LaSalle Hotel Properties Reports Third Quarter Results; RevPAR Increases 9.5 Percent; EBITDA Rises 24 Percent
BETHESDA, Md.| LaSalle Hotel Properties (NYSE:LHO) today reported net income to common shareholders of $11.4 million, or $0.37 per diluted share for the quarter ended September 30, 2005, compared to net income of $10.0 million, or $0.35 per diluted share for the prior year period. Net income for the prior year period includes a $2.6 million gain on sale of the Omaha Marriott and the contingent litigation expense of $0.9 million.
For the quarter ended September 30, 2005, the Company generated funds from operations ("FFO") of $24.1 million versus $17.8 million for the same period of 2004. On a per diluted share/unit basis, FFO for the third quarter was $0.79 versus $0.62 for the same period last year. FFO and FFO per diluted share/unit for the prior year third quarter include a contingent litigation expense of $0.9 million associated with the Company's ongoing litigation with Meridien and related affiliates. The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for 2005's third quarter increased 24 percent to $35.0 million from $28.3 million during the prior year period. EBITDA for the prior year period includes a $2.6 million gain on sale of the Omaha Marriott and the contingent litigation expense of $0.9 million.
Room revenue per available room ("RevPAR") for the quarter ended September 30, 2005 versus the same period in 2004 increased 9.5 percent to $138.48. Average daily rate ("ADR") rose to $175.11, a 5.0 percent improvement, while occupancy climbed 4.3 percent to 79.1 percent from the prior year period.
"We are extremely pleased with the performance of our portfolio in the third quarter. Our urban properties performed particularly well, with RevPAR gains in excess of 13%," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "We exceeded our third quarter outlook of 7.0% to 8.0% RevPAR growth primarily due to better than expected business transient demand at our urban and convention properties."
The Company's hotels generated $37.0 million of EBITDA for the third quarter compared with $33.2 million for the same period last year. Third quarter portfolio-wide EBITDA margins improved 91 basis points from the prior year. EBITDA margins in the quarter would have been higher but for the 4.3% growth in occupancy, the Company's traditionally higher proportion of leisure customers in the third quarter and greater than inflationary increases in salaries, wages, energy and property taxes.
"Fundamentals in the lodging industry are strong as demand growth continues to outpace new supply and pricing power increases," advised Mr. Bortz. "This strength in the fundamentals should allow the lodging industry and our Company to see robust growth in RevPAR and EBITDA for the remainder of 2005 and 2006."
On August 31, 2005, the Company acquired the 803-room Westin Copley Place for approximately $324 million. The urban, luxury full-service hotel is located in the prestigious Back Bay area of downtown Boston, just minutes from Logan International Airport and within close proximity to historic Fenway Park. The hotel features more than 47,000 square feet of meeting and function space, including two major ballrooms. The hotel is connected, via temperature-controlled skywalks, to the Hynes Convention Center and Copley Place, with over 100 retail shops and restaurants.
In association with the Westin Copley Place acquisition, the Company assumed a $210 million first mortgage at a fixed interest rate of 5.28% and issued $58.7 million in preferred units to one of the prior owners at a coupon rate of 7.25%. In August, the Company issued $79.3 million in Series D Cumulative Redeemable Preferred shares at a coupon rate of 7.50%.
As of September 30, 2005, LaSalle Hotel Properties had total outstanding debt of $600.1 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 $52.5 million outstanding as of September 30, 2005. Interest expense for the third quarter, excluding amortization of financing fees, was $5.9 million resulting in a trailing 12-month Corporate EBITDA to interest expense of 4.9 times. As of September 30, 2005, total debt to trailing 12-month Corporate EBITDA equaled 4.9 times. The Company's Corporate EBITDA to interest ratio and debt to Corporate EBITDA ratio are calculated based on the definitions in its Senior Unsecured Credit Facility.
For the nine months ended September 30, 2005, net income applicable to common shareholders increased to $18.7 million from $11.0 million for the prior year period. Corporate EBITDA was $80.7 million compared to $61.7 million for the same period in 2004. FFO was $53.2 million compared with $38.2 million for the prior year period. Net income, EBITDA and FFO for the current year and prior year include the Company's $1.0 million and $0.9 million, respectively, contingent litigation expense related to Meridien and would be $1.0 million and $0.9 million higher but for those expenses. For the nine months ended September 30, 2004, Net Income and EBITDA include the $2.6 million gain on sale of the Omaha Marriott. RevPAR for the nine months ended September 30, 2005 improved 10.5 percent due to an ADR increase of 7.4 percent to $168.13 and an occupancy increase of 2.9 percent to 73.1 percent, each as compared to the same nine month period in 2004.
Subsequent Events
The Company issued 2,200,000 of its common shares of beneficial interest on October 7, 2005. The Company used the net proceeds from this public offering of $74.3 million to pay down debt. Wachovia Securities acted as sole bookrunning manager on the offering, with Raymond James & Associates, Inc. as co-lead manager, and A.G. Edwards & Sons, Inc., Robert W. Baird & Co., BB&T Capital Markets, and KeyBanc Capital Markets as co-managers.
The Company announced on October 14, 2005 that the dividend of $0.10 per common share of beneficial interest will be paid on November 15, 2005 to common shareholders of record on October 31, 2005; the November dividend of $0.10 per common share of beneficial interest will be paid on December 15, 2005 to common shareholders of record on November 30, 2005; and the December dividend of $0.10 per common share of beneficial interest will be paid on January 13, 2006 to common shareholders of record on December 30, 2005.
2005 Outlook
Based on the strength of the third quarter results and the fourth quarter outlook, the Company is increasing its FFO per diluted share/unit outlook for 2005 to $2.13 to $2.16. This represents an increase of 4 to 6 cents versus the Company's prior outlook and includes the impact of the 2.2 million common shares of beneficial interest issued in October.
The Company's current outlook is as follows:
Net Income $18.2 million - $19.1 million
($0.59 - $0.62 per diluted share)
FFO $66.5 million - $67.4 million
($2.13 - $2.16 per diluted share/unit)
EBITDA $107.1 million - $108.0 million
Capital Expenditures $60.0 million
RevPAR Growth 10.0% - 10.5%
Hotel Level Portfolio-Wide
EBITDA Margin Growth 150 - 180 basis points
These forecasts assume a healthy economic environment and no unexpected events that negatively impact the economy or the travel industry. The 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 the contingent litigation expense.
LaSalle Hotel Properties is a leading multi-tenant, multi-operator real estate investment trust, owning interests in 23 upscale and luxury full-service hotels, totaling approximately 7,600 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 2005 outlook, estimates of Net Income, FFO, EBITDA, Capital Expenditures, RevPAR and EBITDA margin growth, and expected industry fundamentals, Company RevPAR and Company EBITDA in 2006. 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.
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
For the For the
three months ended nine months ended
September 30, September 30,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Revenues:
Hotel operating
revenues:
Room revenue $ 63,683 $ 44,590 $ 163,242 $ 115,463
Food and beverage
revenue 29,125 23,323 80,246 63,101
Other operating
department revenue 9,375 6,918 21,963 17,436
----------- ----------- ----------- -----------
Total hotel
operating revenues 102,183 74,831 265,451 196,000
Participating lease
revenue 8,097 7,135 17,511 15,562
Other income 191 18 807 110
----------- ----------- ----------- -----------
Total revenues 110,471 81,984 283,769 211,672
----------- ----------- ----------- -----------
Expenses:
Hotel operating
expenses:
Room 14,538 10,750 38,770 28,755
Food and beverage 20,069 15,954 55,177 43,618
Other direct 4,872 3,762 12,781 10,193
Other indirect 28,582 20,003 74,925 54,765
----------- ----------- ----------- -----------
Total hotel
operating expenses 68,061 50,469 181,653 137,331
Depreciation and
other amortization 12,430 9,977 33,699 28,700
Real estate taxes,
personal property
taxes and insurance 4,137 2,980 11,088 8,723
Ground rent 1,255 1,111 3,024 2,713
General and
administrative 2,911 2,238 8,171 6,351
Lease termination
expenses - 850 1,000 850
Other expenses 17 7 188 590
----------- ----------- ----------- -----------
Total operating
expenses 88,811 67,632 238,823 185,258
----------- ----------- ----------- -----------
Operating income 21,660 14,352 44,946 26,414
Interest income 224 64 429 223
Interest expense (6,569) (3,928) (16,405) (11,566)
----------- ----------- ----------- -----------
Income before income
tax benefit
(expense), minority
interest, equity in
earnings of
unconsolidated
entities and
discontinued
operations 15,315 10,488 28,970 15,071
Income tax benefit
(expense) 27 (558) (18) 807
----------- ----------- ----------- -----------
Income before minority
interest, equity in
earnings of
unconsolidated
entities and
discontinued
operations 15,342 9,930 28,952 15,878
Minority interest of
common units in
LaSalle Hotel
Operating
Partnership, L.P. (120) (158) (284) (256)
Minority interest of
preferred units in
LaSalle Hotel
Operating
Partnership, L.P. (355) - (355) -
----------- ----------- ----------- -----------
Income before equity
in earnings of
unconsolidated
entities and
discontinued
operations 14,867 9,772 28,313 15,622
Equity in earnings of
unconsolidated
entities 275 221 461 235
----------- ----------- ----------- -----------
Income before
discontinued
operations 15,142 9,993 28,774 15,857
Discontinued
operations:
Income (loss) from
operations of
property disposed
of, including gain
on disposal of
assets - 3,286 (45) 4,745
Minority interest,
net of tax - (51) - (72)
Income tax benefit
(expense) - (56) 19 (180)
----------- ----------- ----------- -----------
Net income (loss)
from discontinued
operations - 3,179 (26) 4,493
Net income 15,142 13,172 28,748 20,350
Distributions to
preferred
shareholders (3,744) (3,133) (10,010) (9,399)
----------- ----------- ----------- -----------
Net income applicable
to common
shareholders $ 11,398 $ 10,039 $ 18,738 $ 10,951
=========== =========== =========== ===========
For the For the
three months ended nine months ended
September 30, September 30,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Earnings per Common
Share - Basic:
Income applicable to
common shareholders
before discontinued
operations and after
dividends paid on
unvested restricted
shares $ 0.38 $ 0.25 $ 0.62 $ 0.24
Discontinued
operations - 0.11 - 0.17
----------- ----------- ----------- -----------
Net income applicable
to common
shareholders after
dividends paid on
unvested restricted
shares $ 0.38 $ 0.36 $ 0.62 $ 0.41
=========== =========== =========== ===========
Earnings per Common
Share - Diluted:
Income applicable to
common shareholders
before discontinued
operations $ 0.37 $ 0.24 $ 0.62 $ 0.24
Discontinued
operations - 0.11 - 0.17
----------- ----------- ----------- -----------
Net income applicable
to common
shareholders $ 0.37 $ 0.35 $ 0.62 $ 0.41
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding:
Basic 30,022,302 27,805,183 29,853,499 26,087,859
Diluted 30,492,289 28,351,296 30,329,567 26,714,754
LASALLE HOTEL PROPERTIES
FFO and EBITDA
(Dollars in thousands, except share data)
(Unaudited)
For the For the
three months ended nine months ended
September 30, September 30,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Funds From Operations
(FFO):
Net income applicable
to common
shareholders $ 11,398 $ 10,039 $ 18,738 $ 10,951
Depreciation 12,375 9,949 33,539 28,732
Equity in depreciation
of joint venture 202 265 613 790
Amortization of
deferred lease costs 13 11 36 34
Minority interest:
Minority interest of
common units in
LaSalle Hotel
Operating
Partnership, L.P. 120 158 284 256
Minority interest in
discontinued
operations - 51 - 72
Net gain on sale of
property disposed of - (2,643) - (2,643)
----------- ----------- ----------- -----------
FFO $ 24,108 $ 17,830 $ 53,210 $ 38,192
=========== =========== =========== ===========
Weighted average
number of common
shares and common
units outstanding:
Basic 30,195,827 28,223,539 30,150,728 26,510,419
Diluted 30,665,814 28,769,652 30,626,796 27,137,314
For the For the
three months ended nine months ended
September 30, September 30,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Earnings Before
Interest, Taxes,
Depreciation and
Amortization
(EBITDA):
Net income applicable
to common
shareholders $ 11,398 $ 10,039 $ 18,738 $ 10,951
Interest 6,569 3,928 16,405 11,566
Equity in interest
expense of joint
venture 215 130 556 391
Income tax benefit:
Income tax expense
(benefit) (27) 558 18 (807)
Income tax expense
(benefit) from
discontinued
operations - 56 (19) 180
Depreciation and other
amortization 12,430 9,977 33,699 28,813
Equity in
depreciation/
amortization of joint
venture 224 286 680 879
Minority interest:
Minority interest of
common units in
LaSalle Hotel
Operating
Partnership, L.P. 120 158 284 256
Minority interest of
preferred units in
LaSalle Hotel
Operating
Partnership, L.P. 355 - 355 -
Minority interest in
discontinued
operations - 51 - 72
Distributions to
preferred
shareholders 3,744 3,133 10,010 9,399
----------- ----------- ----------- -----------
EBITDA $ 35,028 $ 28,316 $ 80,726 $ 61,700
=========== =========== =========== ===========
LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ---------------------
2005 2004 2005 2004
TOTAL PORTFOLIO
Occupancy 79.1% 75.8% 73.1% 71.0%
Increase/(Decrease) 4.3% 2.9%
ADR $175.11 $166.80 $168.13 $156.58
Increase/(Decrease) 5.0% 7.4%
REVPAR $138.48 $126.46 $122.87 $111.15
Increase/(Decrease) 9.5% 10.5%
Note:
This schedule includes the operating data for all properties leased to
LHL, and to third parties as of September 30, 2005, including the
Hilton Gaslamp, Grafton on Sunset, Onyx Hotel and Westin Copley Place
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, Onyx Hotel and Westin Copley Place 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
1Q'2004 2Q'2004 3Q'2004 4Q'2004 Full Year 2004
--------- --------- --------- --------- --------------
Occupancy 63.3% 73.4% 75.8% 64.3% 69.1%
ADR $139.96 $159.52 $166.80 $162.43 $158.16
REVPAR $88.65 $117.12 $126.46 $104.50 $109.22
Note:
This schedule includes historical operating data for the hotels owned
as of September 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 For the
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
2005 2004 2005 2004
Revenues
Room 74,391 67,631 188,092 170,600
Food & beverage 32,582 31,405 89,341 83,737
Other 10,557 9,658 24,708 23,914
--------- ---------- ---------- --------
Total hotel sales 117,530 108,694 302,141 278,251
Expenses
Room 16,225 15,280 43,404 40,881
Food & beverage 22,057 21,865 60,796 58,385
Other direct 5,370 4,906 13,850 13,031
General & administrative 9,560 8,632 25,406 23,634
Sales & marketing 7,825 7,228 22,011 20,965
Management fees 4,565 3,781 10,170 8,928
POM 4,504 4,258 12,732 11,583
Energy 4,223 3,729 10,552 9,555
Fixed expenses 6,241 5,818 16,930 16,192
--------- ---------- ---------- --------
Total hotel expenses 80,570 75,497 215,851 203,154
EBITDA 36,960 33,197 86,290 75,097
Note:
This schedule includes the operating data for all properties leased to
LHL, and to third parties as of September 30, 2005, including the
Hilton Gaslamp, Grafton on Sunset, Onyx Hotel and Westin Copley Place
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, Onyx Hotel and Westin Copley Place are shown in
2004 for their comparative period of ownership in 2005.
