LaSalle Hotel Properties Reports First Quarter Results; RevPAR Increases 13.7 Percent
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LaSalle Hotel Properties Reports First Quarter Results; RevPAR Increases 13.7 Percent
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Category: Worldwide
This is a press release selected by our editorial committee and published online for free on 2006-04-20
LaSalle Hotel Properties (NYSE:LHO) today reported net income to common shareholders of $33.3 million, or $0.87 per diluted share for the quarter ended March 31, 2006, compared to a net loss of $2.9 million, or ($0.10) per diluted share for the prior year period. Net income for the first quarter 2006 includes a $38.4 million gain in joint venture equity pick-up related to the sale of the Chicago Marriott.
For the quarter ended March 31, 2006, the Company generated funds from operations ("FFO") of $12.2 million versus $8.3 million for the same period of 2005. FFO per diluted share and unit for the first quarter equaled $0.32 versus $0.27 for the same period last year. The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter was $62.8 million, up from $13.5 million during the prior year period. EBITDA for the first quarter 2006 includes a $38.4 million gain in joint venture equity pick-up related to the sale of the Chicago Marriott.
Room revenue per available room ("RevPAR") for the quarter ended March 31, 2006 versus the same period in 2005 increased 13.7 percent to $116.33. Average daily rate ("ADR") rose to $170.76, a 9.4 percent improvement, while occupancy rose 3.9 percent to 68.1 percent from the prior year.
"Group and transient demand was strong in the quarter, which enabled our hotels to increase occupancy and yield room rates," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "Over 70 percent of our RevPAR increase resulted from higher ADR."
The Company's hotels generated $26.3 million of EBITDA for the quarter, which is an increase of $5.7 million or 27.8 percent over last year. First quarter EBITDA margins across the Company's portfolio grew 280 basis points from the prior year.
"The portfolio's performance exceeded our expectations, primarily as a result of better than expected group demand, particularly at our resort properties," said Mr. Bortz. "Our resort hotels, especially our hotels located in San Diego, led the portfolio's strong performance with 18.4% RevPAR growth and a 543 basis point EBITDA margin improvement."
On January 13, 2006, the Company announced its monthly dividend of $0.10 per share of its common shares of beneficial interest for each of the three months of January, February and March 2006. The January dividend was paid on February 15, 2006 to common shareholders of record on January 31, 2006; the February dividend was paid on March 15, 2006 to common shareholders of record on February 28, 2006; and the March dividend was paid on April 14, 2006 to common shareholders of record on March 31, 2006.
On January 27, 2006, the Company acquired the Le Parc Suite Hotel for $47.0 million. The independent upscale hotel features 154 spacious suites and is located in the heart of West Hollywood. Outrigger Lodging Services ("OLS") continues to manage the Le Parc Suite Hotel. OLS also manages the Company's Le Montrose Suite Hotel and Grafton on Sunset, which are both also located in West Hollywood.
In February, the Company, in an underwritten public offering, sold a total of 3,737,500 common shares resulting in net proceeds of approximately $137.7 million. Additionally, the Company raised net proceeds of $85.3 million with the sale of 3,500,000 Series E Cumulative Redeemable Preferred Shares at a distribution rate of 8.0 percent per year.
On February 15, 2006, the Company successfully remarketed the $42.5 million Massachusetts Port Authority special project revenue bonds related to the Harborside Hyatt with new supporting letters of credit provided by Royal Bank of Scotland. The annual cost of the letters of credit was reduced from 2.0% to 1.35% and certain other terms were amended, creating annual interest savings of approximately $0.4 million.
On February 21, 2006, the Company closed the Washington Grande Hotel, formerly the Holiday Inn Downtown, for renovations. Upon completion of the Company's renovation and repositioning program, the property will reopen in 2007 as a luxury high-style independent hotel.
On March 1, 2006, the Company acquired the Westin Michigan Avenue for $214.7 million and the House of Blues Hotel and related Marina City retail and parking facilities for $114.5 million in separate and unrelated transactions. The Westin Michigan Avenue is located in the heart of Chicago's Magnificent Mile neighborhood and is in close proximity to Chicago's major demand generators, including McCormick Place Convention Center, numerous Fortune 500 corporate headquarters, Navy Pier, professional sports venues and other leisure attractions. Starwood Hotels & Resorts Worldwide, Inc. continues to manage the hotel.
The House of Blues Hotel is a AAA Four Diamond, full service hotel located along the Chicago River and is part of the Marina City mixed-use development. The acquisition included over 115,000 square feet of retail and restaurant space at Marina City and 896 parking spaces encompassing the first 17 floors of the two adjacent Marina City residential towers. Major retail tenants include Smith & Wollensky Steakhouse, Crunch Gym, BIN 36 Restaurant, 10Pin Bowling Lounge and Bank One. Upon acquisition, Gemstone Resorts International, LLC was selected to manage the hotel, marking a new relationship for the Company.
On March 25, 2006, Chicago 540, LLC, a joint venture with The Carlyle Group, closed on the sale of the Chicago Marriott Downtown for $295 million plus approximately $11 million of other consideration. The hotel was purchased by the joint venture in 2000 for $175 million. LaSalle Hotel Properties recognized a gain in joint venture equity pick-up of $38.4 million.
In the first quarter, the Company invested $7.3 million of capital throughout its portfolio, including $2.5 million for completion of the 14,000 square foot Spa Minerale and other renovations at Lansdowne Resort. The Company also continued its renovation and repositioning programs at the Sheraton Bloomington, Chaminade Resort and Hilton Old Town Alexandria.
As of the end of the first quarter 2006, the Company had total outstanding debt of $737.3 million. The Company's $300.0 million credit facility had $51.0 million outstanding as of March 31, 2006. Interest expense for the quarter was $8.4 million, resulting in a trailing 12 month Corporate EBITDA (as defined in the Company's senior unsecured credit facility) to interest coverage ratio of 4.4 times. As of March 31, 2006, total debt to trailing 12 month Corporate EBITDA equaled 4.3 times, one of the lowest debt to EBITDA ratios in the industry.
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