Strategic Hotels & Resorts Reports Second Quarter 2014 Financial Results
Total consolidated revenues were $276.2 million in the second quarter of 2014, a 21.6 percent increase over the prior year period.
Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the second quarter ended June 30, 2014.
“Building upon the positive momentum from the first quarter, we drove continued high performance among all our key metrics in the first half of 2014, perhaps most notably within group room nights and related ancillary spend,” said Raymond L. “Rip” Gellein, Chairman and Chief Executive Officer of Strategic Hotels & Resorts, Inc. “Total RevPAR grew 7.2% while EBITDA margins expanded 170 basis points leading to a 14.3% increase in Comparable EBITDA and a 50.0% increase in Comparable FFO per share in the second quarter; which were all above consensus estimates. From a transactional perspective, the Company has completed nearly $2.7 billion in gross transactions since the beginning of the year, with second quarter highlights including the acquisition of the remaining interest in the iconic Hotel del Coronado, raising or refinancing nearly $1.0 billion of capital and retiring $200 million of high cost preferred equity. This has allowed us to continue building the highest quality portfolio in the industry, while lowering our cost of capital and further deleveraging our balance sheet. I remain very optimistic about the second half of the year, which is why we have upwardly revised the lower end of our guidance ranges.”
|
($ in millions, except per share and operating metrics) |
Second Quarter |
||
|
Earnings Metrics |
2014 |
2013 |
% Change |
|
Net income attributable to common shareholders |
$80.8 |
$3.3 |
2,369.2% |
|
Net income per diluted share |
$0.35 |
$0.01 |
3,400.0% |
|
Comparable funds from operations (Comparable FFO) (a) |
$48.1 |
$28.7 |
67.8% |
|
Comparable FFO per diluted share (a) |
$0.21 |
$0.14 |
50.0% |
|
Comparable EBITDA (a) |
$68.9 |
$60.3 |
14.3% |
|
Total United States Portfolio Operating Metrics (b) |
|||
|
Average Daily Rate (ADR) |
$296.15 |
$282.24 |
4.9% |
|
Occupancy |
79.6% |
79.3% |
0.3 pts |
|
Revenue per Available Room (RevPAR) |
$235.68 |
$223.80 |
5.3% |
|
Total RevPAR |
$447.26 |
$417.10 |
7.2% |
|
EBITDA Margins |
28.1% |
26.4% |
170 bps |
|
(a) |
Please refer to the tables provided later in this press release for a reconciliation of net income attributable to common shareholders to Comparable FFO, Comparable FFO per share and Comparable EBITDA. Comparable FFO, Comparable FFO per share and Comparable EBITDA are non-GAAP measures and are further explained with the reconciliation tables. |
|
(b) |
Operating statistics reflect results from the Company’s Total United States portfolio which is derived from the Company’s hotel portfolio at June 30, 2014, consisting of all 15 properties located in the United States. |
Second Quarter Highlights
- Total consolidated revenues were $276.2 million in the second quarter of 2014, a 21.6 percent increase over the prior year period.
- Net income attributable to common shareholders was $80.8 million, or $0.35 per diluted share, in the second quarter of 2014, compared with $3.3 million, or $0.01 per diluted share, in the second quarter of 2013.
- Comparable FFO was $0.21 per diluted share in the second quarter of 2014, compared with $0.14 per diluted share in the prior year period, a 50.0 percent increase over the prior year period.
- Comparable EBITDA was $68.9 million in the second quarter of 2014, compared with $60.3 million in the prior year period, a 14.3 percent increase between periods.
- Total United States portfolio RevPAR increased 5.3 percent in the second quarter of 2014, driven by a 4.9 percent increase in ADR and a 0.3 percentage point increase in occupancy compared to the second quarter of 2013. Total RevPAR increased 7.2 percent between periods with non-rooms revenue increasing by 9.4 percent between periods.
- Transient occupied room nights in the Total United States portfolio increased 0.6 percent in the second quarter 2014 and group occupied room nights were flat compared to the second quarter of 2013. Transient ADR increased 5.5 percent compared to the second quarter of 2013 and group ADR increased 3.9 percent.
- Total United States portfolio EBITDA margins expanded 170 basis points in the second quarter of 2014, compared to the second quarter of 2013.
- Group room nights currently booked for 2014 are 7.2 percent higher compared to room nights booked for 2013 at the same time last year, with rates 3.2 percent higher, resulting in a 10.6 percent RevPAR increase.
The Company reported financial results for the six month period ended June 30, 2014 as follows:
- Total consolidated revenues were $470.8 million for the six month period ended June 30, 2014, a 15.3 percent increase over the prior year period.
- Net income attributable to common shareholders was $298.0 million, or $1.30 per diluted share, compared with net loss attributable to common shareholders of $20.2 million, or $0.11 per diluted share, for the six month period ended June 30, 2013.
- Comparable FFO was $0.28 per diluted share compared with $0.15 per diluted share in the six month period ended June 30, 2013.
- Comparable EBITDA was $110.1 million compared with $94.8 million for the six month period ended June 30, 2013, a 16.2 percent increase between periods.
Preferred Dividends & Redemptions
On April 3, 2014, the Company completed the redemption of all of the outstanding 4,148,141 shares of its 8.50% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Shares”) at a redemption price of $25.00 per share, plus accrued and unpaid dividends in the amount of $0.54896 per share, for a total redemption cost of $106.0 million. The redemption of the Series A Preferred Shares eliminated approximately $6.5 million in dividend payments in 2014 and $8.8 million of dividend payments on an annual basis.
On June 2, 2014, the Company’s board of directors declared a quarterly dividend of $0.51563 per share of 8.25% Series B Cumulative Redeemable Preferred Stock and 8.25% Series C Cumulative Redeemable Preferred Stock, which was paid on June 30, 2014 to shareholders of record as of the close of business on June 16, 2014.
On July 3, 2014, the Company completed the redemption of all of the outstanding 3,827,727 shares of its 8.25% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Shares”) at a redemption price of $25.00 per share, plus accrued and unpaid dividends in the amount of $0.01719 per share, for a total redemption cost of $95.8 million. The redemption of the Series C Preferred Shares eliminated approximately $3.9 million in dividend payments in 2014 and $7.9 million in dividend payments on an annual basis.
Transaction Activity
On April 21, 2014, the Company paid $22.7 million to terminate its $400.0 million notional value interest rate swap portfolio, which will reduce cash interest expense by approximately $11.5 million in 2014. The swap portfolio had a weighted average LIBOR interest rate of 5.09 percent.
On April 25, 2014, the Company closed on a new $300.0 million stock secured credit facility with an accordion feature allowing for additional borrowing capacity up to $400.0 million. The facility’s interest rate is based upon a leverage-based pricing grid ranging from LIBOR plus 175 basis points to LIBOR plus 250 basis points. The initial pricing is LIBOR plus 200 basis points, representing a 75 basis point decline from the Company’s previous credit facility.
On May 29, 2014, the Company closed on a $120.0 million loan secured by the Loews Santa Monica Beach Hotel. The loan bears interest at a floating rate of LIBOR plus 255 basis points and has a seven-year term, including extension options.
On June 2, 2014, the Company closed on an underwritten public offering of 41.4 million shares of common stock at a public offering price of $10.50 per share, including 5.4 million shares of common stock issued pursuant to the exercise in full of the underwriters’ over-allotment option. The Company received $416.8 million from the offering after deducting underwriting discounts and commissions and transaction expenses related to the offering. The Company used the net proceeds from the offering to fund the acquisition of the 63.6 percent ownership interest in the Hotel del Coronado that it did not previously own from its joint venture partner, to redeem all of the issued and outstanding Series C Preferred Shares, and for general corporate purposes.
On June 11, 2014, the Company closed on the acquisition of the 63.6 percent ownership interest in the Hotel del Coronado that it did not previously own for $210.0 million in cash and became fully obligated under the entire $475.0 million loan encumbering the property.
On June 30, 2014, the Company closed on a $120.0 million loan secured by the Four Seasons Washington, D.C. hotel. The loan bears interest at a floating rate of LIBOR plus 225 basis points and has a five-year term, including extension options.
2014 Guidance
Based on the results of the first six months of 2014 and current forecasts for the remainder of the year, management is raising the lower end of its guidance ranges for full year 2014 RevPAR growth, Total RevPAR growth, EBITDA margin expansion, Comparable EBITDA and Comparable FFO per fully diluted share.
For the full-year ending December 31, 2014, the Company is providing the following guidance ranges:
|
Guidance Metrics |
Previous Range |
Revised Range |
|
|
RevPAR |
5.0% – 7.0% |
5.5% – 7.0% |
|
|
Total RevPAR |
5.0% – 7.0% |
5.5% – 7.0% |
|
|
EBITDA Margin expansion |
120 – 200 basis points |
150 – 200 basis points |
|
|
Comparable EBITDA |
$230M – $250M |
$235M – $250M |
|
|
Comparable FFO per diluted share |
$0.59 – $0.68 |
$0.62 – $0.68 |
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 and Europe. The Company currently has ownership interests in 16 properties with an aggregate of 7,865 rooms and 835,000 square feet of meeting space.
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Statements of Operations (in thousands, except per share data) |
||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||||||
|
Revenues: |
||||||||||||||||
|
Rooms |
$ |
148,874 |
$ |
127,484 |
$ |
251,974 |
$ |
225,748 |
||||||||
|
Food and beverage |
100,028 |
79,966 |
170,045 |
142,023 |
||||||||||||
|
Other hotel operating revenue |
25,942 |
18,491 |
46,181 |
38,150 |
||||||||||||
|
Lease revenue |
1,319 |
1,160 |
2,618 |
2,360 |
||||||||||||
|
Total revenues |
276,163 |
227,101 |
470,818 |
408,281 |
||||||||||||
|
Operating Costs and Expenses: |
||||||||||||||||
|
Rooms |
41,268 |
36,087 |
74,975 |
67,850 |
||||||||||||
|
Food and beverage |
67,077 |
57,289 |
121,680 |
108,839 |
||||||||||||
|
Other departmental expenses |
66,238 |
53,285 |
119,817 |
104,466 |
||||||||||||
|
Management fees |
9,241 |
6,447 |
15,019 |
11,457 |
||||||||||||
|
Other hotel expenses |
15,572 |
15,234 |
31,250 |
30,123 |
||||||||||||
|
Lease expense |
1,260 |
1,206 |
2,518 |
2,382 |
||||||||||||
|
Depreciation and amortization |
28,058 |
24,691 |
50,263 |
49,599 |
||||||||||||
|
Corporate expenses |
7,198 |
7,209 |
14,391 |
12,972 |
||||||||||||
|
Total operating costs and expenses |
235,912 |
201,448 |
429,913 |
387,688 |
||||||||||||
|
Operating income |
40,251 |
25,653 |
40,905 |
20,593 |
||||||||||||
|
Interest expense |
(19,587) |
(19,460) |
(37,861) |
(39,123) |
||||||||||||
|
Interest income |
50 |
20 |
77 |
30 |
||||||||||||
|
Equity in earnings of unconsolidated affiliates |
826 |
1,456 |
5,271 |
2,801 |
||||||||||||
|
Foreign currency exchange (loss) gain |
(8) |
84 |
(6) |
(2) |
||||||||||||
|
Gain on consolidation of affiliates |
65,349 |
— |
143,466 |
— |
||||||||||||
|
Other income, net |
795 |
745 |
1,218 |
877 |
||||||||||||
|
Income (loss) before income taxes and discontinued operations |
87,676 |
8,498 |
153,070 |
(14,824) |
||||||||||||
|
Income tax expense |
(207) |
(72) |
(246) |
(85) |
||||||||||||
|
Income (loss) from continuing operations |
87,469 |
8,426 |
152,824 |
(14,909) |
||||||||||||
|
Income from discontinued operations, net of tax |
604 |
329 |
159,039 |
2,318 |
||||||||||||
|
Net Income (Loss) |
88,073 |
8,755 |
311,863 |
(12,591) |
||||||||||||
|
Net (income) loss attributable to the noncontrolling interests in SHR’s operating partnership |
(281) |
(36) |
(1,130) |
51 |
||||||||||||
|
Net loss attributable to the noncontrolling interests in consolidated affiliates |
217 |
597 |
4,258 |
4,449 |
||||||||||||
|
Net Income (Loss) attributable to SHR |
88,009 |
9,316 |
314,991 |
(8,091) |
||||||||||||
|
Preferred shareholder dividends |
(7,169) |
(6,042) |
(16,993) |
(12,083) |
||||||||||||
|
Net Income (Loss) Attributable to SHR Common Shareholders |
$ |
80,840 |
$ |
3,274 |
$ |
297,998 |
$ |
(20,174) |
||||||||
|
Basic Income (Loss) Per Common Share: |
||||||||||||||||
|
Income (loss) from continuing operations attributable to SHR common shareholders |
$ |
0.36 |
$ |
0.02 |
$ |
0.65 |
$ |
(0.11) |
||||||||
|
Income from discontinued operations attributable to SHR common shareholders |
— |
— |
0.74 |
0.01 |
||||||||||||
|
Net income (loss) attributable to SHR common shareholders |
$ |
0.36 |
$ |
0.02 |
$ |
1.39 |
$ |
(0.10) |
||||||||
|
Weighted average shares of common stock outstanding |
222,013 |
206,061 |
214,450 |
205,849 |
||||||||||||
|
Diluted Income (Loss) Per Common Share: |
||||||||||||||||
|
Income (loss) from continuing operations attributable to SHR common shareholders |
$ |
0.35 |
$ |
0.01 |
$ |
0.60 |
$ |
(0.12) |
||||||||
|
Income from discontinued operations attributable to SHR common shareholders |
— |
— |
0.70 |
0.01 |
||||||||||||
|
Net income (loss) attributable to SHR common shareholders |
$ |
0.35 |
$ |
0.01 |
$ |
1.30 |
$ |
(0.11) |
||||||||
|
Weighted average shares of common stock outstanding |
233,463 |
219,227 |
225,900 |
217,006 |
||||||||||||
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets (in thousands, except share data) |
||||||||
|
June 30, 2014 |
December 31, 2013 |
|||||||
|
Assets |
||||||||
|
Investment in hotel properties, net |
$ |
2,722,752 |
$ |
1,795,338 |
||||
|
Goodwill |
38,128 |
38,128 |
||||||
|
Intangible assets, net of accumulated amortization of $3,716 and $11,753 |
91,635 |
29,502 |
||||||
|
Assets held for sale |
— |
135,901 |
||||||
|
Investment in unconsolidated affiliates |
22,910 |
104,973 |
||||||
|
Cash and cash equivalents |
245,468 |
73,655 |
||||||
|
Restricted cash and cash equivalents |
91,480 |
75,916 |
||||||
|
Accounts receivable, net of allowance for doubtful accounts of $466 and $606 |
67,241 |
39,660 |
||||||
|
Deferred financing costs, net of accumulated amortization of $12,686 and $12,354 |
9,852 |
8,478 |
||||||
|
Deferred tax assets |
2,134 |
— |
||||||
|
Prepaid expenses and other assets |
46,646 |
35,600 |
||||||
|
Total assets |
$ |
3,338,246 |
$ |
2,337,151 |
||||
|
Liabilities, Noncontrolling Interests and Equity |
||||||||
|
Liabilities: |
||||||||
|
Mortgages and other debt payable, net of discount |
$ |
1,636,450 |
$ |
1,163,696 |
||||
|
Bank credit facility |
— |
110,000 |
||||||
|
Liabilities of assets held for sale |
— |
17,027 |
||||||
|
Accounts payable and accrued expenses |
204,171 |
189,889 |
||||||
|
Preferred stock redemption liability |
95,693 |
— |
||||||
|
Distributions payable |
128 |
— |
||||||
|
Deferred tax liabilities |
45,778 |
46,137 |
||||||
|
Total liabilities |
1,982,220 |
1,526,749 |
||||||
|
Commitments and contingencies |
||||||||
|
Noncontrolling interests in SHR’s operating partnership |
9,336 |
7,534 |
||||||
|
Equity: |
||||||||
|
SHR’s shareholders’ equity: |
||||||||
|
8.50% Series A Cumulative Redeemable Preferred Stock ($0.01 par value per share; 0 and 4,148,141 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $0 and $103,704 in the aggregate) |
— |
99,995 |
||||||
|
8.25% Series B Cumulative Redeemable Preferred Stock ($0.01 par value per share; 3,615,375 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $90,446 and $90,384 in the aggregate) |
87,064 |
87,064 |
||||||
|
8.25% Series C Cumulative Redeemable Preferred Stock ($0.01 par value per share; 3,827,727 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $95,759 and $95,693 in the aggregate) |
— |
92,489 |
||||||
|
Common stock ($0.01 par value per share; 350,000,000 shares of common stock authorized; 247,371,386 and 205,582,838 shares of common stock issued and outstanding) |
2,474 |
2,056 |
||||||
|
Additional paid-in capital |
2,105,749 |
1,705,306 |
||||||
|
Accumulated deficit |
(919,961) |
(1,234,952) |
||||||
|
Accumulated other comprehensive loss |
(19,176) |
(41,445) |
||||||
|
Total SHR’s shareholders’ equity |
1,256,150 |
710,513 |
||||||
|
Noncontrolling interests in consolidated affiliates |
90,540 |
92,355 |
||||||
|
Total equity |
1,346,690 |
802,868 |
||||||
|
Total liabilities, noncontrolling interests and equity |
$ |
3,338,246 |
$ |
2,337,151 |
||||
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Financial Highlights
Supplemental Financial Data (in thousands, except per share information) |
||||||||
|
June 30, 2014 |
||||||||
|
Pro Rata Share |
Consolidated |
|||||||
|
Capitalization |
||||||||
|
Shares of common stock outstanding |
247,371 |
247,371 |
||||||
|
Operating partnership units outstanding |
797 |
797 |
||||||
|
Restricted stock units outstanding |
1,446 |
1,446 |
||||||
|
Combined shares and units outstanding |
249,614 |
249,614 |
||||||
|
Common stock price at end of period |
$ |
11.71 |
$ |
11.71 |
||||
|
Common equity capitalization |
$ |
2,922,980 |
$ |
2,922,980 |
||||
|
Preferred equity capitalization (at $25.00 face value) |
90,384 |
90,384 |
||||||
|
Preferred stock redemption liability |
95,693 |
95,693 |
||||||
|
Consolidated debt |
1,638,319 |
1,638,319 |
||||||
|
Pro rata share of consolidated debt |
(132,568) |
— |
||||||
|
Cash and cash equivalents |
(245,468) |
(245,468) |
||||||
|
Total enterprise value |
$ |
4,369,340 |
$ |
4,501,908 |
||||
|
Net Debt / Total Enterprise Value |
31.0 |
% |
33.1 |
% |
||||
|
Preferred Equity / Total Enterprise Value |
2.1 |
% |
2.0 |
% |
||||
|
Common Equity / Total Enterprise Value |
66.9 |
% |
64.9 |
% |
||||
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) |
|||||||||
|
Discontinued Operations |
|||||||||
|
The results of operations of hotels sold are classified as discontinued operations and segregated in the consolidated statements of operations for all periods presented. The following hotels were sold during the six months ended June 30, 2014: |
|||||||||
|
Hotel |
Location |
Date Sold |
Sales Proceeds |
||||||
|
Four Seasons Punta Mita Resort and La Solana land parcel |
Punta Mita, Mexico |
February 28, 2014 |
$ |
203,197,000 |
|||||
|
Marriott London Grosvenor Square |
London, England |
March 31, 2014 |
$ |
208,306,000 |
(a) |
||||
|
(a) |
There was an outstanding balance of £67,301,000 ($112,150,000) on the mortgage loan secured by the Marriott London Grosvenor Square hotel, which was repaid at the time of closing. The net proceeds we received were $96,156,000. |
The following is a summary of income from discontinued operations for the three and six months ended June 30, 2014 and 2013 (in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||||||
|
Hotel operating revenues |
$ |
— |
$ |
17,064 |
$ |
17,767 |
$ |
37,351 |
||||||||
|
Operating costs and expenses |
— |
11,778 |
11,485 |
25,500 |
||||||||||||
|
Depreciation and amortization |
— |
2,306 |
1,275 |
4,616 |
||||||||||||
|
Total operating costs and expenses |
— |
14,084 |
12,760 |
30,116 |
||||||||||||
|
Operating income |
— |
2,980 |
5,007 |
7,235 |
||||||||||||
|
Interest expense |
— |
(1,819) |
(1,326) |
(3,642) |
||||||||||||
|
Interest income |
— |
1 |
2 |
3 |
||||||||||||
|
Loss on early extinguishment of debt |
— |
— |
(272) |
— |
||||||||||||
|
Foreign currency exchange (loss) gain |
— |
(138) |
32 |
188 |
||||||||||||
|
Income tax expense |
— |
(695) |
(833) |
(1,466) |
||||||||||||
|
Gain on sale, net of tax |
604 |
— |
156,429 |
— |
||||||||||||
|
Income from discontinued operations |
$ |
604 |
$ |
329 |
$ |
159,039 |
$ |
2,318 |
||||||||
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Investments in Unconsolidated Affiliates (in thousands) |
||||||||||||||||||||||||
|
We had a 36.4% equity ownership interest in the Hotel del Coronado that we accounted for using the equity method of accounting until we acquired the remaining 63.6% equity ownership interest not previously owned by us on June 11, 2014. We had a 50.0% equity ownership interest in the Fairmont Scottsdale Princess hotel that we accounted for using the equity method of accounting until we acquired the remaining 50.0% equity ownership interest not previously owned by us on March 31, 2014. For purposes of this analysis, the operating results reflect the 36.4% equity ownership interest we held in the Hotel del Coronado prior to June 11, 2014 and the 50.0% equity ownership interest we held in the Fairmont Scottsdale Princess hotel prior to March 31, 2014. |
||||||||||||||||||||||||
|
Three Months Ended June 30, 2014 |
Three Months Ended June 30, 2013 |
|||||||||||||||||||||||
|
Hotel del Coronado |
Fairmont Scottsdale Princess |
Total |
Hotel del Coronado |
Fairmont Scottsdale Princess |
Total |
|||||||||||||||||||
|
Total revenues (100%) |
$ |
33,821 |
$ |
— |
$ |
33,821 |
$ |
37,758 |
$ |
24,204 |
$ |
61,962 |
||||||||||||
|
Property EBITDA (100%) |
$ |
11,202 |
$ |
— |
$ |
11,202 |
$ |
11,946 |
$ |
5,504 |
$ |
17,450 |
||||||||||||
|
Equity in earnings of unconsolidated affiliates (SHR ownership) |
||||||||||||||||||||||||
|
Property EBITDA |
$ |
4,075 |
$ |
— |
$ |
4,075 |
$ |
4,345 |
$ |
2,752 |
$ |
7,097 |
||||||||||||
|
Depreciation and amortization |
(1,572) |
— |
(1,572) |
(1,886) |
(1,632) |
(3,518) |
||||||||||||||||||
|
Interest expense |
(1,518) |
— |
(1,518) |
(1,944) |
(196) |
(2,140) |
||||||||||||||||||
|
Other expenses, net |
(18) |
— |
(18) |
(7) |
(11) |
(18) |
||||||||||||||||||
|
Income taxes |
(87) |
— |
(87) |
(31) |
— |
(31) |
||||||||||||||||||
|
Equity in earnings of unconsolidated affiliates |
$ |
880 |
$ |
— |
$ |
880 |
$ |
477 |
$ |
913 |
$ |
1,390 |
||||||||||||
|
EBITDA Contribution: |
||||||||||||||||||||||||
|
Equity in earnings of unconsolidated affiliates |
$ |
880 |
$ |
— |
$ |
880 |
$ |
477 |
$ |
913 |
$ |
1,390 |
||||||||||||
|
Depreciation and amortization |
1,572 |
— |
1,572 |
1,886 |
1,632 |
3,518 |
||||||||||||||||||
|
Interest expense |
1,518 |
— |
1,518 |
1,944 |
196 |
2,140 |
||||||||||||||||||
|
Income taxes |
87 |
— |
87 |
31 |
— |
31 |
||||||||||||||||||
|
EBITDA Contribution |
$ |
4,057 |
$ |
— |
$ |
4,057 |
$ |
4,338 |
$ |
2,741 |
$ |
7,079 |
||||||||||||
|
FFO Contribution: |
||||||||||||||||||||||||
|
Equity in earnings of unconsolidated affiliates |
$ |
880 |
$ |
— |
$ |
880 |
$ |
477 |
$ |
913 |
$ |
1,390 |
||||||||||||
|
Depreciation and amortization |
1,572 |
— |
1,572 |
1,886 |
1,632 |
3,518 |
||||||||||||||||||
|
FFO Contribution |
$ |
2,452 |
$ |
— |
$ |
2,452 |
$ |
2,363 |
$ |
2,545 |
$ |
4,908 |
||||||||||||
|
Six Months Ended June 30, 2014 |
Six Months Ended June 30, 2013 |
|||||||||||||||||||||||
|
Hotel del Coronado |
Fairmont Scottsdale Princess |
Total |
Hotel del Coronado |
Fairmont Scottsdale Princess |
Total |
|||||||||||||||||||
|
Total revenues (100%) |
$ |
67,863 |
$ |
35,006 |
$ |
102,869 |
$ |
68,087 |
$ |
55,160 |
$ |
123,247 |
||||||||||||
|
Property EBITDA (100%) |
$ |
20,761 |
$ |
13,191 |
$ |
33,952 |
$ |
19,820 |
$ |
15,073 |
$ |
34,893 |
||||||||||||
|
Equity in earnings (losses) of unconsolidated affiliates (SHR ownership) |
||||||||||||||||||||||||
|
Property EBITDA |
$ |
7,426 |
$ |
6,595 |
$ |
14,021 |
$ |
7,209 |
$ |
7,537 |
$ |
14,746 |
||||||||||||
|
Depreciation and amortization |
(3,526) |
(1,551) |
(5,077) |
(3,751) |
(3,472) |
(7,223) |
||||||||||||||||||
|
Interest expense |
(3,418) |
(168) |
(3,586) |
(4,434) |
(390) |
(4,824) |
||||||||||||||||||
|
Other expenses, net |
(25) |
(30) |
(55) |
(23) |
(19) |
(42) |
||||||||||||||||||
|
Income taxes |
143 |
— |
143 |
63 |
— |
63 |
||||||||||||||||||
|
Equity in earnings (losses) of unconsolidated affiliates |
$ |
600 |
$ |
4,846 |
$ |
5,446 |
$ |
(936) |
$ |
3,656 |
$ |
2,720 |
||||||||||||
|
EBITDA Contribution |
||||||||||||||||||||||||
|
Equity in earnings (losses) of unconsolidated affiliates |
$ |
600 |
$ |
4,846 |
$ |
5,446 |
$ |
(936) |
$ |
3,656 |
$ |
2,720 |
||||||||||||
|
Depreciation and amortization |
3,526 |
1,551 |
5,077 |
3,751 |
3,472 |
7,223 |
||||||||||||||||||
|
Interest expense |
3,418 |
168 |
3,586 |
4,434 |
390 |
4,824 |
||||||||||||||||||
|
Income taxes |
(143) |
— |
(143) |
(63) |
— |
(63) |
||||||||||||||||||
|
EBITDA Contribution |
$ |
7,401 |
$ |
6,565 |
$ |
13,966 |
$ |
7,186 |
$ |
7,518 |
$ |
14,704 |
||||||||||||
|
FFO Contribution |
||||||||||||||||||||||||
|
Equity in earnings (losses) of unconsolidated affiliates |
$ |
600 |
$ |
4,846 |
$ |
5,446 |
$ |
(936) |
$ |
3,656 |
$ |
2,720 |
||||||||||||
|
Depreciation and amortization |
3,526 |
1,551 |
5,077 |
3,751 |
3,472 |
7,223 |
||||||||||||||||||
|
FFO Contribution |
$ |
4,126 |
$ |
6,397 |
$ |
10,523 |
$ |
2,815 |
$ |
7,128 |
$ |
9,943 |
||||||||||||
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Leasehold Information (in thousands) |
||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||||||
|
Marriott Hamburg: |
||||||||||||||||
|
Property EBITDA |
$ |
1,687 |
$ |
1,505 |
$ |
3,199 |
$ |
2,901 |
||||||||
|
Revenue (a) |
$ |
1,319 |
$ |
1,160 |
$ |
2,618 |
$ |
2,360 |
||||||||
|
Lease expense |
(1,260) |
(1,206) |
(2,518) |
(2,382) |
||||||||||||
|
Less: Deferred gain on sale-leaseback |
(54) |
(51) |
(107) |
(102) |
||||||||||||
|
Adjusted lease expense |
(1,314) |
(1,257) |
(2,625) |
(2,484) |
||||||||||||
|
Comparable EBITDA contribution from leasehold |
$ |
5 |
$ |
(97) |
$ |
(7) |
$ |
(124) |
||||||||
|
Security Deposit (b): |
June 30, 2014 |
December 31, 2013 |
||||||
|
Marriott Hamburg |
$ |
2,602 |
$ |
2,611 |
||||
|
(a) |
For the three and six months ended June 30, 2014 and 2013, Revenue for the Marriott Hamburg hotel represents lease revenue. |
|
(b) |
The security deposit is recorded in prepaid expenses and other assets on the consolidated balance sheets. |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures
We present five non-GAAP financial measures 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.
EBITDA represents net income (or 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; (iii) depreciation and amortization; and (iv) preferred stock dividends. EBITDA also excludes interest expense, income taxes and depreciation and amortization of our unconsolidated affiliates. EBITDA is presented on a full participation basis, which means we have assumed conversion of all redeemable noncontrolling interests of our operating partnership into our common stock. We believe this treatment of noncontrolling interests provides 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 certain other charges that are highly variable from year to year. 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 compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT 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, impairment of depreciable real estate, real estate-related depreciation and amortization, and our portion of these items related to unconsolidated affiliates. We also present FFO—Fully Diluted, which is FFO plus income or loss on income attributable to redeemable noncontrolling interests in our operating partnership. 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 on non-depreciable assets, foreign currency exchange gains or losses and certain other charges that are highly variable from year to year. 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, excluding shares related to the JW Marriott Essex House Hotel put option. Dilutive securities may include shares granted under share-based compensation plans and operating partnership units. No effect is shown for securities that are anti-dilutive.
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 income (or 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 income (or loss) attributable to SHR common shareholders. In addition, you should be aware that adverse economic and market conditions might negatively impact our cash flow. 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 income (or loss) attributable to SHR common shareholders.
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Income (Loss) Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA (in thousands) |
||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||||||
|
Net income (loss) attributable to SHR common shareholders |
$ |
80,840 |
$ |
3,274 |
$ |
297,998 |
$ |
(20,174) |
||||||||
|
Depreciation and amortization—continuing operations |
28,058 |
24,691 |
50,263 |
49,599 |
||||||||||||
|
Depreciation and amortization—discontinued operations |
— |
2,306 |
1,275 |
4,616 |
||||||||||||
|
Interest expense—continuing operations |
19,587 |
19,460 |
37,861 |
39,123 |
||||||||||||
|
Interest expense—discontinued operations |
— |
1,819 |
1,326 |
3,642 |
||||||||||||
|
Income taxes—continuing operations |
207 |
72 |
246 |
85 |
||||||||||||
|
Income taxes—discontinued operations |
— |
695 |
833 |
1,466 |
||||||||||||
|
Income taxes—sale of assets |
— |
— |
20,451 |
— |
||||||||||||
|
Noncontrolling interests |
281 |
36 |
1,130 |
(51) |
||||||||||||
|
Adjustments from consolidated affiliates |
(3,939) |
(3,549) |
(7,614) |
(7,103) |
||||||||||||
|
Adjustments from unconsolidated affiliates |
3,153 |
5,717 |
8,443 |
12,033 |
||||||||||||
|
Preferred shareholder dividends |
7,169 |
6,042 |
16,993 |
12,083 |
||||||||||||
|
EBITDA |
135,356 |
60,563 |
429,205 |
95,319 |
||||||||||||
|
Realized portion of deferred gain on sale-leaseback |
(54) |
(51) |
(107) |
(102) |
||||||||||||
|
Gain on sale of assets—continuing operations |
(767) |
(273) |
(767) |
(273) |
||||||||||||
|
Gain on sale of assets—adjustments from consolidated affiliates |
109 |
— |
109 |
— |
||||||||||||
|
Gain on sale of assets—discontinued operations |
(604) |
— |
(176,880) |
— |
||||||||||||
|
Gain on consolidation of affiliates |
(65,349) |
— |
(143,466) |
— |
||||||||||||
|
Loss on early extinguishment of debt—discontinued operations |
— |
— |
272 |
— |
||||||||||||
|
Foreign currency exchange loss (gain)—continuing operations (a) |
8 |
(84) |
6 |
2 |
||||||||||||
|
Foreign currency exchange loss (gain)—discontinued operations (a) |
— |
138 |
(32) |
(188) |
||||||||||||
|
Amortization of below market hotel management agreement |
108 |
— |
108 |
— |
||||||||||||
|
Activist shareholder costs |
104 |
— |
1,637 |
— |
||||||||||||
|
Comparable EBITDA |
$ |
68,911 |
$ |
60,293 |
$ |
110,085 |
$ |
94,758 |
||||||||
|
(a) |
Foreign currency exchange gains or losses applicable to certain balance sheet items held by foreign subsidiaries. |
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Income (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 June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||||||
|
Net income (loss) attributable to SHR common shareholders |
$ |
80,840 |
$ |
3,274 |
$ |
297,998 |
$ |
(20,174) |
||||||||
|
Depreciation and amortization—continuing operations |
28,058 |
24,691 |
50,263 |
49,599 |
||||||||||||
|
Depreciation and amortization—discontinued operations |
— |
2,306 |
1,275 |
4,616 |
||||||||||||
|
Corporate depreciation |
(123) |
(127) |
(246) |
(258) |
||||||||||||
|
Gain on sale of assets—continuing operations |
(767) |
(273) |
(767) |
(273) |
||||||||||||
|
Gain on sale of assets, net of tax—discontinued operations |
(604) |
— |
(156,429) |
— |
||||||||||||
|
Gain on consolidation of affiliates |
(65,349) |
— |
(143,466) |
— |
||||||||||||
|
Realized portion of deferred gain on sale-leaseback |
(54) |
(51) |
(107) |
(102) |
||||||||||||
|
Noncontrolling interests adjustments |
(95) |
(125) |
(193) |
(252) |
||||||||||||
|
Adjustments from consolidated affiliates |
(1,971) |
(1,655) |
(3,806) |
(3,296) |
||||||||||||
|
Adjustments from unconsolidated affiliates |
1,571 |
3,518 |
5,077 |
7,224 |
||||||||||||
|
FFO |
41,506 |
31,558 |
49,599 |
37,084 |
||||||||||||
|
Redeemable noncontrolling interests |
376 |
162 |
1,323 |
202 |
||||||||||||
|
FFO—Fully Diluted |
41,882 |
31,720 |
50,922 |
37,286 |
||||||||||||
|
Non-cash interest rate swap activity—continuing operations |
2,184 |
(2,353) |
(110) |
(4,651) |
||||||||||||
|
Non-cash interest rate swap activity—discontinued operations |
— |
(747) |
— |
(1,493) |
||||||||||||
|
Loss on early extinguishment of debt—discontinued operations |
— |
— |
272 |
— |
||||||||||||
|
Foreign currency exchange loss (gain)—continuing operations (a) |
8 |
(84) |
6 |
2 |
||||||||||||
|
Foreign currency exchange loss (gain)—discontinued operations (a) |
— |
138 |
(32) |
(188) |
||||||||||||
|
Amortization of debt discount |
623 |
— |
623 |
— |
||||||||||||
|
Amortization of below market hotel management agreement |
108 |
— |
108 |
— |
||||||||||||
|
Activist shareholder costs |
104 |
— |
1,637 |
— |
||||||||||||
|
Excess of redemption liability over carrying amount of redeemed preferred stock |
3,203 |
— |
6,912 |
— |
||||||||||||
|
Comparable FFO |
$ |
48,112 |
$ |
28,674 |
$ |
60,338 |
$ |
30,956 |
||||||||
|
Comparable FFO per fully diluted share |
$ |
0.21 |
$ |
0.14 |
$ |
0.28 |
$ |
0.15 |
||||||||
|
Weighted average diluted shares (b) |
225,348 |
208,923 |
217,875 |
208,760 |
||||||||||||
|
(a) |
Foreign currency exchange gains or losses applicable to certain balance sheet items held by foreign subsidiaries. |
|
(b) |
Excludes shares related to the JW Marriott Essex House Hotel put option. |
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Debt Summary (dollars in thousands) |
|||||||||||
|
Debt |
Interest Rate |
Spread (a) |
Loan Amount |
Maturity (b) |
|||||||
|
Fairmont Scottsdale Princess (c) |
0.52 |
% |
36 bp |
$ |
117,000 |
April 2015 |
|||||
|
Westin St. Francis |
6.09 |
% |
Fixed |
209,588 |
June 2017 |
||||||
|
Fairmont Chicago |
6.09 |
% |
Fixed |
93,124 |
June 2017 |
||||||
|
JW Marriott Essex House Hotel |
4.75 |
% |
400 bp |
185,826 |
September 2017 |
||||||
|
Hyatt Regency La Jolla (d) |
4.50% / 10.00% |
400 bp / Fixed |
89,277 |
December 2017 |
|||||||
|
Hotel del Coronado (e) |
3.81 |
% |
365 bp |
475,000 |
March 2018 |
||||||
|
InterContinental Miami (f) |
3.66 |
% |
350 bp |
85,000 |
July 2018 |
||||||
|
Bank credit facility (g) |
2.16 |
% |
200 bp |
— |
April 2019 |
||||||
|
Four Seasons Washington, D.C. (h) |
2.41 |
% |
225 bp |
120,000 |
June 2019 |
||||||
|
Loews Santa Monica Beach Hotel (i) |
2.71 |
% |
255 bp |
120,000 |
May 2021 |
||||||
|
InterContinental Chicago |
5.61 |
% |
Fixed |
143,504 |
August 2021 |
||||||
|
1,638,319 |
|||||||||||
|
Unamortized discount (c) |
(1,869) |
||||||||||
|
$ |
1,636,450 |
||||||||||
|
(a) |
Spread over LIBOR (0.16% at June 30, 2014). Interest on the JW Marriott Essex House Hotel loan is subject to a 0.75% LIBOR floor. Interest on the Hyatt Regency La Jolla loan is subject to a 0.50% LIBOR floor. |
|
(b) |
Includes extension options. |
|
(c) |
On March 31, 2014, we acquired the remaining 50.0% equity interest in the Fairmont Scottsdale Princess hotel, resulting in the Fairmont Scottsdale Princess hotel becoming wholly-owned by the Company. In connection with the acquisition, we consolidated the Fairmont Scottsdale Princess hotel and became fully obligated under the entire mortgage loan secured by the Fairmont Scottsdale Princess hotel. We recorded the mortgage loan at its fair value, which included a debt discount, which is being amortized as additional interest expense over the maturity period of the loan. |
|
(d) |
Interest on $72,000,000 is payable at LIBOR plus 4.00%, subject to a 0.50% LIBOR floor, and interest on $17,277,000 is payable at a fixed rate of 10.00%. |
|
(e) |
On June 11, 2014, we acquired the remaining 63.6% equity interest in the Hotel del Coronado, resulting in the Hotel del Coronado becoming wholly-owned by us. In connection with the acquisition, we consolidated the Hotel del Coronado and became fully obligated under the entire outstanding balance of the mortgage and mezzanine loans secured by the Hotel del Coronado. |
|
(f) |
On July 7, 2014, we paid off the outstanding balance on the mortgage loan secured by the InterContinental Miami hotel. We are currently evaluating financing alternatives. |
|
(g) |
On April 25, 2014, we entered into a new $300,000,000 secured bank credit facility, which replaced the previous secured bank credit facility. |
|
(h) |
On June 30, 2014, we refinanced the loan secured by the Four Seasons Washington, D.C. hotel. |
|
(i) |
On May 29, 2014, we refinanced the loan secured by the Loews Santa Monica Beach Hotel. |
|
Debt Summary (Continued) (dollars in thousands) |
||||
|
Future scheduled debt principal payments (including extension options) are as follows: |
||||
|
Years ending December 31, |
Amount |
|||
|
2014 (remainder) |
$ |
1,340 |
||
|
2015 |
121,029 |
|||
|
2016 |
7,783 |
|||
|
2017 |
575,008 |
|||
|
2018 |
559,015 |
|||
|
Thereafter |
374,144 |
|||
|
1,638,319 |
||||
|
Unamortized discount |
(1,869) |
|||
|
$ |
1,636,450 |
|||
|
Percent of fixed rate debt |
28.3 |
% |
||
|
Weighted average interest rate (g) |
4.17 |
% |
||
|
Weighted average maturity of fixed rate debt (debt with maturity of greater than one year) |
4.23 |
|||
|
(g) |
Excludes the amortization of deferred financing costs. |
SOURCE Strategic Hotels & Resorts, Inc.