LaSalle Hotel Properties Reports Second Quarter 2013 Results

LaSalle Hotel Properties Reports Second Quarter 2013 Results

Announces second quarter RevPAR growth of 6.7% (excluding Park Central) and third quarter dividend increase of 40% to $0.28

BETHESDA, Md.--(BUSINESS WIRE)-- LaSalle Hotel Properties (NYS: LHO) today announced results for the quarter ended June 30, 2013. The Company's results include the following:

Second Quarter

Year-to-Date

2013

2012

2013

2012

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

Entire Portfolio (Including Park Central Hotel)

Total Revenue

$

263.6

$

242.1

$

455.3

$

414.4

EBITDA(1)

$

91.6

$

79.7

$

131.4

$

109.9

Adjusted EBITDA(1)

$

93.1

$

85.3

$

132.9

$

119.3

FFO(1)

$

68.7

$

56.1

$

94.4

$

70.1

Adjusted FFO(1)

$

70.3

$

61.8

$

96.0

$

79.6

FFO per diluted share/unit(1)

$

0.72

$

0.65

$

0.99

$

0.82

Adjusted FFO per diluted share/unit(1)

$

0.73

$

0.72

$

1.00

$

0.93

Net income attributable to common shareholders

$

35.2

$

24.8

$

27.8

$

8.7

Net income attributable to common shareholders per diluted share

$

0.37

$

0.29

$

0.29

$

0.10

Portfolio excluding Park Central Hotel

RevPAR

$

191.00

$

179.00

$

162.98

$

153.59

RevPAR growth

6.7%

6.1%

Hotel EBITDA Margin

37.4%

31.4%

Hotel EBITDA Margin growth

99bps

81bps

Entire Portfolio (Including Park Central Hotel)

RevPAR

$

185.35

$

183.69

$

159.26

$

156.36

RevPAR growth

0.9%

1.9%

Hotel EBITDA Margin

36.8%

30.7%

Hotel EBITDA Margin growth

-17bps

-3bps

(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.


Second Quarter Highlights

Results excluding Park Central Hotel (see Park Central and WestHouse Update below)

  • RevPAR excluding Park Central Hotel: Room revenue per available room ("RevPAR") for the quarter ended June 30, 2013 increased 6.7 percent to $191.00, as a result of a 4.9 percent increase in occupancy to 86.6 percent and a 1.8 percent increase in average daily rate ("ADR") to $220.52.

  • Hotel EBITDA Margin excluding Park Central Hotel: The Company's hotel EBITDA margin for the second quarter was 37.4 percent, a 99 basis point improvement compared to the comparable prior year period.

Entire Portfolio Results

  • RevPAR: RevPAR for the quarter ended June 30, 2013 increased 0.9 percent to $185.35, as a result of a 1.3 percent increase in ADR to $221.88 partially offset by a 0.4 percent decrease in occupancy to 83.5 percent.

  • Hotel EBITDA Margin: The Company's hotel EBITDA margin for the second quarter was 36.8 percent, a 17 basis point decrease compared to the comparable prior year period.

  • Adjusted EBITDA: The Company's adjusted EBITDA was $93.1 million, an increase of 9.1 percent over the second quarter of 2012. During the second quarter of 2013, the Company's financial results were impacted by $6.7 million of EBITDA displacement from the Park Central and WestHouse renovation project.

  • Adjusted FFO: The Company generated second quarter adjusted FFO of $70.3 million, or $0.73 per diluted share/unit, compared to $61.8 million or $0.72 per diluted share/unit for the comparable prior year period.

  • Capital Markets: The Company completed the following capital markets activities during the second quarter of 2013:

    • On April 5, 2013, the Company redeemed 4,000,000 shares, or $100.0 million of the 6,348,888 outstanding 7.25% Series G Preferred Shares.

    • On June 3, 2013, the Company retired the $59.8 million mortgage secured by Hotel Solamar. The mortgage carried an interest rate of 5.49 percent and the Company funded the mortgage payoff with proceeds from its senior unsecured credit facility, which has a current interest rate of 1.95 percent.

    • During the quarter, the Company sold 721,706 common shares through its ATM program at an average net price of $27.29 per share for net proceeds of $19.7 million.

  • Capital Investments: The Company invested $39.9 million of capital in its hotels, most of which pertained to the continuation of the Park Central Hotel and Westhouse renovation in New York City.

  • Dividends: On June 14, 2013, the Company declared a second quarter 2013 dividend of $0.20 per common share of beneficial interest.

Common Dividend

  • The Company's Board of Trustees has declared that it has increased the quarterly common dividend in the third quarter 2013 by 40 percent to $0.28 per share, an annualized rate of $1.12 per share.

"We are very excited to announce these strong results and to announce an increase in the common dividend," said Michael D. Barnello, President and Chief Executive Officer of LaSalle Hotel Properties. "Our portfolio's RevPAR, adjusted EBITDA, and adjusted FFO were all at the high end of our expectations. The combination of strong results year-to-date and our solid outlook for the remainder of the year have contributed to the Company's decision to increase the midpoints of our full year adjusted EBITDA and adjusted FFO outlook and the Board's decision to substantially increase the dividend to an annualized rate of $1.12 per share in the third quarter."

Year-to-date Highlights

Excluding the Park Central Hotel, for the six months ended June 30, 2013, RevPAR increased 6.1 percent to $162.98, with occupancy growth of 4.2 percent to 79.4 percent and ADR improvement of 1.9 percent to $205.38. The Company's hotel EBITDA margin excluding the Park Central Hotel was 31.4 percent, an increase of 81 basis points compared to the comparable prior year period. The Company invested $56.1 million of capital in the entire portfolio including the Park Central Hotel during the six months ended June 30, 2013.

Park Central and WestHouse Update

As previously disclosed, the Company is renovating its Park Central Hotel in New York City. The project consists of the full renovation and splitting of the original 934-room Park Central Hotel into two distinct hotels: the newly renovated 761-room Park Central Hotel and the upgraded 172-room premium WestHouse.

The Park Central Hotel portion of the renovation is substantially complete, as all 761 of the Park Central Hotel rooms have been newly renovated. The lobby of the Park Central Hotel will be open in a few days, as the front of the lobby will be complete, while the rear portion of the space will be completed between August and September. The Company remains on schedule to complete the WestHouse renovation between September and November. EBITDA displacement on the entire project during the second quarter was $6.7 million. The Company's expectation for full year EBITDA displacement related to the entire project is $9.0 to $12.0 million. The renovation remains on track for a project cost within the range of $60.0 to $70.0 million.

Balance Sheet

As of June 30, 2013, the Company had total outstanding debt of $1.2 billion, including $180.0 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 4.1 times as of June 30, 2013 and its fixed charge coverage ratio was 3.2 times. For the second quarter, the Company's weighted average interest rate was 4.2 percent. As of June 30, 2013, the Company had $15.1 million of cash and cash equivalents on its balance sheet and capacity of $593.0 million available on its credit facilities.

2013 Third Quarter Outlook

The Company expects third quarter RevPAR, excluding the Park Central Hotel, to increase 2.5 percent to 4.5 percent. The Company expects its portfolio, including the Park Central Hotel, to generate adjusted EBITDA of $85.0 million to $88.0 million and adjusted FFO per share/unit of $0.64 to $0.68.

2013 Outlook

The Company is updating its 2013 outlook. The revised outlook excludes any future acquisitions or equity issuances for the remainder of 2013. The Company's revised financial expectations for 2013 are as follows:

Current Outlook

Low-end

High-end

($'s in millions except

per share/unit data)

Excluding Park Central

RevPAR growth

4.5%

6.0%

Hotel EBITDA Margins

32.0%

32.5%

Hotel EBITDA Margin Change

50 bps

100 bps

Including Park Central

RevPAR growth

1.5%

3.0%

Hotel EBITDA Margins

32.0%

32.5%

Hotel EBITDA Margin Change

0 bps

50 bps

Entire Portfolio (Including Park Central)

Adjusted EBITDA

$

285.0

$

295.0

Adjusted FFO

$

204.5

$

214.0

Adjusted FFO per diluted share/unit

$

2.13

$

2.23

Income Tax Expenses

$

4.5

$

5.5

Capital Investments

Portfolio Excluding Park Central

$

70.0

$

75.0

Park Central

$

60.0

$

70.0

Portfolio Including Park Central

$

130.0

$

145.0

Earnings Call

The Company will conduct its quarterly conference call on Thursday, July 18, 2013 at 10:00 AM EDT. To participate in the conference call, please dial (888) 219-1420. 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 40 hotels and a mezzanine loan secured by two hotels in Santa Monica, CA. The properties are upscale, full-service hotels, totaling more than 10,600 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 the renovation of the Park Central Hotel and Westhouse, outlook for RevPAR, adjusted FFO, adjusted EBITDA and derivations thereof and the Company's outlook for capital investments. 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 six months ended

June 30,

June 30,

2013

2012

2013

2012

Revenues:

Hotel operating revenues:

Room

$

179,089

$

167,186

$

306,077

$

281,878

Food and beverage

65,529

58,787

115,375

103,402

Other operating department

16,328

14,839

29,712

26,695

Total hotel operating revenues

260,946

240,812

451,164

411,975

Other income

2,614

1,283

4,100

2,439

Total revenues

263,560

242,095

455,264

414,414

Expenses:

Hotel operating expenses:

Room

42,294

38,688

79,878

72,541

Food and beverage

42,681

39,475

79,985

73,737

Other direct

5,998

5,558

11,020

10,184

Other indirect

59,189

55,152

112,924

103,193

Total hotel operating expenses

150,162

138,873

283,807

259,655

Depreciation and amortization

33,427

31,279

66,548

61,431

Real estate taxes, personal property taxes and insurance

12,780

10,865

25,134

21,676

Ground rent

2,791

2,210

5,286

3,986

General and administrative

5,564

4,849

10,711

9,463

Acquisition transaction costs

0

307

0

3,901

Other expenses

1,528

918

2,169