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LaSalle Hotel Properties Reports First Quarter 2017 Results

The Company’s RevPAR increased 1.4% to $177.56, driven by 1.2% growth in average daily rate to $228.39 and a 0.2% gain in occupancy to 77.7%.

LaSalle Hotel Properties (NYSE: LHO) today announced results for the quarter ended March 31, 2017. The Company’s results include the following:

           
First Quarter
2017 2016 % Var.
($’s in millions except per share/unit data)
 
Net income attributable to common shareholders(1) $ 76.1 $ 6.0 1,168.3%
Net income attributable to common shareholders per diluted share(1) $ 0.67 $ 0.05 1,240.0%
 
 
RevPAR(2) $ 177.56 $ 175.03 1.4%
Hotel EBITDA Margin(2) 27.5% 27.0%
Hotel EBITDA Margin Growth(2)

 

50 bps

 
 
Total Revenues $ 254.4 $ 260.1 -2.2%
EBITDA(1,2) $ 135.6 $ 62.9 115.6%
Adjusted EBITDA(2) $ 61.8 $ 65.0 -4.9%
Note: Adjusted EBITDA in the first quarter of 2016 includes $6.1 million for assets that the Company sold in July 2016 and January 2017.
 
 
FFO(2) $ 49.0 $ 53.6 -8.6%
Adjusted FFO(2) $ 51.3 $ 55.6 -7.7%
FFO per diluted share/unit(2) $ 0.43 $ 0.47 -8.5%
Adjusted FFO per diluted share/unit(2) $ 0.45 $ 0.49 -8.2%
 

(1) 2017 net income and EBITDA (as defined below) include $74.4 million of gains from the sales of the Hotel Deca, Lansdowne Resort, and Alexis Hotel.

(2) See tables later in this press release, which list adjustments that reconcile net income attributable to common shareholders to earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, funds from operations attributable to common shareholders and unitholders (“FFO”), FFO per share/unit, adjusted FFO, adjusted FFO per share/unit and pro forma hotel EBITDA. EBITDA, adjusted EBITDA, FFO, FFO per share/unit, adjusted FFO, adjusted FFO per share/unit and hotel EBITDA are non-GAAP financial measures. See further discussion of these non-GAAP measures and reconciliations to net income later in this press release. Room revenue per available room (“RevPAR”) is presented on a pro forma basis to reflect hotels in the Company’s current portfolio. See “Statistical Data for the Hotels – Pro Forma” later in this press release.

“We are proud that our teams continue to operate with excellent efficiency across the portfolio, as evidenced by a decline in hotel operating expenses during the first quarter,” said Michael D. Barnello, President and Chief Executive Officer of LaSalle Hotel Properties.

“We have been opportunistic in selling four hotels this year, and we are pleased to use part of these proceeds to redeem our Series H Preferred Shares,” added Mr. Barnello.

First Quarter Results

Disposition and Investment Activity

Balance Sheet and Capital Markets Activities

Dividend

On March 15, 2017, the Company declared a first quarter 2017 dividend of $0.45 per common share of beneficial interest. The dividend represents an annual run rate of $1.80 per share and a 6.2% yield based on the closing share price on April 18, 2017.

Subsequent Event – Series H Preferred Shares Redemption Announcement

On April 3, 2017, the Company provided notice to the holders of its 7.5% Series H Preferred Shares of the redemption of all 2,750,000 of its issued and outstanding Series H Preferred Shares. The cash redemption price for the Series H Preferred Shares is $25.00 per share, plus accrued and unpaid dividends through the redemption date. The redemption date will be May 4, 2017. After the redemption date, dividends on the Series H Preferred Shares will cease to accrue.

About LaSalle Hotel Properties

LaSalle Hotel Properties is a leading multi-operator real estate investment trust. The Company owns 42 properties, which are upscale, full-service hotels, totaling approximately 10,700 guest rooms in 11 markets in seven states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale, full-service hotels located in urban, resort and convention markets. LaSalle Hotel Properties seeks to grow through strategic relationships with premier lodging groups, including Hilton Hotels Corporation, Marriott International, Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, Two Roads Hospitality, Davidson Hotel Company, Kimpton Hotel & Restaurant Group, LLC, Accor, HEI Hotels & Resorts, JRK Hotel Group, Inc., Viceroy Hotel Group, Highgate Hotels, Access Hotels & Resorts, and Provenance Hotels.

 

LASALLE HOTEL PROPERTIES

Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share data)

(unaudited)

 
 
    For the three months ended
March 31,
2017     2016
Revenues:
Hotel operating revenues:
Room $ 178,365 $ 181,420
Food and beverage 52,304 56,347
Other operating department   20,367     20,643  
Total hotel operating revenues 251,036 258,410
Other income   3,369     1,694  
Total revenues   254,405     260,104  
Expenses:
Hotel operating expenses:
Room 52,323 52,291
Food and beverage 39,148 42,908
Other direct 4,184 3,683
Other indirect   69,656     71,915  
Total hotel operating expenses 165,311 170,797
Depreciation and amortization 47,263 47,628
Real estate taxes, personal property taxes and insurance 16,115 16,191
Ground rent 3,385 3,813
General and administrative 6,554 5,830
Other expenses   1,918     2,178  
Total operating expenses   240,546     246,437  
Operating income 13,859 13,667
Interest income 142 1,654
Interest expense (9,827 ) (11,867 )
Loss from extinguishment of debt   (1,706 )   0  
Income before income tax benefit 2,468 3,454
Income tax benefit   4,773     5,620  
Income before gain on sale of properties 7,241 9,074
Gain on sale of properties   74,358     0  
Net income 81,599 9,074
Noncontrolling interests of common units in Operating Partnership   (110 )   (15 )
Net income attributable to the Company 81,489 9,059
Distributions to preferred shareholders   (5,405 )   (3,042 )
Net income attributable to common shareholders $ 76,084   $ 6,017  
 
 

LASALLE HOTEL PROPERTIES

Consolidated Statements of Operations and Comprehensive Income (Loss) – Continued

(in thousands, except share data)

(unaudited)

 
 
    For the three months ended
March 31,
2017     2016
Earnings per Common Share – Basic:
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares $ 0.67   $ 0.05  
Earnings per Common Share – Diluted:
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares $ 0.67   $ 0.05  
Weighted average number of common shares outstanding:
Basic 112,923,719 112,748,492
Diluted 113,306,209 113,108,158
 
Comprehensive Income (Loss):
Net income $ 81,599 $ 9,074
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate derivative instruments 1,124 (14,252 )
Reclassification adjustment for amounts recognized in net income   985     1,780  
83,708 (3,398 )
Noncontrolling interests of common units in Operating Partnership   (112 )   1  
Comprehensive income (loss) attributable to the Company $ 83,596   $ (3,397 )
 
 

LASALLE HOTEL PROPERTIES

FFO and EBITDA

(in thousands, except share/unit data)

(unaudited)

 
 
    For the three months ended
March 31,
2017     2016
Net income attributable to common shareholders $ 76,084 $ 6,017
Depreciation 47,131 47,494
Amortization of deferred lease costs 79 80
Noncontrolling interests of common units in Operating Partnership 110 15
Less: Gain on sale of properties   (74,358 )   0  
FFO attributable to common shareholders and unitholders $ 49,046 $ 53,606
Pre-opening, management transition and severance expenses 82 1,546
Loss from extinguishment of debt 1,706 0
Non-cash ground rent   465     477  
Adjusted FFO attributable to common shareholders and unitholders $ 51,299   $ 55,629  
Weighted average number of common shares and units outstanding:
Basic 113,068,942 112,893,715
Diluted 113,451,432 113,253,381
FFO attributable to common shareholders and unitholders per diluted share/unit $ 0.43 $ 0.47
Adjusted FFO attributable to common shareholders and unitholders per diluted share/unit $ 0.45 $ 0.49
 
 
 
For the three months ended
March 31,
2017 2016
Net income attributable to common shareholders $ 76,084 $ 6,017
Interest expense 9,827 11,867
Loss from extinguishment of debt 1,706 0
Income tax benefit (4,773 ) (5,620 )
Depreciation and amortization 47,263 47,628
Noncontrolling interests of common units in Operating Partnership 110 15
Distributions to preferred shareholders   5,405     3,042  
EBITDA $ 135,622 $ 62,949
Pre-opening, management transition and severance expenses 82 1,546
Gain on sale of properties (74,358 ) 0
Non-cash ground rent   465     477  
Adjusted EBITDA $ 61,811 $ 64,972
Corporate expense 8,632 6,724
Interest and other income (3,512 ) (3,349 )
Pro forma hotel level adjustments, net(1)   (1,831 )   (4,147 )
Hotel EBITDA $ 65,100   $ 64,200  
 

(1)

  Pro forma excludes Mason & Rook Hotel for the period the hotel was closed for renovation during the first quarter of 2016 and the comparable period in 2017. Pro forma excludes Hotel Deca, Lansdowne Resort and Alexis Hotel due to their dispositions during the first quarter of 2017 and Indianapolis Marriott Downtown due to its disposition in July 2016.
 
 

LASALLE HOTEL PROPERTIES

Hotel Operational Data

Schedule of Property Level Results – Pro Forma(1)

(in thousands)

(unaudited)

 
 
    For the three months ended
March 31,
2017     2016
Revenues:
Room $ 171,092 $ 170,447
Food and beverage 47,561 49,466
Other   18,126     17,947  
Total hotel revenues   236,779     237,860  
 
Expenses:
Room 50,350 50,153
Food and beverage 35,722 38,420
Other direct 2,514 2,458
General and administrative 18,615 18,579
Information and telecommunications systems 4,274 3,979
Sales and marketing 18,493 18,253
Management fees 6,848 6,843
Property operations and maintenance 9,173 8,951
Energy and utilities 6,500 6,333
Property taxes 13,862 13,548
Other fixed expenses(2)   5,328     6,143  
Total hotel expenses   171,679     173,660  
 
Hotel EBITDA $ 65,100   $ 64,200  
 
Hotel EBITDA Margin 27.5 % 27.0 %
 

(1)

  This schedule includes the operating data for the three months ended March 31, 2017 for all properties owned by the Company as of March 31, 2017. Mason & Rook Hotel is excluded from the first quarter in both 2016 and 2017 because the hotel was closed for renovation during the entire first quarter of 2016. Pro forma excludes the results of operations of Hotel Deca, Lansdowne Resort and Alexis Hotel due to their dispositions during the first quarter of 2017 and Indianapolis Marriott Downtown due to its disposition in July 2016.

(2)

Other fixed expenses includes ground rent expense, but excludes ground rent payments for The Roger, Harbor Court and Hotel Triton in both periods due to the hotels being subject to capital leases of land and building under GAAP. At The Roger, the base ground rent payment was $99 for the three months ended March 31, 2017 and 2016. At Harbor Court, the base and participating ground rent payment was $288 for the three months ended March 31, 2017 and $333 for the three months ended March 31, 2016. At Hotel Triton, the base and participating ground rent payment was $456 for the three months ended March 31, 2017 and $489 for the three months ended March 31, 2016.
 
 

LASALLE HOTEL PROPERTIES

Statistical Data for the Hotels – Pro Forma(1)

(unaudited)

 
 
    For the three months ended
March 31,
2017     2016
Total Portfolio
Occupancy 77.7 % 77.6 %
Increase 0.2 %
ADR $ 228.39 $ 225.69
Increase 1.2 %
RevPAR $ 177.56 $ 175.03
Increase 1.4 %
 
 
 

For the three months ended

March 31, 2017

Market Detail RevPAR Variance %
Boston 4.0%
Chicago 0.9%
Key West (2.1)%
Los Angeles (11.3)%
New York (3.3)%
Other(2) 4.1%
Philadelphia (1.5)%
San Diego Downtown 8.0%
San Francisco (4.5)%
Washington, DC(3) 21.5%
 

(1)

  Pro forma excludes Mason & Rook Hotel for the period the hotel was closed for renovation during the first quarter of 2016 and the comparable period in 2017. Pro forma excludes Hotel Deca, Lansdowne Resort and Alexis Hotel due to their dispositions during the first quarter of 2017 and Indianapolis Marriott Downtown due to its disposition in July 2016.

(2)

Other includes The Heathman Hotel in Portland, OR, Chaminade Resort in Santa Cruz, CA, L’Auberge Del Mar in Del Mar, CA and The Hilton San Diego Resort and Paradise Point Resort in San Diego, CA.

(3)

Mason & Rook Hotel is excluded due to the hotel’s closure and renovation during the first quarter of 2016.
 
 

LASALLE HOTEL PROPERTIES

Statistical Data for the Hotels – Pro Forma(1) – Continued

(in millions)

(unaudited)

 

Prior Year Operating Data (Excluding Hotel Triton, Hotel Deca, Lansdowne Resort, Alexis Hotel and Indianapolis Marriott Downtown) – 2016 Comparable

                   
 
First Quarter Second Quarter Third Quarter Fourth Quarter Full Year
2016 2016 2016 2016 2016
Occupancy 77.6 % 89.1 % 90.1 % 81.3 % 84.6 %
ADR $ 225.60 $ 259.23 $ 252.99 $ 242.37 $ 245.89
RevPAR $ 175.04 $ 231.02 $ 228.01 $ 197.06 $ 207.94
 
Total hotel revenues $ 235.6 $ 312.9 $ 303.0 $ 270.0 $ 1,121.5
Less: Total hotel expenses   172.4     192.0     191.5     183.6     739.5  
Hotel EBITDA $ 63.2   $ 120.9   $ 111.5   $ 86.4   $ 382.0  
 
Hotel EBITDA Margin 26.8 % 38.6 % 36.8 % 32.0 % 34.1 %
 

(1)

  Pro forma excludes the Mason & Rook Hotel during the first quarter for comparable purposes, due to the hotel being closed for renovation during the first quarter of 2016. Pro forma excludes the results of operations of Hotel Triton due to its disposition in April 2017, Hotel Deca, Lansdowne Resort and Alexis Hotel due to their dispositions during the first quarter of 2017 and Indianapolis Marriott Downtown due to its disposition in July 2016.
 

Non-GAAP Financial Measures

FFO, EBITDA and Hotel EBITDA

The Company considers the non-GAAP measures of FFO (including FFO per share/unit), EBITDA and hotel EBITDA to be key supplemental measures of the Company’s performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO, EBITDA and hotel EBITDA to be helpful in evaluating a real estate company’s operations.

The White Paper on FFO approved by NAREIT in April 2002, as revised in 2011, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of properties and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization and impairment writedowns, and after comparable adjustments for the Company’s portion of these items related to unconsolidated entities and joint ventures. The Company computes FFO consistent with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company.

With respect to FFO, the Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization and impairments, and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs.

With respect to EBITDA, the Company believes that excluding the effect of non-operating expenses and non-cash charges, and the portion of these items related to unconsolidated entities, all of which are also based on historical cost accounting and may be of limited significance in evaluating current performance, can help eliminate the accounting effects of depreciation and amortization, and financing decisions and facilitate comparisons of core operating profitability between periods and between REITs, even though EBITDA also does not represent an amount that accrues directly to common shareholders.

With respect to hotel EBITDA, the Company believes that excluding the effect of corporate-level expenses, non-cash items, and the portion of these items related to unconsolidated entities, provides a more complete understanding of the operating results over which individual hotels and operators have direct control. The Company believes property-level results provide investors with supplemental information on the ongoing operational performance of its hotels and effectiveness of the third-party management companies operating its business on a property-level basis.

FFO, EBITDA and hotel EBITDA do not represent cash generated from operating activities as determined by GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO, EBITDA and hotel EBITDA are not measures of the Company’s liquidity, nor are FFO, EBITDA and hotel EBITDA indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO, EBITDA and hotel EBITDA may include funds that may not be available for management’s discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the Company’s operating performance.

Adjusted FFO and Adjusted EBITDA

The Company presents adjusted FFO (including adjusted FFO per share/unit) and adjusted EBITDA, which adjusts for certain additional items including gains on sale of property and impairment losses (to the extent included in EBITDA), acquisition transaction costs, costs associated with the departure of executive officers, costs associated with the recognition of issuance costs related to the calling of preferred shares and certain other items. The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its assets. As with FFO, EBITDA, and hotel EBITDA, the Company’s calculation of adjusted FFO and adjusted EBITDA may be different from similar adjusted measures calculated by other REITs.

Trailing NOI Capitalization Rate

The Company calculates the weighted average capitalization rate by dividing the aggregate trailing 12-month net operating income of the subject hotels by the aggregate sales prices for such hotels. The Company defines net operating income as hotel revenues (room and other hotel operating revenues) less hotel expenses (hotel operating expenses, real estate and personal property taxes, insurance, ground rent, FF&E reserve, and other hotel expenses).

Posted by on April 19, 2017.

Categories: Financial

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