Press Release: LaSalle Hotel Properties
May 3, 2001
BETHESDA, MD -- LaSalle Hotel Properties (NYSE: LHO) yesterday reported comparable funds from operations (FFO)
of $8.2 million for the first quarter 2001 versus $9.0 million for the first quarter 2000. On a per diluted share/unit
basis, comparable FFO for the first quarter 2001 was $0.44 versus $0.49 for the first quarter 2000. Comparable
FFO is defined as FFO before one-time items including the purchase of LaSalle Hotel Lessee (``LHL''), the transition
expenses associated with becoming a self-managed Real Estate Investment Trust (``REIT''), and the costs associated
with terminating the Hotel Viking lease with Bellevue Properties.
The decrease in comparable FFO was due to expected losses incurred by LHL, the recently acquired affiliated lessee.
LHL historically has experienced significant first quarter losses due to seasonality, which traditionally have
been recouped in the second quarter. The Company continues to anticipate the acquisition of LHL will be accretive
for the year.
For the quarter ended March 31, 2001 versus the same period in 2000, room revenue per available room (RevPAR) rose
5.6 percent to $100.87. The average daily rate (ADR) of $146.01 was a 5.3 percent increase over the prior year
period while occupancy increased to 69.1 percent, a 0.3 percent increase over the first quarter of 2000.
``RevPAR growth for our portfolio during the first quarter was above the industry average and in-line with our
expectations,'' said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. ``However, as
the quarter progressed, we experienced a continual decline in the year-over-year growth in revenues generated by
our hotels.''
The Company's comparable EBITDA decreased 12 percent to $12.2 million for the quarter ended March 31, 2001 compared
to $13.9 million in the first quarter 2000. Comparable EBITDA is defined as earnings before interest, taxes, depreciation,
amortized expenses, the write-down of properties held for disposition, extraordinary items and one-time charges
related to the acquisition of the Company's affiliated lessee, transition costs associated with becoming a self-managed
REIT, and the termination costs associated with the Hotel Viking lease. The decrease in comparable EBITDA was due
to expected seasonal losses incurred by LHL, the recently acquired affiliated lessee.
For the first quarter 2001, the Company experienced a net loss of $2.3 million, or ($0.13) per diluted share/unit,
compared to net income of $1.7 million, or $0.10 per diluted share/unit for the quarter ended March 31, 2000. The
decrease in net income was largely attributable to the acquisition of LHL, the subsequent pick-up of the entire
affiliated lessee's seasonal net loss for the quarter, one-time expenses associated with becoming a self- managed
REIT, and the cost of terminating the Hotel Viking lease.
At the end of the first quarter, LaSalle Hotel Properties had total outstanding debt of approximately $324.3 million,
including approximately $150.4 million outstanding under its credit facility and its approximately $11.8 million
portion of the joint venture mortgage debt. On April 6, the Company entered into a two-year, nine-month fixed interest
rate swap at 4.87 percent for $30.0 million currently outstanding on its credit facility, which effectively fixes
the interest rate at 6.87 percent including the Company's current spread, which varies with its leverage ratio.
On March 8, the Company announced the acquisition of four hotels in Washington, D.C., encompassing 502 guestrooms.
LaSalle expects to spend approximately $30 million to redevelop the four-property hotel collection. The redevelopment
program, to be completed in two phases, will include a complete renovation of all guestrooms and suites, lobbies,
entrances, public corridors, meeting rooms, and restaurants/bars. Renovations at two of the properties are expected
to begin by early in the third quarter with completion in the fourth quarter. The second phase, involving the remaining
two hotels, should commence during the fourth quarter of this year with completion during the first quarter of
2002.
``Washington, D.C. is a high-growth urban market with significant barriers to entry and is one of the strongest
hotel markets in the country,'' said Mr. Bortz. ``Our plans are to reposition these assets as high quality boutique
hotels. We selected the Kimpton Group to oversee the repositioning program and manage the hotels because of their
successful track record converting and operating these types of properties.''
During the first quarter, the Company completed both the transition to become a self-managed REIT and the acquisition
of LHL, its affiliated lessee. On January 1, 2001, the Company acquired the remaining 91 percent of LHL, which
is now a wholly owned subsidiary of LaSalle Hotel Operating Partnership, L.P. LHL currently leases nine of the
Company's hotels, including the Hotel Viking and the acquired Washington, D.C. hotels.
During the first quarter, the Company refinanced the $40.0 million of 1990 Massachusetts Port Authority (``Massport'')
Special Project Revenue Bonds that were secured by its Hyatt Harborside Hotel with $37.1 million of tax-exempt
Massport Special Project Revenue Refunding Bonds and $5.4 million of taxable Massport Special Project Revenue Refunding
Bonds. The maturity on the new bonds, which have received a AAA/A-1+ rating from Standard & Poor's, is 2018.
The new bonds have a weekly floating interest rate, which is currently more favorable than the 10 percent fixed
rate for the 1990 bonds. The Company recorded an extraordinary loss of $1.2 million for the call premium and other
charges related to the 1990 bonds.
On April 12, LaSalle Hotel Properties declared its first quarter dividend of $0.385 per share. The dividend is
payable to all shareholders of record as of April 30, 2001. Based on the stock's closing price on May 2, 2001,
the first quarter dividend represents an annualized dividend yield of 9 percent.
2001 Outlook
``The economic slowdown is having a significant impact on the demand for hotel rooms and services. This weakness
in demand is being experienced by all customer segments, although the greatest impact thus far has occurred in
the commercial transient and group segments,'' advised Mr. Bortz. ``Corporate travel cuts are pervasive and we
expect commercial demand to decline further during the year as the industry experiences the full impact of the
changes in corporate travel policies. Both convention and leisure travel have held up reasonably well, but further
weakening in demand from these segments is anticipated as the year progresses.''
The Company's RevPAR growth of 5.6 percent during the first quarter was robust; however, RevPAR growth rates are
expected to be negative for the remainder of 2001. The Company's EBITDA margins are expected to contract in 2001
as the combination of reduced rental revenues and higher expenses, especially property insurance and energy expenses,
negatively affect margins. The Company currently anticipates 2001 comparable FFO to be in the range of $2.52 to
$2.62 on a per diluted share/unit basis.
``The slowdown of the economy was abrupt and severe, which resulted in noticeably weaker demand across our hotels,''
said Mr. Bortz. ``We no longer expect the economy to rebound in a material way during 2001. Since lodging is a
lagging industry, we expect our business to worsen considerably in the second and third quarters and to remain
weak in the fourth quarter. As a result, we are lowering our 2001 RevPAR growth for the year to (-2) to 0 percent,
down from our previous estimate of 3 to 4 percent, with significant RevPAR declines in the second and third quarters
of this year expected.''
``Although our operating results for the first quarter were solid, including our convention-oriented properties,
the fundamentals at our urban hotels, which typically cater to corporate transient travelers who have more discretionary
travel patterns, have softened considerably. In addition, we anticipate declining consumer confidence to affect
leisure demand at our hotels during the summer, particularly at our resort properties,'' Mr. Bortz added.
Nevertheless, the Company remains optimistic in its outlook for 2002 and beyond due to continuing declines in new
construction of hotels and an ongoing expectation for an economic recovery in 2002. The Company will also continue
to benefit from additional declines in short-term interest rates as approximately $175 million or 54% of the Company's
total outstanding long-term debt is floating rate debt.
The Company remains on target to invest a total of approximately $38.0 million in 2001 for property repositioning,
renovation projects and other capital improvements, including approximately $22 million for repositioning the DC
hotel collection during the year. As of the end of the first quarter, roughly $4.8 million had been spent on capital
expenditures.
LaSalle Hotel Properties announced that its 2001 Annual Meeting of Shareholders will be held at 8 am EDT on May
16, 2001, at the Hyatt Hotel in Bethesda, Maryland. The Company also announced it will host an Institutional Investor
and Research Analyst meeting at its San Diego Paradise Point Resort at 4 pm EDT on May 10, 2001. All shareholders
and other interested parties are invited to participate through a webcast of this meeting, which can be accessed
from the Company's web site. For more information on this upcoming meeting, please visit the Company's web site
at www.lasallehotels.com .
LaSalle Hotel Properties is a leading multi-tenant, multi-operator real estate investment trust that owns 17 upscale
and luxury full-service hotels, totaling approximately 5,800 guest rooms in 14 markets in 11 states and the District
of Columbia. LaSalle Hotel Properties is focused on investing in upscale and luxury full-service hotels located
in urban, resort and convention markets. The Company seeks to grow through strategic relationships with premier
internationally recognized hotel operating companies including Le Meridien Hotels & Resorts, Marriott International,
Inc., Radisson Hotels International, Inc., Crestline Hotels and Resorts, Inc., Outrigger Lodging Services, Noble
House Hotels & Resorts, Hyatt Hotels Corporation and the Kimpton Hotel & Restaurant Group, LLC.
Statements in this press release regarding, among other things, future financial results and performance, achievements,
plans and objectives may be considered forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors
which may cause actual results, performance, achievements, plans and objectives of the Company to be materially
different from those expressed or implied by such forward-looking statements. Factors that could cause actual results
to differ materially include those discussed under ``Business'', ``Management's Discussion and Analysis of Financial
Condition and Results of Operations'', ``Quantitative and Qualitative Disclosure About Market Risk'' and elsewhere
in the Company's annual report on Form 10-K for the year ended December 31, 2000, under ``Management's Discussion
and Analysis of Financial Condition and Results of Operations'', ``Quantitative and Qualitative Disclosure About
Market Risk'', under ``Certain Relationships and Related Transactions'' in the Company's proxy statement dated
March 31, 2001, with respect to the annual meeting of shareholders to be held on May 16, 2001, under ``Risk Factors''
and elsewhere in the Company's Registration Statement (333-77371) and in other periodic reports filed with the
Securities and Exchange Commission. Statements speak only as of the date of this release. The Company expressly
disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to
reflect any change in Company expectations or results, or any change in events.
For additional information, please visit our web site at www.lasallehotels.com
.
LASALLE HOTEL PROPERTIES
Statements of Income
(Dollar amounts in thousands, except share data)
For the three months ended
March 31, 2001 March 31, 2000
Hotel operating revenue
Room revenue 11,654 0
Food & beverage revenue 5,924 0
Other revenue 1,436 0
Participating lease revenue 14,034 16,877
Interest income 276 290
Other income (28) (21)
Total revenues 33,296 17,146
Hotel operating expenses
Room 3,248 0
Food & beverage 4,880 0
Other direct 1,110 0
Other indirect 6,379 0
Depreciation and other amortization 7,338 6,971
Real estate taxes, personal property
taxes and insurance 2,378 1,953
Ground rent 907 586
General and administrative 1,406 293
Advisory fees 0 769
Interest 5,337 4,454
Amortization of deferred financing costs 350 259
Minority interest (74) 163
Other expense 1,921 4
Extraordinary losses 1,227 0
Income tax (776) 0
Total expenses and minority interest 35,631 15,452
Net income (2,335) 1,694
Share Data:
Net income per weighted average
common share outstanding:
-Basic (0.13) 0.10
-Diluted (0.13) 0.10
Weighted average number of common
shares outstanding:
-Basic 18,144,419 16,881,979
-Diluted 18,231,594 16,894,833
Comparable Funds From Operations (FFO):
Net income (2,335) 1,694
Depreciation 7,313 6,969
Equity in depreciation of Joint Venture 228 150
Amortization of deferred lease fees 19 0
Extraordinary losses 1,227 0
Minority interest (74) 163
FFO 6,378 8,976
Advisory transition expense 600 0
Lease termination expense 785 0
Subsidiary purchase cost 455 0
Comparable FFO 8,218 8,976
Comparable FFO per common share and unit:
-Basic 0.44 0.49
-Diluted 0.44 0.49
Weighted average number of common
shares and units outstanding:
-Basic 18,719,232 18,453,485
-Diluted 18,806,407 18,466,339
Comparable EBITDA:
Net income (2,335) 1,694
Interest 5,337 4,454
Depreciation and other amortization 7,338 6,971
Amortization of deferred financing costs 350 259
Equity in depreciation/amort of Joint Venture 243 161
Equity in interest expense of Joint Venture 255 191
Income tax provision (776) 0
Minority interest (74) 163
EBITDA 10,338 13,893
Advisory transition expense 600 0
Lease termination expense 785 0
Subsidiary purchase cost 455 0
Comparable EBITDA 12,178 13,893
LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
For the three For the three
months ended months ended
March 31, March 31,
2001 2000
TOTAL PORTFOLIO
Occupancy 69.1% 68.9%
Increase 0.3%
ADR $146.01 $138.67
Increase 5.3%
REVPAR $100.87 $95.53
Increase 5.6%
SOURCE: LaSalle Hotel Properties