LaSalle Hotel Properties Reports First Quarter Results; RevPAR Increases 13.7 Percent
BETHESDA, Md.| LaSalle Hotel Properties (NYSE:LHO) today reported net income to common shareholders of $33.3 million, or $0.87 per diluted share for the quarter ended March 31, 2006, compared to a net loss of $2.9 million, or ($0.10) per diluted share for the prior year period. Net income for the first quarter 2006 includes a $38.4 million gain in joint venture equity pick-up related to the sale of the Chicago Marriott.
For the quarter ended March 31, 2006, the Company generated funds from operations ("FFO") of $12.2 million versus $8.3 million for the same period of 2005. FFO per diluted share and unit for the first quarter equaled $0.32 versus $0.27 for the same period last year. The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter was $62.8 million, up from $13.5 million during the prior year period. EBITDA for the first quarter 2006 includes a $38.4 million gain in joint venture equity pick-up related to the sale of the Chicago Marriott.
Room revenue per available room ("RevPAR") for the quarter ended March 31, 2006 versus the same period in 2005 increased 13.7 percent to $116.33. Average daily rate ("ADR") rose to $170.76, a 9.4 percent improvement, while occupancy rose 3.9 percent to 68.1 percent from the prior year.
"Group and transient demand was strong in the quarter, which enabled our hotels to increase occupancy and yield room rates," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "Over 70 percent of our RevPAR increase resulted from higher ADR."
The Company's hotels generated $26.3 million of EBITDA for the quarter, which is an increase of $5.7 million or 27.8 percent over last year. First quarter EBITDA margins across the Company's portfolio grew 280 basis points from the prior year.
"The portfolio's performance exceeded our expectations, primarily as a result of better than expected group demand, particularly at our resort properties," said Mr. Bortz. "Our resort hotels, especially our hotels located in San Diego, led the portfolio's strong performance with 18.4% RevPAR growth and a 543 basis point EBITDA margin improvement."
On January 13, 2006, the Company announced its monthly dividend of $0.10 per share of its common shares of beneficial interest for each of the three months of January, February and March 2006. The January dividend was paid on February 15, 2006 to common shareholders of record on January 31, 2006; the February dividend was paid on March 15, 2006 to common shareholders of record on February 28, 2006; and the March dividend was paid on April 14, 2006 to common shareholders of record on March 31, 2006.
On January 27, 2006, the Company acquired the Le Parc Suite Hotel for $47.0 million. The independent upscale hotel features 154 spacious suites and is located in the heart of West Hollywood. Outrigger Lodging Services ("OLS") continues to manage the Le Parc Suite Hotel. OLS also manages the Company's Le Montrose Suite Hotel and Grafton on Sunset, which are both also located in West Hollywood.
In February, the Company, in an underwritten public offering, sold a total of 3,737,500 common shares resulting in net proceeds of approximately $137.7 million. Additionally, the Company raised net proceeds of $85.3 million with the sale of 3,500,000 Series E Cumulative Redeemable Preferred Shares at a distribution rate of 8.0 percent per year.
On February 15, 2006, the Company successfully remarketed the $42.5 million Massachusetts Port Authority special project revenue bonds related to the Harborside Hyatt with new supporting letters of credit provided by Royal Bank of Scotland. The annual cost of the letters of credit was reduced from 2.0% to 1.35% and certain other terms were amended, creating annual interest savings of approximately $0.4 million.
On February 21, 2006, the Company closed the Washington Grande Hotel, formerly the Holiday Inn Downtown, for renovations. Upon completion of the Company's renovation and repositioning program, the property will reopen in 2007 as a luxury high-style independent hotel.
On March 1, 2006, the Company acquired the Westin Michigan Avenue for $214.7 million and the House of Blues Hotel and related Marina City retail and parking facilities for $114.5 million in separate and unrelated transactions. The Westin Michigan Avenue is located in the heart of Chicago's Magnificent Mile neighborhood and is in close proximity to Chicago's major demand generators, including McCormick Place Convention Center, numerous Fortune 500 corporate headquarters, Navy Pier, professional sports venues and other leisure attractions. Starwood Hotels & Resorts Worldwide, Inc. continues to manage the hotel.
The House of Blues Hotel is a AAA Four Diamond, full service hotel located along the Chicago River and is part of the Marina City mixed-use development. The acquisition included over 115,000 square feet of retail and restaurant space at Marina City and 896 parking spaces encompassing the first 17 floors of the two adjacent Marina City residential towers. Major retail tenants include Smith & Wollensky Steakhouse, Crunch Gym, BIN 36 Restaurant, 10Pin Bowling Lounge and Bank One. Upon acquisition, Gemstone Resorts International, LLC was selected to manage the hotel, marking a new relationship for the Company.
On March 25, 2006, Chicago 540, LLC, a joint venture with The Carlyle Group, closed on the sale of the Chicago Marriott Downtown for $295 million plus approximately $11 million of other consideration. The hotel was purchased by the joint venture in 2000 for $175 million. LaSalle Hotel Properties recognized a gain in joint venture equity pick-up of $38.4 million.
In the first quarter, the Company invested $7.3 million of capital throughout its portfolio, including $2.5 million for completion of the 14,000 square foot Spa Minerale and other renovations at Lansdowne Resort. The Company also continued its renovation and repositioning programs at the Sheraton Bloomington, Chaminade Resort and Hilton Old Town Alexandria.
As of the end of the first quarter 2006, the Company had total outstanding debt of $737.3 million. The Company's $300.0 million credit facility had $51.0 million outstanding as of March 31, 2006. Interest expense for the quarter was $8.4 million, resulting in a trailing 12 month Corporate EBITDA (as defined in the Company's senior unsecured credit facility) to interest coverage ratio of 4.4 times. As of March 31, 2006, total debt to trailing 12 month Corporate EBITDA equaled 4.3 times, one of the lowest debt to EBITDA ratios in the industry.
Subsequent Events
On April 13, 2006, the Company announced a 40% increase in its monthly dividend to $0.14 per common share for each of the three months of April, May and June 2006. The April dividend will be paid on May 15, 2006 to common shareholders of record on April 28, 2006; the May dividend will be paid on June 15, 2006 to common shareholders of record on May 31, 2006; and the June dividend will be paid on July 14, 2006 to common shareholders of record on June 30, 2006.
2006 Outlook
The Company's current 2006 outlook is as follows:
Net Income $72.0 million - $75.2 million ($1.81 - $1.89 per diluted share); FFO $110.6 million - $113.8 million ($2.78 - $2.86 per diluted share/unit); and EBITDA $218.0 million - $221.2 million.
This 2006 outlook is based on the following major assumptions:
- Net Income and EBITDA include the $38.4 million gain in joint venture equity pick-up related to the sale of the Chicago Marriott;
- FFO excludes the $38.4 million gain in joint venture equity pick-up related to the sale of the Chicago Marriott;
- Portfolio RevPAR growth of 8.5 to 10.5 percent versus 2005;
- Portfolio hotel EBITDA margins increase 120 to 150 basis points over 2005;
- Corporate general and administrative expenses of $12.0 million;
- Total capital investments of approximately $80.0 to $85.0 million;
- Income tax expense of $0.5 million to $1.5 million;
- Average weighted outstanding debt of approximately $730.0 million; and
- Average weighted fully diluted shares/units of 39.8 million for full-year 2006.
These forecasts assume a healthy economic environment and no unexpected events negatively impacting the economy or the travel industry.
LASALLE HOTEL PROPERTIES Consolidated Statements of Operations (Dollars in thousands, except per share data) For the three months ended March 31, -------------------------- 2006 2005 ------------- ------------ Revenues: Hotel operating revenues: Room Revenue $ 69,905 $ 41,932 Food and beverage 32,459 22,160 Other operating department revenue 7,767 4,771 ------------- ------------ Total hotel operating revenues 110,131 68,863 Participating lease revenue 5,227 3,925 Other income 26 421 ------------- ------------ Total revenues 115,384 73,209 ------------- ------------ Expenses: Hotel operating expenses: Room 18,149 11,265 Food and beverage 23,988 16,467 Other direct 4,796 3,351 Other indirect 34,646 21,585 ------------- ------------ Total hotel operating expenses 81,579 52,668 Depreciation and other amortization 17,159 10,964 Real estate taxes, personal property taxes and insurance 5,735 3,588 Ground rent 1,394 798 General and administrative 3,190 2,766 Other expenses 262 101 ------------- ------------ Total operating expenses 109,319 70,885 ------------- ------------ Operating income 6,065 2,324 Interest income 690 101 Interest expense (9,014) (4,624) ------------- ------------ Loss before income tax benefit, minority interest, equity in earnings of Joint Venture and discontinued operations (2,259) (2,199) Income tax benefit 3,863 2,705 Minority interest of common units in LaSalle Hotel Operating Partnership, L.P. (80) (2) Minority interest of preferred units in LaSalle Hotel Operating Partnership, L.P. (1,064) - Equity in earnings (loss) of Joint Venture 38,411 (289) ------------- ------------ Income from continuing operations 38,871 215 ------------- ------------ Discontinued operations: Loss from operations of properties disposed of, including gain on disposal of assets - (45) Income tax benefit - 19 ------------- ------------ Net loss from discontinued operations - (26) ------------- ------------ Net income 38,871 189 Distributions to preferred shareholders (5,611) (3,133) ------------- ------------ Net income (loss) applicable to common shareholders $ 33,260 $ (2,944) ============= ============ Earnings per Common Share - Basic: Income (loss) applicable to common shareholders before discontinued operations and after dividends paid on unvested restricted shares $ 0.87 $ (0.10) Discontinued operations - - ------------- ------------ Net income (loss) applicable to common shareholders after dividends paid on unvested restricted shares $ 0.87 $ (0.10) ============= ============ Earnings per Common Share - Diluted: Income (loss) applicable to common shareholders before discontinued operations $ 0.87 $ (0.10) Discontinued operations - - ------------- ------------ Net income (loss) applicable to common shareholders $ 0.87 $ (0.10) ============= ============ Weighted average number of common shares outstanding: Basic 38,052,908 29,701,695 Diluted 38,431,801 30,202,017 LASALLE HOTEL PROPERTIES FFO and EBITDA (Dollars in thousands) (Unaudited) For the three months ended March 31, -------------------------- 2006 2005 ------------ ------------- Funds From Operations (FFO): Net income (loss) applicable to common shareholders $ 33,260 $ (2,944) Depreciation 17,075 10,947 Equity in depreciation of joint venture 178 265 Amortization of deferred lease costs 36 11 Minority interest: Minority interest in LaSalle Hotel Operating Partnership, L.P. 80 2 Less: Equity in gain on sale of property (38,393) - ------------ ------------- FFO $ 12,236 $ 8,281 ============ ============= Weighted average number of common shares and units outstanding: Basic 38,129,385 30,084,785 Diluted 38,508,278 30,585,107 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA): Net income (loss) applicable to common shareholders $ 33,260 $ (2,944) Interest 9,014 4,624 Equity in interest expense of joint venture 317 146 Income tax benefit: Income tax benefit (3,863) (2,705) Income tax benefit from discontinued operations - (19) Depreciation and other amortization 17,159 10,964 Equity in depreciation/amortization of joint venture 201 287 Minority interest: Minority interest of common units in LaSalle Hotel Operating Partnership, L.P. 80 2 Minority interest of preferred units in LaSalle Hotel Operating Partnership, L.P. 1,064 - Distributions to preferred shareholders 5,611 3,133 ------------ ------------- EBITDA $ 62,843 $ 13,488 ============ ============= LASALLE HOTEL PROPERTIES Statistical Data for the Hotels (unaudited) For the Three Months Ended March 31, --------------------------- 2006 2005 TOTAL PORTFOLIO Occupancy 68.1% 65.6% Increase/(Decrease) 3.9% ADR $170.76 $156.02 Increase/(Decrease) 9.4% REVPAR $116.33 $102.34 Increase/(Decrease) 13.7% Note: This schedule includes the operating data for all properties leased to LHL, and to third parties as of March 31, 2006, including the Le Parc Suite Hotel, House of Blues Hotel and Westin Michigan Avenue for the Company's period of ownership but excluding the Washington Grande Hotel (closed for renovations). The Onyx Hotel, Westin Copley Place, University Tower Hotel, Hilton San Diego Resort, Le Parc Suite Hotel, House of Blues Hotel and Westin Michigan Avenue are shown in 2005 for their comparative period of ownership in 2006. LASALLE HOTEL PROPERTIES Hotel Operational Data Schedule of Property Level Results (unaudited, in thousands) For the Three Months Ending ----------------------------- March 31, 2006 March 31, 2005 Revenues Room 76,785 67,546 Food & beverage 35,711 33,013 Other 8,268 7,896 -------------- -------------- Total hotel sales 120,764 108,455 Expenses Room 19,434 18,161 Food & beverage 25,989 24,887 Other direct 5,048 4,434 General & administrative 10,400 9,906 Sales & marketing 9,803 8,958 Management fees 4,009 3,602 POM 5,875 5,622 Energy 5,891 4,629 Fixed expenses 8,054 7,710 -------------- -------------- Total hotel expenses 94,503 87,909 EBITDA 26,261 20,546 Notes: This schedule includes the operating data for all properties leased to LHL, and to third parties as of March 31, 2006, including the Le Parc Suite Hotel, House of Blues Hotel and Westin Michigan Avenue for the Company's period of ownership but excluding the Washington Grande Hotel (closed for renovations). The Onyx Hotel, Westin Copley Place, University Tower Hotel, Hilton San Diego Resort, Le Parc Suite Hotel, House of Blues Hotel and Westin Michigan Avenue are shown in 2005 for their comparative period of ownership in 2006. LASALLE HOTEL PROPERTIES Statistical Data for the Hotels (Unaudited) Prior Year Operating Data 1Q'2005 2Q'2005 3Q'2005 4Q'2005 Full Year 2005 --------- --------- --------- --------- -------------- Occupancy 65.6% 77.6% 81.0% 67.6% 73.1% ADR $156.02 $180.58 $177.89 $177.76 $174.14 REVPAR $102.34 $140.10 $144.06 $120.10 $127.30 Note: This schedule includes historical operating data for the owned hotels open and operating as of March 31, 2006 (excludes the Washington Grande Hotel). Historical data is included in 2005 for the hotel's comparative period of ownership in 2006.