Strategic Hotels & Resorts Reports Third Quarter 2009 Results
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Strategic Hotels & Resorts Reports Third Quarter 2009 Results
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-11-05
Strategic Hotels & Resorts (NYSE: BEE - News) today reported results for the third quarter ended September 30, 2009.
Third Quarter Recap
* Comparable funds from operations (Comparable FFO) was a loss of $0.07 per diluted share compared with income of $0.29 per diluted share in the prior year.
* Quarterly Comparable EBITDA was $31.2 million compared with $55.8 million in the prior year.
* North American total revenue per available room (Total RevPAR) decreased 21.9 percent and revenue per available room (RevPAR) decreased 22.6 percent driven by a 4.4 percentage point decrease in occupancy and a 17.8 percent decrease in average daily rate (ADR). Non-rooms revenue declined by 20.9 percent.
* European Total RevPAR decreased 20.3 percent (12.6 percent in constant dollars) and RevPAR decreased 18.6 percent (10.5 percent in constant dollars).
* North American gross operating profit (GOP) and EBITDA margins contracted 630 basis points and 680 basis points, respectively.
Chief Executive Officer Laurence Geller remarked, "Although operating performance continues to be impacted by challenges within the hospitality sector, recent macroeconomic trends, including 3.5% GDP growth in the third quarter, are reason for optimism that we are beginning to turn the corner on hotel demand.
"During the quarter we announced the appointment of new independent directors Raymond Gellein, former President of Starwood Hotels & Resorts' Global Development Group, and Eugene Reilly, President of AMB Property Corporation's Americas division. These appointments are in line with our previously announced strategy of strengthening the board composition in this volatile environment. The experience and outstanding credentials of these individuals in hospitality and real estate will enhance our execution strategy going forward."
Added Geller, "In October, we closed on the sale of the Four Seasons Mexico City at an attractive price in a difficult market. This transaction is directly aligned with our strategic asset disposition plan and provides an important source of liquidity to the company. Looking ahead, and in spite of the difficult near-term operating environment, we have confidence in the value and potential of our real estate platform."
Financial Results
The company reported third quarter 2009 financial results as follows:
* Net loss attributable to common shareholders was $73.5 million, or $0.97 per diluted share, compared with net loss attributable to common shareholders of $65.7 million, or $0.88 per diluted share, for the third quarter of 2008.
* Comparable EBITDA was $31.2 million compared with $55.8 million for the third quarter of 2008.
* FFO was a loss of $37.1 million, or $0.49 per diluted share, compared with a loss of $72.1 million, or $0.95 per diluted share, in the third quarter of 2008. Comparable FFO was a loss of $5.2 million, or $0.07 per diluted share, compared with income of $22.3 million, or $0.29 per diluted share, in the third quarter of 2008.
The company reported financial results for the nine month period ending September 30, 2009 as follows:
* Net loss attributable to common shareholders was $202.6 million, or $2.69 per diluted share, compared with a net loss attributable to common shareholders of $63.1 million, or $0.84 per diluted share, for the nine month period ending September 30, 2008.
* Comparable EBITDA was $87.5 million compared with $185.6 million for the nine month period ending September 30, 2008.
* FFO was a loss of $100.5 million, or $1.34 per diluted share, compared with a net loss of $12.3 million, or $0.16 per diluted share, in the nine months ending September 30, 2008. Comparable FFO was a loss of $19.0 million, or $0.25 per diluted share, compared with income of $81.2 million, or $1.07 per diluted share, in the nine month period ending September 30, 2008.
Impairment Losses
Third quarter 2009 results include an impairment loss totaling $30.8 million for the write-down of the carrying value of the Renaissance Le Parc to its estimated fair value. This one-time charge has been excluded from Comparable EBITDA, FFO and FFO per share metrics.
Transaction Update
During the quarter, the company entered into a joint venture agreement on its 60-acre ocean front land parcel near the Four Seasons Punta Mita Resort in Nayarit, Mexico with Cantiles de Mita, S.A. de C.V., a wholly owned subsidiary of DINE, the master developer of Punta Mita and original seller of the land parcel. In exchange for an interest in the land, the company was released from its final installment payment of $17.5 million which was due in August 2009 and received a preferred position which entitles the company to receive the first $12.0 million of distributions generated from the project with any excess distributions split equally among the partners.
Subsequent Event
The company closed on the sale of the Four Seasons Mexico City to Meridia Capital for a gross sales price of $54.0 million, or $225,000 per room. The transaction closed on October 29, 2009.
Earnings Call
The company will conduct its third quarter 2009 conference call for investors and other interested parties on November 5, 2009 at 10:00 a.m. Eastern Time (ET). Interested individuals are invited to listen to the call by telephone at 888-713-4205 (toll international: 617-213-4862) with pass code 30443392. To participate on the web cast, log on to http://www.strategichotels.com or https://www.theconferencingservice.com/prereg/key.process?key=PQUGYJWCM 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 November 5, 2009, through 11:59 p.m. ET on November 12, 2009. To access the replay, dial 888-286-8010 (toll international: 617-801-6888) and request replay pin number 86018676. A replay of the call will also be available on the Internet at http://www.strategichotels.com or http://www.earnings.com for 30 days after the call.
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 within the third quarter information section.
Portfolio Definitions
North American hotel comparisons for the third quarter 2009 are derived from the company's hotel portfolio at September 30, 2009, consisting of properties in which operations are included in the consolidated results of the company.
European hotel comparisons for the third quarter 2009 are derived from the company's European owned and leased hotel properties at September 30, 2009.
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, Mexico and Europe. The company currently has ownership interests in 18 properties with an aggregate of 8,118 rooms. For a list of current properties and for further information, please visit the company's website at http://www.strategichotels.com.
This press release contains forward-looking statements about Strategic Hotels & Resorts (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. 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: economic conditions generally and in the real estate market specifically, including further deterioration of the global economic downturn and the extent of its effect on business and leisure travel and the lodging industry; demand for hotel rooms in our current and proposed market areas; outbreak of contagious diseases such as the H1N1 virus; our liquidity and refinancing demands; availability of capital; the recovery of financing markets and our ability to obtain or refinance debt; our ability to comply with covenants contained in our debt facilities; rising interest rates and operating costs; rising insurance premiums; cash available for capital expenditures; competition; ability to dispose of existing properties in a manner consistent with our disposition strategy and liquidity needs; delays and cost overruns in construction and development; demand for hotel condominiums; marketing challenges associated with entering new lines of business; risks related to natural disasters; the effect of threats of terrorism and increased security precautions on travel patterns and hotel bookings; the outbreak of hostilities and international political instability; legislative or regulatory changes, including changes to laws governing the taxation of REITs; and changes in generally accepted accounting principles, policies and guidelines applicable to REITs.
Additional risks are discussed in the Company's filings with the Securities and Exchange Commission, including those appearing in the Company's most recent form 10-K and subsequent 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 we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Financial Tables Follow...
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Rooms $108,143 $138,209 $309,356 $416,809
Food and beverage 56,554 73,802 174,304 244,083
Other hotel operating revenue 21,062 25,174 73,032 81,402
------ ------ ------ ------
185,759 237,185 556,692 742,294
Lease revenue 1,224 1,528 3,513 4,217
----- ----- ----- -----
Total revenues 186,983 238,713 560,205 746,511
------- ------- ------- -------
Operating Costs and Expenses:
Rooms 30,579 34,064 86,770 102,637
Food and beverage 43,686 54,439 130,642 170,959
Other departmental expenses 53,911 61,922 163,292 188,700
Management fees 6,496 9,851 20,918 30,507
Other hotel expenses 13,328 13,937 41,043 45,296
Lease expense 4,355 4,702 12,480 13,563
Depreciation and amortization 38,364 32,356 107,678 90,156
Impairment losses and other
charges 30,795 96,679 81,009 96,679
Corporate expenses 5,519 6,541 21,399 21,537
----- ----- ------ ------
Total operating costs and
expenses 227,033 314,491 665,231 760,034
------- ------- ------- -------
Operating loss (40,050) (75,778) (105,026) (13,523)
Interest expense (26,903) (22,050) (77,128) (67,554)
Interest income 202 443 714 1,497
Loss on early extinguishment
of debt - - (883) -
Equity in earnings of joint
ventures 1,573 2,367 2,144 3,170
Foreign currency exchange
(loss) gain (1,193) 2,604 (287) 4,082
Other income (expenses), net 125 (55) 168 (494)
--- --- --- ----
Loss before income taxes,
distributions in excess of
noncontrolling interest capital,
loss on sale of noncontrolling
interests in hotel properties
and discontinued operations (66,246) (92,469) (180,298) (72,822)
Income tax benefit (expense) 358 (103) (424) (6,750)
Distributions in excess of
noncontrolling interest
capital - (1,715) - (2,499)
--- ------ --- ------
Loss before loss on sale of
noncontrolling interests in hotel
properties and discontinued
operations (65,888) (94,287) (180,722) (82,071)
Loss on sale of noncontrolling
interests in hotel properties - - - (46)
--- --- --- ---
Loss from continuing operations (65,888) (94,287) (180,722) (82,117)
Income from discontinued
operations, net of tax - 37,319 - 44,587
--- ------ --- ------
Net loss (65,888) (56,968) (180,722) (37,530)
Net loss attributable to the
noncontrolling interests in
SHR's operating partnership 844 739 2,297 487
Net income attributable to the
noncontrolling interests in
consolidated affiliates (696) (1,778) (1,044) (2,887)
---- ------ ------ ------
Net loss attributable to SHR (65,740) (58,007) (179,469) (39,930)
Preferred shareholder dividends (7,721) (7,721) (23,164) (23,164)
------ ------ ------- -------
Net loss attributable to SHR
common shareholders $(73,461) $(65,728) $(202,633) $(63,094)
======== ======== ========= ========
Basic and Diluted Loss Per Share:
Loss from continuing
operations attributable to
SHR common shareholders $(0.97) $(1.37) $(2.69) $(1.43)
Income from discontinued
operations attributable to
SHR - 0.49 - 0.59
--- ---- --- ----
Net loss attributable to SHR
common shareholders $(0.97) $(0.88) $(2.69) $(0.84)
====== ====== ====== ======
Weighted average common
shares outstanding 75,441 75,022 75,265 75,015
====== ====== ====== ======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets
(in thousands, except share data)
September 30, December 31,
2009 2008
---- ----
Assets
Investment in hotel properties, net $2,321,965 $2,383,860
Goodwill 82,647 120,329
Intangible assets, net of accumulated
amortization of $4,260 and $3,096 34,009 32,277
Investment in joint ventures 83,167 82,122
Cash and cash equivalents 88,481 80,954
Restricted cash and cash equivalents 18,778 37,358
Accounts receivable, net of allowance for
doubtful accounts of $2,657 and $2,203 65,179 70,945
Deferred financing costs, net of accumulated
amortization of $10,701 and $6,655 13,054 10,375
Deferred tax assets 39,894 38,260
Other assets 46,316 52,687
------ ------
Total assets $2,793,490 $2,909,167
========== ==========
Liabilities and Equity
Liabilities:
Mortgages and other debt payable $1,302,650 $1,301,535
Exchangeable senior notes, net of discount 168,284 165,155
Bank credit facility 269,000 206,000
Accounts payable and accrued expenses 258,439 281,918
Deferred tax liabilities 35,404 34,236
Deferred gain on sale of hotels 105,498 104,251
------- -------
Total liabilities 2,139,275 2,093,095
Noncontrolling interests in SHR's
operating partnership 3,464 5,330
Equity:
SHR's shareholders' equity:
8.50% Series A Cumulative Redeemable
Preferred Stock ($0.01 par
value; 4,488,750 shares
issued and outstanding; liquidation
preference $25.00 per share) 108,206 108,206
8.25% Series B Cumulative Redeemable
Preferred Stock ($0.01 par
value; 4,600,000 shares
issued and outstanding; liquidation
preference $25.00 per share) 110,775 110,775
8.25% Series C Cumulative Redeemable
Preferred Stock ($0.01 par
value; 5,750,000 shares
issued and outstanding; liquidation
preference $25.00 per share) 138,940 138,940
Common shares ($0.01 par value;
150,000,000 common shares
authorized; 75,179,918 and
74,410,012 common shares issued
and outstanding) 752 744
Additional paid-in capital 1,233,578 1,228,774
Accumulated deficit (889,732) (710,263)
Accumulated other comprehensive loss (75,526) (93,637)
------- -------
Total SHR's shareholders' equity 626,993 783,539
Noncontrolling interests in consolidated
affiliates 23,758 27,203
------ ------
Total equity 650,751 810,742
------- -------
Total liabilities and equity $2,793,490 $2,909,167
========== ==========
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
FINANCIAL HIGHLIGHTS
Supplemental Financial Data
(in thousands, except per share information)
September 30, 2009
------------------
Pro Rata Share Consolidated
-------------- ------------
Capitalization
--------------
Common shares outstanding 75,180 75,180
Operating partnership units outstanding 971 971
Stock options outstanding 885 885
Restricted stock units outstanding 933 933
--- ---
Combined shares, options and units outstanding 77,969 77,969
Common stock price at end of period $2.59 $2.59
----- -----
Common equity capitalization $201,940 $201,940
Preferred equity capitalization (at
$25.00 face value) 370,236 370,236
Consolidated debt (excludes discount on
exchangeable senior notes) 1,751,650 1,751,650
Pro rata share of unconsolidated debt 282,825 -
Pro rata share of consolidated debt (107,065) -
Cash and cash equivalents (88,481) (88,481)
------- -------
Total enterprise value $2,411,105 $2,235,345
========== ==========
Net Debt / Total Enterprise Value 76.3% 74.4%
Preferred Equity / Total Enterprise Value 15.3% 16.6%
Common Equity / Total Enterprise Value 8.4% 9.0%
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Investment in the Hotel del Coronado
(in thousands)
On January 9, 2006, we purchased a 45% interest in the joint venture that
owns the Hotel del Coronado. We account for this investment using the
equity method of accounting.
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Total revenues (100%) $38,424 $44,054 $96,620 $118,323
Property EBITDA (100%) $14,274 $19,547 $32,221 $45,698
Equity in earnings of joint
venture (SHR 45% ownership)
Property EBITDA $6,423 $8,796 $14,499 $20,564
Depreciation and amortization (1,938) (1,848) (5,763) (5,495)
Interest expense (1,894) (3,506) (5,925) (11,494)
Other income expenses, net (91) (104) (233) (138)
Income taxes (751) (694) (551) (392)
---- ---- ---- ----
Equity in earnings of joint venture $1,749 $2,644 $2,027 $3,045
====== ====== ====== ======
EBITDA Contribution from investment
in Hotel del Coronado
Equity in earnings of joint venture $1,749 $2,644 $2,027 $3,045
Depreciation and amortization 1,938 1,848 5,763 5,495
Interest expense 1,894 3,506 5,925 11,494
Income taxes 751 694 551 392
--- --- --- ---
EBITDA Contribution for investment
in Hotel del Coronado $6,332 $8,692 $14,266 $20,426
====== ====== ======= =======
FFO Contribution from investment in
Hotel del Coronado
Equity in earnings of joint venture $1,749 $2,644 $2,027 $3,045
Depreciation and amortization 1,938 1,848 5,763 5,495
----- ----- ----- -----
FFO Contribution for investment in
Hotel del Coronado $3,687 $4,492 $7,790 $8,540
====== ====== ====== ======
Spread
Interest over Loan
Debt Rate LIBOR Amount Maturity
---- ------- ----- ------ ---------
CMBS Mortgage and Mezzanine 2.33% 208 bp $610,000 January 2011 (a)
Revolving Credit Facility 2.75% 250 bp 18,500 January 2011 (a)
------
628,500
Cash and cash equivalents (53,882)
-------
Net Debt $574,618
========
(a) Includes extension options.
LIBOR
Effective Cap Notional
Cap Date Rate Amount Maturity
--- ---- ---- ------ --------
CMBS Mortgage and Mezzanine
Loan and Revolving Credit
Facility Cap June 2009 3.0% $630,000 January 2010
CMBS Mortgage and Mezzanine
Loan and Revolving Credit
Facility Cap February 2010 5.0% $630,000 January 2011
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Leasehold Information
(in thousands)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Paris Marriott Champs Elysees:
Property EBITDA $6,119 $7,278 $13,371 $17,374
Revenue (a) $6,119 $7,278 $13,371 $17,374
Lease Expense (3,136) (3,433) (8,983) (9,705)
Less: Deferred Gain on Sale Leaseback (1,202) (1,263) (3,448) (3,842)
------ ------ ------ ------
Adjusted Lease Expense (4,338) (4,696) (12,431) (13,547)
------ ------ ---- ------
EBITDA Contribution from Leasehold $1,781 $2,582 $940 $3,827
====== ====== ==== ======
Marriott Hamburg:
Property EBITDA $1,505 $1,612 $4,280 $4,841
Revenue (a) $1,224 $1,528 $3,513 $4,217
Lease Expense (1,219) (1,269) (3,497) (3,858)
Less: Deferred Gain on Sale Leaseback (55) (59) (159) (178)
--- --- ---- ----
Adjusted Lease Expense (1,274) (1,328) (3,656) (4,036)
---- ---- ----- ----
EBITDA Contribution from Leasehold $(50) $200 $(143) $181
==== ==== ===== ====
Total Leaseholds:
Property EBITDA $7,624 $8,890 $17,651 $22,215
Revenue (a) $7,343 $8,806 $16,884 $21,591
Lease Expense (4,355) (4,702) (12,480) (13,563)
Less: Deferred Gain on Sale Leaseback (1,257) (1,322) (3,607) (4,020)
------ ------ ------ ------
Adjusted Lease Expense (5,612) (6,024) (16,087) (17,583)
------ ------ ---- ------
EBITDA Contribution from Leasehold $1,731 $2,782 $797 $4,008
====== ====== ==== ======
September 30, December 31,
Security Deposits (b): 2009 2008
---- ----
Paris Marriott Champs Elysees $10,227 $15,507
Marriott Hamburg 7,317 6,984
----- -----
Total $17,544 $22,491
======= =======
(a) For the three and nine months ended September 30, 2009 and 2008,
Revenue for the Paris Marriott Champs Elysees represents Property EBITDA.
For the three and nine months ended September 30, 2009 and 2008, Revenue
for the Marriott Hamburg represents lease revenue.
(b) The security deposits are recorded in other assets on the consolidated
balance sheets.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures
In addition to REIT hotel income, five other non-GAAP financial measures
are presented for the Company that we believe are useful to management and
investors as key measures of our operating performance: Funds from
Operations (FFO); FFO - Fully Diluted; Comparable FFO; Earnings Before
Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and
Comparable EBITDA. A reconciliation of these measures to net loss
attributable to SHR common shareholders, the most directly comparable GAAP
measure, is set forth in the following tables.
We compute FFO in accordance with standards established by the National
Association of Real Estate Investment Trusts, or NAREIT, which 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 plus real estate-related depreciation and
amortization, and after adjustments for our portion of these items related
to unconsolidated partnerships and joint ventures. We also present FFO -
Fully Diluted, which is FFO plus income or loss on income attributable to
convertible noncontrolling interests. 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, foreign currency
exchange gains or losses and other non-recurring charges. We believe that
the presentation of FFO, 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. Comparable FFO per diluted share, in
accordance with NAREIT, is adjusted for the effects of dilutive
securities. Dilutive securities may include shares granted under
share-based compensation plans, operating partnership units and
exchangeable debt securities. No effect is shown for securities that are
anti-dilutive.
EBITDA represents net 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; and (iii) depreciation and
amortization. EBITDA also excludes interest expense, income taxes and
depreciation and amortization of our equity method investments. EBITDA is
presented on a full participation basis, which means we have assumed
conversion of all convertible noncontrolling interests of our operating
partnership into our common stock and includes preferred dividends. We
believe this treatment of noncontrolling interests provides more 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 other non-recurring charges. 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 caution investors that amounts presented in accordance with our
definitions of FFO, 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, FFO - Fully Diluted, Comparable FFO, EBITDA, and
Comparable EBITDA should not be considered as an alternative measure of
our net loss or operating performance. FFO, 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, 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 loss attributable to SHR common shareholders. In
addition, you should be aware that adverse economic and market conditions
might negatively impact our cash flow. Below, we have provided a
quantitative reconciliation of FFO, FFO - Fully Diluted, Comparable FFO,
EBITDA, and Comparable EBITDA to the most directly comparable GAAP
financial performance measure, which is net loss attributable to SHR
common shareholders, and provide an explanatory description by footnote of
the items excluded from FFO, FFO - Fully Diluted, and EBITDA.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Loss Attributable to SHR Common Shareholders to
EBITDA and Comparable EBITDA
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Net loss attributable to SHR
common shareholders $(73,461) $(65,728) $(202,633) $(63,094)
Depreciation and amortization -
continuing operations 38,364 32,356 107,678 90,156
Depreciation and amortization -
discontinued operations - - - 1,151
Interest expense - continuing
operations 26,903 22,050 77,128 67,554
Income taxes - continuing
operations (358) 103 424 6,750
Income taxes - discontinued
operations - (146) - (321)
Noncontrolling interests (844) (739) (2,297) (487)
Adjustments from consolidated
affiliates (a) (2,508) (1,986) (6,813) (6,258)
Adjustments from
unconsolidated affiliates 4,612 6,112 12,436 17,709
Preferred shareholder dividends 7,721 7,721 23,164 23,164
----- ----- ------ ------
EBITDA 429 (257) 9,087 136,324
Realized portion of deferred
gain on sale leasebacks (1,257) (1,322) (3,607) (4,020)
(Gain) loss on sale of assets -
continuing operations - (13) 5 (147)
Gain on sale of assets -
discontinued operations - (37,248) - (37,662)
Loss on sale of noncontrolling
interests in hotel properties - - - 46
Impairment losses and other
charges 30,795 96,679 81,009 96,679
Impairment losses and other
charges - adjustments from
consolidated affiliates - - (169) -
Foreign currency exchange loss
(gain) (b) 1,193 (2,604) 287 (4,082)
Hyatt Regency La Jolla
noncontrolling interest (a) - (1,180) - (4,063)
Distributions in excess of
noncontrolling interest
capital - 1,715 - 2,499
Loss on early extinguishment
of debt - - 883 -
--- --- --- ---
Comparable EBITDA $31,160 $55,770 $87,495 $185,574
======= ======= ======= ========
(a) The noncontrolling interest partner's share of the Hyatt Regency La
Jolla's property EBITDA is not deducted from net income attributable to
SHR common shareholders under GAAP accounting rules for the three and
nine months ended September 30, 2008. Under new accounting rules
effective January 1, 2009, the noncontrolling interest partner's share of
the Hyatt Regency La Jolla's property EBITDA is included in adjustments
from consolidated affiliates for the three and nine months ended
September 30, 2009.
(b) Foreign currency exchange gains or losses applicable to third-party
and inter-company debt and certain balance sheet items held by foreign
subsidiaries.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Loss Attributable to SHR Common Shareholders to
Funds From Operations (FFO), FFO - Fully Diluted and Comparable FFO
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Net loss attributable to SHR
common shareholders $(73,461) $(65,728) $(202,633) $(63,094)
Depreciation and amortization -
continuing operations 38,364 32,356 107,678 90,156
Depreciation and amortization -
discontinued operations - - - 1,151
Corporate depreciation (305) (304) (913) (896)
(Gain) loss on sale of assets -
continuing operations - (13) 5 (147)
Gain on sale of assets -
discontinued operations - (37,248) - (37,662)
Loss on sale of noncontrolling
interests in hotel properties - - - 46
Realized portion of deferred
gain on sale leasebacks (1,257) (1,322) (3,607) (4,020)
Deferred tax expense on realized
portion of deferred gain on sale
leasebacks 375 393 1,076 1,197
Noncontrolling interests
adjustments (511) (438) (1,440) (1,240)
Adjustments from consolidated
affiliates (a) (1,956) (1,368) (5,648) (4,004)
Adjustments from unconsolidated
affiliates 1,970 1,848 5,859 5,495
----- ----- ----- -----
FFO (36,781) (71,824) (99,623) (13,018)
Convertible noncontrolling
interests (333) (301) (857) 753
---- ---- ---- ---
FFO - Fully Diluted (37,114) (72,125) (100,480) (12,265)
Impairment losses and other
charges 30,795 96,679 81,009 96,679
Impairment losses and other
charges - adjustments from
consolidated affiliates - - (169) -
Foreign currency exchange loss
(gain), net of tax (b) 1,137 (3,195) (279) (3,117)
Hyatt Regency La Jolla
noncontrolling interest (a) - (777) - (2,559)
Distributions in excess of
noncontrolling interest capital - 1,715 - 2,499
Loss on early extinguishment of
debt - - 883 -
--- --- --- ---
Comparable FFO $(5,182) $22,297 $(19,036) $81,237
======= ======= ======== =======
Comparable FFO per diluted share $(0.07) $0.29 $(0.25) $1.07
====== ===== ====== =====
Weighted average diluted shares 75,441 76,010 75,265 76,137
====== ====== ====== ======
(a) The noncontrolling interest partner's share of the Hyatt Regency La
Jolla's property FFO is not deducted from net income attributable to
SHR common shareholders under GAAP accounting rules for the three and nine
months ended September 30, 2008. Under new accounting rules effective
January 1, 2009, the noncontrolling interest partner's share of the Hyatt
Regency La Jolla's property EBITDA is included in adjustments from
consolidated affiliates for the three and nine months ended September 30,
2009.
(b) Foreign currency exchange gains or losses applicable to third-party
and inter-company debt and certain balance sheet items held by foreign
subsidiaries.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Debt Summary
(dollars in thousands)
Interest Loan
Debt Rate Spread (a) Amount Maturity (b)
---- ---- ---------- ------ -------------
Bank credit facility 4.00% 375 bp $269,000 March 2011
Westin St. Francis 0.95% 70 bp 220,000 August 2011
Fairmont Scottsdale 0.81% 56 bp 180,000 September 2011
InterContinental Chicago 1.31% 106 bp 121,000 October 2011
InterContinental Miami 0.98% 73 bp 90,000 October 2011
InterContinental Prague (c) 1.95% 120 bp (c) 152,204 March 2012
Loews Santa Monica Beach
Hotel 0.88% 63 bp 118,250 March 2012
Ritz-Carlton Half Moon Bay 0.92% 67 bp 76,500 March 2012
Exchangeable senior
notes, net of discount (d) 3.50% Fixed 168,284 April 2012
Fairmont Chicago 0.95% 70 bp 123,750 April 2012
Hyatt Regency La Jolla 1.25% 100 bp 97,500 September 2012
Marriott London Grosvenor
Square (e) 1.64% 110 bp (e) 123,446 October 2013
-------
$1,739,934
==========
(a) Spread over LIBOR (0.25% at September 30, 2009).
(b) Includes extension options, excluding the conditional one-year
extension option on the bank credit facility.
(c) Principal balance of euro 104,000,000 at September 30, 2009. Spread
over three-month EURIBOR (0.75% at September 30, 2009).
(d) Reflects the cash coupon.
(e) Principal balance of 77,250,000 pounds Sterling at September 30,
2009. Spread over three-month GBP LIBOR (0.54% at September 30, 2009).
U.S. Interest Rate Swaps
Fixed Pay Rate Notional
Swap Effective Date Against LIBOR Amount Maturity
------------------- ------------- ------ --------
April 2005 4.59% $75,000 April 2012
June 2005 4.12% 50,000 June 2012
June 2006 5.50% 75,000 June 2013
August 2006 5.42% 100,000 August 2013
March 2007 4.84% 100,000 July 2012
March 2009 0.78% 50,000 December 2009
March 2009 0.90% 75,000 April 2010
March 2009 1.12% 50,000 December 2010
March 2009 1.38% 50,000 August 2011
March 2009 1.02% 50,000 December 2010
March 2009 0.64% 50,000 December 2009
March 2009 1.04% 100,000 February 2011
March 2009 1.22% 50,000 August 2011
September 2009 4.90% 100,000 September 2014
---- -------
3.03% $975,000
==== ========
European Interest Rate Swap
Fixed Pay Rate
Against GBP Notional
Swap Effective Date LIBOR (f) Amount Maturity
------------------- --------- ------ --------
October 2007 3.22% - 5.72% 77,250 pounds Sterling October 2013
Fixed Pay Rate Notional
Swap Effective Date Against EURIBOR Amount Maturity
------------------- --------------- ------ --------
September 2008 4.53% euro 104,000 March 2012
Forward-Starting Interest Rate Swaps
Fixed Pay Rate Notional
Swap Effective Date Against LIBOR Amount Maturity
------------------- ------------- ------ --------
December 2009 4.96% $100,000 December 2014
April 2010 5.42% 75,000 April 2015
December 2010 5.23% 100,000 December 2015
February 2011 5.27% 100,000 February 2016
-------
$375,000
========
At September 30, 2009, future scheduled debt principal payments (including
non-conditional extension options) are as follows:
Years ending December 31, Amount
------------------------- ------
2009 $-
2010 7,858
2011 887,858
2012 742,364
2013 113,570
Thereafter -
---
1,751,650
Less discount on
exchangeable
senior notes (11,716)
-------
Total $1,739,934 .
==========
Percent of fixed rate debt including U.S. and European swaps 81.6%
Weighted average interest rate including U.S. and European
swaps (g) 3.91%
Weighted average maturity of fixed rate debt (debt with
maturity of greater than one year) 3.44
(f) In April 2009, we modified the GBP LIBOR interest rate swap agreement,
which adjusts the fixed pay rate from 5.72% to 3.22% for the period from
January 15, 2009 through January 17, 2011.
(g) Excludes the amortization of deferred financing costs, amortization
of the discount on the exchangeable senior notes and the amortization of
the interest rate swap costs.
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