Winston Hotels, Inc. (NYSE: WXH), a real estate investment trust ('REIT') and owner of premium limited-service, upscale extended-stay and full-service hotels, today announced results for the three and nine months ended September 30, 2006. In addition, the company raised its guidance for 2006.
2006 Third Quarter Highlights and Recent Events
• Improved FFO available to common shareholders to $0.35 per share, exceeding First Call consensus analyst expectations by $0.02;
• Achieved net income available to common shareholders per share of $0.41;
• Increased EBITDA, excluding unusual charges, by $4.3 million, or 34.3 percent, to $16.9 million;
• Improved same store RevPAR by 10.9 percent;
• Posted same store operating margin growth of 100 basis points;
• Sold two hotels for total aggregate net proceeds of $19.2 million, resulting in an aggregate gain on sale, net of minority interest, of $6.9 million;
• Raised full-year guidance for FFO available to common shareholders to $0.96 to $0.98 per share, compared to $0.91 to $0.96 previously forecasted. Excluding non-recurring debt extinguishment expenses as well as certain non-cash charges, FFO available to common shareholders is expected to be $1.12 to $1.14, compared to $1.07 to $1.12 previously forecasted;
• Acquired the 121-room Courtyard by Marriott in St. Charles, Ill. and announced that it had entered into definitive agreements to acquire two hotels in New York, NY; and
• Opened a 121-room Hilton Garden Inn in Akron, Ohio on November 2, and expects to open a 142-room Homewood Suites in Princeton, N.J., in mid-November.
2006 Third Quarter Financial Results
Net income available to common shareholders was $11.4 million for the 2006 third quarter, or $0.41 per share, compared to net loss available to common shareholders of ($8.7) million, or ($0.33) per share, for the same period in 2005. Net income available to common shareholders for the 2006 third quarter included a gain on sale, net of minority interest, of approximately $6.9 million, or $0.24 per share.
Net loss available to common shareholders for the 2005 third quarter included a non-cash impairment charge totaling $12.4 million, net of minority interest. Net income available to common shareholders for the 2006 and 2005 third quarters would have been $4.6 million and $3.6 million, or $0.17 and $0.14 per share, respectively, excluding the effects of the gain and impairment charge.
Funds from operations ('FFO') available to common shareholders for the 2006 third quarter was $10.0 million, compared to ($3.7) million in the 2005 third quarter, or $0.35 and ($0.13) per share, respectively. Excluding the impairment charge, FFO available to common shareholders for the 2005 third quarter would have been approximately $8.7 million, or $0.32 per share. The company had approximately 28.9 million and 27.6 million fully diluted weighted average common shares outstanding in the 2006 and 2005 reporting periods, respectively.
Same Store Operating Statistics
Third quarter 2006 revenue per available room ('RevPAR') rose 10.9 percent for the company's 38 hotels that were open throughout each of the nine-month periods ended September 30, 2006 and 2005. The improvement was led by a 9.9 percent increase in average daily room rate ('ADR') and a 1.0 percent increase in occupancy. Third quarter 2006 operating margins increased 100 basis points to 44.4 percent from 43.4 percent in the same period a year earlier, despite higher utility costs and franchise fees. These costs were partially offset by improvements in managing labor costs, lower food and beverage costs and lower frequent traveler expenses.
'Our operators generated excellent results in the third quarter, continuing a trend of improving operating results over the past year,' said Robert W. Winston III, chief executive officer. 'We continue to work closely with our operators to monitor costs and find ways to improve margins.'
The following table details the company's same store operating statistics, for the 38 consolidated hotels that were open throughout each of the nine-month periods ended September 30, 2006 and 2005 (includes 36 wholly owned hotels and two hotels, the Chapel Hill, N.C. Courtyard by Marriott and the Ponte Vedra, Fla. Hampton Inn, that are owned through joint ventures).
Excluding the operating results of two hotels that were negatively impacted by renovations for the nine months ended September 30, 2006 and 2005, same store RevPAR increased 11.7 percent to $72.04 from $64.48; and same store operating margins rose 100 basis points to 44.7 percent from 43.7 percent.
2006 Fourth Quarter Outlook and Guidance
For the 2006 fourth quarter, the company forecasts net income per share available to common shareholders of $0.04 to $0.06. On a same-store basis, the company expects 2006 fourth quarter RevPAR to increase 6 to 8 percent, compared to the prior year's fourth quarter.
FFO per share available to common shareholders is expected to be between $0.21 and $0.23 for the 2006 fourth quarter.
2006 Annual Outlook and Guidance Revised
For the year ended December 31, 2006, the company forecasts net income per share available to common shareholders of $0.75 to $0.77. On a same-store basis, the company expects 2006 RevPAR to increase 9 to 10 percent from the prior year.
FFO per share available to common shareholders for the year ended December 31, 2006, is expected to be between $0.96 to $0.98, compared to a prior forecast of between $0.91 to $0.96. FFO per share available to common shareholders for the year ended December 31, 2006, excluding the non-recurring debt extinguishment expenses and certain non-cash charges, is expected to be between $1.12 and $1.14, compared to a prior forecast of $1.07 to $1.12. This guidance assumes no additional hotel acquisitions, dispositions, developments or placements of hotel debt during the remainder of 2006, other than those activities discussed below.
Hotel Development
On November 2, 2006, one of the company's joint ventures opened a 121-room Hilton Garden Inn in Akron, Ohio. The company holds a 41.7 percent ownership interest in the joint venture and has provided an additional preferred equity investment of $2.2 million. 'We believe this hotel's location adjacent to the Akron-Canton Airport and the significant amount of office space in close proximity will allow us to ramp up the property quickly,' said Joe Green, president and chief financial officer. 'In addition, we expect to open the 142-room, wholly owned $19.6 million Homewood Suites in Princeton, N.J. in mid-November, pending final inspections. Both properties are in strong markets, and we believe that both will quickly become leaders in their respective segments.'
The company also is progressing on schedule with the following development projects:
• The company expects to open a wholly owned, 119-room, $13.3 million Hilton Garden Inn in Wilmington, N.C., in the first quarter of 2007.
• The company has begun construction on a wholly owned, 79-room, $10.7 million Residence Inn in Roanoke, Va., with a planned opening in the 2007 fourth quarter.
• The company has begun construction on a 120-room, $14.6 million Courtyard by Marriott at Flagler Corporate Park in Jacksonville, Fla., scheduled to open in the 2007 fourth quarter. The property is owned by a joint venture in which the company holds a 48 percent equity interest.
• During the fourth quarter of 2006, the company plans to break ground on a 22-room expansion of the Chapel Hill, N.C. Courtyard by Marriott hotel. The expansion is scheduled for completion in the 2007 fourth quarter. The property is owned by a joint venture in which the company holds a 48.78 percent equity interest.
'Our development program has been timed well with the market,' Green said. 'We are optimistic about each of the hotels opening in the fourth quarter, as well as the other projects under construction. These new properties give us significant upside potential in solid markets. Land and construction costs remain high; however, with the housing boom abating somewhat, we believe constructions costs may move downward. We continue to look for potential development opportunities and to maintain an active acquisition pipeline.'
Hotel Acquisitions
As previously announced, in August the company acquired the 121-room Courtyard by Marriott in St. Charles, Ill. for $9.2 million from a private investment group. The hotel is located 35 miles west of downtown Chicago, Ill.
"We have expanded our portfolio strategy to include more locations in or near major urban markets,' Green pointed out. 'We believe we can attain attractive, risk-adjusted returns in these markets, while also diversifying our portfolio.'
In August, the company announced that it had entered into definitive agreements to acquire two hotels in New York City for a purchase price of $55 million each. Located in the Tribeca area and Chelsea area, the hotels currently are under construction and are expected to open late in the 2007 first quarter. Acquisition of the two hotels is subject to satisfactory completion of due diligence and other customary closing conditions. The company has been approved by Hilton Hotels Corporation for a Hilton Garden Inn franchise for the Tribeca hotel and negotiations are underway with Hilton to brand the Chelsea hotel as a Hilton Garden Inn.
'There is significant demand for mid-market properties in Manhattan, which has one of the highest barriers to new competition in the country' Green said. 'These hotels will carry one of the strongest mid-market brands in the industry and are well located in growing markets in the city. These hotels give us a significant urban presence in one of the nation's most dynamic markets.'
Hotel Dispositions
The company sold two hotels in the third quarter, for total aggregate net proceeds of $19.2 million, resulting in an aggregate gain on sale, net of minority interest, of $6.9 million, bringing to six the number of hotel dispositions for the year. The aggregate net proceeds for the six dispositions during 2006 total $42.6 million, resulting in an aggregate gain on sale, net of minority interest, of approximately $14.6 million.
'We have significantly upgraded our portfolio in the past 24 months through a combination of development, acquisitions and selective dispositions,' Green noted. 'We believe these actions make our portfolio stronger and better positioned for all phases of the hotel economic cycle. Although these sales may have a short-term negative effect on FFO, we believe that re-investing our capital into newer, better located properties will allow us to achieve better and higher sustainable growth,' Green said.
Hotel Debt Financing Program
In October 2006, the company sold $6.3 million of its $8.5 million commitment to lend funds to develop a 101-room Hampton Inn and Suites in Murfreesboro, Tenn. to General Electric Capital Corporation ('GECC'). Winston now holds a $2.2 million 'B' note. The 'B' note bears interest at 30-day LIBOR plus 6.05 percent, with an additional 3.86 percent accrual per annum. As of September 30, 2006, the company had funded $0.9 million of the whole loan; on October 2, 2006, GECC funded their pro rata share of $0.7 million to the company, leaving the company's funding of the 'B' note at $0.2 million. The company is obligated to fund the remaining $2.0 million balance of the 'B' note ratably over the projected construction period, which is expected to continue through the second quarter of 2007.
At the close of the 2006 third quarter, the company had 13 loans outstanding, representing loans receivable totaling $61.7 million and related interest receivable totaling $2.0 million.
'We continue to have an active loan pipeline,' Green pointed out. 'We are using our substantial expertise in development to make informed lending decisions.'
Strengthened Balance Sheet
In August 2006, the company successfully completed a public offering of its common stock, selling 2.4 million shares at $11.75 per share and generating net cash proceeds of $26.5 million. The proceeds were used to pay down the company's line of credit. At September 30, 2006, the outstanding balance under the line of credit was $13.0 million and the remaining available balance was $118.9 million, based upon the borrowing base created by the hotels that serve as collateral for the line. During the fourth quarter, the company expects to add an additional five hotels as collateral to the line, which would add approximately $40 million to the available balance.
Dividends
During the 2006 third quarter, the company declared a regular cash dividend of $0.15 per common share and a cash dividend of $0.50 per share of Series B Preferred Stock. 'The company's board of directors evaluates our dividend policy on a quarterly basis and is comfortable with the payout level of our dividends,' Winston said.
|
Post Release
Get Content
Email News Brief
Saved Articles
Advertising
Handheld
XML/RSS
Post News