STRATEGIC HOTELS AND RESORTS INC CHICAGO, Aug. 5, 2015 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the second quarter ended June 30, 2015.
($ in
millions,
except
per
share
and
operating
metrics) Second Quarter
--------------
Earnings
Metrics 2015 2014%
-------- ---- ----
Net
income
attributable
to
common
shareholders $6.7 $80.8 (91.7)%
Net
income
per
diluted
share $0.02 $0.35 (94.3)%
Comparable
funds
from
operations
(Comparable
FFO)
(a) $69.0 $48.1 43.4%
Comparable
FFO
per
diluted
share
(a) $0.25 $0.21 19.0%
Comparable
EBITDA
(a) $88.4 $68.9 28.3%
Same Store United States
Portfolio Operating Metrics (b)
--------------------------------
Average
Daily
Rate
(ADR)
(d) $317.67 $299.97 5.9%
Occupancy 79.1% 80.0% (0.9) pts
Revenue
per
Available
Room
(RevPAR)
(d) $251.41 $239.95 4.8%
Total
RevPAR
(d) $472.27 $462.41 2.1%
EBITDA
Margins
(d) 28.3% 28.3% 0 bps
Total United States Portfolio
Operating Metrics (c)
-----------------------------
Average
Daily
Rate
(ADR)
(d) $328.76 $310.53 5.9%
Occupancy 78.8% 80.0% (1.2) pts
Revenue
per
Available
Room
(RevPAR)
(d) $259.15 $248.40 4.3%
Total
RevPAR(d) $495.90 $486.55 1.9%
EBITDA
Margins(d) 27.7% 27.7% 0 bps
----------- ---- ---- -----
($ in
millions,
except
per
share
and
operating
metrics) Year to Date
------------
Earnings
Metrics 2015 2014%
-------- ---- ----
Net
income
attributable
to
common
shareholders $22.5 $298.0 (92.4)%
Net
income
per
diluted
share $0.07 $1.30 (94.6)%
Comparable
funds
from
operations
(Comparable
FFO)
(a) $125.3 $60.3 107.7%
Comparable
FFO
per
diluted
share
(a) $0.45 $0.28 60.7%
Comparable
EBITDA
(a) $162.5 $110.1 47.6%
Same Store United States
Portfolio Operating Metrics (b)
--------------------------------
Average
Daily
Rate
(ADR)
(d) $312.95 $293.14 6.8%
Occupancy 75.5% 75.0% 0.5 pts
Revenue
per
Available
Room
(RevPAR)
(d) $236.16 $219.84 7.4%
Total
RevPAR
(d) $454.93 $430.34 5.7%
EBITDA
Margins
(d) 26.8% 24.7% 210 bps
Total United States Portfolio
Operating Metrics (c)
-----------------------------
Average
Daily
Rate
(ADR)
(d) $326.59 $305.73 6.8%
Occupancy 75.7% 75.5% 0.2 pts
Revenue
per
Available
Room
(RevPAR)
(d) $247.30 $230.78 7.2%
Total
RevPAR(d) $482.03 $456.46 5.6%
EBITDA
Margins(d) 26.5% 24.6% 190 bps
----------- ---- ---- -------
(a) Please refer to the tables provided
later in this press release for a
reconciliation of net income
attributable to common shareholders
to Comparable FFO, Comparable FFO
per diluted share and Comparable
EBITDA. Comparable FFO, Comparable
FFO per diluted share and
Comparable EBITDA are non-GAAP
measures and are further explained
within the reconciliation tables.
(b) Operating statistics reflect results
from the Company's Same Store
United States portfolio (see
portfolio definitions later in this
press release).
(c) Operating statistics reflect results
from the Company's Total United
States portfolio (see portfolio
definitions later in this press
release).
(d) ADR, RevPAR, Total RevPAR and EBITDA
Margin statistics have been
modified to take into account
certain adjustments, including
those related to the adoption of
the Uniform System of Accounts for
the Lodging Industry, Eleventh
Revised Edition (the "USALI
Eleventh Revised Edition").
"The second quarter represented another solid quarter of operating and financial results for the company," commented Raymond L. "Rip" Gellein, Chairman and Chief Executive Officer of Strategic Hotels & Resorts. "We were productive on many fronts. We acquired a world-class asset, sold a non-core asset, substantially strengthened the balance sheet and, more importantly, significantly grew our top line and bottom line. The outlook for the balance of the year is very positive and we are seeing attractive growth in group bookings looking into 2016 and beyond," summarized Gellein.
Second Quarter Highlights
-- Total consolidated revenues were $356.9 million in the second quarter of
2015, a 29.2 percent increase over the prior year period. The increase
was primarily driven by the acquisitions of the Four Seasons Resort
Scottsdale at Troon North, the Montage Laguna Beach resort and the Four
Seasons Hotel Austin, as well as the consolidation of the Hotel del
Coronado.
-- Net income attributable to common shareholders was $6.7 million, or
$0.02 per diluted share, in the second quarter of 2015, compared with
$80.8 million, or $0.35 per diluted share, in the second quarter of
2014. The year-over-year decrease in net income was primarily the
result of a one-time gain related to the acquisition and consolidation
of the Hotel del Coronado recorded in the second quarter of 2014.
-- Comparable FFO was $0.25 per diluted share in the second quarter of
2015, compared with $0.21 per diluted share in the prior year period, a
19.0 percent increase over the prior year period.
-- Comparable EBITDA was $88.4 million in the second quarter of 2015,
compared with $68.9 million in the prior year period, a 28.3 percent
increase between periods as a result of the Company's acquisition
activity and same store growth.
-- Same Store United States portfolio RevPAR increased 4.8 percent in the
second quarter of 2015, driven by a 5.9 percent increase in ADR
offsetting a 0.9 percentage point decline in occupancy compared to the
second quarter of 2014. Total RevPAR increased 2.1 percent between
periods, with non-rooms revenue decreasing 0.7 percent between periods.
-- Total United States portfolio RevPAR increased 4.3 percent in the second
quarter of 2015, driven by a 5.9 percent increase in ADR offsetting a
1.2 percentage point decline in occupancy compared to the second quarter
of 2014. Total RevPAR increased 1.9 percent between periods, with
non-rooms revenue decreasing 0.5 percent between periods.
-- Group occupied room nights in the Total United States portfolio
decreased 0.9 percent in the second quarter 2015 and transient occupied
room nights decreased 1.8 percent compared to the second quarter of
2014. Transient ADR increased 6.8 percent compared to the second
quarter of 2014 and group ADR increased 4.7 percent.
-- Same Store United States and Total United States portfolio EBITDA
margins were flat in the second quarter of 2015, compared to the second
quarter of 2014. Excluding a one-time real estate tax credit received
in the second quarter of 2014 and one-time charges related to real
estate and personal property taxes recognized in the second quarter of
2015, EBITDA margins expanded 40 basis points in the Same Store and
Total United States portfolios. EBITDA margins in both years have been
adjusted to exclude the amortization of the below market hotel
management agreement related to the Hotel del Coronado, and other
adjustments related to the adoption of the USALI Eleventh Revised
Edition to improve comparability between years.
Year to Date Highlights
-- Total consolidated revenues were $682.2 million for the six month period
ended June 30, 2015, a 44.9 percent increase over the prior year period.
This increase was primarily driven by the acquisitions of the Four
Seasons Resort Scottsdale at Troon North, the Montage Laguna Beach
resort and the Four Seasons Hotel Austin, as well as the consolidation
of the Hotel del Coronado and the Fairmont Scottsdale Princess resort.
-- Net income attributable to common shareholders was $22.5 million, or
$0.07 per diluted share, compared with $298.0 million, or $1.30 per
diluted share, for the six month period ended June 30, 2014. The
year-over-year decrease in net income was primarily the result of the
one-time gains related to the consolidation of the Fairmont Scottsdale
Princess resort and the Hotel del Coronado recorded in the first half of
2014.
-- Comparable FFO was $0.45 per diluted share compared with $0.28 per
diluted share in the six month period ended June 30, 2014, a 60.7
percent increase over the prior year period as a result of the Company's
acquisition and financing activities.
-- Comparable EBITDA was $162.5 million compared with $110.1 million for
the six month period ended June 30, 2014, a 47.6 percent increase
between periods as a result of the Company's acquisition activity and
same store growth.
Transaction Activity
On April 9, 2015, the Company retired the $117.0 million loan that encumbered the Fairmont Scottsdale Princess resort. The loan had an interest rate of LIBOR plus 36 basis points. Upon closing, $15.1 million of cash being held by the lender was released to the Company.
On May 12, 2015, the Company closed on the acquisition of the Four Seasons Hotel Austin for $197.0 million.
On May 21, 2015, the Company, along with its joint venture partner, closed on the sale of the Hyatt Regency La Jolla hotel for $118 million. The Company previously owned a 53.5% interest in the asset. At closing, the joint venture retired $89.2 million of debt secured by the hotel.
On May 27, 2015, the Company closed a new $750.0 million senior unsecured credit facility with an accordion feature allowing additional borrowing capacity up to $1.0 billion. The facility is comprised of a $450.0 million unsecured revolving credit facility and a $300.0 million unsecured term loan. The revolving credit facility interest rate is based upon a leverage-based pricing grid ranging from LIBOR plus 165 basis points to LIBOR plus 240 basis points. The term loan interest rate is also based on a leverage based pricing grid ranging from LIBOR plus 160 basis points to LIBOR plus 235 basis points. The combined unsecured facility has a five-year term.
On May 27, 2015, the Company also closed a $115.0 million mortgage loan secured by the Ritz-Carlton Half Moon Bay hotel. The loan bears interest at a floating rate of LIBOR plus 240 basis points and has a five-year initial term with two, one-year extension options.
On May 27, 2015, the Company simultaneously repaid the previously outstanding $209.6 million loan secured by the Westin St. Francis hotel and the $93.1 million loan secured by the Fairmont Chicago hotel that were cross-collateralized and priced at a fixed interest rate of 6.09 percent and set to mature in June 2017. In connection with the repayment, the Company paid a prepayment penalty totaling approximately $32.9 million.
Subsequent Event
-- On July 24, 2015, the Company acquired the remaining 49 percent
ownership interest in the JW Marriott Essex House hotel. Pursuant to
the terms of the joint venture agreements, the Company's partner,
affiliates of KSL Capital Partners, LLC ("KSL"), exercised a contractual
put option of their equity interests in the asset and the Company will
issue KSL an aggregate of 6,595,449 shares of common stock priced at
$12.82 per share, or an implied valuation of $84.6 million.
2015 Guidance
Based on the results of the first six months of 2015 and current forecasts for the remainder of the year, management is adjusting its guidance ranges for full year 2015 RevPAR growth, Total RevPAR growth, Comparable EBITDA and Comparable FFO per fully diluted share.
For the full-year ending December 31, 2015, the Company is providing the following guidance ranges:
Guidance Metrics Previous Range Revised Range
---------------- -------------- -------------
RevPAR 6.0% - 8.0% 5.5% - 6.5%
Total RevPAR 4.5% - 6.5% 4.0% - 5.0%
EBITDA Margin expansion 125 - 175 basis points 125 - 175 basis points
Comparable EBITDA $320M - $340M $325M - $340M
Comparable FFO per
diluted share $0.85 - $0.93 $0.88 - $0.94
------------------ ------------- -------------
The guidance presented takes into account various accounting changes as stipulated by the industry's USALI Eleventh Revised Edition, which became effective in January 2015. Guidance for 2015 RevPAR, Total RevPAR and EBITDA margin expansion has been presented to reflect changes compared to the prior year as if these 2014 statistics included the USALI Eleventh Revised Edition changes. Actual RevPAR, Total RevPAR and EBITDA Margin changes from prior year may differ slightly. The Company will present 2014 RevPAR, Total RevPAR and EBITDA margins on an as reported basis and on a pro forma basis, which will include the USALI Eleventh Revised Edition changes.
Portfolio Definitions
Same Store United States portfolio hotel comparisons for the second quarter of 2015 are derived from the Company's hotel portfolio at June 30, 2015, consisting of 14 properties located in the United States, but excluding the Four Seasons Resort Scottsdale at Troon North, the Montage Laguna Beach resort, and the Four Seasons Hotel Austin which were acquired on December 9, 2014, January 29, 2015, and May 12, 2015, respectively as well as the Hyatt Regency La Jolla, which was sold on May, 21, 2015.
Total United States portfolio hotel comparisons for the second quarter of 2015 are derived from the Company's hotel portfolio as of June 30, 2015, consisting of all 17 properties located in the United States, including the Four Seasons Resort Scottsdale at Troon North, the Montage Laguna Beach resort, and the Four Seasons Hotel Austin, which were acquired on December 9, 2014, January 29, 2015, and May 12, 2015, respectively, but excluding the Hyatt Regency La Jolla, which was sold on May, 21, 2015.
Total United States portfolio hotel comparisons for the full year 2015 are derived from the Company's current hotel portfolio, consisting of 17 properties located in the United States, including the Four Seasons Resort Scottsdale at Troon North, the Montage Laguna Beach resort, and the Four Seasons Hotel Austin which were acquired on December 9, 2014, January 29, 2015, and May 12, 2015 respectively, but excluding the Hyatt Regency La Jolla, which was sold on May, 21, 2015.
Earnings Call
The Company will conduct its second quarter 2015 conference call for investors and other interested parties on Thursday, August 6, 2015 at 10:00 a.m. Eastern Time (ET). Interested individuals are invited to access the call by dialing 877.930.8296 (toll international: 253.336.8739) with passcode 80609573. To participate on the webcast, log on to the company's website at http://www.strategichotels.com or http://edge.media-server.com/m/p/3x8gtzod/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 1:00 p.m. ET on August 6, 2015 through 11:59 p.m. ET on August 13, 2015. To access the replay, dial 855.859.2056 (toll international: 404.537.3406) with passcode 80609573. A replay of the call will also be available in the Investor Relations section of the company's website at http://www.strategichotels.com.
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.
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 and Europe. The Company currently has ownership interests in 18 properties with an aggregate of 8,199 rooms and 851,000 square feet of multi-purpose meeting and banqueting space. For a list of current properties and for further information, please visit the Company's website at www.strategichotels.com.
This press release contains forward-looking statements about Strategic Hotels & Resorts, Inc. (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. These forward-looking statements include statements regarding the Company's future financial results, stabilization in the lodging space, positive trends in the lodging industry and the Company's continued focus on improving profitability. Actual results could differ materially from the Company's projections. Factors that may contribute to these differences include, but are not limited to the following: the effects of economic conditions and disruptions in financial markets 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, refinance or extend maturing debt; the Company's ability to maintain compliance with covenants contained in its debt facilities; stagnation or deterioration in economic and market conditions, particularly impacting business and leisure travel spending in the markets where the Company's hotels operate and in which the Company invests, including luxury and upper upscale product; general volatility of the capital markets and the market price of the Company's shares of common stock; availability of capital; the Company's ability to dispose of properties in a manner consistent with its investment strategy and liquidity needs; hostilities and security concerns, including future terrorist attacks, or the apprehension of hostilities, in each case that affect travel within or to the United States, Germany 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; delays and cost-overruns in construction and development; marketing challenges associated with entering new lines of business or pursuing new business strategies; the Company's failure to maintain its status as a REIT; changes in the competitive environment in the Company's industry and the markets where the Company invests; changes in real estate and zoning laws or regulations; legislative or regulatory changes, including changes to laws governing the taxation of REITs; changes in generally accepted accounting principles, policies and guidelines; and litigation, judgments or settlements.
Additional risks are discussed in the Company's filings with the Securities and Exchange Commission, including those appearing under the heading "Item 1A. Risk Factors" in the Company's most recent Form 10-K and subsequent Form 10-Qs. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. The forward-looking statements are made as of the date of this press release, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
The following tables reconcile projected 2015 net income 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 Income Attributable to Common
Shareholders $58.9 $73.9
Depreciation and Amortization 160.6 160.6
Interest Expense 81.4 81.4
Income Taxes 8.1 8.1
Non-controlling Interests 0.2 0.2
Adjustments from Consolidated
Affiliates 8.6 8.6
Realized Portion of Deferred Gain on
Sale Leasebacks (0.2) (0.2)
Gain on Sale of Asset (40.6) (40.6)
Impairment Losses 10.4 10.4
Loss on Early Extinguishment of Debt 34.2 34.2
Hotel Acquisition Costs 1.1 1.1
Amortization of Below Market
Management Agreement 2.1 2.1
Other Adjustments 0.2 0.2
--- ---
Comparable EBITDA $325.0 $340.0
Low Range High Range
--------- ----------
Net Income Attributable to Common
Shareholders $58.9 $73.9
Depreciation and Amortization 159.9 159.9
Realized Portion of Deferred Gain
on Sale Leasebacks (0.2) (0.2)
Gain on Sale of Asset (40.6) (40.6)
Non-controlling Interests 0.2 0.2
Adjustments from Consolidated
Affiliates 12.0 12.0
Impairment Losses 10.4 10.4
Interest Rate Swap OCI Amortization 10.4 10.4
Loss on Early Extinguishment of
Debt 34.2 34.2
Amortization of Debt Discount 0.8 0.8
Amortization of Below Market
Management Agreement 2.1 2.1
Hotel Acquisition Costs 1.1 1.1
--- ---
Comparable FFO 249.2 264.2
Comparable FFO per Diluted Share $0.88 $0.94
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2015 2014 2015 2014
---- ---- ---- ----
Revenues:
Rooms $186,377 $148,874 $349,241 $251,974
Food and beverage 134,523 100,028 257,992 170,045
Other hotel operating revenue 34,989 25,942 72,896 46,181
Lease revenue 1,013 1,319 2,044 2,618
----- ----- ----- -----
Total revenues 356,902 276,163 682,173 470,818
------- ------- ------- -------
Operating Costs and Expenses:
Rooms 51,072 41,268 98,937 74,975
Food and beverage 88,245 67,077 171,319 121,680
Other departmental expenses 86,626 66,238 171,350 119,817
Management fees 12,423 9,241 23,862 15,019
Other hotel expenses 19,842 15,572 35,455 31,250
Lease expense 1,017 1,260 2,051 2,518
Depreciation and amortization 40,331 28,058 77,995 50,263
Impairment losses 10,401 - 10,401 -
Corporate expenses 6,441 7,198 14,709 14,391
----- ----- ------ ------
Total operating costs and expenses 316,398 235,912 606,079 429,913
------- ------- ------- -------
Operating income 40,504 40,251 76,094 40,905
Interest expense (20,709) (19,587) (43,494) (37,861)
Interest income 16 50 117 77
Loss on early extinguishment of debt (34,211) - (34,211) -
Equity in earnings of unconsolidated affiliates - 826 - 5,271
Foreign currency exchange gain (loss) 40 (8) (76) (6)
Gain on consolidation of affiliates - 65,349 - 143,466
Other income, net 40,465 795 40,308 1,218
------ --- ------ -----
Income before income taxes and discontinued
operations 26,105 87,676 38,738 153,070
Income tax expense (2,452) (207) (2,671) (246)
------ ---- ------ ----
Income from continuing operations 23,653 87,469 36,067 152,824
Income from discontinued operations, net of tax - 604 - 159,039
--- --- --- -------
Net Income 23,653 88,073 36,067 311,863
Net income attributable to the noncontrolling
interests in SHR's operating partnership (67) (281) (104) (1,130)
Net (income) loss attributable to the
noncontrolling interests in consolidated
affiliates (16,888) 217 (13,454) 4,258
------- --- ------- -----
Net Income Attributable to SHR 6,698 88,009 22,509 314,991
Preferred shareholder dividends - (7,169) - (16,993)
--- ------ --- -------
Net Income Attributable to SHR Common Shareholders $6,698 $80,840 $22,509 $297,998
====== ======= ======= ========
Basic Income Per Common Share:
Income from continuing operations attributable to
SHR common shareholders $0.02 $0.36 $0.08 $0.65
Income from discontinued operations attributable
to SHR common shareholders - - - 0.74
--- --- --- ----
Net income attributable to SHR common shareholders $0.02 $0.36 $0.08 $1.39
===== ===== ===== =====
Weighted average shares of common stock
outstanding 276,380 222,013 257,056 214,450
======= ======= ======= =======
Diluted Income Per Common Share:
Income from continuing operations attributable to
SHR common shareholders $0.02 $0.35 $0.07 $0.60
Income from discontinued operations attributable
to SHR common shareholders - - - 0.70
--- ---
Net income attributable to SHR common shareholders $0.02 $0.35 $0.07 $1.30
===== ===== ===== =====
Weighted average shares of common stock
outstanding 278,383 233,463 284,208 225,900
======= ======= ======= =======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets
(in thousands, except share data)
June 30, 2015 December 31, 2014
------------- -----------------
Assets
Investment in hotel properties, net $3,276,411 $2,828,400
Goodwill 21,629 38,128
Intangible assets, net of accumulated amortization of
$11,783 and $7,288 93,936 94,324
Investment in unconsolidated affiliates 22,850 22,850
Cash and cash equivalents 98,586 442,613
Restricted cash and cash equivalents 77,790 81,510
Accounts receivable, net of allowance for doubtful accounts
of $688 and $492 71,486 51,382
Deferred financing costs, net of accumulated amortization
of $8,203 and $7,814 14,580 11,440
Deferred tax assets 1,419 1,729
Prepaid expenses and other assets 56,727 46,781
------ ------
Total assets $3,735,414 $3,619,157
========== ==========
Liabilities, Noncontrolling Interests and Equity
Liabilities:
Mortgages payable, net of discount $1,460,637 $1,705,778
Credit facility, including an unsecured term loan of
$300,000 and $0 344,000 -
Accounts payable and accrued expenses 234,306 224,505
Preferred stock redemption liability - 90,384
Distributions payable - 104
Deferred tax liabilities 46,117 46,137
------ ------
Total liabilities 2,085,060 2,066,908
Commitments and contingencies
Noncontrolling interests in SHR's operating partnership 9,619 10,500
Equity:
SHR's shareholders' equity:
Common stock ($0.01 par value per share; 350,000,000 shares
of common stock authorized; 275,494,707 and 267,435,799
shares of common stock issued and outstanding) 2,755 2,674
Additional paid-in capital 2,451,209 2,348,284
Accumulated deficit (867,960) (890,469)
Accumulated other comprehensive loss (7,586) (13,032)
------ -------
Total SHR's shareholders' equity 1,578,418 1,447,457
Noncontrolling interests in consolidated affiliates 62,317 94,292
------ ------
Total equity 1,640,735 1,541,749
--------- ---------
Total liabilities, noncontrolling interests and equity $3,735,414 $3,619,157
========== ==========
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Financial Highlights
Supplemental Financial Data
(in thousands, except per share information)
June 30, 2015
-------------
Pro Rata Share Consolidated
-------------- ------------
Capitalization
--------------
Shares of common stock
outstanding 275,495 275,495
Operating partnership units
outstanding 794 794
Restricted stock units
outstanding 1,205 1,205
----- -----
Combined shares and units
outstanding 277,494 277,494
Common stock price at end of
period $12.12 $12.12
------ ------
Common equity capitalization $3,363,227 $3,363,227
Consolidated debt 1,805,618 1,805,618
Pro rata share of consolidated
debt (110,250) -
Cash and cash equivalents (98,586) (98,586)
------- -------
Total enterprise value $4,960,009 $5,070,259
========== ==========
Net Debt /Total Enterprise
Value 32.2% 33.7%
Common Equity /Total
Enterprise Value 67.8% 66.3%
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Disposition of Hotel Properties
2015 Dispositions
Effective January 1, 2015, the Company adopted new accounting guidance which amends the requirements for reporting discontinued operations. Under the guidance, only disposals that represent a strategic shift that has (or will have) a major effect on the Company's results of operations would qualify as discontinued operations.
On May 21, 2015, the Company, along with its joint venture partner, sold the Hyatt Regency La Jolla hotel for sales proceeds of approximately $118,293,000. The $89,228,000 mortgage loan secured by the hotel was repaid at the time of closing. A $40,613,000 gain on the sale was recorded in other income, net in the condensed consolidated statements of operations for the three and six months ended June 30, 2015. The portion of the gain attributable to the joint venture partner was $16,649,000, which is reflected in net income attributable to the noncontrolling interests in consolidated affiliates in the condensed consolidated statements of operations for the three and six months ended June 30, 2015. The disposition of the Hyatt Regency La Jolla hotel does not represent a strategic shift that has had a major effect on the Company's results of operations; therefore, the hotel's results of operations are included in continuing operations for all periods presented.
2014 Dispositions
During the six months ended June 30, 2014, the Company sold the following hotels:
Hotel Location Date Sold Sales Proceeds Gain on sale
----- -------- --------- -------------- ------------
Four Seasons
Punta Mita
Resort and
La Solana
land parcel Punta Mita, Mexico February 28, 2014 $206,867,000 $63,879,000
Marriott
London
Grosvenor
Square London, England March 31, 2014 $209,407,000 (a) $92,889,000
(a) There was an outstanding balance of
BPS67,301,000 ($112,150,000) on the
mortgage loan secured by the
Marriott London Grosvenor Square
hotel, which was repaid at the time
of closing. The net proceeds we
received were $97,257,000.
The results of operations of hotels sold prior to January 1, 2015 are classified as discontinued operations and segregated in the consolidated statements of operations for all periods presented. The following is a summary of income from discontinued operations, net of tax, for the three and six months ended June 30, 2014 (in thousands):
Three Months Six Months Ended
Ended June June 30,
30,
------------- -----------------
2014 2014
---- ----
Hotel operating
revenues $ - $17,767
--- --- -------
Operating costs and
expenses - 11,485
Depreciation and
amortization - 1,275
Total operating costs
and expenses - 12,760
--- ------
Operating income - 5,007
Interest expense - (1,326)
Interest income - 2
Loss on early
extinguishment of debt - (272)
Foreign currency
exchange gain - 32
Income tax expense - (833)
Gain on sale, net of
tax 604 156,429
--- -------
Income from
discontinued
operations, net of tax $604 $159,039
==== ========
Strategic Hotels & Resorts, Inc. and
Subsidiaries (SHR)
Investments in Unconsolidated Affiliates
(in thousands)
We had a 36.4% equity ownership interest
in the Hotel del Coronado that we
accounted for using the equity method of
accounting until we acquired the
remaining 63.6% equity ownership interest
not previously owned by us on June 11,
2014. We had a 50.0% equity ownership
interest in the Fairmont Scottsdale
Princess hotel that we accounted for
using the equity method of accounting
until we acquired the remaining 50.0%
equity ownership interest not previously
owned by us on March 31, 2014. For
purposes of this analysis, the operating
results reflect the 36.4% equity
ownership interest we held in the Hotel
del Coronado prior to June 11, 2014 and
the 50.0% equity ownership interest we
held in the Fairmont Scottsdale Princess
hotel prior to March 31, 2014.
Three Months Ended June 30, 2014
--------------------------------
Hotel del Fairmont
Scottsdale Total
Coronado Princess
-------- --------
Total revenues (100%) $33,821 $ - $33,821
Property EBITDA (100%) $11,202 $ - $11,202
Equity in earnings of
unconsolidated
affiliates (SHR
ownership)
Property EBITDA $4,075 $ - $4,075
Depreciation and
amortization (1,572) - (1,572)
Interest expense (1,518) - (1,518)
Other expenses, net (18) - (18)
Income taxes (87) - (87)
--- --- ---
Equity in earnings of
unconsolidated
affiliates $880 $ - $880
==== === === ====
EBITDA Contribution:
Equity in earnings of
unconsolidated
affiliates $880 $ - $880
Depreciation and
amortization 1,572 - 1,572
Interest expense 1,518 - 1,518
Income taxes 87 - 87
--- --- ---
EBITDA Contribution $4,057 $ - $4,057
====== === === ======
FFO Contribution:
Equity in earnings of
unconsolidated
affiliates $880 $ - $880
Depreciation and
amortization 1,572 - 1,572
----- --- -----
FFO Contribution $2,452 $ - $2,452
====== === === ======
Six Months Ended June 30, 2014
------------------------------
Hotel del Fairmont Total
Coronado Scottsdale
Princess
--------
Total revenues (100%) $67,863 $35,006 $102,869
Property EBITDA (100%) $20,761 $13,191 $33,952
Equity in earnings of
unconsolidated
affiliates (SHR
ownership)
Property EBITDA $7,426 $6,595 $14,021
Depreciation and
amortization (3,526) (1,551) (5,077)
Interest expense (3,418) (168) (3,586)
Other expenses, net (25) (30) (55)
Income taxes 143 - 143
--- --- ---
Equity in earnings of
unconsolidated
affiliates $600 $4,846 $5,446
==== ====== ======
EBITDA Contribution
Equity in earnings of
unconsolidated
affiliates $600 $4,846 $5,446
Depreciation and
amortization 3,526 1,551 5,077
Interest expense 3,418 168 3,586
Income taxes (143) - (143)
---- --- ----
EBITDA Contribution $7,401 $6,565 $13,966
====== ====== =======
FFO Contribution
Equity in earnings of
unconsolidated
affiliates $600 $4,846 $5,446
Depreciation and
amortization 3,526 1,551 5,077
===== ===== =====
FFO Contribution $4,126 $6,397 $10,523
====== ====== =======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Leasehold Information
(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2015 2014 2015 2014
---- ---- ---- ----
Marriott Hamburg:
Property EBITDA $1,321 $1,687 $2,560 $3,199
Revenue (a) $1,013 $1,319 $2,044 $2,618
Lease expense (1,017) (1,260) (2,051) (2,518)
Less: Deferred gain on
sale-leaseback (43) (54) (87) (107)
--- --- --- ----
Adjusted lease expense (1,060) (1,314) (2,138) (2,625)
Comparable EBITDA
contribution from
leasehold $(47) $5 $(94) $(7)
==== === ==== ===
Security Deposit (b): June 30, 2015 December 31,
2014
------------- -------------
Marriott Hamburg $2,117 $2,299
(a) For the three and six months
ended June 30, 2015 and 2014,
Revenue for the Marriott
Hamburg hotel represents lease
revenue.
(b) The security deposit is recorded
in prepaid expenses and other
assets on the consolidated
balance sheets.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures
We present five non-GAAP financial measures that we believe are useful to management and investors as key measures of our operating performance: Funds from Operations (FFO) attributable to SHR common shareholders; FFO--Fully Diluted; Comparable FFO; Earnings Before Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and Comparable EBITDA.
EBITDA represents net income (or loss) attributable to SHR common shareholders excluding: (i) interest expense, (ii) income taxes, including deferred income tax benefits and expenses applicable to our foreign subsidiaries and income taxes applicable to sale of assets; (iii) depreciation and amortization; and (iv) preferred stock dividends. EBITDA also excludes interest expense, income taxes and depreciation and amortization of our unconsolidated affiliates. EBITDA is presented on a full participation basis, which means we have assumed conversion of all redeemable noncontrolling interests of our operating partnership into our common stock. We believe this treatment of noncontrolling interests provides useful information for management and our investors and appropriately considers our current capital structure. We also present Comparable EBITDA, which eliminates the effect of realizing deferred gains on our sale leasebacks, as well as the effect of gains or losses on sales of assets, early extinguishment of debt, impairment losses, foreign currency exchange gains or losses and certain other charges that are highly variable from year to year. We believe EBITDA and Comparable EBITDA are useful to management and investors in evaluating our operating performance because they provide management and investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe they help management and investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our asset base (primarily depreciation and amortization) from our operating results. Our management also uses EBITDA and Comparable EBITDA as measures in determining the value of acquisitions and dispositions.
We compute FFO attributable to SHR common shareholders in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT adopted a definition of FFO in order to promote an industry-wide standard measure of REIT operating performance. NAREIT defines FFO as net income (or loss) (computed in accordance with GAAP) excluding losses or gains from sales of depreciable property, impairment of depreciable real estate, real estate-related depreciation and amortization, and our portion of these items related to unconsolidated affiliates. We also present FFO--Fully Diluted, which is FFO attributable to SHR common shareholders 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 on non-depreciable assets, foreign currency exchange gains or losses and certain other charges that are highly variable from year to year. We believe that the presentation of FFO attributable to SHR common shareholders, FFO--Fully Diluted and Comparable FFO provides useful information to management and investors regarding our results of operations because they are measures of our ability to fund capital expenditures and expand our business. In addition, FFO is widely used in the real estate industry to measure operating performance without regard to items such as depreciation and amortization. We also present Comparable FFO per diluted share as a non-GAAP measure of our performance. We calculate Comparable FFO per diluted share for a given operating period as our Comparable FFO (as defined above) divided by the weighted average of fully diluted shares outstanding, excluding shares related to the JW Marriott Essex House Hotel put option. Dilutive securities may include shares granted under share-based compensation plans and operating partnership units. No effect is shown for securities that are anti-dilutive.
We caution investors that amounts presented in accordance with our definitions of FFO attributable to SHR common shareholders, 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 attributable to SHR common shareholders, 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 attributable to SHR common shareholders, 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 attributable to SHR common shareholders, 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 attributable to SHR common shareholders, FFO--Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA to the most directly comparable GAAP financial performance measure, which is net income (or loss) attributable to SHR common shareholders.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Income Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA
(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2015 2014 2015 2014
---- ---- ---- ----
Net income attributable to SHR
common shareholders $6,698 $80,840 $22,509 $297,998
Depreciation and amortization-
continuing operations 40,331 28,058 77,995 50,263
Depreciation and amortization-
discontinued operations - - - 1,275
Interest expense-continuing
operations 20,709 19,587 43,494 37,861
Interest expense-discontinued
operations - - - 1,326
Income taxes-continuing
operations 2,452 207 2,671 246
Income taxes-discontinued
operations - - - 833
Income taxes-sale of assets - - - 20,451
Net income attributable to
noncontrolling interests in
SHR's operating partnership
(a) 67 281 104 1,130
Adjustments attributable to
noncontrolling interests in
consolidated affiliates (b) (3,209) (3,939) (7,046) (7,614)
Adjustments attributable to
unconsolidated affiliates (c) - 3,153 - 8,443
Preferred shareholder
dividends - 7,169 - 16,993
--- ----- --- ------
EBITDA 67,048 135,356 139,727 429,205
Realized portion of deferred
gain on sale-leaseback (43) (54) (87) (107)
Gain on sale of assets-
continuing operations (40,613) (767) (40,613) (767)
Gain on sale of assets-
discontinued operations - (604) - (176,880)
Gain on consolidation of
affiliates - (65,349) - (143,466)
Impairment losses 10,401 - 10,401 -
Loss on early extinguishment
of debt-continuing
operations 34,211 - 34,211 -
Loss on early extinguishment
of debt-discontinued
operations - - - 272
Foreign currency exchange
(gain) loss-continuing
operations (40) 8 76 6
Foreign currency exchange
gain-discontinued operations - - - (32)
Hotel acquisition costs 346 - 1,066 -
Non-cash interest rate
derivative activity 30 - 146 -
Amortization of below market
hotel management agreement 513 108 1,026 108
Activist shareholder costs - 104 - 1,637
Adjustments attributable to
noncontrolling interests in
consolidated affiliates (d) 16,559 109 16,559 109
------ --- ------ ---
Comparable EBITDA $88,412 $68,911 $162,512 $110,085
======= ======= ======== ========
(a) EBITDA is presented on a full
participation basis, which means we
have assumed conversion of all
redeemable noncontrolling interests
in SHR's operating partnership into
shares of SHR's common stock. This
adjustment reverses the net income
that was allocated to the
noncontrolling interests in SHR's
operating partnership.
(b) This adjustment represents the
portion of interest expense, income
taxes and depreciation and
amortization attributable to the
noncontrolling interest in
affiliates that are consolidated
but not wholly owned by us.
(c) This adjustment represents our
portion of interest expense, income
taxes and depreciation and
amortization related to affiliates
that are not consolidated.
(d) This adjustment represents the
portion of gains or losses from
sales of depreciable property and
the portion of loss on early
extinguishment of debt attributable
to the noncontrolling interests in
affiliates that are consolidated
but not wholly owned by us.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Income Attributable to SHR Common Shareholders to
Funds From Operations (FFO) Attributable to SHR Common Shareholders, FFO-Fully Diluted and Comparable FFO
(in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2015 2014 2015 2014
---- ---- ---- ----
Net income attributable to SHR
common shareholders $6,698 $80,840 $22,509 $297,998
Depreciation and amortization-
continuing operations 40,331 28,058 77,995 50,263
Depreciation and amortization-
discontinued operations - - - 1,275
Corporate depreciation (127) (123) (255) (246)
Gain on sale of assets-continuing
operations (40,613) (767) (40,613) (767)
Gain on sale of assets, net of tax-
discontinued operations - (604) - (156,429)
Gain on consolidation of affiliates - (65,349) - (143,466)
Realized portion of deferred gain
on sale-leaseback (43) (54) (87) (107)
Adjustments attributable to
noncontrolling interests in SHR's
operating partnership (a) (116) (95) (226) (193)
Adjustments attributable to
noncontrolling interests in
consolidated affiliates (b) 14,801 (1,971) 12,558 (3,806)
Adjustments attributable to
unconsolidated affiliates (c) - 1,571 - 5,077
--- ----- --- -----
FFO attributable to SHR common
shareholders 20,931 41,506 71,881 49,599
Adjustments attributable to
noncontrolling interests in SHR's
operating partnership -other (d) 183 376 330 1,323
--- --- --- -----
FFO-Fully Diluted 21,114 41,882 72,211 50,922
Impairment losses 10,401 - 10,401 -
Non-cash interest rate derivative
activity 2,489 2,184 5,718 (110)
Loss on early extinguishment of
debt-continuing operations 34,211 - 34,211 -
Loss on early extinguishment of
debt-discontinued operations - - - 272
Foreign currency exchange (gain)
loss-continuing operations (a) (40) 8 76 6
Foreign currency exchange gain-
discontinued operations (a) - - - (32)
Amortization of debt discount 40 623 690 623
Amortization of below market hotel
management agreement 513 108 1,026 108
Hotel acquisition costs 346 - 1,066 -
Activist shareholder costs - 104 - 1,637
Excess of redemption liability over
carrying amount of redeemed
preferred stock - 3,203 - 6,912
Adjustments attributable to
noncontrolling interests in
consolidated affiliates (e) (90) - (90) -
Comparable FFO $68,984 $48,112 $125,309 $60,338
======= ======= ======== =======
Comparable FFO per fully diluted
share $0.25 $0.21 $0.45 $0.28
===== ===== ===== =====
Weighted average diluted shares (b) 279,380 225,348 278,145 217,875
======= ======= ======= =======
(a) This adjustment represents the
portion of depreciation and
amortization attributable to the
redeemable noncontrolling interests
in our operating partnership.
(b) This adjustment represents the
portion of depreciation and
amortization and gains or losses
from sales of depreciable property
that are attributable to the
noncontrolling interests in
affiliates that are consolidated
but not wholly owned by us.
(c) This adjustment represents our
portion of depreciation and
amortization related to affiliates
that are not consolidated.
(d) This adjustment represents amounts
other than depreciation and
amortization that are attributable
to the redeemable noncontrolling
interests in our operating
partnership.
(e) This adjustment represents the
portion of loss on early
extinguishment of debt that is
attributable to the noncontrolling
interests in affiliates that are
consolidated but not wholly owned
by us.
(f) Excludes shares related to the JW
Marriott Essex House Hotel put
option.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Debt Summary
(dollars in thousands)
Debt Interest
Rate Spread (a) Loan Amount Maturity (b)
---- --------- --------- ----------- -----------
Hotel del Coronado 3.84% 365 bp $475,000 March 2018
Four Seasons Washington, D.C. 2.44% 225 bp 120,000 June 2019
JW Marriott Essex House Hotel 3.14% 295 bp 225,000 January 2020
Unsecured revolving credit
facility (c) 1.84% 165 bp 44,000 May 2020
Unsecured term loan (c) 1.79% 160 bp 300,000 May 2020
Loews Santa Monica Beach Hotel 2.74% 255 bp 120,000 May 2021
InterContinental Chicago 5.61% Fixed 141,618 August 2021
Montage Laguna Beach (d) 3.90% Fixed 150,000 August 2021
Ritz-Carlton Half Moon Bay (e) 2.59% 240 bp 115,000 May 2022
InterContinental Miami 3.99% Fixed 115,000 September 2024
1,805,618
Unamortized discount (d) (981)
----
$1,804,637
==========
(a) Spread over LIBOR (0.19% at June
30, 2015).
(b) Includes extension options.
(c) On May 27, 2015, we entered into a
new $750,000,000 senior unsecured
credit facility that is comprised
of a $450,000,000 unsecured
revolving credit facility and a
$300,000,000 unsecured term loan.
Interest on the unsecured
revolving credit facility is
payable monthly based upon a
leverage-based grid with annual
rates ranging from LIBOR plus
1.65% to LIBOR plus 2.40%.
Interest on the unsecured term
loan is also payable monthly
based upon a leverage-based
pricing grid with annual rates
ranging from LIBOR plus 1.60% to
LIBOR plus 2.35%.
(d) On January 29, 2015, we closed on
the acquisition of the Montage
Laguna Beach resort. In
connection with the acquisition,
we assumed the outstanding
balance of the mortgage loan
secured by the Montage Laguna
Beach resort. We recorded the
mortgage loan at its fair value,
which included a debt discount,
which is being amortized as
additional interest expense over
the maturity period of the loan.
(e) On May 27, 2015, we closed on a
new $115,000,000 mortgage loan
secured by the Ritz-Carlton Half
Moon Bay hotel. The mortgage
loan has two, one-year extension
options, subject to certain
conditions.
Second Quarter 2015 Debt Repayments
On April 9, 2015, we repaid the $117,000,000 mortgage loan secured by the Fairmont Scottsdale Princess hotel.
On May 21, 2015, we sold the Hyatt Regency La Jolla hotel and repaid the $89,288,000 mortgage loan secured by the hotel at the time of closing. We recorded a $193,000 loss on early extinguishment of debt, which included the write off of unamortized deferred financing costs.
On May 27, 2015, we repaid the $209,558,000 mortgage loan secured by the Westin St. Francis hotel and the $93,124,000 mortgage loan secured by the Fairmont Chicago hotel using proceeds from the new mortgage loan secured by the Ritz-Carlton Half Moon Bay hotel and proceeds from the $300,000,000 unsecured term loan. We recorded a $34,014,000 loss on early extinguishment of debt, which included prepayment penalties of $32,917,000 and the write off of unamortized deferred financing costs.
Debt Summary (Continued)
(dollars in thousands)
Future scheduled debt principal payments (including extension options) are as
follows:
Years ending December 31, Amount
------------------------- ------
2015 (remainder) $1,126
2016 2,040
2017 3,066
2018 480,033
2019 125,276
Thereafter 1,194,077
---------
1,805,618
Unamortized discount (981)
----
$1,804,637
==========
Percent of fixed rate debt 22.5%
Weighted average interest
rate (f) 3.29%
Weighted average maturity
of fixed rate debt (debt
with maturity of greater
than one year) 6.97
(f) Excludes the amortization of
deferred financing costs.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/strategic-hotels--resorts-reports-second-quarter-2015-financial-results-300124403.html
SOURCE Strategic Hotels & Resorts, Inc.
