Press Release: FelCor Lodging Trust Incorporated
August 3, 2000
IRVING, TX -- FelCor Lodging Trust Incorporated (NYSE: FCH), one of the nation's largest hotel real estate investment
trusts (REITs), yesterday announced that second quarter 2000 Funds From Operations (``FFO'') totaled $80.9 million,
or $1.20 per share and unit, a record for FelCor since it became a public company, compared to the second quarter
1999 of $80.4 million, or $1.06 per share and unit. This is a 13.2% increase on a per share basis. FelCor's second
quarter FFO results exceeded analyst consensus estimates by $0.11 per share and unit.
Financial Highlights:
Second Quarter 2000 (compared to second quarter 1999):
-- Revenues, after adding back deferred rent, increased 9.2% to
$147.6 million from $135.2 million
-- Total hotel portfolio, excluding hotels held for sale,
(163 hotels) RevPAR increased 9.9%
-- EBITDA increased 8.6% to $126.3 million from $116.3 million
-- EBITDA per share and unit increased 22.9% to $1.88 from $1.53
-- FFO per share and unit increased 13.2% to $1.20 from $1.06
-- Net income per share (before nonrecurring items, the reserve for
hotels held for sale and after adding back deferred rent of
$9.8 million) increased to $0.55 from $0.52
-- Comparable hotels, excluding hotels held for sale, (131 hotels)
RevPAR increased 8.2%
-- Non-comparable hotels, excluding hotels held for sale, (32 hotels)
RevPAR increased 18.8%
-- Hotels held for sale (25 hotels) RevPAR decreased 2.1%
Other Highlights:
-- FelCor has agreed in principle to purchase DJONT Operations, LLC,
one of its two Lessees, currently leasing 86 hotels, effective
January 1, 2001, for approximately 417,000 FelCor Lodging Limited
Partnership units.
-- FelCor has identified 25 non-strategic hotels to be sold, with
estimated aggregate net sale proceeds of approximately
$136 million. It has reached an agreement in principle with Bass
Hotels & Resorts regarding the termination of the leases on 11 of
these hotels for approximately $9 million in FelCor Lodging
Limited Partnership units. In connection with the decision to
sell these hotels, FelCor has recorded a one-time reserve, for
GAAP accounting purposes, of $63 million in the second quarter
of 2000.
-- On July 14, FelCor entered into a binding sale contract for its
Embassy Suites® hotel- Los Angeles International Airport-North,
California (215 suites) for a gross price of approximately
$24 million ($112,000 per room). The Company expects that the
sale will close by the end of August 2000, and FelCor will record
in the third quarter of 2000 a gain on sale of approximately
$3 million.
-- Sold 31 acres of vacant excess land adjacent to its 179-room
Whispering Woods Hotel, Conference Center and Golf Course in Olive
Branch, Mississippi, for approximately $1 million.
-- Completed renovations at three hotels during the quarter with
13 additional hotels undergoing renovation at the end of the
quarter.
-- Renovation expenditures on the Company's hotel portfolio totaled
$8.3 million during the quarter and an additional $10.4 million
was spent on maintenance capital expenditures. There is expected
to be an additional $28 million in renovation expenditures and
$33 million in maintenance capital expenditures during the
remainder of 2000.
-- Started construction on a 90-room addition, with an expected cost
of $10 million, at the Holiday Inn-French Quarter hotel located on
Royal Street in New Orleans, Louisiana.
``This has been an exceptional quarter for FelCor. RevPAR growth exceeded the hotel industry average and the majority
of our hotels continue to outperform their respective competitive sets,'' stated Thomas J. Corcoran, Jr., FelCor's
President and Chief Executive Officer. ``Our renovation and rebranding program of the last several years is generating
much of this above- market growth and should continue for some time to come,'' he continued.
Capitalization:
-- During the second quarter 2000, FelCor repurchased approximately
718,000 common shares for approximately $14.0 million. For the
year 2000, FelCor has repurchased 3.14 million common shares for
approximately $56.7 million.
-- On August 1, 2000, FelCor renewed, reduced in size, and extended
for two years its Senior Revolving Credit Facility. The new
$600 million facility matures in August 2003. The effective
interest rate ranges from 87.5 basis points to 250 basis points
above LIBOR depending on the Company's leverage and corporate
rating. The initial spread is 200 basis points.
-- FelCor declared second quarter dividends of $0.55 per share on its
Common Stock (an annualized dividend yield of approximately 10.1%
as of July 31, 2000), $0.4875 per share on its $1.95 Series A
Cumulative Convertible Preferred Stock and $0.5625 per depositary
share evidencing its 9% Series B Cumulative Redeemable Preferred
Stock.
``The placement of $331 million of long-term fixed rate debt at the end of the first quarter allowed us to reduce
the size of our revolving credit facility while maintaining attractive pricing and a flexible structure,'' said
Andrew J. Welch, FelCor's Vice President and Treasurer. ``The extension of our revolver completes our current financing
objectives for 2000. We are comfortable with 68% of our debt at fixed interest rates and current maturities of
less than $18 million for the remainder of 2000 and less than $25 million in each of the following two years,''
he continued.
Summary Financial Data:
A summary of the financial results for the 2000 and 1999 periods follow:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(in thousands, except per common share and unit data)
Revenues $137,865 $135,187 $264,670 $262,104
Net income applicable to
common shareholders before
nonrecurring items, reserve
for hotels held for sale
and after adding back
deferred rent $ 30,447 $ 35,704 $ 50,569 $ 66,268
Net income (loss) applicable
to common shareholders $(35,074) $ 34,638 $(22,331) $ 65,201
Diluted Earnings Per Common
Share Information:
Net income before nonrecurring
items, reserve for hotels
held for sale and after adding
back deferred rent $ 0.55 $ 0.52 $ 0.88 $ 0.97
Net income (loss) applicable
to common shareholders $ (0.64) $ 0.51 $ (0.39) $ 0.95
Weighted average shares
outstanding 54,945 68,351 57,161 68,347
Funds From Operations:
FFO $ 80,885 $ 80,383 $149,380 $154,232
Diluted FFO per common share
and unit $ 1.20 $ 1.06 $ 2.20 $ 2.03
Weighted average shares and
units outstanding 67,232 76,029 67,987 76,008
Earnings Before Interest,
Taxes, Depreciation and
Amortization:
EBITDA $126,328 $116,286 $238,753 $223,590
EBITDA per common share
and unit $ 1.88 $ 1.53 $ 3.51 $ 2.94
Operating Performance:
The Company recorded a gain applicable to common shareholders before nonrecurring items, reserve for hotels held
for sale, and after adding back deferred rent of $30.4 million in the second quarter of 2000, compared to a gain
of $35.7 million in 1999.
-- In the second quarter, FelCor recorded a one-time reserve for GAAP
accounting purposes of $63.0 million related to the 25 hotels the
Company has identified as held for sale. This represents the
difference between the net book value of the hotels and the
estimated net sale proceeds.
-- The Company recorded deferred income, under SAB 101 of
$9.8 million for the quarter ended June 30, 2000, and
$18.6 million, June year-to-date. The deferred rent should be
fully earned and recognized as Percentage Lease Revenue by the end
of 2000.
-- Interest expense increased, as a percentage of total revenue after
adding back deferred rent, from 23% to 27% for the quarter over
the prior year period. FelCor's total borrowings have increased
by approximately $170 million since June 30, 1999, primarily to
fund its stock repurchase program and its renovation,
redevelopment and rebranding program. In addition, the average
interest rate on the Company's floating rate debt has increased
approximately 130 basis points since the second quarter 1999, as a
result of corresponding increases in short term interest rates.
RevPAR Comparison:
Comparable hotel RevPAR changes (excluding hotels held for sale) for the second quarter 2000 versus 1999 are as
follows:
RevPAR Percentage of Total
Change Room Revenue
Embassy Suites (54 hotels) 9.6 % 46.0%
Holiday®-branded hotels (34 hotels) 9.4 % 24.4%
Crowne Plaza® (14 hotels) 9.0 % 11.7%
Doubletree®-branded hotels (9 hotels) 6.2 % 5.1%
Sheraton®-branded (7 hotels) 5.4 % 6.9%
Other (13 hotels) (3.2)% 5.9%
Total (131 hotels) 8.1 % 100.0%
Excluding hotels held for sale, comparable hotels in Texas, California, Florida and Georgia accounted for approximately
58.3% of comparable hotel room revenues in the quarter. The RevPAR changes during the second quarter 2000 versus
1999 from our comparable hotels in these states are as follows:
RevPAR Percentage of Comparable
Change Room Revenue
Texas (31 hotels) 5.2 % 19.2%
California (17 hotels) 17.1 % 21.7%
Florida (12 hotels) 7.5 % 10.4%
Georgia (10 hotels) 0.8 % 7.0%
Acquisition of DJONT
On July 21, 2000, FelCor's Independent Directors approved the acquisition of 100% of DJONT Operations, LLC and
its subsidiaries effective January 1, 2001. The purchase price is approximately 417,000 FelCor Lodging Limited
Partnership units (currently valued at $9.1 million based upon the $21.88 closing share price on July 31, 2000).
The acquisition of DJONT is expected to have no impact or to be slightly accretive to FelCor's FFO/share in 2001.
The benefits to FelCor from the purchase of DJONT include: (i) a more direct relationship with the hotel and brand
managers, (ii) elimination of potential conflicts of interest and (iii) consolidated hotel level financial reporting.
The Company currently expects to acquire its remaining lessee on January 1, 2001, as well.
Hotels Held for Sale
FelCor has identified 25 non-strategic hotels which it intends to sell. The Company expects gross sales proceeds
from these hotels to be approximately $150 million and net proceeds to be approximately $136 million (after deducting
estimated transaction costs and approximately $11 million in fees to terminate the existing leases and management
rights).
The Company anticipates that the sale of these hotels will result in a book loss of approximately $63 million.
Accordingly, FelCor's Board of Directors approved a $63 million reserve for the hotels held for sale, to reflect
the lower of cost or market for these hotels.
Brand Location Rooms
Fairfield Inn® Scottsdale, AZ 218
Doubletree Guest Suites® Boca Raton, FL 182
Doubletree Guest Suites Tampa, FL 129
Courtyard by Marriott® Atlanta, GA 211
Fairfield Inn Atlanta, GA 242
Hampton Inn® Marietta, GA 140
Hampton Inn Moline, IL 138
Holiday Inn Express® Moline, IL 111
Holiday Inn Moline, IL 216
Holiday Inn Davenport, IA 287
Hampton Inn Davenport, IA 132
Holiday Inn Express Colby, KS 72
Holiday Inn Great Bend, KS 175
Holiday Inn Hays, KS 190
Hampton Inn Hays, KS 116
Holiday Inn Salina, KS 192
Holiday Inn Express Salina, KS 93
Four Points by Sheraton® Leominster, MA 187
Hampton Inn Jackson, MS 119
Doubletree Guest Suites Nashville, TN 138
Fairfield Inn Dallas, TX 204
Courtyard by Marriott Houston, TX 209
Fairfield Inn Houston, TX 107
Fairfield Inn Houston, TX 160
Hampton Inn Houston, TX 90
Total 4,058
Corcoran stated, ``The 25 hotels held for sale include most of our limited service hotels, a number of our small
market Holiday Inns, and all seven of our Marriott®-branded hotels, all of which were included in portfolio
acquisitions. These hotels represent 8.3% of total rooms owned by FelCor but only 4.2% of total revenues. The sale
of these non-strategic hotels will allow us and our brand managers to focus our energies on our upscale and full
service hotels in more strategic markets.''
Financial Profile:
FelCor's conservative financial profile is evidenced by the following at June 30, 2000:
-- Annual interest coverage ratio of 2.9x
-- Total debt to annual EBITDA of 4.2x
-- Consolidated debt equal to 41% of its investment in hotels at cost
-- Annual FFO payout ratio of approximately 53%
-- Borrowing capacity of $440 million under its Line of Credit
($190 million pro forma for renewed Line of Credit)
-- Fixed interest rate debt equal to 68% of total debt
-- Weighted average maturity of fixed interest rate debt of
approximately six years
-- Mortgage debt-to-total assets of 19%
-- Debt of approximately $17 million maturing for the remainder of
2000
Company Information:
FelCor's hotel portfolio consists of 188 hotels with nearly 50,000 rooms and suites and is concentrated primarily
in the upscale and full-service segments. FelCor is the owner of the largest number of Embassy Suites, Crowne Plaza,
Holiday Inn and independently owned Doubletree-branded hotels. Other leading hotel brands under which FelCor's
hotels are operated include Sheraton Suites®, Sheraton and Westin®. FelCor has a current market capitalization
of approximately $3.4 billion. Additional information can be found on the Company's website at www.felcor.com.
FelCor invites you to participate in the Company's second quarter 2000 conference call on Wednesday, August 2,
2000, at 9:00 am CDT by calling 800-689-6707. A replay of the call will be available no later than 1:00 pm Wednesday,
August 2, by accessing FelCor's website at www.felcor.com or by dialing 800-642-1687 (pass code 809464). The conference
call replay will be available until August 9, 2000.
With the exception of historical information, the matters discussed in this news release include ``forward looking
statements'' within the meaning of the federal securities laws that are qualified by cautionary statements contained
herein and in FelCor's filings with the Securities and Exchange Commission.
FelCor Lodging Trust Incorporated
Results of Operations
(in thousands, except per share and unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
Percentage lease revenue $133,286 $131,891 $256,335 $256,882
Equity in income from
unconsolidated entities 3,769 2,591 5,648 3,837
Other revenue 810 705 2,687 1,385
Total revenue 137,865 135,187 264,670 262,104
Expenses:
General and administrative 2,713 2,509 6,112 4,753
Depreciation 41,080 37,737 81,480 74,162
Taxes, insurance and other 17,234 15,425 35,877 32,372
Land lease expense 6,151 4,479 11,711 8,485
Interest expense 39,740 30,750 77,644 59,172
Reserve for hotels held
for sale 63,000 --- 63,000 ---
Minority interest in
Operating Partnership (3,403) 1,519 (2,399) 2,839
Minority interest in other
partnerships 1,125 833 2,093 1,639
Total expenses 167,640 93,252 275,518 183,422
Net income (loss) before
nonrecurring items (29,775) 41,935 (10,848) 78,682
Gain on sale of land 875 --- 875 ---
Extraordinary charge for
write-off of Deferred
financing --- (1,113) --- (1,113)
Net income (loss) (28,900) 40,822 (9,973) 77,569
Preferred dividends 6,174 6,184 12,358 12,368
Net income applicable to
common shareholders $(35,074) $ 34,638 $(22,331) $ 65,201
Diluted Earnings Per Common Share Information:
Net income (loss) applicable
to common shareholders $ (0.64) $ 0.51 $ (0.39) $ 0.95
Weighted average shares
outstanding 54,945 68,351 57,161 68,347
Funds From Operations (FFO):
Net income (loss) (28,900) 40,822 (9,973) 77,569
Extraordinary charge --- 1,113 --- 1,113
Reserve for hotels held
for sale 63,000 --- 63,000 ---
Deferred rent 9,750 --- 18,604 ---
Series B preferred dividends (3,234) (3,234) (6,468) (6,468)
Depreciation 41,080 37,737 81,480 74,162
Depreciation for
unconsolidated entities 2,592 2,426 5,136 5,017
Minority interest in
Operating Partnership (3,403) 1,519 (2,399) 2,839
FFO $ 80,885 $ 80,383 $149,380 $154,232
Diluted FFO per common
share and unit $ 1.20 $ 1.06 $ 2.20 $ 2.03
Weighted average shares
and units outstanding 67,232 76,029 67,987 76,008
FelCor Lodging Trust Incorporated
Results of Operations - (Continued)
(in thousands, except per share and unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Earnings Before Interest,
Taxes, Depreciation
and Amortization (EBITDA):
FFO $ 80,885 $ 80,383 $149,380 $154,232
Interest expense 39,740 30,750 77,644 59,172
Interest expense of
unconsolidated subsidiaries 2,157 1,734 4,787 3,343
Amortization expense 312 185 474 375
Series B preferred dividends 3,234 3,234 6,468 6,468
EBITDA $126,328 $116,286 $238,753 $223,590
Diluted EBITDA per common
share and unit $ 1.88 $ 1.53 $ 3.51 $ 2.94
FelCor Lodging Trust Incorporated
Debt Outstanding
June 30, 2000
Interest Rate Balance Maturity Date
Floating Rate Debt:
Line of Credit LIBOR + 163bps $ 285,000 August 2003(A)
Senior Term Loan LIBOR + 250bps 249,000 March 2004
Mortgage debt (B) LIBOR + 200bps 62,239 February 2003
Other Up to LIBOR + 200bps 11,032 Various
Total Floating Rate Debt 607,271
Fixed Rate Debt:
Line of Credit-swapped 7.18% 125,000 August 2003(A)
Publicly-traded term notes 7.38% 174,441 October 2004
Publicly-traded term notes 7.63% 124,271 October 2007
Mortgage debt 7.24% 141,367 November 2007
Senior Term Loan-swapped 8.55% 125,000 March 2004
Mortgage debt 7.54% 98,354 April 2009
Mortgage debt 7.55% 73,946 June 2009
Mortgage debt 8.73% 144,865 May 2010
Mortgage debt 8.70% 185,763 May 2010
Other 6.96%-7.23% 82,465 2000-2005
Total Fixed Rate Debt 1,275,472
Total Consolidated Debt $1,882,743
(A) Maturity Date reflects the August 2000 renewal of the Company's Line
of Credit
(B) Subject to a LIBOR cap of 7.0%
FelCor's future scheduled debt principal payments at June 30, 2000, reflecting the Line of Credit, as renewed in
August 2000, are as follows (in thousands):
Year
2000 $ 17,368
2001 24,432
2002 13,825
2003 505,318
2004 563,228
2005 and thereafter 759,860
$1,884,031
Discount accretion over term (1,288)
$1,882,743
FelCor Lodging Trust Incorporated
Hotel Performance Statistics
June 30, 2000
The following table sets forth historical Occupancy, ADR and RevPAR and the percentage changes therein between
the quarters presented for the Hotels in which the Company had an ownership interest at June 30, 2000. This information
is presented regardless of the date of acquisition.
Second Quarter 2000 Year to Date 2000
Occupancy ADR RevPAR Occupancy ADR RevPAR
DJONT Comparable
Hotels 77.7% $ 123.92 $96.31 75.4% $126.27 $95.07
Bass Comparable
Hotels 75.1% $ 92.12 $69.23 72.3% $ 91.48 $66.14
Total Comparable
Hotels(A) 76.5% $ 108.87 $83.26 73.8% $109.00 $80.49
Non-comparable
Hotels(B) 74.3% $ 99.58 $73.97 71.6% $101.04 $72.32
Total Hotels
excluding hotels
held for sale 76.0% $ 107.03 $81.37 73.2% $106.92 $78.30
Hotels held for
sale© 60.8% $ 70.42 $42.84 60.1% $ 72.02 $43.28
Total Hotels 74.8% $ 104.57 $78.19 72.1% $104.52 $75.41
Second Quarter 1999 Year to Date 1999
Occupancy ADR RevPAR Occupancy ADR RevPAR
DJONT Comparable
Hotels 74.3% $ 119.27 $88.66 73.2% $123.07 $90.04
Bass Comparable
Hotels 71.8% $ 89.70 $64.41 70.0% $ 89.81 $62.84
Total Comparable
Hotels 73.1% $ 105.28 $76.98 71.5% $106.68 $76.33
Non-comparable
Hotels 64.2% $ 96.98 $62.28 62.1% $ 99.18 $61.54
Total Hotels
excluding hotels
held for sale 71.3% $ 103.78 $74.02 69.0% $104.88 $72.39
Hotels held for sale 63.0% $ 69.47 $43.74 60.5% $ 72.38 $43.76
Total Hotels 70.6% $ 101.25 $71.51 68.3% $102.50 $70.02
Change from prior period Change from prior period
2nd Qtr. 2000 vs. 2nd Qtr. 1999 2000 vs. 1999 Year to Date
Occupancy ADR RevPAR Occupancy ADR RevPAR
DJONT Comparable
Hotels 3.4 pts 3.9% 8.6 % 2.2 pts 2.4 % 5.6 %
Bass Comparable
Hotels 3.3 pts 2.7% 7.5 % 2.3 pts 1.9 % 5.3 %
Total Comparable
Hotels 3.4 pts 3.4% 8.2 % 2.3 pts 2.2 % 5.5 %
Non-comparable
Hotels 10.1 pts 2.7% 18.8 % 9.5 pts 1.9 % 17.5 %
Total Hotels
excluding hotels
held for sale 4.7 pts 3.1% 9.9 % 4.2 pts 1.9 % 8.2 %
Hotels held for
sale (2.2) pts 1.4% (2.1)% (0.4) pts (0.5)% (1.1)%
Total Hotels 4.2 pts 3.3% 9.3 % 3.8 pts 2.0 % 7.7 %
(A) DJONT Comparable Hotels include 73 and 65 hotels and Bass Comparable
hotels include 58 and 56 hotels in the second quarter and year-to-
date which were not undergoing renovation, redevelopment, or
rebranding in either the 2000 or 1999 periods reported and excluding
hotels held for sale.
(B) Non-comparable Hotels include 32 and 42 hotels in the second quarter
and year-to-date undergoing redevelopment in either the 2000 or 1999
periods reported and excluding hotels held for sale.
(C) Hotels held for sale includes three DJONT leased hotels and 22 Bass
leased hotels, consisting of two Courtyard by Marriott hotels, five
Fairfield Inn hotels, six Hampton Inn hotels, eight Holiday-branded
hotels, three Doubletree Guest Suites hotels, and one Four Points by
Sheraton.
SOURCE: FelCor Lodging Trust Incorporated