CHICAGO, Feb.
24, 2010 --
Strategic Hotels & Resorts (NYSE: BEE)
today reported results for the fourth quarter and year ended December 31, 2009.
Fourth
Quarter Recap
- Comparable
funds from operations (Comparable FFO) was a loss of $0.05 per diluted share compared
with income of $0.16 per diluted share in the
prior year.
- Quarterly
Comparable EBITDA was $32.5 million
compared with $48.7
million in the
prior year.
- North
American total revenue per available room (Total RevPAR) decreased 15.2
percent and revenue per available room (RevPAR) decreased 13.9 percent
driven by a 1.5
percentage point decrease in occupancy and an 11.8 percent decrease in
average daily rate (ADR). Non-rooms revenue declined by 16.8
percent.
- European
Total RevPAR increased 6.2 percent (4.5 percent decrease in constant
dollars) and RevPAR increased 10.0 percent (2.7 percent decrease in
constant dollars).
- North
American gross operating profit (GOP) and EBITDA margins contracted 420
basis points and 550 basis points, respectively. North American
EBITDA per room declined 36.8 percent.
Full
Year 2009 Recap
- Comparable
FFO was a loss of $0.30 per diluted share compared
with income of $1.22 per diluted share in the
prior year.
- Comparable
EBITDA was $120.0
million compared
with $234.2
million in the
prior year.
- North
American Total RevPAR decreased 22.0 percent and RevPAR decreased 22.9
percent driven by a 5.9
percentage point decrease in occupancy and a 15.9 percent decrease in
ADR. Non-rooms revenue declined by 21.2 percent.
- European
Total RevPAR decreased 19.7 percent (12.3 percent decrease in constant
dollars) and RevPAR decreased 18.9 percent (11.2 percent decrease in
constant dollars).
- North
American GOP margins and EBITDA margins contracted 610 basis points and
710 basis points, respectively. North American EBITDA per room
declined 44.8 percent.
Chief
Executive Officer Laurence
Geller remarked,
"GDP growth, which was 5.7 percent in the fourth quarter, has
historically driven demand in our industry. This suggests we may
have reached the bottom of the current lodging cycle and, along with a
recent pickup in short-term group bookings and improving corporate and
leisure demand, indicate the potential for a positive second half of
2010.
"More
specifically, meeting planners report being more optimistic about the
outlook for the economy, and our hotels are reporting increased site
visits, which will, at some point, likely translate into bookings.
While visibility in the key group segment remains weak we are seeing
some evidence of improvement as the rate of our cancellations and
attritions are abating."
Financial
Results
The
company reported fourth quarter 2009 financial results as follows:
- Net
loss attributable to common shareholders was $72.2 million,
or $0.96 per diluted share, compared
with a net loss attributable to common shareholders of $285.1 million,
or $3.79 per diluted share, in the
fourth quarter of 2008.
- Comparable
EBITDA was $32.5
million compared
with $48.7
million in the
fourth quarter of 2008.
- FFO
was a loss of $55.3
million, or $0.73 per diluted share, compared
with a loss of $256.8
million or $3.37 per diluted share, in the
fourth quarter of 2008. Comparable FFO was a loss of $3.7 million,
or $0.05 per diluted share, compared
with income of $11.9
million, or $0.16 per diluted share, in the
fourth quarter of 2008.
The
company reported full year 2009 financial results as follows:
- Net
loss attributable to common shareholders was $274.8 million,
or $3.65 per diluted share, compared
with net loss attributable to common shareholders of $348.2 million,
or $4.63 per diluted share, in the
prior year.
- Comparable
EBITDA was $120.0
million compared
with $234.2
million in the
prior year.
- FFO
was a loss of $155.8
million, or $2.07 per diluted share, compared
with a loss of $269.0
million, or $3.53 per diluted share, in the
prior year. Comparable FFO for the year was a loss of $22.8 million,
or $0.30 per diluted share, compared
with income of $93.1
million, or $1.22 per diluted share, in the
prior year.
Impairment
Losses and Other Charges
Fourth
quarter 2009 results include impairment and other charges totaling $49.8 million.
Full year 2009 results include impairment charges totaling $130.8 million,
of which $30.8
million has been
reclassified in discontinued operations. These charges include an
impairment charge to goodwill and long lived assets of $72.7 million,
a $26.5 million write-down of the company's
joint venture investment in the Hotel del Coronado and a $27.7 million write-down of development
opportunities in Mexico.
These one-time charges have been excluded from Comparable EBITDA,
FFO and FFO per share metrics.
Asset
Sales and Other Transactions
During
the fourth quarter, the company closed on the sale of the Renaissance
Le Parc hotel in Paris for a purchase price of euro 35.5 million (approximately $51.5 million)
and the Four Seasons Mexico City for $54.0
million. Proceeds from the sales were used to enhance
corporate liquidity.
Mr.
Geller commented, "As part of our planned balance sheet and liquidity
strategies, during the fourth quarter of 2009 we completed two
strategically important assets dispositions with the sales of our
Renaissance Le Parc hotel in Paris and our Four Seasons in Mexico City. These
transactions, in an exceptionally difficult environment, represent a
tremendous execution on the part of our team and provide an indication
of the underlying desirability of high-end hotels. Gross proceeds
from the sales totaled over $100
million and will
be used to supplement our corporate liquidity."
During
the third quarter, the company entered into a joint venture agreement
on its 60-acre ocean front land parcel near the Four Seasons Punta Mita
Resort in Nayarit,
Mexico. Under the terms of the agreement, the company was
released from its final installment payment of $17.5 million,
which was due in August
2009, and will receive a preferred position on any future
distributions from the partnership.
During
the first quarter of 2009, the company completed an amendment to its
bank credit facility which reduced the facility's total size to $400.0 million,
increased pricing to LIBOR plus 375 basis points and pledged security
interests in previously unsecured hotel properties. In return,
the company negotiated a reduction of the minimum corporate fixed
charge coverage ratio to 0.9 times and an increase in maximum corporate
leverage to 80%.
Subsequent
Event
Last
week, the company entered into an amendment with Aareal Bank AG on the euro 104.0 million non-recourse loan securing
the InterContinental Prague hotel. Under the terms of the
amendment, the loan remains non-recourse and the loan maturity is
extended by three years from its initial maturity of March 2012 to March 2015.
During the remainder of the initial term, scheduled principal
amortization is removed and the financial performance covenants are
effectively waived.
Board
of Directors
During
the third quarter, the company announced the appointment of new
independent directors Raymond
Gellein, former President of Starwood Hotels & Resorts'
Global Development Group, and Eugene
Reilly, President of AMB Property Corporation's Americas
division.
2010
Guidance
The
company is not providing guidance for 2010 at this time as the current
market environment provides insufficient visibility into future
operating performance. Certain items should however be considered
in 2010 including:
- Interest
expense of approximately $100.0
million, including amortization of deferred financing costs and
the amortization of the loan discount on $180 million of exchangeable notes;
- Corporate
expenses of $22.0
million to $23.0 million; and
- Accrual
of unpaid preferred dividends that will reduce income available to
common shareholders and Comparable FFO by approximately $7.7 million per quarter.
Earnings
Call
The
company will conduct its fourth quarter 2009 conference call for
investors and other interested parties on Thursday, February
25, 2010 at 10:00 a.m. Eastern
Time (ET).
Interested individuals are invited to listen to the call by
telephone at 888-713-4214 (toll international: 617-213-4866) with
pass code 19383803. To participate on the web cast, log
on tohttp://www.strategichotels.com or https://www.theconferencingservice.com/prereg/key.process?key=PEN97CJHG 15
minutes before the call to download the necessary software. For
those unable to listen to the call live, a taped rebroadcast will be
available beginning at 1:00 p.m. ET on February 25, 2010,
through 11:59
p.m. ET on
March 4, 2010. To access the replay, dial 888-286-8010 (toll
international: 617-801-6888) and request replay pin
number 63682746. A replay of the call will also be available on
the Internet at http://www.strategichotels.com or http://www.earnings.com for 30 days after the call.
The
company also produces supplemental financial data that includes
detailed information regarding its operating results. This
supplemental data is considered an integral part of this earnings
release. These materials are available on the Strategic Hotels
& Resorts website at www.strategichotels.com within the fourth quarter
information section.
Portfolio
Definitions
North
American hotel comparisons for the fourth quarter 2009 and twelve month
period are derived from the company's hotel portfolio at December 31, 2009,
consisting of properties in which operations are included in the
consolidated results of the company.
European
hotel comparisons for the fourth quarter 2009 and twelve month period
are derived from the company's European owned and leased hotel
properties at December
31, 2009, consisting of the Marriott London Grosvenor Square,
the Paris Marriott Champs-Elysees, the Marriott Hamburg, and the
InterContinental Prague.
About
the Company
Strategic
Hotels & Resorts, Inc. is a real estate investment trust (REIT)
which owns and provides value-enhancing asset management of high-end
hotels and resorts in the
United States, Mexico and Europe. The
company currently has ownership interests in 17 properties with an
aggregate of 8,002 rooms. For a list of current properties and for
further information, please visit the company's website at http://www.strategichotels.com.
This
press release contains forward-looking statements about Strategic
Hotels & Resorts (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: demand for hotel rooms in our current and
proposed market areas; availability of capital; ability to obtain or
refinance debt or comply with covenants contained in our debt
facilities; rising interest rates and operating costs; rising insurance
premiums; cash available for capital expenditures; competition;
economic conditions generally and in the real estate market
specifically, including further deterioration of the current global
economic downturn and the extent of its effect on business and leisure
travel and the lodging industry; ability to dispose of existing
properties in a manner consistent with our disposition strategy; delays
and cost overruns in construction and development; demand for hotel
condominiums; marketing challenges associated with entering new lines
of business; risks related to natural disasters; 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, including those appearing under the heading "Item
1A. Risk Factors" in the Company's most recent Form 10-K and subsequent
Form 10-Qs. 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.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Rooms $99,759 $111,168 $393,206 $507,383
Food and beverage 63,146 77,366 230,630 310,939
Other hotel operating
revenue 23,593 25,681 95,105 104,680
------ ------ ------ -------
186,498 214,215 718,941 923,002
Lease revenue 1,345 1,170 4,858 5,387
----- ----- ----- -----
Total revenues 187,843 215,385 723,799 928,389
------- ------- ------- -------
Operating Costs and
Expenses:
Rooms 27,910 29,214 110,631 126,804
Food and beverage 45,672 52,629 170,503 215,683
Other departmental
expenses 54,117 58,963 210,044 238,258
Management fees 6,736 7,205 26,593 35,920
Other hotel expenses 14,253 14,637 53,613 58,423
Lease expense 4,491 3,926 16,971 17,489
Depreciation and
amortization 36,171 30,789 139,243 116,538
Impairment losses
and other charges 49,795 231,806 100,009 328,485
Corporate expenses 4,778 5,309 25,703 26,369
----- ----- ------ ------
Total operating
costs and expenses 243,923 434,478 853,310 1,163,969
------- ------- ------- ---------
Operating loss (56,080) (219,093) (129,511) (235,580)
Interest expense (25,393) (21,891) (102,521) (89,445)
Interest income 27 315 738 1,796
Loss on early
extinguishment of
debt - - (883) -
Equity in (losses)
earnings of joint
ventures (426) (360) 1,718 2,810
Foreign currency
exchange loss (1,789) (5,187) (2,119) (1,113)
Other expenses, net (777) (196) (609) (690)
---- ---- ---- ----
Loss before income
taxes, distributions
in excess of
noncontrolling
interest capital,
loss on sale of
noncontrolling
interests in hotel
properties and
discontinued
operations (84,438) (246,412) (233,187) (322,222)
Income tax expense (2,086) (3,267) (3,929) (10,560)
Distributions in
excess of
noncontrolling
interest capital - - - (2,499)
--- --- --- ------
Loss before loss on
sale of noncontrolling
interests in hotel
properties and
discontinued
operations (86,524) (249,679) (237,116) (335,281)
Loss on sale of
noncontrolling
interests in hotel
properties - - - (46)
--- --- --- ---
Loss from continuing
operations (86,524) (249,679) (237,116) (335,327)
Income (loss) from
discontinued
operations, net of
tax 20,826 (30,277) (9,317) 17,841
------ ------- ------ ------
Net loss (65,698) (279,956) (246,433) (317,486)
Net loss
attributable to the
noncontrolling
interests in SHR's
operating
partnership 832 3,578 3,129 4,065
Net loss (income)
attributable to the
noncontrolling
interests in
consolidated
affiliates 403 (983) (641) (3,870)
--- ---- ---- ------
Net loss
attributable to SHR (64,463) (277,361) (243,945) (317,291)
Preferred
shareholder
dividends (7,722) (7,722) (30,886) (30,886)
------ ------ ------- -------
Net loss
attributable to SHR
common shareholders $(72,185) $(285,083) $(274,831) $(348,177)
======== ========= ========= =========
Basic and Diluted
Loss Per Share:
Loss from
continuing
operations
attributable to
SHR common
shareholders $(1.23) $(3.40) $(3.53) $(4.86)
Income (loss) from
discontinued
operations
attributable to
SHR 0.27 (0.39) (0.12) 0.23
---- ----- ----- ----
Net loss
attributable to
SHR common
shareholders $(0.96) $(3.79) $(3.65) $(4.63)
====== ====== ====== ======
Weighted average
common shares
outstanding 75,426 75,146 75,267 75,140
====== ====== ====== ======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets
(in thousands, except share data)
December 31,
2009 2008
---- ----
Assets
Investment in hotel properties, net $2,162,584 $2,383,860
Goodwill 75,758 120,329
Intangible assets, net of accumulated
amortization of $4,400 and $3,096 34,046 32,277
Investment in joint ventures 46,745 82,122
Cash and cash equivalents 116,310 80,954
Restricted cash and cash equivalents 22,829 37,358
Accounts receivable, net of allowance for
doubtful accounts of $2,657 and $2,203 54,524 70,945
Deferred financing costs, net of accumulated
amortization of $12,543 and $6,655 11,225 10,375
Deferred tax assets 34,244 38,260
Other assets 39,878 52,687
------ ------
Total assets $2,598,143 $2,909,167
========== ==========
Liabilities and Equity
Liabilities:
Mortgages and other debt payable $1,300,745 $1,301,535
Exchangeable senior notes, net of discount 169,452 165,155
Bank credit facility 178,000 206,000
Accounts payable and accrued expenses 236,269 281,918
Deferred tax liabilities 16,940 34,236
Deferred gain on sale of hotels 101,852 104,251
------- -------
Total liabilities 2,003,258 2,093,095
Noncontrolling interests in SHR's operating
partnership 2,717 5,330
Equity:
SHR's shareholders' equity:
8.50% Series A Cumulative Redeemable
Preferred Stock ($0.01 par value; 4,488,750
shares issued and outstanding; liquidation
preference $25.00 per share) 108,206 108,206
8.25% Series B Cumulative Redeemable Preferred
Stock ($0.01 par value; 4,600,000 shares
issued and outstanding; liquidation
preference $25.00 per share) 110,775 110,775
8.25% Series C Cumulative Redeemable Preferred
Stock ($0.01 par value; 5,750,000 shares
issued and outstanding; liquidation
preference $25.00 per share) 138,940 138,940
Common shares ($0.01 par value; 150,000,000
common shares authorized; 75,253,252 and
74,410,012 common shares issued and
outstanding) 752 744
Additional paid-in capital 1,233,856 1,228,774
Accumulated deficit (954,208) (710,263)
Accumulated other comprehensive loss (69,341) (93,637)
------- -------
Total SHR's shareholders' equity 568,980 783,539
Noncontrolling interests in consolidated
affiliates 23,188 27,203
------ ------
Total equity 592,168 810,742
------- -------
Total liabilities and equity $2,598,143 $2,909,167
========== ==========
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
FINANCIAL HIGHLIGHTS
Supplemental Financial Data
(in thousands, except per share information)
December 31, 2009
-----------------
Pro Rata Share Consolidated
-------------- ------------
Capitalization
--------------
Common shares outstanding 75,253 75,253
Operating partnership units outstanding 955 955
Stock options outstanding 885 885
Restricted stock units outstanding 862 862
--- ---
Combined shares, options and units
outstanding 77,955 77,955
Common stock price at end of period $1.86 $1.86
----- -----
Common equity capitalization $144,996 $144,996
Preferred equity capitalization (at
$25.00 face value) 370,236 370,236
Consolidated debt (excludes discount
on exchangeable senior notes) 1,658,745 1,658,745
Pro rata share of unconsolidated debt 282,825 -
Pro rata share of consolidated debt (107,065) -
Cash and cash equivalents (116,310) (116,310)
-------- --------
Total enterprise value $2,233,427 $2,057,667
========== ==========
Net Debt / Total Enterprise Value 76.9% 75.0%
Preferred Equity / Total Enterprise Value 16.6% 18.0%
Common Equity / Total Enterprise Value 6.5% 7.0%
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Discontinued Operations
The results of operations of hotels sold are classified as discontinued
operations and segregated in the consolidated statements of operations
for all periods presented. The following hotels were sold during 2009
and 2008 (in thousands):
Hotel Date Sold Net Sales Proceeds
----- --------- ------------------
Renaissance Paris
Hotel Le Parc
Trocadero December 21, 2009 $50,275
Four Seasons
Mexico City October 29, 2009 $52,156
Hyatt Regency
Phoenix July 2, 2008 $89,581
The following is a summary of income (loss) from discontinued operations
for the three months and years ended December 31, 2009 and 2008 (in
thousands):
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Hotel operating revenues $7,643 $13,026 $31,892 $70,808
------ ------- ------- -------
Operating costs and expenses 4,231 8,154 24,687 50,554
Depreciation and amortization 413 1,521 5,019 7,079
Impairment losses - 33,335 30,795 33,335
--- ------ ------ ------
Total operating costs and
expenses 4,644 43,010 60,501 90,968
----- ------ ------ ------
Operating income (loss) 2,999 (29,984) (28,609) (20,160)
Interest income - 2 3 19
Foreign currency exchange gain 39 291 82 299
Other expenses, net (82) - (82) (257)
Income tax (expense) benefit (294) (406) 1,125 458
Gain (loss) on sale of assets 18,164 (180) 18,164 37,482
------ ---- ------ ------
Income (loss) from
discontinued operations $20,826 $(30,277) $(9,317) $17,841
======= ======== ======= =======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Investment in the Hotel del Coronado
(in thousands)
On January 9, 2006, we purchased a 45% interest in the joint venture that
owns the Hotel del Coronado. We account for this investment using the
equity method of accounting.
Three Months Ended Years Ended
December 31, December 31,
-------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Total revenues (100%) $19,676 $32,484 $116,297 $150,808
Property EBITDA (100%) $5,767 $11,148 $37,988 $56,846
Equity in (losses)
earnings of joint
venture (SHR 45%
ownership)
Property EBITDA $2,595 $5,017 $17,095 $25,581
Depreciation and
amortization (1,973) (1,884) (7,736) (7,379)
Interest expense (1,874) (3,710) (7,799) (15,204)
Other expenses, net (120) (1,240) (353) (1,378)
Income taxes 469 108 (82) (284)
--- --- --- ----
Equity in (losses)
earnings of
joint venture $(903) $(1,709) $1,125 $1,336
===== ======= ====== ======
EBITDA Contribution
from investment in
Hotel del Coronado
Equity in (losses)
earnings of
joint venture $(903) $(1,709) $1,125 $1,336
Depreciation and
amortization 1,973 1,884 7,736 7,379
Interest expense 1,874 3,710 7,799 15,204
Income taxes (469) (108) 82 284
---- ---- -- ---
EBITDA Contribution
for investment
in Hotel del Coronado $2,475 $3,777 $16,742 $24,203
====== ====== ======= =======
FFO Contribution from
investment in Hotel
del Coronado
Equity in (losses)
earnings of
joint venture $(903) $(1,709) $1,125 $1,336
Depreciation and
amortization 1,973 1,884 7,736 7,379
----- ----- ----- -----
FFO Contribution
for investment in
Hotel del Coronado $1,070 $175 $8,861 $8,715
====== ==== ====== ======
Spread
Interest over Loan
Debt Rate LIBOR Amount Maturity
---- ---------- ----- ------ ---------
CMBS Mortgage and
Mezzanine 2.31% 208 bp $610,000 January 2011 (a)
Revolving Credit
Facility 2.73% 250 bp 18,500 January 2011 (a)
------
628,500
Cash and cash
equivalents (12,009)
-------
Net Debt $616,491
========
(a) Includes extension options.
LIBOR
Effective Cap Notional
Cap Date Rate Amount Maturity
--- ------ ------ --------- --------
CMBS Mortgage and
Mezzanine Loan January 2010 2.0% $630,000 January 2011
and Revolving
Credit Facility Cap
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Leasehold Information
(in thousands)
Three Months
Ended Years Ended
December 31, December 31,
-------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Paris Marriott Champs Elysees:
Property EBITDA $4,368 $3,874 $17,739 $21,248
Revenue (a) $4,368 $3,874 $17,739 $21,248
Lease Expense (3,236) (2,831) (12,219) (12,536)
Less: Deferred Gain on Sale
Leaseback (1,237) (1,091) (4,685) (4,933)
------ ------ ------ ------
Adjusted Lease Expense (4,473) (3,922) (16,904) (17,469)
----- ---- ---- ------
EBITDA Contribution from Leasehold $(105) $(48) $835 $3,779
===== ==== ==== ======
Marriott Hamburg:
Property EBITDA $1,567 $1,406 $5,847 $6,247
Revenue (a) $1,345 $1,170 $4,858 $5,387
Lease Expense (1,255) (1,095) (4,752) (4,953)
Less: Deferred Gain on Sale
Leaseback (58) (50) (217) (228)
--- --- ---- ----
Adjusted Lease Expense (1,313) (1,145) (4,969) (5,181)
------ ------ ------ -----
EBITDA Contribution from Leasehold $32 $25 $(111) $206
=== === ===== ====
Total Leaseholds:
Property EBITDA $5,935 $5,280 $23,586 $27,495
Revenue (a) $5,713 $5,044 $22,597 $26,635
Lease Expense (4,491) (3,926) (16,971) (17,489)
Less: Deferred Gain on Sale
Leaseback (1,295) (1,141) (4,902) (5,161)
------ ------ ------ ------
Adjusted Lease Expense (5,786) (5,067) (21,873) (22,650)
------ ------ ------- -------
EBITDA Contribution from Leasehold $(73) $(23) $724 $3,985
==== ==== ==== ======
December 31,
------------
Security Deposits (b): 2009 2008
---- ----
Paris Marriott Champs Elysees $10,720 $15,507
Marriott Hamburg 7,158 6,984
----- -----
Total $17,878 $22,491
======= =======
(a) For the three months and years ended December 31, 2009 and 2008,
Revenue for the Paris Marriott Champs Elysees represents Property
EBITDA. For the three months and years ended December 31, 2009 and
2008, Revenue for the Marriott Hamburg represents lease revenue.
(b) The security deposits are recorded in other assets on the
consolidated balance sheets.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures
In addition to REIT hotel income, five other non-GAAP financial measures
are presented for the Company that we believe are useful to management and
investors as key measures of our operating performance: Funds from
Operations (FFO); FFO - Fully Diluted; Comparable FFO; Earnings Before
Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and
Comparable EBITDA. A reconciliation of these measures to net loss
attributable to SHR 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. NAREIT defines FFO as net income (or loss)
(computed in accordance with GAAP) excluding losses or gains from sales
of depreciable 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 FFO - Fully Diluted, which is FFO plus income or loss on income
attributable to convertible noncontrolling interests. We also present
Comparable FFO, which is FFO - Fully Diluted excluding the impact of any
gains or losses on early extinguishment of debt, impairment losses,
foreign currency exchange gains or losses and other non-recurring charges.
We believe that the presentation of FFO, FFO - Fully Diluted and
Comparable FFO provide useful information to management and 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. We also present Comparable FFO per diluted share as a
non-GAAP measure of our performance. We calculate Comparable FFO per
diluted share for a given operating period as our Comparable FFO (as
defined above) divided by the weighted average of fully diluted shares
outstanding. Comparable FFO per diluted share, in accordance with NAREIT,
is adjusted for the effects of dilutive securities. Dilutive securities
may include shares granted under share-based compensation plans,
operating partnership units and exchangeable debt securities. No effect
is shown for securities that are anti-dilutive.
EBITDA represents net loss attributable to SHR common shareholders
excluding: (i) interest expense, (ii) income taxes, 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 taxes and
depreciation and amortization of our equity method investments. EBITDA is
presented on a full participation basis, which means we have assumed
conversion of all convertible noncontrolling interests of our operating
partnership into our common stock and includes preferred dividends. We
believe this treatment of noncontrolling interests provides more useful
information for management and our investors and appropriately considers
our current capital structure. We also present Comparable EBITDA, which
eliminates the effect of realizing deferred gains on our sale leasebacks,
as well as the effect of gains or losses on sales of assets, early
extinguishment of debt, impairment losses, foreign currency exchange
gains or losses and other non-recurring charges. We believe 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 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, FFO - Fully Diluted, Comparable FFO, 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, FFO - Fully Diluted, Comparable FFO,
EBITDA, and Comparable EBITDA should not be considered as an alternative
measure of our net loss or operating performance. FFO, FFO - Fully
Diluted, Comparable FFO, 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, FFO - Fully Diluted, Comparable FFO, 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 loss attributable to SHR
common shareholders. 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, FFO - Fully
Diluted, Comparable FFO, EBITDA, and Comparable EBITDA to the most
directly comparable GAAP financial performance measure, which is net loss
attributable to SHR common shareholders, and provide an explanatory
description by footnote of the items excluded from FFO, FFO - Fully
Diluted, and EBITDA.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Loss Attributable to SHR Common Shareholders to
EBITDA and Comparable EBITDA
(in thousands)
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Net loss attributable to SHR
common shareholders $(72,185) $(285,083) $(274,831) $(348,177)
Depreciation and
amortization - continuing
operations 36,171 30,789 139,243 116,538
Depreciation and
amortization - discontinued
operations 413 1,521 5,019 7,079
Interest expense -
continuing operations 25,393 21,891 102,521 89,445
Income taxes - continuing
operations 2,086 3,267 3,929 10,560
Income taxes - discontinued
operations 294 406 (1,125) (458)
Noncontrolling interests (832) (3,578) (3,129) (4,065)
Adjustments from
consolidated affiliates (a) (2,647) (2,096) (9,460) (8,354)
Adjustments from
unconsolidated affiliates 3,498 5,276 15,934 22,985
Preferred shareholder
dividends 7,722 7,722 30,886 30,886
----- ----- ------ ------
EBITDA (87) (219,885) 8,987 (83,561)
Realized portion of deferred
gain on sale leasebacks (1,295) (1,141) (4,902) (5,161)
Loss (gain) on sale of
assets - continuing
operations 472 (4) 477 (151)
(Gain) loss on sale of
assets - discontinued
operations (18,164) 180 (18,164) (37,482)
Loss on sale of
noncontrolling interests in
hotel properties - - - 46
Impairment losses and other
charges - continuing
operations 49,795 231,806 100,009 328,485
Impairment losses and other
charges - discontinued
operations - 33,335 30,795 33,335
Impairment losses and other
charges - adjustments from
consolidated affiliates - - (169) -
Foreign currency exchange
loss - continuing operations
(b) 1,789 5,187 2,119 1,113
Foreign currency exchange
gain - discontinued
operations (b) (39) (291) (82) (299)
Hyatt Regency La Jolla
noncontrolling interest (a) - (530) - (4,593)
Distributions in excess of
noncontrolling interest
capital - - - 2,499
Loss on early extinguishment
of debt - - 883 -
--- --- --- ---
Comparable EBITDA $32,471 $48,657 $119,953 $234,231
======= ======= ======== ========
(a) The noncontrolling interest partner's share of the Hyatt Regency La
Jolla's property EBITDA is not deducted from net loss attributable to
SHR common shareholders under GAAP accounting rules for the three
months and year ended December 31, 2008. Under new accounting rules
effective January 1, 2009, the noncontrolling interest partner's share
of the Hyatt Regency La Jolla's property EBITDA is included in
adjustments from consolidated affiliates for the three months and
year ended December 31, 2009.
(b) Foreign currency exchange gains or losses applicable to third-party
and inter-company debt and certain balance sheet items held by foreign
subsidiaries.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Loss Attributable to SHR Common Shareholders to
Funds From Operations (FFO), FFO - Fully Diluted and Comparable FFO
(in thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Net loss attributable to
SHR common shareholders $(72,185) $(285,083) $(274,831) $(348,177)
Depreciation and
amortization - continuing
operations 36,171 30,789 139,243 116,538
Depreciation and
amortization -
discontinued operations 413 1,521 5,019 7,079
Corporate depreciation (304) (305) (1,217) (1,201)
Loss (gain) on sale of
assets - continuing
operations 472 (4) 477 (151)
(Gain) loss on sale of
assets - discontinued
operations (18,164) 180 (18,164) (37,482)
Loss on sale of
noncontrolling interests
in hotel properties - - - 46
Realized portion of
deferred gain on sale
leasebacks (1,295) (1,141) (4,902) (5,161)
Deferred tax expense on
realized portion of
deferred gain on sale
leasebacks 386 333 1,462 1,530
Noncontrolling interests
adjustments (488) (437) (1,928) (1,677)
Adjustments from
consolidated affiliates
(a) (1,971) (1,372) (7,619) (5,376)
Adjustments from
unconsolidated affiliates 2,005 1,884 7,864 7,379
----- ----- ----- -----
FFO (54,960) (253,635) (154,596) (266,653)
Convertible
noncontrolling interests (344) (3,141) (1,201) (2,388)
---- ------ ------ ------
FFO - Fully Diluted (55,304) (256,776) (155,797) (269,041)
Impairment losses and
other charges - continuing
operations 49,795 231,806 100,009 328,485
Impairment losses and
other charges -
discontinued operations - 33,335 30,795 33,335
Impairment losses and
other charges -
adjustments from
consolidated affiliates - - (169) -
Foreign currency exchange
loss, net of tax (b) -
continuing operations 1,810 3,847 1,574 738
Foreign currency exchange
gain (b) - discontinued
operations (39) (291) (82) (299)
Hyatt Regency La Jolla
noncontrolling interest
(a) - (61) - (2,620)
Distributions in excess of
noncontrolling interest
capital - - - 2,499
Loss on early
extinguishment of debt - - 883 -
--- --- --- ---
Comparable FFO $(3,738) $11,860 $(22,787) $93,097
======= ======= ======== =======
Comparable FFO per diluted
share $(0.05) $0.16 $(0.30) $1.22
====== ===== ====== =====
Weighted average diluted
shares 75,426 76,122 75,267 76,192
====== ====== ====== ======
(a) The noncontrolling interest partner's share of the Hyatt Regency La
Jolla's property FFO is not deducted from net loss attributable to
SHR common shareholders under GAAP accounting rules for the three
months and year ended December 31, 2008. Under new accounting rules
effective January 1, 2009, the noncontrolling interest partner's
share of the Hyatt Regency La Jolla's property EBITDA is included
in adjustments from consolidated affiliates for the three months and
year ended December 31, 2009.
(b) Foreign currency exchange gains or losses applicable to third-party
and inter-company debt and certain balance sheet items held by
foreign
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Debt Summary
(dollars in thousands)
Loan
Debt Interest Rate Spread (a) Amount Maturity (b)
---- -------------- ---------- ------ -------------
Bank credit
facility 3.98% 375 bp $178,000 March 2011
Westin St.
Francis 0.93% 70 bp 220,000 August 2011
Fairmont
Scottsdale 0.79% 56 bp 180,000 September 2011
InterContinental
Chicago 1.29% 106 bp 121,000 October 2011
InterContinental
Miami 0.96% 73 bp 90,000 October 2011
Loews Santa
Monica Beach
Hotel 0.86% 63 bp 118,250 March 2012
Ritz-Carlton
Half Moon Bay 0.90% 67 bp 76,500 March 2012
InterContinental
Prague (c) 1.90% 120 bp (c) 148,886 March 2012
Exchangeable
senior notes,
net of discount
(d) 3.50% Fixed 169,452 April 2012
Fairmont Chicago 0.93% 70 bp 123,750 April 2012
Hyatt Regency La
Jolla 1.23% 100 bp 97,500 September 2012
Marriott London
Grosvenor Square
(e) 1.71% 110 bp (e) 124,859 October 2013
-------
$1,648,197
==========
(a) Spread over LIBOR (0.23% at December 31, 2009).
(b) Includes extension options, excluding the conditional one-year
extension option on the bank credit facility.
(c) Principal balance of euro 104,000,000 at December 31, 2009. Spread
over three-month EURIBOR (0.70% at December 31, 2009).
(d) Reflects the cash coupon.
(e) Principal balance of 77,250,000 pounds Sterling at December 31, 2009.
Spread over three-month GBP LIBOR (0.61% at December 31, 2009).
U.S. Interest Rate Swaps
Fixed Pay Rate Notional
Swap Effective Date Against LIBOR Amount Maturity
------------------- ------------- ------ --------
April 2005 4.59% $75,000 April 2012
June 2005 4.12% 50,000 June 2012
June 2006 5.50% 75,000 June 2013
August 2006 5.42% 100,000 August 2013
March 2007 4.84% 100,000 July 2012
March 2009 0.90% 75,000 April 2010
March 2009 1.12% 50,000 December 2010
March 2009 1.38% 50,000 August 2011
March 2009 1.02% 50,000 December 2010
March 2009 1.04% 100,000 February 2011
March 2009 1.22% 50,000 August 2011
September 2009 4.90% 100,000 September 2014
December 2009 4.96% 100,000 December 2014
---- -------
3.47% $975,000
==== ========
European Interest Rate Swap
Fixed Pay
Rate Against Notional
Swap Effective Date GBP LIBOR (f) Amount Maturity
------------------- ------------- ------ --------
October 2007 3.22% - 5.72% 77,250 pounds October 2013
Fixed Pay
Rate Against Notional
Swap Effective Date EURIBOR Amount Maturity
------------------- --------------- ------ --------
September 2008 4.53% euro 104,000 March 2012
Forward-Starting Interest Rate Swaps
Fixed Pay
Rate Against Notional
Swap Effective Date LIBOR Amount Maturity
------------------- ------------- ------ --------
April 2010 5.42% 75,000 April 2015
December 2010 5.23% 100,000 December 2015
February 2011 5.27% 100,000 February 2016
-------
$275,000
========
At December 31, 2009, future scheduled debt principal payments (including
non-conditional extension options) are as follows:
Years ending December 31, Amount
------------------------- ------
2010 $7,796
2011 796,796
2012 739,282
2013 114,871
2014 -
Thereafter -
-
1,658,745
Less discount on
exchangeable senior
notes (10,548)
-------
Total $1,648,197
==========
Percent of fixed rate debt
including U.S. and
European swaps 86.0%
Weighted average interest
rate including U.S. and
European swaps (g) 4.15%
Weighted average
maturity of fixed rate
debt (debt with maturity
of greater than one year) 3.41
(f) In April 2009, we modified the GBP LIBOR interest rate swap agreement,
which adjusts the fixed pay rate from 5.72% to 3.22% for the period
from January 15, 2009 through January 17, 2011.
(g) Excludes the amortization of deferred financing costs, amortization
of the discount on the exchangeable senior notes and the amortization
of the interest rate swap costs.
