LaSalle Hotel Properties Reports First Quarter Results
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LaSalle Hotel Properties Reports First Quarter Results
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Category: North America & West Indies / Carribean islands
This is a press release selected by our editorial committee and published online for free on 2007-04-19
LaSalle Hotel Properties (NYSE:LHO) today reported net income to common shareholders of $15.7 million, or $0.39 per diluted share for the quarter ended March 31, 2007, compared to net income of $33.3 million, or $0.87 per diluted share for the prior year. Net income includes the $30.3 million net gain on sale of the LaGuardia Marriott and the $3.9 million write-off of the non-cash costs associated with the initial issuance of the Company's Series A Preferred Shares, which were redeemed by the Company in March 2007. Net income for the first quarter of 2006 includes the $38.4 million net gain on the sale of the Chicago Marriott Downtown.
For the quarter ended March 31, 2007, the Company generated funds from operations ("FFO") of $7.6 million versus $12.2 million for the same period of 2006. On a per diluted share basis, FFO for 2007 was $0.19 versus $0.32 a year ago. FFO has been reduced by the $3.9 million non-cash write-off of the initial issuance costs of the Series A Preferred Shares due to their redemption in March 2007. Excluding these non-cash costs, FFO for the first quarter of 2007 would be $11.5 million or $0.29 per diluted share.
The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter was $58.8 million as compared to $62.8 million for the same period of 2006. EBITDA includes the $30.3 million net gain on sale of the LaGuardia Marriott in 2007 and the $38.4 million net gain on the sale of the Chicago Marriott Downtown in 2006. Excluding these gains, EBITDA would be $28.5 million for the first quarter of 2007 versus $24.5 million for the comparable quarter in 2006, representing an increase of 16.6 percent.
Room revenue per available room ("RevPAR") increased 1.8 percent for the first quarter to $119.30 versus the previous year. Average daily rate ("ADR") climbed 5.4 percent to $180.94 compared to the first quarter of 2006, while occupancy declined 3.4 percent to 65.9 percent.
The Company's hotels generated $30.7 million of EBITDA in the first quarter compared with $31.0 million last year. EBITDA margins across the Company's portfolio decreased 43 basis points from the prior year period. The decline in EBITDA and EBITDA margins was anticipated and was primarily attributable to disruptive major renovations at a substantial portion of the Company's hotels.
"As expected, our extensive renovations and repositionings in the quarter had a negative impact on the performance of our portfolio," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "Although a few of these renovations and the associated disruptions will continue into the second quarter, the impact is forecasted to be considerably less than the first three months. While our renovation and repositioning projects are reducing our 2007 performance, we anticipate substantial performance improvements from these extensive capital investments in future years, especially 2008 through 2010, as these newly repositioned hotels ramp up to higher stabilized performance."
As of the end of the first quarter 2007, the Company had total outstanding debt of $834.7 million. The Company's $300.0 million credit facility had an outstanding balance of $12.0 million as of March 31, 2007. Interest expense for the quarter was $10.9 million, resulting in a trailing 12 month Corporate EBITDA (as defined in the Company's senior unsecured credit facility) to interest coverage ratio of 4.3 times. As of March 31, 2007, total debt to trailing 12 month Corporate EBITDA equaled 4.2 times, one of the lowest debt to EBITDA ratios in the industry.
First Quarter Highlights
On January 12, 2007, the Company announced its monthly dividend of $0.14 per share of its common shares of beneficial interest for each of the three months of January, February and March 2007. The January dividend was paid on February 15, 2007 to common shareholders of record on January 31, 2007; the February dividend was paid on March 15, 2007 to common shareholders of record on February 28, 2007; and the March dividend was paid on April 13, 2007 to common shareholders of record on March 30, 2007.
On January 26, 2007, the Company sold the 438-room LaGuardia Marriott Hotel for $69.0 million, resulting in an approximate gain on sale of $30.3 million. The Company utilized the sale of the hotel as the disposition property in the reverse 1031 exchange established in conjunction with the Hotel Solamar acquisition in August 2006. As a result, the Company's gain was deferred for tax purposes.
On March 6, 2007, the Company redeemed its 10 1/4% Series A Preferred Shares at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends. The Company recognized a non-cash expense of $3.9 million related to the write-off of the initial issuance costs associated with the preferred shares due to the redemption of the shares.
Subsequent Events
On April 13, 2007, the Company amended and restated its $300 million senior unsecured credit facility. The terms of the amended and restated facility are substantially the same as the prior credit facility, except for a significant pricing reduction and the extension of the maturity date to April 13, 2011. The Company has an option to extend the facility to April 13, 2012. The interest rate spread over LIBOR has been reduced by 80 to 100 basis points as compared to the previous pricing grid. The unused fee for the facility was reduced by 7.5 basis points to 12.5 basis points. Additionally, LaSalle Hotel Lessee, the Company's taxable REIT subsidiary, also amended and restated its $25 million revolver on similar terms with similar pricing reductions to the amended and restated senior unsecured credit facility.
On April 13, 2007, the Company announced a 21% increase in its monthly dividend to $0.17 per common share for each of the three months of April, May and June 2007. The April dividend will be paid on May 15, 2007 to common shareholders of record on April 30, 2007; the May dividend will be paid on June 15, 2007 to common shareholders of record on May 31, 2007; and the June dividend will be paid on July 13, 2007 to common shareholders of record on June 29, 2007.
2007 Outlook
The outlook for the second, third and fourth quarters of 2007 remains unchanged from our quarterly outlook provided on January 29, 2007. Adjusting our full year 2007 outlook for the first quarter results and assuming no major geopolitical events that might negatively impact the economy or the travel business, our outlook is as follows:
Net Income $64.6 million - $67.0 million ($1.60 - $1.66 per diluted
share);
FFO $122.9 million - $125.3 million ($3.03 - $3.09 per diluted
share); and
EBITDA $240.1 million - $242.5 million.
Excluding the $30.3 million gain on sale and the non-cash write-off of the $3.9 million issuance costs, the Company's outlook for 2007 is as follows:
Net Income $38.2 million - $40.6 million ($0.95 - $1.00 per diluted
share);
FFO $126.8 million - $129.2 million ($3.13 - $3.19 per diluted
share); and
EBITDA $209.8 million - $212.2 million.
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