Strategic Hotels & Resorts Reports Second Quarter 2013 Financial Results Improvements Seen in All Key Metrics; Company Raises Lower-End of Full Year Guidance Range

CHICAGO, Aug. 7, 2013 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the second quarter ended June 30, 2013.  

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

Second Quarter

Earnings Metrics

2013

2012

% Change

Net income/(loss) attributable to common shareholders

$3.3

$(3.0)

N/A

Net income/(loss) per diluted share

$0.01

$(0.01)

N/A

Comparable funds from operations (Comparable FFO) (a)

$28.7

$21.4

33.7%

Comparable FFO per diluted share (a)

$0.14

$0.11

27.3%

Comparable EBITDA (a)

$60.3

$50.9

18.5%





Total North American Portfolio Operating Metrics (b)




Average Daily Rate (ADR)

$285.94

$272.34

5.0%

Occupancy

78.4%

75.5%

2.9 pts

Revenue per Available Room (RevPAR)

$224.29

$205.58

9.1%

Total RevPAR

$418.45

$380.55

10.0%

EBITDA Margins

26.1%

24.5%

160 bps





North American Same Store Operating Metrics (c)




ADR

$267.68

$253.70

5.5%

Occupancy

79.7%

76.5%

3.2 pts

RevPAR

$213.32

$194.11

9.9%

Total RevPAR

$395.52

$360.28

9.8%

EBITDA Margins

26.1%

25.2%

90 bps

(a)

Please refer to the tables provided later in this press release for a reconciliation of net income/(loss) 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).

"For the thirteenth consecutive quarter we achieved strong RevPAR and Total RevPAR growth.  Furthermore, we saw meaningful increases in group bookings and ancillary group spend along with strong margin improvement as we steadily increased rates and maintained our stringent cost controls," commented Rip Gellein, Chairman and Chief Executive Officer of Strategic Hotels & Resorts, Inc.   "Looking forward, we are encouraged by the positive trends we see, including steady group pace heading into 2014.  As such, we have raised the lower end of our guidance range to reflect our ongoing confidence in our strategy, strength of our superior portfolio, depth of our management and hotel teams, and expected future performance," concluded Gellein.

Second Quarter Highlights

  • Total consolidated revenues were $244.2 million in the second quarter of 2013, a 21.2 percent increase over the prior year period.
  • Net income attributable to common shareholders was $3.3 million, or $0.01 per diluted share, in the second quarter of 2013, compared with net loss attributable to common shareholders of $3.0 million, or $0.01 per diluted share, in the second quarter of 2012.
  • Comparable FFO was $0.14 per diluted share in the second quarter of 2013, compared with $0.11 per diluted share in the prior year period, a 27.3 percent increase over the prior year period.    
  • Comparable EBITDA was $60.3 million in the second quarter of 2013, compared with $50.9 million in the prior year period, an 18.5 percent increase between periods.   
  • Total North American portfolio RevPAR increased 9.1 percent in the second quarter of 2013, driven by a 5.0 percent increase in ADR and a 2.9 percentage point increase in occupancy compared to the second quarter of 2012.  Total RevPAR increased 10.0 percent between periods with non-rooms revenue increasing by 11.4 percent between periods.
  • Group occupied room nights in the Total North American portfolio increased 13.5 percent in the second quarter of 2013, which more than offset a 2.2 percent decline in transient occupied room nights compared to the second quarter of 2012.  Transient ADR increased 5.7 percent compared to the second quarter of 2012 and group ADR increased 4.6 percent.
  • North American same store RevPAR increased 9.9 percent in the second quarter of 2013, driven by a 5.5 percent increase in ADR and a 3.2 percent point increase in occupancy.  Total RevPAR increased 9.8 percent with non-rooms revenue increasing by 10.2 percent between periods. 
  • European RevPAR declined 0.1 percent (1.0 percent increase in constant dollars) in the second quarter of 2013, driven by a 0.2 percentage point decrease in occupancy, partially offset by a 0.2 percent increase in ADR (1.2 percent increase in constant dollars) between periods. European Total RevPAR increased 0.8 percent in the second quarter of 2013 over the prior year period (1.9 percent in constant dollars).  
  • Total North American portfolio EBITDA margins expanded 160 basis points in the second quarter of 2013, compared to the second quarter of 2012.  North American same store EBITDA margins expanded 90 basis points.  Adjusted for one-time credits recorded in the second quarter of 2012, Total North American portfolio EBITDA margins expanded 220 basis points over the prior year period.
  • Group room nights currently booked for 2013 are 2.6 percent higher compared to room nights booked for 2012 at the same time last year, with rates 3.9 percent higher, resulting in a 6.7 percent RevPAR increase.

The company reported financial results for the six month period ended June 30, 2013 as follows:

  • Total consolidated revenues were $445.6 million for the six month period ended June 30, 2013, a 17.4 percent increase over the prior year period.
  • Net loss attributable to common shareholders was $20.2 million, or $0.11 per diluted share, compared with net loss attributable to common shareholders of $34.5 million, or $0.18 per diluted share, for the six month period ended June 30, 2012.
  • Comparable FFO was $0.15 per diluted share compared with $0.12 per diluted share in the six month period ended June 30, 2012.    
  • Comparable EBITDA was $94.8 million compared with $84.2 million for the six month period ended June 30, 2012, a 12.6 percent increase between periods.   

Preferred Dividends

On May 28, 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 July 1, 2013 to shareholders of record as of June 14, 2013, a quarterly dividend of $0.51563 per share of 8.25 percent Series B Cumulative Redeemable Preferred Stock paid on July 1, 2013 to shareholders of record as of June 14, 2013 and a quarterly dividend of $0.51563 per share of 8.25 percent Series C Cumulative Redeemable Preferred Stock paid on July 1, 2013 to shareholders of record as of June 14, 2013.

Subsequent Event

On August 7, 2013, the Company closed on a one-year extension of the loan secured by the Marriott London Grosvenor Square hotel.  Under the terms of the agreement, the loan spread over GBP LIBOR increases in steps throughout the extension period from 210 basis points in August 2013 to 425 basis points in April 2014.  The loan will mature in October 2014, has no principal amortization requirement and is pre-payable with no penalty.    

Future Transaction Activity

The Company continues to selectively consider strategic acquisition and disposition opportunities.  After careful consideration, the Company has decided to engage Jones Lang LaSalle to advise the Company on the marketing and sale of its Marriott Grosvenor Square hotel in London.  If a sale is achieved that meets the Company's criteria, it will effectively conclude its exit from the European market.  Potential sale proceeds would be used to further de-lever the Company's balance sheet.

2013 Guidance

Based on the results of the first six months of 2013 and current forecasts for the remainder of the year, management is raising the lower-end of its guidance ranges for full year 2013 RevPAR growth, Total RevPAR growth, Comparable EBITDA, and Comparable FFO per fully diluted share. 

For the year ending December 31, 2013, the Company anticipates that Comparable EBITDA will be in the range of $200.0 million to $210.0 million, and Comparable FFO in the range of $0.35 and $0.40 per fully diluted share.  Management is also raising the lower-end of its guidance for North American same store RevPAR growth in the range between 6.0 percent to 7.0 percent, and Total RevPAR growth in the range between 5.0 percent and 6.0 percent. 

Portfolio Definitions

Total North American portfolio hotel comparisons for the second quarter 2013 are derived from the Company's hotel portfolio at June 30, 2013, consisting of all 16 properties located in North America, including unconsolidated joint ventures.   

North American same store hotel comparisons for the second of quarter 2013 are derived from the Company's hotel portfolio at June 30, 2013, 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 include 13 properties and exclude the JW Marriott Essex House Hotel, which was acquired on September 14, 2012, and the unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels.

European hotel comparisons for the second quarter of 2013 are derived from the Company's European owned and leased hotel properties at June 30, 2013, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg hotels. 

Earnings Call

The Company will conduct its second quarter 2013 conference call for investors and other interested parties on Thursday, August 8, 2013 at 10:00 a.m. Eastern Time (ET).  Interested individuals are invited to access the call by dialing 877.415.3184 (toll international: 857.244.7327) with passcode 52893429. To participate on the webcast, log on to the company's website at http://www.strategichotels.com or http://www.media-server.com/m/acs/6a117fef4c5118d6d472b4e1c97b2fff 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 12:00 p.m. ET on August 8, 2013 through 11:59 p.m. ET on August 15, 2013. To access the replay, dial  888.286.8010 (toll international: 617.801.6888) with passcode 56801187.  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 second 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 18 properties with an aggregate of 8,272 rooms and 840,000 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:  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 or refinance 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 2013 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

$(43.1)


$(33.2)

Depreciation and Amortization

118.3


118.3

Interest Expense

90.8


90.8

Income Taxes

1.6


1.6

Non-controlling Interests

(0.2)


(0.1)

Adjustments from Consolidated Affiliates

(15.3)


(15.3)

Adjustments from Unconsolidated Affiliates

24.4


24.4

Preferred Shareholder Dividends

24.2


24.2

Realized Portion of Deferred Gain on Sale Leasebacks

(0.2)


(0.2)

Gain on Sale of Asset

(0.3)


(0.3)

Other Adjustments

(0.2)


(0.2)

Comparable EBITDA

$200.0


$210.0














Low Range


High Range

Net Loss Attributable to Common Shareholders

$(43.1)


$(33.2)

Depreciation and Amortization

117.5


117.5

Realized Portion of Deferred Gain on Sale Leasebacks

(0.2)


(0.2)

Gain on Sale of Asset

(0.3)


(0.3)

Non-controlling Interests

(0.1)


(0.0)

Adjustments from Consolidated Affiliates

(7.7)


(7.7)

Adjustments from Unconsolidated Affiliates

14.7


14.7

Other Adjustments

(6.3)


(6.3)

Comparable FFO

74.5


84.5

Comparable FFO per Diluted Share

$0.35


$0.40





 


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


Consolidated Statements of Operations

(in thousands, except per share data)




Three Months Ended June 30,


Six Months Ended June 30,



2013


2012


2013


2012

Revenues:









Rooms


$

138,509


$

110,132


$

248,922


$

204,642

Food and beverage


84,521


71,931


151,635


134,410

Other hotel operating revenue


19,975


18,173


42,715


38,298

Lease and other revenue


1,160


1,165


2,360


2,330

Total revenues

244,165


201,401


445,632


379,680

Operating Costs and Expenses:









Rooms


38,198


29,983


72,186


58,559

Food and beverage


60,038


48,317


114,404


95,710

Other departmental expenses


57,941


51,084


114,426


100,649

Management fees


7,418


6,214


13,743


11,830

Other hotel expenses


16,325


12,763


33,055


26,372

Lease expense


1,206


1,143


2,382


2,311

Depreciation and amortization


26,997


25,277


54,215


50,767

Corporate expenses


7,409


2,866


13,393


16,676

Total operating costs and expenses

215,532


177,647


417,804


362,874

      Operating income

28,633


23,754


27,828


16,806

Interest expense


(21,279)


(19,080)


(42,765)


(38,685)

Interest income


21


50


33


80

Equity in earnings (losses) of unconsolidated affiliates


1,456


(717)


2,801


203

Foreign currency exchange (loss) gain


(54)


(168)


186


(173)

Other income, net


745


477


877


929

Income (loss) before income taxes and discontinued operations


9,522


4,316


(11,040)


(20,840)

Income tax expense


(767)


(350)


(1,551)


(815)

Income (loss) from continuing operations


8,755


3,966


(12,591)


(21,655)

Loss from discontinued operations, net of tax



(535)



(535)

Net Income (Loss)


8,755


3,431


(12,591)


(22,190)

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


(36)


(8)


51


109

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


597


(379)


4,449


(350)

Net income (loss) attributable to SHR


9,316


3,044


(8,091)


(22,431)

Preferred shareholder dividends


(6,042)


(6,042)


(12,083)


(12,083)

Net income (loss) attributable to SHR common shareholders


$

3,274


$

(2,998)


$

(20,174)


$

(34,514)

Basic Income (Loss) Per Share:









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


$

0.02


$

(0.01)


$

(0.10)


$

(0.18)

Loss from discontinued operations attributable to SHR common shareholders





Net income (loss) attributable to SHR common shareholders


$

0.02


$

(0.01)


$

(0.10)


$

(0.18)

Weighted average shares of common stock outstanding


206,061


202,021


205,849


194,979

Diluted Income (Loss) Per Share:









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


$

0.01


$

(0.01)


$

(0.11)


$

(0.18)

Loss from discontinued operations attributable to SHR common shareholders





Net income (loss) attributable to SHR common shareholders


$

0.01


$

(0.01)


$

(0.11)


$

(0.18)

Weighted average shares of common stock outstanding


219,227


202,021


217,006


194,979

 

 


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


Consolidated Balance Sheets

(in thousands, except share data)





June 30, 2013


December 31, 2012

Assets





Investment in hotel properties, net


$

1,920,434


$

1,970,560

Goodwill


40,359


40,359

Intangible assets, net of accumulated amortization of $11,406 and $10,812


27,881


30,631

Investment in unconsolidated affiliates


112,149


112,488

Cash and cash equivalents


74,700


80,074

Restricted cash and cash equivalents


70,177


58,579

Accounts receivable, net of allowance for doubtful accounts of $1,676 and $1,602


62,919


45,620

Deferred financing costs, net of accumulated amortization of $9,468 and $7,049


9,157


11,695

Deferred tax assets


1,824


2,203

Prepaid expenses and other assets


57,259


54,208

   Total assets


$

2,376,859


$

2,406,417

Liabilities, Noncontrolling Interests and Equity





Liabilities:





   Mortgages and other debt payable


$

1,161,705


$

1,176,297

   Bank credit facility


157,000


146,000

   Accounts payable and accrued expenses


213,034


228,397

   Distributions payable


6,042


   Deferred tax liabilities


47,598


47,275

         Total liabilities


1,585,379


1,597,969

Commitments and contingencies





Noncontrolling interests in SHR's operating partnership


7,558


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 $105,907 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 $92,249 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 $97,667 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; 205,527,049 and 204,308,710 shares of common stock issued and outstanding)


2,055


2,043

   Additional paid-in capital


1,714,977


1,730,535

   Accumulated deficit


(1,254,018)


(1,245,927)

   Accumulated other comprehensive loss


(47,680)


(58,871)

         Total SHR's shareholders' equity


694,882


707,328

Noncontrolling interests in consolidated affiliates


89,040


95,657

   Total equity


783,922


802,985

         Total liabilities, noncontrolling interests and equity


$

2,376,859


$

2,406,417

 

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


Financial Highlights



Supplemental Financial Data

(in thousands, except per share information)





June 30, 2013



Pro Rata Share


Consolidated

Capitalization





Shares of common stock outstanding


205,527


205,527

Operating partnership units outstanding


853


853

Restricted stock units outstanding


1,600


1,600

Combined shares and units outstanding


207,980


207,980

Common stock price at end of period


$

8.86


$

8.86

Common equity capitalization


$

1,842,703


$

1,842,703

Preferred equity capitalization (at $25.00 face value)


289,102


289,102

Consolidated debt


1,318,705


1,318,705

Pro rata share of unconsolidated debt


239,400


Pro rata share of consolidated debt


(134,553)


Cash and cash equivalents


(74,700)


(74,700)

Total enterprise value


$

3,480,657


$

3,375,810

Net Debt / Total Enterprise Value


38.8%


36.8%

Preferred Equity / Total Enterprise Value


8.3%


8.6%

Common Equity / Total Enterprise Value


52.9%


54.6%

 

 

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 hotel and the Fairmont Scottsdale Princess hotel, respectively. We account for these investments using the equity method of accounting.




Three Months Ended June 30, 2013


Three Months Ended June 30, 2012



Hotel del

Coronado


Fairmont Scottsdale

Princess


Total


Hotel del

Coronado


Fairmont Scottsdale

Princess


Total

Total revenues (100%)


$

37,758


$

24,204


$

61,962


$

34,511


$

19,145


$

53,656

Property EBITDA (100%)


$

11,946


$

5,504


$

17,450


$

10,743


$

3,251


$

13,994

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















Property EBITDA


$

4,345


$

2,752


$

7,097


$

3,685


$

1,626


$

5,311

Depreciation and amortization


(1,886)


(1,632)


(3,518)


(1,698)


(1,776)


(3,474)

Interest expense


(1,944)


(196)


(2,140)


(2,504)


(195)


(2,699)

Other (expenses) income, net


(7)


(11)


(18)


(20)


19


(1)

Income taxes


(31)



(31)


100



100

Equity in earnings (losses) of unconsolidated affiliates


$

477


$

913


$

1,390


$

(437)


$

(326)


$

(763)

EBITDA Contribution:













Equity in earnings (losses) of unconsolidated affiliates


$

477


$

913


$

1,390


$

(437)


$

(326)


$

(763)

Depreciation and amortization


1,886


1,632


3,518


1,698


1,776


3,474

Interest expense


1,944


196


2,140


2,504


195


2,699

Income taxes


31



31


(100)



(100)

EBITDA Contribution


$

4,338


$

2,741


$

7,079


$

3,665


$

1,645


$

5,310

FFO Contribution:













Equity in earnings (losses) of unconsolidated affiliates


$

477


$

913


$

1,390


$

(437)


$

(326)


$

(763)

Depreciation and amortization


1,886


1,632


3,518


1,698


1,776


3,474

FFO Contribution


$

2,363


$

2,545


$

4,908


$

1,261


$

1,450


$

2,711

 

 



Six Months Ended June 30, 2013


Six Months Ended June 30, 2012



Hotel del

Coronado



Fairmont

Scottsdale

Princess


Total


Hotel del

Coronado


Fairmont

Scottsdale

Princess


Total

Total revenues (100%)


$

68,087



$

55,160


$

123,247


$

65,354


$

46,128


$

111,482

Property EBITDA (100%)


$

19,820



$

15,073


$

34,893


$

18,961


$

11,906


$

30,867

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















Property EBITDA


$

7,209



$

7,537


$

14,746


$

6,504


$

5,953


$

12,457

Depreciation and amortization


(3,751)



(3,472)


(7,223)


(3,387)


(3,547)


(6,934)

Interest expense


(4,434)



(390)


(4,824)


(5,022)


(398)


(5,420)

Other expenses, net


(23)



(19)


(42)


(43)


(39)


(82)

Income taxes


63




63


367



367

Equity in (losses) earnings of unconsolidated affiliates


$

(936)



$

3,656


$

2,720


$

(1,581)


$

1,969


$

388

EBITDA Contribution














Equity in (losses) earnings of unconsolidated affiliates


$

(936)



$

3,656


$

2,720


$

(1,581)


$

1,969


$

388

Depreciation and amortization


3,751



3,472


7,223


3,387


3,547


6,934

Interest expense


4,434



390


4,824


5,022


398


5,420

Income taxes


(63)




(63)


(367)



(367)

EBITDA Contribution


$

7,186



$

7,518


$

14,704


$

6,461


$

5,914


$

12,375

FFO Contribution














Equity in (losses) earnings of unconsolidated affiliates


$

(936)



$

3,656


$

2,720


$

(1,581)


$

1,969


$

388

Depreciation and amortization


3,751



3,472


7,223


3,387


3,547


6,934

FFO Contribution


$

2,815



$

7,128


$

9,943


$

1,806


$

5,516


$

7,322

 

 



Investments in Unconsolidated Affiliates (Continued)

(in thousands)


Debt


Interest Rate


Spread over

LIBOR


Loan Amount


Maturity (a)

Hotel del Coronado









CMBS Mortgage and Mezzanine


3.84%


365 bp


$

475,000


March 2018

Cash and cash equivalents






(14,273)



Net Debt






$

460,727



Fairmont Scottsdale Princess









CMBS Mortgage


0.55%


36 bp


$

133,000


April 2015

Cash and cash equivalents






(2,370)



Net Debt






$

130,630




       (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


June 2011


4.00%


$

133,000


December 2013

 

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


Leasehold Information

(in thousands)





Three Months Ended June 30,



Six Months Ended June 30,



2013


2012



2013


2012

Marriott Hamburg:










Property EBITDA


$

1,505


$

1,496



$

2,901


$

2,896

Revenue (a)


$

1,160


$

1,165



$

2,360


$

2,330











Lease expense


(1,206)


(1,143)



(2,382)


(2,311)

Less: Deferred gain on sale-leaseback


(51)


(50)



(102)


(101)

Adjusted lease expense


(1,257)


(1,193)



(2,484)


(2,412)











EBITDA contribution from leasehold


$

(97)


$

(28)



$

(124)


$

(82)

 

Security Deposit (b):


June 30,
2013


December 31,
2012

Marriott Hamburg


$

2,472


$

2,507








 

(a)

For the three and six months ended June 30, 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 June 30,


Six Months Ended June 30,



2013


2012


2013


2012

Net income (loss) attributable to SHR common shareholders


$

3,274


$

(2,998)


$

(20,174)


$

(34,514)

Depreciation and amortization


26,997


25,277


54,215


50,767

Interest expense


21,279


19,080


42,765


38,685

Income taxes


767


350


1,551


815

Noncontrolling interests


36


8


(51)


(109)

Adjustments from consolidated affiliates


(3,549)


(1,246)


(7,103)


(2,503)

Adjustments from unconsolidated affiliates


5,717


6,888


12,033


13,570

Preferred shareholder dividends


6,042


6,042


12,083


12,083

EBITDA


60,563


53,401


95,319


78,794

Realized portion of deferred gain on sale-leaseback


(51)


(50)


(102)


(101)

Gain on sale of assets—continuing operations


(273)



(273)


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


54


168


(186)


173

Foreign currency exchange loss—discontinued operations (a)



535



535

Adjustment for Value Creation Plan



(3,167)



4,772

Comparable EBITDA


$

60,293


$

50,887


$

94,758


$

84,173

 


(a)

Foreign 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 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 June 30,


Six Months Ended June 30,



2013


2012


2013


2012

Net income (loss) attributable to SHR common shareholders


$

3,274


$

(2,998)


$

(20,174)


$

(34,514)

Depreciation and amortization


26,997


25,277


54,215


50,767

Corporate depreciation


(127)


(264)


(258)


(529)

Gain on sale of assets—continuing operations


(273)



(273)


Realized portion of deferred gain on sale-leaseback


(51)


(50)


(102)


(101)

Noncontrolling interests adjustments


(125)


(120)


(252)


(253)

Adjustments from consolidated affiliates


(1,655)


(659)


(3,296)


(1,326)

Adjustments from unconsolidated affiliates


3,518


3,779


7,224


7,543

FFO


31,558


24,965


37,084


21,587

Redeemable noncontrolling interests


162


128


202


144

FFO—Fully Diluted


31,720


25,093


37,286


21,731

Non-cash mark to market of interest rate swaps


(3,100)


(1,187)


(6,144)


(2,717)

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


54


168


(186)


173

Foreign currency exchange loss—discontinued operations (a)



535



535

Adjustment for Value Creation Plan



(3,167)



4,772

Comparable FFO


$

28,674


$

21,442


$

30,956


$

24,494

Comparable FFO per fully diluted share


$

0.14


$

0.11


$

0.15


$

0.12

Weighted average diluted shares (b)


208,923


204,099


208,760


197,133

 


(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)

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)

North Beach Venture


5.00%


Fixed


$

1,476


January 2014

Marriott London Grosvenor Square (c)


2.61%


210 bp (c)


106,538


October 2014

Bank credit facility


3.19%


300 bp


157,000


June 2015

Four Seasons Washington, D.C.


3.34%


315 bp


130,000


July 2016

Westin St. Francis


6.09%


Fixed


211,144


June 2017

Fairmont Chicago


6.09%


Fixed


93,815


June 2017

JW Marriott Essex House Hotel


4.75%


400 bp


189,321


September 2017

Hyatt Regency La Jolla (d)


4.50% / 10.00%


400 bp / Fixed


89,411


December 2017

InterContinental Miami


3.69%


350 bp


85,000


July 2018

Loews Santa Monica Beach Hotel


4.04%


385 bp


110,000


July 2018

InterContinental Chicago


5.61%


Fixed


145,000


August 2021







$

1,318,705



(a)

Spread over LIBOR (0.19% at June 30, 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 June 30, 2013. Spread over three-month GBP LIBOR (0.51% at June 30, 2013). This loan was amended on August 7, 2013 and the new maturity date is reflected in the table.  The loan spread over GBP LIBOR increases in steps throughout the extension period from GBP LIBOR plus 2.10% in August 2013 to GBP LIBOR plus 4.25% in April 2014. The loan has no principal amortization requirement and is pre-payable with no penalty.

(d)

Interest on $72,000,000 is payable at LIBOR plus 4.00%, subject to a 0.50% LIBOR floor, and interest on $17,411,000 is payable at a fixed rate of 10.00%.

 

Domestic and European 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



 

Swap Effective Date


Fixed Pay Rate

Against GBP LIBOR


Notional

Amount


Maturity

October 2007


5.72%


£

70,040


October 2013

 

Future scheduled debt principal payments (including extension options and the loan amendment at the Marriott London Grosvenor Square hotel) are as follows:




Years ending December 31,


Amount

2013


$

6,472

2014


121,886

2015


173,246

2016


150,661

2017


548,248

Thereafter


318,192



$

1,318,705




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


74.0%

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


6.49%

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


3.71

(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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