of $10 million vs $3.3 million in Prior Year 3rd Qtr;
RevPAR Up 11.7%
Hotel Operating Statistics
|BETHESDA, Md. - Oct. 20, 2004 -- LaSalle Hotel Properties (NYSE:LHO)
today reported net income of $10.0 million, or $0.35 per diluted share
for the quarter ended September 30, 2004, compared to net income of $3.3
million, or $0.15 per diluted share for the prior year period.
For the quarter ended September 30, 2004, the Company generated funds from operations ("FFO") of $17.8 million versus $12.1 million for the prior year period. FFO for the current quarter includes a contingent litigation expense of $0.9 million associated with the Company's ongoing litigation with Meridien and related affiliates. On a per diluted share/unit basis, FFO for the third quarter was $0.62 versus $0.56 a year ago.
The Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") for 2004's third quarter were $28.3 million, up from $18.9 million
during the prior year period. The Company's net income and EBITDA for the
current quarter include a $2.6 million gain on the sale of the Omaha Marriott,
which was sold on September 15, 2004 and the contingent litigation expense
of $0.9 million.
"Our business-oriented hotels again led the portfolio's strong performance, generating an impressive 18.1 percent RevPAR gain," noted Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "Business and leisure demand remained solid throughout the summer."
The Company's hotels generated $27.7 million of EBITDA for the third quarter compared with $24.3 million for the same period last year. Third quarter portfolio-wide EBITDA margins improved 152 basis points ("bps") from the prior year. EBITDA margins in the quarter increased primarily due to the robust RevPAR growth driven by the five percent ADR improvement.
"The ability of our hotels to increase room rates during the quarter more than offset the continued cost pressures related to labor expenses, health benefits and insurance," advised Mr. Bortz. "While we believe that constraining these expenses will continue to be an ongoing challenge for our asset managers and hotel operators, we expect that future ADR increases and occupancy growth will more than compensate for these above inflationary cost increases, allowing margins to rise."
For the nine months ended September 30, 2004, net income applicable to common shareholders decreased to $11.0 million from $29.2 million for the prior year period. RevPAR improved 12.2 percent, as ADR increased 4.3 percent to $153.08, while occupancy improved 7.6 percent to 70.0 percent as compared to the same nine-month period in 2003.
For the first nine months of 2004, the Company's EBITDA was $61.7 million compared to $75.1 million for the same period in 2003. EBITDA and net income for the current year include the Company's $2.6 million gain on the sale of the Omaha Marriott and the $0.9 million contingent litigation expense with Meridien and related entities. EBITDA and net income for the prior year include the $37.1 million gain on sale related to the New Orleans Grande Hotel, which was sold during 2003's second quarter and the combined $2.7 million impairment charge and loss on sale for the Holiday Inn Beachside, which was sold during 2003's third quarter.
Year-to-date through September 30, 2004, FFO was $38.2 million compared with $19.1 million for the prior year period. The current year FFO includes the $0.9 million contingent litigation expense. The prior year FFO includes the $2.7 million non-cash impairment expense for the Holiday Inn Beachside and the $1.1 million non-cash expense related to the early extinguishment of debt attributable to the sale of the New Orleans Grande Hotel and Holiday Inn Beachside.
For 2004, the Company has plans for total capital investments in its current assets of approximately $40.0 million to $42.0 million, including $18.0 million at Lansdowne Resort (golf course, clubhouse, guestroom refurbishment, lobby and other resort repositioning enhancements), $4.0 million at the Westin City Center Dallas (guestroom bathroom refurbishment, lobby, public area and infrastructure enhancements) and $5.5 million at the Sheraton Bloomington hotel (brand conversion improvements, guestroom, lobby and public area refurbishments). This represents a $3.0 million to $5.0 million reduction from our prior forecast due to a slower pace of cash outflows, with redevelopment work proceeding on schedule.
"The capital investments we completed throughout our portfolio, and most recently at our Holiday Inn on the Hill in Washington, D.C. and the Hotel Viking in Newport, Rhode Island, continue to contribute to healthy increases in our earnings and cash flow," advised Mr. Bortz. "We continue to be positive about the future returns from our current repositioning programs at Lansdowne Resort, Westin Dallas and Sheraton Bloomington."
On August 26, the Company executed a $34.4 million secured loan with Wells Fargo Bank at a fixed rate of 4.98 percent. The term of the loan is five years and is collateralized by the Company's 241-room Hilton Alexandria Old Town Hotel that was purchased on May 28th of this year.
Also in August, the Company increased its senior unsecured credit facility to $300.0 million from $215.0 million and its affiliated lessee revolving credit facility to $25.0 million from $13.0 million.
On September 15, the Company announced the sale of the 299-room Omaha Marriott for $28.5 million. The cash proceeds from the sale were used to reduce the Company's outstanding debt. In connection with the sale, the Company recognized a gain on sale of $2.6 million which was recorded in the third quarter.
During the third quarter, the Company accrued a net $0.9 million for contingent legal fees relating to its ongoing litigation with Meridien and related affiliates. As a result of this accrual, the net contingent lease termination liability has a current balance of approximately $2.4 million as of September 30, 2004, which is included in accounts payable and accrued expenses in LaSalle's consolidated balance sheets. Based on the claims LaSalle has against Meridien, LaSalle is and will continue to seek damages and reimbursement of legal fees, and therefore, ultimately any contingent lease termination expense may be adjusted accordingly.
As of the end of the third quarter 2004, LaSalle Hotel Properties had total outstanding debt of $272.3 million, which includes its $13.9 million portion of the joint venture debt related to the Chicago Marriott. The Company's $300.0 million unsecured credit facility had no balance outstanding as of September 30, 2004. Interest expense for the quarter was $3.3 million, resulting in a trailing 12-month Corporate EBITDA to interest coverage ratio of 5.0 times. As of September 30, 2004, total debt to trailing 12-month Corporate EBITDA equaled 3.4 times, one of the lowest in the industry.
On October 15, 2004, the Company announced its monthly dividend of $0.08 per common share of beneficial interest for each of the three months of October, November and December 2004. The October dividend will be paid on November 15, 2004 to common shareholders of record on October 29, 2004; the November dividend will be paid on December 15, 2004 to common shareholders of record on November 30, 2004; and the December dividend will be paid on January 14, 2005 to common shareholders of record on December 31, 2004.
"We remain encouraged by the continuing improvements in the economy and travel demand," said Mr. Bortz. "Business transient travel continues to exhibit growth at a healthy pace and leisure travel remains solid. Supply growth remains near ten-year lows. Pricing power is growing and customer mix continues to improve."
As a result of LaSalle's strong third quarter performance, the Company now expects its 2004 portfolio RevPAR will increase 9.0 to 9.5 percent, up from the 8.0 to 9.0 percent increase provided in the Company's prior outlook. The Company's forecast for fourth quarter RevPAR growth remains at 1.0 to 2.0 percent, which is lower than prior quarter performance due to a number of quarter specific factors, including occupancy displacement associated with major capital projects at Lansdowne Resort, Westin Dallas, Sheraton Bloomington, Chicago Marriott Downtown and Le Montrose. The Company's forecast for full year 2004 FFO per diluted share/unit is $1.76 to $1.78. Embedded in this forecast is the better than expected third quarter results, offset by $0.03 related to the contingent litigation expense. Additionally, this assumes fourth quarter performance is in-line with the Company's prior FFO per share/unit forecast of $0.37 to $0.39.
The revised 2004 outlook 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.
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 6,100 guest rooms in 13 markets in 10 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, Sandcastle Resorts & Hotels, 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.
LaSalle Hotel Properties
Hans Weger, Chief Financial Officer
|Also See:||LaSalle Hotel Properties Reports Net Loss of $3.7 million for 4th Qtr 2003; RevPAR Down 4.8% for the Year Hotel Operating Statistics / Feb 2003|
|LaSalle Hotel Properties Acquires the 241 room Hilton Alexandria Old Town for $59 million; Sandcastle Resorts & Hotels Named Manager / May 2004|