LaSalle Hotel Properties Reports Second Quarter Results
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LaSalle Hotel Properties Reports Second Quarter Results
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Category: Worldwide
This is a press release selected by our editorial committee and published online for free on 2007-07-20
LaSalle Hotel Properties (NYSE:LHO) today reported net income to common shareholders of $19.4 million, or $0.48 per diluted share for the quarter ended June 30, 2007, compared to net income of $18.4 million, or $0.46 per diluted share for the prior year.
The Company generated funds from operations ("FFO") of $42.3 million in the second quarter of 2007 versus $37.9 million for the same period of 2006. On a per diluted share basis, FFO for the second quarter of 2007 was $1.05 versus $0.94 a year ago, an increase of 11.4 percent. The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for the second quarter was $65.0 million as compared to $58.7 million for the same period of 2006, an increase of 10.8 percent.
Room revenue per available room ("RevPAR") increased 5.3 percent for the second quarter of 2007 to $165.13 versus the previous year. Average daily rate ("ADR") climbed 4.8 percent to $208.57 compared to the second quarter of 2006, while occupancy rose 0.5 percent to 79.2 percent.
The Company's portfolio-wide hotel EBITDA increased 9.3 percent to $67.6 million in the second quarter compared with $61.8 million last year. EBITDA margins across the Company's portfolio increased 144 basis points from the prior year period.
"The lodging industry continues to strengthen from the recent lull in the current economic cycle," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "As the industry has strengthened, we have seen significant RevPAR growth at our properties not undergoing renovations as well as continued margin improvements across the portfolio."
The Company continues the process of repositioning and renovating many of the properties acquired in 2005 and 2006 as planned at the time of acquisition. This proven strategy of identifying and repositioning assets is expected to drive growth in operating income and long-term shareholder value. For the year, the Company expects to invest $120 million to $130 million into the portfolio including $90 million of repositioning capital investment. The second quarter total capital investment in existing properties was $30.2 million, bringing the year to date total capital investment to $56.8 million.
"The reception from our customers and guests at our repositioned properties has been very positive, resulting in significant gains in market penetration for these properties," said Mr. Bortz. "This positive response and resulting performance improvement reaffirms our belief that though these projects are difficult and negatively impact short-term results, in the long-term the portfolio will outperform the industry and the markets where our hotels are located."
As of the end of the second quarter 2007, the Company had total outstanding debt of $833.9 million. The Company's $300.0 million credit facility had an outstanding balance of $27.0 million as of June 30, 2007. Also, as of June 30, 2007, total debt to trailing 12 month Corporate EBITDA equaled 4.2 times (as defined by our senior unsecured credit facility).
For the six months ended June 30, 2007, net income to common shareholders decreased to $35.0 million from $51.6 million for the prior year period. EBITDA year to date through the end of June increased to $123.8 million from $121.5 million for the prior year period. Net income and EBITDA for the six months ended June 30, 2007 include the $30.3 million gain on sale of the LaGuardia Marriott and $3.9 million write-off of the non-cash costs associated with the initial issuance of the Company's Series A Preferred Shares that were redeemed in March 2007. Net income and EBITDA for the six months ended June 30, 2006 include the $38.4 million gain on sale of the Chicago Marriott. For the first six months of 2007, FFO decreased to $49.9 million from $50.1 million in the prior year period or $1.24 per diluted share from $1.27 per diluted share. FFO for the six months ended June 30, 2007 includes the negative impact from 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.
Second Quarter Highlights
On April 13, 2007, the Company announced an increase in its monthly dividend to $0.17 per common share of beneficial interest for each of the months of April, May and June 2007. This represents a 21 percent increase from the prior monthly dividend of $0.14 per common share. The April dividend was paid on May 15, 2007 to common shareholders of record on April 30, 2007; the May dividend was paid on June 15, 2007 to common shareholders of record on May 31, 2007; and the June dividend was paid on July 13, 2007 to common shareholders of record on June 29, 2007.
Also 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.
Subsequent Events
On July 13, 2007, the Company announced its monthly dividend of $0.17 per common share for each of the three months of July, August and September 2007. The July dividend will be paid on August 15, 2007 to common shareholders of record on July 31, 2007; the August dividend will be paid on September 14, 2007 to common shareholders of record on August 31, 2007; and the September dividend will be paid on October 15, 2007 to common shareholders of record on September 28, 2007.
2007 Outlook
The Company reaffirms its 2007 FFO per share outlook of $3.13 - $3.19 (excluding the $30.3 million gain on sale of the LaGuardia Marriott and the $3.9 million non-cash write-off of the initial issuance costs of the Series A Preferred Shares as a result of their redemption in March 2007) and its anticipated EBITDA margin improvement outlook of 100 - 125 basis points. However, due to the delays in certain renovation projects and related negative impact to revenues and EBITDA, offset by improved booking pace for the fourth quarter and the delay in opening the former Washington Grande Hotel as the luxury independent Donovan House until April 1, 2008, the breakdown of FFO and EBITDA between the two quarters in the second half of the year has changed.
Displacement for the year due to 92,000 room nights out of service and public areas impacted by renovations is projected to lower total revenues for 2007 by $14.5 million, room revenues by $9.5 million and EBITDA by $8.0 million versus our previously projected impact of $11.5 million in total revenues, $6.5 million in room revenues and $5.5 million in EBITDA with 83,000 room nights out of service.
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