Strategic Hotels & Resorts Reports Fourth Quarter and Full Year 2011 Results

CHICAGO, Feb. 22, 2012 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the fourth quarter and full year ended December 31, 2011.  

"Despite lingering global and domestic uncertainty, Strategic Hotels' superior operating performance again led our competitive set, delivering enviable fourth quarter and full year results," said Laurence Geller, Chief Executive Officer of Strategic Hotels & Resorts, Inc.  "With strong and steady demand growth, permanent productivity enhancements, irreplaceable assets with no competition from new supply, a pipeline of profit enhancement opportunities and a completely restructured balance sheet, the Company is ideally positioned for the future.  With these tailwinds, I am pleased to announce the declaration of the first quarter preferred dividend and look forward to continued operating and financial success in 2012."

Fourth Quarter Highlights

• Net loss attributable to common shareholders was $15.9 million, or $0.09 per diluted share, in the fourth quarter of 2011, compared with a net loss attributable to common shareholders of $134.8 million, or $0.89 per diluted share, in the fourth quarter of 2010.
• Comparable funds from operations (Comparable FFO) was $0.11 per diluted share in the fourth quarter of 2011 compared with $0.03 per diluted share in the prior year period.  During the quarter, a $10.7 million one-time gain was recorded related to the successful preferred equity tender completed on December 19, 2011.  Excluding this adjustment, Comparable FFO would have been $0.05 per diluted share.  
• Comparable EBITDA was $39.9 million in the fourth quarter of 2011 compared with $34.5 million in the prior year period, a 15.9 percent increase.  
• United States same store revenue per available room (RevPAR) increased 10.1 percent in the fourth quarter of 2011, driven by a 6.5 percent increase in average daily rate (ADR) and a 2.2 percentage point increase in occupancy, compared to the fourth quarter 2010.  Total revenue per available room (Total RevPAR) increased 10.0 percent with non-rooms revenue increasing by 9.9 percent between periods.
• North American same store RevPAR increased 9.8 percent in the fourth quarter of 2011, driven by a 6.4 percent increase in ADR and a 2.1 percentage point increase in occupancy, compared to the fourth quarter 2010.  Total RevPAR increased 9.0 percent with non-rooms revenue increasing by 8.1 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 10.2 percent in the fourth quarter of 2011, driven by a 6.7 percent increase in ADR and a 2.2 percentage point increase in occupancy, compared to the fourth quarter 2010.  Total RevPAR increased 9.5 percent with non-rooms revenue increasing by 8.8 percent between periods.
• European RevPAR decreased 0.1 percent (a 0.6 percent increase in constant dollars) in the fourth quarter of 2011, driven by a 0.1 percent decline in ADR (a 0.5 percent increase in constant dollars) and no change in occupancy between periods. European Total RevPAR increased 2.3 percent in the fourth quarter over the prior year period (2.6 percent in constant dollars).  
• United States same store EBITDA margins contracted 50 basis points in the fourth quarter of 2011  compared to the fourth quarter of 2010.  North American same store EBITDA margins contracted 80 basis points between periods.  Excluding certain one-time property tax refunds of $4.9 million received during the fourth quarter of 2010, United States same store and North American same store EBITDA margins expanded 290 and 240 basis points, respectively, in the fourth quarter.

Full Year 2011 Highlights

• Net loss attributable to common shareholders was $23.7 million, or $0.13 per diluted share compared with a net loss attributable to common shareholders of $261.9 million, or $2.13 per diluted share in the prior year.
• Comparable FFO was $0.20 per diluted share compared with $0.05 per diluted share in the prior year period.  During the fourth quarter of 2011, a $10.7 million one-time gain was recorded related to the successful preferred equity tender completed on December 19, 2011.  Excluding this adjustment, Comparable FFO would have been $0.14 per diluted share.
• Comparable EBITDA was $154.8 million compared with $132.0 million in the prior year period, a 17.2 percent increase.
• United States same store RevPAR increased 12.7 percent, driven by a 7.0 percent increase in ADR and a 3.6 percentage point increase in occupancy, compared to the full year 2010.  Total RevPAR increased 11.3 percent with non-rooms revenue increasing by 9.7 percent between years.
• North American same store RevPAR increased 11.0 percent, driven by a 5.8 percent increase in ADR and a 3.4 percentage point increase in occupancy, compared to the full year 2010.  Total RevPAR increased 9.6 percent with non-rooms revenue increasing by 8.0 percent between years.
• Total North American RevPAR increased 11.0 percent, driven by a 5.8 percent increase in ADR and a 3.3 percentage point increase in occupancy, compared to the full year 2010.  Total RevPAR increased 9.6 percent with non-rooms revenue increasing by 8.0 percent between years.
• European RevPAR increased 8.5 percent (3.8 percent in constant dollars), driven by a 7.0 percent increase in ADR (2.4 percent increase in constant dollars) and a 1.1 percentage point increase in occupancy between years. European Total RevPAR increased 8.2 percent in between years (3.6 percent in constant dollars).  
• United States same store EBITDA margins expanded 220 basis points and North American EBITDA margins expanded 160 basis points compared to the full year 2010. Excluding certain one-time property tax refunds of $4.9 million received during the fourth quarter of 2010, United States same store and North American same store EBITDA margins expanded 320 and 240 basis points, respectively, compared to the full year 2010.  

Preferred Dividends

For the first quarter 2012, the Company's board of directors authorized, and the Company declared a quarterly dividend of $0.53125 per share of 8.5 percent Series A Cumulative Redeemable Preferred Stock (Series A) payable on June 29, 2012 to shareholders of record as of June 15, 2012, a quarterly dividend of $0.51563 per share of 8.25 percent Series B Cumulative Redeemable Preferred Stock (Series B) payable on June 29, 2012 to shareholders of record as of June 15, 2012 and a quarterly dividend of $0.51563 per share of 8.25 percent Series C Cumulative Redeemable Preferred Stock (Series C) payable on June 29, 2012 to shareholders of record as of June 15, 2012, contingent upon the Company's ability to meet, on the payment date, the requirements of the Maryland General Corporation Law with respect to the payment of dividends (the "Maryland Dividend Requirement").  While the Company cannot make any guarantees, it currently expects to be able to meet the Maryland Dividend Requirement on the June 29, 2012 payment date.

The Company had previously announced, in conjunction with the successful purchase of approximately 3.2 million shares of preferred equity, the declaration of accrued and unpaid dividends on the Series A, B and C preferred stock through December 31, 2011 payable on June 29, 2012 to shareholders of record as of June 15, 2012, contingent upon the Company's ability to meet the Maryland Dividend Requirement on the payment date.

2011 Transaction Review

• In December, the Company closed on the purchase of an aggregate of 3,247,507 shares of preferred stock consisting of 1,922,273 shares of Series C stock and 984,625 shares of Series B stock at a purchase price of $26.50 per share and 340,609 shares of Series A stock at a purchase price of $26.70 per share.  In addition, the Company announced the payment of 12 quarters of accrued and unpaid dividends through the end of December 31, 2011 to shareholders of record as of June 15, 2012, payable on June 29, 2012, contingent upon the Company's ability to meet the Maryland Dividend Requirement on the payment date.  Total accrued dividends of approximately $72.5 million have been recorded on the balance sheet as distributions payable.
• In July, 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.
• In July, 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.  
• In July, 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.
• In July, 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.  
• In June, the Company closed a new $300.0 million secured, revolving credit facility with an accordion feature allowing for additional borrowing capacity up to $400.0 million, subject to certain conditions.  The facility's interest rate is based upon a leverage-based pricing grid ranging from LIBOR plus 275 basis points to LIBOR plus 375 basis points.  The facility matures in three years with a one-year extension option available to the Company, subject to certain conditions.  The facility is secured by the Four Seasons Punta Mita Resort, the Marriott Lincolnshire Resort, the Ritz-Carlton Half Moon Bay hotel, and the Ritz-Carlton Laguna Niguel hotel.
• In June, the Company closed on the acquisition of the 49 percent interest in the InterContinental Chicago hotel previously held by an affiliate of the Government of Singapore Investment Corporation (GIC). As part of the transaction, the Company also acquired an additional 2.5 percent ownership interest in the Hyatt Regency La Jolla hotel, giving the Company a 53.5% controlling ownership interest in that hotel. Total consideration was $90.2 million, which included the issuance of 10.8 million shares at a price of $6.51 per share and $19.4 million of cash which includes working capital and post-closing adjustments of $0.5 million.  
• In June, the Company closed on an agreement to recapitalize the Fairmont Scottsdale Princess hotel in a newly formed joint venture with Walton Street Capital, L.L.C. (Walton Street Capital).  The recapitalization included an amendment and extension of the existing CMBS first mortgage debt through December 31, 2013, with the option for a second extension through April 9, 2015 upon satisfaction of certain terms and conditions.  The new joint venture retired the hotel's $40.0 million mezzanine debt and total debt on the property was reduced from $180.0 million to $133.0 million.  The Company's total investment in the joint venture was approximately $34.9 million, which includes its pro rata share of funding for the development of a new 23,000 square foot ballroom and adjoining meeting space at the hotel.  The Company and Walton Street Capital are equal partners in the joint venture, with the Company serving as the managing member and continuing to serve as the property's asset manager.  
• In April, the Company sold its leasehold interest in the Paris Marriott Champs Elysees hotel for consideration of euro 29.2 million ($41.6 million).  As part of the transaction, the Company received euro 11.9 million ($16.9 million) related to the release of the security deposit and other closing adjustments. The Company expects to receive an additional euro 1.6 million ($2.1 million).    
• In March, the Company closed on an agreement to acquire the Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels from The Woodbridge Company Limited (Woodbridge) in exchange for an aggregate of 15.2 million shares of common stock at an agreed upon issuance price of $6.08 per share, or approximately $92.4 million.  In addition, the Company concurrently privately placed and issued an additional 8.0 million shares of common stock at a price of $6.25 per share to an affiliate of Woodbridge resulting in gross proceeds of $50.0 million.
• In February, the Company completed a recapitalization of the joint venture that owns the Hotel del Coronado hotel.  Under terms of the agreement, a new joint venture was established among the Company, Blackstone Real Estate Advisors (Blackstone) and KSL Resorts.  As part of the recapitalization, which valued the hotel at approximately $590 million, the Company invested approximately $57 million to retain a 34.3 percent ownership position in the joint venture and remained as asset manager of the hotel.  Blackstone is a 60 percent owner and general partner of the joint venture.  A $425 million debt financing was originated by Deutsche Bank.
• In January, the Company sold its 50 percent interest in BuyEfficient, an electronic purchasing platform, for $9.0 million.

2012 Guidance

For the full year 2012, the Company anticipates that Comparable EBITDA will be in the range of $165.0 million to $180.0 million and Comparable FFO in the range of $0.22 and $0.30 per fully diluted share.

The Company's 2012 guidance includes the following assumptions:

• Same Store North American RevPAR and Total RevPAR growth in the range of 6.0 percent to 8.0 percent and 5.0 percent to 7.0 percent, respectively.  Same Store operating metrics include North American hotels which are included in the Company's consolidated financial results but excludes the Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels, which were acquired in 2011;  
• Same Store North American EBITDA margins between 22.1 percent and 22.9 percent or 100 basis points to 175 basis points expansion;
• Corporate G&A expenses in the range of $22.0 to $24.0 million, excluding any expense related to the Company's Value Creation Plan;
• Consolidated interest expense in the range of $85 million to $90 million, including approximately $12 million of non-cash interest expense, primarily related to swap financing amortization costs;
• Hyatt Regency La Jolla mortgage, which matures in September 2012, successfully restructured or refinanced and ownership of 53.5 percent is retained through year-end;
• Preferred dividend expense of $24.2 million;
• Capital expenditures totaling approximately $65 million to $75 million, including spending of $35 million from property furniture, fixtures and equipment (FF&E) reserves and an additional $30 million to $40 million of owner-funded spending; and
• No additional planned acquisition, disposition or capital raising activity.

Portfolio Definitions

United States same store hotel comparisons for the fourth quarter and full year 2011 are derived from the Company's hotel portfolio at December 31, 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 fourth quarter and full year 2011 are derived from the Company's hotel portfolio at December 31, 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 for the fourth quarter and full year 2011 are derived from the Company's hotel portfolio at December 31, 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 fourth quarter and full year 2011 are derived from the Company's European owned and leased hotel properties at December 31, 2011, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg.  

Earnings Call

The Company will conduct its fourth quarter and full-year 2011 conference call for investors and other interested parties on Thursday, February 23, 2012 at 10:00 a.m. Eastern Time (ET).  Interested individuals are invited to listen to the call by telephone at 888.680.0892 (toll international: 617.213.4858) with passcode 19468568.  To participate on the web cast, log on to http://edge.media-server.com/m/p/y86b8c79/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 12:00 p.m. ET on February 23, 2012, through 11:59 p.m. ET on March 1, 2012. To access the replay, dial 888 286.8010 (toll international: 617 801.6888) and request replay pin number 47825728. 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 fourth 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 the Company. Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. 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 the Company's debt facilities; the Company's ability to meet the requirements of the Maryland General Corporation Law with respect to the payment of preferred dividends on the June 29, 2012 payment date; 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 the Company's 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 the Company's 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.

The following tables reconcile projected 2012 net loss attributable to common shareholders to projected Comparable EBITDA, Comparable FFO and Comparable FFO per diluted share (in millions, except per share data):

SOURCE Strategic Hotels & Resorts, Inc.