Same-store revenue per available room at 80 consolidated hotels increased 5.7% for the quarter and 4.3% for the year.
• Exceeds Guidance
• Continues Debt Reduction
• Expands Asset Sale Program
FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the fourth quarter and year ended December 31, 2010.
Summary:
Same-store RevPAR for 80 consolidated hotels was $79.77, a 5.7% increase compared to the same period in 2009. This increase was driven by a 4.2% occupancy increase to 66.2% and a 1.5% average daily rate (“ADR”) increase to $120.47. RevPAR at the Fairmont Copley Plaza (not included in same-store RevPAR) increased 9.3% (to $172.43) and ADR increased 6.9% (to $249.18), compared to the same period in 2009.
“We ended the year on a very strong note. RevPAR for our portfolio grew more than 4% during the year, which was much better than we expected at the outset of 2010. Industry fundamentals continue to improve, and we don't see signs of those trends diminishing in the near future. ADR is becoming a larger portion of the RevPAR growth, and our flow-through from revenue to EBITDA continues to accelerate,” said Richard A. Smith, FelCor's President and Chief Executive Officer.
“Last year, we repaid more than $225 million of debt, extended maturities and acquired an iconic hotel in Boston at a substantial discount to replacement cost. FelCor's evolution continues, and we anticipate another active year in 2011. Although we have a strong portfolio today, we remain focused on continuing to improve overall portfolio quality, future growth rates and diversification through asset sales and selective acquisitions in our two target markets (New York and Washington, D.C.),” added Mr. Smith.
Hotel EBITDA was $48.4 million, compared to $41.1 million for the same period in 2009, a 17.9% increase. Hotel EBITDA represents EBITDA for 80 same-store consolidated hotels prior to corporate expenses and joint venture adjustments. Hotel EBITDA margin was 22.0%, a 240 basis point increase compared to the same period in 2009.
Adjusted EBITDA (which includes our pro rata share of joint ventures) was $45.0 million, compared to $30.4 million for the same period in 2009, a 47.8% increase, which was $3 million ahead of the high-end of our guidance. Same-store Adjusted EBITDA was $39.2 million, a 28.5% increase, compared to the prior year period. Same-store Adjusted EBITDA excludes EBITDA from hotels sold and acquired during the year.
Adjusted funds from operations (“FFO”) was a loss of $3.6 million or $0.04 per share, compared to an $18.7 million loss, or $0.29 per share, for the same period in 2009.
Net loss attributable to common stockholders was $103.1 million, or $1.08 per share, compared to a $60.4 million loss, or $0.96 per share, for the same period in 2009. Our 2010 net loss includes $86.8 million of impairment charges reflecting the reduced book values on ten non-strategic hotels (three hotels comprise the majority of the impairment), as well as a $7.0 million gain on extinguishment of debt related to the disposition of one hotel, a $1.6 million charge related to the repurchase of $40 million of our senior notes maturing 2011 and a $20.5 million gain related to the sale of our interest in a joint venture. Our 2009 net loss included a $1.1 million loss from debt extinguishment.
Full Year Operating Results:
Same-store RevPAR in 2010 was $85.58, a 4.3% increase compared to 2009. This increase was driven by a 5.8% occupancy increase to 70.5% and a 1.5% ADR decrease to $121.47, compared to 2009.
Hotel EBITDA was $217.8 million, compared to $206.2 million in 2009, a 5.6% increase. Hotel EBITDA represents EBITDA for 80 same-store consolidated hotels prior to corporate expenses and joint venture adjustments. Hotel EBITDA margin was 24.0%, a 32 basis point increase compared to 2009.
Adjusted EBITDA (which includes our pro rata share of joint ventures) was $188.1 million, compared to $178.9 million in 2009, a 5.1% increase. Same-store Adjusted EBITDA was $179.6 million. Same-store Adjusted EBITDA excludes EBITDA from hotels sold and acquired during the year.
Adjusted FFO was a loss of $7.6 million or $0.09 per share, compared to a positive $25.0 million, or $0.39 per share, in 2009.
Net loss attributable to common stockholders was $261.8 million, or $3.25 per share, compared to a $146.8 million loss, or $2.33 per share, in 2009. Our 2010 loss included $173.7 million of impairment charges, $59.4 million of gains from extinguishment of debt, and a $20.5 million gain related to the sale of our interest in an unconsolidated joint venture. Our 2009 loss included a $3.4 million impairment charge, a $910,000 gain from disposition, and a $1.7 million loss from debt extinguishment.
EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Adjusted FFO per share are all non-GAAP financial measures. See our discussion of “Non-GAAP Financial Measures” beginning on page 15 for a reconciliation of each of these measures to the most comparable GAAP financial measure and for information regarding the use, limitations and importance of these non-GAAP financial measures.
Balance Sheet:
At December 31, 2010, we had $1.5 billion of consolidated debt and $201.0 million of cash and cash equivalents. We reduced our consolidated debt balance by more than $225 million during 2010.
During the fourth quarter, we repurchased $40 million of our senior notes maturing in June 2011 in separate transactions using excess cash on hand. The remaining $46 million of notes will be repaid with cash on hand.
On December 29, the Embassy Suites in Deerfield, Illinois was transferred to the lender in full satisfaction of the $14 million loan securing that hotel. We recorded a $7.0 million gain on debt extinguishment (which reflects the principal amount of that loan in excess of the value of that hotel, as reflected on our balance sheet). The hotel generated $357,000 of EBITDA during the trailing-twelve-months ended November 2010 (the debt satisfied represents 39 times EBITDA).
We reinstated the current quarterly payment on our preferred stock. On January 31, 2011, we made current quarterly dividend payments on our Series A Cumulative Convertible Preferred Stock and our 8% Series C Cumulative Redeemable Preferred Stock. Seven quarters of preferred dividends remain in arrears, which we plan to pay with proceeds from future asset sales.
“We are very pleased with our accomplishments during the quarter. We reinstated the preferred dividends, as our cash flows have meaningfully improved since the depths of the downturn. We also created shareholder value through the deed-in-lieu of two hotels where the debt balance significantly exceeded the fair value of the hotels. We continue to strengthen our balance sheet by reducing debt and improving liquidity. Furthermore, we are in the process of reestablishing a line of credit with a syndicate of lenders. This line of credit will provide us with greater flexibility to manage our balance sheet while negotiating and completing strategic hotel acquisitions,” said Andrew J. Welch, FelCor's Executive Vice President and Chief Financial Officer.
Portfolio Management:
For the quarter and year ended December 31, 2010, we spent $11.6 million and $40.4 million, respectively, on capital improvements at our hotels (including our pro rata share of joint venture expenditures). As part of our long-term capital plan, we anticipate renovating between six and eight core properties each year. In 2011, we will start renovations at six hotels (Embassy Suites - Mandalay Beach Hotel & Resort, Embassy Suites - Napa Valley, Sheraton Society Hill - Philadelphia, Doubletree Guest Suites - Austin, Doubletree Guest Suites - Charlotte-SouthPark and the Renaissance Vinoy Resort & Golf Club), in addition to the more than $20 million redevelopment project at the Fairmont Copley Plaza that will refresh the property and implement various value-enhancing initiatives.
During the fourth quarter, we commenced the second phase of asset sales. This is part of our long-term strategic plan developed in 2006 to further improve our portfolio quality, growth rates and diversification and to reinvest sales proceeds into investments that generate higher returns and increase shareholder value. In October, we began marketing 14 hotels for sale, of which 11 are suburban or airport locations, and seven are located in Texas, Florida and Georgia. The 2010 RevPAR for these hotels was $70.86, or 27% below the remaining portfolio's hotel RevPAR ($90.09). In addition, we shortened the hold period on an additional 21 non-strategic hotels. We will continue to monitor the transaction environment and will bring these hotels to market at the appropriate time.
In December 2010, we sold the 443-room Sheraton Premiere Hotel at Tysons Corner in Vienna, Virginia for $84.5 million in cash. The property was owned in a joint venture between FelCor and Starwood Hotels & Resorts Worldwide Inc. We received $42.3 million in gross proceeds, and there was no debt associated with the hotel. The sale price, approximately $191,000 per key, represented approximately 23 times trailing-twelve-month hotel EBITDA.
Outlook:
Lodging demand growth continues to accelerate and new hotel supply growth is moderating. This supply and demand imbalance is resulting in both occupancy and average rate growth for FelCor and the industry. Our hotels are taking advantage of the growth in corporate and premium segments to remix the customer base and replace the lower rated business with those premium customers. Additionally, our hotels are opportunistically increasing rates where appropriate. New hotel supply growth continues to moderate and is below the historical, long-term average and also compares favorably to prior cycles. Overall, hotel rooms under construction in our markets represent only 1.0% of existing supply, which is below the industry average. These factors are expected to drive accelerating RevPAR and margin growth throughout 2011.
For 2011, we anticipate:
FelCor, a real estate investment trust, is the nation's largest owner of upper-upscale, all-suite hotels. FelCor owns interests in 82 properties located in major markets throughout 22 states. FelCor's diversified portfolio of hotels and resorts are flagged under global brands such as - Doubletree®, Embassy Suites Hotels®, Hilton®, Fairmont®, Marriott®, Renaissance®, Sheraton®, Westin® and Holiday Inn®.
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