Market Overview

LaSalle Hotel Properties Reports Second Quarter 2018 Results

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Special Meeting to Approve Merger with Blackstone Scheduled for
September 6, 2018

LaSalle Hotel Properties (NYSE:LHO) ("LaSalle" or the "Company") today
announced results for the quarter ended June 30, 2018. The Company's
results are summarized below.

 
  Second Quarter   Year-to-Date
2018   2017   % Var. 2018   2017   % Var.
(dollars in millions except per share/unit data)
 
Net income attributable to common shareholders(1) $ 31.6 $ 55.5 -43.1 % $ 20.5 $ 131.6 -84.4 %
Net income attributable to common shareholders per diluted share(1) $ 0.28 $ 0.49 -42.9 % $ 0.18 $ 1.16 -84.5 %
 
RevPAR(2) $ 230.96 $ 227.18 1.7 % $ 198.28 $ 203.13 -2.4 %
Hotel EBITDAre Margin(2) 37.4 % 38.0 % 31.6 % 33.3 %
 
Adjusted EBITDAre(2) $ 107.9 $ 110.4 -2.3 % $ 155.5 $ 172.2 -9.7 %
Note: Second quarter 2017 included $3.7 million and year-to-date
2017 included $7.3 million of adjusted EBITDAre for assets that the
Company sold in 2017.
 
Adjusted FFO attributable to common shareholders and unitholders(2) $ 88.3 $ 91.5 -3.5 % $ 125.6 $ 142.8 -12.0 %
Adjusted FFO attributable to common shareholders and unitholders per
diluted share/unit(2)
$ 0.80 $ 0.81 -1.2 % $ 1.12 $ 1.26 -11.1 %
 
(1) 2017 year-to-date net income included $85.5 million
of gains from the sales of Hotel Deca, Lansdowne Resort, Alexis
Hotel, Hotel Triton, and Westin Philadelphia.
(2) See the discussion of non-GAAP measures and the
tables later in this press release for reconciliations from net
income to such measures, including earnings before interest, taxes,
depreciation and amortization ("EBITDA"), adjusted EBITDA for real
estate ("EBITDAre"), adjusted funds from operations ("FFO"), and pro
forma hotel EBITDAre. Room revenue per available room ("RevPAR") is
presented on a pro forma basis to reflect hotels in the Company's
current portfolio. See "Statistical Data for the Hotels - Pro Forma"
later in this press release.
 

Michael D. Barnello, President and Chief Executive Officer of LaSalle
said, "Our second quarter results exceeded our expectations, as the
industry and our portfolio benefitted from strong lodging demand.
LaSalle took an important step this quarter to maximize shareholder
value by entering into a definitive agreement to be acquired by
Blackstone in an all-cash transaction. The transaction followed a
thorough review of strategic alternatives and we believe it represents a
compelling opportunity for LaSalle's shareholders, delivering a
significant premium with immediate and certain cash value."

Second Quarter 2018 Results

  • Net Income: The Company's net income attributable to common
    shareholders was $32 million, which decreased by $24 million from the
    same period in 2017. The second quarter 2017 benefited from $11
    million of gains from the sale of two assets last year.
  • RevPAR: The Company's second quarter 2018 RevPAR grew 1.7% to
    $231, driven by a 1.1% increase in average daily rate ("ADR") to $261
    and an occupancy growth of 0.6% to 88.6%. Excluding the Company's
    hotels managed by Kimpton and Marriott, RevPAR increased 3.7% versus
    last year. For reference, Kimpton has been working on systems
    integration with the IHG platform throughout 2018, and Marriott has
    been doing the same with Starwood's former systems.
  • Hotel EBITDAre Margin: The Company's hotel EBITDAre
    margin was 37.4%.
  • Adjusted EBITDAre: The Company's adjusted EBITDAre
    was $108 million, which declined $2 million year-over-year. In the
    second quarter 2017, the Company earned $4 million of adjusted EBITDAre
    from assets sold in 2017.
  • Adjusted FFO: The Company generated adjusted FFO of $88
    million, or $0.80 per diluted share/unit, compared to $92 million, or
    $0.81 per diluted share/unit, for the second quarter 2017.

Year-to-Date 2018 Results

  • Net Income: The Company's net income attributable to common
    shareholders was $20 million, which decreased by $111 million from the
    same period in 2017. During the first half of 2017, the Company sold
    five assets for a combined gain of $86 million, which distorts this
    comparison year-over-year.
  • RevPAR: The Company's first half 2018 RevPAR decreased 2.4% to
    $198, driven by a 1.0% reduction in ADR to $242 and an occupancy
    decline of 1.4% to 81.8%. Excluding the Company's hotels managed by
    Kimpton and Marriott, RevPAR was flat to last year.
  • Hotel EBITDAre Margin: The Company's hotel EBITDAre
    margin was 31.6%.
  • Adjusted EBITDAre: The Company's adjusted EBITDAre
    was $155 million, a decrease of $17 million from the first half of
    2017. In the first half of 2017, the Company earned $7 million of
    adjusted EBITDAre from assets sold in 2017, negatively
    impacting the year-over-year comparison.
  • Adjusted FFO: The Company generated adjusted FFO of $126
    million, or $1.12 per diluted share/unit, compared to $143 million, or
    $1.26 per diluted share/unit, for the first half of 2017.

Capital Investments: The Company invested $42 million of capital
in its hotels in the second quarter. Since March, the Company has
completed guestroom renovations at San Diego Paradise Point Resort &
Spa, Hotel Spero, Harbor Court Hotel, The Heathman Hotel, Chamberlain
West Hollywood, Montrose West Hollywood, and Westin Copley Place. The
Company also completed lobby or restaurant renovations at Hotel Spero,
Harbor Court Hotel, The Heathman Hotel, Chamberlain West Hollywood,
Montrose West Hollywood, and Sofitel Washington, DC Lafayette Square.
Additionally, the Company renovated its meeting space at Hotel Chicago
and Hyatt Regency Boston Harbor.

Balance Sheet and Capital Markets Activities

  • Balance Sheet Summary as of June 30, 2018: The Company had
    total outstanding debt of $1.1 billion, and total net debt to trailing
    12 month Corporate EBITDA (as defined in the financial covenant
    section of the Company's senior unsecured credit facility, adjusted
    for all cash and cash equivalents on its balance sheet) was 2.6 times.
    The Company's fixed charge coverage ratio was 5.2 times, and its
    weighted average interest rate for the second quarter was 3.3%. The
    Company had capacity of $773 million available on its credit
    facilities, in addition to $221 million of cash and cash equivalents
    on its balance sheet.
  • Share Repurchase Program: The Company has not repurchased any
    common shares under its share repurchase program since March 5, 2018.

Key West Impact Update: In the second quarter's adjusted EBITDAre,
the Company recorded $1.3 million of business interruption proceeds
related to losses in 2017 and 2018 following Hurricane Irma.
Year-to-date through the second quarter, the Company collected $2.6
million of business interruption proceeds relating to Hurricane Irma.
The Company will continue to process business interruption claims for
both of the Key West properties.

Dividend: On June 15, 2018, the Company declared a second quarter
2018 dividend of $0.225 per common share.

Blackstone Transaction: As previously announced on May 21, 2018,
LaSalle entered into a definitive agreement with affiliates of
Blackstone Real Estate Partners VIII ("Blackstone"), under which
Blackstone would acquire all outstanding common shares of LaSalle for
$33.50 per share in an all-cash transaction valued at $4.8 billion (the
"Blackstone Merger Agreement"). The transaction was unanimously approved
by LaSalle's Board of Trustees after careful consideration of multiple
proposals received. The Company remains committed to completing the
transaction with Blackstone, which is subject to customary closing
conditions, including the approval of LaSalle's shareholders. The
LaSalle Board recommends that shareholders vote "FOR" the proposal to
approve the merger and other transactions contemplated by the Blackstone
Merger Agreement in advance of the special meeting of shareholders,
which will be held on September 6, 2018. The transaction is expected to
close within a week of the special meeting and is not contingent on
receipt of financing.

2018 Outlook and Earnings Call: Given the pending transaction
with Blackstone, the Company is not updating its outlook for the balance
of 2018. The Company will not host an investor conference call this
quarter.

About LaSalle Hotel Properties

LaSalle Hotel Properties is a leading multi-operator real estate
investment trust. The Company owns 41 properties, which are upscale,
full-service hotels, totaling 10,452 guest rooms in 11 markets in seven
states and the District of Columbia. The Company focuses on owning,
redeveloping and repositioning upscale, full-service hotels located in
urban, resort and convention markets. LaSalle Hotel Properties seeks to
grow through strategic relationships with premier lodging groups,
including Access Hotels & Resorts, Accor, Benchmark Hospitality,
Davidson Hotel Company, Evolution Hospitality, HEI Hotels & Resorts,
Highgate Hotels, Hilton, Hyatt Hotels Corporation, IHG, JRK Hotel Group,
Inc., Marriott International, Noble House Hotels & Resorts, Outrigger
Lodging Services, Provenance Hotels, Two Roads Hospitality, and Viceroy
Hotel Group.

Additional Information about the Proposed Merger Transaction and
Where to Find It

This communication relates to the proposed merger transaction involving
the Company and may be deemed to be solicitation material in respect of
the proposed merger transaction. In connection with the proposed merger
transaction, the Company has filed a definitive proxy statement (the
"Proxy Statement") with the Securities and Exchange Commission (the
"SEC"), as well as other relevant materials in connection with the
proposed merger transaction pursuant to the terms of the Agreement and
Plan of Merger, dated as of May 20, 2018, among BRE Landmark Parent
L.P., BRE Landmark L.P., BRE Landmark Acquisition L.P., the Company and
LaSalle Hotel Operating Partnership, L.P. This communication is not a
substitute for the Proxy Statement or for any other document that the
Company has filed or may file with the SEC or send to the Company's
shareholders in connection with the proposed merger transaction. BEFORE
MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS OF THE
COMPANY ARE URGED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN
IMPORTANT INFORMATION ABOUT THE COMPANY, THE PROPOSED MERGER TRANSACTION
AND RELATED MATTERS. Investors and security holders are able to obtain
free copies of the Proxy Statement and other documents filed by the
Company with the SEC through the website maintained by the SEC at http://www.sec.gov.
Copies of the documents filed by the Company with the SEC are also
available free of charge on the Company's website at www.lasallehotels.com,
or by contacting the Company's Investor Relations Department at (301)
941- 1500. The Company and its trustees and certain of its executive
officers may be considered participants in the solicitation of proxies
from the Company's shareholders with respect to the proposed merger
transaction under the rules of the SEC. Information about the trustees
and executive officers of the Company is set forth in its Annual Report
on Form 10-K for the year ended December 31, 2017, which was filed with
the SEC on February 20, 2018, its proxy statement for its 2018 annual
meeting of shareholders, which was filed with the SEC on March 22, 2018
and in subsequent documents filed with the SEC. Additional information
regarding persons who may be deemed participants in the proxy
solicitations and a description of their direct and indirect interests,
by security holdings or otherwise, is included in the Proxy Statement
and may be included in other relevant materials to be filed with the
SEC. You may obtain free copies of this document as described above.

Cautionary Statement Regarding Forward-Looking Statements

This press release, together with other statements and information
publicly disseminated by the Company, contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. The Company intends such forward-looking statements to
be covered by the safe harbor provisions for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 and
includes this statement for purposes of complying with these safe harbor
provisions. The forward-looking statements contained in this press
release, including statements regarding the proposed merger transaction
and the timing of such transaction, are subject to various risks and
uncertainties. Although the Company believes the expectations reflected
in any forward-looking statements contained herein are based on
reasonable assumptions, there can be no assurance that the Company's
expectations will be achieved. Forward-looking statements, which are
based on certain assumptions and describe future plans, strategies and
expectations of the Company, are generally identifiable by use of the
words "believe," "expect," "intend," "anticipate," "estimate,"
"project," or other similar expressions. Such statements involve known
and unknown risks, uncertainties, and other factors that may cause the
actual results of the Company to differ materially from future results,
performance or achievements projected or contemplated in the
forward-looking statements. Some of the factors that may affect outcomes
and results include, but are not limited to: (i) risks associated with
the Company's ability to obtain the shareholder approval required to
consummate the proposed merger transaction and the timing of the closing
of the proposed merger transaction, including the risks that a condition
to closing would not be satisfied within the expected timeframe or at
all or that the closing of the proposed merger transaction will not
occur, (ii) the outcome of any legal proceedings that may be instituted
against the parties and others related to the merger agreement, (iii)
unanticipated difficulties or expenditures relating to the proposed
merger transaction, the response of business partners and competitors to
the announcement of the proposed merger transaction, and/or potential
difficulties in employee retention as a result of the announcement and
pendency of the proposed merger transaction, (iv) changes affecting the
real estate industry and changes in financial markets, interest rates
and foreign currency exchange rates, (v) increased or unanticipated
competition for the Company's properties, (vi) risks associated with the
hotel industry, including competition for guests and meetings from other
hotels and alternative lodging companies, increases in wages, energy
costs and other operating costs, potential unionization or union
disruption, actual or threatened terrorist attacks, any type of flu or
disease-related pandemic and downturns in general and local economic
conditions, (vii) the availability and terms of financing and capital
and the general volatility of securities markets, (viii) the Company's
dependence on third-party managers of its hotels, including its
inability to implement strategic business decisions directly, (ix) risks
associated with the real estate industry, including environmental
contamination and costs of complying with the Americans with
Disabilities Act of 1990, as amended, and similar laws, (x) the possible
failure of the Company to maintain its qualification as a REIT and the
risk of changes in laws affecting REITs, (xi) the possibility of
uninsured losses, (xii) risks associated with redevelopment and
repositioning projects, including delays and cost overruns, (xiii) the
risk of a material failure, inadequacy, interruption or security failure
of the Company's or the hotel managers' information technology networks
and systems, (xiv) uncertainties regarding future actions that may be
taken by Pebblebrook in furtherance of its unsolicited proposal and
solicitation of proxies, and (xv) those additional risks and factors
discussed in reports filed with the SEC by the Company from time to
time, including those discussed under the heading "Risk Factors" in its
most recently filed reports on Forms 10-K and 10-Q. The Company
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. Investors should not place undue reliance upon
forward-looking statements.

For additional information or to receive press releases via e-mail,
please visit our website at www.lasallehotels.com.

 
LASALLE HOTEL PROPERTIES
Consolidated Balance Sheets

(in thousands, except share and per share data)

 

  June 30,  

December 31,

2018 2017
(unaudited)

Assets:

Investment in hotel properties, net $ 3,288,558 $ 3,265,615
Property under development 14,781 49,459
Cash and cash equivalents 220,771 400,667
Restricted cash reserves 14,025 14,262
Hotel receivables (net of allowance for doubtful accounts of $357
and $404, respectively)
43,904 35,916
Debt issuance costs for borrowings under credit facilities, net 2,729 3,274
Deferred tax assets 2,136 2,136
Prepaid expenses and other assets 64,634   43,612  
Total assets $ 3,651,538   $ 3,814,941  
Liabilities:
Borrowings under credit facilities $ 0 $ 0
Term loans, net of unamortized debt issuance costs 853,488 853,195
Bonds payable, net of unamortized debt issuance costs 0 42,494
Mortgage loan, net of unamortized debt issuance costs 224,915 224,432
Accounts payable and accrued expenses 147,953 134,216
Advance deposits 32,084 26,625
Accrued interest 2,295 2,383
Distributions payable 28,984   55,135  
Total liabilities 1,289,719   1,338,480  
Commitments and contingencies
Equity:
Shareholders' Equity:
Preferred shares of beneficial interest, $0.01 par value
(liquidation preference of $260,000), 40,000,000 shares authorized;
10,400,000 shares issued and outstanding
104 104
Common shares of beneficial interest, $0.01 par value, 200,000,000
shares authorized; 113,251,427 shares issued and 110,382,519 shares
outstanding, and 113,251,427 shares issued and 113,209,392 shares
outstanding, respectively
1,132 1,132
Treasury shares, at cost (71,658 ) (1,181 )
Additional paid-in capital, net of offering costs of $82,865 and
$82,842, respectively
2,766,809 2,767,924
Accumulated other comprehensive income 22,042 10,880
Distributions in excess of retained earnings (359,894 ) (305,708 )
Total shareholders' equity 2,358,535   2,473,151  
Noncontrolling Interests:
Noncontrolling interests in consolidated entities 16 18
Noncontrolling interests of common units in Operating Partnership 3,268   3,292  
Total noncontrolling interests 3,284   3,310  
Total equity 2,361,819   2,476,461  
Total liabilities and equity $ 3,651,538   $ 3,814,941  
 
 
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations and Comprehensive Income

(in thousands, except share and per share data)

(unaudited)

 
  For the three months ended   For the six months ended
June 30, June 30,
2018   2017 2018   2017
Revenues:
Hotel operating revenues:
Room $ 219,666 $ 222,385 $ 375,088 $ 400,750
Food and beverage 56,977 59,308 100,609 111,612
Other operating department 24,521   22,118   44,628   42,485  
Total hotel operating revenues 301,164 303,811 520,325 554,847
Other income 3,445   3,233   7,307   6,602  
Total revenues 304,609   307,044   527,632   561,449  
Expenses:
Hotel operating expenses:
Room 55,885 55,271 105,071 107,594
Food and beverage 39,265 40,132 74,081 79,280
Other direct 3,439 2,654 6,372 6,838
Other indirect 71,053   73,177   133,247   142,833  
Total hotel operating expenses 169,642 171,234 318,771 336,545
Depreciation and amortization 46,857 44,066 92,172 91,329
Real estate taxes, personal property taxes and insurance 16,308 14,089 32,336 30,204
Ground rent 4,245 3,823 8,074 7,208
General and administrative 6,667 6,917 13,183 13,471
Costs related to the Mergers and unsolicited takeover offers 8,680 0 11,331 0
Other expenses 1,589   1,559   2,809   3,477  
Total operating expenses 253,988   241,688   478,676   482,234  
Operating income 50,621 65,356 48,956 79,215
Interest income 569 315 1,403 457
Interest expense (10,458 ) (9,423 ) (20,618 ) (19,250 )
Loss from extinguishment of debt 0   0   0   (1,706 )
Income before income tax expense 40,732 56,248 29,741 58,716
Income tax expense (4,993 ) (5,003 ) (966 ) (230 )
Income before gain on sale of properties 35,739 51,245 28,775 58,486
Gain on sale of properties 0   11,156   0   85,514  
Net income 35,739   62,401   28,775   144,000  
Net income attributable to noncontrolling interests:
Noncontrolling interests in consolidated entities (8 ) (8 ) (8 ) (8 )
Noncontrolling interests of common units in Operating Partnership (61 ) (83 ) (59 ) (193 )
Net income attributable to noncontrolling interests (69 ) (91 ) (67 ) (201 )
Net income attributable to the Company 35,670 62,310 28,708 143,799
Distributions to preferred shareholders (4,115 ) (4,387 ) (8,231 ) (9,792 )
Issuance costs of redeemed preferred shares 0   (2,401 ) 0   (2,401 )
Net income attributable to common shareholders $ 31,555   $ 55,522   $ 20,477   $ 131,606  
 
 
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations and Comprehensive Income -
Continued

(in thousands, except share and per share data)

(unaudited)

 
  For the three months ended   For the six months ended
June 30, June 30,
2018   2017 2018   2017
Earnings per Common Share - Basic:
Net income attributable to common shareholders excluding amounts
attributable to unvested restricted shares
$ 0.29   $ 0.49   $ 0.18   $ 1.16  
Earnings per Common Share - Diluted:
Net income attributable to common shareholders excluding amounts
attributable to unvested restricted shares
$ 0.28   $ 0.49   $ 0.18   $ 1.16  
Weighted average number of common shares outstanding:
Basic 110,115,770 112,951,714 111,134,064 112,937,794
Diluted 110,552,220 113,342,151 111,552,469 113,347,580
 
Comprehensive Income:
Net income $ 35,739 $ 62,401 $ 28,775 $ 144,000
Other comprehensive income:
Unrealized gain (loss) on interest rate derivative instruments 3,677 (1,675 ) 11,886 (551 )
Reclassification adjustment for amounts recognized in net income (703 ) 498   (709 ) 1,483  
38,713 61,224 39,952 144,932
Comprehensive income attributable to noncontrolling interests:
Noncontrolling interests in consolidated entities (8 ) (8 ) (8 ) (8 )
Noncontrolling interests of common units in Operating Partnership (65 ) (82 ) (74 ) (194 )
Comprehensive income attributable to noncontrolling interests (73 ) (90 ) (82 ) (202 )
Comprehensive income attributable to the Company $ 38,640   $ 61,134   $ 39,870   $ 144,730  

 

 
LASALLE HOTEL PROPERTIES
FFO, EBITDA and EBITDAre

(in thousands, except share/unit and per share/unit data)

(unaudited)

 
  For the three months ended   For the six months ended
June 30, June 30,
2018   2017 2018   2017
Net income $ 35,739 $ 62,401 $ 28,775 $ 144,000
Depreciation 46,695 43,928 91,849 91,059
Amortization of deferred lease costs 123 91 243 170
Gain on sale of properties 0   (11,156 ) 0   (85,514 )
FFO $ 82,557 $ 95,264 $ 120,867 $ 149,715
Distributions to preferred shareholders (4,115 ) (4,387 ) (8,231 ) (9,792 )
Issuance costs of redeemed preferred shares 0   (2,401 ) 0   (2,401 )
FFO attributable to common shareholders and unitholders $ 78,442 $ 88,476 $ 112,636 $ 137,522
Pre-opening, management transition and severance expenses 927 169 1,135 251
Costs related to the Mergers and unsolicited takeover offers 8,680 0 11,331 0
Issuance costs of redeemed preferred shares 0 2,401 0 2,401
Loss from extinguishment of debt 0 0 0 1,706
Hurricane property insurance proceeds, net of related repairs and
cleanup costs
(197 ) 0 (552 ) 0
Loss from The Marker Waterfront Resort original development
deficiencies
0 0 145 0
Non-cash ground rent 449   460   903   925  
Adjusted FFO attributable to common shareholders and unitholders $ 88,301   $ 91,506   $ 125,598   $ 142,805  
Weighted average number of common shares and units outstanding:
Basic 110,260,993 113,096,937 111,279,287 113,083,017
Diluted 110,697,443 113,487,374 111,697,692 113,492,803
FFO attributable to common shareholders and unitholders per
diluted share/unit
$ 0.71 $ 0.78 $ 1.01 $ 1.21
Adjusted FFO attributable to common shareholders and unitholders
per diluted share/unit
$ 0.80 $ 0.81 $ 1.12 $ 1.26
 
 
  For the three months ended   For the six months ended
June 30, June 30,
2018   2017 2018   2017
Net income $ 35,739 $ 62,401 $ 28,775 $ 144,000
Interest expense 10,458 9,423 20,618 19,250
Income tax expense 4,993 5,003 966 230
Depreciation and amortization 46,857   44,066   92,172   91,329  
EBITDA $ 98,047 $ 120,893 $ 142,531 $ 254,809
Gain on sale of properties 0   (11,156 ) 0   (85,514 )
EBITDAre $ 98,047 $ 109,737 $ 142,531 $ 169,295
Pre-opening, management transition and severance expenses 927 169 1,135 251
Costs related to the Mergers and unsolicited takeover offers 8,680 0 11,331 0
Loss from extinguishment of debt 0 0 0 1,706
Hurricane property insurance proceeds, net of related repairs and
cleanup costs
(197 ) 0 (552 ) 0
Loss from The Marker Waterfront Resort original development
deficiencies
0 0 145 0
Non-cash ground rent 449   460   903   925  

Adjusted EBITDAre

$ 107,906 $ 110,366 $ 155,493 $ 172,177
Corporate expense 7,787 8,536 15,798 17,168
Interest and other income (4,012 ) (3,548 ) (8,710 ) (7,060 )
Pro forma hotel level adjustments, net(1) 1,268   (3,364 ) 2,570   (6,253 )

Hotel EBITDAre

$ 112,949   $ 111,990   $ 165,151   $ 176,032  
 
 
(1)

Pro forma includes all properties owned by the Company as of June
30, 2018.

 
 
LASALLE HOTEL PROPERTIES
Hotel Operational Data

Schedule of Property Level Results - Pro Forma(1)

(in thousands)

(unaudited)

 
  For the three months ended   For the six months ended
June 30, June 30,
2018   2017 2018   2017
Revenues:
Room $ 219,666 $ 216,061 $ 375,088 $ 384,236
Food and beverage 56,977 56,227 100,609 103,272
Other 25,555   22,400   46,647   40,784  

Total hotel revenues

302,198   294,688   522,344   528,292  
 
Expenses:
Room 55,885 53,970 105,071 103,734
Food and beverage 39,265 38,833 74,081 74,453
Other direct 3,434 2,544 6,365 4,941
General and administrative 20,521 19,958 38,736 38,533
Information and telecommunications systems 3,910 4,053 7,920 8,233
Sales and marketing 19,263 19,051 36,807 36,826
Management fees 10,635 11,055 16,589 17,806
Property operations and maintenance 8,901 8,920 17,824 17,986
Energy and utilities 6,253 6,124 12,505 12,590
Property taxes 14,573 12,302 29,060 26,087
Other fixed expenses(2) 6,609   5,888   12,235   11,071  
Total hotel expenses 189,249   182,698   357,193   352,260  
 
Hotel EBITDAre $ 112,949   $ 111,990   $ 165,151   $ 176,032  
 
Hotel EBITDAre Margin 37.4 % 38.0 % 31.6 % 33.3 %
 
 
(1)

This schedule includes the operating data for the three and six
months ended June 30, 2018 and 2017 for all properties owned by
the Company as of June 30, 2018.

(2)

Other fixed expenses includes ground rent expense, but excludes
ground rent payments for The Roger and Harbor Court in all periods
due to the hotels being subject to capital leases of land and
building under GAAP. At The Roger, the base ground rent payments
were $100 and $199 for the three and six months ended June 30,
2018 and 2017, respectively. At Harbor Court, the base and
participating ground rent payments were $330 and $565 for the
three and six months ended June 30, 2018, respectively, and $298
and $586 for the three and six months ended June 30, 2017,
respectively.

 
 
LASALLE HOTEL PROPERTIES

Statistical Data for the Hotels - Pro Forma(1)

(unaudited)

 
  For the three months ended   For the six months ended
June 30, June 30,
2018   2017 2018   2017
Total Portfolio
Occupancy 88.6 % 88.1 % 81.8 % 83.0 %

Increase (Decrease)

0.6 % (1.4 )%
ADR $ 260.57 $ 257.75 $ 242.39 $ 244.78
Increase (Decrease) 1.1 % (1.0 )%
RevPAR $ 230.96 $ 227.18 $ 198.28 $ 203.13
Increase (Decrease) 1.7 % (2.4 )%
 
 
 

For the three months ended

 

For the six months ended

June 30, 2018

June 30, 2018

Market Detail RevPAR Variance %
Boston (2.0)% (4.0)%
Chicago 0.6% 1.3%
Key West (3.7)% (6.8)%
Los Angeles (9.1)% (8.7)%
New York 6.3% 4.9%
Other(2) 0.6% 2.6%
San Diego Downtown 3.9% 0.0%
San Francisco 14.8% 3.5%
Washington, DC (1.2)% (11.8)%
Kimpton and Marriott Integration Impact Detail
Kimpton and Marriott managed hotels (2.9)% (8.7)%
All other hotels 3.7% 0.0%
 
 
(1)

Pro forma includes the statistical data for all properties owned
by the Company as of June 30, 2018.

(2) Other includes The Heathman Hotel in Portland, Chaminade Resort in
Santa Cruz, Embassy Suites Philadelphia - Center City in
Philadelphia, L'Auberge Del Mar in Del Mar, and The Hilton San Diego
Resort and Paradise Point Resort in San Diego.
 

Non-GAAP Financial Measures

The Company considers the non-GAAP measures of FFO (including FFO per
share/unit), adjusted FFO (including adjusted FFO per share/unit),
EBITDA, EBITDAre, adjusted EBITDAre and hotel EBITDAre
to be key supplemental measures of the Company's performance and should
be considered along with, but not as alternatives to, net income or loss
as a measure of the Company's operating performance. Historical cost
accounting for real estate assets implicitly assumes that the value of
real estate assets diminishes predictably over time. Since real estate
values instead have historically risen or fallen with market conditions,
most real estate industry investors consider FFO, adjusted FFO, EBITDA,
EBITDAre, adjusted EBITDAre and hotel EBITDAre to
be helpful in evaluating a real estate company's operations.

FFO, adjusted FFO, EBITDA, EBITDAre, adjusted EBITDAre and
hotel EBITDAre do not represent cash generated from operating
activities as determined by GAAP and should not be considered as
alternatives to net income or loss, cash flows from operations or any
other operating performance measure prescribed by GAAP. FFO, adjusted
FFO, EBITDA, EBITDAre, adjusted EBITDAre and hotel EBITDAre
are not measures of the Company's liquidity, nor are such measures
indicative of funds available to fund the Company's cash needs,
including its ability to make cash distributions. These measurements do
not reflect cash expenditures for long-term assets and other items that
have been or will be incurred. FFO, adjusted FFO, EBITDA, EBITDAre,
adjusted EBITDAre and hotel EBITDAre may include funds
that may not be available for management's discretionary use due to
functional requirements to conserve funds for capital expenditures,
property acquisitions and other commitments and uncertainties. To
compensate for this, management considers the impact of these excluded
items to the extent they are material to operating decisions or the
evaluation of the Company's operating performance.

FFO

The white paper on FFO approved by the National Association of Real
Estate Investment Trusts ("NAREIT") defines FFO as net income or loss
(computed in accordance with GAAP), excluding gains or losses from sales
of properties and items classified by GAAP as extraordinary, plus real
estate-related depreciation and amortization and impairment writedowns,
and after comparable adjustments for the Company's portion of these
items related to unconsolidated entities and joint ventures. The Company
computes FFO consistent with the standards established by NAREIT, which
may not be comparable to FFO reported by other REITs that do not define
the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company.

With respect to FFO, the Company believes that excluding the effect of
extraordinary items, real estate-related depreciation and amortization
and impairments, and the portion of these items related to
unconsolidated entities, all of which are based on historical cost
accounting and which may be of limited significance in evaluating
current performance, can facilitate comparisons of operating performance
between periods and between REITs, even though FFO does not represent an
amount that accrues directly to common shareholders. However, FFO may
not be helpful when comparing the Company to non-REITs.

EBITDA and EBITDAre

EBITDA represents net income or loss (computed in accordance with GAAP),
excluding interest expense, income tax, depreciation and amortization.
The white paper "Earnings Before Interest, Taxes, Depreciation and
Amortization for Real Estate" approved by NAREIT defines EBITDAre as
net income or loss (computed in accordance with GAAP), excluding
interest expense, income tax, depreciation and amortization, gains or
losses on the disposition of depreciated property (including gains or
losses on change of control), impairment write-downs of depreciated
property and of investments in unconsolidated affiliates caused by a
decrease in value of depreciated property in the affiliate, and after
comparable adjustments for the Company's portion of these items related
to unconsolidated affiliates. The Company computes EBITDAre
consistent with the standards established by NAREIT, which may not be
comparable to EBITDAre reported by other REITs that do not define
the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company.

With respect to EBITDA, the Company believes that excluding the effect
of non-operating expenses and non-cash charges, and the portion of these
items related to unconsolidated entities, all of which are also based on
historical cost accounting and may be of limited significance in
evaluating current performance, can help eliminate the accounting
effects of depreciation and amortization, and financing decisions and
facilitate comparisons of core operating profitability between periods
and between REITs, even though EBITDA also does not represent an amount
that accrues directly to common shareholders. In addition, the Company
believes the presentation of EBITDAre, which adjusts for certain
additional items including gains on sale of property, allows for
meaningful comparisons with other REITs and between periods and is more
indicative of the ongoing performance of its assets.

Adjusted FFO and Adjusted EBITDAre

The Company presents adjusted FFO (including adjusted FFO per
share/unit) and adjusted EBITDAre, which measures are adjusted
for certain additional items, including impairment losses (to the extent
included in EBITDAre), loss from extinguishment of debt,
acquisition transaction costs, costs associated with management
transitions or the departure of executive officers, costs associated
with the recognition of issuance costs related to the redemption of
preferred shares, non-cash ground rent and certain other items. The
Company excludes these items as it believes it allows for meaningful
comparisons with other REITs and between periods and is more indicative
of the ongoing performance of its assets. As with FFO, EBITDA and EBITDAre,
the Company's calculation of adjusted FFO and adjusted EBITDAre
may be different from similar adjusted measures calculated by other
REITs.

Hotel EBITDAre

The Company also presents hotel EBITDAre, which excludes the
effect of corporate-level expenses, non-cash items, and the portion of
these items related to unconsolidated entities. In addition, hotel EBITDAre
is presented on a pro forma basis to include the results of operations
of certain hotels under previous ownership acquired during the periods
presented and exclude the results of operations of any hotels sold or
closed for renovations during the periods presented. Results for the
hotels for periods prior to the Company's ownership were provided by
prior owners and have not been adjusted by the Company or audited by its
auditors. The Company believes that presenting pro forma hotel EBITDAre,
excluding the effect of corporate-level expenses, non-cash items, and
the portion of these items related to unconsolidated entities, provides
a more complete understanding of the operating results over which the
individual hotels and operators have direct control. The Company
believes these property-level results provide investors with
supplemental information on the ongoing operational performance of each
of the hotels and the effectiveness of the third-party management
companies operating the Company's business on a property-level basis.

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