Hotel Online
News for the Hospitality Executive

.

advertisement
 
 

 LaSalle Hotel Properties Reports 3rd Qtr Net Income to Common Shareholders
of $12.5 million, a 38% Drop from the $20.2 million Reported in 3rd Qtr 2007
.
Reduces Dividend as the Lodging Industry Faces Declining Trends
.

LaSalle Hotel Properties Reports Third Quarter Results 

BETHESDA, Md. - October 23, 2008 - LaSalle Hotel Properties (NYSE:LHO) today reported net income to common shareholders of $12.5 million, or $0.30 per diluted share for the quarter ended September 30, 2008, compared to net income of $20.2 million, or $0.50 per diluted share for the prior year period. Net income for the quarter ended September 30, 2008 includes a $4.3 million expense related to the final settlement and dismissal of all Meridien litigation. 

For the quarter ended September 30, 2008, the Company generated funds from operations (“FFO”) of $39.9 million versus $43.7 million for the same period of 2007. On a per diluted share basis, FFO for the third quarter was $0.99 versus $1.09 for the same period last year. FFO for the quarter ended September 30, 2008 was reduced by the $4.3 million settlement expense related to the Meridien litigation. Excluding the settlement expense, FFO for the third quarter 2008 would have been $44.2 million or $1.09 per diluted share. 

The Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the third quarter declined to $60.0 million from $65.5 million during the prior year period. EBITDA for the quarter ended September 30, 2008 was reduced by the $4.3 million settlement expense related to the Meridien litigation. Excluding the settlement expense, EBITDA for the third quarter 2008 would have been $64.3 million. 

Room revenue per available room (“RevPAR”) for the quarter ended September 30, 2008 versus the same period in 2007 decreased 0.1 percent to $166.76. RevPAR for the quarter consisted of a 0.8 percent increase in occupancy offset by a 1.0 percent decline in Average Daily Rate (“ADR”) from the prior year period. 

The Company’s hotels generated $66.9 million of EBITDA for the third quarter compared with $66.0 million for the same period last year. Hotel revenues increased 1.6 percent in the quarter versus the prior year’s third quarter while hotel expenses rose 1.7 percent in the quarter versus the prior year. 

“Despite weakening trends, our operators were successful in generating positive revenue growth while limiting expense growth to a minor increase,” said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. “Given the challenging economic environment, we remain active with our operators in our joint efforts to aggressively lower expenses as business levels weaken. Our properties are in excellent physical condition, our balance sheet and liquidity are strong and are both being enhanced by the actions we have announced today.” 

As of the end of the third quarter 2008, the Company had total outstanding debt of $1,008.1 million. The Company’s $450.0 million credit facility had an outstanding balance of $221.5 million as of September 30, 2008. Total debt to trailing 12 month Corporate EBITDA (as defined by our senior unsecured credit facility) equaled 4.5 times as of September 30, 2008. 

For the nine months ended September 30, 2008, net income to common shareholders decreased to $18.2 million from $55.3 million for the prior year period. Net income for the prior year period includes the $30.4 million gain on sale of the LaGuardia Marriott. For the first nine months of 2008, FFO rose to $97.1 million from $93.6 million in the prior year period or $2.41 per diluted share from $2.33 per diluted share. EBITDA year to date through the end of September declined to $155.0 million from $189.3 million for the prior year period. EBITDA for the prior year period includes the $30.4 million gain on sale of the LaGuardia Marriott. Net income, FFO and EBITDA for the nine months ended September 30, 2008 include the negative impact from the $4.3 million expense related to the settlement of all Meridien litigation. 

RevPAR increased 1.6 percent for the nine months ended September 30, 2008 to $153.26 versus the prior year period. The increase in RevPAR was due to ADR growth of 1.1 percent to $201.95 and an increase in occupancy of 0.5 percent to 75.9 percent for the nine months ended September 30, 2008. 

For the nine months ended September 30, 2008, the Company’s hotels generated $168.0 million of hotel EBITDA compared with $165.7 million for the same period last year. Hotel revenue growth was 2.1 percent for the nine months ended September 30, 2008 versus the same period last year while hotel expenses grew 2.4 percent versus the same prior year period. 

Third Quarter Highlights 

On September 11, 2008, the Company entered into a settlement agreement that ended its six year litigation with Meridien. The Company recorded a one-time expense of $4.3 million in the current year’s third quarter for the settlement and dismissal of both the New Orleans and Dallas cases, representing all of the litigation with Meridien. 

Subsequent Events 

On October 1, 2008, the Company extinguished $58.6 million of secured debt related to San Diego Paradise Point Resort with cash and additional borrowings from the Company’s line of credit. This reduced the Company’s total outstanding debt to approximately $961.0 million. 

On October 3, 2008, the Company exercised its option to extend for one year the $20.0 million loan secured by Gild Hall. The Company has no maturities remaining in 2008 and only $68.5 million of non-extendable maturities in 2009. Should the debt markets remain unfavorable, the Company can utilize capacity on its line of credit to repay the 2009 non-extendable maturities. 

Fourth Quarter Dividends 

The Company announced its monthly dividend of $0.085 per common share of beneficial interest for each of the months of October, November and December 2008. The October dividend will be paid on November 14, 2008 to common shareholders of record on November 3, 2008; the November dividend will be paid on December 15, 2008 to common shareholders of record on November 28, 2008; and the December dividend will be paid on January 15, 2009 to common shareholders of record on December 31, 2008. This monthly dividend results in an annualized rate of $1.02 per common share which is a reduction from the prior declared dividend’s annualized rate of $2.10 per common share. The $1.02 per common share annualized rate represents a 9.1 percent yield based on today’s closing share price. 

“The Board of Trustees took this action to reduce the dividend based on the recommendation of management, the current challenging economic environment and the view that the U.S. economy, as well as the lodging industry, will likely continue to face declining economic trends through 2009,” said Hans Weger, Chief Financial Officer. “This reduction will further strengthen the balance sheet, provide over $100 million of additional liquidity over the next 26 months and position the Company to take advantage of future investment opportunities.” 

Given sluggish operating fundamentals since the fourth quarter of 2007, combined with the current rapidly deteriorating economic environment and the expectation that the lodging industry will face a challenging operating environment through at least 2009, the Company has also taken the following additional steps to further strengthen its balance sheet and liquidity: 

  • Limit capital investments at the hotels in 2009 to those related to life safety, emergency capital maintenance and a few minor projects that are currently underway; 
  • Modified the fast-track schedule for the IBM Building conversion in Chicago to a normal development schedule with major construction commencing in 2010 and the super-luxury hotel opening in 2011; and 
  • Continue to work aggressively with our operators to improve efficiencies, reduce costs and enhance revenues at our properties. 


2008 Outlook 

The outlook for the full year 2008 is as follows: 

Net Income:   $11.7 million - $13.7 million ($0.29 - $0.34 per diluted share); 
FFO:   $117.4 million - $119.4 million ($2.91 - $2.96 per diluted share); and 
EBITDA:   $195.5 million - $197.5 million. 
Excluding the $4.3 million settlement expense related to Meridien, the Company’s outlook for 2008 is as follows: 
Net Income:   $16.0 million - $18.0 million ($0.40 - $0.45 per diluted share); 
FFO:   $121.7 million - $123.7 million ($3.02 - $3.07 per diluted share); and 
EBITDA:   $199.8 million - $201.8 million. 
LaSalle Hotel Properties is a leading multi-operator real estate investment trust owning 31 upscale and luxury full-service hotels, totaling approximately 8,500 guest rooms in 14 markets in 11 states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale and luxury full-service hotels located in urban, resort and convention markets. LaSalle Hotel Properties seeks to grow through strategic relationships with premier lodging companies, including Westin Hotels and Resorts, Sheraton Hotels & Resorts Worldwide, Inc., Hilton Hotels Corporation, Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, White Lodging Services Corporation, Gemstone Hotels & Resorts, LLC, Thompson Hotels, Sandcastle Resorts & Hotels, Davidson Hotel Company, Denihan Hospitality Group and the Kimpton Hotel & Restaurant Group, LLC. 

This press release, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. Forward-looking statements in this press release include, among others, statements about the economy, industry fundamentals, the effects of the Company’s renovation and repositioning strategy, asset physical condition, 2009 capital investment plans, IBM building timeline, balance sheet, liquidity, EBITDA, FFO, and Net Income. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, (i) the Company’s dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly, (ii) risks associated with the hotel industry, including competition, increases in wages, energy costs and other operating costs, actual or threatened terrorist attacks, downturns in general and local economic conditions and cancellation of or delays in the completion of anticipated demand generators, (iii) the availability and terms of financing and capital and the general volatility of securities markets, (iv) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws, (v) interest rate increases, (vi) the possible failure of the Company to qualify as a REIT and the risk of changes in laws affecting REITs, (vii) the possibility of uninsured losses, (viii) risks associated with redevelopment and repositioning projects, including delays and cost overruns, and (ix) the risk factors discussed in the Company’s Annual Report on Form 10-K as updated in its Quarterly Reports. Accordingly, there is no assurance that the Company's expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 

For additional information or to receive press releases via e-mail, please visit our website at www.lasallehotels.com 
 

LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(unaudited)
                                                                       For the three months ended                           For the nine months ended
                                                                       September 30,                                        September 30,
                                                                       2008                       2007                      2008                       2007
Revenues:
Hotel operating revenues:
Room                                                                   $    127,245               $    115,116              $    334,946               $    310,775
Food and beverage                                                           49,361                     42,427                    134,123                    125,953
Other operating department                                                  15,766                     14,147                    39,655                     36,502
Total hotel operating revenues                                              192,372                    171,690                   508,724                    473,230
Participating lease revenue                                                 1,393                      9,569                     11,957                     22,229
Other income                                                                2,120                      1,485                     6,160                      3,923
Total revenues                                                              195,885                    182,744                   526,841                    499,382
Expenses:
Hotel operating expenses:
Room                                                                        27,790                     23,877                    76,638                     68,772
Food and beverage                                                           33,040                     28,750                    91,256                     85,949
Other direct                                                                7,071                      6,213                     18,399                     17,356
Other indirect                                                              48,653                     45,327                    134,739                    128,124
Total hotel operating expenses                                              116,554                    104,167                   321,032                    300,201
Depreciation and amortization                                               27,372                     23,550                    78,932                     68,635
Real estate taxes, personal property taxes and insurance                    7,098                      7,862                     25,764                     24,307
Ground rent                                                                 2,241                      2,200                     5,786                      5,369
General and administrative                                                  5,108                      2,706                     12,936                     10,104
Lease termination expense                                                   4,269                      -                         4,269                      -
Other expenses                                                              650                        546                       2,154                      1,779
Total operating expenses                                                    163,292                    141,031                   450,873                    410,395
Operating income                                                            32,593                     41,713                    75,968                     88,987
Interest income                                                             20                         174                       129                        1,197
Interest expense                                                            (12,379     )              (11,874     )             (36,210     )              (35,185     )
Income before income tax expense, minority interest, equity in              20,234                     30,013                    39,887                     54,999
earnings of joint venture and discontinued operations
Income tax expense                                                          (767        )              (2,574      )             (650        )              (2,825      )
Minority interest in loss of consolidated entities                          6                          -                         11                         -
Minority interest of common units in Operating Partnership                  (53         )              (69         )             (106        )              (212        )
Minority interest of preferred units in Operating Partnership               (1,262      )              (1,547      )             (4,021      )              (4,604      )
Equity in earnings of joint venture                                         -                          -                         -                          27
Income from continuing operations                                           18,158                     25,823                    35,121                     47,385
Discontinued operations:
Income from operations of property disposed of, including gain on           -                          44                        -                          30,385
disposal of assets
Minority interest, net of tax                                               -                          -                         -                          (1          )
Income tax benefit                                                          -                          -                         -                          73
Net income from discontinued operations                                     -                          44                        -                          30,457
Net income                                                                  18,158                     25,867                    35,121                     77,842
Distributions to preferred shareholders                                     (5,625      )              (5,625      )             (16,873     )              (18,720     )
Issuance costs of redeemed preferred shares                                 -                          -                         -                          (3,868      )
Net income applicable to common shareholders                           $    12,533                $    20,242               $    18,248                $    55,254
 

LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations - Continued
(Dollars in thousands, except per share data)
(unaudited)

                                                                       For the three months ended                           For the nine months ended
                                                                       September 30,                                        September 30,
                                                                       2008                       2007                      2008                       2007
Earnings per Common Share - Basic:
Net income applicable to common shareholders before discontinued       $    0.30                  $    0.50                 $    0.44                  $    0.62
operations and after dividends on unvested restricted shares
Discontinued operations                                                     -                          -                         -                          0.76
Net income applicable to common shareholders after dividends on        $    0.30                  $    0.50                 $    0.44                  $    1.38
unvested restricted shares
Earnings per Common Share - Diluted:
Net income applicable to common shareholders before discontinued       $    0.30                  $    0.50                 $    0.44                  $    0.61
operations and after dividends on unvested restricted shares
Discontinued operations                                                     -                          -                         -                          0.76
Net income applicable to common shareholders after dividends on        $    0.30                  $    0.50                 $    0.44                  $    1.37
unvested restricted shares
Weighted average number of common shares outstanding:
Basic                                                                       40,264,498                 39,854,950                40,035,102                 39,851,249
Diluted                                                                     40,350,444                 40,117,918                40,152,485                 40,115,746
 

LASALLE HOTEL PROPERTIES
FFO and EBITDA
(Dollars in thousands, except share data)
(unaudited)

                                                                       For the three months ended                           For the nine months ended
                                                                       September 30,                                        September 30,
                                                                       2008                       2007                      2008                       2007
Funds From Operations (FFO):
Net income applicable to common shareholders                           $    12,533                $    20,242               $    18,248                $    55,254
Depreciation                                                                27,042                     23,345                    78,205                     68,083
Amortization of deferred lease costs                                        287                        123                       591                        369
Minority interest:
Minority interest in consolidated entities                                  (6          )              -                         (11         )              -
Minority interest of common units in Operating Partnership                  53                         69                        106                        212
Minority interest in discontinued operations                                -                          -                         -                          1
Less: Net gain on sale of property disposed of                              -                          (44         )             -                          (30,322     )
FFO                                                                    $    39,909                $    43,735               $    97,139                $    93,597
Weighted average number of common shares and units outstanding:
Basic                                                                       40,368,028                 39,958,480                40,138,632                 39,954,778
Diluted                                                                     40,453,974                 40,221,448                40,256,015                 40,219,276
                                                                       For the three months ended                           For the nine months ended
                                                                       September 30,                                        September 30,
                                                                       2008                       2007                      2008                       2007
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA):
Net income applicable to common shareholders                           $    12,533                $    20,242               $    18,248                $    55,254
Interest expense                                                            12,379                     11,874                    36,210                     35,185
Income tax expense (benefit):
Income tax expense                                                          767                        2,574                     650                        2,825
Income tax benefit from discontinued operations                             -                          -                         -                          (73         )
Depreciation and amortization                                               27,372                     23,550                    78,932                     68,686
Minority interest:
Minority interest in consolidated entities                                  (6          )              -                         (11         )              -
Minority interest of common units in Operating Partnership                  53                         69                        106                        212
Minority interest of preferred units in Operating Partnership               1,262                      1,547                     4,021                      4,604
Minority interest in discontinued operations                                -                          -                         -                          1
Distributions to preferred shareholders                                     5,625                      5,625                     16,873                     22,588
EBITDA                                                                 $    59,985                $    65,481               $    155,029               $    189,282
Corporate expense                                                           10,007                     3,191                     20,258                     12,580
Interest and other income                                                   (2,139      )              (1,671      )             (6,288      )              (5,159      )
Participating lease adjustments (net)                                       87                         858                       517                        1,316
Hotel level adjustments (net)                                               (995        )              (1,806      )             (1,545      )              (1,940      )
Income from operations of property disposed of, including gain on           -                          (36         )             -                          (30,428     )
sale
Hotel EBITDA                                                           $    66,945                $    66,017               $    167,971               $    165,651
 

With respect to Hotel EBITDA, the Company believes that excluding
the effect of corporate-level expenses, non-cash items, and the
portion of these items related to unconsolidated entities, provides
a more complete understanding of the operating results over which
individual hotels and operators have direct control. We believe
property-level results provide investors with supplemental
information on the ongoing operational performance of our hotels and
effectiveness of management in running our business on a
property-level basis.
Hotel EBITDA includes the operating data for all properties leased
to LHL and to third parties for the three and nine months ended
September 30, 2008 and 2007 excluding the Donovan House. Chaminade
Resort is excluded from January (closed for renovations) in the nine
months ended September 30, 2008 and 2007.
 

LASALLE HOTEL PROPERTIES
Hotel Operational Data
Schedule of Property Level Results
(Dollars in thousands)
(unaudited)

                                            For the three months ended                    For the nine months ended
                                            September 30,                                 September 30,
                                            2008                   2007                   2008                   2007
Revenues
Room                                        $      126,957         $      127,093         $      346,802         $      340,307
Food and beverage                                  48,889                 45,732                 140,214                136,512
Other                                              14,931                 14,951                 38,922                 38,272
Total hotel revenues                               190,777                187,776                525,938                515,091
Expenses
Room                                               26,975                 25,764                 77,638                 73,625
Food and beverage                                  32,671                 30,855                 94,340                 91,796
Other direct                                       6,820                  6,560                  18,331                 18,053
General and administrative                         14,061                 13,839                 41,414                 39,262
Sales and marketing                                12,527                 12,597                 37,092                 36,271
Management fees                                    7,967                  7,760                  19,300                 19,724
Property operations and maintenance                6,454                  6,648                  19,344                 19,936
Energy and utilities                               6,570                  6,604                  18,102                 18,623
Property taxes                                     6,239                  7,227                  22,451                 21,335
Other fixed expenses                               3,548                  3,905                  9,955                  10,815
Total hotel expenses                               123,832                121,759                357,967                349,440
Hotel EBITDA                                $      66,945          $      66,017          $      167,971         $      165,651
Note:
This schedule includes the operating data for all properties leased
to LHL, and to third parties as of September 30, 2008, excluding the
Donovan House. Chaminade Resort is excluded from January (closed for
renovations).
 

LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
(unaudited)

                            For the three months ended                  For the nine months ended
                            September 30,                               September 30,
                            2008                  2007                  2008                  2007
Total Portfolio
Occupancy                          81.6%                 80.9%                 75.9%                 75.5%
Increase/(Decrease)                0.8%                                        0.5%
ADR                         $      204.37         $      206.36         $      201.95         $      199.79
Increase/(Decrease)                (1.0%)                                      1.1%
RevPAR                      $      166.76         $      167.00         $      153.26         $      150.91
Increase/(Decrease)                (0.1%)                                      1.6%
Note:
This schedule includes the operating data for all properties leased
to LHL, and to third parties as of September 30, 2008, excluding the
Donovan House. Chaminade Resort is excluded from January (closed for
renovations).
 

LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
(unaudited)

Prior Year Operating Data
           First Quarter            Second Quarter           Third Quarter            Fourth Quarter           Full Year
                 2007                     2007                     2007                     2007                    2007
Occupancy  66.2%                    79.3%                    80.9%                    69.6%                    74.0%
ADR        $     180.35             $     208.99             $     206.36             $     203.84             $    200.75
REVPAR     $     119.42             $     165.63             $     167.00             $     141.83             $    148.61
Note:
This schedule includes historical operating data for the owned
hotels open and operating as of December 31, 2007 (excludes the
Donovan House for the full year and Chaminade Resort for January &
December, as these properties were closed for renovations).

 
.
Contact:

LaSalle Hotel Properties 
Hans Weger, Chief Financial Officer 
301-941-1500
 

.
.
Also See: LaSalle Hotel Properties Reports 2nd Qtr 2008 Net Income to Common Shareholders Increased to $20.5 million Compared to $19.4 million in the Previous Year; Total Revenues Increased to $201.3 million from $184.7 million / July 2008
.

To search Hotel Online data base of News and Trends Go to Hotel.OnlineSearch
Home | Welcome| Hospitality News | Classifieds| One-on-One |
Viewpoint Forum | Industry Resources | Press Releases
Please contact Hotel.Onlinewith your comments and suggestions.