LaSalle Hotel Properties Reports Third Quarter 2012 Results

LaSalle Hotel Properties Reports Third Quarter 2012 Results

Achieves RevPAR growth of 5.1 percent, adjusted EBITDA growth of 30 percent, adjusted FFO per share growth of 36 percent and Hotel EBITDA margin improvement of 180 basis points

BETHESDA, Md.--(BUSINESS WIRE)-- LaSalle Hotel Properties (NYS: LHO) today announced results for the quarter ended September 30, 2012. The Company's results include the following:

Third Quarter

Year-to-Date

2012

2011

2012

2011

($'s in millions except per share/unit data)

Total Revenue

$

237.0

$

199.1

$

651.4

$

540.0

Net income to common shareholders

$

26.5

$

14.9

$

35.2

$

12.4

Net income to common shareholders per diluted share

$

0.31

$

0.18

$

0.41

$

0.15

EBITDA(1)

$

81.3

$

63.3

$

191.2

$

153.8

Adjusted EBITDA(1)

$

81.7

$

62.8

$

201.1

$

155.2

FFO(1)

$

58.1

$

41.9

$

128.2

$

95.0

Adjusted FFO(1)

$

58.4

$

42.4

$

138.0

$

97.4

FFO per diluted share/unit(1)

$

0.67

$

0.49

$

1.49

$

1.18

Adjusted FFO per diluted share/unit(1)

$

0.68

$

0.50

$

1.61

$

1.21

RevPAR

$

178.43

$

169.80

$

162.26

$

154.80

RevPAR growth

5.1

%

4.8

%

Hotel EBITDA Margin

35.9

%

34.1

%

32.6

%

31.1

%

Hotel EBITDA Margin growth

180 bps

155 bps

(1) See tables later in press release, which list adjustments that reconcile net income to earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, funds from operations ("FFO"), FFO per share/unit, adjusted FFO, adjusted FFO per share/unit and hotel EBITDA. EBITDA, adjusted EBITDA, FFO, FFO per share/unit, adjusted FFO, adjusted FFO per share/unit and hotel EBITDA are non-GAAP financial measures. See further discussion of these non-GAAP measures and reconciliations to net income later in this press release.


Third Quarter Highlights

  • RevPAR: Room revenue per available room ("RevPAR") for the quarter ended September 30, 2012 increased 5.1 percent to $178.43, as a result of a 3.3 percent increase in average daily rate ("ADR") to $205.75 and a 1.7 percent improvement in occupancy to 86.7 percent.

  • Hotel EBITDA Margin: The Company's hotel EBITDA margin for the third quarter was 35.9 percent, a 180 basis point improvement compared to the comparable prior year period.

  • Adjusted EBITDA: The Company's adjusted EBITDA was $81.7 million, an increase of 30.1 percent over the third quarter of 2011.

  • Adjusted FFO: The Company generated third quarter adjusted FFO of $58.4 million, or $0.68 per diluted share/unit, compared to $42.4 million or $0.50 per diluted share/unit for the comparable prior year period, an increase of 36.0 percent in adjusted FFO per diluted share/unit.

  • Acquisitions: On July 13, 2012, the Company invested $67.4 million to acquire the performing mezzanine loan secured by the equity interests in the entities that own Shutters on the Beach and Hotel Casa Del Mar in Santa Monica, California. The Company purchased the debt instrument for 93.6 percent of the $72.0 million face value of the loan. The fixed-rate, interest only coupon on the mezzanine loan is 9.76 percent at par value, which translates to a 10.4 percent interest rate on the Company's investment. The mezzanine loan matures on May 11, 2014.

  • Capital Markets: On August 2, 2012, the Company entered into a new $300.0 million unsecured loan. The five-year term loan matures on August 2, 2017, including a one-year extension subject to certain conditions. The term loan was swapped to a fixed interest rate for the full five-year term. The term loan's interest rate will be 2.68 percent when the Company's leverage ratio (as defined by the term loan) is between 4.0 and 4.75 times. $200.0 million of the loan proceeds were funded at closing. The Company has the flexibility to draw the remaining $100.0 million any time during the 95 days following closing and expects to draw these funds toward the end of the 95-day period.

  • Capital Investments: The Company invested $13.7 million of capital in its hotels.

  • Dividends: On September 12, 2012, the Company declared a third quarter 2012 dividend of $0.20 per common share of beneficial interest.

"We are pleased with the performance of our portfolio during the quarter," said Michael D. Barnello, President and Chief Executive Officer of LaSalle Hotel Properties. "We continued to see the bulk of our revenue increases come through improved average rate. This, in conjunction with our diligent asset management practices led to outstanding hotel EBITDA margin growth of 180 basis points. On the capital markets front, we closed on a very favorable five-year term loan, which enabled us to further reduce the balance on our senior unsecured credit facility."

Year-to-date Highlights

For the nine months ended September 30, 2012, RevPAR increased 4.8 percent to $162.26, with ADR growth of 4.2 percent to $200.87 and a 0.6 percent improvement in occupancy to 80.8 percent. The Company's hotel EBITDA margin was 32.6 percent, an increase of 155 basis points compared to the comparable prior year period. The Company invested $48.9 million of capital in its hotels during the nine months ended September 30, 2012.

Balance Sheet

As of September 30, 2012, the Company had total outstanding debt of $1.21 billion, including $201.0 million outstanding on its senior unsecured credit facility. Total net debt to trailing 12 month Corporate EBITDA (as defined in the Company's senior unsecured credit facility) was 4.4 times as of September 30, 2012 and its fixed charge coverage ratio was 2.9 times. For the third quarter, the Company's weighted average interest rate was 4.3 percent. As of September 30, 2012, the Company had $22.4 million of cash and cash equivalents on its balance sheet and capacity of $563.1 million available on its credit facilities.

Park Central Renovation Update

The Company plans to commence the renovation and repositioning of the Park Central Hotel in New York City early January 2013 and continue through at least the third quarter and possibly into the fourth quarter of 2013. Of the hotel's 934 rooms, 761 rooms will be renovated as part of the main hotel, which will undergo a lobby, guestroom and corridor renovation. The remaining 173 rooms will be upgraded as part of the premium hotel, which will include a separate lobby on 55th Street, premium amenities and a more upscale guestroom product. The Company expects to invest between $60.0 and $70.0 million to complete the renovation.

"We are very excited about our plans for the Park Central. As would be expected from a renovation of this scope and size, in a property that operates with high occupancy, there will be EBITDA displacement during 2013. This displacement is expected to range between $8.0 and $12.0 million during 2013," said Michael D. Barnello. "The displacement is one time in nature and it is our expectation that the property will be in a much better position in 2014 and beyond. This EBITDA impact will be partially offset by the January inauguration, which will be helpful for our DC portfolio and the rebound from EBITDA displacement at the Roger Williams and Le Montrose hotels, which occurred during the first half of 2012."

2012 Outlook

The Company is updating its 2012 outlook, tightening the range to reflect its expectations for the one remaining quarter of the year. The revised outlook assumes no additional acquisitions or equity issuance for the remainder of 2012. The Company's revised financial expectations for 2012 are as follows:

Previous Outlook

Current Outlook

Low-end

High-end

Low-end

High-end

($'s in millions except per share/unit data)

RevPAR growth

4.5

%

6.0

%

4.5

%

4.8

%

Hotel EBITDA Margins

32.3

%

32.8

%

32.3

%

32.5

%

Hotel EBITDA Margin Change

125 bps

175 bps

125 bps

150 bps

Adjusted EBITDA

$

263.5

$

272.0

$

263.5

$

265.5

Adjusted FFO

$

179.3

$

186.8

$

179.3

$

180.3

Adjusted FFO per diluted share/unit

$

2.09

$

2.17

$

2.09

$

2.10

Earnings Call

The Company will conduct its quarterly conference call on Thursday, October 18, 2012 at 10:00 AM EDT. To participate in the conference call, please dial (888) 811-5421. Additionally, a live webcast of the conference call will be available through the Company's website. To access, log on to http://www.lasallehotels.com. A replay of the conference call will be archived and available online through the Investor Relations section of http://www.lasallehotels.com.

LaSalle Hotel Properties is a leading multi-operator real estate investment trust. The Company owns interests in 40 hotels of which 38 are owned 100 percent. The 38 wholly-owned properties are upscale full-service hotels, totaling 10,200 guest rooms in 13 markets in 9 states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale full-service hotels located in urban, resort and convention markets. LaSalle Hotel Properties seeks to grow through strategic relationships with premier lodging companies, including Westin Hotels and Resorts, Hilton Hotels Corporation, Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, White Lodging Services Corporation, Thompson Hotels, Davidson Hotel Company, Denihan Hospitality Group, the Kimpton Hotel & Restaurant Group, LLC, Accor, Destination Hotels & Resorts, HEI Hotels & Resorts, JRK Hotel Group, Inc., Viceroy Hotel Group, Highgate Hotels and Access Hotels & Resorts.

This press release, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "will," "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. Forward-looking statements in this press release include, among others, statements about outlook for RevPAR, hotel EBITDA margin, adjusted FFO, adjusted EBITDA and derivations thereof and the terms and the renovation plans and future expectations for the Park Central Hotel. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, (i) the Company's dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly, (ii) risks associated with the hotel industry, including competition, increases in wages, energy costs and other operating costs, actual or threatened terrorist attacks, downturns in general and local economic conditions and cancellation of or delays in the completion of anticipated demand generators, (iii) the availability and terms of financing and capital and the general volatility of securities markets, (iv) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws, (v) interest rate increases, (vi) the possible failure of the Company to qualify as a REIT and the risk of changes in laws affecting REITs, (vii) the possibility of uninsured losses, (viii) risks associated with redevelopment and repositioning projects, including delays and cost overruns and (ix) the risk factors discussed in the Company's Annual Report on Form 10-K as updated in its Quarterly Reports.Accordingly, there is no assurance that the Company's expectations will be realized.Except as otherwise required by the federal securities laws, the Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

For additional information or to receive press releases via e-mail, please visit our website atwww.lasallehotels.com.

LASALLE HOTEL PROPERTIES

Consolidated Statements of Operations and Comprehensive Income

(in thousands, except share data)

(unaudited)

For the three months ended

For the nine months ended

September 30,

September 30,

2012

2011

2012

2011

Revenues:

Hotel operating revenues:

Room

$

167,437

$

133,152

$

449,315

$

356,070

Food and beverage

52,896

50,554

156,298

142,999

Other operating department

15,410

14,256

42,105

37,374

Total hotel operating revenues

235,743

197,962

647,718

536,443

Other income

1,254

1,166

3,693

3,585

Total revenues

236,997

199,128

651,411

540,028

Expenses:

Hotel operating expenses:

Room

39,662

30,920

112,203

86,893

Food and beverage

37,751

34,669

111,488

99,249

Other direct

5,659

5,895

15,843

15,737

Other indirect

54,532

48,411

157,725

136,465

Total hotel operating expenses

137,604

119,895

397,259

338,344

Depreciation and amortization

31,480

27,765

92,911

83,572

Real estate taxes, personal property taxes and insurance

11,254

9,199

32,930

26,470

Ground rent

2,627

2,485

6,613

5,861

General and administrative

5,172

4,185

14,635

12,919

Acquisition transaction costs

156

153

4,057

574

Other expenses

922

668

2,391

1,749

Total operating expenses

189,215

164,350

550,796

469,489

Operating income

47,782

34,778

100,615

70,539

Interest income

2,060

8

2,086

22

Interest expense

(14,110

)

(9,856

)

(38,391

)

(29,566

)

Income before income tax expense and discontinued operations

35,732

24,930

64,310

40,995

Income tax expense

(4,943

)

(3,125

)

(6,920

)

(5,670

)

Income from continuing operations

30,789

21,805

57,390

35,325

Discontinued operations:

Income from operations of property disposed of

0

760

0

441

Income tax expense

0

(244

)

0

(112

)

Net income from discontinued operations

0

516

0

329

Net income

30,789

22,321

57,390

35,654

Noncontrolling interests:

Redeemable noncontrolling interest in loss of consolidated entity

0

0

0

2

Noncontrolling interests of common units in Operating Partnership

(116

)

0

(224

)

0

Net (income) loss attributable to noncontrolling interests

(116

)

0

(224

)

2

Net income attributable to the Company

30,673

22,321

57,166

35,656

Distributions to preferred shareholders

(4,166

)

(7,402

)

(17,567

)

(22,550

)

Issuance costs of redeemed preferred shares

0

0

(4,417

)

(731

)

Net income attributable to common shareholders

$

26,507

$

14,919