34 $0.27 $0.24 $0.03
=========== =========== =========== ===========
Earnings per Common
Share - Diluted:
Income (loss)
applicable to common
shareholders before
discontinued
operations $0.28 $0.17 $0.23 $(0.02)
Discontinued
operations 0.06 0.09 0.01 0.06
----------- ----------- ----------- -----------
Net income applicable
to common
shareholders $0.34 $0.26 $0.24 $0.04
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding:
Basic 29,822,566 26,395,156 29,767,699 25,220,929
Diluted 30,287,688 26,917,093 30,245,373 25,850,312
LASALLE HOTEL PROPERTIES
FFO and EBITDA
(Dollars in thousands, except share data)
(Unaudited)
For the three For the six
months ended months ended
June 30, June 30,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Funds From Operations
(FFO):
Net income applicable
to common shareholders $10,284 $7,099 $7,340 $912
Depreciation 10,217 9,651 21,164 18,783
Equity in depreciation
of joint venture 146 262 411 525
Amortization of
deferred lease costs 12 12 23 23
Minority interest:
Minority interest in
LaSalle Hotel
Operating Partnership,
L.P. 138 131 157 93
Minority interest in
discontinued
operations 23 41 7 26
----------- ----------- ----------- -----------
FFO $20,820 $17,196 $29,102 $20,362
=========== =========== =========== ===========
Weighted average number
of common shares and
units outstanding:
Basic 30,159,942 26,819,842 30,127,805 25,645,615
Diluted 30,625,064 27,341,779 30,605,480 26,274,998
For the three For the six
months ended months ended
June 30, June 30,
----------------------- ----------------------
2005 2004 2005 2004
----------- ----------- ----------- ----------
Earnings Before
Interest, Taxes,
Depreciation and
Amortization (EBITDA):
Net income applicable to
common shareholders $10,284 $7,099 $7,340 $912
Interest 5,213 3,837 9,837 7,638
Equity in interest
expense of joint
venture 195 114 341 261
Income tax expense
(benefit)
Income tax expense
(benefit) 2,571 1,187 766 (790)
Income tax expense
(benefit) from
discontinued
operations 178 452 (740) (451)
Depreciation and other
amortization 10,305 9,678 21,269 18,836
Equity in depreciation/
amortization of joint
venture 169 302 456 593
Minority interest:
Minority interest in
LaSalle Hotel
Operating Partnership,
L.P. 138 131 157 93
Minority interest in
discontinued
operations 23 41 7 26
Distributions to
preferred shareholders 3,133 3,133 6,266 6,266
----------- ----------- ----------- ----------
EBITDA $32,209 $25,974 $45,699 $33,384
=========== =========== =========== ==========
LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
(Unaudited)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
----------------- -----------------
2005 2004 2005 2004
TOTAL PORTFOLIO
Occupancy 75.4% 73.4% 69.8% 68.4%
Increase/(Decrease) 2.7% 2.1%
ADR $173.40 $159.52 $163.86 $150.50
Increase/(Decrease) 8.7% 8.9%
REVPAR $130.77 $117.12 $114.43 $102.93
Increase/(Decrease) 11.7% 11.2%
Note:
This schedule includes the operating data for all properties leased to
LHL, and to third parties as of June 30, 2005, including the Hilton
Gaslamp, Grafton on Sunset and Onyx Hotel for the Company's period of
ownership, and the Company's 9.9% interest in The Chicago Marriott
Downtown joint venture. The Indianapolis Marriott, Hilton Alexandria
Old Town, Chaminade, Hilton Gaslamp, Grafton on Sunset and Onyx Hotel
are shown in 2004 for their comparative period of ownership in 2005.
LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
(Unaudited)
Prior Year Operating Data
Full Year
1Q'2004 2Q'2004 3Q'2004 4Q'2004 2004
--------- --------- --------- --------- ---------
Occupancy 63.3% 73.4% 75.5% 63.2% 68.8%
ADR $139.96 $159.52 $163.47 $151.76 $154.34
REVPAR $88.65 $117.12 $123.39 $95.97 $106.14
Note:
This schedule includes historical operating data for the hotels owned
as of June 30, 2005. Historical data is included in 2004 for the
hotel's comparative period of ownership in 2005.
LASALLE HOTEL PROPERTIES
Hotel Operational Data
Schedule of Property Level Results
(unaudited, dollars in thousands)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
--------------------- ---------------------
2005 2004 2005 2004
Revenues
Room 65,541 58,645 113,701 102,969
Food & beverage 32,112 30,004 56,759 52,332
Other 8,696 8,779 14,150 14,256
---------- ---------- ---------- ----------
Total hotel sales 106,349 97,428 184,610 169,557
Expenses
Room 14,515 13,704 27,179 25,601
Food & beverage 20,541 19,812 38,739 36,520
Other direct 4,841 4,613 8,480 8,125
General & administrative 8,466 7,857 15,846 15,001
Sales & marketing 7,490 7,043 14,185 13,737
Management fees 3,428 3,106 5,605 5,147
POM 4,195 3,718 8,228 7,325
Energy 3,191 2,804 6,329 5,826
Fixed expenses 5,337 5,231 10,688 10,375
---------- ---------- ---------- ----------
Total hotel expenses 72,004 67,888 135,279 127,657
EBITDA 34,345 29,540 49,331 41,900
Note:
This schedule includes the operating data for all properties leased to
LHL, and to third parties as of June 30, 2005, including the Hilton
Gaslamp, Grafton on Sunset and Onyx Hotel for the Company's period of
ownership, and the Company's 9.9% interest in The Chicago Marriott
Downtown joint venture. The Indianapolis Marriott, Hilton Alexandria
Old Town, Chaminade, Hilton Gaslamp, Grafton on Sunset and Onyx Hotel
are shown in 2004 for their comparative period of ownership in 2005.