LaSalle Hotel Properties Reports Second Quarter Results
FFO per Diluted Share/Unit Increases 38% for the Quarter
BETHESDA, Md. -- LaSalle Hotel Properties (NYSE:LHO - News) today reported net income to common shareholders of $18.4 million, or $0.46 per diluted share for the quarter ended June 30, 2006, compared to net income of $10.3 million, or $0.34 per diluted share for the prior year period.
For the quarter ended June 30, 2006, the Company generated funds from operations ("FFO") of $37.9 million versus $20.8 million for the same period of 2005. On a per diluted share/unit basis, FFO for the second quarter was $0.94 versus $0.68 for the same period last year, a 38 percent increase. The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for 2006's second quarter rose to $58.7 million from $32.2 million during the prior year period.
Room revenue per available room ("RevPAR") for the quarter ended June 30, 2006 versus the same period in 2005 increased 10.6 percent to $155.39. Average daily rate ("ADR") rose to $196.09, an 8.5 percent improvement, while occupancy rose 1.9 percent to 79.2 percent from the prior year period. For the six months ended June 30, 2006, RevPAR increased 11.8 percent to $136.96 from the prior year period. ADR increased 8.8 percent to $185.09 and occupancy increased 2.7 percent to 74.0 percent from the prior year period.
The Company's hotels generated $59.4 million of EBITDA for the second quarter compared with $54.2 million for the same period last year. Second quarter portfolio-wide EBITDA margins increased 5 basis points ("bps") from the prior year. For the six months ended June 30, 2006, portfolio-wide EBITDA margins improved 110 bps from the prior year period.
"The Company's overall performance in the second quarter was in-line with our expectations," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "In the quarter, demand remained healthy, RevPAR growth was strong and FFO per diluted share/unit rose 38 percent. While hotel EBITDA margins disappointed us slightly, most of the quarter's margin pressures were anticipated and our hotel EBITDA margin growth outlook for the year remains within our prior range. Though we experienced some minor softness in leisure demand in June, fundamentals for the lodging industry and LaSalle Hotel Properties remain strong."
On April 13, 2006, LaSalle Hotel Properties increased its monthly dividend to $0.14 per common share of beneficial interest for each of the months of April, May and June 2006. This represented a 40 percent increase from the prior monthly dividend of $0.10 per common share.
On June 8, 2006, the Company successfully executed a $101.8 million secured loan with Bank of America, N.A. at a fixed annualized interest rate of 5.99 percent. The term of the loan is 10 years and is collateralized by the 615-room Indianapolis Marriott Downtown. Proceeds from the loan were used to repay the previous $57.0 million mortgage secured by the hotel and reduce the Company's outstanding balance on its credit facility. In conjunction with this refinancing, the Company recognized $1.1 million of income in the second quarter related to the termination of a swap for the $57.0 million mortgage, although a higher interest rate on the new loan will offset most of this income over the prior mortgage's remaining term.
On June 15, 2006, the Company acquired the Alexis Hotel in Seattle, Washington, for $38.0 million. The 109-room Four Diamond, independent full-service hotel is located on First Avenue in the heart of downtown Seattle. The purchase price included 19,000 square feet of retail space currently 100 percent leased to third-party tenants. The historic Alexis Hotel is located in the heart of the central business district of downtown Seattle, in close proximity to leisure and business demand generators. The hotel is managed by the Kimpton Hotel & Restaurant Group, LLC.
As of the end of the second quarter 2006, the Company had total outstanding debt of $730.1 million. The Company's $300.0 million credit facility had no outstanding balance as of June 30, 2006. Interest expense for the quarter was $9.4 million, resulting in a trailing 12 month Corporate EBITDA (as defined in the Company's senior unsecured credit facility) to interest coverage ratio of 4.5 times. As of June 30, 2006, total debt to trailing 12 month Corporate EBITDA equaled 4.1 times, one of the lowest debt to EBITDA ratios in the industry.
For the six months ended June 30, 2006, net income to common shareholders increased to $51.6 million from $7.3 million for the prior year period. EBITDA increased to $121.5 million from $45.7 million for the prior year period. FFO increased to $50.1 million from $29.1 million or $1.27 per diluted share/unit from $0.95 per diluted share/unit for the prior year period, which represents a 34 percent increase. Net income and EBITDA for the six months ended June 30, 2006 include the $38.4 million gain in joint venture equity pick-up related to the sale of the Chicago Marriott. Net income, EBITDA and FFO include the $1.0 million contingent litigation expense for the six months ended June 30, 2005.
Subsequent Events
On July 14, 2006, the Company announced its monthly dividend of $0.14 per common share of beneficial interest for each of the months of July, August and September 2006. This represents a 3.5 percent annualized yield based on the Company's closing share price on July 19, 2006.
The July dividend will be paid on August 15, 2006 to common shareholders of record on July 31, 2006; the August dividend will be paid on September 15, 2006 to common shareholders of record on August 31, 2006; and the September dividend will be paid on October 13, 2006 to common shareholders of record on September 29, 2006.
2006 Outlook
The Company's current 2006 outlook is as follows:
Net Income $72.0 million - $73.6 million ($1.81 - $1.85 per diluted share); FFO $110.6 million - $112.2 million ($2.78 - $2.82 per diluted share/unit); and EBITDA $220.0 million - $221.9 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 9.0 to 10.0 percent versus 2005;
- Portfolio hotel EBITDA margins increase 120 to 140 basis points over 2005;
- Corporate general and administrative expenses of $12.2 million;
- Total capital investments of approximately $80.0 to $85.0 million;
- Income tax expense of $0.2 million to $0.8 million;
- Weighted average outstanding debt of approximately $720.0 million; and
- Weighted average 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 is a leading multi-tenant, multi-operator real estate investment trust, owning interests in 29 upscale and luxury full-service hotels, totaling approximately 8,500 guest rooms in 15 markets in 11 states and the District of Columbia. The Company focuses on owning 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, Benchmark Hospitality, White Lodging Services Corporation, Gemstone Resorts International, LLC, Thompson Hotels, 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 2006 outlook, including the Company's underlying assumptions and expectations of demand growth, supply growth, RevPAR growth and expected completion of renovations. 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, downturns in general and local economic conditions and cancellation of or delays in the completion of anticipated demand generators, (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 as updated in its Quarterly Reports. 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 obligation 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 For the three months ended six months ended June 30, June 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Revenues: Hotel operating revenues: Room revenue $ 106,605 $ 57,627 $ 176,510 $ 99,559 Food and beverage revenue 46,442 28,961 78,901 51,121 Other operating department revenue 12,765 7,817 20,532 12,588 ----------- ----------- ----------- ----------- Total hotel operating revenues 165,812 94,405 275,943 163,268 Participating lease revenue 6,525 5,490 11,752 9,415 Other income 2,804 194 2,830 617 ----------- ----------- ----------- ----------- Total revenues 175,141 100,089 290,525 173,300 ----------- ----------- ----------- ----------- Expenses: Hotel operating expenses: Room 22,871 12,966 41,020 24,232 Food and beverage 30,828 18,641 54,816 35,108 Other direct 6,404 4,558 11,200 7,909 Other indirect 43,820 24,758 78,466 46,343 ----------- ----------- ----------- ----------- Total hotel operating expenses 103,923 60,923 185,502 113,592 Depreciation and other amortization 19,554 10,305 36,713 21,269 Real estate taxes, personal property taxes and insurance 7,514 3,363 13,249 6,951 Ground rent 1,553 971 2,947 1,769 General and administrative 2,801 2,478 5,991 5,243 Lease termination expenses - 1,018 - 1,018 Other expenses 993 71 1,255 172 ----------- ----------- ----------- ----------- Total operating expenses 136,338 79,129 245,657 150,014 ----------- ----------- ----------- ----------- Operating income 38,803 20,960 44,868 23,286 Interest income 336 105 1,026 205 Interest expense (10,223) (5,213) (19,237) (9,836) ----------- ----------- ----------- ----------- Income before income tax (expense) benefit, minority interest, equity in earnings of joint venture and discontinued operations 28,916 15,852 26,657 13,655 Income tax (expense) benefit (3,106) (2,749) 757 (45) Minority interest of common units in LaSalle Hotel Operating Partnership, L.P. (12) (161) (92) (164) Minority interest of preferred units in LaSalle Hotel Operating Partnership, L.P. (1,065) - (2,129) - Equity in earnings of joint venture - 475 38,411 186 ----------- ----------- ----------- ----------- Income from continuing operations 24,733 13,417 63,604 13,632 ----------- ----------- ----------- ----------- Discontinued operations: Loss from operations of properties disposed of - - - (45) Income tax benefit - - - 19 ----------- ----------- ----------- ----------- Net loss from discontinued operations - - - (26) ----------- ----------- ----------- ----------- Net income 24,733 13,417 63,604 13,606 Distributions to preferred shareholders (6,369) (3,133) (11,980) (6,266) ----------- ----------- ----------- ----------- Net income applicable to common shareholders $ 18,364 $ 10,284 $ 51,624 $ 7,340 =========== =========== =========== =========== Earnings per Common Share - Basic: Income applicable to common shareholders before discontinued operations and after dividends paid on unvested restricted shares $ 0.46 $ 0.34 $ 1.32 $ 0.24 Discontinued operations - - - - ----------- ----------- ----------- ----------- Net income applicable to common shareholders after dividends paid on unvested restricted shares $ 0.46 $ 0.34 $ 1.32 $ 0.24 =========== =========== =========== =========== Earnings per Common Share - Diluted: Income applicable to common shareholders before discontinued operations $ 0.46 $ 0.34 $ 1.31 $ 0.24 Discontinued operations - - - - ----------- ----------- ----------- ----------- Net income applicable to common shareholders $ 0.46 $ 0.34 $ 1.31 $ 0.24 =========== =========== =========== =========== Weighted average number of common shares outstanding: Basic 39,776,207 29,822,566 38,919,318 29,767,699 Diluted 40,170,665 30,287,688 39,315,706 30,245,373 LASALLE HOTEL PROPERTIES FFO and EBITDA (Dollars in thousands, except share data) (Unaudited) For the For the three months ended six months ended June 30, June 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Funds From Operations (FFO): Net income applicable to common shareholders $ 18,364 $ 10,284 $ 51,624 $ 7,340 Depreciation 19,314 10,217 36,389 21,164 Equity in depreciation of joint venture - 146 178 411 Amortization of deferred lease costs 196 12 232 23 Minority interest: Minority interest of common units in LaSalle Hotel Operating Partnership, L.P. 12 161 92 164 Less: Equity in gain on sale of property - - (38,393) - ----------- ----------- ----------- ----------- FFO $ 37,886 $ 20,820 $ 50,122 $ 29,102 =========== =========== =========== =========== Weighted average number of common shares and units outstanding: Basic 39,809,737 30,159,942 38,974,203 30,127,805 Diluted 40,204,195 30,625,064 39,370,591 30,605,480 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA): Net income applicable to common shareholders $ 18,364 $ 10,284 $ 51,624 $ 7,340 Interest 10,223 5,213 19,237 9,837 Equity in interest expense of joint venture - 195 317 341 Income tax benefit: Income tax expense (benefit) 3,106 2,749 (757) 45 Income tax expense (benefit) from discontinued operations - - - (19) Depreciation and other amortization 19,554 10,305 36,713 21,269 Equity in depreciation/ amortization of joint venture - 169 201 456 Minority interest: Minority interest of common units in LaSalle Hotel Operating Partnership, L.P. 12 161 92 164 Minority interest of preferred units in LaSalle Hotel Operating Partnership, L.P. 1,065 - 2,129 - Distributions to preferred shareholders 6,369 3,133 11,980 6,266 ----------- ----------- ----------- ----------- EBITDA $ 58,693 $ 32,209 $ 121,536 $ 45,699 =========== =========== =========== =========== LASALLE HOTEL PROPERTIES Statistical Data for the Hotels (unaudited) For the For the Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2006 2005 2006 2005 TOTAL PORTFOLIO Occupancy 79.2% 77.8% 74.0% 72.0% Increase/(Decrease) 1.9% 2.7% ADR $ 196.09 $180.67 $185.09 $ 170.08 Increase/(Decrease) 8.5% 8.8% REVPAR $ 155.39 $140.50 $136.96 $ 122.50 Increase/(Decrease) 10.6% 11.8% Note: This schedule includes the operating data for all properties leased to LHL, and to third parties as of June 30, 2006, including the Le Parc Suite Hotel, House of Blues Hotel, Westin Michigan Avenue and Alexis Hotel 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, Westin Michigan Avenue and Alexis Hotel are shown in 2005 for their comparable period of ownership in 2006. LASALLE HOTEL PROPERTIES Hotel Operational Data Schedule of Property Level Results (unaudited, in thousands) For the For the Three Months Ended Six Months Ended ------------------- ----------------- June 30, June 30, June 30, June 30, 2006 2005 2006 2005 Revenues Room 114,794 103,533 191,579 171,079 Food & beverage 49,995 46,985 85,707 79,998 Other 13,614 12,570 21,882 20,466 ---------- -------- -------- -------- Total hotel sales 178,403 163,088 299,168 271,543 Expenses Room 24,365 22,522 43,799 40,683 Food & beverage 32,880 30,472 58,869 55,358 Other direct 6,741 5,886 11,789 10,320 General & administrative 12,938 11,978 23,338 21,884 Sales & marketing 11,797 10,789 21,600 19,746 Management fees 7,898 7,290 11,907 10,892 POM 6,877 6,171 12,752 11,792 Energy 5,733 4,854 11,624 9,483 Fixed expenses 9,745 8,889 17,798 16,599 ---------- -------- -------- -------- Total hotel expenses 118,974 108,851 213,476 196,757 EBITDA 59,429 54,237 85,692 74,786 Notes: This schedule includes the operating data for all properties leased to LHL, and to third parties as of June 30, 2006, including the Le Parc Suite Hotel, House of Blues Hotel, Westin Michigan Avenue and Alexis Hotel 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, Westin Michigan Avenue and Alexis Hotel are shown in 2005 for their comparable period of ownership in 2006. LASALLE HOTEL PROPERTIES Statistical Data for the Hotels (Unaudited) Prior Year Operating Data Full Year 1Q'2005 2Q'2005 3Q'2005 4Q'2005 2005 --------- --------- ---------- ---------- --------- Occupancy 65.6% 77.8% 81.2% 67.9% 73.3% ADR $ 156.02 $ 180.67 $ 178.57 $ 177.57 $ 174.34 REVPAR $ 102.34 $ 140.50 $ 145.06 $ 120.56 $ 127.80 Note: This schedule includes historical operating data for the owned hotels open and operating as of June 30, 2006 (excludes the Washington Grande Hotel). Historical data is included in 2005 for each hotel's comparative period of ownership in 2006.
Hans Weger
Chief Financial Officer
301-941-1500
LaSalle