of $4.3 million For the Year Ended December 2004;
Expecting Improvements in 2005 Driven by Renovation, Repositioning
|MCLEAN, Va., Feb. 10, 2005 - Highland Hospitality Corporation (NYSE:
HIH), a lodging real estate investment trust, or REIT, today reported its
consolidated financial results for the quarter and year ended December
Consolidated Financial Results
For the quarter ended December 31, 2004, the Company reported consolidated total revenue of $53.0 million and consolidated net income of $.9 million, or $.02 per diluted share. Funds from operations, or FFO, which is defined as consolidated net income plus depreciation and amortization, were $5.6 million, or $.14 per diluted share, for the quarter. Earnings before interest, income taxes and depreciation and amortization, or EBITDA, were $10.1 million, or $.26 per diluted share, for the quarter.
For the year ended December 31, 2004, the Company reported consolidated total revenue of $133.0 million and consolidated net income of $4.3 million, or $.10 per diluted share. FFO was $15.8 million, or $.40 per diluted share, for the full year. EBITDA was $22.0 million, or $.56 per diluted share, for the full year.
"This quarter was one of transition for us, as we absorbed the nine hotels we acquired in the third quarter," said James L. Francis, Highland's President and Chief Executive Officer. "Although we are pleased with the overall performance of our hotels during the fourth quarter, as we look forward in 2005, we expect to see improvements in performance driven by our renovation, repositioning and asset management efforts, combined with the continued strength of the lodging industry."
Both FFO and EBITDA are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission. Management believes that FFO and EBITDA are key measures of a REIT's financial performance and should be considered along with, but not as an alternative to, net income and cash flow as a measure of the Company's operating performance. A reconciliation of these non-GAAP financial measures is included in the accompanying financial tables.
Hotel Operating Performance
For the quarter ended December 31, 2004, the Company's 17 hotels contributed $53.0 million of total revenue and $12.9 million of hotel operating profit. Included in the following table are the key hotel operating statistics for the Company's 17 hotel properties for the fourth quarter 2004 and 2003. Since 12 of the 17 hotels were acquired in 2004 and five were acquired in December 2003, the hotel operating statistics for the fourth quarter 2003 reflect the results of operations of the hotels under previous ownership for either a portion of, or the entire, fourth quarter 2003.
Occ % ADR RevPAR Occ % ADR RevPAR
Other (10 hotels) 68.0% $105.62 $71.87 65.3% $101.79 $66.44
* Rebranded/Renovated includes hotels that are currently going through significant renovation and/or in the process of changing their franchise affiliation.
For the quarter ended December 31, 2004, revenue per available room, or RevPAR, for the Company's total portfolio of 17 hotels increased by 2.7% to $71.12, versus the same period in 2003. Occupancy decreased by 0.9 percentage points to 63.5%, while average daily rate, or ADR, increased by 4.1% to $111.96. For the Company's hotels that are being renovated and/or rebranded, RevPAR decreased 1.5% to $70.50, versus the same period in 2003. Occupancy decreased by 3.9 percentage points to 59.7%, while ADR increased by 5.0%. For the Company's other hotels, RevPAR increased 8.2% to $71.87, versus the same period in 2003. Occupancy increased by 2.7 percentage points to 68.0%, while ADR increased by 3.8%.
During the fourth quarter, the Company completed the following financing transactions:
During the fourth quarter, the Company generated $7.2 million of cash flow from its operations, used $5.8 million in investing activities, and generated $43.4 million in financing activities.
Douglas W. Vicari, Highland's Executive Vice President and Chief Financial Officer, stated, "We are pleased with the terms and pricing of our recent financing transactions. Our lenders and shareholders continue to show strong support and confidence in our Company due to our high quality assets and our conservatively managed balance sheet. We believe that we are well positioned to take advantage of opportunities in the investment market for hotels and resorts given the capital structure that we have put in place."
Acquisition Activity/Investment Outlook
During the full year 2004, the Company acquired 12 hotels consisting
of 3,623 rooms for an aggregate purchase price of $441.6 million, including
the assumption of mortgage debt and transaction costs. Below is a
list of the properties acquired:
On February 4, 2005, the Company closed on its previously announced acquisition of the Sheraton Annapolis hotel in Annapolis, MD for $18.0 million. The 196-room hotel will be managed by Crestline Hotels & Resorts and will remain a Sheraton-branded hotel. With the acquisition of the Sheraton Annapolis hotel, the Company has now closed on 18 hotels since its initial public offering in December 2003. Including in excess of $50 million in planned renovations, the Company has committed approximately $670 million of capital in hotel investments. The Company continues to actively pursue investment opportunities that fit with its strategic objectives.
James L. Francis stated, "Our current hotel portfolio is an excellent representation of our investment strategy. We continue to focus on hotels that will provide us with upside through new management expertise, upgrading and renovating, franchise repositioning and intense asset management. We see a strong and competitive acquisition market with many opportunities available to us, but we will continue to carefully allocate our capital to investments that will maximize our returns and increase shareholders' value over the long-term."
Dividend Update and Outlook
During the fourth quarter, the Company declared a dividend of $.14 per share payable to its common shareholders of record as of December 31, 2004. The dividend was paid on January 14, 2005. During the full year 2004, the Company declared common dividends of $.36 per common share. The level of future dividends will continue to be determined by the Company's quarterly operating results, general economic conditions, capital requirements and other operating trends.
The Company estimates that comparable hotel RevPAR for the full year
2005 will increase between 4% to 5% for its 17-hotel portfolio. Assuming
the estimated RevPAR increase, the timely completion of planned renovations,
and the investment of the Company's remaining $70 million of capital during
the second quarter 2005, the Company estimates that for the full year 2005:
In addition, the Company estimates that for the first quarter 2005:
"We continue to be encouraged by the performance of our industry as
we enter 2005," advised Mr. Francis. "With key business travel and
overall demand indicators pointing positive, we expect our portfolio will
benefit from these strong fundamentals as we renovate and reposition a
significant number of our hotels. While we anticipate that our performance
will be impacted in the first half of the year by our renovation and repositioning
efforts, we will begin to see the benefits of these efforts in the later
part of the year. We believe that we are in the early-to-mid stages
of a lodging industry recovery and our efforts in 2004 and 2005 will position
us to benefit as industry fundamentals continue to improve."
Highland Hospitality Corporation is a self-advised lodging real estate investment trust, or REIT, focused on hotel investment primarily in the United States. The Company currently owns 18 hotel properties in ten states with an aggregate of 5,143 rooms.
Certain statements and assumptions in this press release contain or are based upon "forward-looking" information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Highland Hospitality Corporation
|Also See:||Newly Formed REIT, Highland Hospitality Corporation, Acquires First Three Properties for $71 million / December 2003|
|Highland Hospitality Corporation (HIH), a REIT, Expects IPO Proceeds of $342.3 million; Organized to Take Advantage of Lodging Investment Opportunities / December 2003|