Strategic Hotels & Resorts Reports Fourth Quarter And Full Year 2013 Results

Full Year 2013 RevPAR increased 8.8 percent in the Company's Total North American Portfolio and EBITDA margins expanded by 290 basis points

Initiates Full Year 2014 RevPAR growth guidance in the range of 5.0 percent to 7.0 percent

Feb 25, 2014, 16:01 ET from Strategic Hotels & Resorts, Inc.

CHICAGO, Feb. 25, 2014 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the fourth quarter and full year ended December 31, 2013. 

($ in millions, except per share and operating metrics)

Fourth Quarter

Earnings Metrics

2013

2012

% Change

Net income (loss) attributable to common shareholders

$3.2

$(36.4)

N/A

Net income (loss) per diluted share

$0.02

$(0.18)

N/A

Comparable funds from operations (Comparable FFO) (a)

$28.7

$12.2

134.9%

Comparable FFO per diluted share (a)

$0.14

$0.06

133.3%

Comparable EBITDA (a)

$58.3

$44.7

30.6%

Total North American Portfolio Operating Metrics (b)

Average Daily Rate (ADR)

$293.19

$276.26

6.1%

Occupancy

71.3%

69.1%

2.2 pts

Revenue per Available Room (RevPAR)

$209.17

$190.82

9.6%

Total RevPAR

$419.59

$365.15

14.9%

EBITDA Margins

25.9%

21.3%

460 bps

North American Same Store Operating Metrics (c)

ADR

$292.75

$275.64

6.2%

Occupancy

73.7%

71.3%

2.4 pts

RevPAR

$215.75

$196.66

9.7%

Total RevPAR

$415.35

$359.73

15.5%

EBITDA Margins

26.7%

21.5%

 520 bps

Note: Fourth quarter and full year results include payments pursuant to the JW Marriott Essex House NOI guarantee of $1.4 million and $12.8 million in 2012 and 2013, respectively.

 

($ in millions, except per share and operating metrics)

Full Year

Earnings Metrics

2013

2012

% Change

Net loss attributable to common shareholders

$(13.2)

$(79.5)

N/A

Net loss per diluted share

$(0.06)

$(0.40)

N/A

Comparable FFO (a)

$89.5

$53.7

66.6%

Comparable FFO per diluted share (a)

$0.43

$0.26

65.4%

Comparable EBITDA (a)

$213.2

$175.4

21.5%

Total North American Portfolio Operating Metrics (b)

ADR

$289.90

$273.30

6.1%

Occupancy

74.2%

72.3%

1.9 pts

RevPAR

$214.98

$197.59

8.8%

Total RevPAR

$401.56

$365.43

9.9%

EBITDA Margins

24.4%

21.5%

290 bps

North American Same Store Operating Metrics (c)

ADR

$270.07

$254.06

6.3%

Occupancy

75.0%

73.2%

1.8 pts

RevPAR

$202.58

$186.05

8.9%

Total RevPAR

$373.90

$344.77

8.4%

EBITDA Margins

23.4%

22.0%

140 bps

Note:

Fourth quarter and full year results include payments pursuant to the JW Marriott Essex House NOI guarantee of $1.4 million and $12.8 million in 2012 and 2013, respectively.

(a)

Please refer to tables provided later in this press release for a reconciliation of net (loss)/income to Comparable FFO, Comparable FFO per share and Comparable EBITDA. Comparable FFO, Comparable FFO per share and Comparable EBITDA are non-GAAP measures and are further explained with the reconciliation tables.

(b)

Operating statistics reflect results from the Company's Total North American portfolio (see portfolio definitions later in this press release).

(c)

Operating statistics reflect results from the Company's North American same store portfolio (see portfolio definitions later in this press release).

 

"We achieved outstanding operating and financial results across the board in 2013, leading the industry in RevPAR growth and margin expansion," said Raymond L. "Rip" Gellein, Jr., Chairman and Chief Executive Officer of Strategic Hotels & Resorts, Inc.  "We have very positive expectations for 2014, based on our group outlook, continued strength from the transient traveler, and our ability to continue expanding margins across the portfolio.  We also look forward to continuing to deleverage the Company's balance sheet and reviewing growth opportunities that meet our strategic and financial thresholds.  The luxury sector is well positioned for continued strength given the dearth of competitive new supply in virtually all of our major markets," summarized Gellein.    

Fourth Quarter Highlights

  • Total consolidated revenues were $242.4 million in the fourth quarter of 2013, a 13.9 percent increase over the prior year period.
  • Total North American portfolio RevPAR increased 9.6 percent in the fourth quarter of 2013, driven by a 6.1 percent increase in ADR and a 2.2 percentage point increase in occupancy compared to the fourth quarter of 2012.  Total RevPAR increased 14.9 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 10.6 percent in the fourth quarter of 2013 as compared to the fourth quarter of 2012.
  • Comparable FFO was $0.14 per diluted share in the fourth quarter of 2013 compared with $0.06 per diluted share in the prior year period, a 133.3 percent increase over the prior year period.       
  • Comparable EBITDA was $58.3 million in the fourth quarter of 2013 compared with $44.7 million in the prior year period, a 30.6 percent increase.   
  • Net income attributable to common shareholders was $3.2 million, or $0.02 per diluted share, in the fourth quarter of 2013, compared with a net loss attributable to common shareholders of $36.4 million, or $0.18 per diluted share, in the fourth quarter of 2012.  Fourth quarter 2012 results include $18.8 million of impairment losses and other related charges, a $7.8 million charge related to the termination of the management agreement at the Hotel del Coronado and a $2.5 million severance charge.  These charges have been excluded from Comparable EBITDA, FFO and FFO per share.
  • Transient occupied room nights in the Total North American portfolio increased 5.0 percent, offsetting a 1.2 percent decline in group occupied rooms in the fourth quarter of 2013 compared to the fourth quarter of 2012.  Transient ADR increased 4.7 percent compared to the fourth quarter of 2012 and group ADR increased 6.2 percent compared to the fourth quarter of 2012.  Transient revenues increased 9.9 percent compared to the fourth quarter of 2012 and group revenues increased 4.9 percent, compared to the fourth quarter of 2012.
  • Total United States RevPAR increased 9.7 percent in the fourth quarter of 2013, driven by a 6.4 percent increase in ADR and a 2.2 percentage point increase in occupancy, compared to the fourth quarter of 2012.  Total RevPAR increased 15.1 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 10.6 percent in the fourth quarter of 2013 as compared to the fourth quarter of 2012.
  • North American same store RevPAR increased 9.7 percent in the fourth quarter of 2013, driven by a 6.2 percent increase in ADR and a 2.4 percentage point increase in occupancy, compared to the fourth quarter of 2012.  Total RevPAR increased 15.5 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 10.1 percent in the fourth quarter of 2013 as compared to the fourth quarter of 2012.
  • European RevPAR increased 4.4 percent (a 2.2 percent increase in constant dollars) in the fourth quarter of 2013, driven by a 1.1 percent increase in ADR (a 1.1 percent decline in constant dollars) and a 2.7 percentage point increase in occupancy. European Total RevPAR increased 5.8 percent in the fourth quarter of 2013 over the prior year period (a 3.8 percent increase in constant dollars).  
  • Total North American portfolio EBITDA margins expanded 460 basis points in the fourth quarter of 2013 compared to the fourth quarter of 2012.  North American same store EBITDA margins expanded 520 basis points between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, EBITDA margins expanded 180 basis points and 160 basis points in the Total North American and North American same store portfolios, respectively, between periods.

Full Year Highlights

  • Total consolidated revenues were $900.0 million in 2013, a 16.1 percent increase over the prior year period.
  • Total North American RevPAR increased 8.8 percent in 2013, driven by a 6.1 percent increase in ADR and a 1.9 percentage point increase in occupancy, compared to the full year 2012.  Total RevPAR increased 9.9 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 8.8 percent in 2013 compared to 2012. 
  • Comparable FFO was $0.43 per diluted share in 2013 compared with $0.26 per diluted share in the prior year, a 65.4 percent increase.    
  • Comparable EBITDA was $213.2 million in 2013 compared with $175.4 million in the prior year, a 21.5 percent increase.
  • Net loss attributable to common shareholders was $13.2 million, or $0.06 per diluted share, in 2013 compared with a net loss attributable to common shareholders of $79.5 million, or $0.40 per diluted share, in the prior year.  Full year 2012 results include $18.8 million of impairment losses and other related charges, a $7.8 million charge related to the termination of the management agreement at the Hotel del Coronado, and a $2.5 million severance charge.  These charges have been excluded from Comparable EBITDA, FFO and FFO per share.
  • Transient occupied room nights in the Total North American portfolio increased 3.1 percent and group occupied room nights increased 1.6 percent in 2013 compared to 2012.  Transient ADR increased 6.1 percent in 2013 and group ADR increased 4.8 percent compared to 2012.  Transient revenues increased 9.4 percent in 2013 and group revenues increased 6.5 percent, compared to 2012.
  • Total United States RevPAR increased 8.6 percent in 2013, driven by a 5.9 percent increase in ADR and a 1.8 percentage point increase in occupancy, compared to the full year 2012.  Total RevPAR increased 9.7 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 8.6 percent in 2013 compared to 2012.
  • North American same store RevPAR increased 8.9 percent, driven by a 6.3 percent increase in ADR and a 1.8 percentage point increase in occupancy, compared to the full year 2012.  Total RevPAR increased 8.4 percent between periods. 
  • European RevPAR decreased 1.7 percent (2.1 percent in constant dollars) in 2013, driven by a 2.4 percentage decrease in ADR (2.8 percent in constant dollars) offsetting a 0.6 percentage point increase in occupancy between years. European Total RevPAR decreased 1.2 percent in between years (1.6 percent in constant dollars). 
  • Total North American portfolio EBITDA margins expanded 290 basis points in 2013 compared to the full year 2012.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, EBITDA margins expanded 210 basis points compared to the full year 2012.  North American same store EBITDA margins expanded 140 basis points between periods. 

Preferred Dividends

On November 27, 2013, the Company's Board of Directors declared a quarterly dividend of $0.53125 per share of 8.5 percent Series A Cumulative Redeemable Preferred Stock paid on December 31, 2013 to shareholders of record as of the close of business on December 16, 2013, a quarterly dividend of $0.51563 per share of 8.25 percent Series B Cumulative Redeemable Preferred Stock paid on December 31, 2013 to shareholders of record as of the close of business on December 16, 2013 and a quarterly dividend of $0.51563 per share of 8.25 percent Series C Cumulative Redeemable Preferred Stock paid on December 31, 2013 to shareholders of record as of the close of business on December 16, 2013.

2013 Transaction Activity

  • On December 12, 2013, the Company announced the signing of an agreement with Cascade Investment, L.L.C. to sell the Four Seasons Punta Mita Resort and adjacent La Solana land parcel for gross consideration of $200 million, subject to certain working capital adjustments.  The transaction is expected to close in the first quarter of 2014.
  • On October 16, 2013, the Company sold the Lakeshore Athletic Club property adjacent to the Fairmont Chicago hotel for $10.5 million to the owner of Lakeshore Sport & Fitness.
  • On September 9, 2013, the Company closed on amendments to the cross-collateralized mortgage agreements secured by the Westin St. Francis and Fairmont Chicago hotels, which eliminated future principal amortization payments totaling $37.2 million in scheduled payments from the signing the amendment through the remaining term of the two agreements.
  • On March 12, 2013, the Company, along with certain affiliates of Blackstone Real Estate Partners VI L.P., its joint-venture partner, closed on a $475 million loan secured by the Hotel del Coronado, bearing interest at LIBOR plus 365 basis points and has an initial two-year term with three, one-year extension options.

2014 Guidance

For the full year 2014, the Company is providing the following guidance ranges for its Total United States and United States same-store portfolios.  Comparable EBITDA and Comparable FFO per share ranges assume the pending sale of the Four Seasons Punta Mita Resort and adjacent La Solana land parcel closes in the first quarter and proceeds are used to reduce the outstanding balance on the Company's revolving credit facility, partially redeem preferred equity, and other general corporate purposes.

 

Operating Metrics

 

5.0% - 7.0%

4.5% - 6.5%

120 – 200 basis points

RevPAR

Total RevPAR

EBITDA Margin expansion

Corporate Metrics

Comparable EBITDA

$220M - $240M

$0.53 - $0.63

Comparable FFO per diluted share

 

Full year 2014 RevPAR and Total RevPAR growth guidance ranges have been reduced by 100 basis points and the EBITDA margin expansion guidance range has been reduced by 20 basis points as the result of anticipated displacement related to renovation activity.

The Company is additionally providing the following guidance for 2014:

  • Corporate general and administrative expenses in the range of $22.0 million to $24.0 million, excluding costs associated with the Orange Capital activist campaign;
  • Consolidated interest expense in the range of $85 million to $90 million, including approximately $8 million of non-cash interest expense;
  • Preferred dividend expense of $17.6 million, which assumes the redemption of the Series A Preferred Equity at the end of the first quarter, contingent on the closing of the sale of the Four Seasons Punta Mita Resort;
  • Capital expenditures totaling approximately $75 million to $80 million, including spending of $40 million from property-level furniture, fixtures and equipment (FF&E) reserves and an additional $35 million to $40 million of owner-funded spending; and
  • No effect from any additional acquisition, disposition or capital raising activity that may occur during the year.

Portfolio Definitions

Total United States portfolio hotel comparisons for the fourth quarter and full year 2013 are derived from the Company's hotel portfolio at December 31, 2013, consisting of all 15 properties located in the United States, including unconsolidated joint ventures. 

North American same store hotel comparisons for the fourth quarter and full year 2013 are derived from the Company's hotel portfolio at December 31, 2013, consisting of properties located in North America and held for five or more quarters in the case of fourth quarter results and eight or more quarters for full year results, in which operations are included in the consolidated results of the Company.  As a result, same store comparisons contain 14 properties for the fourth quarter, including the Four Seasons Punta Mita Resort, but excluding the unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels. Same store comparisons for the full year contain 13 properties, also excluding the JW Marriott Essex House Hotel, which was acquired on September 14, 2012.

European hotel comparisons for the fourth quarter and full year 2013 are derived from the Company's European owned and leased hotel properties at December 31, 2013, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg hotels. 

Earnings Call

The Company will conduct its fourth quarter and full-year 2013 conference call for investors and other interested parties on Wednesday, February 26, 2014 at 10:00 a.m. Eastern Time (ET).  Interested individuals are invited to listen to the call by dialing 877.415.3177 (toll international: 857.244.7320) with passcode 66838542. To participate on the webcast, log on to http://edge.media-server.com/m/p/vpa3u2wm/lan/en 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 2:00 p.m. ET on February 26, 2014 through 11:59 p.m. ET on March 5, 2014. To access the replay, dial 888.286.8010 (toll international: 617.801.6888) with passcode 62181703. A replay of the call will also be available on the Internet at http://www.strategichotels.com or http://www.reuters.com/finance/markets/earnings 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.

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 18 properties with an aggregate of 8,271 rooms and 851,600 square feet of meeting space. 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 the Company's future financial results, stabilization in the lodging space, positive trends in the lodging industry and the Company's 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 or close on transactions or the failure of closing conditions to be satisfied, including the closing of the disposition of the Four Seasons Punta Mita Resort; a change in the proposed use of proceeds from the disposition of the Four Seasons Punta Mita Resort; the effects of the recent global economic recession upon business and leisure travel and the hotel markets in which the Company invests; the Company's liquidity and refinancing demands; the Company's ability to obtain,  refinance or extend maturing debt; the Company's ability to maintain compliance with covenants contained in its debt facilities; stagnation or further deterioration in economic and market conditions, particularly impacting business and leisure travel spending in the markets where the Company's hotels operate and in which the Company invests, including luxury and upper upscale product; general volatility of the capital markets and the market price of the Company's shares of common stock; availability of capital; the Company's ability to dispose of properties in a manner consistent with its investment strategy and liquidity needs; hostilities and security concerns, including future terrorist attacks, or the apprehension of hostilities, in each case that affect travel within or to the United States, Mexico, Germany, England or other countries where the Company invests; difficulties in identifying properties to acquire and completing acquisitions; the Company's failure to maintain effective internal control over financial reporting and disclosure controls and procedures; risks related to natural disasters; increases in interest rates and operating costs, including insurance premiums and real property taxes; contagious disease outbreaks, such as the H1N1 virus outbreak; delays and cost-overruns in construction and development; marketing challenges associated with entering new lines of business or pursuing new business strategies; the Company's failure to maintain its status as a REIT; changes in the competitive environment in the Company's industry and the markets where the Company invests; changes in real estate and zoning laws or regulations; legislative or regulatory changes, including changes to laws governing the taxation of REITs; changes in generally accepted accounting principles, policies and guidelines; and litigation, judgments or settlements.

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 the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

The following tables reconcile projected 2014 net income 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 Income Attributable to Common Shareholders

$52.9

$72.9

Depreciation and Amortization

112.8

112.8

Interest Expense

86.0

86.0

Income Taxes

2.3

2.3

Non-controlling Interests

0.4

0.4

Adjustments from Consolidated Affiliates

(15.5)

(15.5)

Adjustments from Unconsolidated Affiliates

23.5

23.5

Preferred Shareholder Dividends

17.6

17.6

Realized Portion of Deferred Gain on Sale Leasebacks

(0.2)

(0.2)

Gain on Sale of Assets

(59.8)

(59.8)

Comparable EBITDA

$220.0

$240.0

 

Low Range

High Range

Net Income Attributable to Common Shareholders

$52.9

$72.9

Depreciation and Amortization

112.0

112.0

Realized Portion of Deferred Gain on Sale Leasebacks

(0.2)

(0.2)

Gain on Sale of Assets

(59.8)

(59.8)

Non-controlling Interests

0.3

0.3

Adjustments from Consolidated Affiliates

(8.0)

(8.0)

Adjustments from Unconsolidated Affiliates

14.9

14.9

Comparable FFO

112.1

132.1

Comparable FFO per Diluted Share

$0.53

$0.63

 

 

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

Consolidated Statements of Operations

(in thousands, except per share data)

 

Three Months Ended December 31,

Years Ended December 31,

2013

2012

2013

2012

Revenues:

Rooms

$

126,917

$

117,255

$

506,348

$

429,689

Food and beverage

81,426

73,483

294,969

264,893

Other hotel operating revenue

32,709

20,799

93,535

75,857

Lease revenue

1,385

1,273

5,161

4,778

Total revenues

242,437

212,810

900,013

775,217

Operating Costs and Expenses:

Rooms

36,160

33,288

144,464

121,794

Food and beverage

59,504

54,794

225,213

193,431

Other departmental expenses

56,226

55,189

220,523

200,219

Management fees

7,829

6,227

27,126

23,085

Other hotel expenses

15,239

15,221

60,618

53,117

Lease expense

1,234

1,155

4,818

4,580

Depreciation and amortization

24,507

26,055

101,943

99,458

Impairment losses and other charges

18,406

728

18,406

Corporate expenses

7,161

8,150

25,807

31,578

Total operating costs and expenses

207,860

218,485

811,240

745,668

Operating income (loss)

34,577

(5,675)

88,773

29,549

Interest expense

(20,405)

(16,862)

(84,276)

(75,489)

Interest income

14

95

59

213

Equity in (losses) earnings of unconsolidated affiliates

(265)

(11,431)

2,987

(13,485)

Foreign currency exchange gain (loss)

8

15

44

(1,258)

Other (expenses) income, net

(359)

455

(314)

1,820

Income (loss) before income taxes and discontinued operations

13,570

(33,403)

7,273

(58,650)

Income tax expense

(153)

(257)

(557)

(800)

Income (loss) from continuing operations

13,417

(33,660)

6,716

(59,450)

Income from discontinued operations, net of tax

2,248

1,362

3,171

1,189

Net Income (Loss)

15,665

(32,298)

9,887

(58,261)

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

(60)

58

(38)

184

Net (income) loss attributable to the noncontrolling interests in consolidated affiliates

(6,341)

1,880

1,126

2,771

Net Income (Loss) Attributable to SHR

9,264

(30,360)

10,975

(55,306)

Preferred shareholder dividends

(6,041)

(6,041)

(24,166)

(24,166)

Net Income (Loss) Attributable to SHR Common Shareholders

$

3,223

$

(36,401)

$

(13,191)

$

(79,472)

Basic Income (Loss) Per Share:

Income (loss) from continuing operations attributable to SHR common shareholders

$

0.01

$

(0.18)

$

(0.08)

$

(0.40)

Income from discontinued operations attributable to SHR common shareholders

0.01

0.02

Net income (loss) attributable to SHR common shareholders

$

0.02

$

(0.18)

$

(0.06)

$

(0.40)

Weighted average common shares outstanding

206,814

206,836

206,334

201,109

Diluted Income (Loss) Per Share:

Income (loss) from continuing operations attributable to SHR common shareholders

$

0.01

$

(0.18)

$

(0.08)

$

(0.40)

Income from discontinued operations attributable to SHR common shareholders

0.01

0.02

Net income (loss) attributable to SHR common shareholders

$

0.02

$

(0.18)

$

(0.06)

$

(0.40)

Weighted average common shares outstanding

208,986

206,836

206,334

201,109

 

 

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

Consolidated Balance Sheets

(in thousands, except share data)

 

December 31,

2013

2012

Assets

Investment in hotel properties, net

$

1,795,338

$

1,970,560

Goodwill

38,128

40,359

Intangible assets, net of accumulated amortization of $12,213 and $10,812

29,502

30,631

Assets held for sale

135,901

Investment in unconsolidated affiliates

104,973

112,488

Cash and cash equivalents

73,655

80,074

Restricted cash and cash equivalents

75,916

58,579

Accounts receivable, net of allowance for doubtful accounts of $1,745 and $1,602

39,660

45,620

Deferred financing costs, net of accumulated amortization of $12,354 and $7,049

8,478

11,695

Deferred tax assets

2,203

Prepaid expenses and other assets

35,600

54,208

Total assets

$

2,337,151

$

2,406,417

Liabilities, Noncontrolling Interests and Equity

Liabilities:

Mortgages and other debt payable

$

1,163,696

$

1,176,297

Bank credit facility

110,000

146,000

Liabilities of assets held for sale

17,027

Accounts payable and accrued expenses

189,889

228,397

Deferred tax liabilities

46,137

47,275

Total liabilities

1,526,749

1,597,969

Commitments and contingencies

Noncontrolling interests in SHR's operating partnership

7,534

5,463

Equity:

SHR's shareholders' equity:

8.50% Series A Cumulative Redeemable Preferred Stock ($0.01 par value per share; 4,148,141 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $103,704 in the aggregate)

99,995

99,995

8.25% Series B Cumulative Redeemable Preferred Stock ($0.01 par value per share; 3,615,375 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $90,384 in the aggregate)

87,064

87,064

8.25% Series C Cumulative Redeemable Preferred Stock ($0.01 par value per share; 3,827,727 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $95,693 in the aggregate)

92,489

92,489

Common stock ($0.01 par value per share; 350,000,000 shares of common stock authorized; 205,582,838 and 204,308,710 shares of common stock issued and outstanding)

2,056

2,043

Additional paid-in capital

1,705,306

1,730,535

Accumulated deficit

(1,234,952)

(1,245,927)

Accumulated other comprehensive loss

(41,445)

(58,871)

Total SHR's shareholders' equity

710,513

707,328

Noncontrolling interests in consolidated affiliates

92,355

95,657

Total equity

802,868

802,985

Total liabilities, noncontrolling interests and equity

$

2,337,151

$

2,406,417

 

 

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

Financial Highlights

Supplemental Financial Data

(in thousands, except per share information)

 

December 31, 2013

Pro Rata Share

Consolidated

Capitalization

Shares of common stock outstanding

205,583

205,583

Operating partnership units outstanding

797

797

Restricted stock units outstanding

1,699

1,699

Combined shares and units outstanding

208,079

208,079

Common stock price at end of period

$

9.45

$

9.45

Common equity capitalization

$

1,966,347

$

1,966,347

Preferred equity capitalization (at $25.00 face value)

289,102

289,102

Consolidated debt

1,273,696

1,273,696

Pro rata share of unconsolidated debt

231,400

Pro rata share of consolidated debt

(132,794)

Cash and cash equivalents

(73,655)

(73,655)

Total enterprise value

$

3,554,096

$

3,455,490

Net Debt / Total Enterprise Value

36.6

%

34.7

%

Preferred Equity / Total Enterprise Value

8.1

%

8.4

%

Common Equity / Total Enterprise Value

55.3

%

56.9

%

 

 

 

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 December 12, 2013, we entered into an agreement to sell the Four Seasons Punta Mita Resort and the adjacent La Solana land parcel for $200,000,000.

 

The following is a summary of income from discontinued operations for the three months and years ended December 31, 2013 and 2012 (in thousands):

 

Three Months Ended December 31,

Years Ended December 31,

2013

2012

2013

2012

Hotel operating revenues

$

12,300

$

11,262

$

37,964

$

33,100

Operating costs and expenses

9,061

8,010

30,203

26,909

Depreciation and amortization

1,052

993

4,075

4,006

Impairment losses and other charges

437

437

Total operating costs and expenses

10,113

9,440

34,278

31,352

Operating income

2,187

1,822

3,686

1,748

Interest income

4

Foreign currency exchange (loss) gain

(142)

79

(1)

(352)

Other income, net

375

375

Income tax expense

(172)

(539)

(889)

(211)

Income from discontinued operations

$

2,248

$

1,362

$

3,171

$

1,189

 

 

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

Investments in Unconsolidated Affiliates (in thousands)

 

We have a 36.4% and 50.0% ownership interest in the Hotel del Coronado and the Fairmont Scottsdale Princess hotel, respectively. We account for these investments using the equity method of accounting.

 

Three Months Ended December 31, 2013

Three Months Ended December 31, 2012

Hotel del

Coronado

Fairmont Scottsdale

Princess

Total

Hotel del

Coronado

Fairmont Scottsdale

Princess

Total

Total revenues (100%)

$

33,115

$

23,634

$

56,749

$

29,888

$

20,546

$

50,434

Property EBITDA (100%)

$

8,668

$

4,111

$

12,779

$

7,201

$

3,034

$

10,235

Equity in (losses) earnings of unconsolidated affiliates (SHR ownership)

Property EBITDA

$

3,153

$

2,056

$

5,209

$

2,491

$

1,517

$

4,008

Depreciation and amortization

(1,917)

(1,565)

(3,482)

(1,797)

(1,823)

(3,620)

Interest expense

(1,941)

(193)

(2,134)

(2,549)

(189)

(2,738)

Other expenses, net

(14)

(23)

(37)

(7,869)

(111)

(7,980)

Income taxes

85

85

90

90

Equity in (losses) earnings of unconsolidated affiliates

$

(634)

$

275

$

(359)

$

(9,634)

$

(606)

$

(10,240)

EBITDA Contribution:

Equity in (losses) earnings of unconsolidated affiliates

$

(634)

$

275

$

(359)

$

(9,634)

$

(606)

$

(10,240)

Depreciation and amortization

1,917

1,565

3,482

1,797

1,823

3,620

Termination fee

7,820

7,820

Interest expense

1,941

193

2,134

2,549

189

2,738

Income taxes

(85)

(85)

(90)

(90)

EBITDA Contribution

$

3,139

$

2,033

$

5,172

$

2,442

$

1,406

$

3,848

FFO Contribution:

Equity in (losses) earnings of unconsolidated affiliates

$

(634)

$

275

$

(359)

$

(9,634)

$

(606)

$

(10,240)

Depreciation and amortization

1,917

1,565

3,482

1,797

1,823

3,620

Termination fee

7,820

7,820

FFO Contribution

$

1,283

$

1,840

$

3,123

$

(17)

$

1,217

$

1,200

 

Year Ended December 31, 2013

Year Ended December 31, 2012

Hotel del

Coronado

Fairmont

Scottsdale

Princess

Total

Hotel del

Coronado

Fairmont

Scottsdale

Princess

Total

Total revenues (100%)

$

148,482

$

93,133

$

241,615

$

140,220

$

77,281

$

217,501

Property EBITDA (100%)

$

47,155

$

18,883

$

66,038

$

40,722

$

12,777

$

53,499

Equity in earnings (losses) of unconsolidated affiliates (SHR ownership)

Property EBITDA

$

17,152

$

9,442

$

26,594

$

13,989

$

6,389

$

20,378

Depreciation and amortization

(7,564)

(6,570)

(14,134)

(6,895)

(7,145)

(14,040)

Interest expense

(8,325)

(778)

(9,103)

(10,093)

(778)

(10,871)

Other expenses, net

(242)

(58)

(300)

(7,931)

(155)

(8,086)

Income taxes

(191)

(191)

383

383

Equity in earnings (losses) of unconsolidated affiliates

$

830

$

2,036

$

2,866

$

(10,547)

$

(1,689)

$

(12,236)

EBITDA Contribution

Equity in earnings (losses) of unconsolidated affiliates

$

830

$

2,036

$

2,866

$

(10,547)

$

(1,689)

$

(12,236)

Depreciation and amortization

7,564

6,570

14,134

6,895

7,145

14,040

Termination fee

7,820

7,820

Interest expense

8,325

778

9,103

10,093

778

10,871

Income taxes

191

191

(383)

(383)

EBITDA Contribution

$

16,910

$

9,384

$

26,294

$

13,878

$

6,234

$

20,112

FFO Contribution

Equity in earnings (losses) of unconsolidated affiliates

$

830

$

2,036

$

2,866

$

(10,547)

$

(1,689)

$

(12,236)

Depreciation and amortization

7,564

6,570

14,134

6,895

7,145

14,040

Termination fee

7,820

7,820

FFO Contribution

$

8,394

$

8,606

$

17,000

$

4,168

$

5,456

$

9,624

 

Investments in Unconsolidated Affiliates (Continued)

(in thousands)

 

Debt

Interest Rate

Spread over

LIBOR

Loan Amount

Maturity (a)

Hotel del Coronado

CMBS Mortgage and Mezzanine

3.82

%

365 bp

$

475,000

March 2018

Cash and cash equivalents

(7,462)

Net Debt

$

467,538

Fairmont Scottsdale Princess

CMBS Mortgage

0.53

%

36 bp

$

117,000

April 2015

Cash and cash equivalents

(6,841)

Net Debt

$

110,159

(a)

Includes extension options.

Caps

Effective

Date

LIBOR Cap Rate

Notional Amount

Maturity

Hotel del Coronado

CMBS Mortgage and Mezzanine Loan Caps

March 2013

3.00

%

$

475,000

March 2015

Fairmont Scottsdale Princess

CMBS Mortgage Loan Cap

December 2013

4.00

%

$

117,000

April 2015

 

 

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

Leasehold Information

(in thousands)

 

Three Months Ended December 31,

Years Ended December 31,

2013

2012

2013

2012

Marriott Hamburg:

Property EBITDA

$

1,741

$

1,472

$

6,298

$

5,876

Revenue (a)

$

1,385

$

1,273

$

5,161

$

4,778

Lease expense

(1,234)

(1,155)

(4,818)

(4,580)

Less: Deferred gain on sale-leaseback

(53)

(50)

(207)

(200)

Adjusted lease expense

(1,287)

(1,205)

(5,025)

(4,780)

EBITDA contribution from leasehold

$

98

$

68

$

136

$

(2)

 

December 31,

Security Deposit (b):

2013

2012

Marriott Hamburg

$

2,611

$

2,507

(a)

For the three months and years ended December 31, 2013 and 2012, Revenue for the Marriott Hamburg hotel represents lease revenue.

(b)

The security deposit is recorded in prepaid expenses and 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 income (or 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; (iii) depreciation and amortization; and (iv) preferred stock dividends. 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. We believe this treatment of noncontrolling interests provides 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 certain other charges that are highly variable from year to year. 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, with the exception of impairment of depreciable real estate. NAREIT 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, impairment of depreciable real estate, real estate-related depreciation and amortization, and 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 certain other charges that are highly variable from year to year. 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, excluding shares related to the JW Marriott Essex House Hotel put option. Dilutive securities may include shares granted under share-based compensation plans and operating partnership units. 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 income (or 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 income (or 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 income (or loss) attributable to SHR common shareholders.

 

 

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

Reconciliation of Net Income (Loss) Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA

(in thousands)

 

Three Months Ended December 31,

Years Ended December 31,

2013

2012

2013

2012

Net income (loss) attributable to SHR common shareholders

$

3,223

$

(36,401)

$

(13,191)

$

(79,472)

Depreciation and amortization—continuing operations

24,507

26,055

101,943

99,458

Depreciation and amortization—discontinued operations

1,052

993

4,075

4,006

Interest expense—continuing operations

20,405

16,862

84,276

75,489

Income taxes—continuing operations

153

257

557

800

Income taxes—discontinued operations

172

539

889

211

Noncontrolling interests

60

(58)

38

(184)

Adjustments from consolidated affiliates

(3,589)

(4,217)

(14,604)

(8,599)

Adjustments from unconsolidated affiliates

5,553

6,956

23,489

27,562

Preferred shareholder dividends

6,041

6,041

24,166

24,166

EBITDA

57,577

17,027

211,638

143,437

Realized portion of deferred gain on sale-leaseback

(53)

(50)

(207)

(200)

Loss on sale of assets

430

1,185

Loss on sale of assets—adjustments from consolidated affiliates

(85)

(455)

Impairment losses and other charges—continuing operations

18,406

728

18,406

Impairment losses and other charges—discontinued operations

437

437

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

(8)

(15)

(44)

1,258

Foreign currency exchange loss (gain)—discontinued operations (a)

142

(79)

1

352

Activist shareholder costs

342

342

Adjustment for Value Creation Plan

(1,352)

1,407

Severance charges

2,485

2,485

Management agreement termination fee (b)

7,820

7,820

Comparable EBITDA

$

58,345

$

44,679

$

213,188

$

175,402

 

(a)

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

(b)

Our share of the Hotel del Coronado management agreement termination fee included in both equity in (losses) earnings of unconsolidated affiliates and net (income) loss attributable to the noncontrolling interest in consolidated affiliates.

 

 

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

Reconciliation of Net Income (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 December 31,

Years Ended December 31,

2013

2012

2013

2012

Net income (loss) attributable to SHR common shareholders

$

3,223

$

(36,401)

$

(13,191)

$

(79,472)

Depreciation and amortization—continuing operations

24,507

26,055

101,943

99,458

Depreciation and amortization—discontinued operations

1,052

993

4,075

4,006

Corporate depreciation

(125)

(190)

(508)

(979)

Loss on sale of assets

430

1,185

Realized portion of deferred gain on sale-leaseback

(53)

(50)

(207)

(200)

Noncontrolling interests adjustments

(123)

(127)

(400)

(501)

Adjustments from consolidated affiliates

(1,813)

(1,906)

(7,378)

(4,091)

Adjustments from unconsolidated affiliates

3,482

3,923

14,135

15,258

FFO

30,580

(7,703)

99,654

33,479

Redeemable noncontrolling interests

183

69

438

317

FFO—Fully Diluted

30,763

(7,634)

100,092

33,796

Impairment losses and other charges—continuing operations

18,406

728

18,406

Impairment losses and other charges—discontinued operations

437

437

Non-cash mark to market of interest rate swaps

(2,496)

(7,833)

(11,617)

(12,238)

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

(8)

(15)

(44)

1,258

Foreign currency exchange loss (gain)—discontinued operations (a)

142

(79)

1

352

Activist shareholder costs

342

342

Adjustment for Value Creation Plan

(1,352)

1,407

Severance charges

2,485

2,485

Management agreement termination fee (b)

7,820

7,820

Comparable FFO

$

28,743

$

12,235

$

89,502

$

53,723

Comparable FFO per fully diluted share

$

0.14

$

0.06

$

0.43

$

0.26

Weighted average diluted shares (c)

209,800

209,307

209,328

203,605

 

(a)

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

(b)

Our share of the Hotel del Coronado management agreement termination fee included in both equity in (losses) earnings of unconsolidated affiliates and net (income) loss attributable to the noncontrolling interests in consolidated affiliates.

(c)

Excludes shares related to the JW Marriott Essex House Hotel put option.

 

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

Debt Summary

(dollars in thousands)

 

Debt

Interest Rate

Spread (a)

Loan Amount

Maturity (b)

Marriott London Grosvenor Square (c)

4.28

%

375 bp (c)

$

115,958

October 2014

North Beach Venture

5.00

%

Fixed

1,469

January 2015

Bank credit facility

3.17

%

300 bp

110,000

June 2015

Four Seasons Washington, D.C.

3.32

%

315 bp

130,000

July 2016

Westin St. Francis

6.09

%

Fixed

209,588

June 2017

Fairmont Chicago

6.09

%

Fixed

93,124

June 2017

JW Marriott Essex House Hotel

4.75

%

400 bp

185,826

September 2017

Hyatt Regency La Jolla (d)

4.50% / 10.00

%

400 bp / Fixed

89,312

December 2017

InterContinental Miami

3.67

%

350 bp

85,000

July 2018

Loews Santa Monica Beach Hotel

4.02

%

385 bp

109,000

July 2018

InterContinental Chicago

5.61

%

Fixed

144,419

August 2021

$

1,273,696

 

(a)

Spread over LIBOR (0.17% at December 31, 2013). Interest on the JW Marriott Essex House Hotel loan is subject to a 0.75% LIBOR floor.  Interest on the Hyatt Regency La Jolla loan is subject to a 0.50% LIBOR floor.

(b)

Includes extension options.

(c)

Principal balance of £70,040,000 at December 31, 2013. On August 7, 2013, the Company entered into an amendment to the mortgage loan. The amendment extended the maturity of the loan to October 2014 and waived the July 2013 and subsequent principal payments through the extended term. Pursuant to the amendment, the spread over GBP LIBOR increases in steps during the extension period from GBP LIBOR plus 2.10% in August 2013 to GBP LIBOR plus 4.25% in April 2014. The spread in the table is the spread over three-month GBP LIBOR (0.53% at December 31, 2013).

(d)

Interest on $72,000,000 is payable at LIBOR plus 4.00%, subject to a 0.50% LIBOR floor, and interest on $17,312,000 is payable at a fixed rate of 10.00%.

 

Interest Rate Swaps

Swap Effective Date

Fixed Pay Rate

Against LIBOR

Notional

Amount

Maturity

February 2010

4.90

%

$

100,000

September 2014

February 2010

4.96

%

100,000

December 2014

December 2010

5.23

%

100,000

December 2015

February 2011

5.27

%

100,000

February 2016

5.09

%

$

400,000

 

Future scheduled debt principal payments (including extension options) are as follows:

Years ending December 31,

Amount

2014

$

120,213

2015

117,498

2016

139,783

2017

577,043

2018

185,015

Thereafter

134,144

$

1,273,696

Percent of fixed rate debt including swaps

68.0

%

Weighted average interest rate including swaps (e)

6.21

%

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

3.92

 

(e)

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

SOURCE Strategic Hotels & Resorts, Inc.



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