FelCor Lodging Trust Incorporated (NYSE: FCH), today reported operating results for the quarter ended September 30, 2013.
- Adjusted FFO per share improved 75% to $0.14.
- Total hotel revenue for 52 comparable hotels (Same-store hotels excluding eight recently rebranded Wyndham hotels) increased 7.5% to $204.6 million.
- RevPAR for 52 comparable hotels increased 7.1%.
- Adjusted EBITDA increased by $1.6 million to $54.8 million, and Same-store Adjusted EBITDA increased by $4.4 million to $53.9 million.
- Net loss per share improved by $0.18 to $0.05.
- Sold five hotels in 2013, including three hotels since our second quarter earnings release, for a total of $102.7 million. Currently have executed contracts to sell three additional hotels this year.
- Reinstating quarterly common stock dividend; declares $0.02 per share fourth quarter dividend.
Commenting on operating results, Richard A. Smith, President and Chief Executive Officer of FelCor, said, “Our portfolio continues to produce solid results. Third quarter comparable Hotel EBITDA increased by almost 13%, led by a 53% increase for our newly acquired and recently redeveloped hotels. We are proud that RevPAR for our comparable portfolio once again outperformed the industry. Based on the outstanding condition of our portfolio and favorable industry fundamentals, our outlook for continued RevPAR growth remains optimistic.”
Mr. Smith added, “We continue to make substantial progress repositioning our portfolio. We have sold five hotels this year, for a total of 24 hotels since we began the current phase of dispositions, and have three hotels under contract. Through the combination of asset sales and EBITDA growth, we continue to strengthen our balance sheet, reduce leverage and grow stockholder value. As a result, we are pleased to announce that we have reinstated our common dividend.”
Our board has declared a $0.02 per share quarterly common stock dividend for the fourth quarter. The board has reinstated our common dividend recognizing the ongoing success of our portfolio repositioning and restructured balance sheet, as well as our positive funds available for distribution (“FAD”) this year. The dividend will be paid in January 2014. Future quarterly dividends will be based on estimates of FAD, reinvestment opportunities within our portfolio and taxable net income, among other things.
Summary of Third Quarter Hotel Results:
|Comparable hotels (52)|
|Total hotel revenue, in millions||$||204.6||$||190.3||7.5||%|
|Hotel EBITDA, in millions||$||52.0||$||46.2||12.7||%|
|Hotel EBITDA margin||25.4||%||24.3||%||119 bps|
|Wyndham Hotels (8)|
|Total hotel revenue, in millions||$||26.4||$||32.7||(19.1||)%|
|Hotel EBITDA, in millions||$||10.0||$||10.9||(8.4||)%|
|Hotel EBITDA margin||37.8||%||33.4||%||444 bps|
|Same-store hotels (60)|
|Total hotel revenue, in millions||$||231.0||$||223.0||3.6||%|
|Hotel EBITDA, in millions||$||62.0||$||57.1||8.7||%|
|Hotel EBITDA margin||26.9||%||25.6||%||126 bps|
RevPAR for our 37 comparable core hotels (45 core hotels that exclude the eight Wyndham hotels) increased 7.4% compared to the same period in 2012, while RevPAR for our 15 non-strategic hotels increased 5.5% compared to the same period in 2012.
RevPAR for our 52 comparable hotels (37 comparable core hotels plus 15 non-strategic hotels) was $117.18, a 7.1% increase compared to the same period in 2012. The increase reflects a 4.0% increase in ADR to $151.66 and a 3.0% increase in occupancy to 77.3%.
We believe comparable hotels (which excludes the Wyndham hotels) is the most appropriate measure to assess the ongoing operating performance of our portfolio. The eight Wyndham hotels were rebranded from Holiday Inn to Wyndham on March 1, 2013. RevPAR for those eight hotels declined 20.3% for the third quarter compared to the same period in 2012. This decline reflects the impact of transitioning brands and management companies, including related renovations. Wyndham Worldwide Corporation has guaranteed minimum annual NOI for the eight hotels. We have recorded a $5.2 million pro rata portion of the projected 2013 guaranty through September 30, 2013 (of which $2.4 million is for the third quarter 2013) as a reduction of Wyndham’s contractual management and other fees, which is reflected in Hotel EBITDA and Hotel EBITDA margin. In addition, our outlook assumes EBITDA for our Wyndham hotels that equates to the annual NOI guaranty level. We expect revenues at these hotels to show meaningful improvement as the transitional disruption subsides.
For our 52 comparable hotels, total hotel revenue increased 7.5% compared to the same period in 2012. Hotel EBITDA was $52.0 million, 12.7% higher than in the same period in 2012. Hotel EBITDA margin was 25.4% during the quarter, a 119 basis point increase from the same period in 2012.
RevPAR for our 60 Same-store hotels (52 comparable hotels plus the Wyndham hotels) was $114.19, a 2.8% increase compared to the same period in 2012. The increase reflects a 2.6% increase in ADR to $150.18 and a 0.2% increase in occupancy to 76.0%.
See page 15 for hotel portfolio composition and pages 16 and 22 for more detail on hotel portfolio operating data.
Summary of Third Quarter Operating Results:
|$ in millions, except for per share information||2013||2012||Change|
|Same-store Adjusted EBITDA||$||53.9||$||49.5||9.0||%|
|Adjusted FFO per share||$||0.14||$||0.08||$||0.06|
|Net loss per share||$||(0.05||)||$||(0.23||)||$||0.18|
Same-store Adjusted EBITDA was $53.9 million compared to $49.5 million for the same period in 2012. Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels prior to sale) was $54.8 million compared to $53.2 million for the same period in 2012.
Adjusted FFO was $17.1 million, or $0.14 per share, compared to $0.08 per share in 2012. Net loss attributable to common stockholders was $6.4 million, or $0.05 per share, for the quarter, compared to net loss of $28.7 million, or $0.23 per share, for the same period in 2012. The third quarter included $11.8 million and $9.9 million in net gains on asset sales in 2013 and 2012, respectively. The third quarter of 2012 also included $11.8 million in debt extinguishment charges.
Year-to-Date Operating Results:
RevPAR for 52 comparable hotels was $112.94, a 6.9% increase compared to the same period in 2012. The increase reflects a 4.3% increase in ADR to $150.15 and a 2.4% increase in occupancy to 75.2%. Total hotel revenue for the 52 comparable hotels increased 7.3% from the same period in 2012. RevPAR for our 37 comparable core hotels increased 7.5%, while RevPAR for our 15 non-strategic hotels increased 4.1%.
Same-store Adjusted EBITDA was $150.5 million compared to $138.9 million, for the same period in 2012. Hotel EBITDA margin was 26.1%, a 67 basis point increase from the same period in 2012. Adjusted EBITDA was $157.1 million compared to $160.8 million for the same period in 2012.
Adjusted FFO was $42.3 million, or $0.34 per share, for the nine months ended September 30, 2013, compared to $0.24 per share for the same period in 2012. Net loss attributable to common stockholders was $70.7 million, or $0.57 per share, for the nine months ended September 30, 2013, compared to a net loss of $64.7 million, or $0.52 per share, for the same period in 2012. Net loss for the nine months ended September 30, 2013 included a $19.1 million net gain on asset sales and a $27.7 million impairment charge. Net loss for the same period in 2012 included a $26.6 million net gain on asset sales, a $1.3 million impairment charge and $12.6 million in debt extinguishment charges.
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 18 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.
To date, we have sold 24 (five during 2013) of 39 non-strategic hotels as part of our portfolio repositioning plan. During the third quarter, we sold the 278-room Sheraton Suites Galleria - Atlanta for $21.0 million, the 223-room Embassy Suites - Baton Rouge for $20.0 million and the 244-room DoubleTree - Wilmington for $27.7 million. On October 10, we sold the 277-room Embassy Suites - Jacksonville for $10.0 million. These hotels’ operating performance is included in discontinued operations for the third quarter and year-to-date.
We are currently marketing six non-strategic hotels, of which we have agreed to sell three. We will continue using the sale proceeds to repay debt and reduce leverage. The remaining nine non-strategic hotels are owned by joint ventures, and we continue to advance toward agreements with our partners, and expect to begin marketing those properties in early 2014.
Capital expenditures at our operating hotels were $27.6 million during the quarter, including approximately $13.1 million for redevelopment projects and repositioning our Wyndham hotels.
During 2013, we are investing approximately $65 million on capital improvements and renovations, concentrated mostly at seven hotels, as part of our long-term capital plan. In addition, we are investing approximately $40 million on redevelopment projects (excluding the Knickerbocker) and repositioning our Wyndham hotels. Please see page 12 of this release for more detail on renovations.
In addition to the initial acquisition cost, we have spent $55.1 million (excluding capitalized interest) through September 30, 2013, to redevelop the 4+ star Knickerbocker Hotel. The project remains on budget, and all contracts for hard cost construction have been secured. We now expect the opening of the hotel to be summer of 2014. The hotel’s executive team is now in place and fully engaged in the sales and marketing efforts to ensure a successful and strong opening.
As of September 30, 2013, we had $1.6 billion of consolidated debt bearing a 6.3% weighted-average interest rate (113 basis points below last year) and a seven-year weighted-average maturity. We had $68.6 million of cash and cash equivalents as of September 30, 2013. In addition, we had $78.1 million of restricted cash, of which $64.9 million secures our Knickerbocker construction loan.
We have tightened our 2013 outlook to reflect third quarter operating results and updated timing of asset sales. Our previous outlook assumed selling nine hotels during 2013. As of today, we have sold three of those hotels. Our revised outlook assumes the sale of the six remaining hotels (three currently under contract to close during the fourth quarter and three to close at the end of the year). Our outlook continues to assume EBITDA for the Wyndham hotels equates to Wyndham’s annual NOI guaranty.
During 2013, we project:
- Comparable RevPAR will increase between 6.5%-7.0%;
- Adjusted EBITDA will be between $199.0 million and $200.5 million;
- Adjusted FFO per share will be between $0.37 and $0.38;
- Net loss attributable to FelCor will be between $63.5 million and $62.0 million; and
- Interest expense, including pro rata share from joint ventures, will be $107.5 million.
The following table reconciles our 2013 Adjusted EBITDA to Same-store Adjusted EBITDA outlook (in millions):
|Previous Adjusted EBITDA||$||197.0||$||203.5|
|Third Quarter Operations||—||
|Updated timing of asset sales(a)||2.0||(1.0||)|
|Current Adjusted EBITDA||$||199.0||$||
|Same-store Adjusted EBITDA (54 hotels)||$||178.0||$||
FelCor, a real estate investment trust, owns a diversified portfolio of primarily upper-upscale and luxury hotels that are located in major and resort markets. FelCor partners with leading hotel companies to operate its hotels, which are flagged under globally renowned brands and premier independent hotels.
The following information is presented in order to help our investors understand FelCor’s financial position as of and for the three and nine months ended September 30, 2013.
TABLE OF CONTENTS
|Consolidated Statements of Operations(a)||8|
|Consolidated Balance Sheets(a)||9|
|Consolidated Debt Summary||10|
|Schedule of Encumbered Hotels||11|
|Hotels Under Renovation or Redevelopment During 2013||12|
|Supplemental Financial Data||13|
|Hotel Portfolio Composition||15|
|Hotel Operating Statistics by Brand||16|
|Hotel Operating Statistics by Market||17|
|Historical Quarterly Operating Statistics||18|
|Non-GAAP Financial Measures||18|
|Consolidated Statements of Operations|
(in thousands, except per share data)
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|Hotel operating revenue:|
|Food and beverage||33,460||31,968||113,380||103,578|
|Other operating departments||12,238||11,947||35,929||37,246|
|Hotel departmental expenses:|
|Food and beverage||28,513||27,609||91,061||84,250|
|Other operating departments||5,660||5,440||16,990||16,515|
|Other property-related costs||61,153||59,766||181,942||176,050|
|Management and franchise fees||9,272||10,425||27,568||30,787|
|Taxes, insurance and lease expense||25,957||24,771||73,209||70,257|
|Depreciation and amortization||30,124||30,050||90,407||87,305|
|Total operating expenses||216,953||212,810||675,634||625,181|
|Interest expense, net||(25,996||)||(30,568||)||(79,053||)||(91,013||)|
|Gain on involuntary conversion, net||21||—||21||—|
|Loss before equity in income from unconsolidated entities||(10,365||)||(29,314||)||(68,705||)||(69,167||)|
|Equity in income from unconsolidated entities||2,100||1,536||4,095||2,674|
|Loss from continuing operations||(8,265||)||(27,778||)||(64,610||)||(66,493||)|
|Income from discontinued operations||12,054||8,223||18,999||30,105|
|Net income (loss)||3,789||(19,555||)||(45,611||)||(36,388||)|
|Net loss (income) attributable to noncontrolling interests in other partnerships||(591||)||386||3,621||440|
|Net loss attributable to redeemable noncontrolling interests in FelCor LP||32||144||352||329|
|Net income (loss) attributable to FelCor||3,230||(19,025||)||(41,638||)||(35,619||)|
|Net loss attributable to FelCor common stockholders||$||(6,448||)||$||(28,703||)||$||(70,672||)||$||(64,653||)|
|Basic and diluted per common share data:|
|Loss from continuing operations||$||(0.14||)||$||(0.30||)||$||(0.72||)||$||(0.76||)|
|Basic and diluted weighted average common shares outstanding||123,817||123,640||123,815||123,648|
|Consolidated Balance Sheets|
|Investment in hotels, net of accumulated depreciation of $931,375 and $929,298 at September 30, 2013 and December 31, 2012, respectively||$||1,672,413||$||1,794,564|
|Investment in unconsolidated entities||51,069||55,082|
|Hotel held for sale||9,684||—|
|Cash and cash equivalents||68,589||45,745|
|Accounts receivable, net of allowance for doubtful accounts of $221 and $469 at September 30, 2013 and December 31, 2012, respectively||38,892||25,383|
|Deferred expenses, net of accumulated amortization of $18,690 and $13,820 at September 30, 2013 and December 31, 2012, respectively||30,921||34,262|
|Liabilities and Equity|
|Debt, net of discount of $6,181 and $10,318 at September 30, 2013 and December 31, 2012, respectively||$||1,648,165||$||1,630,525|
|Accrued expenses and other liabilities||163,464||138,442|
|Commitments and contingencies|
|Redeemable noncontrolling interests in FelCor LP, 618 and 621 units issued and outstanding at September 30, 2013 and December 31, 2012, respectively||3,804||2,902|
|Preferred stock, $0.01 par value, 20,000 shares authorized:|
|Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,011, issued and outstanding at September 30, 2013 and December 31, 2012||309,362||309,362|
|Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at September 30, 2013 and December 31, 2012||169,412||169,412|
|Common stock, $0.01 par value, 200,000 shares authorized; 124,126 and 124,117 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively||1,241||1,241|
|Additional paid-in capital||2,355,086||2,353,581|
|Accumulated other comprehensive income||25,447||26,039|
|Total FelCor stockholders’ equity||324,908||394,667|
|Noncontrolling interests in other partnerships||23,476||27,352|
|Total liabilities and equity||$||2,172,362||$||2,202,433|
|Consolidated Debt Summary|
(dollars in thousands)
|Line of credit||9||LIBOR + 3.375||June 2016(a)||$||73,000||$||56,000|
|Hotel mortgage debt|
|Mortgage debt(b)||5||6.66||June - August 2014||63,877||65,431|
|Mortgage debt||1||5.81||July 2016||10,032||10,405|
|Mortgage debt(b)||4||4.95||October 2022||126,839||128,066|
|Mortgage debt||1||4.94||October 2022||31,832||32,176|
|Senior secured notes||11||10.00||October 2014||227,724||223,586|
|Senior secured notes||6||6.75||June 2019||525,000||525,000|
|Senior secured notes||9||5.625||March 2023||525,000||525,000|
|Other(c)||—||LIBOR + 1.25||May 2016||64,861||64,861|
|Schedule of Encumbered Hotels|
(dollars in millions)
|Consolidated||September 30, 2013|
|Line of credit||$||73||Charleston Mills House - WYN, Charlotte SouthPark - DT, Dana Point - DT, Houston Medical Center - WYN, Mandalay Beach - ES, Miami International Airport - ES, Philadelphia Historic District - WYN, Pittsburgh University Center - WYN and Santa Monica at the Pier - WYN|
|CMBS debt(a)||$||64||Atlanta Airport - ES, Austin - DTGS, BWI Airport - ES, Orlando Airport - HI and Phoenix Biltmore - ES|
|CMBS debt||$||10||Indianapolis North - ES|
|CMBS debt(a)||$||127||Birmingham - ES, Ft. Lauderdale - ES, Minneapolis Airport - ES and Napa Valley - ES|
|CMBS debt||$||32||Deerfield Beach - ES|
|Senior secured notes (10.00%)||$||228||Atlanta Airport - SH, Boston Beacon Hill - WYN, Myrtle Beach Resort - ES, Nashville Opryland - Airport - HI, New Orleans French Quarter - WYN, Orlando Walt Disney World® - DT, San Diego Bayside - WYN, San Francisco Waterfront - ES, San Francisco Fisherman’s Wharf - HI, San Francisco Union Square - MAR and Toronto Airport - HI|
|Senior secured notes (6.75%)||$||525||Boston Copley - FMT, Indian Wells Esmeralda Resort & Spa - REN, LAX South - ES, Morgans, Royalton and St. Petersburg Vinoy Resort & Golf Club - REN|
|Senior secured notes (5.625%)||$||525||Atlanta Buckhead - ES, Boston Marlboro - ES, Burlington - SH, Dallas Love Field - ES, Milpitas - ES, Myrtle Beach Resort - HIL, Orlando South - ES, Philadelphia Society Hill - SH and SF South San Francisco - ES|
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|Improvements and additions to majority-owned hotels||$||27,433||$||26,636||$||74,456||$||99,985|
|Partners’ pro rata share of additions to consolidated joint venture hotels||(126||)||(190||)||(434||)||(819||)|
|Pro rata share of additions to unconsolidated hotels||299||440||1,101||1,804|
Total additions to hotels(a)
Hotels Under Renovation or Redevelopment During 2013
|LAX South - ES||guestrooms||Sep-2012||Feb-2013|
|Myrtle Beach Resort-HIL||guestrooms||Oct-2012||Mar-2013|
|Napa Valley-ES||public areas(a)||Nov-2012||Mar-2013|
|Mandalay Beach-ES||public areas, meeting rooms, F&B(b)||Jan-2013||May-2013|
|San Francisco Waterfront-ES||public areas||Feb-2013||May-2013|
|Santa Monica Beach - at the Pier-WYN||guestrooms, corridors, public areas||May-2013||Sep-2013|
|Ft. Lauderdale-ES||public areas||Aug-2013||Nov-2013|
|Orlando - Walt Disney World Resort-DT||guestrooms, corridors(c)||May-2013||Nov-2013|
|Houston Medical Center-WYN||guestrooms, corridors, public areas||Jul-2013||Dec-2013|
|Philadelphia - Historic District-WYN||guestrooms, corridors, public areas||Aug-2013||Jan-2014|
|Charleston Mills House-WYN||guestrooms, corridors, public areas||Aug-2013||Jan-2014|
|Morgans||guestroom addition, public areas, fitness center, re-concept F&B||Feb-2012||Aug-2013|
|Guestroom renovations were completed in April 2012.|
|Guestroom renovations were completed in May 2012.|
|Public area renovations were completed in June 2012.|
|Supplemental Financial Data|
(in thousands, except per share data)
|September 30,||December 31,|
Total Enterprise Value
|Common shares outstanding||124,126||124,117|
|Combined shares and units outstanding||124,744||124,738|
|Common stock price||$||6.16||$||4.67|
|Series A preferred stock(a)||309,362||309,362|
|Series C preferred stock(a)||169,412||169,412|
|Noncontrolling interests of consolidated debt||(2,742||)||(2,810||)|
|Pro rata share of unconsolidated debt||73,436||74,198|
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