BETHESDA, Md.-- April 21, 2004 -- LaSalle Hotel
Properties (NYSE:LHO) today reported a net loss to common shareholders
of $6.2 million, or ($0.25) per diluted share for the quarter ended March
31, 2004, compared to a net loss of $6.3 million, or ($0.34) per diluted
share for the prior year period.
For the quarter ended March 31, 2004, the Company generated funds from
operations ("FFO") of $3.2 million versus $2.4 million for the same period
of 2003. On a per diluted share/unit basis, FFO for the first quarter was
$0.13, which was flat to last year's first quarter. The Company's earnings
before interest, taxes, depreciation and amortization ("EBITDA") for 2004's
first quarter increased to $7.4 million from $7.0 million during the prior
year period.
Room revenue per available room ("RevPAR") for the quarter ended March
31, 2004 versus the same period in 2003 increased 7.3 percent to $82.75.
Occupancy increased 7.1 percent to 61.8 percent from the prior year, while
the average daily rate ("ADR") of $133.91 represented a 0.2 percent increase.
These RevPAR results include the Indianapolis Marriott for eight weeks
in the current and prior year first quarter, as the hotel was purchased
during February 2004.
"Our business-oriented properties were our best performing segment,
led by our hotels located in Washington, D.C.," said Jon Bortz, Chairman
and Chief Executive Officer of LaSalle Hotel Properties. "Business travel
demand continues to strengthen and group booking activity is gaining momentum.
The RevPAR growth we achieved in our portfolio exceeded our expectations
as the recovery in business travel occurred sooner and with more strength
than we expected. Additionally, our properties benefited to a greater extent
from the extensive investments we have made over the last several years.
We continue to be encouraged by the strength of the economy and consequently,
expect both business and leisure travel demand to be healthy throughout
the year."
The Company's hotels generated $8.9 million of EBITDA for the quarter
which was flat compared with the same period last year. First quarter EBITDA
margins across the Company's portfolio decreased 70 basis points ("bps")
from the prior year. The EBITDA margin decline was primarily due to above
inflationary increases in certain operating costs.
"While we were disappointed with the portfolio-wide margin decline in
the first quarter, it was expected. The majority of the quarter's RevPAR
growth resulted from increased occupancy, which added variable costs,"
explained Mr. Bortz. "We experienced cost pressures from greater than inflationary
increases in wages and benefits, liability insurance, energy and other
utilities and property taxes. As we have historically done, we will continue
to employ aggressive and creative asset management efforts in conjunction
with our hotel management teams to minimize expense increases, create efficiencies
and improve operating margins."
On February 10, the Company acquired the 615-room AAA Four-Diamond Indianapolis
Marriott Downtown. The convention hotel is centrally located in the heart
of Indianapolis' business and leisure district, with a direct connection
to the city's expanded convention center. White Lodging Services Corporation
will continue to operate the hotel as manager pursuant to a Marriott franchise
agreement. Following this acquisition, the Company successfully arranged
a $57.0 million interest-only loan collateralized by the hotel. The term
of the loan is three years with two one-year extension options. In conjunction
with the loan, the company executed a three-year swap agreement, effectively
fixing the rate of the loan at 3.56 percent.
On February 11, the Company prepaid the existing 7.5 percent floating
rate debt securing Lansdowne Resort. The Company anticipates annual interest
expense savings of approximately $1.4 million as a result of the Lansdowne
debt prepayment and the Company's 5.25 percent fixed-rate mortgage on its
San Diego Paradise Point Resort arranged in December 2003. These savings
have been incorporated into the Company's 2004 outlook.
In March, the Company's 565-room convention hotel located in Bloomington,
Minnesota was successfully reflagged as the Sheraton Bloomington Hotel,
Minneapolis South. Starwood was selected to manage the property as a Sheraton,
Starwood's upscale brand. The hotel is currently undergoing a $10.5 million
renovation and repositioning program, which will feature the Sheraton brand's
signature amenities, as well as a refurbishment of the hotel lobby and
guestrooms and other guest service enhancements. The Company anticipates
approximately $0.7 million in expenses related to this transition and rebranding,
of which $0.4 million was recognized in the first quarter.
"The rebranding and repositioning program at our Sheraton Minneapolis
hotel is well underway and we expect to see improvements in both rate and
occupancy levels following the refurbishment," stated Mr. Bortz. "We are
very excited about the potential of this hotel and the benefits we expect
from the strength of the Sheraton brand as well as Starwood's marketing
and management expertise."
In the first quarter, the Company invested approximately $5.6 million
of capital throughout its portfolio, including approximately $1.6 million
for the new Greg Norman designed golf course and master plan development
at the Lansdowne Resort. In addition, $1.2 million was invested at the
Seaview Marriott Resort located outside of Atlantic City, New Jersey as
part of the lobby, meeting space and ballroom renovation.
"We continue to achieve significant benefits from our capital repositioning
and reinvestment programs," noted Mr. Bortz. "Our recently repositioned
Holiday Inn on the Hill, three blocks from the U.S. Capitol, and Hotel
Viking, in Newport, Rhode Island, combined with the ramp-up of our five
D.C. Urban Collection Hotels and the rebranding of the Westin Dallas and
Sheraton Minneapolis should continue to positively impact our results throughout
this year and next. Overall, we believe that our portfolio has begun to
take advantage of the long awaited recovery in the lodging business."
For 2004, the Company has plans for total capital investments of approximately
$45.0 million, which include $20.0 million at Lansdowne Resort (golf course,
clubhouse, guestroom refurbishment and other resort repositioning enhancements),
$6.5 million at the Westin City Center Dallas Hotel (brand conversion improvements,
guestroom and bathroom refurbishment, and public area and infrastructure
enhancements) and $5.5 million at the Sheraton Minneapolis hotel (brand
conversion improvements, guestroom and lobby refurbishments).
As of the end of the first quarter 2004, LaSalle Hotel Properties had
total outstanding debt of $316.2 million, including its $11.9 million portion
of the joint venture debt related to the Chicago Marriott Downtown. The
Company's $215.0 million unsecured credit facility had $82.5 million outstanding
as of March 31, 2004. Interest expense for the quarter was $3.3 million,
resulting in a trailing 12-month Corporate EBITDA to interest coverage
ratio of 3.7 times. As of March 31, 2004, total debt to trailing 12-month
Corporate EBITDA equaled 4.6 times, one of the lowest debt to EBITDA ratios
in the industry.
Subsequent Events
On April 6, 2004, the $120.0 million mortgage loan collateralized by
the Chicago Marriott Downtown, in which the Company holds a non-controlling
9.9% ownership interest, was refinanced. The new $140.0 million loan has
a two-year term with three one-year extension options. The mortgage has
an interest rate of LIBOR plus 225 bps. The Company's pro rata share of
the new loan is approximately $13.9 million and is not included in the
Company's balance sheet.
On April 15, 2004, the Company announced its monthly dividend of $0.07
per common share of beneficial interest for each of the three months of
April, May and June 2004. The April dividend will be paid on May 14, 2004
to common shareholders of record on April 30, 2004; the May dividend will
be paid on June 15, 2004 to common shareholders of record on May 31, 2004;
and the June dividend will be paid on July 15, 2004 to common shareholders
of record on June 30, 2004. This represents a 4.0 percent annualized yield
based on the Company's closing share price on April 20, 2004.
2004 Outlook
"We are very encouraged by the performance of our portfolio during the
first quarter, which exceeded our expectations," advised Mr. Bortz. "With
all of our key travel and lodging demand indicators now pointing positive,
we expect that the hotel industry, and particularly our portfolio, will
perform meaningfully better during the first half of 2004 than what we
assumed in our prior outlook."
As a result of the earlier and stronger than expected improvements in
business transient and group travel, the Company expects that its 2004
portfolio RevPAR will increase 5.5 to 6.5 percent, up from the 4.0 to 5.0
percent increase provided in the Company's prior outlook. FFO per diluted
share/unit is now forecasted at $1.62 to $1.70, up from the Company's prior
expectations of $1.52 to $1.62.
The revised 2004 and second quarter outlook assumes the sale of the
Omaha Marriott by the end of the second quarter, although it does not include
the assumption of any potential gain on the sale. The outlook also assumes
a steadily recovering economic and travel environment, continued improving
performance from the Company's renovated and repositioned hotels, and no
adverse geopolitical events or terrorist acts in the U.S.
Based upon these assumptions, the Company currently expects full year
2004 net income to range between $2.3 million and $4.5 million and EBITDA
to range between $65.5 million and $67.5 million.
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
For the three months ended
March 31,
2004 2003
----------- -----------
Revenues:
Hotel operating revenues:
Room revenue
$27,899 $14,490
Food and beverage revenue
15,574 8,716
Other operating department revenue
3,695 1,827
----------- -----------
Total hotel operating
revenues
47,168 25,033
Participating lease revenue
3,573 4,960
Other income
81 402
----------- -----------
Total revenues
50,822 30,395
----------- -----------
Expenses:
Hotel operating expenses:
Room
7,997 4,863
Food and beverage
11,743 7,101
Other direct
2,727 1,283
Other indirect
15,699 8,789
----------- -----------
Total hotel operating
expenses
38,166 22,036
----------- -----------
Depreciation and other amortization
9,045 7,822
Real estate taxes, personal property taxes and
insurance
2,748 2,088
Ground rent
771 772
General and administrative
2,143 1,918
Amortization of deferred financing costs
511 582
Other expenses
450 -
----------- -----------
Total operating expenses
53,834 35,218
----------- -----------
Operating loss
(3,012) (4,823)
Interest income
73 61
Interest expense
(3,287) (2,674)
----------- -----------
Loss before income tax benefit, minority
interest, equity in earnings of
unconsolidated entities and discontinued
operations
(6,226) (7,436)
Income tax benefit
2,862 2,657
----------- -----------
Loss before minority interest, equity in
earnings of unconsolidated entities and
discontinued operations
(3,364) (4,779)
Minority interest in LaSalle Hotel Operating
Partnership, L.P.
62 111
----------- -----------
Loss before equity in earnings of
unconsolidated entities and discontinued
operations
(3,302) (4,668)
Equity in earnings of unconsolidated entities
(248) (207)
----------- -----------
Loss before discontinued operations
(3,550) (4,875)
Discontinued operations:
Income from operations of property disposed of
- 1,093
Income from operations of property held for
sale
487 50
Minority interest, net of tax
(9) (26)
Income tax benefit
18 3
----------- -----------
Net income from discontinued operations
496 1,120
Net loss
(3,054) (3,755)
Distributions to preferred shareholders
(3,133) (2,557)
----------- -----------
Net loss applicable to common shareholders
$(6,187) $(6,312)
=========== ===========
Earnings per Common Share - Basic:
Loss applicable to common shareholders before
discontinued operations and after dividends
paid on unvested restricted shares
$(0.28) $(0.40)
Discontinued operations
0.02 0.06
----------- -----------
Net loss applicable to common shareholders
after dividends paid on unvested restricted
shares
$(0.26) $(0.34)
Earnings per Common Share - Diluted:
Loss applicable to common shareholders
before discontinued operations
$(0.27) $(0.39)
Discontinued operations
0.02 0.05
----------- -----------
Net loss applicable to common shareholders
$(0.25) $(0.34)
=========== ===========
Weighted average number common shares
outstanding:
Basic
24,045,610 18,483,506
Diluted
24,729,272 18,838,009
LASALLE HOTEL PROPERTIES
FFO and EBITDA
(Dollars in thousands, except per share data)
(Unaudited)
For the three months ended
March 31,
2004 2003
----------- -----------
Funds From Operations (FFO):
Net loss applicable to common shareholders
$(6,187) $(6,312)
Depreciation
9,132 8,565
Equity in depreciation of joint venture
263 249
Amortization of deferred lease costs
11 8
Minority interest:
Minority interest in LaSalle Hotel Operating
Partnership, L.P.
(62) (111)
Minority interest in discontinued operations
9 26
----------- -----------
FFO
$3,166 $2,425
=========== ===========
Weighted average number of common shares
and units outstanding:
Basic
24,470,296 18,908,192
Diluted
25,153,958 19,262,695
Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA):
Net loss applicable to common shareholders
$(6,187) $(6,312)
Interest
3,290 3,865
Equity in interest expense of joint venture
147 146
Income tax benefit:
Income tax benefit
(2,862) (2,657)
Income tax benefit from discontinued
operations
(18) (3)
Depreciation and other amortization
9,158 8,587
Equity in depreciation/amortization of joint
venture
291 276
Amortization of deferred financing costs
511 618
Minority interest:
Minority interest in LaSalle Hotel Operating
Partnership, L.P.
(62) (111)
Minority interest in discontinued operations
9 26
Distributions to preferred shareholders
3,133 2,557
----------- -----------
EBITDA
$7,410 $6,992
=========== ===========
LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
(Unaudited)
For the Three Months Ended
March 31,
---------------------------------
2004
2003
TOTAL PORTFOLIO
Occupancy
61.8%
57.7%
Increase/(Decrease)
7.1%
ADR
$133.91
$133.67
Increase/(Decrease)
0.2%
REVPAR
$82.75
$77.14
Increase/(Decrease)
7.3%
Note:
This schedule includes the operating data for all properties
leased to
LHL, and to third parties as of March 31, 2004, including
the
Indianapolis Marriott for the Company's period of ownership,
and the
Company's 9.9% interest in The Chicago Marriott Downtown
joint
venture. The 2003 operating performance is shown as though
Lansdowne
Resort and Hotel George were owned for the entire quarter;
The
Indianapolis Marriott is shown for the comparative period
of ownership
in 2004.
LASALLE HOTEL PROPERTIES
Hotel Operational Data
Schedule of Property Level Results
(unaudited, dollars in thousands)
For the Three Months Ended
March 31,
------------------------------
2004
2003
Revenues
Room
$35,954 $33,278
Food & beverage
19,303
19,383
Other
4,656
4,366
------------ -------------
Total hotel sales
59,913
57,027
Expenses
Room
9,925
9,355
Food & beverage
14,350
14,032
Other direct
3,129
2,880
General & administrative
17,170
16,018
Management fees
1,769
1,617
Fixed expenses
4,677
4,261
------------ -------------
Total hotel expenses
51,020
48,163
EBITDA
$8,893
$8,864
============ =============
Note:
This schedule includes the operating data for all properties
leased to
LHL, and to third parties as of March 31, 2004, including
the
Indianapolis Marriott for the Company's period of ownership,
and the
Company's 9.9% interest in The Chicago Marriott Downtown
joint
venture. The 2003 operating performance is shown as though
Lansdowne
Resort and Hotel George were owned for the entire quarter;
The
Indianapolis Marriott is shown for the comparative period
of ownership
in 2004.
LaSalle Hotel Properties is a leading multi-tenant, multi-operator
real estate investment trust, which owns interests in 18 upscale and luxury
full-service hotels, totaling approximately 6,200 guest rooms 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., Westin Hotels & Resorts, Sheraton
Hotels & Resorts, Crestline Hotels and Resorts, Inc., Outrigger Lodging
Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark
Hospitality, White Lodging Services Corporation, and the Kimpton Hotel
& Restaurant Group, LLC.
The Company considers the non-GAAP measure of funds from
operations ("FFO") to be a key supplemental measure of the Company's performance
and should be considered along with, but not as an alternative to, net
income as a measure of the Company's operating performance. Historical
cost accounting for real estate assets implicitly assumes that the value
of real estate assets diminishes predictably over time. Since real estate
values instead have historically risen or fallen with market conditions,
most industry investors consider supplemental measurements of performance
to be helpful in evaluating a real estate company's operations. The Company
believes that excluding the effect of gains or losses from debt restructuring,
extraordinary items, real estate-related depreciation and amortization,
and the portion of these items related to unconsolidated entities, all
of which are based on historical cost accounting and which may be of limited
significance in evaluating current performance, can facilitate comparisons
of operating performance between periods and between REITs, even though
FFO does not represent an amount that accrues directly to common shareholders.
However, FFO may not be helpful when comparing the Company to non-REITs. |
The Company considers the non-GAAP measure of earnings before interest,
taxes, depreciation and amortization ("EBITDA") to be a key measure of
the Company's performance and should be considered along with, but not
as an alternative to, net income as a measure of the Company's operating
performance. Most industry investors consider EBITDA a measurement of performance
that is helpful in evaluating a REIT's operations. The Company believes
that excluding the effect of non-operating expenses and non-cash charges,
and the portion of these items related to unconsolidated entities, all
of which are based on historical cost accounting and which may be of limited
significance in evaluating current performance, can help eliminate the
accounting effects of depreciation and amortization, and financing decisions
and facilitate comparisons of core operating profitability between periods
and between REITs, even though EBITDA does not represent an amount that
accrues directly to common shareholders.
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. Although LaSalle Hotel Properties believes
the expectations reflected in such forward looking statements are based
on reasonable assumptions, it can give no assurance that its expectations
will be attained. Certain factors that could cause actual results to differ
materially from the Company's expectations are listed in the Company's
Form 10-K for the year ended December 31, 2003 and subsequent SEC reports
and filings. LaSalle Hotel Properties assumes no obligation to update or
supplement forward-looking statements that become untrue because of subsequent
events.
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