IRVING, Texas--FelCor Lodging Trust Incorporated (NYSE: FCH) reported operating results for the second quarter ended June 30, 2014.
RevPAR for comparable hotels increased 9.2%.
Adjusted FFO per share improved to $0.26 up from $0.21.
Adjusted EBITDA increased $4.6 million to $69.2 million, and Same-store Adjusted EBITDA increased $9.9 million, or 17.3%, to $67.0 million.
Net income per share improved $0.35 to $0.12.
Two non-strategic hotels were sold during the quarter for gross proceeds of $54 million. Agreed to sell five other hotels (four with non-refundable deposits) for gross proceeds of $115 million.
The exchange of interests in 10 non-strategic hotels that were owned in joint ventures was completed in July. We now wholly-own five of these non-strategic hotels and will begin marketing them in early September.
A $140 million term loan, bearing interest at LIBOR plus 2.5%, and maturing in 2017, closed in July. Proceeds, along with cash and our line of credit, will be used to redeem our remaining $234 million of 10% senior secured notes in August.
Redevelopment of the Knickerbocker hotel remains on track to open in early fall.
"I am very pleased with our performance in the second quarter. We exceeded our expectations, as Same-store Adjusted EBITDA increased 17%, and RevPAR growth for our portfolio once again outperformed the industry," said Richard A. Smith, President and Chief Executive Officer of FelCor. "Our success in executing our strategic plan continues to drive positive results, and we have positioned FelCor to deliver sustainable growth by assembling a high-quality and diverse portfolio. We will continue to leverage our strengths to outperform the industry to create long-term shareholder value."
Mr. Smith added, "We continue to make very good progress on our portfolio positioning and balance sheet restructuring programs. After unwinding some of our joint ventures, we now have 12 remaining non-strategic hotels. We have agreed to sell five of these hotels. In addition, we obtained a flexible and low-cost term loan that will be used to redeem our 10% senior notes. After that redemption, our cost of borrowing and maturity profile will be greatly improved. We will use proceeds from future asset sales to repay the term loan and our line of credit, thereby completing the final phase of our balance sheet restructuring."
RevPAR for our 46 comparable hotels (31 comparable core hotels plus 15 non-strategic hotels) was $132.17, a 9.2% increase compared to the same period in 2013. The increase reflects a 6.3% increase in ADR to $164.79 and a 2.7% increase in occupancy to 80.2%. Hotel EBITDA for our 46 comparable hotels was $63.6 million, a 15.0% increase, and Hotel EBITDA margin was 29.9% during the quarter, a 175 basis point increase.
RevPAR for our 31 comparable core hotels (39 core hotels that exclude Wyndham hotels converted from Holiday Inn on March 1, 2013) increased 9.7% compared to the same period in 2013, while RevPAR for our 15 non-strategic hotels increased 7.5%.
Hotel EBITDA for our acquired and recently redeveloped hotels increased 23%, compared to the same period in 2013.
RevPAR for the eight hotels converted to Wyndham in 2013 increased 20.4% for the second quarter, compared to the same period in 2013. We expect revenues at these hotels will continue to grow meaningfully during 2014 and beyond, as transitional disruption subsides. Wyndham Worldwide Corporation has guaranteed minimum annual NOI for the eight hotels over the ten-year term of the management agreement. We do not expect any amount funded for 2014 by Wyndham under the guaranty to be significant.
RevPAR for our 54 Same-store hotels (46 comparable hotels plus the recently-converted Wyndham hotels) was $131.45, a 10.8% increase compared to the same period in 2013. The increase reflects a 7.0% increase in ADR to $164.81 and a 3.5% increase in occupancy to 79.8%.
See page 14 for hotel portfolio composition and pages 15-17 and 21-22 for more detailed hotel portfolio operating data.
Second Quarter Operating Results
Same-store Adjusted EBITDA was $67.0 million, compared to $57.1 million for the same period in 2013, a 17.3% increase. Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels prior to sale) was $69.2 million compared to $64.6 million for the same period in 2013.
Adjusted FFO was $32.9 million, or $0.26 per share, compared to $26.1 million, or $0.21 per share in 2013. Net income attributable to common stockholders was $14.6 million, or $0.12 per share in 2014, compared to a net loss of $28.4 million, or $0.23 per share, in 2013. Net income in 2014 included a $15.6 million net gain on asset sales. Net loss in 2013 included a $24.4 million impairment loss partially offset by a $7.3 million gain.
Year-to-Date Operating Results
RevPAR for 46 comparable hotels was $123.57, an 8.3% increase compared to the same period in 2013. The increase reflects a 5.9% increase in ADR to $162.12 and a 2.3% increase in occupancy to 76.2%. Total revenue for the 46 comparable hotels increased 7.7% from the same period in 2013. RevPAR for our 31 comparable core hotels increased 8.9%, while RevPAR for our 15 non-strategic hotels increased 6.5%.
Same-store Adjusted EBITDA was $106.1 million, compared to $90.0 million for the same period in 2013, a 17.9% increase. Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels prior to sale) was $110.3 million compared to $102.2 million for the same period in 2013.
Adjusted FFO was $37.0 million, or $0.29 per share, compared to $25.3 million, or $0.20 per share, in 2013. Net loss attributable to common stockholders was $9.9 million, or $0.08 per share, in 2014, compared to a net loss of $64.2 million, or $0.52 per share, in 2013. Net loss in 2014 included a $21.5 million net gain on asset sales, and net loss in 2013 included a $24.4 million impairment loss partially offset by a $7.3 million gain.
EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Adjusted FFO per share are all non-GAAP financial measures. See our discussion of "Non-GAAP Financial Measures" beginning on page 17 for a reconciliation of each of these measures to the most comparable GAAP financial measure and for information regarding the use, limitations and importance of these non-GAAP financial measures.
During the first six months of 2014, we sold four hotels for total gross proceeds of $95.2 million. At June 30, 2014, we had 17 non-strategic hotels to be sold (two of which had contracts with non-refundable deposits and were excluded from our same-store metrics).
In July, we unwound joint ventures that owned 10 non-strategic hotels. Through an exchange of interests, we now own five of those hotels outright (comprising 1,224 rooms), and our joint venture partner owns the other five (comprising 1,215 rooms). The five retained hotels will be marketed for sale in early September. In addition, we received our joint ventures partner's 10% interest in the DoubleTree Suites hotel located in downtown Austin and now wholly-own that property.
Following the exchange of interests in our joint venture hotels, we now have 12 non-strategic hotels remaining to sell. Of the twelve, we have agreed to sell five hotels for total gross proceeds of approximately $115 million. Of the five, we have contracts, with non-refundable deposits, to sell four - the DoubleTree Suites-Charlotte, the Embassy Suites-Indianapolis, the Holiday Inn-Toronto Airport and the Sheraton-Atlanta Gateway.
Since December 2010, we have sold 28 non-strategic hotels, for total gross proceeds of $627 million, and exchanged interests in 10 non-strategic hotels with our joint venture partner.
During the quarter, we invested $20.0 million in capital expenditures at our hotels (excluding the Knickerbocker), including approximately $7.8 million for redevelopment projects and repositioning for our Wyndham hotels.
During 2014, we plan to invest approximately $60 million in capital improvements and renovations, concentrated at seven core hotels, as part of our long-term capital plan. In addition, we are investing approximately $25 million to complete the repositioning of our Wyndham portfolio. Please see page 12 of this release for more detail on renovations.
We have invested $105.5 million (excluding initial acquisition costs and capitalized interest) through June 30, 2014 to redevelop the 4+ star Knickerbocker Hotel. Our net expected project cost remains $240 million, and we expect the hotel to open in early fall.
As of June 30, 2014, we had $1.6 billion of consolidated debt bearing a 6.3% weighted-average interest rate and a six-year weighted-average maturity. We had $61.3 million of cash and cash equivalents and $66.0 million of restricted cash, of which $51.9 million secured our Knickerbocker construction loan.
During the quarter, we repaid three loans that would have matured between July and August 2014, totaling $35 million. Those loans, each secured by a different hotel, bore interest at a weighted average rate of 6.6%.
During July, we obtained a $140 million term loan secured by three hotels. Borrowings under the facility bear interest at LIBOR (no floor) plus 2.5%. The loan matures in 2017 (may be extended for up to two years, subject to satisfaction of certain conditions) and is freely pre-payable. On August 15, 2014, we expect to use borrowings from the term loan, cash on hand and borrowings under our line of credit to redeem the remaining $234 million of our 10% senior secured notes. We will use proceeds from pending and future asset sales to repay the term loan and our line of credit. After redeeming the 10% notes, we will have no significant debt maturities, other than our line of credit, until 2019 and will have lowered our weighted average borrowing rate to below 6.0%.
During the second quarter, we declared a $0.02 per share common stock dividend, which was paid in July. Future quarterly dividends will be based on funds available for distribution, reinvestment opportunities within our portfolio and taxable income, among other things.
We have increased our RevPAR and EBITDA outlook primarily to reflect better than expected second quarter results. Our 2014 outlook reflects continued strong lodging industry fundamentals. Our expected RevPAR growth reflects a premium to the industry because of our high-quality diverse portfolio and continued strong growth at our acquired and recently redeveloped hotels.
Our outlook reflects selling all 12 remaining non-strategic hotels. The low end of our outlook assumes that five hotels are sold during the third quarter and seven are sold in the fourth quarter. The high end of our outlook assumes four hotels are sold in the third quarter and eight hotels are sold during the fourth quarter. Our outlook assumes EBITDA for the Wyndham hotels equates to the amount of Wyndham's annual NOI guaranty.
During 2014, we expect:
RevPAR for same-store hotels will increase 8.75% - 9.25%; and RevPAR for comparable hotels (excludes Wyndham) will increase 7.5% - 8.0%;
Adjusted EBITDA will be $211.5 million to $217.5 million;
Adjusted FFO per share will be $0.56 to $0.60;
Net income attributable to FelCor will be $1.0 million to $5.0 million; and
Interest expense, including our pro rata share from joint ventures, will be $96.0 million to $96.5 million.
The following table reconciles our 2014 Adjusted EBITDA to core Adjusted EBITDA outlook (in millions):
To view all tables corresponding to this release please visit:
FelCor, a real estate investment trust, owns a diversified portfolio of primarily upper-upscale and luxury hotels that are located in major and resort markets. FelCor partners with leading hotel companies to operate its hotels, which are flagged under globally renowned brands and premier independent hotels. Additional information can be found on the Company's website at www.felcor.com.
We invite you to listen to our second quarter earnings Conference Call on Thursday, July 31, 2014 at 10:00 a.m. (Central Time). The conference call will be webcast simultaneously on FelCor's website at www.felcor.com. Interested investors and other parties who wish to access the call can go to FelCor's website and click on the conference call microphone icon on the "Investor Relations" page. The conference call replay will also be archived on the Company's website.
Contact: Stephen A. Schafer, Vice President Strategic Planning & Investor Relations