LaSalle Hotel Properties Reports Third Quarter 2016 Results

10/20/16

BETHESDA, Md.--(BUSINESS WIRE)--LaSalle Hotel Properties (NYSE: LHO) today announced results for the quarter ended September 30, 2016.

“Our portfolio performed well in a slow growth operating environment, with softening demand and increasing hotel supply. We benefited from the recovery of business at Park Central Hotel New York and WestHouse Hotel New York, and we are proud that our teams continue to operate with best-in-class efficiency across the portfolio, as evidenced by expense growth being limited to less than one percent year-to-date, excluding Park Central Hotel New York and WestHouse Hotel New York,” said Michael D. Barnello, President and Chief Executive Officer of LaSalle Hotel Properties.

“Following the disposition of two non-core assets during the third quarter, the Company now has an even stronger balance sheet, with a low debt-to-EBITDA ratio, an excellent quality portfolio primarily in core locations, and a well-covered dividend providing a high yield,” added Mr. Barnello.

Park Central Hotel New York and WestHouse Hotel New York Recovery

Excluding Park Central Hotel New York and WestHouse Hotel New York from the third quarter 2016 and the comparable period in 2015, the Company’s third quarter RevPAR grew by 1.5 percent and its hotel EBITDA margin decreased by 50 basis points to 37.6 percent. During the third quarter, the Company regained $5.6 million of the $7.2 million of lost EBITDA from the comparable prior year period.

Third Quarter Results

  • Net Income: The Company’s net income attributable to common shareholders increased 242.6 percent to $152.1 million, due in part to a $104.8 million gain relating to the sale of the Indianapolis Marriott Downtown.
  • RevPAR: The Company’s RevPAR increased 4.3 percent to $224.98, primarily driven by a 3.9 percent growth in occupancy to 89.5 percent. Average daily rate (“ADR”) rose by 0.4 percent to $251.26.
  • Hotel EBITDA Margin: The Company’s hotel EBITDA margin expanded by 29 basis points from the comparable prior year period to 36.8 percent.
  • Adjusted EBITDA: The Company’s adjusted EBITDA was $115.3 million, an increase of $0.7 million over the third quarter of 2015.
  • Adjusted FFO: The Company generated adjusted FFO of $96.4 million, or $0.85 per diluted share/unit, compared to $98.8 million, or $0.87 per diluted share/unit, for the comparable prior year period, a per share/unit decrease of 2.3 percent. The Company’s income taxes increased by $3.6 million, or $0.03 per diluted share/unit, from the comparable prior year period.

Year-to-Date Results

  • Net Income: The Company grew net income attributable to common shareholders by 113.5 percent to $213.3 million.
  • RevPAR: RevPAR increased 2.4 percent to $207.72, primarily driven by a 2.4 percent growth in occupancy to 85.0 percent. ADR was just above the prior year at $244.36.
  • Hotel EBITDA Margin: The Company’s hotel EBITDA margin expanded by 35 basis points from the comparable prior year period to 34.5 percent.
  • Adjusted EBITDA: The Company’s adjusted EBITDA was $310.8 million, an increase of 4.6 percent over the first nine months of 2015.
  • Adjusted FFO: The Company generated adjusted FFO of $259.1 million, or $2.29 per diluted share/unit, compared to $246.7 million, or $2.18 per diluted share/unit, for the comparable prior year period, a per share/unit increase of 5.0 percent.

Asset Sales

In July, the Company completed two non-core asset sales for $245.0 million. Proceeds from both transactions were used to reduce borrowings on the Company’s senior unsecured credit facility and for general corporate purposes.

  • On July 8, 2016, the Company sold its junior mezzanine loan (the “Mezzanine Loan”) secured by equity interests in two hotels: Shutters on the Beach and Casa Del Mar, in Santa Monica, California. The Mezzanine Loan sold for $80.0 million, which was the principal amount.
  • On July 14, 2016, the Company sold the Indianapolis Marriott Downtown for $165.0 million, generating a 13.7 percent unleveraged IRR. The Company acquired the hotel in February 2004 for $106.0 million.

Capital Investments

During the quarter, the Company invested $17.5 million of capital in its hotels, which was primarily maintenance expenditures. A portion of the capital investment during the quarter was for deposits on upcoming room renovations at L’Auberge Del Mar and Embassy Suites Philadelphia Center City.

Balance Sheet

As of September 30, 2016, the Company had total outstanding debt of $1.1 billion. Total net debt to trailing 12 month Corporate EBITDA (as defined in the financial covenant section of the Company’s senior unsecured credit facility) was 2.8 times, as of September 30, 2016 and its fixed charge coverage ratio was 5.8 times. For the third quarter, the Company’s weighted average interest rate was 2.6 percent, compared to 3.0 percent during the same prior year period. As of September 30, 2016, the Company had $135.0 million of cash and cash equivalents on its balance sheet and capacity of $772.5 million available on its credit facilities.

The Company did not acquire any common shares during the third quarter of 2016 or to date during the fourth quarter of 2016. The Company has $69.8 million of capacity remaining in its share repurchase program.

Dividend

On September 15, 2016, the Company declared a third quarter 2016 dividend of $0.45 per common share of beneficial interest. The dividend represents an annual run rate of $1.80 per share and a 7.2 percent yield based on the closing share price on October 18, 2016.

About LaSalle Hotel Properties

LaSalle Hotel Properties is a leading multi-operator real estate investment trust. The Company owns 46 properties, which are upscale, full-service hotels, totaling approximately 11,450 guest rooms in 13 markets in nine states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale, full-service hotels located in urban, resort and convention markets. LaSalle Hotel Properties seeks to grow through strategic relationships with premier lodging groups, including Hilton Hotels Corporation, Marriott International, Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, Two Roads Hospitality, Davidson Hotel Company, Kimpton Hotel & Restaurant Group, LLC, Accor, HEI Hotels & Resorts, JRK Hotel Group, Inc., Viceroy Hotel Group, Highgate Hotels and Access Hotels & Resorts.