Hotel Online  Special Report
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Strategic Hotels & Resorts Completes First Full Year as a Public Company; 
Reports Net Income Available to Common Shareholders of $14.0 million
Compared to a Net Loss of $9.4 million for the 4th Qtr of 2004
Hotel Operating Statistics
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CHICAGO, Feb. 28, 2006 - Strategic Hotel Capital, Inc. (NYSE: SLH), which operates as Strategic Hotels and Resorts, today reported results for the fourth quarter and full year ended December 31, 2005 that exceeded previous earnings guidance.

Financial Highlights

  • Increase of 9.8 percent Total RevPAR and 7.9 percent RevPAR in the North American same store portfolio for fourth quarter 2005.  RevPAR growth was driven by a 3.2 percent rise in ADR and a 4.6 percent rise in occupancy. Total RevPAR and RevPAR for the total North American portfolio grew 10.2 percent and 10.6 percent for the quarter;
  • Increase of 9.8 percent Total RevPAR and 9.9 percent RevPAR in the North American same store portfolio for full year 2005. RevPAR growth was driven by a 5.7 percent rise in ADR and a 4.1 percent rise in occupancy.  Total RevPAR and RevPAR for the total North American portfolio grew 11.4 percent and 12.5 percent for the year;
  • Quarterly Comparable EBITDA of $27.4 million, an increase of 36 percent over prior year;
  • Quarterly Comparable FFO of $0.33 per fully converted share, an increase of 22 percent over prior year;
  • Full year 2005 Comparable EBITDA of $116.0 million;
  • Full year 2005 Comparable FFO of $1.55 per fully converted share;
  • Management reaffirms its previously released 2006 guidance of Adjusted EBITDA and FFO per fully converted share of $156.4 million to $165.4 million and $1.45 to $1.60 per share, respectively.
Previously Announced Fourth Quarter Activities
  • Closed on the dispositions of the Embassy Suites Lake Buena Vista Resort and the Marriott Schaumburg, for net sales prices of $54.8 million and $21.5 million, respectively;
  • Completed refinancing of the $238.9 million CMBS loan and amended line of credit to provide lower pricing and additional unused capacity;
  • Expanded the Board of Directors with the addition of two independent directors;
  • Began operating as Strategic Hotels & Resorts in order to better represent the company's asset intensive focus and ownership in high- end hotels and luxury resorts.
Subsequent Events
  • Closed on a 45 percent managing joint venture ownership interest in the Hotel del Coronado in San Diego, California;
  • Completed a public offering for $115 million of 8.25% Series B Cumulative Redeemable Preferred Stock;
  • Entered into an agreement to acquire the Four Seasons Washington, D.C. for $168.9 million;
  • Completed an offering of 20.7 million shares of common stock comprised of 8.0 million primary shares from the company and 12.7 million secondary shares from selling shareholders.  Net proceeds to the company, after underwriting discounts and estimated offering expenses, of $151.9 million;
  • Accepted the resignation of two directors associated with certain shareholders affiliated or associated with Prudential Financial, Inc. and Whitehall Street Real Estate Limited Partnerships VII and IX, resulting from the complete divestiture of ownership interests.
Due to the company's restructuring at its IPO in June 2004, many full year 2005 year-over-year comparisons are not representative of performance. "Same store" hotel comparisons for the full year 2005 are derived from the company's North American portfolio at December 31, 2005, excluding properties held for less than two fiscal years (the Ritz-Carlton Half Moon Bay, acquired on August 24, 2004, the InterContinental Chicago and InterContinental Miami, both acquired on April 1, 2005, and the Fairmont Chicago acquired on September 1, 2005) and excluding the Hyatt Regency New Orleans, which was taken out of service on August 29, 2005, due to damage from Hurricane Katrina. "Same store" hotel comparisons for the fourth quarter 2005 are derived from the company's North American portfolio at December 31, 2005, excluding properties held for less than five quarters (the InterContinental Chicago and InterContinental Miami, both acquired on April 1, 2005, and the Fairmont Chicago acquired on September 1, 2005) and excluding the Hyatt Regency New Orleans.

Total North American portfolio comparisons are derived from the company's hotel portfolio at December 31, 2005, which includes newly acquired properties, excludes the Hyatt Regency New Orleans, and includes comparisons with operating statistics in periods prior to ownership by the company.

Laurence Geller, chief executive officer of Strategic Hotels & Resorts, commented, "Our first full year as a public company was by all measures, clearly a spectacular success. We achieved all of our goals for the year including generating broad growth across our portfolio, selectively adding properties with strong real estate underpinnings, developing our multi-year internal investment strategy, creating a strong balance sheet, and most recently removing the overhang from our sponsoring shareholders while generating one of the highest total shareholder returns for all REITs. I am particularly proud of our internal investments in highly skilled human capital to support our myriad of activities and our rigorous, multi-disciplined, research driven approach supporting thoughtful analysis and decisions that have permitted us to bring the company so far in one year."

Operating Results

The company reported net income available to common shareholders of $14.0 million, or $0.32 per diluted share for the fourth quarter compared with a net loss of $9.4 million, or $0.31 per diluted share, for the fourth quarter of 2004. For the year ending December 31, 2005, the company reported net income available to common shareholders of $23.5 million, or $0.66 per diluted share.

Adjusted EBITDA for the fourth quarter was $40.5 million compared with $7.4 million for the fourth quarter of 2004. Excluding losses on early extinguishment of debt of $8.1 million and a gain on sale of assets totaling $21.2 million, Comparable EBITDA was $27.4 million for the quarter versus Comparable EBITDA of $20.1 million for fourth quarter 2004 after excluding an impairment loss of $12.7 million. Adjusted EBITDA for the year was $129.1 million. Excluding losses on early extinguishment of debt and gain on sale of assets, Comparable EBITDA was $116.0 million for the year.

FFO in the fourth quarter was $9.2 million, or $0.17 per fully converted share, compared with a loss of $1.9 million, or $0.05 per fully converted share in the fourth quarter of 2004. Excluding losses on early extinguishment of debt of $8.1 million, Comparable FFO was $17.3 million, or $0.33 per fully converted share for the quarter versus Comparable FFO of $10.7 million, or $0.27 per fully converted share, for fourth quarter 2004 after excluding an impairment loss of $12.7 million. For the full year, the company reported FFO of $61.3 million, or $1.37 per fully converted share. Excluding losses on early extinguishment of debt, full year 2005 Comparable FFO per fully converted share was $1.55. "Fully converted" per share results represent FFO before minority interest adjustments, divided by the weighted average total number of shares and operating partnership units convertible into shares.

North American same store portfolio Total RevPAR increased 9.8 percent during the quarter over the prior period in 2004. North American same store Total RevPAR for the year rose 9.8 percent. Total RevPAR for the total North American portfolio grew 10.2 percent for the quarter and 11.4 percent for the year.

North American same store RevPAR increased 7.9 percent during the quarter due to a 4.6 percent rise in occupancy and 3.2 percent increase in ADR. North American same store RevPAR for the year rose 9.9 percent due to a 4.1 percent rise in occupancy and 5.7 percent increase in ADR. RevPAR for the total North American portfolio grew 10.6 percent for the quarter and 12.5 percent for the year.

For the European hotels, RevPAR for the fourth quarter decreased by 6.6 percent over the fourth quarter of 2004, due to a 7.7 percent decrease in ADR and 1.1 percent increase in occupancy. For the year, RevPAR increased 3.4 percent driven by a 4.1 percent increase in ADR and a 0.6 percent decrease in occupancy. The operating results for the quarter were negatively impacted by changes in exchange rates.

Portfolio Update

As previously announced, the company closed on the disposition of the Marriott Schaumburg for a net sales price of $21.5 million and the Embassy Suites Lake Buena Vista for a net sales price of $54.8 million.

Balance Sheet and Capital Market Activity

During the quarter, the company refinanced its $238.9 million CMBS loan, decreasing the size to $220.0 million, with the capacity to draw up to $350.0 million. In addition, the pricing was reduced by 56 basis points to LIBOR plus 85 basis points. The company also amended its line of credit, changing the pricing to leverage-based grid pricing with an initial rate of LIBOR plus 150 basis points from LIBOR plus 295 basis points previously, as well as reducing the size of the facility from $175.0 million to $125.0 million. The combined facilities have $246.0 million outstanding and provided $229.0 million of unused capacity at year end.

Quarterly Distribution

The Board of Directors previously declared a fourth quarter dividend of $0.22 per share of common stock, payable to shareholders of record as of the close of business Friday, December 30, 2005. The dividend was paid on January 20, 2006. Additionally, the Board declared a quarterly dividend of $0.53125 per share of 8.5% Series A Cumulative Redeemable Preferred Stock, which was paid on December 30, 2005, to shareholders of record as of December 20, 2005.

Recent Events

As previously announced, subsequent to the quarter end, the company closed on the agreement to acquire a 45 percent managing joint venture ownership interest in the Hotel del Coronado in San Diego, California. An affiliate of Kohlberg Kravis Roberts & Co. holds 41 percent and KSL Resorts holds the remaining 14 percent of the joint venture. The agreed upon market value of the new joint venture was $745 million, of which Strategic's total equity investment was approximately $70 million.

The company closed a public offering of 4,600,000 shares of its 8.25% Series B Cumulative Redeemable Preferred Stock (liquidation preference $25 per share). Net proceeds totaled $110.9 million after underwriting discounts and estimated offering expenses.

A common stock offering of 20,731,640 shares was completed at a price of $20.00 per share. The company sold a total of 8,000,000 primary shares of common stock and certain shareholders affiliated or associated with Prudential Financial, Inc. and Whitehall Street Real Estate Limited Partnerships VII and IX sold 12,731,640 secondary shares of common stock. The 8,000,000 shares of common stock sold by the company resulted in net proceeds of $151.9 million, after underwriting discounts and estimated offering expenses.

Management Reaffirms 2006 Outlook

Management reaffirms its full year 2006 guidance with Adjusted EBITDA in the range of $156.4 million to $165.4 million, and FFO per fully converted share in the range of $1.45 to $1.60.

The company's 2006 guidance assumes continued growth in the lodging sector resulting in North American same store RevPAR and Total RevPAR growth of 9.0 percent to 11.0 percent and 7.5 percent to 9.5 percent, respectively.

The following tables reconcile projected 2006 net income to projected FFO and Adjusted EBITDA (in millions, except per share data):

                                                    Low Range     High Range
     Net Income                                         $14.0          $22.9
     Deferred Tax on Realized Portion of
      Deferred Gain                                       1.4            1.4
     Realized Portion of Deferred Gain on
      Sale Leasebacks                                    (4.6)          (4.6)
     Depreciation                                        55.7           55.7
     Depreciation from Unconsolidated Affiliates         19.8           19.8
     Minority Interest of SH Funding                      0.7            0.8
     Minority Interest of Consolidated Joint Ventures    (1.4)          (1.4)
       Funds from Operations                             85.6           94.6
       FFO per Fully Converted Share                    $1.45          $1.60
 

                                                    Low Range     High Range
     Net Income                                         $14.0          $22.9
     Preferred Shareholder Dividends                     17.2           17.2
     Realized Portion of Deferred Gain on
      Sale Leasebacks                                    (4.6)          (4.6)
     Depreciation                                        55.7           55.7
     Minority Interest of SH Funding                      0.7            0.8
     Minority Interest of Consolidated Joint Ventures    (3.3)          (3.3)
     Interest Expense                                    29.7           29.7
     Adjustments from Unconsolidated Affiliates          40.8           40.8
     Income Taxes                                         6.2            6.2
       Adjusted EBITDA                                 $156.4         $165.4
 

First Quarter 2006 Guidance

For the first quarter 2006, the company anticipates that Adjusted EBITDA will be in the range of $35.1 million to $37.4 million, net income available to common shareholders will be in the range of $2.6 million to $4.9 million, FFO will be in the range of $18.4 million and $20.7 million, and FFO per fully converted share will be in the range of $0.32 to $0.36.

The company expects first quarter 2006 North American same store RevPAR growth in the range of 7.0 percent to 9.0 percent. The company expects first quarter 2006 North American same store Total RevPAR growth in the range of 6.5 percent to 8.5 percent.

The following tables reconcile projected first quarter 2006 net income to projected FFO and Adjusted EBITDA.

                                                    Low Range     High Range
     Net Income                                          $2.6           $4.9
     Deferred Tax on Realized Portion of Deferred Gain    0.3            0.3
     Realized Portion of Deferred Gain on
      Sale Leasebacks                                    (1.1)          (1.1)
     Depreciation                                        11.9           11.9
     Depreciation from Unconsolidated Affiliates          4.9            4.9
     Minority Interest of SH Funding                      0.2            0.2
     Minority Interest of Consolidated Joint Ventures    (0.4)          (0.4)
       Funds from Operations                             18.4           20.7
       FFO per Fully Converted Share                    $0.32          $0.36
 
 

                                                    Low Range     High Range
     Net Income                                          $2.6           $4.9
     Preferred Shareholder Dividends                      3.7            3.7
     Realized Portion of Deferred Gain on
      Sale Leasebacks                                    (1.1)          (1.1)
     Depreciation                                        11.9           11.9
     Minority Interest of SH Funding                      0.2            0.2
     Minority Interest of Consolidated Joint Ventures    (0.8)          (0.8)
     Interest Expense                                     8.0            8.0
     Adjustments from Unconsolidated Affiliates          10.1           10.1
     Income Taxes                                         0.5            0.5
       Adjusted EBITDA                                  $35.1          $37.4
 
 
 
 

Three Months and Years Ended December 31, 2005 and 2004
Consolidated Statements of Operations
(in thousands, except per share data)

                                        Three Months Ended    Years Ended
                                           December 31,       December 31,
                                          2005     2004      2005      2004
    Revenues:
      Rooms                              $68,628  $48,705  $257,628  $248,371
      Food and beverage                   49,940   32,563   164,838   138,480
      Other hotel operating revenue       15,263   13,715    53,492    49,827
                                         133,831   94,983   475,958   436,678
      Lease revenue                        3,294    3,314    16,787    24,233

        Total revenues                   137,125   98,297   492,745   460,911

    Operating Costs and Expenses:
      Rooms                               17,862   11,433    62,730    62,772
      Food and beverage                   34,511   24,196   116,493   106,131
      Other departmental expenses         40,069   29,180   136,559   125,803
      Management fees                      3,398    3,837    15,033    16,351
      Other property level expenses        7,730    5,638    29,089    27,722
      Lease expense                        3,210    3,257    13,178     6,446
      Depreciation and amortization       13,568    9,591    49,824    57,275
      Corporate expenses                   6,237    4,352    21,023    28,845

        Total operating costs and
         expenses                        126,585   91,484   443,929   431,345

          Operating income                10,540    6,813    48,816    29,566

      Interest expense                    (8,611)  (7,084)  (36,142)  (62,191)
      Interest income                        991      252     2,117     1,255
      (Loss) gain on early
       extinguishment of debt             (7,572)      29    (7,572)  (20,874)
      Other income, net                    1,698    1,233     8,359       549
      (Loss) income before income taxes,
        minority interests
        and discontinued operations       (2,954)   1,243    15,578   (51,695)
      Income tax benefit (expense)         1,064   (1,628)   (1,298)   (2,388)
      Minority interests                     301       83    (3,508)    1,993
      (Loss) income from continuing
       operations                         (1,589)    (302)   10,772   (52,090)
      Income (loss) from discontinued
       operations                         17,720   (9,116)   19,488    65,423

      Net income (loss)                   16,131   (9,418)   30,260    13,333
      Preferred shareholder dividend      (2,125)     -      (6,753)      -

      Net income (loss) available to
       common shareholders               $14,006  $(9,418)  $23,507   $13,333

      Basic Income (Loss) Per Share:
        (Loss) income from continuing
          operations available to common
          shareholders per share          $(0.08)  $(0.01)    $0.11    $(2.14)
        Income (loss) from discontinued
         operations per share               0.40    (0.30)     0.55      2.69
        Net income (loss) available to
         common shareholders per share     $0.32   $(0.31)    $0.66     $0.55
        Basic weighted-average common
         shares outstanding               44,086   30,204    35,376    24,390

      Diluted Income (Loss) Per Share:
        (Loss) income from continuing
          operations available to common
          shareholders per share          $(0.08)  $(0.08)    $0.11    $(2.14)
        Income (loss) from discontinued
         operations per share               0.40    (0.23)     0.55      2.69
        Net income (loss) available to
         common shareholders per share     $0.32   $(0.31)    $0.66     $0.55
        Diluted weighted-average common
         shares outstanding               44,086   39,753    35,577    24,390
 
 
 

                                                    December 31, 2005 and 2004
 

                         Consolidated Balance Sheets
                      (in thousands, except share data)
                                                          Years Ended
                                                          December 31,
                                                     2005              2004
    Assets
      Property and equipment                      $1,300,250         $952,717
        Less accumulated depreciation               (217,695)        (222,150)
          Net property and equipment               1,082,555          730,567
      Goodwill                                        66,656           66,438
      Intangible assets (net of
       accumulated amortization of $1,340
       and $87, respectively)                          2,129            1,613
      Investment in hotel joint venture               12,886           12,060
      Cash and cash equivalents                       65,017           40,071
      Restricted cash and cash equivalents            32,115           26,979
      Accounts receivable (net of
       allowance for doubtful accounts of
       $427 and $361, respectively)                   31,286           21,056
      Deferred financing costs (net of
       accumulated amortization of $969
       and $1,420, respectively)                       7,544           11,178
      Other assets                                   122,334           80,388
      Insurance recoveries receivable                 25,588              -
        Total assets                              $1,448,110         $990,350

    Liabilities and Owners' Equity
      Liabilities:
        Mortgages and other debt payable            $633,380         $489,140
        Bank credit facility                          26,000           54,000
        Accounts payable and accrued
         expenses                                     90,486           58,946
        Distributions payable                         11,531            8,709
        Deferred fees on management
         contracts                                       -              2,333
        Deferred gain on sale of hotels               99,970          119,616
          Total liabilities                          861,367          732,744

      Minority interests in SHCI's
       operating partnership                          76,030           61,053
      Minority interests in consolidated
       hotel joint ventures                           11,616              -

      Owners' equity:
        8.5% Series A Cumulative Redeemable
         Preferred Shares ($0.01 par value;
         4,000,000 shares issued and
         outstanding; liquidation
         preference $25.00 per share)                 97,553              -
        Common shares ($0.01 par value;
         150,000,000 common shares
         authorized; 43,878,273 and
         30,035,701 common shares issued
         and outstanding, respectively)                  439              300
        Additional paid-in capital                   688,250          483,691
        Deferred compensation                         (1,916)          (1,731)
        Accumulated deficit                         (241,613)        (271,873)
        Accumulated distributions to
         shareholders                                (53,142)         (13,447)
        Accumulated other comprehensive
         income (loss)                                 9,526             (387)
          Total owners' equity                       499,097          196,553
          Total liabilities and owners'
           equity                                 $1,448,110         $990,350
 
 
 

                      Three Months and Years Ended December 31, 2005 and 2004
 

                   REIT Hotel Statements of Operations (a)
                    (in thousands, except per share data)

                                       Three Months Ended    Years Ended
                                          December 31,       December 31,
                                         2005     2004      2005      2004
    REIT Hotel Revenues:
      Rooms                             $68,628  $48,705  $257,628  $170,300
      Food and beverage                  49,940   32,563   164,838   102,633
      Other hotel operating revenue      15,263   13,715    53,492    41,135
                                        133,831   94,983   475,958   314,068
      Lease revenue (b)                   3,294    3,314    16,787    20,698

        REIT hotel revenues             137,125   98,297   492,745   334,766

    REIT Hotel Expenses:
      Rooms                              17,862   11,433    62,730    38,859
      Food and beverage                  34,511   24,196   116,493    76,266
      Other departmental expenses        40,069   29,180   136,559    94,512
      Management fees                     3,398    3,837    15,033    13,431
      Other property level expenses       7,730    5,638    29,089    17,953
      Lease expense                       3,210    3,257    13,178     6,446

        REIT hotel expenses             106,780   77,541   373,082   247,467

    REIT Hotel Adjusted Operating
     Income                              30,345   20,756   119,663    87,299

      Interest expense, net              (7,620)  (6,832)  (34,025)  (38,698)
      (Loss) gain on early
       extinguishment of debt            (7,572)      29    (7,572)   (8,211)
      Other income, net (c)                 448      (17)    3,359    (1,951)

      Income before income taxes and
       minority interests                15,601   13,936    81,425    38,439

      Income tax benefit (expense)        1,064   (1,628)   (1,298)   (2,388)
      Minority interests (d)                301       83    (3,508)    1,993

    REIT Hotel Income                    16,966   12,391    76,619    38,044

    REIT depreciation and amortization  (13,568)  (9,591)  (49,824)  (37,590)
    Corporate expenses                   (6,237)  (4,352)  (21,023)  (28,845)
    Asset management fees related to
     distributed assets (e)               1,250    1,250     5,000     2,500
    Non-REIT hotel results, net             -        -         -     (26,199)
    Income (loss) from discontinued
     operations                          17,720   (9,116)   19,488    65,423

    Net Income (Loss)                   $16,131  $(9,418)  $30,260   $13,333
 
 

                       Three Months and Years Ended December 31, 2005 and 2004

(a) REIT hotel operating data above excludes the results of operations of the distributed assets that are required to be included in GAAP financial statement presentations prior to the date of the IPO because we are deemed to have continuing involvement as a result of our agreement to asset manage those assets. In addition, REIT hotel operating data above also excludes the results of operations of hotels sold. As a result, we have presented only REIT hotel operating results and a reconciliation of REIT hotel income to net income (loss), the most directly comparable GAAP measure.

REIT hotel operating results are presented because we believe that it most fairly represents comparable period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. Because of the elimination of the non-REIT hotel operations, the REIT hotel operating results do not represent our total revenues, expenses or operating profit in accordance with GAAP. These results should be considered in combination with our GAAP financial statements by investors when evaluating our performance.

(b) Until March 1, 2004, the Hamburg Marriott was accounted for under the equity method. After March 1, 2004 when we acquired our joint venture partner's 65% leasehold interest in the property, we record lease revenue for the Hamburg Marriott. Lease revenue for the year ended December 31, 2004 includes revenues from the Hyatt Regency New Orleans until June 29, 2004 when we converted the Hyatt Regency New Orleans lease to a management agreement. Prior to June 29, 2004, the Paris Marriott Champs Elysees was accounted for as a finance obligation and we consolidated its results because of a continuing involvement in supporting the financing of the property through a collateralized guarantee. On June 29, 2004, we recorded a sale and leaseback related to the Paris Marriott Champs Elysees. Subsequent to June 29, 2004, we earn only lease revenue from the Hamburg Marriott and the Paris Marriott Champs Elysees.

(c) Other income, net includes our equity in earnings or losses of our investment in the Prague hotel joint venture for the three months and years ended December 31, 2005 and 2004 as well as earnings or losses from our investment in the Hamburg Marriott hotel joint venture are included in the year ended December 31, 2004 until the acquisition of our joint venture partner's interest in the property on March 1, 2004.

(d) There are two components to our minority interests. First, we reflect minority interests related to the InterContinental Chicago and Miami hotels on the balance sheet for the 15% portion of the properties consolidated by us, but not owned by us. The $11,616,000 minority interest balance was established based on the historical book value of the assets at the time of the transaction. The earnings or losses from these properties attributable to minority interests are normally reflected as minority interests in the statements of operations; however, based on the partnership agreements with IHG, we receive a preferred return of all the net cash flow (as defined in the agreements) at the properties through December 31, 2005, up to a certain threshold. The threshold was not exceeded in 2005; therefore no earnings or losses from these properties have been reflected as adjustments to minority interests. Second, minority interest in SHC Funding on the consolidated balance sheets is calculated by dividing the number of units held by the minority interests by the sum of SHCI's units and the units held by the minority interests, all calculated based on the units outstanding at the end of the period. Net income (loss) is allocated to minority interests in SHC Funding based on their weighted average ownership percentages during the period. The ownership percentage is calculated by dividing the number of units held by the minority interests by the sum of SHCI's units and the units held by the minority interests, all calculated based on the weighted average days outstanding.

(e) We have an asset management agreement with SHC LLC, under which we manage the day-to-day business of SHC LLC for an initial annual fee of $5,000,000, payable monthly in arrears. The term of the agreement is for five years, commenced on June 29, 2004 and will renew unless prior written notice is given. In addition, SHC LLC has the right to terminate the agreement if certain events occur. SHC LLC recently sold three properties in 2005 and one property in 2006. As a result of the disposition of these properties, the asset management fee was reduced by approximately $2.2 million annually.

                                                        December 31, 2005

                         Non-GAAP Financial Measures

In addition to REIT hotel income, six other non-GAAP financial measures are presented for the Company that we believe are useful to investors as key measures of our operating performance: Funds from Operations (FFO); Fully Converted FFO; and Comparable FFO; Earnings Before Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and Adjusted EBITDA; and Comparable EBITDA. Reconciliation of these measures to net income (loss) available to common shareholders, the most directly comparable GAAP measure, is set forth in the following tables.

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which adopted a definition of FFO in order to promote an industry-wide standard measure of REIT operating performance that would not have certain drawbacks associated with net income (loss) under GAAP. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or (losses) from sales of property plus real estate-related depreciation and amortization, and after adjustments for our portion of these items related to unconsolidated partnerships and joint ventures. We also present Fully Converted FFO, which is FFO plus convertible debt interest expense and minority interest expense on convertible minority interests. We also present Comparable FFO, which is Fully Converted FFO excluding the impact of any gains or losses on early extinguishment of debt and impairment losses. We believe that the presentation of FFO, Fully Converted FFO and Comparable FFO provides useful information to investors regarding our results of operations because they are measures of our ability to fund capital expenditures and expand our business. In addition, FFO is widely used in the real estate industry to measure operating performance without regard to items such as depreciation and amortization.

EBITDA represents net income (loss) available to common shareholders excluding: (i) interest expense, (ii) income tax expense, including deferred income tax benefits and expenses applicable to our foreign subsidiaries and income taxes applicable to sale of assets; and (iii) depreciation and amortization. EBITDA also excludes interest expense, income tax expense and depreciation and amortization of our equity method investments. EBITDA for 2005 and 2004 is presented on a full participation basis, which means we have assumed conversion of all operating partnership minority interests into the Company's common shares. We believe this treatment of minority interest provides more useful information for management and our investors and appropriately considers our current capital structure. We also present Adjusted EBITDA, which eliminates the effect of realizing deferred gains on our sale leasebacks. We also present Comparable EBITDA, which eliminates the effect of gains or losses on sales of assets and early extinguishment of debt and impairment losses. We believe EBITDA, Adjusted EBITDA and Comparable EBITDA are useful to management and investors in evaluating our operating performance because they provide management and investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe they help management and investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our asset base (primarily depreciation and amortization) from our operating results. Our management also uses EBITDA, Adjusted EBITDA and Comparable EBITDA as measures in determining the value of acquisitions and dispositions.

We caution investors that amounts presented in accordance with our definitions of FFO, Fully Converted FFO, Comparable FFO, EBITDA, Adjusted EBITDA and Comparable EBITDA may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. FFO, Fully Converted FFO, Comparable FFO, EBITDA, Adjusted EBITDA and Comparable EBITDA should not be considered as an alternative measure of our net income (loss) or operating performance. FFO, Fully Converted FFO, Comparable FFO, EBITDA, Adjusted EBITDA and Comparable EBITDA may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that FFO, Fully Converted FFO, Comparable FFO, EBITDA, Adjusted EBITDA and Comparable EBITDA can enhance your understanding of our financial condition and results of operations, these non-GAAP financial measures, when viewed individually, are not necessarily a better indicator of any trend as compared to comparable GAAP measures such as net income. In addition, you should be aware that adverse economic and market conditions might negatively impact our cash flow. Below, we have provided a quantitative reconciliation of FFO, Fully Converted FFO, Comparable FFO, EBITDA, Adjusted EBITDA and Comparable EBITDA to the most directly comparable GAAP financial performance measure, which is net income (loss) available to common shareholders, and provide an explanatory description by footnote of the items excluded from FFO, Fully Converted FFO, EBITDA and Adjusted EBITDA. Prior year amounts have been adjusted to conform to the current year presentation of a fully converted basis.

                      Three Months and Years Ended December 31, 2005 and 2004

     Reconciliation of Net Income (Loss) Available to Common Shareholders to
                  EBITDA, Adjusted EBITDA and Comparable EBITDA
                                  (in thousands)

                                        Three Months Ended    Years Ended
                                          December 31,       December 31,
                                          2005     2004      2005      2004

    Net income (loss) available to
     common shareholders                 $14,006  $(9,418)  $23,507   $13,333
    Depreciation and amortization -
     continuing operations                13,568    9,591    49,824    57,275
    Depreciation and amortization -
     discontinued operations                 -      1,062     2,782     4,188
    Interest expense - continuing
     operations                            8,611    7,084    36,142    62,191
    Interest expense - discontinued
     operations                              231      397     1,607     2,964
    Income taxes - continuing operations  (1,064)   4,055     1,298     4,815
    Mexican asset tax refund                 -     (2,427)      -      (2,427)
    Minority interests                     3,057   (2,914)    7,396    (4,831)
    Adjustments from unconsolidated
     affiliates                            1,031    1,064     4,166     5,672
    Preferred shareholder dividend         2,125      -       6,753       -
    EBITDA (a)                            41,565    8,494   133,475   143,180
    Realized portion of deferred gain on
     sale leasebacks                      (1,061)  (1,058)   (4,355)   (2,180)
    Adjusted EBITDA (a)                  $40,504   $7,436  $129,120  $141,000
    Gain on sale of assets -
     discontinued operations             (21,202)     -     (21,202)  (75,982)
    Loss (gain) on early extinguishment
     of debt - continuing operations       7,572      (29)    7,572    20,874
    Loss on early extinguishment of debt
     - discontinued operations               543      -         543     1,060
    Impairment losses - discontinued
     operations                              -     12,675       -      12,675
    Comparable EBITDA                    $27,417  $20,082  $116,033   $99,627

    (a) EBITDA and Adjusted EBITDA have not been adjusted for the following
        amounts included in net income (loss) available to common shareholders
        because these gains (losses) have either occurred during the prior two
        years or are reasonably likely to occur within two years (in
        thousands).

        -- Loss (gain) on early extinguishment of debt from continuing
           operations amounted to $7,572 and $(29) for the three months ended
           December 31, 2005 and 2004, respectively, and $7,572 and $20,874
           for the years ended December 31, 2005 and 2004, respectively.

        -- Loss on early extinguishment of debt from discontinued operations
           amounted to $543 and $0 for the three months ended December 31,
           2005 and 2004, respectively, and $543 and $1,060 for years ended
           December 31, 2005 and 2004, respectively.

        -- Gain on sale of assets from discontinued operations amounted to
           $21,202 and $0 for the three months ended December 31, 2005 and
           2004, respectively, and $21,202 and $75,982 for the years ended
           December 31, 2005 and 2004, respectively.
 

                     Three Months and Years Ended December 31, 2005 and 2004
 

   Reconciliation of Net Income (Loss) Available to Common Shareholders to
    Funds From Operations (FFO), FFO - Fully Converted and Comparable FFO
                                (in thousands)

                                          Three Months Ended    Years Ended
                                              December 31,      December 31,
                                             2005     2004     2005     2004

    Net income (loss) available to common
     shareholders                          $14,006  $(9,418) $23,507  $13,333
    Depreciation and amortization -
     continuing operations                  13,568    9,591   49,824   57,275
    Depreciation and amortization -
     discontinued operations                     -    1,062    2,782    4,188
    Gain on sale of assets - continuing
     operations                                  -        -      (42)       -
    Gain on sale of assets - discontinued
     operations                            (21,202)       -  (21,202) (75,982)
    Realized portion of deferred gain on
     sale leasebacks                        (1,061)  (1,058)  (4,355)  (2,180)
    Deferred tax expense on realized
     portion of deferred gain
     on sale leasebacks                        312      335    1,307      657
    Minority interests adjustments          (2,244)  (2,642) (10,546)  (5,573)
    Adjustments from unconsolidated
     affiliates                                522      494    2,096    3,174
    FFO (a)                                  3,901   (1,636)  43,371   (5,108)
      Convertible debt interest expense          -        -        -    4,105
      Convertible minority interests         5,301     (271)  17,942      743
    FFO - Fully Converted (a)               $9,202  $(1,907) $61,313    $(260)
    Loss (gain) on early extinguishment
     of debt - continuing operations         7,572      (29)   7,572   20,874
    Loss on early extinguishment of debt
     - discontinued operations                 543        -      543    1,060
    Impairment losses - discontinued
     operations                                  -   12,675        -   12,675
    Comparable FFO                         $17,317  $10,739  $69,428  $34,349

    (a) FFO and Fully Converted FFO have not been adjusted for the following
        amounts included in net income (loss) available to common shareholders
        because these gains (losses) have either occurred during the prior two
        years or are reasonably likely to occur within two years (in
        thousands).

        -- Loss (gain) on early extinguishment of debt from continuing
           operations amounted to $7,572 and $(29) for the three months ended
           December 31, 2005 and 2004, respectively, and $7,572 and $20,874
           for the years ended December 31, 2005 and 2004, respectively.

        -- Loss on early extinguishment of debt from discontinued operations
           amounted to $543 and $0 for the three months ended December 31,
           2005 and 2004, respectively, and $543 and $1,060 for the years
           ended December 31, 2005 and 2004, respectively.
 
 

                                         Four Quarters Ended December 31, 2005
 

                       Seasonality by Geographic Region

     Same store revenues have been adjusted to show hotel performance on a
     comparable quarter-over-quarter basis.  Adjustments include (i) exclusion
     of Hyatt Regency New Orleans due to a hurricane that ceased significant
     operations in August; (ii) exclusion of Marriott Schaumburg and Embassy
     Suites Lake Buena Vista Resort as these properties were sold in the
     fourth quarter of 2005 and their results of operations were reclassified
     to discontinued operations; and (iii) presentation of the European hotels
     without regard to either ownership structure or leaseholds.  Acquisition
     properties and the related dates of purchase are as follows:
     InterContinental Chicago and InterContinental Miami (April 1, 2005), and
     Fairmont Chicago (September 1, 2005).
 

     United States Hotels (as of December 31, 2005)
     Acquisition property revenues - 3 Properties and 2,140 Rooms
     Same store property revenues - 7 Properties and 3,040 Rooms
 

                                        Three Months Ended
                                 March    June  September  December
                                  31,      30,      30,      31,
                                 2005     2005     2005     2005      Total

    Acquisition property
     revenues                      $-  $28,664  $31,964   $44,027  $104,655
    Same store property
     revenues                  67,237   67,093   63,468    71,883   269,681
    Total revenues            $67,237  $95,757  $95,432  $115,910  $374,336
    Same store seasonality %     24.9%    24.9%    23.5%     26.7%    100.0%
 

    Mexican Hotels (as of December 31, 2005)
    Same store property revenues - 2 Properties and 380 Rooms

                                         Three Months Ended
                                 March    June  September  December
                                  31,      30,      30,      31,
                                 2005     2005     2005     2005      Total

    Same store property
     revenues                 $17,085  $15,990  $12,646   $15,891   $61,612
    Same store seasonality %     27.7%    26.0%    20.5%     25.8%    100.0%
 

    Total North American Hotels (as of December 31, 2005)
    Acquisition property revenues - 3 Properties and 2,140 Rooms
    Same store property revenues - 9 Properties and 3,420 Rooms
 

                                       Three Months Ended
                                 March    June  September  December
                                  31,      30,      30,      31,
                                 2005     2005     2005     2005      Total

    Acquisition property
     revenue                       $-  $28,664  $31,964   $44,027  $104,655
    Same store property
     revenue                   84,322   83,083   76,114    87,774   331,293
    Total revenues            $84,322 $111,747 $108,078  $131,801  $435,948
    Same store seasonality %     25.5%    25.1%    23.0%     26.4%    100.0%
 

    European Hotels (as of December 31, 2005)
    Same store property revenues - 3 Properties and 841 Rooms

                                         Three Months Ended
                                 March    June  September  December
                                  31,      30,      30,      31,
                                 2005     2005     2005     2005      Total

    Same store property
     revenues                 $16,708  $23,179  $23,582   $18,923   $82,392
    Same store seasonality %     20.3%    28.1%    28.6%     23.0%    100.0%
 
 

                       Three Months and Years Ended December 31, 2005 and 2004

                  Operating Statistics by Geographic Region

     Operating results have been adjusted to show hotel performance on a
     comparable period basis.  Adjustments include (i) exclusion of the seven
     properties distributed out of the Company in connection with the IPO;
     (ii) exclusion of InterContinental Chicago, InterContinental Miami and
     Fairmont Chicago's partial year results; (iii) exclusion of Ritz-Carlton
     Half Moon Bay's partial year results for the year to date analysis; (iv)
     exclusion of Hyatt Regency New Orleans due to a hurricane that ceased
     significant operations in August; (v) exclusion of Marriott Schaumburg
     and Embassy Suites Lake Buena Vista Resort as these properties were sold
     in the fourth quarter of 2005 and their results of operations were
     reclassified to discontinued operations; and (vi) presentation of the
     European hotels without regard to either ownership structure or
     leaseholds.

     United States Hotels (as of December 31, 2005)

     7 Properties                                 6 Properties
     3,040 Rooms                                  2,779 Rooms

                          Three Months Ended             Years Ended
                             December 31,                December 31,
                        2005      2004   Change    2005       2004    Change

    Average Daily
     Rate            $166.70   $162.39    2.7%    $156.30   $148.04    5.6%
    Average Occupancy   65.8%     62.8%   3.0 pts    71.2%     68.4%   2.8 pts
    RevPAR           $109.75   $101.95    7.7%    $111.24   $101.32    9.8%
    Total RevPAR     $242.63   $219.16   10.7%    $215.81   $197.22    9.4%
    Property EBITDA
     Margin             18.6%     17.7%   0.9 pts    22.3%     20.9%   1.4 pts
 

     Mexican Hotels (as of December 31, 2005)
 

     2 Properties                                 2 Properties
     380 Rooms                                    380 Rooms
 

                          Three Months Ended             Years Ended
                             December 31,                December 31,
                        2005     2004    Change     2005      2004    Change

    Average Daily
     Rate            $383.37   $360.35    6.4%    $369.90   $349.71    5.8%
    Average Occupancy   70.0%     68.7%   1.3 pts    70.4%     67.7%   2.7 pts
    RevPAR           $268.22   $247.40    8.4%    $260.47   $236.68   10.1%
    Total RevPAR     $454.54   $430.89    5.5%    $444.21   $401.11   10.7%
    Property EBITDA
     Margin             27.8%     32.5%  (4.7)pts    30.1%     31.1%  (1.0)pts
 

     Total North American Hotels (as of December 31, 2005)
 

     9 Properties                                 8 Properties
     3,420 Rooms                                  3,159 Rooms
 

                          Three Months Ended            Years Ended
                             December 31,               December 31,
                        2005      2004   Change    2005      2004    Change

    Average Daily
     Rate            $190.84   $184.95    3.2%    $181.78   $171.99    5.7%
    Average Occupancy   66.3%     63.4%   2.9 pts    71.1%     68.3%   2.8 pts
    RevPAR           $126.47   $117.26    7.9%    $129.21   $117.55    9.9%
    Total RevPAR     $264.99   $241.44    9.8%    $243.31   $221.67    9.8%
    Property EBITDA
     Margin             20.2%     20.5%  (0.3)pts    24.0%     23.1%   0.9 pts
 

                       Three Months and Years Ended December 31, 2005 and 2004

     European Hotels (as of December 31, 2005)

     3 Properties                                 3 Properties
     841 Rooms                                    841 Rooms
 

                            Three Months Ended            Years Ended
                               December 31,               December 31,
                        2005      2004    Change    2005     2004    Change

    Average Daily
     Rate            $206.77   $224.13   (7.7)%   $238.67   $229.37    4.1%
    Average
     Occupancy          80.0%     79.1%   0.9 pts    80.1%     80.6%  (0.5)pts
    RevPAR           $165.50   $177.23   (6.6)%   $191.16   $184.86    3.4%
    Total RevPAR     $244.55   $258.47   (5.4)%   $278.53   $259.92    7.2%
    Property EBITDA
     Margin             38.3%     35.8%   2.5 pts    40.6%     40.4%   0.2 pts
 
 

                                  Years Ended December 31, 2005, 2004 and 2003

Selected Financial and Operating Information by Property (In Thousands, Except
                            Operating Information)

The following tables present selected financial and operating information by property for the years ended December 31, 2005, 2004 and 2003. Property EBITDA reflects property net operating income plus depreciation and amortization.

                                                       December 31,
                                       2005              2004          2003

    INTERCONTINENTAL CHICAGO
     Selected Financial Information (This table includes financial information
     only for our period of ownership):
      Total revenues                  $52,164             N/A           N/A
      Property EBITDA                 $18,299             N/A           N/A

     Selected Operating Information (This table includes statistical
     information only for our period of ownership. For the full year of 2005,
     average occupancy was 72.9%, ADR was $182.50, RevPAR was $133.03 and
     Total RevPAR was $207.70. For the full year of 2004, average occupancy
     was 71.5%, ADR was $166.15, RevPAR was $118.86 and Total RevPAR was
     $188.80):
      Rooms                               807             N/A           N/A
      Average occupancy                  79.5%            N/A           N/A
      ADR                             $190.46             N/A           N/A
      RevPAR                          $151.43             N/A           N/A
      Total RevPAR                    $235.05             N/A           N/A

    HYATT REGENCY PHOENIX
     Selected Financial Information:
      Total revenues                  $36,169         $36,234       $34,392
      Property EBITDA                  $8,911         $10,095        $9,974

     Selected Operating Information:
      Rooms                               696             712           712
      Average occupancy                  64.9%           64.7%         59.7%
      ADR                             $133.31         $134.37       $136.33
      RevPAR                           $86.58          $86.97        $81.34
      Total RevPAR                    $142.38         $139.04       $132.34

    FAIRMONT CHICAGO
     Selected Financial Information (This table includes financial information
     only for our period of ownership):
      Total revenues                  $22,654             N/A           N/A
      Property EBITDA                  $6,357             N/A           N/A

     Selected Operating Information (This table includes statistical
     information only for our period of ownership. For the full year of 2005,
     average occupancy was 73.0%, ADR was $189.49, RevPAR was $138.36 and
     Total RevPAR was $238.43. For the full year of 2004, average occupancy
     was 67.2%, ADR was $175.20, RevPAR was $117.75 and Total RevPAR was
     $204.65):

      Rooms                               692             N/A           N/A
      Average occupancy                  72.8%            N/A           N/A
      ADR                             $213.79             N/A           N/A
      RevPAR                          $155.63             N/A           N/A
      Total RevPAR                    $268.63             N/A           N/A
 
 

                                  Years Ended December 31, 2005, 2004 and 2003

                                                    December 31,
                                     2005               2004          2003

    INTERCONTINENTAL MIAMI
     Selected Financial Information (This table includes financial information
     only for our period of ownership):
      Total revenues                $29,837             N/A           N/A
      Property EBITDA                $6,439             N/A           N/A

     Selected Operating Information (This table includes statistical
     information only for our period of ownership. For the full year of 2005,
     average occupancy was 72.0%, ADR was $154.04, RevPAR was $110.89 and
     Total RevPAR was $190.62. For the full year of 2004, average occupancy
     was 63.8%, ADR was $137.46, RevPAR was $87.76 and Total RevPAR was
     $159.21):

      Rooms                             641             N/A           N/A
      Average occupancy                67.6%            N/A           N/A
      ADR                           $143.46             N/A           N/A
      RevPAR                         $97.02             N/A           N/A
      Total RevPAR                  $169.26             N/A           N/A

    HILTON BURBANK AIRPORT AND
     CONVENTION CENTER
     Selected Financial
      Information:
      Total revenues                $28,459         $23,227       $21,700
      Property EBITDA                $8,865          $6,094        $5,730

     Selected Operating Information:
      Rooms                             488             488           488
      Average occupancy                73.7%           61.9%         61.1%
      ADR                           $123.26         $114.56       $112.47
      RevPAR                         $90.87          $70.92        $68.70
      Total RevPAR                  $159.77         $130.04       $121.83

    MARRIOTT RANCHO LAS PALMAS
     RESORT
     Selected Financial Information:
      Total revenues                $34,745         $32,815       $34,373
      Property EBITDA                $2,511          $1,791        $3,240

     Selected Operating Information:
      Rooms                             444             444           444
      Average occupancy                67.9%           67.3%         68.0%
      ADR                           $151.22         $142.28       $143.66
      RevPAR                        $102.67          $95.74        $97.70
      Total RevPAR                  $214.98         $203.04       $212.68

    HYATT REGENCY LA JOLLA AT AVENTINE
     Selected Financial Information:
      Total revenues                $38,077         $34,158       $33,280
      Property EBITDA                $8,247          $6,667        $7,738

     Selected Operating Information:
      Rooms                             419             419           419
      Average occupancy                76.4%           74.2%         69.0%
      ADR                           $163.83         $152.57       $155.73
      RevPAR                        $125.10         $113.14       $107.47
      Total RevPAR                  $248.98         $222.74       $217.61
 
 

                                  Years Ended December 31, 2005, 2004 and 2003

                                                    December 31,
                                       2005            2004           2003

    MARRIOTT LINCOLNSHIRE RESORT
     Selected Financial Information:
      Total revenues                  $38,474         $36,947       $36,725
      Property EBITDA                  $6,259          $5,287        $5,550

     Selected Operating Information:
      Rooms                               390             390           390
      Average occupancy                  66.7%           68.7%         65.6%
      ADR                             $121.57         $112.49       $112.95
      RevPAR                           $81.14          $77.23        $74.08
      Total RevPAR                    $271.18         $260.26       $258.70

    LOEWS SANTA MONICA BEACH HOTEL
     Selected Financial Information:
      Total revenues                  $42,784         $37,922       $33,041
      Property EBITDA                 $13,921         $12,076        $9,059

     Selected Operating Information:
      Rooms                               342             342           342
      Average occupancy                  83.1%           79.7%         70.3%
      ADR                             $263.34         $244.00       $236.58
      RevPAR                          $218.81         $194.53       $166.22
      Total RevPAR                    $342.74         $302.96       $264.69

    RITZ-CARLTON HALF MOON BAY
     Selected Financial Information (This table includes financial information
     only for our period of ownership):
      Total revenues                  $50,973         $18,202           N/A
      Property EBITDA                  $8,508          $2,823           N/A

     Selected Operating Information (This table includes statistical
     information only for our period of ownership. For the year ended December
     31, 2004, average occupancy was 64.0%, ADR was $315.59, RevPAR was
     $202.08 and Total RevPAR was $487.33):

      Rooms                               261             261           N/A
      Average occupancy                  67.4%           67.9%          N/A
      ADR                             $328.99         $319.11           N/A
      RevPAR                          $221.71         $216.84           N/A
      Total RevPAR                    $535.07         $536.46           N/A

    HYATT REGENCY NEW ORLEANS
     Selected Financial Information (For purposes of comparison, we have
     provided financial information for this property as if the hotel was
     subject to a management agreement (it was on a lease prior to June
     2004)):

      Total revenues                  $40,011         $59,101       $63,143
      Property EBITDA                  $9,790         $16,964       $20,149

     Selected Operating Information (The number of rooms for the year ended
     December 31, 2005 was calculated using an average rate assuming no rooms
     were in use for September through December due to the hurricane):

      Rooms                               779           1,184         1,184
      Average occupancy                  59.9%           62.3%         65.0%
      ADR                             $139.79         $141.14       $142.75
      RevPAR                           $83.80          $87.92        $92.79
      Total RevPAR                    $140.80         $136.38       $146.11
 
 

                                 Years Ended December 31, 2005, 2004 and 2003

                                                     December 31,
                                            2005        2004       2003

    FOUR SEASONS MEXICO CITY
     Selected Financial Information:
      Total revenues                      $22,777     $22,274     $22,297
      Property EBITDA                      $4,941      $5,883      $5,550

     Selected Operating Information:
      Rooms                                   240         240         240
      Average occupancy                      64.7%       63.3%       63.2%
      ADR                                 $220.72     $217.62     $216.92
      RevPAR                              $142.86     $137.69     $137.05
      Total RevPAR                        $260.01     $253.57     $254.53

    FOUR SEASONS PUNTA MITA RESORT
     Selected Financial Information:
      Total revenues                      $38,835     $33,512     $29,654
      Property EBITDA                     $13,623     $11,458      $9,691

     Selected Operating Information:
      Rooms                                   140         140         140
      Average occupancy                      80.2%       75.2%       68.0%
      ADR                                 $576.34     $540.10     $528.85
      RevPAR                              $462.10     $406.39     $359.83
      Total RevPAR                        $759.98     $654.02     $580.31
 
 

                                Years Ended December 31, 2005, 2004 and 2003

                                                    December 31,
                                            2005       2004        2003

    INTERCONTINENTAL PRAGUE
     Selected Financial Information
      (Amounts below are 100% of
      operations, of which SHCI
      owns 35%):
      Total revenues                      $33,609     $32,866     $28,010
      Property EBITDA                     $15,364     $15,028     $13,845

     Selected Operating Information:
      Rooms                                   372         372         372
      Average Occupancy                      80.1%       80.4%       73.5%
      ADR                                 $198.93     $195.21     $181.39
      RevPAR                              $159.31     $156.87     $133.36
      Total RevPAR                        $247.53     $241.39     $206.29

    MARRIOTT HAMBURG
     Selected Financial Information
      (Amounts below are 100% of
      operations, of which SHCI owned
      35% through March 2004):
      Total revenues                      $17,183     $17,683     $16,186
      Property EBITDA                      $5,005      $4,906      $4,522

     Selected Operating Information:
      Rooms                                   277         277         277
      Average occupancy                      78.8%       79.8%       78.7%
      ADR                                 $146.42     $149.05     $133.00
      RevPAR                              $115.39     $118.93     $104.63
      Total RevPAR                        $169.95     $174.42     $160.09

    PARIS MARRIOTT CHAMPS ELYSEES
     Selected Financial Information:
      Total revenues                      $31,600     $29,455     $27,614
      Property EBITDA                     $13,091     $12,366     $11,980

     Selected Operating Information:
      Rooms                                   192         192         192
      Average occupancy                      82.0%       82.2%       82.0%
      ADR                                 $441.84     $406.54     $384.07
      RevPAR                              $362.18     $334.19     $315.12
      Total RevPAR                        $450.91     $419.16     $394.04
 

                                Years Ended December 31, 2005, 2004 and 2003

                 Reconciliation of Property EBITDA to EBITDA
                                (in thousands)

                                        Years Ended December 31,
                               2005              2004               2003
                      Property           Property            Property
        Hotel          EBITDA    EBITDA   EBITDA    EBITDA    EBITDA   EBITDA

    Hyatt Regency
     New Orleans       $9,790    $9,790   $16,964  $16,964   $20,149  $20,149
    InterContinental
     Chicago (a)       18,299    18,299       -        -         -        -
    Hyatt Regency
     Phoenix            8,911     8,911    10,095   10,095     9,974    9,974
    Fairmont
     Chicago (b)        6,357     6,357       -        -         -        -
    InterContinental
     Miami (a)          6,439     6,439       -        -         -        -
    Hilton Burbank
     Airport and
     Convention Center  8,865     8,865     6,094    6,094     5,730    5,730
    Marriott Rancho
     Las Palmas Resort  2,511     2,511     1,791    1,791     3,240    3,240
    Hyatt Regency
     La Jolla at
     Aventine           8,247     8,247     6,667    6,667     7,738    7,738
    Marriott
     Lincolnshire
     Resort             6,259     6,259     5,287    5,287     5,550    5,550
    Loews Santa Monica
     Beach Hotel       13,921    13,921    12,076   12,076     9,059    9,059
    Ritz-Carlton Half
     Moon Bay (c)       8,508     8,508     2,823    2,823       -        -
    Four Seasons
     Mexico City        4,941     4,941     5,883    5,883     5,550    5,550
    Four Seasons Punta
     Mita Resort       13,623    13,623    11,458   11,458     9,691    9,691
    InterContinental
     Prague (d)        15,364       -      15,028      -      13,845      -
    Marriott
     Hamburg (e)        5,005       135     4,906    1,455     4,522      -
    Paris Marriott
     Champs
     Elysees (f)       13,091     2,888    12,366    6,931    11,980   11,713
                     $150,131  $119,694  $111,438  $87,524  $107,028  $88,394

    Adjustments:
    Distributed
     Property EBITDA
     (see note on
     page 7)                      $ -              $28,387            $55,149
    Corporate expenses          (21,023)           (28,845)           (21,912)
    Interest income               2,117              1,255              2,606
    Loss on early
     extinguishment of debt      (7,572)           (20,874)           (13,121)
    Other income
     (expenses), net              8,359                549             (7,581)
    Income taxes                    -                2,427                551
    Mexican asset
     tax refund                     -               (2,427)               -
    Income from
     discontinued
     operations
     (excluding minority
     interest)                   23,376             62,585             25,432
    Depreciation and
     amortization
     - discontinued
     operations                   2,782              4,188              9,414
    Interest expense
     - discontinued
     operations                   1,607              2,964              9,684
    Adjustments from
     unconsolidated
     affiliates                   4,166              5,672              3,165
    Other adjustments               (31)              (225)               -
    EBITDA                     $133,475           $143,180           $151,781

    (a) On April 1, 2005, we purchased an 85% controlling interest in the
    joint ventures that own the InterContinental Chicago and Miami hotels.  We
    consolidate these hotels for reporting purposes. We have included the
    results of this hotel in Property EBITDA above for our period of
    ownership.

    (b) On September 1, 2005, we purchased the Fairmont Chicago for
    $158.0 million.  We have included the results of this hotel in Property
    EBITDA above for our period of ownership.

    (c) On August 24, 2004, we purchased the Ritz-Carlton Half Moon Bay for
    $123.2 million.  We have included the results of this hotel in Property
    EBITDA above for our period of ownership.

    (d) We have a 35% interest in the joint venture that owns the
    InterContinental Prague and account for our investment under the equity
    method of accounting.  Our equity in earnings of the hotel joint venture
    is included in other income (expenses), net in our consolidated statements
    of operations.

    (e) On March 1, 2004, we acquired the 65% interest we did not previously
    own in the joint venture that leases the Hamburg Marriott.   On June 29,
    2004, we eliminated the collateralized guarantee on the sale leaseback
    related to the property and no longer treat the transaction as a
    financing. Accordingly, a sale of the Hamburg Marriott was recorded and
    the leaseback has now been recorded as an operating lease as of June 29,
    2004.   We eliminated the finance obligation on the consolidated balance
    sheet and now records lease expense instead of mortgage interest and
    depreciation expense.

    (f) On June 29, 2004, we eliminated the collateralized guarantee related
    to the Paris Marriott Champs Elysees and no longer treat the transaction
    as a financing. Accordingly, a sale of the Paris Marriott Champs Elysees
    was recorded and the leaseback has now been recorded as an operating lease
    as of June 29, 2004.   We eliminated the finance obligation on the
    consolidated balance sheet and now records lease expense instead of
    mortgage interest and depreciation expense.

Earnings Call

The company will conduct its quarterly conference call for investors and other interested parties on Wednesday, March 1st at 11:00 a.m. Eastern Standard Time (EST). Interested individuals are invited to listen to the call by telephone at (800) 817-4887. To participate on the webcast, log on to http://www.strategichotels.com or http://www.earnings.com 15 minutes before the call to download the necessary software.

The company also produces supplemental financial data that includes detailed information regarding the operating results. This supplemental data is considered an integral part of this earnings release and together with the release, is available on the Strategic Hotels & Resorts website at http://www.strategichotels.com in the investor relations section.

About the Company

Strategic Hotel Capital, Inc. also operates under the name Strategic Hotels & Resorts and is a real estate investment trust, which owns and asset manages high-end hotels and resorts. The company has ownership interests in 17 properties with an aggregate of 8,269 rooms. For further information, please visit the company's website at http://www.strategichotels.com .

This press release contains forward-looking statements about Strategic Hotel Capital (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. Actual results could differ materially from the Company's projections. Factors that may contribute to these differences include, but are not limited to the following: availability of capital; ability to obtain or refinance debt; rising interest rates; rising insurance premiums; cash available for capital expenditures; competition; demand for hotel rooms in our current and proposed market areas; economic conditions generally and in the real estate market specifically; delays in construction and development; demand for hotel condominiums; marketing challenges associated with entering new lines of business; risks related to natural disasters; the pace and extent of the recovery of the New Orleans economy and tourism industry; the successful collection of insurance proceeds and rehabilitation of the New Orleans property; the effect of threats of terrorism and increased security precautions on travel patterns and hotel bookings; the outbreak of hostilities and international political instability; legislative or regulatory changes, including changes to laws governing the taxation of REITs; and changes in generally accepted accounting principles, policies and guidelines applicable to REITs.

Additional risks are discussed in the Company's filings with the Securities and Exchange Commission. Although the Company 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. The forward-looking statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

.
Contact:

Strategic Hotel Capital, Inc.
http://www.shci.com/

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Also See: Fractional Ownership and Hotel Condos an Integral Part of Strategic Hotel Capital's Redevelopment Plans for Chicago's Intercontinental and Fairmont Hotels / November 2005
Strategic Hotel Capital, Inc. Reports Fourth Quarter Net Loss of $9.4 million; RevPAR Up 5.8% at 11 North American Hotels / Hotel Operating Statistics / March 2005

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