Anticipates Spending $20 to $25 million for Upgrades of Hotels and the
Re-branding of Mondrian Scottsdale
Hotel Operating Statistics
|NEW YORK - March 27, 2006 -- Morgans Hotel Group Co.(NASDAQ: MHGC):
Fourth quarter 2005 revenue per available room (RevPAR) for owned hotels, all of which are comparable, increased 12.6% over the same period in 2004. Total revenues, which include food and beverage, other hotel revenues and management fees, increased 7.9% to $70.1 million as compared to $65.0 million in the fourth quarter of 2004. Adjusted earnings before interest, taxes depreciation and amortization (Adjusted EBITDA) increased by 8.8% to $22.5 million as compared to $20.7 million in the fourth quarter of 2004. Included in Adjusted EBITDA in the fourth quarter of 2005 was $0.5 million in severance charges and $0.4 million in reserves for prior period payroll taxes at the Company's London joint venture. Included in the 2004 fourth quarter Adjusted EBITDA was $0.6 million in income due to settlements of prior period legal expenses. Excluding these items in both years' quarters, Adjusted EBITDA increased by 16%.
Net loss for the fourth quarter of 2005 was $4.1 million compared to
a net loss of $2.4 million in the fourth quarter of 2004. In addition to
the items affecting Adjusted EBITDA above, the results were negatively
impacted by $2.2 million for the Company's 50% share of a write-off of
financing costs in connection with the refinancing of debt in the London
joint venture. A reconciliation of operating income and net loss, calculated
in accordance with U.S. generally accepted accounting principles, to Adjusted
EBITDA is included in the accompanying tables.
In February 2006, the Company completed its initial public offering
selling 18.0 million shares, including 3.0 million shares from existing
stockholders. The Company received net proceeds of approximately $275.0
million. The proceeds were used to improve the Company's debt-to-equity
ratio by repaying a portion of outstanding debt and preferred equity interests.
Additionally, the Company will use the proceeds to finance a portion of
the acquisition of the James Hotel Scottsdale and for general corporate
purposes, including hotel renovations.
Fourth Quarter Operating Results
RevPAR for the Company's owned hotels was $247.60 for the fourth quarter 2005, a 12.6% increase over the comparable period in 2004. The increase in RevPAR was driven by an increase of 18.4% for the Company's three New York hotels. The growth was partially offset by the impact from Hurricane Wilma in October which affected RevPAR at the Delano in Miami for the fourth quarter 2005. Excluding Miami, RevPAR at the Company's remaining five owned hotels increased approximately 15.0%.
The RevPAR growth for the Company's owned hotels was derived solely from average daily rate (ADR) growth, which increased by 13.5%, or $38.72, to $326.22 for the fourth quarter of 2005 from $287.50 for the fourth quarter of 2004. Occupancy for the Company's owned portfolio was 75.9% in the fourth quarter 2005 as compared to 76.5% in the fourth quarter of 2004.
Hotel operating margins, defined as hotel revenues less hotel operating expenses, as a percentage of hotel revenues increased to 36.4% in the fourth quarter of 2005 from 32.1% in the fourth quarter of 2004. The margin growth has been driven by the company's ability to increase ADR due to the high occupancies in its markets.
At the Company's unconsolidated hotels, the London hotels rebounded from the July terrorist bombings to post a RevPAR increase of 4.1%. RevPAR at the Shore Club in Miami declined due to Hurricane Wilma.
Full Year 2005 Company Highlights
RevPAR for owned hotels increased 17.3% to $224.19 for the full year 2005 over the full year 2004. The Company achieved RevPAR growth across all of its geographic markets. In particular, the Company's three New York City hotels had RevPAR growth of 22.9% for the full year 2005 as compared to the full year 2004.
The RevPAR growth at the Company's owned hotels for the full year 2005 was due to strong ADR growth, which increased 11.0%, or $27.73, to $280.24 as compared to the full year 2004. Occupancy for the Company's owned portfolio increased to 80.0% for the full year 2005 from 75.7% in the full year 2004. All six of the Company's owned hotels experienced occupancy increases for the full year 2005 as compared to the full year 2004.
Hotel operating margins, increased to 35.0% for the full year 2005 as compared 31.7% for the full year 2004. The margin growth was driven by the company's ability to increase ADR due to high occupancies in its markets.
Mr. Scheetz continued, "2005 was a year of strong operational performance with double digit revenue and operating profit growth. Results for full year 2005 also demonstrate the strength of our locations with all U.S. markets significantly outperforming the industry average. The Company's RevPAR growth, led by a significant rise in rate across our total portfolio, is indicative of the favorable demand by consumers of the unique luxury experience we provide and our position in high barrier-to-entry markets."
Balance Sheet and Financing
After giving effect to the IPO, the Company's pro forma adjusted debt at December 31, 2005 was $472.6 million. Cash and cash equivalents were $58.9 million and additional cash reserves designated for renovation projects were $15.0 million, resulting in net debt of $398.7 million. The Company's weighted average debt maturity has increased to 4.4 years and its weighted average interest rate is now 5.7%. The Company also has an undrawn $125 million revolving credit facility.
In December 2005, the Company agreed to purchase the James Hotel, a 194-room boutique hotel in Scottsdale, Arizona for $47.5 million. At that time, the Company paid 10% of the purchase price to the seller. The purchase is expected to close by the end of April 2006 and the hotel will be re-branded as Mondrian Scottsdale. The Company intends to upgrade the hotel with the repositioning expected to be completed by the end of the fourth quarter of 2006.
In January 2006, the Company entered into a 50/50 joint venture with Boyd Gaming Corporation (NYSE: BYD) to develop two flagship hotels in Las Vegas bearing the Company's Delano and Mondrian brands. The project is expected to be completed in 2010.
In January 2006, Morgans Hotel Group completed the acquisition of the property across from Delano Miami for approximately $14.3 million. The Company expects to convert the property into additional guest rooms and additional guest facilities and have the property in operation by the end of 2007.
Mr. Scheetz concluded, "We are committed to expanding our brands in new markets and are off to a strong start with Las Vegas and Scottsdale. We will continue to provide our guests an innovative, dynamic and exciting venue for their lodging, dining and relaxation experiences. Our improved results in 2005 reflect our customer's appreciation and loyalty to our product and we intend to build on this in every market where we operate. As we execute our plan, we believe we can profitably expand Morgans Hotels over time to many additional locations in major markets to achieve the highest possible return on invested capital for our shareholders."
Guidance For 2006
The statements below are the Company's outlook or forecast for the Company's business for the fiscal year ending December 31, 2006. Based upon the Company's expectations for continued improvement of the U.S. economy, moderate supply growth, further rate improvement in the Luxury lodging and consumer service sectors, recent joint-venture announcements, along with planned expense increases, the Company is issuing the following guidance for the full year 2006:
8.0% to 10.0%
The first quarter is typically the Company's slowest quarter, while the fourth quarter is the typically the strongest. Adjusted EBITDA for 2006 includes costs of approximately $2.0 million related to public company's expenses and excludes stock compensation expense. The Company expects its first quarter results to be below the prior year as the first quarter in 2005 was positively influenced by "The Gates" exhibition in New York City and the first quarter of 2006 will include public company costs and a special promotional initiative.
The Company anticipates spending approximately $20 to $25 million for
upgrades of hotels and the re-branding of Mondrian Scottsdale. In addition,
maintenance capital expenditures for 2006 are estimated to be approximately
$10 to $12 million.
Forward-Looking and Cautionary Statements
About Morgans Hotel Group
Morgans Hotel Group
|Also See:||Morgans Hotel Group Provides Update on Growth Plans with its Brands Delano and Mondrian / February 2006|
|The Morgans Hotel Group, Formerly Known as Ian Schrager Hotels, Completes $475 million Recapitalization / July 2004|