Press Release
November 27, 2000
WASHINGTON, DC -- MeriStar Hospitality Corporation (NYSE: MHX), the nation's third largest hotel real estate investment
trust (REIT), yesterday announced results for the third quarter ended September 30, 2000.
Funds from operations (FFO) for the 2000 third quarter rose to $57.1 million, and FFO per diluted share rose 5.1
percent to $1.04. Revenues increased 6.3 percent to $98.6 million. Earnings before interest expense, income taxes,
depreciation and amortization (EBITDA) rose 5.0 percent to $84.5 million.
Third-quarter revenue per available room (RevPAR) for the company's hotels advanced 6.05 percent to $76.80. Average
daily rate (ADR) increased 7.0 percent to $103.83, while occupancy decreased 0.9 percent to 74.0 percent.
``We enjoyed a strong third quarter, much better than we expected at the beginning of the year, as the economy
continued in a positive mode,'' said Paul W. Whetsell, chairman and CEO of MeriStar Hospitality. ``Our strategy
of geographic diversity, with properties located primarily in markets with high barriers to new competition, generated
positive results. Our Northern California properties led the way, with RevPAR increasing 22.0 percent, followed
by the Southern California and Mid-Atlantic (includes Maryland, Virginia and the District of Columbia) markets,
where RevPAR rose 17.5 percent and 10.6 percent, respectively.''
Operating Performance in Significant Markets
RevPAR changes from third quarter 1999 to third quarter 2000 and EBITDA contribution in significant markets are
as follows:
EBITDA
RevPAR Contribution % of Total
Change in (000's) EBITDA
Northern California 22.0% $ 9,201 10.9%
New Jersey 6.8% 8,564 10.1%
Mid-Atlantic 10.6% 8,033 9.5%
Southern California 17.5% 6,508 7.7%
Chicago 10.4% 4,443 5.3%
Southwest Florida 4.3% 3,511 4.2%
Orlando 0.4% 3,444 4.1%
Tampa/Clearwater 0.0% 3,208 3.8%
Houston 8.5% 2,796 3.3%
Dallas -9.0% 2,725 3.2%
Colorado 2.3% 2,443 2.9%
Atlanta 2.6% 2,164 2.6%
Connecticut -2.6% 2,122 2.5%
Strong Balance Sheet
John Emery, chief operating officer, commented, ``We have continued to focus on improving yields on our existing
assets and maintaining a strong capital structure that provides liquidity for prudent growth.'' Emery added, ``The
increase in the current LIBOR interest rate has impacted our interest costs, however, 83 percent of our debt is
now fixed and the company is well protected against future rate increases.''
Key Financial Information: - Total debt to annual EBITDA of 4.8x - Annual interest coverage ratio of 2.7x - $129 million available on revolving line of credit - Weighted average cost of debt of 7.9% - Capitalized interest of $2.1 million and $5.7 million, respectively, for the three months and nine months ended September 30, 2000, compared to $4.4 million and $8.1 million for the same 1999 periods - Capital expenditures were $12 million and $51 million, respectively, for the three and nine months ended September 30, 2000. Long-Term Debt Long-term debt as of September 30, 2000 consists of the following: Interest
Balance Rate Maturity
Revolver $ 371,000 LIBOR + 165bps 2003 Term Loan A 300,000 LIBOR + 165bps 2003 Term Loan B 196,000 LIBOR + 200bps
2004 Convertible Notes 154,300 4.75% 2004 Subordinated Notes 202,332 8.75% 2007 CMBS 325,687 7.76% 2009 Mortgage
Debt
and Other 60,504 8.85% Various
$ 1,609,823
The company has $600 million of swap agreements that effectively fix 30-day LIBOR at an average rate of 6.58 percent.
The maturities on these agreements range from September 2001 to August 2003.
MeriStar to Acquire 106 Leases
In conjunction with the REIT Modernization Act (RMA), the company has entered into an agreement to convert all
106 leases with MeriStar Hotels & Resorts to management contracts beginning January 1, 2001. The management
agreements have been structured to mirror the current economics and terms of the existing leases. The conversion
does not result in any cash consideration to be exchanged between the parties. Under the new management agreements,
the base management fee is 2.5 percent of total hotel revenue with incentives up to an additional 1.5 percent of
total revenue if certain operating thresholds are achieved.
Whetsell commented, ``Both the company and MeriStar Hotels & Resorts will benefit from this new structure,
as the interests of the owner and manager are more closely aligned to focus on overall hotel profitability.'' Under
RMA, the leases will be held by the company in a taxable REIT subsidiary. The company can further utilize the taxable
REIT subsidiary structure to operate other hospitality-related businesses under the REIT umbrella.
MeriStar Hospitality is currently in discussions regarding the conversion of the leases on its eight other hotels.
Outlook
Regarding the fourth quarter of 2000, Whetsell said, ``October results are in line with our expectations, and we
estimate fourth-quarter RevPAR growth over 1999 to be 5.0 to 6.0 percent. We remain comfortable with the current
FFO consensus estimate of $.92 for the fourth quarter.''
Washington, D.C.-based MeriStar Hospitality Corporation owns 114 principally upscale, full-service hotels in major
market and resort locations with 29,090 rooms in 27 states, the District of Columbia and Canada. The company owns
hotels under such internationally known brands as Hilton, Sheraton, Marriott, Westin, Radisson and Doubletree.
For more information about MeriStar Hospitality Corporation, visit the company's Web site: www.meristar.com.
This press release contains forward-looking statements about MeriStar Hospitality Corporation, including those
statements regarding future operating results and the timing and composition of revenues, among others. Except
for historical information, the matters discussed in this press release are forward-looking statements that are
subject to certain risks and uncertainties that could cause the actual results to differ materially, including
the following: the ability of the company to successfully implement its acquisition strategy and operating strategy;
the company's ability to manage rapid expansion; changes in economic cycles; competition from other hospitality
companies; and changes in the laws and government regulations applicable to the company.
MeriStar Hospitality Corporation
Statements of Operations (1)
(Unaudited, in thousands except
per share amounts and operating statistics)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenue
Participating lease
revenue $ 96,359 $ 91,256 $ 300,712 $ 282,360
Office rental and
other revenue 2,240 1,538 5,848 4,896
Total revenue 98,599 92,794 306,560 287,256
Expenses
Administrative and general 2,110 1,300 6,260 4,043
Office rental and
other expense 454 474 1,797 1,458
Property taxes, insurance
and other 11,555 10,555 36,648 36,570
Depreciation and
amortization 28,387 25,398 83,130 73,864
Interest expense, net 29,108 24,125 87,525 74,621
Total expenses 71,614 61,852 215,360 190,556
Income before minority
interests, income taxes,
gain on sale of assets
and extraordinary (loss)/gain 26,985 30,942 91,200 96,700
Minority interests 2,285 2,439 8,443 9,204
Income taxes 494 537 1,655 1,717
Income before gain on sale
of assets and extraordinary
(loss)/gain 24,206 27,966 81,102 85,779
Gain on sale of assets,
net of taxes - - 3,425 -
Extraordinary (loss)/gain,
net of taxes - (4,532) 3,054 (4,532)
Net income $ 24,206 $ 23,434 $ 87,581 $ 81,247
Diluted funds from operations
Income before gain on
sale of assets and
extraordinary (loss)/gain $ 24,206 $ 27,966 $ 81,102 $ 85,779
Minority interest to common
OP unit holders 2,144 2,298 8,019 8,780
Interest on convertible debt 1,833 2,095 5,656 6,214
Hotel depreciation and
amortization 27,380 24,320 80,184 70,936
Deferred cost on sale
of asset 1,542 - 1,542 -
$ 57,105 $ 56,679 $ 176,503 $ 171,709
Weighted average number
of diluted shares of common
stock outstanding 55,036 57,463 55,424 57,465
Funds from operations
per diluted share $ 1.04 $ 0.99 $ 3.18 $ 2.99
(1)Excludes the effect of SAB 101 which would be an increase to
participating lease revenue of $19,032 and $10,420 for the three
months ended September 30, 2000 and 1999, respectively. There
would be a decrease of $40,290 and $45,894 for the nine months
ended September 30, 2000 and 1999, respectively.
Operating Information
EBITDA $ 84,480 $ 80,465 $ 261,855 $ 245,185
Occupancy 74.0% 74.6% 74.1% 74.3%
ADR $ 103.83 $ 97.06 $ 108.33 $ 102.36
RevPAR $ 76.80 $ 72.42 $ 80.29 $ 76.02
RevPAR Increase 6.05% 5.62%
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Contact:
MeriStar Hospitality Corporation
Bruce Riggins, Director of Finance, 202/295-2276
Melissa Thompson, Director of Corporate Communications,
202/295-2228
or
Daly Gray Public Relations (Media)
Jerry Daly or Carol McCune, 703/435-6293