Hotel Online  Special Report


advertisement
..
..
  Highland Hospitality Corporation Pays First Dividend, 
Reports Net Income of $2.2 million for 2nd Qtr

.

MCLEAN, VA, August 4, 2004 – Highland Hospitality Corporation (NYSE: HIH), a lodging real estate investment trust, or REIT, today reported its consolidated financial results for the quarter ended June 30, 2004.

Consolidated Financial Results

For the quarter ended June 30, 2004, the Company reported consolidated total revenue of $25.3 million and consolidated net income of $2.2 million, or $.05 per diluted share.  Funds from operations, or FFO, which is defined as consolidated net income plus depreciation and amortization, were $4.3 million, or $.11 per diluted share, for the quarter. Earnings before interest, income taxes and depreciation and amortization, or EBITDA, were $4.3 million, or $.11 per diluted share, for the quarter.
For the six months ended June 30, 2004, the Company reported consolidated total revenue of $44.0 million and consolidated net income of $2.8 million, or $.07 per diluted share.  FFO was $6.5 million, or $.16 per diluted share, for the six-month period.  EBITDA was $5.9 million, or $.15 per diluted share, for the six-month period.
On May 10, 2004, the Company acquired the 491-room Dallas/Fort Worth Airport Marriott hotel for $59.5 million.  The consolidated financial results for the second quarter 2004 include the results of operations for the hotel from its acquisition date. 

“We are pleased with our consolidated results for the quarter, as our portfolio performed well and the industry continues to show signs of a solid recovery,” said James L. Francis, President and Chief Executive Officer of Highland Hospitality Corporation.  “We believe that our hotels will continue to benefit from overall industry improvements, coupled with our renovation, repositioning and asset management efforts.” 

Both FFO and EBITDA are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission.  Management believes both FFO and EBITDA to be key measures of a REIT’s financial performance and should be considered along with, but not as an alternative to, net income and cash flow as a measure of the Company’s operating performance.  A reconciliation of these non-GAAP financial measures to net income is included in the accompanying financial tables.

Hotel Operating Performance

For the quarter ended June 30, 2004, the Company’s eight hotels generated $25.3 million of total revenue and $6.7 million of hotel operating profit.  Included in the following table are the key hotel operating statistics for the Company’s eight hotel properties for the second quarter 2004.  Also included is a comparison of the hotel operating statistics for the second quarter 2004 and 2003 for the Company’s six hotel properties that were open and operating during both periods.  This latter comparison does not include, for either period, hotel operating statistics for the Sugar Land Marriott hotel and Hilton Garden Inn Virginia Beach hotel, as these two hotels did not open for business until October 2003 and November 2003, respectively.  The hotel operating statistics for the six hotels for the second quarter 2003 reflect the results of operations of the hotels under previous ownership.

                                         Quarter Ended                Quarter Ended
                                         June 30, 2004                  June 30, 2003

                                            Total            Comparable       Comparable

    Occupancy %                        73.4%       78.3%         76.9%
    Average Daily Rate ("ADR")   $122.44      $125.41       $119.60
    Revenue per Available
    Room ("RevPAR")                 $89.85        $98.25        $92.02
 

Balance Sheet/Liquidity

As of June 30, 2004, the Company had $107.5 million of cash and cash equivalents.  Total assets were $394.9 million, including $256.2 million of net investment in hotel properties, total debt was $17.0 million, and stockholders’ equity was $354.4 million.
During the second quarter 2004, the Company generated $2.6 million of cash flow from its operations and used $74.6 million in investing activities, primarily to acquire the Dallas/Fort Worth Airport Marriott hotel, as well as deposits related to potential acquisitions.  In addition, the Company used $4.9 million in financing activities, which related to deposits on loan applications.

On June 17, 2004, the Company declared its first dividend payment to common shareholders.  The dividend payment was $.13 per common share for the six months ended June 30, 2004.  The dividend was paid on July 15, 2004 to stockholders of record as of June 30, 2004.

On July 9, 2004, the Company completed a $67.0 million fixed rate mortgage loan with Column Financial, Inc., an affiliate of Credit Suisse First Boston.  The loan is secured by three assets: The Hyatt Regency hotel in Savannah, GA, the Renaissance Hotel and Conference Center in Portsmouth, VA and the Hilton Garden Inn BWI Airport hotel in Linthicum, MD.  The term of the loan is seven years and carries an annual fixed rate of interest of 6.47%. 

The Company is currently in negotiations with several financial institutions to obtain additional long-term fixed rate non-recourse property mortgage debt, as well as a revolving credit or term loan facility, to supplement the IPO proceeds in providing capital for acquisition opportunities.  We intend to maintain target debt levels of 40-50% of historical asset cost.  As of July 30, 2004, the Company had approximately $161 million of cash and cash equivalents available for acquisitions and general corporate needs. 

Investment Outlook/Pipeline

The Company continues to actively pursue investment opportunities.  Since its IPO through June 30, 2004, the Company has closed on eight hotel properties using $265 million of total consideration, payable in the form of cash, limited partnership units in Highland Hospitality, L.P., the Company’s operating partnership, and the assumption of debt. 

During the second quarter 2004, the Company completed the following with respect to its investment pipeline:

  • On May 10, 2004, the Company acquired the 491-room Dallas/Fort Worth Airport Marriott hotel in Dallas/Fort Worth, TX for $59.5 million, or approximately $121,000 per room.  The hotel was purchased from Host Marriott Corporation (NYSE:HMT) and is managed under a long-term agreement by Marriott International, Inc. (NYSE:MAR).
  • On June 25, 2004, the Company announced the signing of a definitive agreement to acquire four hotels consisting of 1,687 rooms from Wyndham International, Inc. (Amex:WBR) for $227 million, or approximately $134,500 per room.  The four hotels are the 510-room Hilton hotel in Parsippany, NJ, the 495-room Crowne Plaza Ravinia hotel in Atlanta, GA, the 360-room Wyndham Wind Watch hotel in Hauppauge, Long Island, NY and the 322-room Tremont Boston – A Wyndham Historic Hotel in Boston, MA.  The Company expects the transaction to close before the end of August.
On August 3, 2004, the Company announced the following with respect to its investment initiatives:
  • The acquisition of the 156-room Courtyard Savannah Historic District hotel in Savannah, GA and the 109-room Residence Inn Tampa Downtown hotel in Tampa, FL from McKibbon Hotel Group.  McKibbon Hotel Management, Inc. of Tampa, FL will continue to manage both hotels under long-term agreements.
  • The signing of two separate definitive agreements to purchase the 299-room Omaha Marriott hotel in Omaha, NE and the 283-room Radisson Mount Laurel hotel in Mount Laurel, NJ.  The Company expects to close on the two hotels within 15 – 45 days.
The combined purchase price for the four hotels consisting of 847 rooms is $81.3 million or approximately $96,000 per room. 

James L. Francis stated, “We are delighted with our progress regarding our acquisition initiatives.  We continue to focus on hotels that will provide us with upside through new management expertise, upgrading and renovating, franchise repositioning and intense asset management.  The acquisition market remains competitive with many opportunities available to us, and we will continue to carefully allocate our capital to investments that will maximize our returns and increase stockholders’ value over the long-term.”

Dividend Outlook

The Company declared and paid its first dividend to common stockholders for the first six months of 2004 and currently anticipates that it will pay a dividend for the third quarter 2004 based on current and projected cash flow performance.

2004 Outlook

“We remain encouraged by the performance of our industry and our portfolio during the second quarter 2004,” advised Mr. Francis.  “With key business travel and overall demand indicators pointing positive, we expect that the industry and our portfolio will continue to benefit from these strong fundamentals.  As we have stated previously, our performance for 2004 will be based on this favorable industry environment, combined with the anticipated timing of our investments.  We remain confident that we will have invested significant capital by the end of 2004 and will be positioned for continued improvements in the industry in 2005.”
 

HIGHLAND HOSPITALITY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

                                                  June 30,        December 31,
                                                    2004              2003
    ASSETS
    Investment in hotel properties, net           $256,210          $147,562
    Deposits on hotel property acquisitions         11,950                 -
    Cash and cash equivalents                      107,498           225,630
    Restricted cash                                  3,377                 -
    Accounts receivable, net                         5,968             2,917
    Prepaid expenses and other assets                5,003             3,379
    Deposits on loan applications                    4,940                 -
      Total assets                                $394,946          $379,488
 

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Mortgage loan                                  $17,000          $      -
    Accounts payable and accrued expenses            8,740             6,936
    Payable to affiliates                              316             8,832
    Dividends/distributions payable                  5,323                 -
    Other liabilities                                  631                 -
      Total liabilities                             32,010            15,768

    Minority interest in
     operating partnership                           8,496             8,457
    Commitments and contingencies

    Preferred stock, $.01 par value;
     100,000,000 shares authorized;
     no shares issued and outstanding
     at June 30, 2004 and December 31, 2003              -                 -
    Common stock, $.01 par value;
     500,000,000 shares authorized;
     39,982,011 shares and 39,882,500
     shares issued and outstanding
     at June 30, 2004 and December 31,
     2003, respectively                                400               399
    Additional paid-in capital                     366,639           365,454
    Unearned compensation                           (7,486)           (7,917)
    Accumulated deficit                             (5,113)           (2,673)
      Total stockholders' equity                   354,440           355,263

      Total liabilities and
       stockholders' equity                       $394,946          $379,488
 
 

                       HIGHLAND HOSPITALITY CORPORATION
                    CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except share and per share data)

                                          Three Months Ended  Six Months Ended
                                              June 30, 2004      June 30, 2004
    REVENUE
    Rooms                                      $    16,430        $    28,543
    Food and beverage                                7,897             13,784
    Other                                              927              1,661
      Total revenue                                 25,254             43,988

    EXPENSES
    Hotel operating expenses:
      Rooms                                          3,518              6,090
      Food and beverage                              5,740             10,488
      Other direct                                     594              1,077
      Indirect                                       8,688             15,826
        Total hotel operating expenses              18,540             33,481
    Depreciation and amortization                    2,132              3,726
    Corporate general and administrative:
      Stock-based compensation                         884              1,590
      Other                                          1,472              2,963
    Total operating expenses                        23,028             41,760

    Operating income                                 2,226              2,228

    Interest income                                    294                675
    Interest expense                                   336                646

    Income before minority interest in
     operating partnership and income taxes          2,184              2,257
    Minority interest in
     operating partnership                             (52)               (66)
    Income tax benefit                                  26                567

    Net income                                 $     2,158        $     2,758
 

    Earnings per share:
      Numerator:
        Net income                             $     2,158        $     2,758
        Less: dividends on unvested
         restricted common stock                      (116)              (116)
        Net income after dividends on
         unvested restricted common stock      $     2,042        $     2,642

      Denominator:
        Weighted average number of common
         shares outstanding - basic             39,084,890         39,082,449
        Weighted average number of common
         shares outstanding - diluted           39,295,778         39,358,064
      Earnings per share:
        Basic                                  $      0.05        $      0.07
        Diluted                                $      0.05        $      0.07
 
 

                       HIGHLAND HOSPITALITY CORPORATION
                RECONCILIATION OF NET INCOME TO FFO AND EBITDA
                    (in thousands, except per share data)

    The following table reconciles net income to FFO for the three and six
months ended June 30, 2004:
                                         Three Months Ended   Six Months Ended
                                           June 30, 2004         June 30, 2004

    Net income                                 $2,158               $2,758
    Add:  Depreciation and amortization         2,132                3,726
    FFO                                        $4,290               $6,484

    FFO per share:
      Basic                                    $ 0.11               $ 0.17
      Diluted                                  $ 0.11               $ 0.16
 

    The following table reconciles net income to EBITDA for the three and six
months ended June 30, 2004:
                                         Three Months Ended   Six Months Ended
                                           June 30, 2004         June 30, 2004

    Net income                                 $2,158               $2,758
    Add:  Depreciation and amortization         2,132                3,726
          Interest expense                        336                  646
    Less: Interest income                        (294)                (675)
          Income tax benefit                      (26)                (567)
    EBITDA                                     $4,306               $5,888

    EBITDA per share:
      Basic                                    $ 0.11               $ 0.15
      Diluted                                  $ 0.11               $ 0.15
 

Highland Hospitality Corporation is a self-advised lodging real estate investment trust, or REIT, focused on hotel investments primarily in the United States.  The Company owns ten hotel properties in five states with an aggregate of 2,481 rooms. 

Certain statements and assumptions in this press release contain or are based upon “forward-looking” information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 

 

 
Contact:

Highland Hospitality Corporation
http://www.highlandhospitality.com
 

Also See: Highland Hospitality Corporation, a New Lodging REIT with Seven Hotel Properties, Reports a Loss of $2.7 million for Period Ended December 31, 2003 / February 2004
Highland Hospitality Corporation (HIH), a REIT, Expects IPO Proceeds of $342.3 million; Organized to Take Advantage of Lodging Investment Opportunities / December 2003


To search Hotel Online data base of News and Trends Go to Hotel.Online Search

Home | Welcome! | Hospitality News | Classifieds | Catalogs & Pricing | Viewpoint Forum | Ideas/Trends
Please contact Hotel.Online with your comments and suggestions.