LaSalle Hotel Properties (NYSE:LHO) reported a net loss to common shareholders of $2.9 million, or ($0.10) per diluted share for the quarter ended March 31, 2005, compared to a net loss of $6.2 million, or ($0.25) per diluted share for the prior year period.
For the quarter ended March 31, 2005, the Company generated funds from operations ("FFO") of $8.3 million versus $3.2 million for the same period of 2004. On a per diluted share/unit basis, FFO for the first quarter was $0.27 versus $0.13 for the same period last year. The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for 2005's first quarter increased 82.0 percent to $13.5 million from $7.4 million during the prior year period.
Room revenue per available room ("RevPAR") for the quarter ended March 31, 2005 versus the same period in 2004 increased 10.3 percent to $97.80. Average daily rate ("ADR") rose to $152.45, an 8.9 percent improvement, while occupancy rose 1.3 percent to 64.2 percent from the prior year.
"RevPAR growth for the portfolio exceeded our expectations, primarily as a result of greater pricing power," said Jon Bortz, Chairman and Chief Executive Officer of LaSalle Hotel Properties. "Our urban hotels, especially our hotels located in Washington, D.C. and Boston led the portfolio's strong performance. Our resort-oriented hotels also achieved impressive RevPAR gains led by San Diego Paradise Point Resort and Seaview Resort. Both of these resorts are poised for a good year, as booking trends are encouraging and group demand is improving at both properties. Overall, we are pleased with our portfolio's results during the quarter, especially since there was significant disruption caused by the ongoing capital reinvestment programs occurring at a number of our hotels."
In addition to the strong RevPAR growth in the quarter, portfolio-wide food and beverage revenue increased 10.4 percent over prior year to $24.6 million. This growth was attributable to continued improvement in group and corporate demand at several of the Company's hotels. As a result, total revenue generated by the portfolio rose 8.5 percent over prior year to $78.3 million.
The Company's hotels generated $15.0 million of EBITDA for the quarter, which is an increase of $2.6 million or 21.3 percent over last year. First quarter EBITDA margins across the Company's portfolio grew 202 basis points from the prior year. The EBITDA margin increase was primarily due to the Company's continued ability to raise rates at its urban and resort properties.
"We are pleased with the margin improvement our portfolio generated during the first quarter, although as expected, we continue to experience above inflationary increases in wages and benefits, property taxes, liability insurance and energy," explained Mr. Bortz. "As we have historically done, we will continue to employ aggressive and creative asset management efforts in conjunction with our hotel management teams to minimize expense growth, create efficiencies and improve operating margins."
On January 6, 2005, the Company acquired the Hilton San Diego Gaslamp Quarter for $85.0 million. The upscale full-service hotel opened in 2000 and is located in the heart of the Gaslamp historic district in downtown San Diego. Featuring 282 well-appointed guestrooms, the hotel is operated pursuant to a Hilton franchise agreement and managed by Davidson Hotel Company. The hotel is located directly across the street from the San Diego Convention Center, two blocks from PETCO Park, the new home of the San Diego Padres baseball team, and just three miles from San Diego International Airport.
On January 10, 2005, LaSalle acquired the Grafton on Sunset for $25.5 million. The Grafton is an upscale full-service hotel with 108 guestrooms and suites. The Grafton is located in the heart of West Hollywood, adjacent to Beverly Hills and just a short distance from Melrose Avenue, Century City, Santa Monica, Marina Del Rey and downtown Los Angeles. The Grafton is managed by Outrigger Lodging Services ("OLS"), which also manages the Company's Le Montrose Suite Hotel, also located in West Hollywood.
On January 14, 2005, the Company announced its monthly dividend of $0.08 per share of its common shares of beneficial interest for each of the three months of January, February and March 2005. The January dividend was paid on February 15, 2005 to common shareholders of record on January 31, 2005; the February dividend was paid on March 15, 2005 to common shareholders of record on February 28, 2005; and the March dividend was paid on April 15, 2005 to common shareholders of record on March 31, 2005.
In the first quarter, the Company invested $16.8 million of capital throughout its portfolio, including $9.5 million for the redevelopment and repositioning of Lansdowne Resort and the amenity additions related to the development of the Golf Club at Lansdowne. The Company also continued its renovations and repositioning programs at the Sheraton Bloomington, the Westin City Center Dallas, Seaview Resort, Le Montrose Suite Hotel and the Chicago Marriott Downtown.
As of the end of the first quarter 2005, LaSalle Hotel Properties had total outstanding debt of $372.0 million, including its $14.4 million portion of the joint venture debt related to the Chicago Marriott Downtown. The Company's $300.0 million unsecured credit facility had $90.9 million outstanding as of March 31, 2005. Interest expense for the quarter was $4.0 million, resulting in a trailing 12-month Corporate EBITDA to interest coverage ratio of 5.2 times. As of March 31, 2005, total debt to trailing 12-month Corporate EBITDA equaled 4.1 times, one of the lowest debt to EBITDA ratios in the industry.
Subsequent Events
On April 15, 2005, the Company announced its monthly dividend of $0.08 per common share of beneficial interest for each of the three months of April, May and June 2005. The April dividend will be paid on May 13, 2005 to common shareholders of record on April 29, 2005; the May dividend will be paid on June 15, 2005 to common shareholders of record on May 31, 2005; and the June dividend will be paid on July 15, 2005 to common shareholders of record on June 30, 2005. This represents a 3.3 percent annualized yield based on the Company's closing share price on April 20, 2005.
2005 Outlook
"As evidenced by our portfolio's strong first quarter performance, we believe 2005 will continue to be an outstanding year for the hotel industry and LaSalle Hotel Properties," said Mr. Bortz. "Demand growth should continue to substantially outpace new room supply. As a result, we expect to continue to exercise pricing power in many of the markets where we own hotels. This should result in a meaningful improvement in RevPAR and property level EBITDA. However, we expect that continued above-inflationary increases in employee wages, benefits, insurance costs, property taxes and energy will limit our ability to further improve property-level margins beyond the 100 to 150 basis point increase we are currently forecasting for 2005."
The Company's current 2005 outlook is as follows:
Net Income $13.8 million - $16.1 million ($0.45 - $0.53
per diluted share)
FFO $61.6 million - $64.0 million ($2.01 - $2.09
per diluted share/unit);
EBITDA $96.0 million - $98.3 million; and
Capital Expenditures $60.0 million.
