Company Press Release: Homestead Village Incorporated
May 3, 2000
ATLANTA, GA -- Homestead Village Incorporated (NYSE: HSD) yesterday reported diluted earnings per share of $0.07
per share in the first quarter 2000, compared with a loss per share of $(0.50) in the first quarter 1999. Net earnings
for the first quarter 2000 were $8.49 million, compared to a loss of $(18.96) million in the first quarter 1999.
Homestead reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $0.22 per diluted
share for the first quarter 2000. Per-share EBITDA in the first quarter 1999 was $0.29. The diluted weighted average
shares outstanding in the first quarter 2000 was 141.5 million shares, compared with 57.5 million shares in the
first quarter 1999. Aggregate EBITDA for the first quarter 2000 was $30.48 million, compared to $16.43 million
in the first quarter 1999.
Property-Level Operating Performance
RevPAR (revenue per available room) increased in the first quarter for the total portfolio. First quarter 2000
weekly RevPAR for the total portfolio increased 14.0% to $252, compared to $221 in the first quarter 1999. The
average weekly rate decreased 0.8% to $349 (from $352 in the prior year period), while first quarter occupancy
increased 940 basis points, from 62.8% in first quarter 1999 to 72.2% in first quarter 2000. The property-level
operating margin for the total portfolio increased 320 basis points to 57.4% in the first quarter 2000, compared
to 54.2% in the first quarter 1999.
Total Homestead Portfolio
1Q99 2Q99 3Q99 4Q99 1Q00
Operating Properties 125 129 136 136 136
Average Occupancy 62.8% 70.9% 75.2% 71.4% 72.2%
Average Weekly Rate $352 $352 $347 $345 $349
Weekly RevPAR $221 $250 $261 $246 $252
Property Operating
Margin 54.2% 54.1% 60.1% 56.3% 57.4%
James Potts, Homestead's president and chief operating officer, said, ``Property-level profitability is a key component
of the company's improved financial performance; therefore, we are very pleased with achieving a 5.1% increase
in our 'same-store' RevPAR while simultaneously raising the operating margin for these properties by 40 basis points.
We have a dedicated operating team who are focused on combining a high level of customer satisfaction with operating
profitability.''
Weekly RevPAR for the company's 100 same-store properties was $230 in the first quarter 2000, a 5.1% increase over
the same-store RevPAR of $219 for the year ago period. The company's same-store results include only properties
that were both operational and stabilized during both periods. Same-store weekly rate decreased 3.3% to $326 from
$337, while occupancy increased 560 basis points from 65.1% in the first quarter 1999 to 70.7% in the first quarter
2000. Property-level operating margin for the same-store properties increased 40 basis points to 55.4% in first
quarter 2000 (from 55.0% in first quarter 1999).
Debt and Long-Term Liabilities
Homestead has been using some of its cash from operations and proceeds from the land-held-for-sale transactions
to pay-down its debt obligations. As of March 31, 2000, Homestead's debt obligations totaled approximately $442.2
million, including the company's $139.9-million capital lease obligation. As of April 28, 2000, there were no drawings
under the company's $35-million revolving line of credit.
1Q99 2Q99 3Q99 4Q99 1Q00 28-Apr-00
Debt & Long-Term
Liabilities/
Total Assets 61.4% 46.8% 46.5% 43.0% 40.3% 39.8%
Reduction in Overhead Costs
In the first quarter 2000, total overhead costs were $24.5 million on an annualized basis, approximately 50% of
the first quarter 1999 annualized overhead costs of $48.6 million. Management believes that the current annualized
overhead level is appropriate for a company operating 136 stabilized properties.
Annualized Overhead Costs
1Q99 2Q99 3Q99 4Q99 1Q00
Capitalized
Overhead Costs $10,608 $5,008 $2,740 $604 $692
Expensed Overhead
Costs 38,035 35,156 29,330 26,628 23,808
Total Overhead
Costs $48,643 $40,164 $32,070 $27,232 $24,500
Land-Held-for-Sale
Homestead has sold fourteen of its 23 parcels of land-held-for-sale with net proceeds of $82.6 million. An additional
four properties are under contract with estimated net proceeds of approximately $9.2 million. The total net proceeds
from these 18 parcels would be approximately $91.8 million or 96% of the $95.5 million carrying value of the land-held-for
sale. The company is continuing to market the remaining five land parcels that have not been sold or placed under
contract.
Homestead Board Announces Merger Agreement
Homestead announced on May 2, 2000, that it has entered into a definitive merger agreement providing for the acquisition
by cash tender offer by Security Capital Group Incorporated (NYSE: SCZ - news) for all the publicly-held shares
of Homestead's common stock and the associated preferred share purchase rights at $4.10 per share. Security Capital
Group currently owns 87% of Homestead's outstanding common stock. Any shares of Homestead common stock and associated
preferred share purchase rights not purchased in the tender offer will be acquired by Security Capital Group in
a subsequent merger transaction at the same $4.10 per share cash price.
A special committee consisting of the independent directors of Homestead's board reviewed and recommended approval
of the offer by the Company's full board. The special committee's recommendation, and the board's approval, is
based on a number of factors, including the opinion of Stern Stewart & Co., the financial advisor to the special
committee that the $4.10 per share consideration to be received by the public shareholders of Homestead in the
transaction is fair from a financial point of view to such holders.
The tender offer will commence shortly and will be made only by an offer to purchase and other offering documents,
copies of which will be filed with the Securities and Exchange Commission and mailed to Homestead stockholders.
Homestead Annual Meeting of Shareholders
In light of the tender offer by Security Capital Group, Homestead's board of directors has decided it is in the
best interest of shareholders to delay the Annual Meeting which had been scheduled for June 8, 2000.
Homestead, based in Atlanta, Georgia, is an owner and operator of 136 extended stay-lodging facilities in 28 states.
Focused on the business traveler, Homestead has developed an operating system designed to ensure a consistent,
high-quality, uniform lodging experience.
Homestead's news releases and corporate information are available on the company's website at www.stayhsd.com
In addition to historical information, this news release contains forward-looking statements under the federal
securities laws. These statements are based on current expectations, estimates, and projections about the industry
and markets in which Homestead operates, management's beliefs, and assumptions made by management. Forward-looking
statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult
to predict. Actual operating results may be affected by changes in national and local economic conditions, competitive
market conditions, changes in financial markets or interest rates that could adversely affect Homestead's cost
of capital and its ability to meet its financing needs and obligations, weather, and the ability of potential buyers
of land-held-for-sale to obtain financing for such purchases, and therefore, may differ materially from what is
expressed or forecasted in this news release.
Nothing in this announcement is either an offer to purchase or a solicitation of an offer to sell shares of the
company. At the time the offer is commenced, Security Capital Group will file a tender offer statement with the
SEC and Homestead will file a solicitation/recommendation statement with respect to the offer. The tender offer
statement (including an offer to purchase, a related letter of transmittal and other offer documents) and the solicitation/recommendation
statement will contain important information that should be read carefully before any decision is made with respect
to the offer. The offer to purchase, the related letter of transmittal and certain other documents, as well as
the solicitation/recommendation statement, will be made available to all shareholders of Homestead, at no expense
to them. The tender offer statement (including the offer to purchase, the related letter of transmittal and all
other documents filed with the SEC) and the solicitation/recommendation statement will also be available at no
charge at the SEC's website at www.sec.com .
Homestead Village
First Quarter 2000
Unaudited Financial Results
Statements of Operations, EBITDA and EBDADT
(In thousands, except per share amounts)
Three Months Ended March 31,
2000 1999
Room revenues and other
property revenues $59,869 $48,125
Property operating expenses (25,489) (22,030)
Corporate operating expenses (6,010) (9,694)
Miscellaneous revenues 191 25
EBIDTA, before special charge $28,561 $16,426
Interest income 262 154
Net interest expense (11,290) (11,316)
Depreciation and amortization (10,962) (9,997)
Gain on sale of depreciable assets 2 2
Provision for income taxes -- --
Earnings (loss) before cumulative
effect of accounting change $6,573 $(4,731)
Cumulative effect of
accounting change -- (14,230)
Net earnings (loss) before
special charge $6,573 $(18,961)
Special charge credit 1,922 --
Net earnings (loss) $8,495 $(18,961)
Reconciliation of Earnings
(Loss) to EBDADT:
Net earnings (loss) $8,495 $(18,961)
Add back:
Real property depreciation 10,073 9,120
Gain on sale of depreciable assets (2) (2)
Amortization of trademark
and intangibles 621 621
Cumulative effect of accounting
change for organizational,
pre-opening, and start-up activities -- 14,230
EBDADT $19,187 $5,008
Add back of net convertible
debt interest, if dilutive -- --
Diluted EBDADT $19,187 $5,008
EBITDA $30,483 $16,426
EBITDA before special charge $28,561 $16,426
Diluted EBITDA per share $0.22 $0.29
Diluted EBITDA per share
before special charge $0.20 $0.29
Net earnings (loss) $8,495 $(18,961)
Net earnings (loss)
before special charge $6,573 $(18,961)
Diluted earnings (loss) per share (1) $0.07 $(0.50)
Diluted earnings (loss) per share
before special charge (1) $0.05 $(0.50)
Diluted EBDADT $19,187 $5,008
Diluted EBDADT before special charge $17,265 $5,008
Diluted EBDADT per share (1) $0.16 $0.13
Diluted EBDADT per share
before special charge (1) $0.14 $0.13
Weighted average shares outstanding:
Basic 120,031 38,245
Diluted 141,464 57,492
(1) Basic per share results are presented where diluted calculations
produce anti-dilutive results.
Homestead Village
First Quarter 2000
Unaudited Financial Results
Balance Sheets and Statements of Cash Flows
(In thousands)
Balance Sheets:
March 31, December 31,
Assets 2000 1999
Cash and cash equivalents $214 $20,747
Investment in property
and equipment, net 1,021,806 1,039,991
Other assets 75,197 72,702
Total assets 1,097,217 1,133,440
Liabilities and Shareholders' Equity
Liabilities:
Lines of credit 80,949 125,449
Convertible mortgages payable 221,334 221,334
Capital lease obligation 139,930 140,854
Accrued special charge expenses 2,130 5,372
Accounts payable, accrued
expenses and other liabilities 36,033 32,094
Total liabilities 480,376 525,103
Shareholders' equity 616,841 608,337
Total liabilities and
shareholders' equity $1,097,217 $1,133,440
Statements of Cash Flows: Three Months Ended March 31,
2000 1999
Operating Activities:
Net property operating income $34,380 $26,095
Miscellaneous revenues 191 25
Interest income 262 154
Less:
Corporate operating expenses 5,952 9,509
Special charge credit (1,922) --
Gains on sales of land 713 --
Holding cost on land held for sale 58 --
Interest expense 11,290 11,316
Current tax expense -- --
Net cash flow provided by
operating activities 18,742 5,449
Investing Activities:
Capital expenditures:
Real estate development (983) (41,644)
Other capital expenditures (576) (2,191)
Proceeds from sales of land 9,996 --
Other balance sheet accounts (870) (17,590)
Net cash flow provided by
(used in) investing activities 7,567 (61,425)
Financing Activities:
Line of credit advances,
net of repayments (44,500) 41,920
Mortgage debt advances (repayments) -- (122,028)
Deferred loan costs for
line of credit (1,418) (2,377)
Capital lease obligation,
net of payments (924) 143,260
Net cash flow provided by
(used in) financing activities (46,842) 60,775
Net increase in cash
and cash equivalents (20,533) 4,799
Cash and cash equivalents,
beginning of period 20,747 12,144
Cash and cash equivalents,
end of period $214 $16,943
Homestead Village
First Quarter 2000
Unaudited Financial Results
Debt Outstanding and Share Information
(In thousands, except per share amounts)
March 31, December 31,
Debt: 2000 1999
Lines of credit, due
February 28, 2003 $80,949 $125,449
Capital lease
obligation, amortizing
through December 2015 139,930 140,854
Convertible mortgage
notes payable, due
October 31, 2006 221,334 221,334
Total debt $442,213 $487,637
Common Shares Issued
and Outstanding and
Issuable: As of March 31,
2000 1999
Common shares issued
and outstanding 120,031 38,245
Shares issuable upon
conversion of
convertible mortgage
notes 21,191 19,246
Options outstanding 3,340 3,701
144,562 61,192
Per Share Data: (1) Before Special Charge After Special Charge
Three Months Ended Three Months Ended
March 31, March 31,
2000 1999 2000 1999
Earnings (loss) per
share data (2):
Earnings (loss)
attributable to
common shares $6,573 ($4,731) $8,495 ($4,731)
Convertible mortgage
interest -- -- -- --
Earnings (loss)
attributable to
common shares and
assumed conversions $6,573 ($4,731) $8,495 ($4,731)
Weighted average shares
outstanding - basic 120,031 38,245 120,031 38,245
Increase in shares
which would result from:
Exercise of options -- -- -- --
Conversion of mortgages -- -- -- --
Weighted average shares
outstanding - diluted 120,031 38,245 120,031 38,245
Per share earnings (loss)
Basic $0.05 ($0.12) $0.07 ($0.12)
Diluted $0.05 ($0.12) $0.07 ($0.12)
EBDADT per share data:
EBDADT attributable
to common shares $17,265 $5,008 $19,187 $5,008
Convertible mortgage
interest -- -- -- --
EBDADT attributable
to common shares and
assumed conversions $17,265 $5,008 $19,187 $5,008
Weighted average shares
outstanding - basic 120,031 38,245 120,031 38,245
Increase in shares
which would result from:
Exercise of options -- -- -- --
Conversion of mortgages -- -- -- --
Weighted average shares
outstanding - diluted 120,031 38,245 120,031 38,245
Per share EBDADT
Basic $0.14 $0.13 $0.16 $0.13
Diluted $0.14 $0.13 $0.16 $0.13
(1) Convertible debt is not assumed to be converted and the exercise of
options is not assumed in periods where the effects are
anti-dilutive.
(2) Per share earnings results for 1999 are presented before the
cumulative effect of an accounting change.
Homestead Village
First Quarter 2000
Unaudited Financial Results
Operating Property Performance
Three Months Ended March 31,
2000 1999 Change
Stabilized, Comparable Properties
("Same-store"): (1)
Number of properties 100 100 0.0%
RevPAR (3) $230 $219 5.1%
Average Weekly Rate (4) $326 $337 -3.3%
Occupancy % 70.7% 65.1% 5.6
Property Operating
Income Margin 55.4% 55.0% 0.4
Investment in Comparable
Properties (000's) $743,314 $743,314 0.0%
Percent of Comparable
Investment to Total
Investment 68.2% 76.2% (8.0)
Stabilized Properties: (2)
Number of properties 136 100 36.0%
RevPAR (3) $252 $219 14.9%
Average Weekly Rate (4) $349 $337 3.7%
Occupancy % 72.2% 65.1% 7.1
Property Operating
Income Margin 57.4% 55.0% 2.4
Investment in Stabilized
Properties (000's) $1,090,137 $743,314 46.7%
Percent of Stabilized
Investment to Total
Investment 100.0% 76.2% 23.8
Pre-stabilized Properties:
Number of properties n/a 25 n/a
RevPAR (3) n/a $228 n/a
Average Weekly Rate (4) n/a $430 n/a
Occupancy % n/a 53.2% n/a
Property Operating
Income Margin n/a 51.4% n/a
Investment in Pre-stabilized
Properties (000's) n/a $232,503 n/a
Percent of Pre-stabilized
Investment to Total
Investment n/a 23.8% n/a
Total Properties:
Number of properties 136 125 8.8%
RevPAR (3) $252 $221 14.0%
Average Weekly Rate (4) $349 $352 -0.8%
Occupancy % 72.2% 62.8% 9.4
Property Operating
Income Margin 57.4% 54.2% 3.2
Investment in Operating
Properties (000's) $1,090,137 $975,816 11.7%
Notes:
(1) Stabilized, comparable properties represent those properties that
were stabilized as of the beginning of the first quarter of 1999.
(2) Stabilized properties represent those properties that have achieved
80% occupancy or have been open for 24 weeks. The three months ended
March 31, 2000 includes one property which became stabilized during
the period.
(3) Weekly revenue per available room ("RevPAR") is determined by
dividing room revenue by the number of guest room days available for
the period and multiplying by seven.
(4) Average weekly rate is determined by dividing room revenue by the
number of guest room days occupied for the period and multiplying by
seven.
Homestead Village
First Quarter 2000
Unaudited Financial Results
Regional Portfolio Information and Corporate Overhead Costs
(Dollar amounts in thousands)
Regional Portfolio Information:
Number of
Region States Properties Investment
Northeast CT,DE,MA 21 $207,522
MD,NJ,PA
VA (northern)
Southeast AL,FL,GA 23 192,892
West CA,NV 19 173,728
Midwest IL,KS,MI 17 146,424
MO,MN,OH
WI
Mountain AZ,CO,NM 20 145,805
OR,UT,WA
Southwest TX 25 128,543
East NC,TN,VA 11 95,223
Totals 136 $1,090,137
Actual Corporate Overhead Costs:
Corporate Overhead Costs (1)
Q1 1999 Q2 1999 Q3 1999 Q4 1999 Q1 2000
Capitalized
costs
(annualized) $10,608 $5,008 $2,740 $604 $692
Expensed costs
(annualized) 38,035 35,156 29,330 26,628 23,808
Total
(annualized) $48,643 $40,164 $32,070 $27,232 $24,500
(1) Represents a projection of annual costs calculated by annualizing the
costs for the individual quarters.
SOURCE: Homestead Village Incorporated