Strategic Hotels & Resorts Reports Fourth Quarter And Full Year 2013 Results - Beckley, Bluefield & Lewisburg News, Weather, Sports

Strategic Hotels & Resorts Reports Fourth Quarter And Full Year 2013 Results

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SOURCE Strategic Hotels & Resorts, Inc.

Full Year 2013 RevPAR increased 8.8 percent in the Company's Total North American Portfolio and EBITDA margins expanded by 290 basis points

Initiates Full Year 2014 RevPAR growth guidance in the range of 5.0 percent to 7.0 percent

CHICAGO, Feb. 25, 2014 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the fourth quarter and full year ended December 31, 2013. 

($ in millions, except per share and operating metrics)

Fourth Quarter

Earnings Metrics

2013

2012

% Change

Net income (loss) attributable to common shareholders

$3.2

$(36.4)

N/A

Net income (loss) per diluted share

$0.02

$(0.18)

N/A

Comparable funds from operations (Comparable FFO) (a)

$28.7

$12.2

134.9%

Comparable FFO per diluted share (a)

$0.14

$0.06

133.3%

Comparable EBITDA (a)

$58.3

$44.7

30.6%





Total North American Portfolio Operating Metrics (b)




Average Daily Rate (ADR)

$293.19

$276.26

6.1%

Occupancy

71.3%

69.1%

2.2 pts

Revenue per Available Room (RevPAR)

$209.17

$190.82

9.6%

Total RevPAR

$419.59

$365.15

14.9%

EBITDA Margins

25.9%

21.3%

460 bps





North American Same Store Operating Metrics (c)




ADR

$292.75

$275.64

6.2%

Occupancy

73.7%

71.3%

2.4 pts

RevPAR

$215.75

$196.66

9.7%

Total RevPAR

$415.35

$359.73

15.5%

EBITDA Margins

26.7%

21.5%

 520 bps



Note: Fourth quarter and full year results include payments pursuant to the JW Marriott Essex House NOI guarantee of $1.4 million and $12.8 million in 2012 and 2013, respectively.

 

($ in millions, except per share and operating metrics)

Full Year

Earnings Metrics

2013

2012

% Change

Net loss attributable to common shareholders

$(13.2)

$(79.5)

N/A

Net loss per diluted share

$(0.06)

$(0.40)

N/A

Comparable FFO (a)

$89.5

$53.7

66.6%

Comparable FFO per diluted share (a)

$0.43

$0.26

65.4%

Comparable EBITDA (a)

$213.2

$175.4

21.5%





Total North American Portfolio Operating Metrics (b)




ADR

$289.90

$273.30

6.1%

Occupancy

74.2%

72.3%

1.9 pts

RevPAR

$214.98

$197.59

8.8%

Total RevPAR

$401.56

$365.43

9.9%

EBITDA Margins

24.4%

21.5%

290 bps





North American Same Store Operating Metrics (c)




ADR

$270.07

$254.06

6.3%

Occupancy

75.0%

73.2%

1.8 pts

RevPAR

$202.58

$186.05

8.9%

Total RevPAR

$373.90

$344.77

8.4%

EBITDA Margins

23.4%

22.0%

140 bps



Note:

Fourth quarter and full year results include payments pursuant to the JW Marriott Essex House NOI guarantee of $1.4 million and $12.8 million in 2012 and 2013, respectively.



(a)

Please refer to tables provided later in this press release for a reconciliation of net (loss)/income to Comparable FFO, Comparable FFO per share and Comparable EBITDA. Comparable FFO, Comparable FFO per share and Comparable EBITDA are non-GAAP measures and are further explained with the reconciliation tables.



(b)

Operating statistics reflect results from the Company's Total North American portfolio (see portfolio definitions later in this press release).



(c)

Operating statistics reflect results from the Company's North American same store portfolio (see portfolio definitions later in this press release).

 

"We achieved outstanding operating and financial results across the board in 2013, leading the industry in RevPAR growth and margin expansion," said Raymond L. "Rip" Gellein, Jr., Chairman and Chief Executive Officer of Strategic Hotels & Resorts, Inc.  "We have very positive expectations for 2014, based on our group outlook, continued strength from the transient traveler, and our ability to continue expanding margins across the portfolio.  We also look forward to continuing to deleverage the Company's balance sheet and reviewing growth opportunities that meet our strategic and financial thresholds.  The luxury sector is well positioned for continued strength given the dearth of competitive new supply in virtually all of our major markets," summarized Gellein.    

Fourth Quarter Highlights

  • Total consolidated revenues were $242.4 million in the fourth quarter of 2013, a 13.9 percent increase over the prior year period.
  • Total North American portfolio RevPAR increased 9.6 percent in the fourth quarter of 2013, driven by a 6.1 percent increase in ADR and a 2.2 percentage point increase in occupancy compared to the fourth quarter of 2012.  Total RevPAR increased 14.9 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 10.6 percent in the fourth quarter of 2013 as compared to the fourth quarter of 2012.
  • Comparable FFO was $0.14 per diluted share in the fourth quarter of 2013 compared with $0.06 per diluted share in the prior year period, a 133.3 percent increase over the prior year period.       
  • Comparable EBITDA was $58.3 million in the fourth quarter of 2013 compared with $44.7 million in the prior year period, a 30.6 percent increase.   
  • Net income attributable to common shareholders was $3.2 million, or $0.02 per diluted share, in the fourth quarter of 2013, compared with a net loss attributable to common shareholders of $36.4 million, or $0.18 per diluted share, in the fourth quarter of 2012.  Fourth quarter 2012 results include $18.8 million of impairment losses and other related charges, a $7.8 million charge related to the termination of the management agreement at the Hotel del Coronado and a $2.5 million severance charge.  These charges have been excluded from Comparable EBITDA, FFO and FFO per share.
  • Transient occupied room nights in the Total North American portfolio increased 5.0 percent, offsetting a 1.2 percent decline in group occupied rooms in the fourth quarter of 2013 compared to the fourth quarter of 2012.  Transient ADR increased 4.7 percent compared to the fourth quarter of 2012 and group ADR increased 6.2 percent compared to the fourth quarter of 2012.  Transient revenues increased 9.9 percent compared to the fourth quarter of 2012 and group revenues increased 4.9 percent, compared to the fourth quarter of 2012.
  • Total United States RevPAR increased 9.7 percent in the fourth quarter of 2013, driven by a 6.4 percent increase in ADR and a 2.2 percentage point increase in occupancy, compared to the fourth quarter of 2012.  Total RevPAR increased 15.1 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 10.6 percent in the fourth quarter of 2013 as compared to the fourth quarter of 2012.
  • North American same store RevPAR increased 9.7 percent in the fourth quarter of 2013, driven by a 6.2 percent increase in ADR and a 2.4 percentage point increase in occupancy, compared to the fourth quarter of 2012.  Total RevPAR increased 15.5 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 10.1 percent in the fourth quarter of 2013 as compared to the fourth quarter of 2012.
  • European RevPAR increased 4.4 percent (a 2.2 percent increase in constant dollars) in the fourth quarter of 2013, driven by a 1.1 percent increase in ADR (a 1.1 percent decline in constant dollars) and a 2.7 percentage point increase in occupancy. European Total RevPAR increased 5.8 percent in the fourth quarter of 2013 over the prior year period (a 3.8 percent increase in constant dollars).  
  • Total North American portfolio EBITDA margins expanded 460 basis points in the fourth quarter of 2013 compared to the fourth quarter of 2012.  North American same store EBITDA margins expanded 520 basis points between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, EBITDA margins expanded 180 basis points and 160 basis points in the Total North American and North American same store portfolios, respectively, between periods.

Full Year Highlights

  • Total consolidated revenues were $900.0 million in 2013, a 16.1 percent increase over the prior year period.
  • Total North American RevPAR increased 8.8 percent in 2013, driven by a 6.1 percent increase in ADR and a 1.9 percentage point increase in occupancy, compared to the full year 2012.  Total RevPAR increased 9.9 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 8.8 percent in 2013 compared to 2012. 
  • Comparable FFO was $0.43 per diluted share in 2013 compared with $0.26 per diluted share in the prior year, a 65.4 percent increase.    
  • Comparable EBITDA was $213.2 million in 2013 compared with $175.4 million in the prior year, a 21.5 percent increase.
  • Net loss attributable to common shareholders was $13.2 million, or $0.06 per diluted share, in 2013 compared with a net loss attributable to common shareholders of $79.5 million, or $0.40 per diluted share, in the prior year.  Full year 2012 results include $18.8 million of impairment losses and other related charges, a $7.8 million charge related to the termination of the management agreement at the Hotel del Coronado, and a $2.5 million severance charge.  These charges have been excluded from Comparable EBITDA, FFO and FFO per share.
  • Transient occupied room nights in the Total North American portfolio increased 3.1 percent and group occupied room nights increased 1.6 percent in 2013 compared to 2012.  Transient ADR increased 6.1 percent in 2013 and group ADR increased 4.8 percent compared to 2012.  Transient revenues increased 9.4 percent in 2013 and group revenues increased 6.5 percent, compared to 2012.
  • Total United States RevPAR increased 8.6 percent in 2013, driven by a 5.9 percent increase in ADR and a 1.8 percentage point increase in occupancy, compared to the full year 2012.  Total RevPAR increased 9.7 percent between periods.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, Total RevPAR increased 8.6 percent in 2013 compared to 2012.
  • North American same store RevPAR increased 8.9 percent, driven by a 6.3 percent increase in ADR and a 1.8 percentage point increase in occupancy, compared to the full year 2012.  Total RevPAR increased 8.4 percent between periods. 
  • European RevPAR decreased 1.7 percent (2.1 percent in constant dollars) in 2013, driven by a 2.4 percentage decrease in ADR (2.8 percent in constant dollars) offsetting a 0.6 percentage point increase in occupancy between years. European Total RevPAR decreased 1.2 percent in between years (1.6 percent in constant dollars). 
  • Total North American portfolio EBITDA margins expanded 290 basis points in 2013 compared to the full year 2012.  Excluding payments received pursuant to the JW Marriott Essex House NOI guarantee, EBITDA margins expanded 210 basis points compared to the full year 2012.  North American same store EBITDA margins expanded 140 basis points between periods. 

Preferred Dividends

On November 27, 2013, the Company's Board of Directors declared a quarterly dividend of $0.53125 per share of 8.5 percent Series A Cumulative Redeemable Preferred Stock paid on December 31, 2013 to shareholders of record as of the close of business on December 16, 2013, a quarterly dividend of $0.51563 per share of 8.25 percent Series B Cumulative Redeemable Preferred Stock paid on December 31, 2013 to shareholders of record as of the close of business on December 16, 2013 and a quarterly dividend of $0.51563 per share of 8.25 percent Series C Cumulative Redeemable Preferred Stock paid on December 31, 2013 to shareholders of record as of the close of business on December 16, 2013.

2013 Transaction Activity

  • On December 12, 2013, the Company announced the signing of an agreement with Cascade Investment, L.L.C. to sell the Four Seasons Punta Mita Resort and adjacent La Solana land parcel for gross consideration of $200 million, subject to certain working capital adjustments.  The transaction is expected to close in the first quarter of 2014.
  • On October 16, 2013, the Company sold the Lakeshore Athletic Club property adjacent to the Fairmont Chicago hotel for $10.5 million to the owner of Lakeshore Sport & Fitness.
  • On September 9, 2013, the Company closed on amendments to the cross-collateralized mortgage agreements secured by the Westin St. Francis and Fairmont Chicago hotels, which eliminated future principal amortization payments totaling $37.2 million in scheduled payments from the signing the amendment through the remaining term of the two agreements.
  • On March 12, 2013, the Company, along with certain affiliates of Blackstone Real Estate Partners VI L.P., its joint-venture partner, closed on a $475 million loan secured by the Hotel del Coronado, bearing interest at LIBOR plus 365 basis points and has an initial two-year term with three, one-year extension options.

2014 Guidance

For the full year 2014, the Company is providing the following guidance ranges for its Total United States and United States same-store portfolios.  Comparable EBITDA and Comparable FFO per share ranges assume the pending sale of the Four Seasons Punta Mita Resort and adjacent La Solana land parcel closes in the first quarter and proceeds are used to reduce the outstanding balance on the Company's revolving credit facility, partially redeem preferred equity, and other general corporate purposes.

 

Operating Metrics


 

5.0% - 7.0%

4.5% - 6.5%

120 – 200 basis points

RevPAR


Total RevPAR


EBITDA Margin expansion






Corporate Metrics




Comparable EBITDA


$220M - $240M

$0.53 - $0.63

Comparable FFO per diluted share


 

Full year 2014 RevPAR and Total RevPAR growth guidance ranges have been reduced by 100 basis points and the EBITDA margin expansion guidance range has been reduced by 20 basis points as the result of anticipated displacement related to renovation activity.

The Company is additionally providing the following guidance for 2014:

  • Corporate general and administrative expenses in the range of $22.0 million to $24.0 million, excluding costs associated with the Orange Capital activist campaign;
  • Consolidated interest expense in the range of $85 million to $90 million, including approximately $8 million of non-cash interest expense;
  • Preferred dividend expense of $17.6 million, which assumes the redemption of the Series A Preferred Equity at the end of the first quarter, contingent on the closing of the sale of the Four Seasons Punta Mita Resort;
  • Capital expenditures totaling approximately $75 million to $80 million, including spending of $40 million from property-level furniture, fixtures and equipment (FF&E) reserves and an additional $35 million to $40 million of owner-funded spending; and
  • No effect from any additional acquisition, disposition or capital raising activity that may occur during the year.

Portfolio Definitions

Total United States portfolio hotel comparisons for the fourth quarter and full year 2013 are derived from the Company's hotel portfolio at December 31, 2013, consisting of all 15 properties located in the United States, including unconsolidated joint ventures. 

North American same store hotel comparisons for the fourth quarter and full year 2013 are derived from the Company's hotel portfolio at December 31, 2013, consisting of properties located in North America and held for five or more quarters in the case of fourth quarter results and eight or more quarters for full year results, in which operations are included in the consolidated results of the Company.  As a result, same store comparisons contain 14 properties for the fourth quarter, including the Four Seasons Punta Mita Resort, but excluding the unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels. Same store comparisons for the full year contain 13 properties, also excluding the JW Marriott Essex House Hotel, which was acquired on September 14, 2012.

European hotel comparisons for the fourth quarter and full year 2013 are derived from the Company's European owned and leased hotel properties at December 31, 2013, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg hotels. 

Earnings Call

The Company will conduct its fourth quarter and full-year 2013 conference call for investors and other interested parties on Wednesday, February 26, 2014 at 10:00 a.m. Eastern Time (ET).  Interested individuals are invited to listen to the call by dialing 877.415.3177 (toll international: 857.244.7320) with passcode 66838542. To participate on the webcast, log on to http://edge.media-server.com/m/p/vpa3u2wm/lan/en 15 minutes before the call to download the necessary software.  For those unable to listen to the call live, a taped rebroadcast will be available beginning at 2:00 p.m. ET on February 26, 2014 through 11:59 p.m. ET on March 5, 2014. To access the replay, dial 888.286.8010 (toll international: 617.801.6888) with passcode 62181703. A replay of the call will also be available on the Internet at http://www.strategichotels.com or http://www.reuters.com/finance/markets/earnings for 30 days after the call. 

The Company also produces supplemental financial data that includes detailed information regarding its operating results.  This supplemental data is considered an integral part of this earnings release.  These materials are available on the Strategic Hotels & Resorts' website at www.strategichotels.com.

About the Company

Strategic Hotels & Resorts, Inc. is a real estate investment trust (REIT) which owns and provides value-enhancing asset management of high-end hotels and resorts in the United States, Mexico and Europe. The Company currently has ownership interests in 18 properties with an aggregate of 8,271 rooms and 851,600 square feet of meeting space. For a list of current properties and for further information, please visit the Company's website at http://www.strategichotels.com.

This press release contains forward-looking statements about Strategic Hotels & Resorts, Inc. (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. These forward-looking statements include statements regarding the Company's future financial results, stabilization in the lodging space, positive trends in the lodging industry and the Company's continued focus on improving profitability.  Actual results could differ materially from the Company's projections. Factors that may contribute to these differences include, but are not limited to the following:  failure to complete or close on transactions or the failure of closing conditions to be satisfied, including the closing of the disposition of the Four Seasons Punta Mita Resort; a change in the proposed use of proceeds from the disposition of the Four Seasons Punta Mita Resort; the effects of the recent global economic recession upon business and leisure travel and the hotel markets in which the Company invests; the Company's liquidity and refinancing demands; the Company's ability to obtain,  refinance or extend maturing debt; the Company's ability to maintain compliance with covenants contained in its debt facilities; stagnation or further deterioration in economic and market conditions, particularly impacting business and leisure travel spending in the markets where the Company's hotels operate and in which the Company invests, including luxury and upper upscale product; general volatility of the capital markets and the market price of the Company's shares of common stock; availability of capital; the Company's ability to dispose of properties in a manner consistent with its investment strategy and liquidity needs; hostilities and security concerns, including future terrorist attacks, or the apprehension of hostilities, in each case that affect travel within or to the United States, Mexico, Germany, England or other countries where the Company invests; difficulties in identifying properties to acquire and completing acquisitions; the Company's failure to maintain effective internal control over financial reporting and disclosure controls and procedures; risks related to natural disasters; increases in interest rates and operating costs, including insurance premiums and real property taxes; contagious disease outbreaks, such as the H1N1 virus outbreak; delays and cost-overruns in construction and development; marketing challenges associated with entering new lines of business or pursuing new business strategies; the Company's failure to maintain its status as a REIT; changes in the competitive environment in the Company's industry and the markets where the Company invests; changes in real estate and zoning laws or regulations; legislative or regulatory changes, including changes to laws governing the taxation of REITs; changes in generally accepted accounting principles, policies and guidelines; and litigation, judgments or settlements.

Additional risks are discussed in the Company's filings with the Securities and Exchange Commission, including those appearing under the heading "Item 1A. Risk Factors" in the Company's most recent Form 10-K and subsequent Form 10-Qs. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. The forward-looking statements are made as of the date of this press release, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

The following tables reconcile projected 2014 net income attributable to common shareholders to projected Comparable EBITDA, Comparable FFO and Comparable FFO per diluted share ($ in millions, except per share data):


Low Range


High Range

Net Income Attributable to Common Shareholders

$52.9


$72.9

Depreciation and Amortization

112.8


112.8

Interest Expense

86.0


86.0

Income Taxes

2.3


2.3

Non-controlling Interests

0.4


0.4

Adjustments from Consolidated Affiliates

(15.5)


(15.5)

Adjustments from Unconsolidated Affiliates

23.5


23.5

Preferred Shareholder Dividends

17.6


17.6

Realized Portion of Deferred Gain on Sale Leasebacks

(0.2)


(0.2)

Gain on Sale of Assets

(59.8)


(59.8)

Comparable EBITDA

$220.0


$240.0

 


Low Range


High Range

Net Income Attributable to Common Shareholders

$52.9


$72.9

Depreciation and Amortization

112.0


112.0

Realized Portion of Deferred Gain on Sale Leasebacks

(0.2)


(0.2)

Gain on Sale of Assets

(59.8)


(59.8)

Non-controlling Interests

0.3


0.3

Adjustments from Consolidated Affiliates

(8.0)


(8.0)

Adjustments from Unconsolidated Affiliates

14.9


14.9

Comparable FFO

112.1


132.1

Comparable FFO per Diluted Share

$0.53


$0.63





 


 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Consolidated Statements of Operations

(in thousands, except per share data)

 




Three Months Ended
December 31,


Years Ended
December 31,



2013


2012


2013


2012

Revenues:









Rooms


$

126,917



$

117,255



$

506,348



$

429,689


Food and beverage


81,426



73,483



294,969



264,893


Other hotel operating revenue


32,709



20,799



93,535



75,857


Lease revenue


1,385



1,273



5,161



4,778


Total revenues


242,437



212,810



900,013



775,217


Operating Costs and Expenses:









Rooms


36,160



33,288



144,464



121,794


Food and beverage


59,504



54,794



225,213



193,431


Other departmental expenses


56,226



55,189



220,523



200,219


Management fees


7,829



6,227



27,126



23,085


Other hotel expenses


15,239



15,221



60,618



53,117


Lease expense


1,234



1,155



4,818



4,580


Depreciation and amortization


24,507



26,055



101,943



99,458


Impairment losses and other charges


-



18,406



728



18,406


Corporate expenses


7,161



8,150



25,807



31,578


Total operating costs and expenses


207,860



218,485



811,240



745,668


Operating income (loss)


34,577



(5,675)



88,773



29,549


Interest expense


(20,405)



(16,862)



(84,276)



(75,489)


Interest income


14



95



59



213


Equity in (losses) earnings of unconsolidated affiliates


(265)



(11,431)



2,987



(13,485)


Foreign currency exchange gain (loss)


8



15



44



(1,258)


Other (expenses) income, net


(359)



455



(314)



1,820


Income (loss) before income taxes and discontinued operations


13,570



(33,403)



7,273



(58,650)


Income tax expense


(153)



(257)



(557)



(800)


Income (loss) from continuing operations


13,417



(33,660)



6,716



(59,450)


Income from discontinued operations, net of tax


2,248



1,362



3,171



1,189


Net Income (Loss)


15,665



(32,298)



9,887



(58,261)


Net (income) loss attributable to the noncontrolling interests in SHR's operating partnership


(60)



58



(38)



184


Net (income) loss attributable to the noncontrolling interests in consolidated affiliates


(6,341)



1,880



1,126



2,771


Net Income (Loss) Attributable to SHR


9,264



(30,360)



10,975



(55,306)


Preferred shareholder dividends


(6,041)



(6,041)



(24,166)



(24,166)


Net Income (Loss) Attributable to SHR Common Shareholders


$

3,223



$

(36,401)



$

(13,191)



$

(79,472)


Basic Income (Loss) Per Share:









Income (loss) from continuing operations attributable to SHR common shareholders


$

0.01



$

(0.18)



$

(0.08)



$

(0.40)


Income from discontinued operations attributable to SHR common shareholders


0.01



-



0.02



-


Net income (loss) attributable to SHR common shareholders


$

0.02



$

(0.18)



$

(0.06)



$

(0.40)


Weighted average common shares outstanding


206,814



206,836



206,334



201,109


Diluted Income (Loss) Per Share:









Income (loss) from continuing operations attributable to SHR common shareholders


$

0.01



$

(0.18)



$

(0.08)



$

(0.40)


Income from discontinued operations attributable to SHR common shareholders


0.01



-



0.02



-


Net income (loss) attributable to SHR common shareholders


$

0.02



$

(0.18)



$

(0.06)



$

(0.40)


Weighted average common shares outstanding


208,986



206,836



206,334



201,109


 


 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Consolidated Balance Sheets

(in thousands, except share data)

 




December 31,



2013


2012

Assets





Investment in hotel properties, net


$

1,795,338



$

1,970,560


Goodwill


38,128



40,359


Intangible assets, net of accumulated amortization of $12,213 and $10,812


29,502



30,631


Assets held for sale


135,901



-


Investment in unconsolidated affiliates


104,973



112,488


Cash and cash equivalents


73,655



80,074


Restricted cash and cash equivalents


75,916



58,579


Accounts receivable, net of allowance for doubtful accounts of $1,745 and $1,602


39,660



45,620


Deferred financing costs, net of accumulated amortization of $12,354 and $7,049


8,478



11,695


Deferred tax assets


-



2,203


Prepaid expenses and other assets


35,600



54,208


Total assets


$

2,337,151



$

2,406,417


Liabilities, Noncontrolling Interests and Equity





Liabilities:





Mortgages and other debt payable


$

1,163,696



$

1,176,297


Bank credit facility


110,000



146,000


Liabilities of assets held for sale


17,027



-


Accounts payable and accrued expenses


189,889



228,397


Deferred tax liabilities


46,137



47,275


Total liabilities


1,526,749



1,597,969


Commitments and contingencies





Noncontrolling interests in SHR's operating partnership


7,534



5,463


Equity:





SHR's shareholders' equity:





8.50% Series A Cumulative Redeemable Preferred Stock ($0.01 par value per share; 4,148,141 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $103,704 in the aggregate)


99,995



99,995


8.25% Series B Cumulative Redeemable Preferred Stock ($0.01 par value per share; 3,615,375 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $90,384 in the aggregate)


87,064



87,064


8.25% Series C Cumulative Redeemable Preferred Stock ($0.01 par value per share; 3,827,727 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $95,693 in the aggregate)


92,489



92,489


Common stock ($0.01 par value per share; 350,000,000 shares of common stock authorized; 205,582,838 and 204,308,710 shares of common stock issued and outstanding)


2,056



2,043


Additional paid-in capital


1,705,306



1,730,535


Accumulated deficit


(1,234,952)



(1,245,927)


Accumulated other comprehensive loss


(41,445)



(58,871)


Total SHR's shareholders' equity


710,513



707,328


Noncontrolling interests in consolidated affiliates


92,355



95,657


Total equity


802,868



802,985


Total liabilities, noncontrolling interests and equity


$

2,337,151



$

2,406,417


 


 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Financial Highlights

Supplemental Financial Data

(in thousands, except per share information)

 



December 31, 2013



Pro Rata Share


Consolidated

Capitalization





Shares of common stock outstanding


205,583



205,583


Operating partnership units outstanding


797



797


Restricted stock units outstanding


1,699



1,699


Combined shares and units outstanding


208,079



208,079


Common stock price at end of period


$

9.45



$

9.45


Common equity capitalization


$

1,966,347



$

1,966,347


Preferred equity capitalization (at $25.00 face value)


289,102



289,102


Consolidated debt


1,273,696



1,273,696


Pro rata share of unconsolidated debt


231,400



-


Pro rata share of consolidated debt


(132,794)



-


Cash and cash equivalents


(73,655)



(73,655)


Total enterprise value


$

3,554,096



$

3,455,490


Net Debt / Total Enterprise Value


36.6

%


34.7

%

Preferred Equity / Total Enterprise Value


8.1

%


8.4

%

Common Equity / Total Enterprise Value


55.3

%


56.9

%

 

 

 


Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Discontinued Operations

 

The results of operations of hotels sold or held for sale are classified as discontinued operations and segregated in the consolidated statements of operations for all periods presented. On December 12, 2013, we entered into an agreement to sell the Four Seasons Punta Mita Resort and the adjacent La Solana land parcel for $200,000,000.

 

The following is a summary of income from discontinued operations for the three months and years ended December 31, 2013 and 2012 (in thousands):

 




Three Months Ended December 31,


Years Ended December 31,



2013


2012


2013


2012

Hotel operating revenues


$

12,300



$

11,262



$

37,964



$

33,100


Operating costs and expenses


9,061



8,010



30,203



26,909


Depreciation and amortization


1,052



993



4,075



4,006


Impairment losses and other charges


-



437



-



437


Total operating costs and expenses


10,113



9,440



34,278



31,352


Operating income


2,187



1,822



3,686



1,748


Interest income


-



-



-



4


Foreign currency exchange (loss) gain


(142)



79



(1)



(352)


Other income, net


375



-



375



-


Income tax expense


(172)



(539)



(889)



(211)


Income from discontinued operations


$

2,248



$

1,362



$

3,171



$

1,189


 

 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Investments in Unconsolidated Affiliates
(in thousands)

 

We have a 36.4% and 50.0% ownership interest in the Hotel del Coronado and the Fairmont Scottsdale Princess hotel, respectively. We account for these investments using the equity method of accounting.

 




Three Months Ended December 31, 2013


Three Months Ended December 31, 2012



Hotel del

Coronado


Fairmont Scottsdale

Princess


Total


Hotel del

Coronado


Fairmont Scottsdale

Princess


Total

Total revenues (100%)


$

33,115



$

23,634



$

56,749



$

29,888



$

20,546



$

50,434


Property EBITDA (100%)


$

8,668



$

4,111



$

12,779



$

7,201



$

3,034



$

10,235


Equity in (losses) earnings of unconsolidated affiliates (SHR ownership)









Property EBITDA


$

3,153



$

2,056



$

5,209



$

2,491



$

1,517



$

4,008


Depreciation and amortization


(1,917)



(1,565)



(3,482)



(1,797)



(1,823)



(3,620)


Interest expense


(1,941)



(193)



(2,134)



(2,549)



(189)



(2,738)


Other expenses, net


(14)



(23)



(37)



(7,869)



(111)



(7,980)


Income taxes


85



-



85



90



-



90


Equity in (losses) earnings of unconsolidated affiliates


$

(634)



$

275



$

(359)



$

(9,634)



$

(606)



$

(10,240)


EBITDA Contribution:













Equity in (losses) earnings of unconsolidated affiliates


$

(634)



$

275



$

(359)



$

(9,634)



$

(606)



$

(10,240)


Depreciation and amortization


1,917



1,565



3,482



1,797



1,823



3,620


Termination fee


-



-



-



7,820



-



7,820


Interest expense


1,941



193



2,134



2,549



189



2,738


Income taxes


(85)



-



(85)



(90)



-



(90)


EBITDA Contribution


$

3,139



$

2,033



$

5,172



$

2,442



$

1,406



$

3,848


FFO Contribution:













Equity in (losses) earnings of unconsolidated affiliates


$

(634)



$

275



$

(359)



$

(9,634)



$

(606)



$

(10,240)


Depreciation and amortization


1,917



1,565



3,482



1,797



1,823



3,620


Termination fee


-



-



-



7,820



-



7,820


FFO Contribution


$

1,283



$

1,840



$

3,123



$

(17)



$

1,217



$

1,200


 



Year Ended December 31, 2013


Year Ended December 31, 2012



Hotel del

Coronado


Fairmont

Scottsdale

Princess


Total


Hotel del

Coronado


Fairmont

Scottsdale

Princess


Total

Total revenues (100%)


$

148,482



$

93,133



$

241,615



$

140,220



$

77,281



$

217,501


Property EBITDA (100%)


$

47,155



$

18,883



$

66,038



$

40,722



$

12,777



$

53,499


Equity in earnings (losses) of unconsolidated affiliates (SHR ownership)









Property EBITDA


$

17,152



$

9,442



$

26,594



$

13,989



$

6,389



$

20,378


Depreciation and amortization


(7,564)



(6,570)



(14,134)



(6,895)



(7,145)



(14,040)


Interest expense


(8,325)



(778)



(9,103)



(10,093)



(778)



(10,871)


Other expenses, net


(242)



(58)



(300)



(7,931)



(155)



(8,086)


Income taxes


(191)



-



(191)



383



-



383


Equity in earnings (losses) of unconsolidated affiliates


$

830



$

2,036



$

2,866



$

(10,547)



$

(1,689)



$

(12,236)


EBITDA Contribution













Equity in earnings (losses) of unconsolidated affiliates


$

830



$

2,036



$

2,866



$

(10,547)



$

(1,689)



$

(12,236)


Depreciation and amortization


7,564



6,570



14,134



6,895



7,145



14,040


Termination fee


-



-



-



7,820



-



7,820


Interest expense


8,325



778



9,103



10,093



778



10,871


Income taxes


191



-



191



(383)



-



(383)


EBITDA Contribution


$

16,910



$

9,384



$

26,294



$

13,878



$

6,234



$

20,112


FFO Contribution













Equity in earnings (losses) of unconsolidated affiliates


$

830



$

2,036



$

2,866



$

(10,547)



$

(1,689)



$

(12,236)


Depreciation and amortization


7,564



6,570



14,134



6,895



7,145



14,040


Termination fee


-



-



-



7,820



-



7,820


FFO Contribution


$

8,394



$

8,606



$

17,000



$

4,168



$

5,456



$

9,624


 


Investments in Unconsolidated Affiliates (Continued)

(in thousands)

 


Debt


Interest Rate




Spread over

LIBOR




Loan Amount


Maturity (a)

Hotel del Coronado













CMBS Mortgage and Mezzanine


3.82

%




365 bp




$

475,000



March 2018

Cash and cash equivalents










(7,462)




Net Debt










$

467,538




Fairmont Scottsdale Princess













CMBS Mortgage


0.53

%




36 bp




$

117,000



April 2015

Cash and cash equivalents










(6,841)




Net Debt










$

110,159






(a)

Includes extension options.

Caps


Effective

Date


LIBOR Cap Rate


Notional Amount


Maturity

Hotel del Coronado









CMBS Mortgage and Mezzanine Loan Caps


March 2013


3.00

%


$

475,000



March 2015

Fairmont Scottsdale Princess









CMBS Mortgage Loan Cap


December 2013


4.00

%


$

117,000



April 2015

 

 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Leasehold Information

(in thousands)

 




Three Months Ended December 31,


Years Ended December 31,



2013


2012


2013


2012

Marriott Hamburg:









Property EBITDA


$

1,741



$

1,472



$

6,298



$

5,876


Revenue (a)


$

1,385



$

1,273



$

5,161



$

4,778











Lease expense


(1,234)



(1,155)



(4,818)



(4,580)


Less: Deferred gain on sale-leaseback


(53)



(50)



(207)



(200)


Adjusted lease expense


(1,287)



(1,205)



(5,025)



(4,780)











EBITDA contribution from leasehold


$

98



$

68



$

136



$

(2)


 



December 31,

Security Deposit (b):


2013


2012

Marriott Hamburg


$

2,611



$

2,507











(a)

For the three months and years ended December 31, 2013 and 2012, Revenue for the Marriott Hamburg hotel represents lease revenue.

(b)

The security deposit is recorded in prepaid expenses and other assets on the consolidated balance sheets.

 


Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Non-GAAP Financial Measures

We present five non-GAAP financial measures that we believe are useful to management and investors as key measures of our operating performance: Funds from Operations (FFO); FFO-Fully Diluted; Comparable FFO; Earnings Before Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and Comparable EBITDA.

EBITDA represents net income (or loss) attributable to SHR common shareholders excluding: (i) interest expense, (ii) income taxes, including deferred income tax benefits and expenses applicable to our foreign subsidiaries and income taxes applicable to sale of assets; (iii) depreciation and amortization; and (iv) preferred stock dividends. EBITDA also excludes interest expense, income taxes and depreciation and amortization of our unconsolidated affiliates. EBITDA is presented on a full participation basis, which means we have assumed conversion of all redeemable noncontrolling interests of our operating partnership into our common stock. We believe this treatment of noncontrolling interests provides useful information for management and our investors and appropriately considers our current capital structure. We also present Comparable EBITDA, which eliminates the effect of realizing deferred gains on our sale leasebacks, as well as the effect of gains or losses on sales of assets, early extinguishment of debt, impairment losses, foreign currency exchange gains or losses and certain other charges that are highly variable from year to year. We believe EBITDA and Comparable EBITDA are useful to management and investors in evaluating our operating performance because they provide management and investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe they help management and investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our asset base (primarily depreciation and amortization) from our operating results. Our management also uses EBITDA and Comparable EBITDA as measures in determining the value of acquisitions and dispositions.

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, with the exception of impairment of depreciable real estate. NAREIT adopted a definition of FFO in order to promote an industry-wide standard measure of REIT operating performance. NAREIT defines FFO as net income (or loss) (computed in accordance with GAAP) excluding losses or gains from sales of depreciable property, impairment of depreciable real estate, real estate-related depreciation and amortization, and our portion of these items related to unconsolidated affiliates. We also present FFO-Fully Diluted, which is FFO plus income or loss on income attributable to redeemable noncontrolling interests in our operating partnership. We also present Comparable FFO, which is FFO-Fully Diluted excluding the impact of any gains or losses on early extinguishment of debt, impairment losses, foreign currency exchange gains or losses and certain other charges that are highly variable from year to year. We believe that the presentation of FFO, FFO-Fully Diluted and Comparable FFO provides useful information to management and investors regarding our results of operations because they are measures of our ability to fund capital expenditures and expand our business. In addition, FFO is widely used in the real estate industry to measure operating performance without regard to items such as depreciation and amortization. We also present Comparable FFO per diluted share as a non-GAAP measure of our performance. We calculate Comparable FFO per diluted share for a given operating period as our Comparable FFO (as defined above) divided by the weighted average of fully diluted shares outstanding, excluding shares related to the JW Marriott Essex House Hotel put option. Dilutive securities may include shares granted under share-based compensation plans and operating partnership units. No effect is shown for securities that are anti-dilutive.

We caution investors that amounts presented in accordance with our definitions of FFO, FFO-Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. FFO, FFO-Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA should not be considered as an alternative measure of our net income (or loss) or operating performance. FFO, FFO-Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that FFO, FFO-Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA can enhance your understanding of our financial condition and results of operations, these non-GAAP financial measures, when viewed individually, are not necessarily a better indicator of any trend as compared to comparable GAAP measures such as net income (or loss) attributable to SHR common shareholders. In addition, you should be aware that adverse economic and market conditions might negatively impact our cash flow. We have provided a quantitative reconciliation of FFO, FFO-Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA to the most directly comparable GAAP financial performance measure, which is net income (or loss) attributable to SHR common shareholders.

 

 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Reconciliation of Net Income (Loss) Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA

(in thousands)

 




Three Months Ended
December 31,


Years Ended
December 31,



2013


2012


2013


2012

Net income (loss) attributable to SHR common shareholders


$

3,223



$

(36,401)



$

(13,191)



$

(79,472)


Depreciation and amortization-continuing operations


24,507



26,055



101,943



99,458


Depreciation and amortization-discontinued operations


1,052



993



4,075



4,006


Interest expense-continuing operations


20,405



16,862



84,276



75,489


Income taxes-continuing operations


153



257



557



800


Income taxes-discontinued operations


172



539



889



211


Noncontrolling interests


60



(58)



38



(184)


Adjustments from consolidated affiliates


(3,589)



(4,217)



(14,604)



(8,599)


Adjustments from unconsolidated affiliates


5,553



6,956



23,489



27,562


Preferred shareholder dividends


6,041



6,041



24,166



24,166


EBITDA


57,577



17,027



211,638



143,437


Realized portion of deferred gain on sale-leaseback


(53)



(50)



(207)



(200)


Loss on sale of assets


430



-



1,185



-


Loss on sale of assets-adjustments from consolidated affiliates


(85)



-



(455)



-


Impairment losses and other charges-continuing operations


-



18,406



728



18,406


Impairment losses and other charges-discontinued operations


-



437



-



437


Foreign currency exchange (gain) loss-continuing operations (a)


(8)



(15)



(44)



1,258


Foreign currency exchange loss (gain)-discontinued operations (a)


142



(79)



1



352


Activist shareholder costs


342



-



342



-


Adjustment for Value Creation Plan


-



(1,352)



-



1,407


Severance charges


-



2,485



-



2,485


Management agreement termination fee (b)


-



7,820



-



7,820


Comparable EBITDA


$

58,345



$

44,679



$

213,188



$

175,402


 


(a)

Foreign currency exchange gains or losses applicable to third-party and inter-company debt and certain balance sheet items held by foreign subsidiaries.

(b)

Our share of the Hotel del Coronado management agreement termination fee included in both equity in (losses) earnings of unconsolidated affiliates and net (income) loss attributable to the noncontrolling interest in consolidated affiliates.

 

 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Reconciliation of Net Income (Loss) Attributable to SHR Common Shareholders to

Funds From Operations (FFO), FFO-Fully Diluted and Comparable FFO

(in thousands, except per share data)

 




Three Months Ended
December 31,


Years Ended
December 31,



2013


2012


2013


2012

Net income (loss) attributable to SHR common shareholders


$

3,223



$

(36,401)



$

(13,191)



$

(79,472)


Depreciation and amortization-continuing operations


24,507



26,055



101,943



99,458


Depreciation and amortization-discontinued operations


1,052



993



4,075



4,006


Corporate depreciation


(125)



(190)



(508)



(979)


Loss on sale of assets


430



-



1,185



-


Realized portion of deferred gain on sale-leaseback


(53)



(50)



(207)



(200)


Noncontrolling interests adjustments


(123)



(127)



(400)



(501)


Adjustments from consolidated affiliates


(1,813)



(1,906)



(7,378)



(4,091)


Adjustments from unconsolidated affiliates


3,482



3,923



14,135



15,258


FFO


30,580



(7,703)



99,654



33,479


Redeemable noncontrolling interests


183



69



438



317


FFO-Fully Diluted


30,763



(7,634)



100,092



33,796


Impairment losses and other charges-continuing operations


-



18,406



728



18,406


Impairment losses and other charges-discontinued operations


-



437



-



437


Non-cash mark to market of interest rate swaps


(2,496)



(7,833)



(11,617)



(12,238)


Foreign currency exchange (gain) loss-continuing operations (a)


(8)



(15)



(44)



1,258


Foreign currency exchange loss (gain)-discontinued operations (a)


142



(79)



1



352


Activist shareholder costs


342



-



342



-


Adjustment for Value Creation Plan


-



(1,352)



-



1,407


Severance charges


-



2,485



-



2,485


Management agreement termination fee (b)


-



7,820



-



7,820


Comparable FFO


$

28,743



$

12,235



$

89,502



$

53,723


Comparable FFO per fully diluted share


$

0.14



$

0.06



$

0.43



$

0.26


Weighted average diluted shares (c)


209,800



209,307



209,328



203,605


 


(a)

Foreign currency exchange gains or losses applicable to third-party and inter-company debt and certain balance sheet items held by foreign subsidiaries.

(b)

Our share of the Hotel del Coronado management agreement termination fee included in both equity in (losses) earnings of unconsolidated affiliates and net (income) loss attributable to the noncontrolling interests in consolidated affiliates.

(c)

Excludes shares related to the JW Marriott Essex House Hotel put option.

 

Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)

Debt Summary

(dollars in thousands)

 


Debt


Interest Rate


Spread (a)


Loan Amount


Maturity (b)

Marriott London Grosvenor Square (c)


4.28

%


375 bp (c)


$

115,958



October 2014

North Beach Venture


5.00

%


Fixed


1,469



January 2015

Bank credit facility


3.17

%


300 bp


110,000



June 2015

Four Seasons Washington, D.C.


3.32

%


315 bp


130,000



July 2016

Westin St. Francis


6.09

%


Fixed


209,588



June 2017

Fairmont Chicago


6.09

%


Fixed


93,124



June 2017

JW Marriott Essex House Hotel


4.75

%


400 bp


185,826



September 2017

Hyatt Regency La Jolla (d)


4.50% / 10.00

%


400 bp / Fixed


89,312



December 2017

InterContinental Miami


3.67

%


350 bp


85,000



July 2018

Loews Santa Monica Beach Hotel


4.02

%


385 bp


109,000



July 2018

InterContinental Chicago


5.61

%


Fixed


144,419



August 2021







$

1,273,696




 

(a)

Spread over LIBOR (0.17% at December 31, 2013). Interest on the JW Marriott Essex House Hotel loan is subject to a 0.75% LIBOR floor.  Interest on the Hyatt Regency La Jolla loan is subject to a 0.50% LIBOR floor.

(b)

Includes extension options.

(c)

Principal balance of £70,040,000 at December 31, 2013. On August 7, 2013, the Company entered into an amendment to the mortgage loan. The amendment extended the maturity of the loan to October 2014 and waived the July 2013 and subsequent principal payments through the extended term. Pursuant to the amendment, the spread over GBP LIBOR increases in steps during the extension period from GBP LIBOR plus 2.10% in August 2013 to GBP LIBOR plus 4.25% in April 2014. The spread in the table is the spread over three-month GBP LIBOR (0.53% at December 31, 2013).

(d)

Interest on $72,000,000 is payable at LIBOR plus 4.00%, subject to a 0.50% LIBOR floor, and interest on $17,312,000 is payable at a fixed rate of 10.00%.

 

Interest Rate Swaps

Swap Effective Date


Fixed Pay Rate

Against LIBOR


Notional

Amount


Maturity

February 2010


4.90

%


$

100,000



September 2014

February 2010


4.96

%


100,000



December 2014

December 2010


5.23

%


100,000



December 2015

February 2011


5.27

%


100,000



February 2016



5.09

%


$

400,000




 

Future scheduled debt principal payments (including extension options) are as follows:

Years ending December 31,


Amount

2014


$

120,213


2015


117,498


2016


139,783


2017


577,043


2018


185,015


Thereafter


134,144




$

1,273,696





Percent of fixed rate debt including swaps


68.0

%

Weighted average interest rate including swaps (e)


6.21

%

Weighted average maturity of fixed rate debt (debt with maturity of greater than one year)


3.92


 

(e)

Excludes the amortization of deferred financing costs and the amortization of the interest rate swap costs.

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