Strategic Hotels & Resorts, Inc. Reports Third Quarter 2011 Financial Results
U.S. Same Store RevPAR increases 11.7 percent driven by 9.7 percent ADR growth
2012 group pace currently 6.3 percent higher than same-time last year
CHICAGO, Nov. 2, 2011 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the third quarter ended September 30, 2011.
Third Quarter Highlights
- Net loss attributable to common shareholders was $11.9 million, or $0.06 per diluted share, in the third quarter of 2011, compared with a net loss attributable to common shareholders of $39.4 million, or $0.26 per diluted share, in the third quarter of 2010.
- Comparable funds from operations (Comparable FFO) was $0.06 per diluted share compared with $0.06 per diluted share in the prior year period.
- Comparable EBITDA was $43.6 million compared with $37.4 million in the prior year period, a 16.6 percent increase between periods.
- United States same store revenue per available room (RevPAR) increased 11.7 percent, driven by a 9.7 percent increase in average daily rate (ADR) and a 1.4 percentage point increase in occupancy compared to the third quarter of 2010. Total revenue per available room (Total RevPAR) increased 8.8 percent between periods.
- North American same store RevPAR increased 11.1 percent, driven by a 9.4 percent increase in ADR and a 1.3 percentage point increase in occupancy compared to the third quarter of 2010. Total RevPAR increased 7.7 percent between periods.
- Total North American RevPAR, which includes results from the recently acquired Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels, increased by 10.8 percent, driven by an 8.9 percent increase in ADR and a 1.3 percentage point increase in occupancy compared to the third quarter of 2010. Total RevPAR increased 7.1 percent between periods.
- United States same store EBITDA margins expanded 200 basis points compared to the third quarter of 2010. North American same store EBITDA margins expanded 170 basis points and Total North American EBITDA margins expanded 160 basis points between periods.
- European RevPAR increased 5.4 percent (0.7 percent decrease in constant dollars), driven by a 5.1 percent increase in ADR (1.0 percent decrease in constant dollars) and a 0.3 percentage point increase in occupancy compared to the third quarter of 2010. European Total RevPAR increased 5.8 percent (0.1 percent decrease in constant dollars) between periods.
"Once again, our overall performance was very strong in the quarter," said Laurence Geller, Chief Executive Officer of Strategic Hotels & Resorts, Inc. "As we look ahead, we continue to see favorable group booking trends, which is one of our best forward-looking indicators. Confirmed group nights for 2012 in our U.S. portfolio have increased over six percent compared to the same time last year and group production has remained very healthy since August. We remain optimistic about increasing demand in our portfolio since our core customer base continues to spend and book group, leisure and corporate travel, despite the lingering global and domestic challenges and uncertainty."
The company reported financial results for the nine month period ended September 30, 2011 as follows:
- Net loss attributable to common shareholders was $7.8 million, or $0.04 per diluted share, compared with a net loss attributable to common shareholders of $127.1 million, or $1.12 per diluted share, for the nine month period ended September 30, 2010.
- Comparable FFO was $0.09 per diluted share compared with $0.02 per diluted share in the nine month period ended September 30, 2010.
- Comparable EBITDA was $114.8 million compared with $97.6 million for the nine month period ended September 30, 2010, an increase of 17.7 percent.
Third Quarter 2011 Transaction Review
- On July 6th, the Company closed an $85.0 million limited recourse loan secured by the InterContinental Miami hotel. The loan bears interest at a floating rate of LIBOR plus 350 basis points and has a five-year initial term with two, one-year extension options, upon satisfaction of certain financial and other conditions.
- On July 14th, the Company closed a $110.0 million limited recourse loan secured by the Loews Santa Monica Beach hotel. The loan bears interest at a floating rate of LIBOR plus 385 basis points and has a four-year initial term with three, one-year extension options, upon satisfaction of certain financial and other conditions.
- On July 20th, the Company closed a $130.0 million limited recourse loan secured by the Four Seasons Washington, D.C. hotel. The loan bears interest at a floating rate of LIBOR plus 315 basis points and has a three-year initial term with two, one-year extension options, upon satisfaction of certain financial and other conditions.
- On July 28th, the Company closed a $145.0 million limited recourse loan secured by the InterContinental Chicago hotel. The loan bears interest at a fixed rate of 5.61 percent and has a ten-year term.
2011 Guidance
Based on the results of the first three quarters and current forecasts for the fourth quarter, management is narrowing its full year guidance range for 2011. For the year ending December 31, 2011, the Company anticipates that Comparable EBITDA will be in the range of $150.0 million to $156.0 million and Comparable FFO in the range of $0.10 and $0.13 per diluted share. Management is also raising its guidance for North American same store RevPAR growth to be in the range between 9.0 percent and 10.0 percent, and maintaining its guidance for Total RevPAR growth to be in the range between 8.0 percent and 9.0 percent.
Portfolio Definitions
United States same store hotel comparisons for the third quarter of 2011 are derived from the Company's hotel portfolio at September 30, 2011, consisting of properties located in the United States 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 contain 10 properties and exclude the Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels, which were acquired on March 11, 2011, and the unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels.
North American same store hotel comparisons for the third quarter of 2011 are derived from the Company's hotel portfolio at September 30, 2011, 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 contain 11 properties, including the Four Seasons Punta Mita Resort and excluding the Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels, which were acquired on March 11, 2011, and the unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels.
Total North American hotel comparisons are derived from the Company's hotel portfolio at September 30, 2011, consisting of properties in which operations are included in the consolidated results of the company, including the Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels.
European hotel comparisons for the third quarter of 2011 are derived from the Company's European owned and leased hotel properties at September 30, 2011, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg.
Earnings Call
The Company will conduct its third quarter 2011 conference call for investors and other interested parties on Thursday, November 3, 2011 at 10:00 a.m. Eastern Time (ET). Interested individuals are invited to listen to the call by telephone at 888.679.8018 (toll international: 617.213.4845) with passcode 88489803. To participate on the web cast, log on to the Company's website at http://www.strategichotels.com or http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=176522&eventID=4203220 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 1:00 p.m. ET on November 3, 2011 through 11:59 p.m. ET on November 10, 2011. To access the replay, dial 888.286.8010 (toll international: 617.801.6888) with passcode 91217547. 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 http://www.strategichotels.com within the third 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 17 properties with an aggregate of 7,762 rooms. 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: ability to obtain, refinance or restructure debt or comply with covenants contained in the Company's debt facilities; demand for hotel rooms in the Company's current and proposed market areas; availability of capital; rising interest rates and operating costs; rising insurance premiums; cash available for capital expenditures; competition; economic conditions generally and in the real estate market specifically, including deterioration of economic conditions and the extent of its effect on business and leisure travel and the lodging industry; ability to dispose of existing properties in a manner consistent with the Company's disposition strategy; risks related to natural disasters; the effect of threats of terrorism, security concerns, and increased security precautions on travel patterns and hotel bookings; the outbreak of hostilities and international political instability; failure to complete and close on transactions in light of due diligence findings or the failure of closing conditions to be satisfied; legislative or regulatory changes, including changes to laws governing the taxation of REITs; changes in generally accepted accounting principles, policies and guidelines applicable to REITs; general volatility of the capital markets; and difficulties in identifying properties to acquire and completing acquisitions.
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 we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
The following tables reconcile projected 2011 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 |
($39.7) |
($33.7) |
||
Depreciation and Amortization |
116.3 |
116.3 |
||
Interest Expense |
88.4 |
88.4 |
||
Income Taxes |
1.8 |
1.8 |
||
Adjustments from Consolidated Affiliates |
(6.6) |
(6.6) |
||
Adjustments from Unconsolidated Affiliates |
21.5 |
21.5 |
||
Preferred Shareholder Dividends |
30.9 |
30.9 |
||
Realized Portion of Deferred Gain on Sale Leasebacks |
(1.4) |
(1.4) |
||
Gain on Sale of Asset |
(103.5) |
(103.5) |
||
Adjustment for Value Creation Plan |
12.0 |
12.0 |
||
Loss on Early Extinguishment of Debt |
1.2 |
1.2 |
||
Loss on Early Termination of Derivative Financial Instruments |
29.2 |
29.2 |
||
Other Adjustments |
(0.1) |
(0.1) |
||
Comparable EBITDA |
$150.0 |
$156.0 |
||
Low Range |
High Range |
|||
Net Loss Attributable to Common Shareholders |
($39.7) |
($33.7) |
||
Depreciation and Amortization |
115.1 |
115.1 |
||
Realized Portion of Deferred Gain on Sale Leasebacks |
(1.4) |
(1.4) |
||
Deferred Tax on Realized Portion of Deferred Gain |
0.4 |
0.4 |
||
Adjustments from Consolidated Affiliates |
(4.3) |
(4.3) |
||
Adjustments from Unconsolidated Affiliates |
9.8 |
9.8 |
||
Gain on Sale of Asset |
(103.5) |
(103.5) |
||
Adjustment for Value Creation Plan |
12.0 |
12.0 |
||
Loss on Early Extinguishment of Debt |
1.2 |
1.2 |
||
Loss on Early Termination of Derivative Financial Instruments |
29.2 |
29.2 |
||
Other Adjustments |
(0.6) |
(0.6) |
||
Comparable FFO |
$18.2 |
$24.2 |
||
Comparable FFO per Diluted Share |
$0.10 |
$0.13 |
||
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) |
||||||||||||
Consolidated Statements of Operations |
||||||||||||
(in thousands, except per share data) |
||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||
September 30, |
September 30, |
|||||||||||
2011 |
2010 |
2011 |
2010 |
|||||||||
Revenues: |
||||||||||||
Rooms |
$ 110,048 |
$ 94,995 |
$ 310,330 |
$ 268,674 |
||||||||
Food and beverage |
58,664 |
54,028 |
195,987 |
172,423 |
||||||||
Other hotel operating revenue |
19,939 |
18,762 |
59,860 |
57,285 |
||||||||
Lease revenue |
1,255 |
1,108 |
3,747 |
3,383 |
||||||||
Total revenues |
189,906 |
168,893 |
569,924 |
501,765 |
||||||||
Operating Costs and Expenses: |
||||||||||||
Rooms |
29,283 |
27,364 |
85,728 |
77,938 |
||||||||
Food and beverage |
45,345 |
40,947 |
142,010 |
124,038 |
||||||||
Other departmental expenses |
51,358 |
49,701 |
155,856 |
145,869 |
||||||||
Management fees |
5,879 |
5,222 |
18,203 |
16,818 |
||||||||
Other hotel expenses |
12,672 |
12,621 |
39,497 |
40,048 |
||||||||
Lease expense |
1,249 |
1,106 |
3,702 |
3,396 |
||||||||
Depreciation and amortization |
25,526 |
32,209 |
86,222 |
98,195 |
||||||||
Corporate expenses |
(2,228) |
8,679 |
24,206 |
22,098 |
||||||||
Total operating costs and expenses |
169,084 |
177,849 |
555,424 |
528,400 |
||||||||
Operating income (loss) |
20,822 |
(8,956) |
14,500 |
(26,635) |
||||||||
Interest expense |
(21,838) |
(22,118) |
(67,148) |
(68,488) |
||||||||
Interest income |
41 |
64 |
124 |
369 |
||||||||
Loss on early extinguishment of debt |
(399) |
(39) |
(1,237) |
(925) |
||||||||
Loss on early termination of derivative financial instruments |
- |
- |
(29,242) |
(18,263) |
||||||||
Equity in (losses) earnings of unconsolidated affiliates |
(1,867) |
3,001 |
(6,266) |
2,900 |
||||||||
Foreign currency exchange (loss) gain |
(209) |
(132) |
77 |
(1,394) |
||||||||
Other income, net |
355 |
1,605 |
4,716 |
2,299 |
||||||||
Loss before income taxes and discontinued operations |
(3,095) |
(26,575) |
(84,476) |
(110,137) |
||||||||
Income tax expense |
(867) |
(68) |
(279) |
(296) |
||||||||
Loss from continuing operations |
(3,962) |
(26,643) |
(84,755) |
(110,433) |
||||||||
Income (loss) from discontinued operations, net of tax |
19 |
(4,143) |
101,215 |
6,474 |
||||||||
Net (loss) income |
(3,943) |
(30,786) |
16,460 |
(103,959) |
||||||||
Net loss (income) attributable to the noncontrolling interests in SHR's operating partnership |
16 |
192 |
(70) |
879 |
||||||||
Net income attributable to the noncontrolling interests in consolidated affiliates |
(254) |
(1,086) |
(997) |
(858) |
||||||||
Net (loss) income attributable to SHR |
(4,181) |
(31,680) |
15,393 |
(103,938) |
||||||||
Preferred shareholder dividends |
(7,721) |
(7,721) |
(23,164) |
(23,164) |
||||||||
Net loss attributable to SHR common shareholders |
$ (11,902) |
$ (39,401) |
$ (7,771) |
$ (127,102) |
||||||||
Basic and Diluted (Loss) Income Per Share: |
||||||||||||
Loss from continuing operations attributable to SHR common shareholders |
$ (0.06) |
$ (0.23) |
$ (0.62) |
$ (1.18) |
||||||||
(Loss) income from discontinued operations attributable to SHR common shareholders |
- |
(0.03) |
0.58 |
0.06 |
||||||||
Net loss attributable to SHR common shareholders |
$ (0.06) |
$ (0.26) |
$ - |
$ (0.04) |
$ (1.12) |
|||||||
Weighted average common shares outstanding |
186,146 |
151,635 |
173,349 |
113,237 |
||||||||
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) |
||||||||
Consolidated Balance Sheets |
||||||||
(in thousands, except share data) |
||||||||
September 30, |
December 31, |
|||||||
2011 |
2010 |
|||||||
Assets |
||||||||
Investment in hotel properties, net |
$ 1,707,798 |
$ 1,835,451 |
||||||
Goodwill |
40,359 |
40,359 |
||||||
Intangible assets, net of accumulated amortization of $8,311 and $6,536 |
31,301 |
32,620 |
||||||
Assets held for sale |
- |
45,145 |
||||||
Investment in unconsolidated affiliates |
128,407 |
18,024 |
||||||
Cash and cash equivalents |
88,843 |
78,842 |
||||||
Restricted cash and cash equivalents |
44,543 |
34,618 |
||||||
Accounts receivable, net of allowance for doubtful accounts of $1,538 and $1,922 |
47,959 |
35,250 |
||||||
Deferred financing costs, net of accumulated amortization of $2,587 and $15,756 |
11,680 |
3,322 |
||||||
Deferred tax assets |
6,017 |
4,121 |
||||||
Other assets |
26,791 |
34,564 |
||||||
Total assets |
$ 2,133,698 |
$ 2,162,316 |
||||||
Liabilities, Noncontrolling Interests and Equity |
||||||||
Liabilities: |
||||||||
Mortgages and other debt payable |
$ 1,000,706 |
$ 1,118,281 |
||||||
Bank credit facility |
- |
28,000 |
||||||
Liabilities of assets held for sale |
- |
93,206 |
||||||
Accounts payable and accrued expenses |
240,397 |
266,773 |
||||||
Deferred tax liabilities |
48,848 |
1,732 |
||||||
Deferred gain on sale of hotels |
3,781 |
3,930 |
||||||
Total liabilities |
1,293,732 |
1,511,922 |
||||||
Noncontrolling interests in SHR's operating partnership |
3,678 |
5,050 |
||||||
Equity: |
||||||||
SHR's shareholders' equity: |
||||||||
8.50% Series A Cumulative Redeemable Preferred Stock ($0.01 par value; 4,488,750 shares |
||||||||
issued and outstanding; liquidation preference $25.00 per share and $138,450 and $131,296 |
||||||||
in the aggregate) |
108,206 |
108,206 |
||||||
8.25% Series B Cumulative Redeemable Preferred Stock ($0.01 par value; 4,600,000 shares |
||||||||
issued and outstanding; liquidation preference $25.00 per share and $141,091 and $133,975 |
||||||||
in the aggregate) |
110,775 |
110,775 |
||||||
8.25% Series C Cumulative Redeemable Preferred Stock ($0.01 par value; 5,750,000 shares |
||||||||
issued and outstanding; liquidation preference $25.00 per share and $176,363 and $167,469 |
||||||||
in the aggregate) |
138,940 |
138,940 |
||||||
Common shares ($0.01 par value; 250,000,000 common shares authorized; 185,627,199 and |
||||||||
151,305,314 common shares issued and outstanding) |
1,856 |
1,513 |
||||||
Additional paid-in capital |
1,715,023 |
1,553,286 |
||||||
Accumulated deficit |
(1,170,022) |
(1,185,294) |
||||||
Accumulated other comprehensive loss |
(78,695) |
(107,164) |
||||||
Total SHR's shareholders' equity |
826,083 |
620,262 |
||||||
Noncontrolling interests in consolidated affiliates |
10,205 |
25,082 |
||||||
Total equity |
836,288 |
645,344 |
||||||
Total liabilities, noncontrolling interests and equity |
$ 2,133,698 |
$ 2,162,316 |
||||||
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) |
||||||
FINANCIAL HIGHLIGHTS |
||||||
Supplemental Financial Data |
||||||
(in thousands, except per share information) |
||||||
September 30, 2011 |
||||||
Pro Rata Share |
Consolidated |
|||||
Capitalization |
||||||
Common shares outstanding |
185,627 |
185,627 |
||||
Operating partnership units outstanding |
853 |
853 |
||||
Restricted stock units outstanding |
1,039 |
1,039 |
||||
Value Creation Plan units outstanding |
974 |
974 |
||||
Combined shares and units outstanding |
188,493 |
188,493 |
||||
Common stock price at end of period |
$ 4.31 |
$ 4.31 |
||||
Common equity capitalization |
$ 812,405 |
$ 812,405 |
||||
Preferred equity capitalization (at $25.00 face value) |
370,236 |
370,236 |
||||
Consolidated debt |
1,000,706 |
1,000,706 |
||||
Pro rata share of unconsolidated debt |
212,275 |
- |
||||
Pro rata share of consolidated debt |
(45,548) |
- |
||||
Cash and cash equivalents |
(88,843) |
(88,843) |
||||
Total enterprise value |
$ 2,261,231 |
$ 2,094,504 |
||||
Net Debt / Total Enterprise Value |
47.7% |
43.5% |
||||
Preferred Equity / Total Enterprise Value |
16.4% |
17.7% |
||||
Common Equity / Total Enterprise Value |
35.9% |
38.8% |
||||
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) |
|||||||||||||
Discontinued Operations |
|||||||||||||
The results of operations of hotels sold are classified as discontinued operations and segregated in the consolidated statements of operations for all periods presented. The following hotels were sold during 2011 and 2010 (in thousands): |
|||||||||||||
Hotel |
Date Sold |
Net Sales Proceeds |
|||||||||||
Paris Marriott Champs Elysees (Paris Marriott) |
April 6, 2011 |
$ 55,245 |
|||||||||||
InterContinental Prague |
December 15, 2010 |
$ 3,564 |
|||||||||||
The following is a summary of income (loss) from discontinued operations for the three and nine months ended September 30, 2011 and 2010 (in thousands): |
|||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||
September 30, |
September 30, |
||||||||||||
2011 |
2010 |
2011 |
2010 |
||||||||||
Hotel operating revenues |
$ - |
$ 19,495 |
$ 9,743 |
$ 51,987 |
|||||||||
Operating costs and expenses |
(54) |
13,984 |
9,456 |
40,394 |
|||||||||
Depreciation and amortization |
- |
1,859 |
- |
5,413 |
|||||||||
Total operating costs and expenses |
(54) |
15,843 |
9,456 |
45,807 |
|||||||||
Operating income |
54 |
3,652 |
287 |
6,180 |
|||||||||
Interest expense |
- |
(2,378) |
- |
(7,716) |
|||||||||
Interest income |
- |
8 |
- |
19 |
|||||||||
Foreign currency exchange (loss) gain |
- |
(5,096) |
51 |
7,490 |
|||||||||
Other income, net |
- |
- |
326 |
- |
|||||||||
Income tax expense |
- |
(329) |
(379) |
(736) |
|||||||||
(Loss) gain on sale |
(35) |
- |
100,930 |
1,237 |
|||||||||
Income (loss) from discontinued operations |
$ 19 |
$ (4,143) |
$ 101,215 |
$ 6,474 |
|||||||||
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) |
|||||||||||||||
Investments in the Hotel del Coronado and Fairmont Scottsdale Princess |
|||||||||||||||
(in thousands) |
|||||||||||||||
On January 9, 2006, we purchased a 45% interest in the unconsolidated affiliate that owns the Hotel del Coronado. On February 4, 2011, we completed a recapitalization of the unconsolidated affiliate. As part of the recapitalization, a new unconsolidated affiliate was formed to own the Hotel del Coronado and to invest cash in the asset. Pursuant to the terms of the recapitalization, we became a limited partner in the new unconsolidated affiliate, and our ownership interest in the Hotel del Coronado decreased from 45% to 34.3%. On June 9, 2011, we completed a recapitalization of the Fairmont Scottsdale Princess hotel. As part of the recapitalization, our ownership interest in the Fairmont Scottsdale Princess decreased from 100% to 50%. We account for these investments using the equity |
|||||||||||||||
Three Months Ended |
Three Months Ended |
||||||||||||||
September 30, 2011 |
September 30, 2010 |
||||||||||||||
Fairmont |
Fairmont |
||||||||||||||
Hotel del |
Scottsdale |
Hotel del |
Scottsdale |
||||||||||||
Coronado |
Princess |
Total |
Coronado |
Princess |
Total |
||||||||||
Total revenues (100%) |
$ 40,765 |
$ 10,280 |
$ 51,045 |
$ 39,683 |
$ - |
$ 39,683 |
|||||||||
Property EBITDA (100%) |
$ 16,995 |
$ (2,452) |
$ 14,543 |
$ 15,593 |
$ - |
$ 15,593 |
|||||||||
Equity in earnings (losses) of unconsolidated affiliates (SHR ownership) |
|||||||||||||||
Property EBITDA |
$ 5,830 |
$ (1,226) |
$ 4,604 |
$ 7,017 |
$ - |
$ 7,017 |
|||||||||
Depreciation and amortization |
(1,665) |
(1,806) |
(3,471) |
(2,015) |
- |
(2,015) |
|||||||||
Interest expense |
(2,648) |
(198) |
(2,846) |
(1,981) |
- |
(1,981) |
|||||||||
Other expenses, net |
(83) |
(96) |
(179) |
(15) |
- |
(15) |
|||||||||
Income taxes |
(125) |
- |
(125) |
(272) |
- |
(272) |
|||||||||
Equity in earnings (losses) of unconsolidated affiliates |
$ 1,309 |
$ (3,326) |
$ (2,017) |
$ 2,734 |
$ - |
$ 2,734 |
|||||||||
EBITDA Contribution |
|||||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
$ 1,309 |
$ (3,326) |
$ (2,017) |
$ 2,734 |
$ - |
$ 2,734 |
|||||||||
Depreciation and amortization |
1,665 |
1,806 |
3,471 |
2,015 |
- |
2,015 |
|||||||||
Interest expense |
2,648 |
198 |
2,846 |
1,981 |
- |
1,981 |
|||||||||
Income taxes |
125 |
- |
125 |
272 |
- |
272 |
|||||||||
EBITDA Contribution |
$ 5,747 |
$ (1,322) |
$ 4,425 |
$ 7,002 |
$ - |
$ 7,002 |
|||||||||
FFO Contribution |
|||||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
$ 1,309 |
$ (3,326) |
$ (2,017) |
$ 2,734 |
$ - |
$ 2,734 |
|||||||||
Depreciation and amortization |
1,665 |
1,806 |
3,471 |
2,015 |
- |
2,015 |
|||||||||
FFO Contribution |
$ 2,974 |
$ (1,520) |
$ 1,454 |
$ 4,749 |
$ - |
$ 4,749 |
|||||||||
Nine Months Ended |
Nine Months Ended |
||||||||||||||
September 30, 2011 |
September 30, 2010 |
||||||||||||||
Fairmont |
Fairmont |
||||||||||||||
Hotel del |
Scottsdale |
Hotel del |
Scottsdale |
||||||||||||
Coronado |
Princess |
Total |
Coronado |
Princess |
Total |
||||||||||
Total revenues (100%) |
$ 101,255 |
$ 12,389 |
$ 113,644 |
$ 94,167 |
$ - |
$ 94,167 |
|||||||||
Property EBITDA (100%) |
$ 34,748 |
$ (3,196) |
$ 31,552 |
$ 30,871 |
$ - |
$ 30,871 |
|||||||||
Equity in (losses) earnings of unconsolidated affiliates (SHR ownership) |
|||||||||||||||
Property EBITDA |
$ 12,022 |
$ (1,598) |
$ 10,424 |
$ 13,892 |
$ - |
$ 13,892 |
|||||||||
Depreciation and amortization |
(4,963) |
(2,257) |
(7,220) |
(6,003) |
- |
(6,003) |
|||||||||
Interest expense |
(7,382) |
(248) |
(7,630) |
(5,711) |
- |
(5,711) |
|||||||||
Other expenses, net |
(1,547) |
(640) |
(2,187) |
(163) |
- |
(163) |
|||||||||
Income taxes |
554 |
- |
554 |
111 |
- |
111 |
|||||||||
Equity in (losses) earnings of unconsolidated affiliates |
$ (1,316) |
$ (4,743) |
$ (6,059) |
$ 2,126 |
$ - |
$ 2,126 |
|||||||||
EBITDA Contribution |
|||||||||||||||
Equity in (losses) earnings of unconsolidated affiliates |
$ (1,316) |
$ (4,743) |
$ (6,059) |
$ 2,126 |
$ - |
$ 2,126 |
|||||||||
Depreciation and amortization |
4,963 |
2,257 |
7,220 |
6,003 |
- |
6,003 |
|||||||||
Interest expense |
7,382 |
248 |
7,630 |
5,711 |
- |
5,711 |
|||||||||
Income taxes |
(554) |
- |
(554) |
(111) |
- |
(111) |
|||||||||
EBITDA Contribution |
$ 10,475 |
$ (2,238) |
$ 8,237 |
$ 13,729 |
$ - |
$ 13,729 |
|||||||||
FFO Contribution |
|||||||||||||||
Equity in (losses) earnings of unconsolidated affiliates |
$ (1,316) |
$ (4,743) |
$ (6,059) |
$ 2,126 |
$ - |
$ 2,126 |
|||||||||
Depreciation and amortization |
4,963 |
2,257 |
7,220 |
6,003 |
- |
6,003 |
|||||||||
FFO Contribution |
$ 3,647 |
$ (2,486) |
$ 1,161 |
$ 8,129 |
$ - |
$ 8,129 |
|||||||||
Spread over |
|||||||||||||||
Debt |
Interest Rate |
LIBOR |
Loan Amount |
Maturity (b) |
|||||||||||
Hotel del Coronado |
|||||||||||||||
CMBS Mortgage and Mezzanine |
5.80% (a) |
480 bp (a) |
$ 425,000 |
March 2016 |
|||||||||||
Cash and cash equivalents |
(22,939) |
||||||||||||||
Net Debt |
$ 402,061 |
||||||||||||||
Fairmont Scottsdale Princess |
|||||||||||||||
CMBS Mortgage |
0.60% |
36 bp |
$ 133,000 |
April 2015 |
|||||||||||
Cash and cash equivalents |
(1,066) |
||||||||||||||
Net Debt |
$ 131,934 |
||||||||||||||
Effective |
|||||||||||||||
Caps |
Date |
LIBOR Cap Rate |
Notional Amount |
Maturity |
|||||||||||
Hotel del Coronado |
|||||||||||||||
CMBS Mortgage and Mezzanine Loan Caps |
February 2011 |
2.00% |
$ 425,000 |
February 2013 |
|||||||||||
CMBS Mortgage and Mezzanine Loan Caps |
February 2013 |
2.50% |
$ 425,000 |
March 2013 |
|||||||||||
Fairmont Scottsdale Princess |
|||||||||||||||
CMBS Mortgage Loan Cap |
June 2011 |
4.00% |
$ 133,000 |
December 2013 |
|||||||||||
(a) Subject to a 1% LIBOR floor. |
|||||||||||||||
(b) Includes extension options. |
|||||||||||||||
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) |
||||||||
Leasehold Information |
||||||||
(in thousands) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
September 30, |
September 30, |
|||||||
2011 |
2010 |
2011 |
2010 |
|||||
Paris Marriott (a): |
||||||||
Property EBITDA |
$ - |
$ 6,784 |
$ 3,455 |
$ 15,858 |
||||
Revenue (b) |
$ - |
$ 6,784 |
$ 3,455 |
$ 15,858 |
||||
Lease expense |
- |
(3,076) |
(3,274) |
(8,915) |
||||
Less: Deferred gain on sale-leaseback |
- |
(1,088) |
(1,214) |
(3,321) |
||||
Adjusted lease expense |
- |
(4,164) |
(4,488) |
(12,236) |
||||
EBITDA contribution from leasehold |
$ - |
$ 2,620 |
$ (1,033) |
$ 3,622 |
||||
Marriott Hamburg: |
||||||||
Property EBITDA |
$ 1,734 |
$ 1,620 |
$ 5,034 |
$ 4,369 |
||||
Revenue (b) |
$ 1,255 |
$ 1,108 |
$ 3,747 |
$ 3,383 |
||||
Lease expense |
(1,249) |
(1,106) |
(3,702) |
(3,396) |
||||
Less: Deferred gain on sale-leaseback |
(42) |
(51) |
(151) |
(154) |
||||
Adjusted lease expense |
(1,291) |
(1,157) |
(3,853) |
(3,550) |
||||
EBITDA contribution from leasehold |
$ (36) |
$ (49) |
$ (106) |
$ (167) |
||||
Total Leaseholds: |
||||||||
Property EBITDA |
$ 1,734 |
$ 8,404 |
$ 8,489 |
$ 20,227 |
||||
Revenue (b) |
$ 1,255 |
$ 7,892 |
$ 7,202 |
$ 19,241 |
||||
Lease expense |
(1,249) |
(4,182) |
(6,976) |
(12,311) |
||||
Less: Deferred gain on sale-leasebacks |
(42) |
(1,139) |
(1,365) |
(3,475) |
||||
Adjusted lease expense |
(1,291) |
(5,321) |
(8,341) |
(15,786) |
||||
EBITDA contribution from leaseholds |
$ (36) |
$ 2,571 |
$ (1,139) |
$ 3,455 |
||||
September 30, |
December 31, |
|||||||
Security Deposits (c): |
2011 |
2010 |
||||||
Paris Marriott |
$ - |
$ 14,459 |
||||||
Marriott Hamburg |
2,544 |
2,540 |
||||||
Total |
$ 2,544 |
$ 16,999 |
||||||
(a) On April 6, 2011, we sold our leasehold interest in the Paris Marriott. The results of operations for the Paris Marriott have been classified as discontinued operations for all periods presented. |
||||||||
(b) For the three and nine months ended September 30, 2011 and 2010, Revenue for the Paris Marriott represents Property EBITDA. For the three and nine months ended September 30, 2011 and 2010, Revenue for the Marriott Hamburg represents lease revenue. |
||||||||
(c) The security deposits are recorded in 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 more 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 other non-cash charges, such as the Value Creation Plan expense. 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, which 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 plus real estate-related depreciation and amortization, and after adjustments for 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 other non-cash charges, such as the Value Creation Plan expense. 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. Comparable FFO per diluted share, in accordance with NAREIT, is adjusted for the effects of dilutive securities. Dilutive securities may include shares granted under share-based compensation plans, operating partnership units and exchangeable debt securities. 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 Loss Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA |
||||||||||||
(in thousands) |
||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||
September 30, |
September 30, |
|||||||||||
2011 |
2010 |
2011 |
2010 |
|||||||||
Net loss attributable to SHR common shareholders |
$ (11,902) |
$ (39,401) |
$ (7,771) |
$ (127,102) |
||||||||
Depreciation and amortization - continuing operations |
25,526 |
32,209 |
86,222 |
98,195 |
||||||||
Depreciation and amortization - discontinued operations |
- |
1,859 |
- |
5,413 |
||||||||
Interest expense - continuing operations |
21,838 |
22,118 |
67,148 |
68,488 |
||||||||
Interest expense - discontinued operations |
- |
2,378 |
- |
7,716 |
||||||||
Income taxes - continuing operations |
867 |
68 |
279 |
296 |
||||||||
Income taxes - discontinued operations |
- |
329 |
379 |
736 |
||||||||
Noncontrolling interests |
(16) |
(192) |
70 |
(879) |
||||||||
Adjustments from consolidated affiliates |
(1,248) |
(1,978) |
(5,431) |
(5,596) |
||||||||
Adjustments from unconsolidated affiliates |
7,162 |
4,332 |
16,293 |
11,890 |
||||||||
Preferred shareholder dividends |
7,721 |
7,721 |
23,164 |
23,164 |
||||||||
EBITDA |
49,948 |
29,443 |
180,353 |
82,321 |
||||||||
Realized portion of deferred gain on sale-leaseback - continuing operations |
(42) |
(51) |
(151) |
(154) |
||||||||
Realized portion of deferred gain on sale-leaseback - discontinued operations |
- |
(1,088) |
(1,214) |
(3,321) |
||||||||
Gain on sale of assets - continuing operations |
- |
- |
(2,640) |
- |
||||||||
Loss (gain) on sale of assets - discontinued operations |
35 |
- |
(100,930) |
(1,237) |
||||||||
Loss on early extinguishment of debt |
399 |
39 |
1,237 |
925 |
||||||||
Loss on early termination of derivative financial instruments |
- |
- |
29,242 |
18,263 |
||||||||
Foreign currency exchange loss (gain) - continuing operations (a) |
209 |
132 |
(77) |
1,394 |
||||||||
Foreign currency exchange loss (gain) - discontinued operations (a) |
- |
5,096 |
(51) |
(7,490) |
||||||||
Adjustment for Value Creation Plan |
(6,921) |
3,844 |
9,078 |
6,871 |
||||||||
Comparable EBITDA |
$ 43,628 |
$ 37,415 |
$ 114,847 |
$ 97,572 |
||||||||
(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 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 |
Nine Months Ended |
|||||||||||
September 30, |
September 30, |
|||||||||||
2011 |
2010 |
2011 |
2010 |
|||||||||
Net loss attributable to SHR common shareholders |
$ (11,902) |
$ (39,401) |
$ (7,771) |
$ (127,102) |
||||||||
Depreciation and amortization - continuing operations |
25,526 |
32,209 |
86,222 |
98,195 |
||||||||
Depreciation and amortization - discontinued operations |
- |
1,859 |
- |
5,413 |
||||||||
Corporate depreciation |
(279) |
(304) |
(868) |
(914) |
||||||||
Gain on sale of assets - continuing operations |
- |
- |
(2,640) |
- |
||||||||
Loss (gain) on sale of assets - discontinued operations |
35 |
- |
(100,930) |
(1,237) |
||||||||
Realized portion of deferred gain on sale-leaseback - continuing operations |
(42) |
(51) |
(151) |
(154) |
||||||||
Realized portion of deferred gain on sale-leaseback - discontinued operations |
- |
(1,088) |
(1,214) |
(3,321) |
||||||||
Deferred tax expense on realized portion of deferred gain on sale-leasebacks |
- |
340 |
379 |
1,036 |
||||||||
Noncontrolling interests adjustments |
(134) |
(230) |
(440) |
(937) |
||||||||
Adjustments from consolidated affiliates |
(663) |
(1,342) |
(3,822) |
(4,644) |
||||||||
Adjustments from unconsolidated affiliates |
3,770 |
2,047 |
8,023 |
6,099 |
||||||||
FFO |
16,311 |
(5,961) |
(23,212) |
(27,566) |
||||||||
Redeemable noncontrolling interests |
118 |
38 |
510 |
58 |
||||||||
FFO - Fully Diluted |
16,429 |
(5,923) |
(22,702) |
(27,508) |
||||||||
Non-cash mark to market of interest rate swaps |
1,146 |
5,597 |
(487) |
9,778 |
||||||||
Loss on early extinguishment of debt |
399 |
39 |
1,237 |
925 |
||||||||
Loss on early termination of derivative financial instruments |
- |
- |
29,242 |
18,263 |
||||||||
Foreign currency exchange loss (gain) - continuing operations (a) |
209 |
132 |
(77) |
1,394 |
||||||||
Foreign currency exchange loss (gain), net of tax - discontinued operations (a) |
- |
5,085 |
(51) |
(7,515) |
||||||||
Adjustment for Value Creation Plan |
(6,921) |
3,844 |
9,078 |
6,871 |
||||||||
Comparable FFO |
$ 11,262 |
$ 8,774 |
$ 16,240 |
$ 2,208 |
||||||||
Comparable FFO per diluted share |
$ 0.06 |
$ 0.06 |
$ 0.09 |
$ 0.02 |
||||||||
Weighted average diluted shares |
188,097 |
153,093 |
175,974 |
114,897 |
||||||||
(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) |
||||||||||
Debt Summary |
||||||||||
(dollars in thousands) |
||||||||||
Loan |
||||||||||
Debt |
Interest Rate |
Spread (a) |
Amount |
Maturity (b) |
||||||
Hyatt Regency La Jolla |
1.24% |
100 bp |
$ 97,500 |
September 2012 |
||||||
North Beach Venture |
5.00% |
Fixed |
1,476 |
January 2013 |
||||||
Marriott London Grosvenor Square (c) |
2.05% |
110 bp (c) |
113,980 |
October 2013 |
||||||
Bank credit facility |
3.24% |
300 bp |
- |
June 2015 |
||||||
Four Seasons Washington, D.C. |
3.39% |
315 bp |
130,000 |
July 2016 |
||||||
Westin St. Francis |
6.09% |
Fixed |
220,000 |
June 2017 |
||||||
Fairmont Chicago |
6.09% |
Fixed |
97,750 |
June 2017 |
||||||
InterContinental Miami |
3.74% |
350 bp |
85,000 |
July 2018 |
||||||
Loews Santa Monica Beach Hotel |
4.09% |
385 bp |
110,000 |
July 2018 |
||||||
InterContinental Chicago |
5.61% |
Fixed |
145,000 |
August 2021 |
||||||
$ 1,000,706 |
||||||||||
(a) Spread over LIBOR (0.24% at September 30, 2011). |
||||||||||
(b) Includes extension options. |
||||||||||
(c) Principal balance of £73,130,000 at September 30, 2011. Spread over three-month GBP LIBOR (0.95% at September 30, 2011). |
||||||||||
Domestic and European Interest Rate Swaps |
||||||||||
Fixed Pay Rate |
Notional |
|||||||||
Swap Effective Date |
Against LIBOR |
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 |
|||||||||
Fixed Pay Rate |
Notional |
|||||||||
Swap Effective Date |
Against GBP LIBOR |
Amount |
Maturity |
|||||||
October 2007 |
5.72% |
£ 73,130 |
October 2013 |
|||||||
At September 30, 2011, future scheduled debt principal payments (including extension options) are as follows: |
||||||||||
Years ending December 31, |
Amount |
|||||||||
2011 (remainder) |
$ - |
|||||||||
2012 |
109,107 |
|||||||||
2013 |
123,112 |
|||||||||
2014 |
13,872 |
|||||||||
2015 |
15,046 |
|||||||||
Thereafter |
739,569 |
|||||||||
$ 1,000,706 |
||||||||||
Percent of fixed rate debt including U.S. and European swaps |
97.8% |
|||||||||
Weighted average interest rate including U.S. and European swaps (d) |
6.80% |
|||||||||
Weighted average maturity of fixed rate debt (debt with maturity of greater than one year) |
5.05 |
|||||||||
(d) Excludes the amortization of deferred financing costs and the amortization of the interest rate swap costs. |
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SOURCE Strategic Hotels & Resorts, Inc.
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