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.
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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.