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BETHESDA, Md.--July 18, 2012--LaSalle Hotel Properties (NYSE: LHO) today announced results for the quarter ended June 30, 2012. The Company’s results include the following:
Second Quarter Highlights
Capital Markets Initiatives The Company has received commitments for a $300.0 million five-year unsecured term loan, which is expected to close by early August 2012, subject to customary closing conditions. The term loan was swapped to a fixed interest rate for the full five-year term. The term loan’s interest rate will be 2.68 percent when the Company’s leverage ratio is between 4.0 and 4.75 times. Proceeds will be used to reduce amounts outstanding on the Company’s senior unsecured credit facility. “Our second quarter results were impacted more than we expected by the guestroom renovations at Hotel Roger Williams and Le Montrose and the management transitions at the Donovan House and Hotel Sax,” said Michael D. Barnello, President and Chief Executive Officer of LaSalle Hotel Properties. “Despite that, we are encouraged by the increase in average rate of our portfolio, which grew 5.8 percent for the entire portfolio. In addition, our portfolio delivered significant hotel EBITDA margin growth and achieved our highest-ever reported quarterly hotel EBITDA margin. On the capital markets front, we closed on a very favorable seven-year term loan and have received commitments on a five-year term loan with excellent pricing, which will enable us to reduce the balance on our senior unsecured credit facility. “The trends in our business remain strong and we continue to be optimistic about the outlook for the second half of the year.” Acquisition of Mezzanine Loan On July 13, 2012, the Company invested $67.4 million to acquire the performing mezzanine loan secured by the equity interests in the entities that own Shutters on the Beach and Hotel Casa Del Mar in Santa Monica, California. The Company purchased the debt instrument for 93.6 percent of the $72.0 million face value of the loan. The fixed-rate, interest only coupon on the mezzanine loan is 9.76 percent at par value, which translates to a 10.4 percent interest rate on the Company’s investment. The mezzanine loan is subordinate to a $310.0 million first mortgage loan secured by the properties. Both the first mortgage and the mezzanine loan mature on May 11, 2014. “We are excited to acquire the mezzanine loan related to these two iconic assets,” added Michael D. Barnello. “The Santa Monica market benefits from very favorable demand dynamics and these high-quality hotels have excellent locations within the market. Furthermore, the 10.4 percent yield on our investment is very attractive.” Shutters on the Beach is a 198 room full-service, luxury hotel, with guestrooms located between two buildings: the 157 room Ocean House and the 41 room Beach House. Shutters features three food and beverage options, including the 230-seat casual beachfront restaurant called Coast, the upscale 85-seat One Pico and a lounge called The Living Room. Shutters also includes 9,000 square feet of flexible meeting and function space. Hotel Casa Del Mar is a 129 room full-service, luxury hotel located on the beach in Santa Monica, California. Food and beverage options include the 75-seat Catch restaurant as well as a lobby lounge. The ocean-front hotels are located one block from the Company’s Viceroy Santa Monica, two blocks from Santa Monica Pier and proximate to the Third Street Promenade and the Main Street shopping district. Santa Monica is a premier corporate and leisure destination. A variety of companies hold offices in Santa Monica, including Apple, Microsoft, Symantec, Blackstone, Colony Capital, HBO, Universal Music, Sony BMG Music Entertainment and MTV, among many others. The city is well known for world-class shopping throughout the Third Street Promenade, Main Street, Montana Avenue, Santa Monica Place and Ocean Park. Santa Monica also includes attractions such as the Santa Monica Pier and the Main Street district with its art galleries, cafes and antique shops. Year-to-date Highlights For the six months ended June 30, 2012, RevPAR increased 4.7 percent to $153.97, with ADR growth of 4.8 percent to $198.07, offset by a 0.1 percent decline in occupancy to 77.7 percent. The Company’s hotel EBITDA margin was 30.8 percent, an increase of 143 basis points compared to the comparable prior year period. The Company invested $35.2 million of capital in its hotels during the six months ended June 30, 2012. Balance Sheet As of June 30, 2012, the Company had total outstanding debt of $1.18 billion, including $376.0 million outstanding on its senior unsecured credit facility. Total net debt to trailing 12 month Corporate EBITDA (as defined in the Company’s senior unsecured credit facility) was 4.5 times as of June 30, 2012 and its fixed charge coverage ratio was 2.7 times. For the second quarter, the Company’s weighted average interest rate was 4.1 percent. As of June 30, 2012, the Company had $41.6 million of cash and cash equivalents on its balance sheet and capacity of $392.5 million available on its credit facilities. 2012 Outlook The Company is updating its 2012 outlook and has incorporated the acquisition of the mezzanine loan and its planned placement of a new five-year term loan. The revised outlook assumes no additional acquisitions or equity issuance for the remainder of 2012. The Company’s revised financial expectations for 2012 are as follows:
Earnings Call The Company will conduct its quarterly conference call on Thursday, July 19, 2012 at 8:30 AM EDT. To participate in the conference call, please dial (888) 715-1394. Additionally, a live webcast of the conference call will be available through the Company’s website. To access, log on to http://www.lasallehotels.com. A replay of the conference call will be archived and available online through the Investor Relations section of http://www.lasallehotels.com. LaSalle Hotel Properties is a leading multi-operator real estate investment trust. The Company owns interests in 40 hotels of which 38 are owned 100 percent. The 38 wholly-owned properties are upscale full-service hotels, totaling 10,200 guest rooms in 13 markets in 9 states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale 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, Hilton Hotels Corporation, Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, White Lodging Services Corporation, Thompson Hotels, Davidson Hotel Company, Denihan Hospitality Group, the Kimpton Hotel & Restaurant Group, LLC, Accor, Destination Hotels & Resorts, HEI Hotels & Resorts, JRK Hotel Group, Inc., Viceroy Hotel Group, Highgate Hotels and Access Hotels & Resorts. 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 “will,” "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. Forward-looking statements in this press release include, among others, statements about outlook for RevPAR, hotel EBITDA margin, adjusted FFO, adjusted EBITDA and derivations thereof and the terms and timing of the $300.0 million term loan and the use of proceeds from the loan. 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. Non-GAAP Financial Measures FFO, EBITDA and Hotel EBITDA The Company considers the non-GAAP measures of FFO (including FFO per share/unit), EBITDA and hotel EBITDA to be key supplemental measures of the Company's performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company's operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO, EBITDA and hotel EBITDA to be helpful in evaluating a real estate company's operations. The White Paper on FFO approved by NAREIT in April 2002, as revised in 2011, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of properties, impairment write-downs and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization (excluding amortization of deferred finance costs) and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company computes FFO consistent with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company. With respect to FFO, the Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization, and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs. With respect to EBITDA, the Company believes that excluding the effect of non-operating expenses and non-cash charges, and the portion of these items related to unconsolidated entities, all of which are also based on historical cost accounting and may be of limited significance in evaluating current performance, can help eliminate the accounting effects of depreciation and amortization, and financing decisions and facilitate comparisons of core operating profitability between periods and between REITs, even though EBITDA also does not represent an amount that accrues directly to common shareholders. 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 the third-party management companies operating our business on a property-level basis. FFO, EBITDA and hotel EBITDA do not represent cash generated from operating activities as determined by GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO, EBITDA and hotel EBITDA are not measures of the Company's liquidity, nor are FFO, EBITDA and hotel EBITDA indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO, EBITDA and hotel EBITDA may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the Company's operating performance. Adjusted FFO and Adjusted EBITDA The Company presents adjusted FFO (including adjusted FFO per share/unit) and adjusted EBITDA, which adjusts for certain additional items including gains on sale of property and impairment losses (to the extent included in EBITDA), acquisition transaction costs, costs associated with the departure of executive officers, costs associated with the recognition of issuance costs related to the calling of preferred shares and certain other items. The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its assets. As with FFO, EBITDA, and hotel EBITDA, the Company’s calculation of adjusted FFO and adjusted EBITDA may be different from similar adjusted measures calculated by other REITs.
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