FelCor Lodging Trust Incorporated (NYSE: FCH) reported operating results for the quarter ended March 31, 2014.
- RevPAR for 49 comparable hotels increased 7.0%.
- Adjusted FFO per share improved from $(0.01) to $0.03.
- Adjusted EBITDA increased by $3.4 million to $41.1 million, and Same-store Adjusted EBITDA increased by $6.1 million, or 18%, to $39.9 million.
- Net loss per share improved by $0.09 to $0.20.
- Two non-strategic hotels were sold for gross proceeds of $41 million. Five other hotels are under contract to sell for gross proceeds of $114 million.
“I am very pleased with our performance in the first quarter. We exceeded our expectations, and RevPAR for our comparable portfolio once again outperformed the industry,” said Richard A. Smith, President and Chief Executive Officer of FelCor. “We have positioned FelCor to deliver sustainable growth by assembling a high-quality and diverse portfolio, and we will continue to leverage our strengths to outperform the industry and drive superior stockholder value.”
Mr. Smith added, “We continue to make very good progress on our balance sheet restructuring and portfolio positioning, with two non-strategic hotels sold so far this year and five others under contract. During 2014, we plan to sell most of our 19 remaining non-strategic hotels and repay our 2014 debt maturities with the proceeds. In addition, the Knickerbocker redevelopment remains on schedule and budget, and we look forward to a strong opening in early fall.”
RevPAR for our 31 comparable core hotels (39 core hotels that exclude Wyndham hotels converted from Holiday Inn on March 1, 2013) increased 7.9% compared to the same period in 2013, while RevPAR for our 18 non-strategic hotels increased 4.5%.
RevPAR for our 49 comparable hotels (31 comparable core hotels plus 18 non-strategic hotels) was $112.02, a 7.0% increase compared to the same period in 2013. The increase reflects a 4.9% increase in ADR to $155.85 and a 2.0% increase in occupancy to 71.9%. Hotel EBITDA for our 49 comparable hotels was $44.5 million, a 14.4% increase, and Hotel EBITDA margin was 23.1% during the quarter, a 158 basis point increase.
The comparable hotels metric that excludes the recently-converted Wyndham hotels is the most appropriate measure to assess the current operating performance of our portfolio. RevPAR for those eight hotels converted to Wyndham in 2013 increased 2.7% for the first quarter compared to the same period in 2013, a significant improvement from the fourth quarter 2013 decline of 11.6%. We expect revenues at these hotels to grow meaningfully during 2014 and beyond, as the transitional disruption subsides. Wyndham Worldwide Corporation has guaranteed minimum annual NOI for the eight hotels over the ten-year term of the management agreement. We do not expect the amount funded by Wyndham under the 2014 guaranty to be significant.
RevPAR for our 57 Same-store hotels (49 comparable hotels plus the recently-converted Wyndham hotels) was $108.90, a 6.4% increase compared to the same period in 2013. The increase reflects a 4.8% increase in ADR to $154.36 and a 1.6% increase in occupancy to 70.5%.
See page 14 for hotel portfolio composition and pages 15 and 20 for more detailed hotel portfolio operating data.
Same-store Adjusted EBITDA was $39.9 million, compared to $33.8 million for the same period in 2013, an 18% increase. Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels prior to sale) was $41.1 million compared to $37.7 million for the same period in 2013, a 9.1% increase.
Adjusted FFO was $4.1 million, or $0.03 per share, compared to a loss of $773,000, or $0.01 per share, in 2013. Net loss attributable to common stockholders was $24.5 million, or $0.20 per share, in 2014, compared to a net loss of $35.9 million, or $0.29 per share, in 2013. Net loss in 2014 included a $5.8 million net gain on asset sales.
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 17 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.
During 2014, we sold a 232-room Embassy Suites hotel in Atlanta for $17.2 million and a 218-room Embassy Suites hotel in Bloomington, Minnesota, for $24 million. Since December 2010, we have sold 26 non-strategic hotels, for total gross proceeds of $573 million, as part of our portfolio repositioning program.
We also have agreed to sell a 208-room DoubleTree Suites in Charlotte, North Carolina, for $37 million and a 196-room DoubleTree Suites in Dana Point, California, for $32.9 million. In addition, we have executed contracts to sell three hotels for total gross proceeds of $44.0 million. Of the five hotels currently under contract, we expect four to sell during the second quarter and one to sell during the third quarter.
Following the sale of those hotels currently under contract, we will have 14 remaining non-strategic hotels. Of the remaining hotels, we are currently marketing three and expect to begin marketing another hotel later this year. We indirectly own 50% interests in the other 10 non-strategic hotels, which are owned by a joint venture with one of our brand-managers. We have made substantial progress with our partner to unwind that joint venture, as a consequence of which we would own five of those hotels outright (our joint venture partner would own the other five). When the joint venture is unwound (which we are targeting to occur in the second quarter), we intend to begin marketing those hotels immediately.
During the quarter, we invested $29.1 million in capital expenditures at our operating hotels, including approximately $11.0 million for redevelopment projects and repositioning our Wyndham hotels.
During 2014, we will invest approximately $60 million in capital improvements and renovations, concentrated at seven hotels, as part of our long-term capital plan. In addition, we are investing approximately $25 million to complete the repositioning of our Wyndham portfolio. Please see page 12 of this release for more detail on renovations.
We have invested $85.6 million (excluding initial acquisition costs and capitalized interest) through March 31, 2014 to redevelop the 4+ star Knickerbocker Hotel. Our total expected project cost remains $240 million (net of historic tax credits), and we expect the hotel to open in early fall.
The hotel’s executive team is in place and fully engaged to ensure a successful and strong opening. In early 2014, we finalized an agreement with Charlie Palmer, one of the nation’s most recognized master chefs, to manage the food and beverage operations. In addition, the Knickerbocker will be a member of Leading Hotels of the World, the largest collection of luxury hotels.
Our Knickerbocker Hotel joint venture raised $45 million by selling 3.5% preferred equity through the EB-5 immigrant investor program. The venture received $41.5 million in proceeds during the first quarter of 2014, and the remaining $3.5 million will be received as investors’ visas are approved by the government. We used our 95% share of the proceeds to repay borrowings under our line of credit.
As of March 31, 2014, we had $1.6 billion of consolidated debt bearing a 6.3% weighted-average interest rate and a six-year weighted-average maturity. We had $73.5 million of cash and cash equivalents and $67.0 million of restricted cash, of which $51.9 million secured our Knickerbocker construction loan.
During the quarter, we repaid two loans (each secured by a different hotel) maturing in 2014 totaling $28 million. We will use the proceeds from future asset sales to repay additional debt.
During the first quarter, we declared a $0.02 per share common stock dividend, which was paid in April. Future quarterly dividends will be based on funds available for distribution (“FAD”), reinvestment opportunities within our portfolio and taxable income, among other things.
Our 2014 outlook reflects continued strong fundamentals for the lodging industry. Our expected RevPAR growth reflects a premium to the industry because of both our high-quality diverse portfolio and continued strong growth at our acquired and recently redeveloped hotels. We have also increased our RevPAR and EBITDA outlook primarily to reflect better than expected first quarter results. Our outlook reflects selling all remaining 19 non-strategic hotels. Both the low and high end of our guidance assumes the sale of the five hotels currently under contract (four in the second quarter and one in the third quarter). The low end of our outlook assumes that the remaining 14 hotels are sold in the third quarter. The high end of our outlook assumes two hotels are sold in the third quarter, and the 12 remaining hotels are sold during the fourth quarter. Our outlook assumes EBITDA for the Wyndham hotels equates to the amount of Wyndham’s annual NOI guaranty.
During 2014, we expect:
- RevPAR for comparable hotels (49 hotels) will increase 6.5% to 7.5% and RevPAR for Same-store hotels (57 hotels) will increase 7.75% to 8.75%;
- Adjusted EBITDA will be in the range of $206.0 million to $217.0 million;
- Adjusted FFO per share will be $0.53 to $0.59;
- Net loss attributable to FelCor will be $30.0 million to $26.5 million; and
- Interest expense, including our pro rata share from joint ventures, will be $94.0 million to $97.5 million.
The following table reconciles our 2014 Adjusted EBITDA to Same-store Adjusted EBITDA outlook (in millions):
The decrease in the high end reflects the lost EBITDA that would be recognized with respect to four hotels that we previously assumed would sell in the third quarter and we now assume will be sold during the second quarter.
|(b)||EBITDA that is forecasted to be generated by 21 hotels that we assume will be sold from January 1, 2014 through the dates of sale.|
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 months ended March 31, 2014.
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 During 2014||12|
|Supplemental Financial Data||13|
|Hotel Portfolio Composition||14|
|Hotel Operating Statistics by Brand||15|
|Hotel Operating Statistics by Market||16|
|Historical Quarterly Operating Statistics||17|
|Non-GAAP Financial Measures||17|
|Consolidated Statements of Operations|
(in thousands, except per share data)
|Three Months Ended|
|Hotel operating revenue:|
|Food and beverage||39,785||36,943|
|Other operating departments||11,408||11,088|
|Hotel departmental expenses:|
|Food and beverage||31,187||30,246|
|Other operating departments||5,603||5,289|
|Other property-related costs||61,578||59,428|
|Management and franchise fees||9,013||9,163|
|Taxes, insurance and lease expense||23,633||22,164|
|Depreciation and amortization||29,601||29,755|
|Total operating expenses||217,187||210,196|
|Operating income (loss)||4,162||(1,259||)|
|Interest expense, net||(25,227||)||(26,285||)|
|Loss before equity in income from unconsolidated entities||(21,071||)||(27,544||)|
|Equity in income from unconsolidated entities||643||89|
|Loss from continuing operations||(20,428||)||(27,455||)|
|Income from discontinued operations||135||850|
|Loss before gain on sale of property||(20,293||)||(26,605||)|
|Gain on sale of property, net||5,457||—|
|Net loss attributable to noncontrolling interests in other partnerships||78||240|
|Net loss attributable to redeemable noncontrolling interests in FelCor LP||121||180|
|Preferred distributions - consolidated joint venture||(181||)||—|
|Net loss attributable to FelCor||(14,818||)||(26,185||)|
|Net loss attributable to FelCor common stockholders||$||(24,496||)||$||(35,863||)|
|Basic and diluted per common share data:|
|Loss from continuing operations||$||(0.20||)||$||(0.30||)|
|Basic and diluted weighted average common shares outstanding||124,146||123,814|
|Consolidated Balance Sheets|
|March 31,||December 31,|
|Investment in hotels, net of accumulated depreciation of $915,561 and $929,801 at March 31, 2014 and December 31, 2013, respectively||$||1,611,247||$||1,653,267|
|Investment in unconsolidated entities||44,634||46,943|
|Hotel held for sale||19,137||16,319|
|Cash and cash equivalents||73,526||45,645|
|Accounts receivable, net of allowance for doubtful accounts of $179 and $262 at March 31, 2014 and December 31, 2013, respectively||34,486||35,747|
|Deferred expenses, net of accumulated amortization of $21,360 and $20,362 at March 31, 2014 and December 31, 2013, respectively||27,635||29,325|
|Liabilities and Equity|
|Debt, net of discount of $3,190 and $4,714 at March 31, 2014 and December 31, 2013, respectively||$||1,640,628||$||1,663,226|
|Accrued expenses and other liabilities||152,103||150,738|
|Commitments and contingencies|
|Redeemable noncontrolling interests in FelCor LP, 618 units issued and outstanding at March 31, 2014 and December 31, 2013||5,583||5,039|
|Preferred stock, $0.01 par value, 20,000 shares authorized:|
|Series A Cumulative Convertible Preferred Stock, 12,880 shares, liquidation value of $322,004 and $322,011, issued and outstanding at March 31, 2014 and December 31, 2013, respectively||309,354||309,362|
|Series C Cumulative Redeemable Preferred Stock, 68 shares, liquidation value of $169,950, issued and outstanding at March 31, 2014 and December 31, 2013||169,412||169,412|
|Common stock, $0.01 par value, 200,000 shares authorized; 124,186 and 124,051 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively||1,242||1,240|
|Additional paid-in capital||2,354,613||2,354,328|
|Accumulated other comprehensive income||24,320||24,937|
|Total FelCor stockholders’ equity||262,647||290,929|
|Noncontrolling interests in other partnerships||24,204||23,301|
|Preferred equity in consolidated joint venture, liquidation value of $41,464||40,909||—|
|Total liabilities and equity||$||2,137,269||$||2,144,280|
|Consolidated Debt Summary|
(dollars in thousands)
|Line of credit||9||LIBOR + 3.375||June 2016(a)||$||93,000||$||88,000|
|Hotel mortgage debt|
|Mortgage debt(b)||3||6.58||July - August 2014||34,821||35,133|
|Mortgage debt||1||5.81||July 2016||9,772||9,904|
|Mortgage debt(b)||4||4.95||October 2022||125,871||126,220|
|Mortgage debt||1||4.94||October 2022||31,589||31,714|
|Senior secured notes||11||10.00||October 2014||230,714||229,190|
|Senior secured notes||6||6.75||June 2019||525,000||525,000|
|Senior secured notes||9||5.625||March 2023||525,000||525,000|
|Construction tranche||—||LIBOR + 4.00||May 2016||12,994||—|
Cash collateralized tranche
|—||LIBOR + 1.25||May 2016||51,867||64,861|
|Schedule of Encumbered Hotels|
(dollars in millions)
|Consolidated||March 31, 2014|
|Line of credit||$||93||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)||$||35||Austin - DTGS, BWI Airport - ES and Orlando Airport - HI|
|CMBS debt||$||10||Indianapolis North - ES|
|CMBS debt(a)||$||126||Birmingham - ES, Ft. Lauderdale - ES, Minneapolis Airport - ES and Napa Valley - ES|
|CMBS debt||$||32||Deerfield Beach - ES|
|Senior secured notes (10.00%)||$||231||Atlanta Airport - SH, Boston Beacon Hill - WYN, Myrtle Beach Resort - ES, Nashville Opryland - Airport - HI, New Orleans French Quarter - WYN, Orlando Walt Disney World® - DT, San Diego Bayside - WYN, San Francisco Waterfront - ES, San Francisco Fisherman’s Wharf - HI, San Francisco Union Square - MAR and Toronto Airport - HI|
|Senior secured notes (6.75%)||$||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%)||$||525||Atlanta Buckhead - ES, Boston Marlboro - ES, Burlington - SH, Dallas Love Field - ES, Milpitas - ES, Myrtle Beach Resort - HIL, Orlando South - ES, Philadelphia Society Hill - SH and SF South San Francisco - ES|
|Three Months Ended|
|Improvements and additions to majority-owned hotels||$||28,617||$||23,342|
|Partners’ pro rata share of additions to consolidated joint venture hotels||(93||)||(158||)|
|Pro rata share of additions to unconsolidated hotels||623||337|
|Total additions to hotels(a)||$||29,147||$||23,521|
Hotels Under Renovation During 2014
|Burlington - SH||guestrooms, exterior||Nov-2013||May-2014|
|San Francisco Fisherman’s Wharf - HI||guestrooms, public areas, F&B||Nov-2013||Mar-2014|
|San Diego - WYN(a)||guestrooms, public areas||Nov-2013||May-2014|
|San Francisco Waterfront-ES(b)||guestrooms, F&B||Dec-2013||
|LAX- ES(c)||public areas, F&B||Feb-2014||May-2014|
|New Orleans - WYN(a)||guestrooms, public areas||
|Dallas Love Field - ES||guestrooms, F&B||
|Nashville - HI||public areas, F&B||
|Ft. Lauderdale - ES(d)||guestrooms||
|Supplemental Financial Data|
(in thousands, except per share data)
|March 31,||December 31,|
Total Enterprise Value
|Common shares outstanding||124,186||124,051|
|Combined shares and units outstanding||124,804||124,669|
|Common stock price||$||9.04||$||8.16|
|Series A preferred stock(a)||309,354||309,362|
|Series C preferred stock(a)||169,412||169,412|
|Preferred equity - Knickerbocker joint venture, net(b)||38,864||—|
|Noncontrolling interests of consolidated debt||(2,694||)||(2,719||)|
|Pro rata share of unconsolidated debt||73,460||73,179|
|Cash, cash equivalents and restricted cash(c)||(140,573||)||(122,872||)|
|Total enterprise value (TEV)||$||2,979,950||$||2,890,140|
|Hotel Portfolio Composition|
The following table illustrates the distribution of same-store hotels.
2013 Hotel Operating
|Embassy Suites Hotels||18||4,982||$||255,744||$||81,062|
|Wyndham and Wyndham Grand(b)||8||2,528||103,931||35,046|
|Renaissance and Marriott||3||1,321||119,838||21,341|
|DoubleTree by Hilton and Hilton||3||802||41,106||12,621|
|Sheraton and Westin||2||673||37,996||10,174|
|Morgans and Royalton||2||285||34,340||3,514|
|San Francisco area||5||1,903||$||124,825||$||31,587|
|Los Angeles area||2||481||23,760||10,451|
|New York area||3||546||48,045||6,761|
|(a)||Hotel EBITDA is more fully described on page 24.|
|(b)||These hotels were converted to Wyndham on March 1, 2013.|
Excludes hotel held for sale as of March 31, 2014.
The following tables set forth occupancy, ADR and RevPAR for the three months ended March 31, 2014 and 2013, and the percentage changes therein for the periods presented, for our same-store Consolidated Hotels.
Hotel Operating Statistics by Brand
|Three Months Ended|
|Embassy Suites Hotels||76.8||74.1||3.7|
|Renaissance and Marriott||75.6||74.8||1.1|
|DoubleTree by Hilton and Hilton||64.4||59.8||7.8|
|Sheraton and Westin||56.4||58.2||(3.0||)|
|Morgans and Royalton||79.4||81.0||(2.0||)|
|Comparable core hotels (31)||72.2||70.9||1.8|
|Non-strategic hotels (18)(a)||71.3||69.7||2.3|
|Comparable hotels (49)||71.9||70.5||2.0|
|Wyndham and Wyndham Grand(b)||62.9||63.6||(1.0||)|
|Same-store hotels (57)||70.5||69.5||1.6|
|Three Months Ended|
|Embassy Suites Hotels||166.71||157.30||6.0|
|Renaissance and Marriott||236.72||221.01||7.1|
|DoubleTree by Hilton and Hilton||156.22||155.48||0.5|
|Sheraton and Westin||127.91||125.38||2.0|
|Morgans and Royalton||258.62||260.05||(0.5||)|
|Comparable core hotels (31)||176.24||166.29||6.0|
|Non-strategic hotels (18)(a)||117.30||114.77||2.2|
|Comparable hotels (49)||155.85||148.56||4.9|
|Wyndham and Wyndham Grand(b)||144.62||139.38||3.8|
|Same-store hotels (57)||154.36||147.30||4.8|
|Three Months Ended|
|Embassy Suites Hotels||128.06||116.56||9.9|
|Renaissance and Marriott||178.95||165.32||8.2|
|DoubleTree by Hilton and Hilton||100.65||92.96||8.3|
|Sheraton and Westin||72.20||72.93||(1.0||)|
|Morgans and Royalton||205.34||210.76||(2.6||)|
|Comparable core hotels (31)||127.25||117.93||7.9|
|Non-strategic hotels (18)(a)||83.62||80.00||4.5|
|Comparable hotels (49)||112.02||104.73||7.0|
|Wyndham and Wyndham Grand(b)||90.99||88.60||2.7|
|Same-store hotels (57)||108.90||102.31||6.4|
Hotel Operating Statistics by Market
|Three Months Ended|
|San Francisco area||72.0||74.3||(3.2||)|
|Los Angeles area||82.7||76.9||7.5|
|New York area||71.7||73.3||(2.2||)|
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