STRATEGIC HOTELS AND RESORTS INC CHICAGO, Nov. 5, 2015 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the third quarter ended September 30, 2015.
($ in millions, except per share
and operating metrics) Third Quarter
-------------
Earnings Metrics 2015 2014%
---------------- ---- ----
Total Revenues $354.4 $305.3 16.1%
Net income attributable to common
shareholders $23.3 $21.0 10.8%
Net income per diluted share $0.08 $0.07 14.3%
Comparable funds from operations
(Comparable FFO) (a) $69.4 $56.7 22.4%
Comparable FFO per diluted share
(a) $0.25 $0.23 8.7%
Comparable EBITDA (a) $89.2 $75.2 18.6%
Same Store United States
Portfolio Operating Metrics (b)
--------------------------------
Average Daily Rate (ADR) (d) $327.88 $318.25 3.0%
Occupancy 80.3% 80.1% 0.2 pts
Revenue per Available Room
(RevPAR) (d) $263.35 $255.02 3.3%
Total RevPAR (d) $462.96 $448.10 3.3%
EBITDA Margins (d) 27.8% 27.3% 50 bps
Total United States Portfolio
Operating Metrics (c)
-----------------------------
Average Daily Rate (ADR) (d) $341.46 $330.81 3.2%
Occupancy 79.6% 78.9% 0.7 pts
Revenue per Available Room
(RevPAR) (d) $271.77 $260.85 4.2%
Total RevPAR(d) $485.23 $465.88 4.2%
EBITDA Margins(d) 27.1% 26.4% 70 bps
---------------- ---- ---- ------
($ in millions, except per share
and operating metrics) Year to Date
------------
Earnings Metrics 2015 2014%
---------------- ---- ----
Total Revenues $1,036.6 $776.1 33.6%
Net income attributable to common
shareholders $45.8 $319.0 (85.7)%
Net income per diluted share $0.16 $1.32 (87.9)%
Comparable funds from operations
(Comparable FFO) (a) $194.7 $117.0 66.4%
Comparable FFO per diluted share
(a) $0.70 $0.51 37.3%
Comparable EBITDA (a) $251.7 $185.3 35.9%
Same Store United States
Portfolio Operating Metrics (b)
--------------------------------
Average Daily Rate (ADR) (d) $318.19 $301.98 5.4%
Occupancy 77.1% 76.7% 0.4 pts
Revenue per Available Room
(RevPAR) (d) $245.32 $231.70 5.9%
Total RevPAR (d) $457.64 $436.33 4.9%
EBITDA Margins (d) 27.1% 25.6% 150 bps
Total United States Portfolio
Operating Metrics (c)
-----------------------------
Average Daily Rate (ADR) (d) $331.77 $314.43 5.5%
Occupancy 77.0% 76.6% 0.4 pts
Revenue per Available Room
(RevPAR) (d) $255.54 $240.91 6.1%
Total RevPAR(d) $483.11 $459.64 5.1%
EBITDA Margins(d) 26.7% 25.2% 150 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").
"We are pleased to report another solid quarter of operating results which translated into attractive growth in our key financial metrics. Looking forward, we are also pleased to report continued strong group pace into 2016," commented Raymond L. "Rip" Gellein, Chairman and Chief Executive Officer of Strategic Hotels & Resorts. "Importantly, we continue to make progress towards closing our previously announced merger with Blackstone," summarized Gellein.
Third Quarter Highlights
-- Total consolidated revenues were $354.4 million in the third quarter of
2015, a 16.1 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.
-- Net income attributable to common shareholders was $23.3 million, or
$0.08 per diluted share, in the third quarter of 2015, compared with
$21.0 million, or $0.07 per diluted share, in the third quarter of 2014.
-- Comparable FFO was $0.25 per diluted share in the third quarter of 2015,
compared with $0.23 per diluted share in the prior year period, an 8.7
percent increase over the prior year period.
-- Comparable EBITDA was $89.2 million in the third quarter of 2015,
compared with $75.2 million in the prior year period, an 18.6 percent
increase between periods as a result of the Company's acquisition
activity and same store growth.
-- Same Store United States portfolio RevPAR increased 3.3 percent in the
third quarter of 2015, driven by a 3.0 percent increase in ADR and a 0.2
percentage point increase in occupancy compared to the third quarter of
2014. Total RevPAR increased 3.3 percent between periods, with
non-rooms revenue increasing 3.4 percent between periods.
-- Total United States portfolio RevPAR increased 4.2 percent in the third
quarter of 2015, driven by a 3.2 percent increase in ADR and a 0.7
percentage point increase in occupancy compared to the third quarter of
2014. Total RevPAR increased 4.2 percent between periods, with
non-rooms revenue increasing 4.1 percent between periods.
-- Group occupied room nights in the Total United States portfolio
decreased 3.3 percent in the third quarter 2015 while transient occupied
room nights increased 3.8 percent compared to the third quarter of 2014.
Group ADR increased 4.0 percent and transient ADR increased 1.8 percent
compared to the third quarter of 2014.
-- Same Store United States and Total United States portfolio EBITDA
margins expanded 50 basis points and 70 basis points, respectively, in
the third quarter of 2015, compared to the third quarter of 2014.
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 $1,036.6 million for the nine month
period ended September 30, 2015, a 33.6 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.
-- Comparable net income attributable to common shareholders was $45.8
million, or $0.16 per diluted share for the nine month period ended
September 30, 2015, compared with $319.0 million, or $1.32 per diluted
share, for the nine month period ended September 30, 2014. The
year-over-year decrease in net income was primarily the result of 2014
gains on sales of assets totaling $156.5 million, or $0.66 per diluted
share and one-time gains of $143.5 million, or $0.60 per diluted share
related to the consolidation of the Fairmont Scottsdale Princess resort
and the Hotel del Coronado recorded in 2014.
-- Comparable FFO was $0.70 per diluted share in the nine month period
ended September 30, 2015, compared with $0.51 per diluted share in the
nine month period ended September 30, 2014, a 37.3 percent increase over
the prior year period as a result of the Company's acquisition and
financing activities.
-- Comparable EBITDA was $251.7 million for the nine month period ended
September 30, 2015 compared with $185.3 million for the nine month
period ended September 30, 2014, a 35.9 percent increase between periods
as a result of the Company's acquisition activity and same store growth.
Transaction Activity
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 joint venture partner, affiliates of KSL Capital Partners, LLC ("KSL"), exercised a contractual put option of their equity interests in the asset and the Company issued 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.
Merger Agreement
On September 8, 2015, the Company announced that it entered into a definitive agreement (the "Merger Agreement") with affiliates of Blackstone Real Estate Partners VIII L.P., under which Blackstone would acquire all outstanding shares of common stock of Strategic Hotels & Resorts, Inc. for $14.25 per share in cash, and all of the outstanding membership units of the Company's subsidiary, Strategic Hotels Funding, L.L.C., not held by the Company, for $14.25 per unit in cash (the "Mergers").
2015 Guidance
Management has suspended the issuance of earnings guidance in light of the Company entering into a definitive merger agreement with affiliates of Blackstone Real Estate Partners VIII L.P.
Portfolio Definitions
Same Store United States portfolio hotel comparisons for the third quarter of 2015 are derived from the Company's hotel portfolio at September 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.
Total United States portfolio hotel comparisons for the third quarter of 2015 are derived from the Company's hotel portfolio as of September 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.
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.
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. The Company currently has ownership interests in 17 properties with an aggregate of 7,921 rooms and 847,000 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.
Forward Looking Statements
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 failure to satisfy conditions to completion of the mergers described above (the "Mergers"), including receipt of stockholder approval; the failure of the Mergers to close for any other reason; the occurrence of any change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the merger agreement entered into with affiliates of Blackstone Real Estate Partners VIII L.P. (the "Merger Agreement"); the outcome of the legal proceedings that have been, or may be, instituted against the Company and others following the announcement of the Company entering into the Merger Agreement; risks that the proposed Mergers disrupt current plans and operations including potential difficulties in relationships with employees; the amounts of the costs, fees, expenses and charges relating to the Mergers; 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 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.
Additional Information Regarding the Transaction and Where to Find It
This press release does not constitute an offer to sell or the solicitation of an offer to buy the Company's securities or the solicitation of any vote or approval. The proposed merger of the Company involving BRE Diamond Hotel Holdings LLC, BRE Diamond Hotel LLC, BRE Diamond Hotel Acquisition LLC, the Company and Strategic Hotels Funding L.L.C. will be submitted to the stockholders of the Company for their consideration at a special meeting of stockholders of the Company on December 8, 2015, at 10:00 a.m. Central Time. In connection therewith, the Company has filed and will continue to file relevant materials with the Securities and Exchange Commission (the "SEC"), including a definitive proxy statement that was filed with the SEC on October 19, 2015, and was first mailed to stockholders of the Company on or about October 26, 2015. BEFORE MAKING ANY VOTING OR ANY INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of the definitive proxy statement, any amendments or supplements thereto and other documents containing important information about the Company, as such documents are filed with the SEC, through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by the Company will be available free of charge on the Company's website at www.strategichotels.com under the heading "Financial Information" within the "Investor Relations" portion of the Company's website. Stockholders of the Company may also obtain a free copy of the definitive proxy statement and the filings with the SEC incorporated by reference in the proxy statement by contacting the Company's Investor Relations Department at 312-658-5000.
Participants in the Solicitation
The Company and its directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of the Company is set forth in its proxy statement for its 2015 annual meeting of stockholders, which was filed with the SEC on April 10, 2015, its annual report on Form 10-K for the fiscal year ended December 31, 2014, which was filed with the SEC on February 24, 2015, and in subsequent documents filed with the SEC, each of which can be obtained free of charge from the sources indicated above. Other information regarding the participants in the proxy solicitation of the stockholders of the Company and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the definitive proxy statement and other relevant materials filed with the SEC.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2015 2014 2015 2014
---- ---- ---- ----
Revenues:
Rooms $198,114 $176,133 $547,355 $428,107
Food and beverage 115,296 96,642 373,288 266,687
Other hotel operating revenue 40,346 31,224 113,242 77,405
Lease revenue 678 1,264 2,722 3,882
--- ----- ----- -----
Total revenues 354,434 305,263 1,036,607 776,081
------- ------- --------- -------
Operating Costs and Expenses:
Rooms 52,968 48,197 151,905 123,172
Food and beverage 83,412 70,965 254,731 192,645
Other departmental expenses 89,068 74,640 260,418 194,457
Management fees 11,578 9,970 35,440 24,989
Other hotel expenses 21,688 17,998 57,143 49,248
Lease expense 682 1,215 2,733 3,733
Depreciation and amortization 39,633 32,932 117,628 83,195
Impairment losses 2,325 - 12,726 -
Corporate expenses 10,709 5,405 25,418 19,796
------ ----- ------ ------
Total operating costs and expenses 312,063 261,322 918,142 691,235
------- ------- ------- -------
Operating income 42,371 43,941 118,465 84,846
Interest expense (18,575) (21,844) (62,069) (59,705)
Interest income 3 46 120 123
Loss on early extinguishment of debt - (609) (34,211) (609)
Equity in (losses) earnings of unconsolidated
affiliates - (4) - 5,267
Foreign currency exchange gain (loss) 4 (69) (72) (75)
(Loss) gain on consolidation of affiliates - (15) - 143,451
Other income (expenses), net 2,746 (136) 43,054 1,082
----- ---- ------ -----
Income before income taxes and discontinued
operations 26,549 21,310 65,287 174,380
Income tax expense (3,857) (370) (6,528) (616)
------ ---- ------ ----
Income from continuing operations 22,692 20,940 58,759 173,764
Income from discontinued operations, net of tax - 63 - 159,102
--- --- --- -------
Net Income 22,692 21,003 58,759 332,866
Net income attributable to the noncontrolling
interests in SHR's operating partnership (65) (67) (169) (1,197)
Net loss (income) attributable to the noncontrolling
interests in consolidated affiliates 634 1,854 (12,820) 6,112
--- ----- ------- -----
Net Income Attributable to SHR 23,261 22,790 45,770 337,781
Preferred shareholder dividends - (1,802) - (18,795)
--- ------ --- -------
Net Income Attributable to SHR Common Shareholders $23,261 $20,988 $45,770 $318,986
======= ======= ======= ========
Basic Income Per Common Share:
Income from continuing operations attributable to
SHR common shareholders $0.08 $0.08 $0.17 $0.71
Income from discontinued operations attributable to
SHR common shareholders - - - 0.70
--- --- --- ----
Net income attributable to SHR common shareholders $0.08 $0.08 $0.17 $1.41
===== ===== ===== =====
Weighted average shares of common stock outstanding 279,579 248,509 276,580 225,932
======= ======= ======= =======
Diluted Income Per Common Share:
Income from continuing operations attributable to
SHR common shareholders $0.08 $0.07 $0.16 $0.65
Income from discontinued operations attributable to
SHR common shareholders - - - 0.67
--- ---
Net income attributable to SHR common shareholders $0.08 $0.07 $0.16 $1.32
===== ===== ===== =====
Weighted average shares of common stock outstanding 282,659 260,257 278,583 237,680
======= ======= ======= =======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets
(in thousands, except share data)
September 30, 2015 December 31, 2014
------------------ -----------------
Assets
Investment in hotel properties, net $3,248,230 $2,828,400
Goodwill 21,629 38,128
Intangible assets, net of accumulated amortization of
$14,217 and $7,288 91,502 94,324
Assets held for sale 24,674 -
Investment in unconsolidated affiliates 21,010 22,850
Cash and cash equivalents 128,000 442,613
Restricted cash and cash equivalents 77,657 81,510
Accounts receivable, net of allowance for doubtful accounts
of $563 and $492 68,414 51,382
Deferred financing costs, net of accumulated amortization of
$9,206 and $7,814 13,873 11,440
Deferred tax assets 769 1,729
Prepaid expenses and other assets 49,164 46,781
------ ------
Total assets $3,744,922 $3,619,157
========== ==========
Liabilities, Noncontrolling Interests and Equity
Liabilities:
Mortgages payable, net of discount $1,460,206 $1,705,778
Credit facility, including an unsecured term loan of
$300,000 and $0 302,000 -
Liabilities of assets held for sale 6,499 -
Accounts payable and accrued expenses 255,645 224,505
Preferred stock redemption liability - 90,384
Distributions payable - 104
Deferred tax liabilities 46,117 46,137
------ ------
Total liabilities 2,070,467 2,066,908
Commitments and contingencies
Noncontrolling interests in SHR's operating partnership 10,944 10,500
Equity:
SHR's shareholders' equity:
Common stock ($0.01 par value per share; 350,000,000 shares
of common stock authorized; 282,090,156 and 267,435,799
shares of common stock issued and outstanding) 2,821 2,674
Additional paid-in capital 2,508,756 2,348,284
Accumulated deficit (844,699) (890,469)
Accumulated other comprehensive loss (5,131) (13,032)
------ -------
Total SHR's shareholders' equity 1,661,747 1,447,457
Noncontrolling interests in consolidated affiliates 1,764 94,292
----- ------
Total equity 1,663,511 1,541,749
--------- ---------
Total liabilities, noncontrolling interests and equity $3,744,922 $3,619,157
========== ==========
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Financial Highlights
Supplemental Financial Data
(in thousands, except per share information)
September 30, 2015
------------------
Capitalization
--------------
Shares of common stock
outstanding 282,090
Operating partnership units
outstanding 794
Restricted stock units
outstanding 1,291
-----
Combined shares and units
outstanding 284,175
Common stock price at end of
period $13.79
------
Common equity capitalization $3,918,773
Debt 1,763,147
Cash and cash equivalents (128,000)
--------
Total enterprise value $5,553,920
==========
Net Debt / Total Enterprise Value 29.4%
Common Equity /Total Enterprise
Value 70.6%
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Disposition of Hotel Properties
Effective January 1, 2015, we 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 our results of operations will qualify as discontinued operations.
Asset Held for Sale
On August 19, 2015, we entered into an agreement with an unaffiliated third party to sell the Marriott Lincolnshire Resort for $20,650,000. The transaction, which is subject to customary closing conditions, is expected to close in the fourth quarter of 2015. The hotel's assets and liabilities have been classified as held for sale on the accompanying consolidated balance sheet as of September 30, 2015. The disposition of the Marriott Lincolnshire Resort will not represent a strategic shift that will have a major effect on our results of operations; therefore, the hotel's results of operations are included in continuing operations for all periods presented.
2015 Disposition
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 $40,594,000 gain on the sale was recorded in other income, net in the condensed consolidated statements of operations for the three and nine months ended September 30, 2015. The portion of the gain attributable to the joint venture partner was $16,640,000, which is reflected in net loss (income) attributable to the noncontrolling interests in consolidated affiliates in the condensed consolidated statements of operations for the three and nine months ended September 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
Prior to January 1, 2015, and the adoption of the new accounting guidance that changed the criteria for reporting discontinued operations, 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. We received net
proceeds of $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 nine months ended September 30, 2014 (in thousands):
Three Months Nine Months Ended
Ended September 30,
September
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 63 156,492
--- -------
Income from
discontinued
operations,
net of tax $63 $159,102
=== ========
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.
Nine Months Ended September 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 September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2015 2014 2015 2014
---- ---- ---- ----
Marriott Hamburg:
Property EBITDA $920 $1,757 $3,480 $4,956
Revenue (a) $678 $1,264 $2,722 $3,882
Lease expense (682) (1,215) (2,733) (3,733)
Less: Deferred gain on
sale-leaseback (29) (52) (116) (159)
--- --- ---- ----
Adjusted lease expense (711) (1,267) (2,849) (3,892)
Less: Gain on sale of
assets (b) (2,680) - (2,680) -
------ --- ------ ---
Comparable EBITDA
contribution from
leasehold $(2,713) $(3) $(2,807) $(10)
======= === ======= ====
Security Deposit (c): September 30, December 31,
2015 2014
-------------- -------------
Marriott Hamburg $2,124 $2,299
(a) For the three and nine months ended
September 30, 2015 and 2014,
Revenue for the Marriott Hamburg
hotel represents lease revenue.
(b) Effective September 1, 2015, we
transferred our leasehold interest
in the Marriott Hamburg hotel to
an unaffiliated third party and
were released from all of our
obligations under the lease
arrangements. We recognized the
previously deferred gain of
$2,680,000 during the three and
nine months ended September 30,
2015 in other income (expenses),
net, in the condensed consolidated
statements of operations.
(c) The security deposit is recorded in
prepaid expenses and other assets
on the consolidated balance sheets
and will be released back to us in
four equal installments over four
years beginning on March 1, 2017.
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. 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 September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2015 2014 2015 2014
---- ---- ---- ----
Net income attributable to SHR
common shareholders $23,261 $20,988 $45,770 $318,986
Depreciation and amortization-
continuing operations 39,633 32,932 117,628 83,195
Depreciation and amortization-
discontinued operations - - - 1,275
Interest expense-continuing
operations 18,575 21,844 62,069 59,705
Interest expense-discontinued
operations - - - 1,326
Income taxes-continuing
operations 3,857 370 6,528 616
Income taxes-discontinued
operations - - - 833
Income taxes-sale of assets - - - 20,451
Net income attributable to
noncontrolling interests in
SHR's operating partnership (a) 65 67 169 1,197
Adjustments attributable to
noncontrolling interests in
consolidated affiliates (b) (732) (4,070) (7,778) (11,684)
Adjustments attributable to
unconsolidated affiliates (c) - (11) - 8,432
Preferred shareholder dividends - 1,802 - 18,795
--- ----- --- ------
EBITDA 84,659 73,922 224,386 503,127
Realized portion of deferred
gain on sale-leaseback (29) (52) (116) (159)
(Gain) loss on sale of assets-
continuing operations (2,661) 38 (43,274) (729)
Gain on sale of assets-
discontinued operations - (63) - (176,943)
Loss (gain) on consolidation of
affiliates - 15 - (143,451)
Impairment losses 2,325 - 12,726 -
Loss on early extinguishment of
debt-continuing operations - 609 34,211 609
Loss on early extinguishment of
debt-discontinued operations - - - 272
Foreign currency exchange (gain)
loss-continuing operations (4) 69 72 75
Foreign currency exchange gain-
discontinued operations - - - (32)
Hotel acquisition costs 343 - 1,409 -
Merger-related costs 4,018 - 4,018 -
Non-cash interest rate
derivative activity 6 127 152 127
Amortization of below market
hotel management agreement 513 513 1,539 621
Activist shareholder costs - - - 1,637
Adjustments attributable to
noncontrolling interests in
consolidated affiliates (d) (8) (5) 16,551 104
--- --- ------ ---
Comparable EBITDA $89,162 $75,173 $251,674 $185,258
======= ======= ======== ========
(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 September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2015 2014 2015 2014
---- ---- ---- ----
Net income attributable to SHR common
shareholders $23,261 $20,988 $45,770 $318,986
Depreciation and amortization-
continuing operations 39,633 32,932 117,628 83,195
Depreciation and amortization-
discontinued operations - - - 1,275
Corporate depreciation (126) (124) (381) (370)
(Gain) loss on sale of assets-
continuing operations (2,661) 38 (43,274) (729)
Gain on sale of assets, net of tax-
discontinued operations - (63) - (156,492)
Loss (gain) on consolidation of
affiliates - 15 - (143,451)
Impairment losses 2,325 - 12,726 -
Realized portion of deferred gain on
sale-leaseback (29) (52) (116) (159)
Adjustments attributable to
noncontrolling interests in SHR's
operating partnership (a) (113) (105) (339) (298)
Adjustments attributable to
noncontrolling interests in
consolidated affiliates (b) (436) (2,166) 12,122 (5,972)
Adjustments attributable to
unconsolidated affiliates (c) - - - 5,077
--- --- --- -----
FFO attributable to SHR common
shareholders 61,854 51,463 144,136 101,062
Adjustments attributable to
noncontrolling interests in SHR's
operating partnership -other (d) 178 172 508 1,495
--- --- --- -----
FFO-Fully Diluted 62,032 51,635 144,644 102,557
Non-cash interest rate derivative
activity 2,465 3,241 8,183 3,131
Loss on early extinguishment of debt-
continuing operations - 609 34,211 609
Loss on early extinguishment of debt-
discontinued operations - - - 272
Foreign currency exchange (gain)
loss-continuing operations (a) (4) 69 72 75
Foreign currency exchange gain-
discontinued operations (a) - - - (32)
Amortization of debt discount 40 623 730 1,246
Amortization of below market hotel
management agreement 513 513 1,539 621
Hotel acquisition costs 343 - 1,409 -
Costs related to the Mergers 4,018 - 4,018 -
Activist shareholder costs - - - 1,637
Excess of redemption liability over
carrying amount of redeemed
preferred stock - - - 6,912
Adjustments attributable to
noncontrolling interests in
consolidated affiliates (e) - - (90) -
Comparable FFO $69,407 $56,690 $194,716 $117,028
======= ======= ======== ========
Comparable FFO per fully diluted
share $0.25 $0.23 $0.70 $0.51
===== ===== ===== =====
Weighted average diluted shares (f) 282,664 251,862 279,739 229,364
======= ======= ======= =======
(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 for the three and nine
months ended September 30, 2014. On
July 24, 2015, our joint venture
partner exercised its put option.
In connection with the exercise of
the put option, and in accordance
with the terms of the joint venture
agreements, we issued an aggregate
of 6,595,449 shares of our common
stock to our joint venture partner,
which are included in the weighted
average diluted shares outstanding
for the three and nine months ended
September 30, 2015.
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 2,000 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 141,147 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
1,763,147
Unamortized discount (d) (941)
----
$1,762,206
==========
(a) Spread over LIBOR (0.19% at
September 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.
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) $655
2016 2,040
2017 3,066
2018 480,033
2019 125,276
Thereafter 1,152,077
---------
1,763,147
Unamortized discount (941)
----
$1,762,206
Percent of fixed rate debt 23.0%
Weighted average interest
rate (f) 3.31%
Weighted average maturity
of fixed rate debt (debt
with maturity of greater
than one year) 6.72
(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-third-quarter-2015-financial-results-300172913.html
SOURCE Strategic Hotels & Resorts, Inc.
