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Strategic Hotels & Resorts Reports First Quarter 2013 Financial Results
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Reaffirms Full Year Guidance Ranges

CHICAGO, April 29, 2013 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the first quarter ended March 31, 2013. 

($ in millions, except per share and operating metrics)

First Quarter

Earnings Metrics

2013

2012

% Change

Net loss attributable to common shareholders

$(23.4)

$(31.5)

N/A

Net loss attributable to common shareholders per diluted share

$(0.12)

$(0.17)

N/A

Comparable funds from operations (Comparable FFO) (a)

$2.3

$3.1

(25.2)%

Comparable FFO per diluted share (a)

$0.01

$0.02

(50.0)%

Comparable EBITDA (a)

$34.5

$33.3

3.5%





Total North American Portfolio Operating Metrics (b)




Average Daily Rate (ADR)

$280.36

$263.44

6.4%

Occupancy

67.9%

68.2%

(0.3) pts

Revenue per Available Room (RevPAR)

$190.35

$179.57

6.0%

Total RevPAR

$362.93

$343.98

5.5%

EBITDA Margins

18.9%

17.8%

110 bps





North American Same Store Operating Metrics (c)




ADR

$265.73

$248.23

7.0%

Occupancy

66.2%

67.5%

(1.3) pts

RevPAR

$175.99

$167.60

5.0%

Total RevPAR

$335.95

$320.18

4.9%

EBITDA Margins

18.0%

17.8%

20 bps

(a)

Please refer to tables provided later in this press release for a reconciliation of net loss 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 North American portfolio (see portfolio definitions later in this press release).

(c)

Operating statistics reflect results from the Company's North American same store portfolio (see portfolio definitions later in this press release).

"We are pleased with our first quarter results, which exceeded our expectations. Most notable was the very strong transient demand seen in the quarter as well as significant increases in ADR across our portfolio and guest categories," commented Raymond Gellein, Chairman and Chief Executive Officer of Strategic Hotels & Resorts, Inc. "While group nights declined as compared to the prior year period, this was expected due to non-recurring city-wide conventions and other group meetings, as well as planned displacement at select properties during capital renovations. As we look forward to the remainder of the year, we expect very strong group demand and are reaffirming our full year guidance," concluded Gellein.

First Quarter Highlights

  • Net loss attributable to common shareholders was $23.4 million, or $0.12 per diluted share, in the first quarter of 2013, compared with net loss attributable to common shareholders of $31.5 million, or $0.17 per diluted share, in the first quarter of 2012.
  • Comparable FFO was $0.01 per diluted share in the first quarter of 2013, compared with $0.02 per diluted share in the prior year period.    
  • Comparable EBITDA was $34.5 million in the first quarter of 2013, compared with $33.3 million in the prior year period, a 3.5 percent increase between periods.   
  • Total North American portfolio RevPAR increased 6.0 percent in the first quarter of 2013, driven by a 6.4 percent increase in ADR, offsetting a 0.3 percentage point decline in occupancy compared to the first quarter of 2012. Total RevPAR increased 5.5 percent between periods with non-rooms revenue increasing by 4.6 percent between periods.
  • Transient occupied room nights in the Total North American portfolio increased 6.2 percent in the first quarter of 2013, which partially offset an 8.3 percent decline in group occupied room nights compared to the first quarter of 2012. Transient ADR increased 6.9 percent compared to the first quarter of 2012 and group ADR increased 4.2 percent.
  • RevPAR increased 6.2 percent in the first quarter of 2013 in the Company's Total North American urban portfolio and 5.7 percent in the Company's Total North American resort portfolio, compared to the first quarter of 2012.
  • North American same store RevPAR increased 5.0 percent in the first quarter of 2013, driven by a 7.0 percent increase in ADR, offsetting a 1.3 percent point decline in occupancy. Total RevPAR increased 4.9 percent with non-rooms revenue increasing by 4.4 percent between periods. The decline in occupancy was driven by a decrease in group room nights due to several large, non-repeat group bookings from the first quarter of 2012.
  • European RevPAR declined 9.7 percent (9.0 percent in constant dollars) in the first quarter of 2013, driven by a 3.4 percentage point decrease in occupancy and a 5.6 percent decrease in ADR (4.9 percent in constant dollars) between periods. European Total RevPAR decreased 5.6 percent in the first quarter of 2013 over the prior year period (4.9 percent in constant dollars).  
  • North American same store EBITDA margins expanded 20 basis points in the first quarter of 2013, compared to the first quarter of 2012.  Total North American portfolio EBITDA margins expanded 110 basis points.
  • Group room nights currently booked for 2013 are 4.3 percent higher compared to room nights booked for 2012 at the same time last year, with rates 3.3 percent higher, resulting in a 7.7 percent RevPAR increase.
  • The GAAP accounting treatment related to the Marriott NOI guarantee at the JW Marriott Essex House also impacted the Company's first quarter results.  Monthly guarantee payments, which totaled approximately $5.6 million and for which the Company's pro-rata share was $2.9 million, are recorded as deferred revenue and will be recognized as Other Hotel Operating Revenue at year-end.

Preferred Dividends

On February 21, 2013, the Company's board of directors declared a quarterly dividend of $0.53125 per share of 8.5 percent Series A Cumulative Redeemable Preferred Stock paid on April 1, 2013 to shareholders of record as of March 18, 2013, a quarterly dividend of $0.51563 per share of 8.25 percent Series B Cumulative Redeemable Preferred Stock paid on April 1, 2013 to shareholders of record as of March 18, 2013, and a quarterly dividend of $0.51563 per share of 8.25 percent Series C Cumulative Redeemable Preferred Stock paid on April 1, 2013 to shareholders of record as of March 18, 2013.

Transaction Activity

On March 12, 2013 the Company, along with certain affiliates of Blackstone Real Estate Partners VI, L.P., its joint venture partner, closed on a $475 million loan secured by the Hotel del Coronado. Under the terms of the agreement, the loan bears interest at LIBOR plus 365 basis points and has an initial two-year term with three, one-year extension options available to the venture upon satisfaction of certain financial and other conditions.   

2013 Guidance

Based on the results of the first quarter and current forecasts for the remainder of the year, management is reaffirming its guidance range for full year 2013 RevPAR growth, Total RevPAR growth, Comparable EBITDA, and Comparable FFO per fully diluted share. 

For the year ending December 31, 2013, the Company anticipates that Comparable EBITDA will be in the range of $195.0 million to $210.0 million and Comparable FFO in the range of $0.33 and $0.40 per fully diluted share. Management is also reaffirming its guidance for North American same store RevPAR growth in the range between 5.0 percent to 7.0 percent and Total RevPAR growth in the range between 4.0 percent and 6.0 percent. 

Portfolio Definitions

Total North American portfolio hotel comparisons for the first quarter 2013 are derived from the Company's hotel portfolio at March 31, 2013, consisting of all 16 properties located in North America, including unconsolidated joint ventures.   

North American same store hotel comparisons for the first quarter 2013 are derived from the Company's hotel portfolio at March 31, 2013, consisting of properties located in North America and held for five or more quarters, in which operations are included in the consolidated results of the Company. As a result, same store comparisons include 13 properties and exclude the JW Marriott Essex House Hotel, which was acquired on September 14, 2012, and the unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels.

European hotel comparisons for the first quarter of 2013 are derived from the Company's European owned and leased hotel properties at March 31, 2013, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg hotels. 

Earnings Call

The Company will conduct its first quarter 2013 conference call for investors and other interested parties on Tuesday, April 30, 2013 at 10:00 a.m. Eastern Time (ET).  Interested individuals are invited to access the call by dialing 866.953.6856 (toll international: 617.399.3480) with passcode 30814835. To participate on the webcast, log on to the company's website at http://www.strategichotels.com or http://edge.media-server.com/m/p/jrirmk6w/lan/en 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 12:00 p.m. ET on April 30, 2013 through 11:59 p.m. ET on May 7, 2013. To access the replay, dial  888.286.8010 (toll international: 617.801.6888) with passcode 35134540.  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 first quarter information section.

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 8,272 rooms and 840,000 square feet of meeting space. 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, Inc. (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. These forward-looking statements include statements regarding the Company's future financial results, stabilization in the lodging space, positive trends in the lodging industry and the Company's continued focus on improving profitability.  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:  the effects of the recent global economic recession upon business and leisure travel and the hotel markets in which the Company invests; the Company's liquidity and refinancing demands; the Company's ability to obtain or refinance maturing debt, including the $106.5 million mortgage debt related to the Marriott London Grosvenor Square hotel that matures on October 15, 2013; the Company's ability to maintain compliance with covenants contained in its debt facilities; stagnation or further deterioration in economic and market conditions, particularly impacting business and leisure travel spending in the markets where the Company's hotels operate and in which the Company invests, including luxury and upper upscale product; general volatility of the capital markets and the market price of the Company's shares of common stock; availability of capital; the Company's ability to dispose of properties in a manner consistent with its investment strategy and liquidity needs; hostilities and security concerns, including future terrorist attacks, or the apprehension of hostilities, in each case that affect travel within or to the United States, Mexico, Germany, England or other countries where the Company invests; difficulties in identifying properties to acquire and completing acquisitions; the Company's failure to maintain effective internal control over financial reporting and disclosure controls and procedures; risks related to natural disasters; increases in interest rates and operating costs, including insurance premiums and real property taxes; contagious disease outbreaks, such as the H1N1 virus outbreak; delays and cost-overruns in construction and development; marketing challenges associated with entering new lines of business or pursuing new business strategies; the Company's failure to maintain its status as a REIT; changes in the competitive environment in the Company's industry and the markets where the Company invests; changes in real estate and zoning laws or regulations; legislative or regulatory changes, including changes to laws governing the taxation of REITs; changes in generally accepted accounting principles, policies and guidelines; and litigation, judgments or settlements.

Additional risks are discussed in the Company's filings with the Securities and Exchange Commission, including those appearing under the heading "Item 1A. Risk Factors" in the Company's most recent Form 10-K and subsequent Form 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 the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

The following tables reconcile projected 2013 net loss attributable to common shareholders to projected Comparable EBITDA, Comparable FFO and Comparable FFO per diluted share (in millions, except per share data):


Low Range


High Range

Net Loss Attributable to Common Shareholders

$(49.8)


$(34.8)

Depreciation and Amortization

117.3


117.3

Interest Expense

93.8


93.8

Income Taxes

1.1


1.1

Non-controlling Interests

0.0


0.0

Adjustments from Consolidated Affiliates

(15.5)


(15.5)

Adjustments from Unconsolidated Affiliates

24.3


24.3

Preferred Shareholder Dividends

24.2


24.2

Realized Portion of Deferred Gain on Sale Leasebacks

(0.2)


(0.2)

Other Adjustments

(0.2)


(0.2)

Comparable EBITDA

$195.0


$210.0






Low Range


High Range

Net Loss Attributable to Common Shareholders

$(49.8)


$(34.8)

Depreciation and Amortization

116.5


116.5

Realized Portion of Deferred Gain on Sale Leasebacks

(0.2)


(0.2)

Non-controlling Interests

(0.1)


0.0

Adjustments from Consolidated Affiliates

(7.9)


(7.9)

Adjustments from Unconsolidated Affiliates

14.9


14.9

Other Adjustments

(3.3)


(3.3)

Comparable FFO

$70.1


$85.2

Comparable FFO per Diluted Share

$0.33


$0.40






 


 


Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)


Consolidated Statements of Operations

(in thousands, except per share data)




Three Months Ended March 31,



2013


2012

Revenues:





Rooms


$

110,413


$

94,510

Food and beverage


67,114


62,479

Other hotel operating revenue


22,740


20,125

Lease and other revenue


1,200


1,165

Total revenues


201,467


178,279

Operating Costs and Expenses:





Rooms


33,988


28,576

Food and beverage


54,366


47,393

Other departmental expenses


56,485


49,565

Management fees


6,325


5,616

Other hotel expenses


16,730


13,609

Lease expense


1,176


1,168

Depreciation and amortization


27,218


25,490

Corporate expenses


5,984


13,810

Total operating costs and expenses


202,272


185,227

Operating loss


(805)


(6,948)

Interest expense


(21,486)


(19,605)

Interest income


12


30

Equity in earnings of unconsolidated affiliates


1,345


920

Foreign currency exchange gain (loss)


240


(5)

Other income, net


132


452

Loss before income taxes


(20,562)


(25,156)

Income tax expense


(784)


(465)

Net loss


(21,346)


(25,621)

Net loss attributable to the noncontrolling interests in SHR's operating partnership


87


117

Net loss attributable to the noncontrolling interests in consolidated affiliates


3,852


29

Net loss attributable to SHR


(17,407)


(25,475)

Preferred shareholder dividends


(6,041)


(6,041)

Net loss attributable to SHR common shareholders


$

(23,448)


$

(31,516)

Basic Loss Per Share:





Net loss attributable to SHR common shareholders


$

(0.11)


$

(0.17)

Weighted average common shares outstanding


206,981


186,430

Diluted Loss Per Share:





Net loss attributable to SHR common shareholders


$

(0.12)


$

(0.17)

Weighted average common shares outstanding


218,710


186,430

 

 


Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)


Consolidated Balance Sheets

(in thousands, except share data)









March 31, 2013


December 31, 2012

Assets





Investment in hotel properties, net


$

1,960,764


$

1,970,560

Goodwill


40,359


40,359

Intangible assets, net of accumulated amortization of $10,972 and $10,812


28,296


30,631

Investment in unconsolidated affiliates


91,490


112,488

Cash and cash equivalents


78,527


80,074

Restricted cash and cash equivalents


67,558


58,579

Accounts receivable, net of allowance for doubtful accounts of $1,609 and $1,602


50,635


45,620

Deferred financing costs, net of accumulated amortization of $8,214 and $7,049


10,410


11,695

Deferred tax assets


2,140


2,203

Prepaid expenses and other assets


53,201


54,208

Total assets


$

2,383,380


$

2,406,417

Liabilities, Noncontrolling Interests and Equity





Liabilities:





Mortgages and other debt payable


$

1,164,587


$

1,176,297

Bank credit facility


156,000


146,000

Accounts payable and accrued expenses


223,975


228,397

Distributions payable


6,041


Deferred tax liabilities


47,720


47,275

Total liabilities


1,598,323


1,597,969

Noncontrolling interests in SHR's operating partnership


7,123


5,463

Commitments and contingencies





Equity:





SHR's shareholders' equity:





8.50% Series A Cumulative Redeemable Preferred Stock ($0.01 par value per share; 4,148,141 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $105,907 and $103,704 in the aggregate)


99,995


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 $92,249 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 $97,667 and $95,693 in the aggregate)


92,489


92,489

Common shares ($0.01 par value per share; 350,000,000 common shares authorized; 204,495,534 and 204,308,710 common shares issued and outstanding)


2,045


2,043

Additional paid-in capital


1,723,138


1,730,535

Accumulated deficit


(1,263,334)


(1,245,927)

Accumulated other comprehensive loss


(53,108)


(58,871)

Total SHR's shareholders' equity


688,289


707,328

Noncontrolling interests in consolidated affiliates


89,645


95,657

Total equity


777,934


802,985

Total liabilities, noncontrolling interests and equity


$

2,383,380


$

2,406,417

 

 





Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)


Financial Highlights

Supplemental Financial Data

(in thousands, except per share information)





March 31, 2013



Pro Rata Share



Consolidated

Capitalization







Common shares outstanding


204,496



204,496


Operating partnership units outstanding


853



853


Restricted stock units outstanding


1,620



1,620


Value Creation Plan units outstanding under the deferral program


1,301



1,301


Combined shares and units outstanding


208,270



208,270


Common stock price at end of period


$

8.35



$

8.35


Common equity capitalization


$

1,739,055



$

1,739,055


Preferred equity capitalization (at $25.00 face value)


289,102



289,102


Consolidated debt


1,320,587



1,320,587


Pro rata share of unconsolidated debt


239,400




Pro rata share of consolidated debt


(134,910)




Cash and cash equivalents


(78,527)



(78,527)


Total enterprise value


$

3,374,707



$

3,270,217


Net Debt / Total Enterprise Value


39.9

%


38.0

%

Preferred Equity / Total Enterprise Value


8.6

%


8.8

%

Common Equity / Total Enterprise Value


51.5

%


53.2

%

 


 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)


Investments in Unconsolidated Affiliates

(in thousands)


We have a 36.4% and 50.0% ownership interest in the Hotel del Coronado hotel and the Fairmont Scottsdale Princess hotel, respectively. We account for these investments using the equity method of accounting.








Three Months Ended March 31, 2013


Three Months Ended March 31, 2012



Hotel del

Coronado


Fairmont Scottsdale

Princess


Total


Hotel del

Coronado


Fairmont Scottsdale

Princess


Total

Total revenues (100%)


$

30,330



$

30,956



$

61,286



$

30,843



$

26,983



$

57,826


Property EBITDA (100%)


$

7,874



$

9,569



$

17,443



$

8,219



$

8,655



$

16,874


Equity in (losses) earnings of unconsolidated affiliates (SHR ownership)









Property EBITDA


$

2,864



$

4,785



$

7,649



$

2,819



$

4,327



$

7,146


Depreciation and amortization


(1,865)



(1,840)



(3,705)



(1,689)



(1,771)



(3,460)


Interest expense


(2,490)



(194)



(2,684)



(2,518)



(203)



(2,721)


Other expenses, net


(16)



(8)



(24)



(23)



(58)



(81)


Income taxes


94





94



267





267


Equity in (losses) earnings of unconsolidated affiliates


$

(1,413)



$

2,743



$

1,330



$

(1,144)



$

2,295



$

1,151


EBITDA Contribution:













Equity in (losses) earnings of unconsolidated affiliates


$

(1,413)



$

2,743



$

1,330



$

(1,144)



$

2,295



$

1,151


Depreciation and amortization


1,865



1,840



3,705



1,689



1,771



3,460


Interest expense


2,490



194



2,684



2,518



203



2,721


Income taxes


(94)





(94)



(267)





(267)


EBITDA Contribution


$

2,848



$

4,777



$

7,625



$

2,796



$

4,269



$

7,065


FFO Contribution:













Equity in (losses) earnings of unconsolidated affiliates


$

(1,413)



$

2,743



$

1,330



$

(1,144)



$

2,295



$

1,151


Depreciation and amortization


1,865



1,840



3,705



1,689



1,771



3,460


FFO Contribution


$

452



$

4,583



$

5,035



$

545



$

4,066



$

4,611


 

 

Investments in Unconsolidated Affiliates (Continued)

(in thousands)










Debt


Interest Rate


Spread over

LIBOR


Loan Amount


Maturity (a)

Hotel del Coronado









CMBS Mortgage and Mezzanine


3.85

%


365 bp


$

475,000



March 2018

Cash and cash equivalents






(5,283)




Net Debt






$

469,717




Fairmont Scottsdale Princess









CMBS Mortgage


0.56

%


36 bp


$

133,000



April 2015

Cash and cash equivalents






(4,413)




Net Debt






$

128,587



























(a)

Includes extension options.

 

 


Caps


Effective

Date


LIBOR Cap Rate


Notional Amount


Maturity

Hotel del Coronado









CMBS Mortgage and Mezzanine Loan Caps


March 2013


3.00

%


$

475,000



March 2015

Fairmont Scottsdale Princess









CMBS Mortgage Loan Cap


June 2011


4.00

%


$

133,000



December 2013
















 

 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)


Leasehold Information

(in thousands)






Three Months Ended March 31,



2013


2012

Marriott Hamburg:





Property EBITDA


$

1,396


$

1,400

Revenue (a)


$

1,200


$

1,165






Lease expense


(1,176)


(1,168)

Less: Deferred gain on sale-leaseback


(51)


(51)

Adjusted lease expense


(1,227)


(1,219)






EBITDA contribution from leasehold


$

(27)


$

(54)





















Security Deposit (b):


March 31, 2013


December 31, 2012

Marriott Hamburg


$

2,436


$

2,507

 

(a)

For the three months ended March 31, 2013 and 2012, 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, with the exception of impairment of depreciable real estate. 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, 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 Loss Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA

(in thousands)




Three Months Ended March 31,



2013


2012

Net loss attributable to SHR common shareholders


$

(23,448)


$

(31,516)

Depreciation and amortization


27,218


25,490

Interest expense


21,486


19,605

Income taxes


784


465

Noncontrolling interests


(87)


(117)

Adjustments from consolidated affiliates


(3,554)


(1,257)

Adjustments from unconsolidated affiliates


6,316


6,682

Preferred shareholder dividends


6,041


6,041

EBITDA


34,756


25,393

Realized portion of deferred gain on sale-leaseback


(51)


(51)

Foreign currency exchange (gain) loss (a)


(240)


5

Adjustment for Value Creation Plan



7,939

Comparable EBITDA


$

34,465


$

33,286

 


(a)

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 March 31,



2013


2012

Net loss attributable to SHR common shareholders


$

(23,448)


$

(31,516)

Depreciation and amortization


27,218


25,490

Corporate depreciation


(131)


(265)

Realized portion of deferred gain on sale-leaseback


(51)


(51)

Noncontrolling interests adjustments


(127)


(133)

Adjustments from consolidated affiliates


(1,641)


(667)

Adjustments from unconsolidated affiliates


3,706


3,764

FFO


5,526


(3,378)

Redeemable noncontrolling interests


40


16

FFO—Fully Diluted


5,566


(3,362)

Non-cash mark to market of interest rate swaps


(3,044)


(1,530)

Foreign currency exchange (gain) loss (a)


(240)


5

Adjustment for Value Creation Plan



7,939

Comparable FFO


$

2,282


$

3,052

Comparable FFO per fully diluted share


$

0.01


$

0.02

Weighted average diluted shares (b)


209,895


188,787

 


(a)

Foreign currency exchange gains or losses applicable to third-party and inter-company debt and 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)

Marriott London Grosvenor Square (c)


1.61

%


110 bp (c)


$

106,475



October 2013

North Beach Venture


5.00

%


Fixed


1,476



January 2014

Bank credit facility


3.20

%


300 bp


156,000



June 2015

Four Seasons Washington, D.C.


3.35

%


315 bp


130,000



July 2016

Westin St. Francis


6.09

%


Fixed


212,677



June 2017

Fairmont Chicago


6.09

%


Fixed


94,496



June 2017

JW Marriott Essex House Hotel


4.75

%


400 bp


190,000



September 2017

Hyatt Regency La Jolla (d)


4.50% / 10.00

%


400 bp / Fixed


89,463



December 2017

InterContinental Miami


3.70

%


350 bp


85,000



July 2018

Loews Santa Monica Beach Hotel


4.05

%


385 bp


110,000



July 2018

InterContinental Chicago


5.61

%


Fixed


145,000



August 2021







$

1,320,587




 

(a)

Spread over LIBOR (0.20% at March 31, 2013). 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)

Principal balance of £70,040,000 at March 31, 2013. Spread over three-month GBP LIBOR (0.51% at March 31, 2013).

(d)

Interest on $72,000,000 is payable at LIBOR plus 4.00%, subject to a 0.50% LIBOR floor, and interest on $17,463,000 is payable at a fixed rate of 10.00%.

 

Domestic and European Interest Rate Swaps








Swap Effective Date


Fixed Pay Rate

Against LIBOR


Notional

Amount


Maturity

February 2010


4.90

%


$

100,000



September 2014

February 2010


4.96

%


100,000



December 2014

December 2010


5.23

%


100,000



December 2015

February 2011


5.27

%


100,000



February 2016



5.09

%


$

400,000

















 

Swap Effective Date


Fixed Pay Rate

Against GBP LIBOR


Notional

Amount



Maturity

October 2007


5.72

%




£

70,040



October 2013














 

Future scheduled debt principal payments (including extension options) are as follows:




Years ending December 31,


Amount

2013


$

115,161


2014


15,348


2015


172,246


2016


150,661


2017


548,979


Thereafter


318,192




$

1,320,587





Percent of fixed rate debt including U.S. and European swaps


74.0

%

Weighted average interest rate including U.S. and European swaps (e)


6.41

%

Weighted average maturity of fixed rate debt (debt with maturity of greater than one year)


3.96


 

(e)

Excludes the amortization of deferred financing costs and the amortization of the interest rate swap costs.

 

SOURCE Strategic Hotels & Resorts, Inc.

Diane Morefield, EVP & Chief Financial Officer, Strategic Hotels & Resorts, (312) 658-5740; Jonathan Stanner, Vice President, Capital Markets & Treasurer, Strategic Hotels & Resorts, (312) 658-5746