Strategic Hotels Q2 RevPAR Up 12.6%

Company raises RevPAR, EBITDA and FFO guidance

Completes comprehensive balance sheet restructuring strategy

Strategic Hotels & Resorts, Inc. (NYSE: BEE) reported results for the second quarter ended June 30, 2011.  

Second Quarter Highlights

• Net income attributable to common shareholders was $39.5 million, or $0.22 per diluted share in the second quarter of 2011, compared with a net loss attributable to common shareholders of $47.4 million, or $0.42 per diluted share, in the second quarter of 2010.
• Comparable funds from operations (Comparable FFO) was $0.05 per diluted share compared with $0.04 per diluted share in the prior year period.    
• Comparable EBITDA was $42.5 million compared with $37.6 million in the prior year period, a 12.9 percent increase between periods.  
• United States same store revenue per available room (RevPAR) increased 12.6 percent, driven by a 4.0 percentage point increase in occupancy and a 6.5 percent increase in average daily rate (ADR), compared to the second quarter 2010.  Total revenue per available room (Total RevPAR) increased 11.5 percent between periods.
• North American same store RevPAR increased 11.5 percent, driven by a 3.9 percentage point increase in occupancy and a 5.7 percent increase in ADR.  Total RevPAR increased 10.8 percent between periods.
• Total North American RevPAR, which includes results from the recently acquired Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels, increased by 11.8 percent, driven by a 3.9 percentage point increase in occupancy and a 5.9 percent increase in ADR.  Total RevPAR increased 11.1 percent between periods.  
• United States same store EBITDA margins expanded 390 basis points compared to the second quarter of 2010.  North American same store and Total North American EBITDA margins both expanded 360 basis points.
• European RevPAR increased 25.9 percent (14.1 percent in constant dollars), driven by a 3.2 percentage point increase in occupancy and a 21.2 percent increase in ADR (9.8 percent increase in constant dollars) between periods. European Total RevPAR increased 22.4 percent in the second quarter over the prior year period (10.7 percent in constant dollars).  The European portfolio excludes results from the Paris Marriott Champs Elysees which was sold in April 2011.

"Strategic Hotels continues to far outpace both the industry average as well as our relevant competitors in nearly all vital measures of performance.  Impressive RevPAR and EBITDA performance can be attributed to the sophistication of our operational and asset management capabilities, the superior condition of our properties and the virtually zero new supply in the markets where we compete," said Laurence Geller, Chief Executive Officer of Strategic Hotels & Resorts, Inc.  "Importantly, this quarter saw the culmination of our aggressive and well-timed debt refinancing strategy.  The speed and efficiency with which we were able to refinance $1.3 billion in 2011 and 2012 maturities this year is a testament to both our team as well as our reputation in the credit markets.  As we look forward, we remain optimistic about the continued upswing in luxury demand and our resultant performance and are increasing guidance in our key metrics accordingly.  However, the current economic uncertainty mandates careful monitoring to determine if any future changes to our forecasts are warranted."

The company reported financial results for the six month period ending June 30, 2011 as follows:

• Net income attributable to common shareholders was $4.1 million, or $0.02 per diluted share, compared with a net loss attributable to common shareholders of $87.7 million, or $0.94 per diluted share, for the six month period ending June 30, 2010.
• Comparable funds from operations (Comparable FFO) was $0.03 per diluted share compared with a loss of $0.07 per diluted share in the six month period ending June 30, 2010.
• Comparable EBITDA was $71.2 million compared with $60.2 million for the six month period ending June 30, 2010, an increase of 18.4 percent.

Second Quarter 2011 Transaction Review

• On April 6th, the Company sold its leasehold interest in the Paris Marriott Champs Elysees hotel for euro 29.2 million ($41.6 million).  The Company also received euro 10.1 million ($14.5 million) of an additional euro 11.6 million ($16.6 million) owed related to the release of an existing leasehold guarantee and other closing adjustments for total proceeds of euro 40.8 million ($58.2 million).  
• On June 9th, the Company closed on an agreement to recapitalize the Fairmont Scottsdale Princess hotel in a newly formed joint venture with Walton Street Capital, L.L.C. (Walton Street Capital).  The recapitalization included an amendment and extension of the existing CMBS first mortgage debt through December 31, 2013, with the option for a second extension through April 9, 2015 upon satisfaction of certain terms and conditions.  The new joint venture retired the hotel's $40.0 million mezzanine debt and total debt on the property was reduced from $180.0 million to $133.0 million.  The Company's total investment in the joint venture was approximately $34.9 million, which includes its pro rata share of funding for the development of a new 23,000 square foot ballroom and adjoining meeting space at the hotel.  The Company and Walton Street Capital are equal partners in the joint venture, with the Company serving as the managing member and continuing to serve as the property's asset manager.  
• On June 24th, the Company closed on the acquisition of the 49 percent interest in the InterContinental Chicago hotel previously held by an affiliate of the Government of Singapore Investment Corporation (GIC) in exchange for approximately 10.8 million shares of the Company's common stock at an agreed upon issuance price of $6.50 per share, approximately $11.8 million of cash consideration, its pro rata share of working capital and certain reimbursements subject to post-closing adjustments.  
• On June 30th, the Company closed a new $300.0 million secured, revolving credit facility with an accordion feature allowing for additional borrowing capacity up to $400.0 million.  The facility's interest rate is based upon a leverage-based pricing grid ranging from LIBOR plus 275 basis points to LIBOR plus 375 basis points, with current pricing on any borrowings of LIBOR plus 300 basis points.  The facility matures in three years with a one-year extension option available to the Company.  The facility is secured by the Four Seasons Punta Mita, Marriott Lincolnshire, Ritz-Carlton Half Moon Bay and Ritz-Carlton Laguna Niguel hotels.  As part of the transaction the Company repaid the $76.5 million loan previously secured by the Ritz-Carlton Half Moon Bay hotel.

Subsequent Events

• On July 7th, the Company closed on an $85.0 million loan secured by the InterContinental Miami hotel.  The loan bears interest at a floating rate of LIBOR plus 350 basis points and has a seven-year term, including extensions.
• On July 14th, the Company closed on a $110.0 million loan secured by the Loews Santa Monica Beach hotel.  The loan bears interest at a floating rate of LIBOR plus 385 basis points and has a seven-year term, including extensions.
• On July 20th, the Company closed on a $130.0 million loan secured by the Four Seasons Washington, D.C. hotel.  The loan bears interest at a floating rate of LIBOR plus 315 basis points and has a five-year term, including extensions.
• On July 28th, the Company closed on a $145.0 million loan secured by the InterContinental Chicago hotel.  The loan bears interest at a fixed rate of 5.61% and has a ten-year term.

2011 Guidance

Based on the results of the first and second quarter and current forecasts for the remainder of the year, management is raising its full year guidance range for 2011.  For the year ending December 31, 2011, the Company anticipates that Comparable EBITDA will be in the range of $145.0 million to $155.0 million and Comparable FFO in the range of $0.08 and $0.14 per fully diluted share.  Management is also raising its guidance for North American same store RevPAR growth to be in the range between 8.0 percent and 9.5 percent and Total RevPAR growth to be in the range between 8.0 percent and 9.0 percent.

Portfolio Definitions

United States same store hotel comparisons for the second quarter 2011 are derived from the Company's hotel portfolio at June 30, 2011, consisting of properties located in the United States and held for five or more quarters, in which operations are included in the consolidated results of the Company.  As a result, same store comparisons contain 10 properties and exclude the Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels, which were acquired on March 11, 2011, and the unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels.

North American same store hotel comparisons for the second quarter 2011 are derived from the Company's hotel portfolio at June 30, 2011, consisting of properties located in North America and held for five or more quarters, in which operations are included in the consolidated results of the Company.  As a result, same store comparisons contain 11 properties, including the Four Seasons Punta Mita and excludes the Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels, which were acquired on March 11, 2011, and the unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels.

Total North American hotel comparisons are derived from the Company's hotel portfolio at June 30, 2011, consisting of properties in which operations are included in the consolidated results of the company, including the Four Seasons Jackson Hole and Four Seasons Silicon Valley hotels.

European hotel comparisons for the second quarter 2011 are derived from the Company's European owned and leased hotel properties at June 30, 2011, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg.  The Paris Marriott Champs Elysees, which was sold in the second quarter 2011, is excluded from the European portfolio comparisons.

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 17 properties with an aggregate of 7,762 rooms.

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