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Strategic Hotels & Resorts Reports 1st Qtr 2011 Net Loss of $35.4 million
Compared to $40.3 million Last Year

U.S. Same Store Portfolio RevPAR Increases 16.6%

 

CHICAGO, May 4, 2011 -- Strategic Hotels & Resorts (NYSE: BEE) today reported results for the first quarter ended March 31, 2011.

First Quarter Highlights

  • Net loss attributable to common shareholders was $35.4 million, or $0.23 per diluted share in the first quarter of 2011, compared with net loss attributable to common shareholders of $40.3 million, or $0.53 per diluted share, in the first quarter of 2010.
  • Comparable funds from operations (Comparable FFO) was a loss of $0.02 per diluted share compared with a loss of $0.14 per diluted share in the prior year period.
  • Comparable EBITDA was $28.7 million compared with $22.5 million in the prior year period, a 27.6 percent increase between periods.
  • United States same store revenue per available room (RevPAR) increased 16.6 percent, driven by a 6.1 percentage point increase in occupancy and a 6.1 percent increase in average daily rate (ADR), compared to the first quarter 2010. Total revenue per available room (Total RevPAR) increased 14.5 percent between periods.
  • North American same store RevPAR increased 11.9 percent, driven by a 5.5 percentage point increase in occupancy and a 2.7 percent increase in ADR. Total RevPAR increased 10.7 percent with non-rooms revenue increasing by 9.4 percent between periods.
  • Total North American RevPAR, which includes results from the recently acquired Four Seasons Jackson Hole and Four Seasons Silicon Valley, increased by 11.6 percent and Total RevPAR increased 10.4 percent, driven by a 5.3 percentage point increase in occupancy and a 2.7 percent increase in ADR. Non-rooms revenue increased 9.3 percent.
  • European RevPAR increased 2.9 percent (1.5 percent in constant dollars), driven by a 0.8 percentage point increase in occupancy and a 1.6 percent increase in ADR (0.2 percent increase in constant dollars) between periods. European Total RevPAR increased 2.8 percent in the first quarter over the prior year period (1.5 percent in constant dollars). The European portfolio excludes results from the Paris Marriott Champs Elysees which was recently sold.
  • United States same store EBITDA margins expanded 430 basis points compared to the first quarter of 2010. North American same store and Total North American EBITDA margins expanded 230 and 240 basis points, respectively.

"We are extremely pleased by our first quarter performance," said Chief Executive Officer Laurence Geller. "We delivered terrific RevPAR growth and operating margins that far outpaced not only the industry average but our relevant competitors. This is the result of the productivity enhancement programs we put in place during the downturn, our unmatched asset management capabilities and our superior portfolio of irreplaceable hotel and resort properties, which are in excellent physical and competitive condition."

First Quarter 2011 Transaction Review

  • In March, the Company closed on an agreement to acquire the Four Seasons Jackson Hole and Four Seasons Silicon Valley from The Woodbridge Company Limited (Woodbridge) in exchange for an aggregate of 15.2 million shares of common stock at an agreed upon issuance price of $6.25 per share, or an implied valuation of $95.0 million. In addition, the Company concurrently privately placed and issued an additional 8.0 million shares of common stock at a price of $6.25 per share to an affiliate of Woodbridge resulting in total gross proceeds of $50.0 million.
  • In February, the Company extended the maturity date of its revolving credit facility to March 2012 and amended certain terms. The amendment included an increase of the advance rate from 45 percent to 55 percent of the borrowing base assets' appraised values, a reduction in the debt service coverage ratio constant from 8 percent to 7 percent and a reduction of the debt service coverage ratio limit from 1.3 times to 1.2 times. In exchange, the Company agreed to reduce the total committed facility from $400 million to $350 million and reduce the maximum total leverage covenant from 80 percent to 70 percent.
  • In February, the Company completed a recapitalization of the joint venture that owns the Hotel del Coronado. Under terms of the agreement, a new joint venture has been established between the Company, Blackstone Real Estate Advisors (Blackstone) and KSL Resorts. As part of the recapitalization, which valued the hotel at approximately $590 million, the Company invested approximately $57 million to retain a 34.3 percent ownership position in the joint venture and will remain as asset manager of the hotel. Blackstone is a 60 percent owner and general partner of the joint venture. A $425 million debt financing was originated by Deutsche Bank.
  • In February, the Company terminated $125 million of interest rate swaps for a total termination cost of $4.2 million.
  • In January, the Company sold its 50 percent interest in BuyEfficient, an electronic purchasing platform, for $9.0 million.

Subsequent Event

  • On April 6th, the Company continued its planned exit from Europe when it closed on the sale of its leasehold interest in the Paris Marriott Champs Elysees hotel for euro 29.2 million ($41.6 million). The Company has also received euro 10.1 million ($14.4 million) of an additional euro 11.6 million ($16.6 million) owed related to the release of an existing leasehold guarantee and other closing adjustments for total proceeds of euro 40.8 million ($58.2 million).

2011 Guidance

Based on the results of the first quarter and current forecasts for the remainder of the year, management is raising the low end of the full year guidance range for 2011. For the year ending December 31, 2011, the Company anticipates that Comparable EBITDA will be in the range of $140.0 million to $150.0 million and Comparable FFO in the range of $0.01 and $0.07 per fully diluted share. Management is also raising the low end of its guidance for North American same store RevPAR and Total RevPAR growth to be in the range between 7.5 percent and 9.0 percent.

Portfolio Definitions

United States same store hotel comparison for the first quarter 2011 are derived from the Company's hotel portfolio at March 31, 2011, consisting of properties located in the United States and held for five or more quarters, in which operations are included in the consolidated results of the Company. As a result, same store comparisons contain 11 properties and exclude the Four Seasons Jackson Hole and Four Seasons Silicon Valley, which were acquired on March 11, 2011, and the unconsolidated Hotel del Coronado.

North American same store hotel comparison for the first quarter 2011 are derived from the Company's hotel portfolio at March 31, 2011, consisting of properties located in North America and held for five or more quarters, in which operations are included in the consolidated results of the Company. As a result, same store comparisons contain 12 properties and exclude the Four Seasons Jackson Hole and Four Seasons Silicon Valley, which were acquired on March 11, 2011, and the unconsolidated Hotel del Coronado.

Total North American hotel comparisons are derived from the Company's hotel portfolio at March 31, 2011, consisting of properties in which operations are included in the consolidated results of the company, including the Four Seasons Jackson Hole and Four Seasons Silicon Valley.

European hotel comparisons for the first quarter 2011 are derived from the Company's European owned and leased hotel properties at March 31, 2011, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg. The Paris Marriott Champs Elysees, which was sold in the second quarter 2011, is excluded from the European portfolio comparisons.

Earnings Call

The Company will conduct its first quarter 2011 conference call for investors and other interested parties on Thursday, May 5, 2011 at 10:00 a.m. Eastern Time (ET). Interested individuals are invited to listen to the call by telephone at 888-680-0879 (toll international: 617-213-4856) with pass code 98214614. To participate on the web cast, log on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=176522&eventID=3945504 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 May 5, 2011, through 11:59 p.m. ET on May 12, 2011. To access the replay, dial 888-286-8010 (toll international: 617-801-6888) and request replay pin number 65175180. 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 first quarter information section.

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 7,762 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, Inc. (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. These forward-looking statements include statements regarding our future financial results, stabilization in the lodging space, positive trends in the lodging industry and our continued focus on improving profitability. 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: failure to complete and close on transactions in light of due diligence findings or the failure of closing conditions to be satisfied; ability to obtain, refinance or restructure debt or comply with covenants contained in our debt facilities; demand for hotel rooms in our current and proposed market areas; availability of capital; 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 deterioration of economic conditions 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; 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.

The following tables reconcile projected 2011 net loss attributable to common shareholders to projected Comparable EBITDA, Comparable FFO and Comparable FFO per diluted share (in millions, except per share data):




Low Range


High Range


Net Loss Attributable to Common Shareholders

($135.1)


($125.2)


Depreciation and Amortization

124.4


124.4


Interest Expense

93.2


93.2


Income Taxes

3.1


3.1


Non-controlling Interests

(0.5)


(0.4)


Adjustments from Consolidated Affiliates

(8.8)


(8.8)


Adjustments from Unconsolidated Affiliates

16.4


16.4


Preferred Shareholder Dividends

30.9


30.9


Realized Portion of Deferred Gain on Sale Leasebacks

(2.4)


(2.4)


Gain on Sale of Asset

(2.6)


(2.6)


Adjustment for Value Creation Plan

21.6


21.6


Other Adjustments

(0.2)


(0.2)


Comparable EBITDA

$140.0


$150.0













Low Range


High Range


Net Loss Attributable to Common Shareholders

($135.1)


($125.2)


Depreciation and Amortization

123.2


123.2


Realized Portion of Deferred Gain on Sale Leasebacks

(2.4)


(2.4)


Deferred Tax on Realized Portion of Deferred Gain

0.4


0.4


Non-controlling Interests

(0.5)


(0.4)


Adjustments from Consolidated Affiliates

(5.5)


(5.5)


Adjustments from Unconsolidated Affiliates

7.2


7.2


Gain on Sale of Asset

(2.6)


(2.6)


Adjustment for Value Creation Plan

21.6


21.6


Other Adjustments

(4.6)


(4.6)


Comparable FFO

$1.7


$11.7


Comparable FFO per Diluted Share

$0.01


$0.07










Note: Beginning in the first quarter of 2011, the definitions of Comparable EBITDA, Comparable FFO and Comparable FFO per diluted share have been modified to exclude any expense related to the Company's Value Creation Plan.

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)




















Consolidated Statements of Operations


(in thousands, except per share data)
















Three Months Ended







March 31,







2011


2010


Revenues:






Rooms



$ 91,470


$ 80,890


Food and beverage


62,882


54,699


Other hotel operating revenue


19,973


19,100


Lease revenue


1,215


1,187













Total revenues


175,540


155,876











Operating Costs and Expenses:






Rooms



26,627


24,161


Food and beverage


46,007


39,805


Other departmental expenses


50,673


46,825


Management fees


5,774


5,672


Other hotel expenses


13,358


13,228


Lease expense


1,196


1,195


Depreciation and amortization


30,605


34,043


Corporate expenses


14,477


6,060













Total operating costs and expenses


188,717


170,989














Operating loss


(13,177)


(15,113)











Interest expense


(19,548)


(21,506)


Interest income


32


151


Equity in losses of unconsolidated affiliates


(1,600)


(560)


Foreign currency exchange gain (loss)


139


(451)


Other income, net


3,925


232


Loss before income taxes and discontinued operations


(30,229)


(37,247)


Income tax benefit


1,648


837


Loss from continuing operations


(28,581)


(36,410)


Income from discontinued operations, net of tax


162


1,799











Net loss


(28,419)


(34,611)


Net loss attributable to the noncontrolling interests in SHR's operating partnership


138


442


Net loss attributable to the noncontrolling interests in consolidated affiliates


595


1,599


Net loss attributable to SHR


(27,686)


(32,570)


Preferred shareholder dividends


(7,721)


(7,721)


Net loss attributable to SHR common shareholders


$ (35,407)


$ (40,291)











Basic and Diluted Loss Per Share:







Loss from continuing operations attributable to SHR common shareholders


$ (0.23)


$ (0.55)



Income from discontinued operations attributable to SHR


-


0.02



Net loss attributable to SHR common shareholders


$ (0.23)


$ (0.53)



Weighted average common shares outstanding


157,333


75,572












Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)




















Consolidated Balance Sheets


(in thousands, except share data)














March 31,


December 31,







2011


2010


Assets








Investment in hotel properties, net

$ 1,913,569


$ 1,835,451



Goodwill


40,359


40,359



Intangible assets, net of accumulated amortization of $7,197 and $6,536

33,350


32,620



Assets held for sale

45,143


45,145



Investment in unconsolidated affiliates

100,438


18,024



Cash and cash equivalents

68,475


78,842



Restricted cash and cash equivalents

41,408


34,618



Accounts receivable, net of allowance for doubtful accounts of $1,738 and $1,922

51,096


35,250



Deferred financing costs, net of accumulated amortization of $17,067 and $15,756

3,101


3,322



Deferred tax assets

5,830


4,121



Other assets

37,438


34,564




Total assets

$ 2,340,207


$ 2,162,316











Liabilities, Noncontrolling Interests and Equity






Liabilities:







Mortgages and other debt payable

$ 1,121,458


$ 1,118,281




Bank credit facility

7,000


28,000




Liabilities of assets held for sale

95,417


93,206




Accounts payable and accrued expenses

281,560


266,773




Deferred tax liabilities

48,736


1,732




Deferred gain on sale of hotels

4,029


3,930






Total liabilities

1,558,200


1,511,922



Noncontrolling interests in SHR’s operating partnership

5,505


5,050



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 and $133,681 in the aggregate)

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 and $136,347 in the aggregate)

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 and $170,434 in the aggregate)

138,940


138,940





Common shares ($0.01 par value; 250,000,000 common shares authorized; 174,798,667 and









151,305,314 common shares issued and outstanding)

1,748


1,513





Additional paid-in capital

1,694,880


1,553,286





Accumulated deficit

(1,212,980)


(1,185,294)





Accumulated other comprehensive loss

(100,432)


(107,164)






Total SHR's shareholders' equity

741,137


620,262




Noncontrolling interests in consolidated affiliates

35,365


25,082





Total equity

776,502


645,344






Total liabilities, noncontrolling interests and equity

$ 2,340,207


$ 2,162,316












Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)














FINANCIAL HIGHLIGHTS








Supplemental Financial Data


(in thousands, except per share information)




March 31, 2011








Pro Rata Share


Consolidated


Capitalization



Common shares outstanding

174,799


174,799


Operating partnership units outstanding

853


853


Restricted stock units outstanding

1,154


1,154








Combined shares and units outstanding

176,806


176,806


Common stock price at end of period

$ 6.45


$ 6.45








Common equity capitalization

$ 1,140,399


$ 1,140,399


Preferred equity capitalization (at $25.00 face value)

370,236


370,236


Consolidated debt

1,128,458


1,128,458


Pro rata share of unconsolidated debt

145,775


-


Pro rata share of consolidated debt

(107,275)


-


Cash and cash equivalents

(68,475)


(68,475)









Total enterprise value

$ 2,609,118


$ 2,570,618








Net Debt / Total Enterprise Value

42.1%


41.2%


Preferred Equity / Total Enterprise Value

14.2%


14.4%


Common Equity / Total Enterprise Value

43.7%


44.4%









Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)




























Discontinued Operations




The results of operations of hotels sold or held for sale are classified as discontinued operations and segregated in the consolidated statements of operations for all periods presented. On April 6, 2011, we sold our leasehold interest in the Paris Marriott Champs Elysees for consideration of euro 29,200,000 ($41,567,000). As part of the transaction, we also received an additional euro 10,100,000 ($14,500,000) related to the release of the security deposit and other closing adjustments and expect to receive another euro 1,500,000 ($2,130,000) within six months of the close date for total proceeds of approximately euro 40,800,000 ($58,197,000). The following hotel was sold during 2010 (in thousands):












































Hotel


Date Sold


Net Sales Proceeds









InterContinental Prague


December 15, 2010


$ 3,564
















































The following is a summary of income from discontinued operations for the three months ended March 31, 2011 and 2010 (in thousands):








Three Months Ended






March 31,






2011


2010










Hotel operating revenues


$ 8,805


$ 13,521










Operating costs and expenses


8,682


12,577


Depreciation and amortization


-


1,814



Total operating costs and expenses


8,682


14,391












Operating income (loss)


123


(870)










Interest expense


-


(3,186)


Interest income


-


7


Foreign currency exchange gain


58


6,519


Other income, net


326


-


Income tax expense


(359)


(59)


Gain (loss) on sale


14


(612)



Income from discontinued operations


$ 162


$ 1,799











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 unconsolidated affiliate that owns the Hotel del Coronado. On February 4, 2011, we completed a recapitalization of the unconsolidated affiliate. As part of the recapitalization, a new unconsolidated affiliate was formed to own the Hotel del Coronado and to invest cash in the asset. Pursuant to the terms of the recapitalization, we became a limited partner in the new unconsolidated affiliate, and our ownership interest in the Hotel del Coronado decreased from 45% to 34.3%. We account for this investment using the equity method of accounting.










Three Months Ended




March 31,




2011


2010


Total revenues (100%)


$ 28,260


$ 23,736


Property EBITDA (100%)


$ 7,298


$ 5,554








Equity in losses of unconsolidated affiliate (SHR ownership)






Property EBITDA


$ 2,606


$ 2,499


Depreciation and amortization


(1,635)


(1,991)


Interest expense


(2,305)


(1,833)


Other expenses, net


(739)


(63)


Income taxes


577


537


Equity in losses of unconsolidated affiliate


$ (1,496)


$ (851)








EBITDA Contribution from investment in Hotel del Coronado






Equity in losses of unconsolidated affiliate


$ (1,496)


$ (851)


Depreciation and amortization


1,635


1,991


Interest expense


2,305


1,833


Income taxes


(577)


(537)


EBITDA Contribution from investment in Hotel del Coronado


$ 1,867


$ 2,436








FFO Contribution from investment in Hotel del Coronado






Equity in losses of unconsolidated affiliate


$ (1,496)


$ (851)


Depreciation and amortization


1,635


1,991


FFO Contribution from investment in Hotel del Coronado


$ 139


$ 1,140













Spread over






Debt


Interest Rate (a)


LIBOR (a)


Loan Amount


Maturity


CMBS Mortgage and Mezzanine


5.80%


480 bp


$ 425,000


March 2016 (b)












Cash and cash equivalents






(14,547)














Net Debt






$ 410,453
















Effective








Caps


Date


LIBOR Cap Rate


Notional Amount


Maturity


CMBS Mortgage and Mezzanine Loan Caps


February 2011


2.00%


$ 425,000


February 2013


CMBS Mortgage and Mezzanine Loan Caps


February 2013


2.50%


425,000


March 2013












(a) Subject to a 1% LIBOR floor.




(b) Includes extension options.













Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)














Leasehold Information


(in thousands)










Three Months Ended




March 31,




2011


2010








Paris Marriott Champs Elysees (a):






Property EBITDA


$ 3,249


$ 3,405


Revenue (b)


$ 3,249


$ 3,405








Lease expense


(3,051)


(3,046)


Less: Deferred gain on sale leaseback


(1,152)


(1,165)


Adjusted lease expense


(4,203)


(4,211)








EBITDA contribution from leasehold


$ (954)


$ (806)








Marriott Hamburg:






Property EBITDA


$ 1,456


$ 1,393


Revenue (b)


$ 1,215


$ 1,187








Lease expense


(1,196)


(1,195)


Less: Deferred gain on sale leaseback


(53)


(54)


Adjusted lease expense


(1,249)


(1,249)








EBITDA contribution from leasehold


$ (34)


$ (62)








Total Leaseholds:






Property EBITDA


$ 4,705


$ 4,798


Revenue (b)


$ 4,464


$ 4,592








Lease expense


(4,247)


(4,241)


Less: Deferred gain on sale leaseback


(1,205)


(1,219)


Adjusted lease expense


(5,452)


(5,460)








EBITDA contribution from leaseholds


$ (988)


$ (868)
















March 31,


December 31,



Security Deposits (c):

2011


2010



Paris Marriott Champs Elysees

$ 14,055


$ 14,459



Marriott Hamburg

2,693


2,540



Total

$ 16,748


$ 16,999









(a) On April 6, 2011, we sold our leasehold interest in the Paris Marriott Champs Elysees. The results of operations for the Paris Marriott Champs Elysees have been classified as discontinued operations for all periods presented.









(b) For the three months ended March 31, 2011 and 2010, Revenue for the Paris Marriott Champs Elysees represents Property EBITDA. For the three months ended March 31, 2011 and 2010, Revenue for the Marriott Hamburg represents lease revenue.









(c) The security deposits are recorded in other assets on the consolidated balance sheets.










Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)




Non-GAAP Financial Measures




We present five non-GAAP financial measures 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.




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 unconsolidated affiliates. EBITDA is presented on a full participation basis, which means we have assumed conversion of all redeemable 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-cash charges, such as the Value Creation Plan expense. 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 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 affiliates. We also present FFO - Fully Diluted, which is FFO plus income or loss on income attributable to redeemable noncontrolling interests in our operating partnership. 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-cash charges, such as the Value Creation Plan expense. We believe that the presentation of FFO, FFO - Fully Diluted and Comparable FFO provides 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.




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. 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.





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




March 31,




2011


2010








Net loss attributable to SHR common shareholders


$ (35,407)


$ (40,291)


Depreciation and amortization - continuing operations


30,605


34,043


Depreciation and amortization - discontinued operations


-


1,814


Interest expense - continuing operations


19,548


21,506


Interest expense - discontinued operations


-


3,186


Income taxes - continuing operations


(1,648)


(837)


Income taxes - discontinued operations


359


59


Noncontrolling interests


(138)


(442)


Adjustments from consolidated affiliates


(1,329)


(1,482)


Adjustments from unconsolidated affiliates


3,890


3,402


Preferred shareholder dividends


7,721


7,721


EBITDA


23,601


28,679


Realized portion of deferred gain on sale leaseback - continuing operations


(53)


(54)


Realized portion of deferred gain on sale leaseback - discontinued operations


(1,152)


(1,165)


Gain on sale of assets - continuing operations


(2,640)


-


(Gain) loss on sale of assets - discontinued operations


(14)


612


Foreign currency exchange (gain) loss - continuing operations (a)


(139)


451


Foreign currency exchange gain - discontinued operations (a)


(58)


(6,519)


Adjustment for Value Creation Plan


9,181


506


Comparable EBITDA


$ 28,726


$ 22,510














(a) Fore ign 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





March 31,





2011


2010









Net loss attributable to SHR common shareholders


$ (35,407)


$ (40,291)


Depreciation and amortization - continuing operations


30,605


34,043


Depreciation and amortization - discontinued operations


-


1,814


Corporate depreciation


(299)


(304)


Gain on sale of assets - continuing operations


(2,640)


-


(Gain) loss on sale of assets - discontinued operations


(14)


612


Realized portion of deferred gain on sale leaseback - continuing operations


(53)


(54)


Realized portion of deferred gain on sale leaseback - discontinued operations


(1,152)


(1,165)


Deferred tax expense on realized portion of deferred gain on sale leasebacks


359


363


Noncontrolling interests adjustments


(157)


(480)


Adjustments from consolidated affiliates


(1,561)


(1,966)


Adjustments from unconsolidated affiliates


1,839


2,004


FFO


(8,480)


(5,424)



Redeemable noncontrolling interests


19


38


FFO - Fully Diluted


(8,461)


(5,386)


Non-cash mark to market of interest rate swaps


(4,366)


-


Foreign currency exchange (gain) loss - continuing operations (a)


(139)


451


Foreign currency exchange gain, net of tax - discontinued operations (a)


(58)


(6,526)


Adjustment for Value Creation Plan


9,181


506


Comparable FFO


$ (3,843)


$ (10,955)
















Comparable FFO per diluted share


$ (0.02)


$ (0.14)


Weighted average diluted shares


157,333


75,572

















(a) Foreign currency exchange gains or losses applicable to third-party and inter-company debt and certain balance sheet items held by foreign subsidiaries. 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














Fairmont Scottsdale



0.80%



56 bp


$ 180,000


September 2011


InterContinental Chicago



1.30%



106 bp


121,000


October 2011


InterContinental Miami



0.97%



73 bp


90,000


October 2011


Bank credit facility



3.99%



375 bp


7,000


March 2012


Loews Santa Monica Beach Hotel



0.87%



63 bp


118,250


March 2012


Ritz-Carlton Half Moon Bay



0.91%



67 bp


76,500


March 2012


Hyatt Regency La Jolla



1.24%



100 bp


97,500


September 2012


North Beach Venture



5.00%



Fixed


1,476


January 2013


Marriott London Grosvenor Square (b)



1.92%



110 bp (b)


118,982


October 2013


Westin St. Francis



6.09%



Fixed


220,000


June 2017


Fairmont Chicago



6.09%



Fixed


97,750


June 2017










$ 1,128,458




(a) Spread over LIBOR (0.24% at March 31, 2011).


(b) Principal balance of 74,160,000 British pounds Sterling at March 31, 2011. Spread over three-month GBP LIBOR (0.82% at March 31, 2011).



























Domestic and European Interest Rate Swaps













Fixed Pay Rate



Notional




Swap Effective Date



Against LIBOR



Amount


Maturity


February 2010



4.84%



$ 100,000


July 2012


February 2010



5.50%



75,000


June 2013


February 2010



5.42%



50,000


August 2013


February 2010



4.90%



100,000


September 2014


February 2010



4.96%



100,000


December 2014


April 2010



5.42%



75,000


April 2015


December 2010



5.23%



100,000


December 2015


February 2011



5.27%



100,000


February 2016





5.16%



$ 700,000



























































Fixed Pay Rate



Notional





Swap Effective Date



Against GBP LIBOR



Amount


Maturity



October 2007



5.72%



74,160 pounds


October 2013

























At March 31, 2011, future scheduled debt principal payments are as follows:













Years ending December 31,



Amount








2011 (remainder)



$ 392,653








2012



310,952








2013



124,423








2014



9,481








2015



10,075








Thereafter



280,874











$ 1,128,458



















Percent of fixed rate debt including U.S. and European swaps





~100.0%



Weighted average interest rate including U.S. and European swaps (c)





6.12%



Weighted average maturity of fixed rate debt (debt with maturity of greater than one year)


4.09














(c) Excludes the amortization of deferred financing costs and the amortization of the interest rate swap costs.


  .
Contact: 
 

Strategic Hotels & Resorts, Inc.

http://www.strategichotels.com

.
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Also See: Strategic Hotels & Resorts 4th Qtr 2010 Net Loss Increases to $134,835 million Compared to $72.19 million Last Year; Significant Balance Sheet Restructuring Continues; Company Enters Agreement to Sell Paris Marriott Champs Elysees / February 2011

Strategic Hotels & Resorts 4th Qtr 2009 Net Loss Narrows to $72.19 million from $285.08 million Last Year; During the fourth quarter, the company closed on the sale of the Renaissance Le Parc hotel in Paris and the Four Seasons Mexico City to Improve corporate liquidity / February 2010

Strategic Hotels & Resorts Reports Fourth Quarter Net Loss of $284.1 million Compared with Net Income $5.4 million for the Fourth Quarter of 2007; Reduces Work Force at Hotels by 15% in Salaried and Hourly Positions, 27% Reduction at Corporate Office, Virtually Eliminated all Capital Programs / February 2009
.

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