of $4.4 million for Third Quarter;
RevPAR Increased 1.4%
Hotel Operating Statistics
Share/Unit RevPAR Increases 1.4 Percent for the Quarter
BETHESDA, Md., Oct 21, 2002 - LaSalle Hotel Properties (NYSE: LHO) today reported comparable funds from operations ("FFO") of $12.4 million for the quarter ended September 30, 2002 versus $12.3 million for the third quarter of 2001. On a per diluted common share/unit basis, comparable FFO for the third quarter 2002 was $0.64 versus $0.65 a year ago. Comparable FFO is defined as funds from operations before one-time items, including the purchase of LaSalle Hotel Lessee ("LHL"), the transition expenses associated with becoming a self-managed Real Estate Investment Trust ("REIT"), and costs associated with terminating third-party tenant leases, all of which occurred during 2001.
For the quarter ended September 30, 2002 versus the same period in 2001, room revenue per available room ("RevPAR") increased 1.4 percent to $106.39. RevPAR improvement was driven by an occupancy increase of 3.1 percent over prior year to 69.9 percent, while average daily rate ("ADR") of $152.27 represented a 1.7 percent decrease over the prior year period.
"The RevPAR increase for our portfolio in the third quarter was in the range of our expectations, largely due to the performance of our resort- oriented properties, which experienced relatively stable leisure demand during August and September," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "Despite the weak economy, our hotels continue to show a steady but very gradual improvement in demand. We continue to aggressively asset manage our hotels and closely monitor operating expenses as we attempt to maximize cash flow during this improving, but challenging operating environment. "
For the third quarter 2002, the Company experienced net income applicable to common shareholders of $4.4 million, or $0.23 per diluted common share/unit, up compared with $3.9 million, or $0.21 per diluted common share/unit a year earlier. The Company's Comparable EBITDA improved 7.7 percent to $19.5 million for the third quarter, compared to $18.1 million a year ago. Comparable EBITDA is defined as earnings before interest, taxes, depreciation, amortization and one-time items, including the purchase of LHL, the transition expenses associated with becoming a self-managed REIT, and costs associated with terminating third-party tenant leases.
The Company's hotels generated $19.6 million of EBITDA for the third quarter, compared with $18.7 million for the prior year period. Third quarter EBITDA margins across the Company's portfolio increased 172 basis points from the prior year, largely due to savings in energy costs, property taxes and ground rent. In addition, rooms and food and beverage departmental expenses were well maintained, due to the Company's continued focus on improving operating efficiencies and aggressive cost containment.
For the nine months ended September 30, 2002, RevPAR declined 7.7 percent, as ADR declined 4.4 percent to $145.81 and occupancy fell 3.5 percent to 65.7 percent as compared to the same nine-month period in 2001. Net income applicable to common shareholders decreased to $2.4 million from $5.2 million for the prior year period. For the first nine months of 2002, the Company's Comparable EBITDA was $46.8 million compared to $51.1 million for the same period in 2001. For the year-to-date through September 30, 2002, interest expense equaled $11.6 million, resulting in a Comparable EBITDA to interest coverage multiple of 4.0 times, one of the highest coverage ratios in the industry.
On September 23, 2002, the Company completed the renovation and repositioning of the 82-room Hotel Madera, the third of LaSalle's four Washington, D.C. properties being repositioned as upscale boutique hotels. The hotel is managed by Kimpton Hotel & Restaurant Group, LLC and is located in the trendy Dupont Circle area of Washington's Golden Triangle. In conjunction with the opening of Hotel Madera, the hotel's full-service 100-seat restaurant and bar, Firefly, opened with significant fanfare. The 178-room Hotel Helix, which will also be managed by Kimpton, is slated to open in November. The total redevelopment costs for the four hotels in the D.C. Boutique Collection are anticipated to be approximately $31.5 million, with approximately $7.3 million remaining to be spent.
"We continue to be encouraged by the positive fundamentals exhibited by the Washington, D.C. economy and lodging market," commented Mr. Bortz. "During 2001, Washington, D.C. was the only metropolitan area in the country that achieved GDP growth greater than 4.0 percent, and this was despite the negative impact of the events of September 11. This further reinforces our belief that the D.C. region has a diverse and expanding demand base, which can grow even during challenging economic periods. Moreover, with the expected completion of the new 835,000 square foot Washington Convention Center in March 2003, combined with significant barriers to entry for new hotel rooms, we expect that the city will be one of the strongest lodging markets in the country for the next few years."
During 2002, the Company anticipates spending a total of approximately $33.0 million throughout the portfolio, including the redevelopments of the Hotel Madera and Hotel Helix. The cost of guest refurbishments for the planned Westin conversions of approximately $6.0 million at the Dallas and New Orleans properties is not included in this amount. The Company still expects that the Dallas and New Orleans properties will be converted to Westins; however, due to legal proceedings with Meridien, the anticipated conversions at both properties have been delayed.
On October 3, 2002 the Company announced that it reinstated a normal quarterly dividend of $0.21 per common share of beneficial interest for the third quarter ended September 30, 2002, which will be paid November 15, 2002 to shareholders of record as of October 31, 2002. The Company also announced that it expects the fourth quarter dividend to be $0.21 per share. Additionally, beginning in 2003, the Company plans to pay monthly dividends in lieu of quarterly dividends to its common shareholders of beneficial interest. The first monthly dividend is anticipated to be paid in February for the month of January at a level of $0.07 per common share of beneficial interest.
"We are pleased that the dividend limitations which our banking group instituted in February 2002 have been eliminated because of the improving operating fundamentals of our hotel portfolio, the strength of our balance sheet and the conservative business practices of our management team," noted Hans Weger, Chief Financial Officer of LaSalle Hotel Properties. "We operate with one of the most conservative leverage ratios in the industry and our hotels continue to experience gradual improvements in cash flow. Moreover, our balance sheet has been strengthened as a result of our approximately $100 million preferred offering in March 2002, which was over subscribed, and through the retention of cash over the past year. The reinstatement of our dividend to a meaningful amount and the move to monthly dividends in 2003 demonstrate our commitment to our mission of being an income company foremost, with moderate long-term earnings growth."
At the end of the third quarter 2002, LaSalle Hotel Properties had total outstanding debt of approximately $255.6 million, down approximately $95.1 million from a year ago. This includes its $11.9 million portion of the joint venture debt related to the Chicago Marriott. For the quarter, the Company's Comparable EBITDA covered its interest expense by approximately 5.7 times. As of September 30, 2002, the Company had $78.3 million outstanding on its $210.0 million unsecured credit facility.
"We are encouraged by the steady and gradual improvements that our hotels have demonstrated during this challenging operating environment," noted Mr. Bortz. "However, the economic recovery has not been as pronounced or immediate as expected earlier in the year. As a result, Corporate America remains constrained in its spending, particularly relating to travel and entertainment. Consequently, we anticipate that business travel, which is highly correlated with corporate profits and employment growth, will continue to experience only moderate growth during the next 12 to 18 months as the recovery appears to be weaker and slower paced than previously forecasted. Moreover, geopolitical uncertainty related to the war on terrorism and the possibility of new military action in the Middle East seem to be having a further dampening effect on business travel."
As a result, the Company now anticipates that its fourth quarter RevPAR will increase by 5 to 7 percent, compared with previous expectations of 7 to 10 percent. RevPAR for 2002 is now forecasted to decline 4 to 5 percent, down compared with previous projections of a 2 to 4 percent decline.
Operating margins are also expected to be more challenging in the fourth
quarter, due to these lowered RevPAR forecasts and difficult comparisons
resulting from the severe cost cutting that occurred after the events of
September 11. As a result, the Company now anticipates that fourth quarter
FFO will be $0.28 to $0.32 per share/unit and 2002 FFO will be between
$1.74 and $1.78 per share/unit.
LaSalle Hotel Properties is a leading multi-tenant, multi-operator REIT, which owns 17 upscale and luxury full-service hotels, totaling approximately 5,900 guestrooms in 13 markets in 11 states and the District of Columbia. LaSalle Hotel Properties focuses on investing in upscale and luxury full- service hotels located in urban, resort and convention markets. The Company seeks to grow through strategic relationships with premier internationally recognized hotel operating companies including Marriott International, Inc., Starwood Hotels & Resorts Worldwide, Inc., Radisson Hotels International, Inc., Crestline Hotels & Resorts, Inc., Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Interstate Hotels Corporation, and the Kimpton Hotel & Restaurant Group, LLC.
Certain matters discussed in this press release may be deemed to be forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Vice President of Finance & Investor Relations
LaSalle Hotel Properties, +1-301-941-1516
|Also See:||LaSalle Hotel Properties Reports RevPAR Decline for 2nd Qtr Better than Expectations Due to Healthy Leisure Demand / Statistical Data for the Hotels / July 2002|