Completes Two Asset Sales in July 2016, Resulting in $245 Million Gross Proceeds
LaSalle Hotel Properties (NYSE: LHO) today announced results for the quarter ended June 30, 2016. The Company’s results include the following:
Second Quarter Year-to-Date 2016 2015 % Var. 2016 2015 % Var. ($'s in millions except per share/unit data) Net income attributable to common shareholders $ 55.2 $ 55.8 -1.1 % $ 61.2 $ 55.5 10.3 % Net income attributable to common shareholders per diluted share $ 0.49 $ 0.49 0.0 % $ 0.54 $ 0.49 10.2 % RevPAR $ 223.13 $ 219.31 1.7 % $ 195.56 $ 192.11 1.8 % Hotel EBITDA Margin(1) 38.6 % 38.3 % 33.4 % 33.0 % Hotel EBITDA Margin Growth(1) 31 bps 45 bps Total Revenue $ 351.1 $ 341.4 2.8 % $ 611.2 $ 592.2 3.2 % EBITDA(1) $ 127.6 $ 124.4 2.6 % $ 190.5 $ 178.8 6.5 % Adjusted EBITDA(1) $ 130.5 $ 125.2 4.2 % $ 195.5 $ 182.4 7.2 % FFO(1) $ 104.1 $ 101.8 2.3 % $ 157.7 $ 144.4 9.2 % Adjusted FFO(1) $ 107.0 $ 102.6 4.3 % $ 162.7 $ 147.9 10.0 % FFO per diluted share/unit(1) $ 0.92 $ 0.90 2.2 % $ 1.39 $ 1.27 9.4 % Adjusted FFO per diluted share/unit(1) $ 0.95 $ 0.91 4.4 % $ 1.44 $ 1.31 9.9 %
“During the second quarter, our team and operators continued to execute at record levels, delivering hotel EBITDA growth and a best-in-class 38.6 percent hotel EBITDA margin,” said Michael D. Barnello, President and Chief Executive Officer of LaSalle Hotel Properties. “Concurrently, we have been able to further strengthen the Company through a preferred equity raise and by completing two non-core asset dispositions.”
“The preferred equity offering boasts the lowest-ever coupon for a lodging REIT. The sale of Indianapolis Marriott Downtown capped off an excellent long-term investment for us. We owned the hotel for 12 years and it generated a 13.7 percent unleveraged IRR. We also sold our non-core junior mezzanine loan on Shutters on the Beach and Casa Del Mar at par. Each of these transactions has reduced our debt, and as a result our debt-to-EBITDA ratio, further bolstering our already solid balance sheet,” added Mr. Barnello.
Second Quarter Results
- Net Income: The Company’s net income attributable to common shareholders was $55.2 million.
- RevPAR: Room revenue per available room (“RevPAR”) increased 1.7 percent to $223.13, primarily driven by a 2.0 percent growth in occupancy to 88.7 percent. Average daily rate (“ADR”) was just below the prior year at $251.58.
- Hotel EBITDA Margin: The Company’s hotel EBITDA margin expanded by 31 basis points from the comparable prior year period to 38.6 percent.
- Adjusted EBITDA: The Company’s adjusted EBITDA was $130.5 million, an increase of 4.2 percent over the second quarter of 2015.
- Adjusted FFO: The Company generated adjusted FFO of $107.0 million, or $0.95 per diluted share/unit, compared to $102.6 million, or $0.91 per diluted share/unit, for the comparable prior year period, a per share/unit increase of 4.4 percent.
Year-to-Date Results
- Net Income: The Company grew net income attributable to common shareholders by 10.3 percent to $61.2 million.
- RevPAR: RevPAR increased 1.8 percent to $195.56, primarily driven by a 2.0 percent growth in occupancy to 82.3 percent. ADR was just below the prior year at $237.62.
- Hotel EBITDA Margin: The Company’s hotel EBITDA margin expanded by 45 basis points from the comparable prior year period to 33.4 percent.
- Adjusted EBITDA: The Company’s adjusted EBITDA was $195.5 million, an increase of 7.2 percent over the first half of 2015.
- Adjusted FFO: The Company generated adjusted FFO of $162.7 million, or $1.44 per diluted share/unit, compared to $147.9 million, or $1.31 per diluted share/unit, for the comparable prior year period, a per share/unit increase of 9.9 percent.
Subsequent Events: Asset Sales
On July 8, 2016, the Company sold its junior mezzanine loan (the “Mezzanine Loan”) secured by equity interests in two hotels: Shutters on the Beach and Casa Del Mar, in Santa Monica, California. The Mezzanine Loan sold for $80.0 million, which was the principal amount. The Company originally provided the Mezzanine Loan on July 20, 2015.
On July 14, 2016, the Company sold the Indianapolis Marriott Downtown for $165.0 million, generating a 13.7 percent unleveraged IRR. The Company acquired the hotel in February 2004 for $106.0 million. For RevPAR, hotel EBITDA, and hotel EBITDA margin detail for this hotel for the trailing four quarters, please refer to the supporting table at the end of this release.
Proceeds from both transactions were used to reduce borrowings on the Company’s senior unsecured credit facility and for general corporate purposes.
Capital Markets Activities
During the quarter, the Company issued 6,000,000 6.3 percent Series J Cumulative Redeemable Preferred Shares for gross proceeds of $150.0 million. The 6.3 percent coupon is the lowest-ever for a lodging REIT.
Capital Investments
During the quarter, the Company invested $21.2 million of capital in its hotels. As a result of fewer planned renovations at the end of 2016 and the sale of Indianapolis Marriott Downtown, the Company is lowering its 2016 anticipated capital expenditures to a range of $110.0 million to $130.0 million. Previously, the Company anticipated investing between $130.0 million and $170.0 million of capital in its hotels during 2016.
Balance Sheet
As of June 30, 2016, the Company had total outstanding debt of $1.3 billion, including $190.0 million outstanding on its senior unsecured credit facility. Total net debt to trailing 12 month Corporate EBITDA (as defined in the financial covenant section of the Company’s senior unsecured credit facility) was 3.2 times as of June 30, 2016 and its fixed charge coverage ratio was 5.6 times. For the second quarter, the Company’s weighted average interest rate was 2.5 percent, compared to 3.3 percent during the same prior year period. As of June 30, 2016, the Company had $43.1 million of cash and cash equivalents on its balance sheet and capacity of $582.4 million available on its credit facilities.
Pro forma for the sale of Indianapolis Marriott Downtown and the Mezzanine Loan, the Company’s total net debt to trailing 12 month Corporate EBITDA is 2.9 times, with $98.1 million of cash and cash equivalents on its balance sheet and capacity of $772.4 million available on its credit facilities.
The Company did not acquire any common shares during the second quarter of 2016 or to date during the third quarter of 2016. The Company has $69.8 million of capacity remaining in its share repurchase program.
Dividend
On June 15, 2016, the Company declared a second quarter 2016 dividend of $0.45 per common share of beneficial interest. The dividend represents an annual run rate of $1.80 per share and a 7.0 percent yield based on the closing share price on July 19, 2016.
Appointment of Kenneth G. Fuller as Chief Financial Officer
On April 25, 2016, Kenneth G. Fuller was appointed as the Company’s Executive Vice President, Chief Financial Officer, Secretary, and Treasurer. Mr. Fuller returned to the Company after founding Vine Investment Partners (“Vine”) – a real estate company focused on acquiring and developing multi-family residential properties and hotels. Prior to founding Vine, Mr. Fuller served the Company in various positions dating back to 2000, including most recently as Treasurer from 2011 to 2015.
About LaSalle Hotel Properties
LaSalle Hotel Properties is a leading multi-operator real estate investment trust. The Company owns 46 properties, which are upscale, full-service hotels, totaling approximately 11,450 guest rooms in 13 markets in nine states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale, full-service hotels located in urban, resort and convention markets. LaSalle Hotel Properties seeks to grow through strategic relationships with premier lodging groups, including Hilton Hotels Corporation, Marriott International, Starwood Hotels & Resorts Worldwide, Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, Commune Hotels and Resorts, Destination Hotels, Davidson Hotel Company, Kimpton Hotel & Restaurant Group, LLC, Accor, HEI Hotels & Resorts, JRK Hotel Group, Inc., Viceroy Hotel Group, Highgate Hotels and Access Hotels & Resorts.
LASALLE HOTEL PROPERTIES | ||||||||||||||||
Consolidated Statements of Operations and Comprehensive Income | ||||||||||||||||
(in thousands, except share data) |
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(unaudited) |
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For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues: | ||||||||||||||||
Hotel operating revenues: | ||||||||||||||||
Room | $ | 245,286 | $ | 242,447 | $ | 426,706 | $ | 413,038 | ||||||||
Food and beverage | 79,025 | 75,480 | 135,372 | 136,395 | ||||||||||||
Other operating department | 24,457 | 21,560 | 45,100 | 39,577 | ||||||||||||
Total hotel operating revenues | 348,768 | 339,487 | 607,178 | 589,010 | ||||||||||||
Other income | 2,319 | 1,899 | 4,013 | 3,179 | ||||||||||||
Total revenues | 351,087 | 341,386 | 611,191 | 592,189 | ||||||||||||
Expenses: | ||||||||||||||||
Hotel operating expenses: | ||||||||||||||||
Room | 58,963 | 55,998 | 111,254 | 104,719 | ||||||||||||
Food and beverage | 49,994 | 49,069 | 92,902 | 94,187 | ||||||||||||
Other direct | 4,973 | 4,927 | 8,656 | 8,847 | ||||||||||||
Other indirect | 80,283 | 78,877 | 152,198 | 148,879 | ||||||||||||
Total hotel operating expenses | 194,213 | 188,871 | 365,010 | 356,632 | ||||||||||||
Depreciation and amortization | 48,841 | 45,916 | 96,469 | 88,794 | ||||||||||||
Real estate taxes, personal property taxes and insurance | 16,919 | 16,352 | 33,110 | 32,286 | ||||||||||||
Ground rent | 4,108 | 4,011 | 7,921 | 7,673 | ||||||||||||
General and administrative | 7,643 | 6,501 | 13,473 | 12,768 | ||||||||||||
Acquisition transaction costs | 0 | (3 | ) | 0 | 444 | |||||||||||
Other expenses | 2,327 | 1,259 | 4,505 | 3,604 | ||||||||||||
Total operating expenses | 274,051 | 262,907 | 520,488 | 502,201 | ||||||||||||
Operating income | 77,036 | 78,479 | 90,703 | 89,988 | ||||||||||||
Interest income | 1,676 | 1 | 3,330 | 7 | ||||||||||||
Interest expense | (11,482 | ) | (13,895 | ) | (23,349 | ) | (27,540 | ) | ||||||||
Income before income tax expense | 67,230 | 64,585 | 70,684 | 62,455 | ||||||||||||
Income tax expense | (7,610 | ) | (5,574 | ) | (1,990 | ) | (706 | ) | ||||||||
Net income | 59,620 | 59,011 | 68,694 | 61,749 | ||||||||||||
Net income attributable to noncontrolling interests: | ||||||||||||||||
Noncontrolling interests in consolidated entities | (8 | ) | (8 | ) | (8 | ) | (8 | ) | ||||||||
Noncontrolling interests of common units in Operating Partnership | (81 | ) | (139 | ) | (96 | ) | (154 | ) | ||||||||
Net income attributable to noncontrolling interests | (89 | ) | (147 | ) | (104 | ) | (162 | ) | ||||||||
Net income attributable to the Company | 59,531 | 58,864 | 68,590 | 61,587 | ||||||||||||
Distributions to preferred shareholders | (4,355 | ) | (3,042 | ) | (7,397 | ) | (6,084 | ) | ||||||||
Net income attributable to common shareholders | $ | 55,176 | $ | 55,822 | $ | 61,193 | $ | 55,503 | ||||||||
LASALLE HOTEL PROPERTIES | ||||||||||||||||
Consolidated Statements of Operations and Comprehensive Income - Continued | ||||||||||||||||
(in thousands, except share data) |
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(unaudited) |
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For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Earnings per Common Share - Basic: | ||||||||||||||||
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares |
$ | 0.49 | $ | 0.49 | $ | 0.54 | $ | 0.49 | ||||||||
Earnings per Common Share - Diluted: | ||||||||||||||||
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares | $ | 0.49 | $ | 0.49 | $ | 0.54 | $ | 0.49 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 112,784,976 | 112,728,085 | 112,766,734 | 112,688,122 | ||||||||||||
Diluted | 113,113,253 | 113,141,908 | 113,119,556 | 113,094,640 | ||||||||||||
Comprehensive Income: | ||||||||||||||||
Net income | $ | 59,620 | $ | 59,011 | $ | 68,694 | $ | 61,749 | ||||||||
Other comprehensive income: | ||||||||||||||||
Unrealized (loss) gain on interest rate derivative instruments | (5,971 | ) | 26 | (20,223 | ) | (4,372 | ) | |||||||||
Reclassification adjustment for amounts recognized in net income | 1,730 | 1,069 | 3,510 | 2,139 | ||||||||||||
55,379 | 60,106 | 51,981 | 59,516 | |||||||||||||
Comprehensive income attributable to noncontrolling interests: | ||||||||||||||||
Noncontrolling interests in consolidated entities | (8 | ) | (8 | ) | (8 | ) | (8 | ) | ||||||||
Noncontrolling interests of common units in Operating Partnership | (76 | ) | (144 | ) | (75 | ) | (150 | ) | ||||||||
Comprehensive income attributable to noncontrolling interests | (84 | ) | (152 | ) | (83 | ) | (158 | ) | ||||||||
Comprehensive income attributable to the Company | $ | 55,295 | $ | 59,954 | $ | 51,898 | $ | 59,358 | ||||||||
LASALLE HOTEL PROPERTIES | ||||||||||||||||
FFO and EBITDA | ||||||||||||||||
(in thousands, except share/unit data) |
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(unaudited) |
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For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income attributable to common shareholders | $ | 55,176 | $ | 55,822 | $ | 61,193 | $ | 55,503 | ||||||||
Depreciation | 48,706 | 45,790 | 96,200 | 88,542 | ||||||||||||
Amortization of deferred lease costs | 82 | 72 | 162 | 147 | ||||||||||||
Noncontrolling interests: | ||||||||||||||||
Noncontrolling interests in consolidated entities | 8 | 8 | 8 | 8 | ||||||||||||
Noncontrolling interests of common units in Operating Partnership | 81 | 139 | 96 | 154 | ||||||||||||
FFO attributable to common shareholders and unitholders | $ | 104,053 | $ | 101,831 | $ | 157,659 | $ | 144,354 | ||||||||
Pre-opening, management transition and severance expenses | 2,518 | 303 | 4,064 | 2,150 | ||||||||||||
Acquisition transaction costs | 0 | (3 | ) | 0 | 444 | |||||||||||
Non-cash ground rent | 471 | 487 | 948 | 980 | ||||||||||||
Adjusted FFO attributable to common shareholders and unitholders | $ | 107,042 | $ | 102,618 | $ | 162,671 | $ | 147,928 | ||||||||
Weighted average number of common shares and units outstanding: | ||||||||||||||||
Basic | 112,930,199 | 112,943,036 | 112,911,957 | 112,943,523 | ||||||||||||
Diluted | 113,258,476 | 113,356,859 | 113,264,779 | 113,350,041 | ||||||||||||
FFO attributable to common shareholders and unitholders per diluted share/unit | $ | 0.92 | $ | 0.90 | $ | 1.39 | $ | 1.27 | ||||||||
Adjusted FFO attributable to common shareholders and unitholders per diluted share/unit | $ | 0.95 | $ | 0.91 | $ | 1.44 | $ | 1.31 | ||||||||
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income attributable to common shareholders | $ | 55,176 | $ | 55,822 | $ | 61,193 | $ | 55,503 | ||||||||
Interest expense | 11,482 | 13,895 | 23,349 | 27,540 | ||||||||||||
Income tax expense | 7,610 | 5,574 | 1,990 | 706 | ||||||||||||
Depreciation and amortization | 48,841 | 45,916 | 96,469 | 88,794 | ||||||||||||
Noncontrolling interests: | ||||||||||||||||
Noncontrolling interests in consolidated entities | 8 | 8 | 8 | 8 | ||||||||||||
Noncontrolling interests of common units in Operating Partnership | 81 | 139 | 96 | 154 | ||||||||||||
Distributions to preferred shareholders | 4,355 | 3,042 | 7,397 | 6,084 | ||||||||||||
EBITDA | $ | 127,553 | $ | 124,396 | $ | 190,502 | $ | 178,789 | ||||||||
Pre-opening, management transition and severance expenses | 2,518 | 303 | 4,064 | 2,150 | ||||||||||||
Acquisition transaction costs | 0 | (3 | ) | 0 | 444 | |||||||||||
Non-cash ground rent | 471 | 487 | 948 | 980 | ||||||||||||
Adjusted EBITDA | $ | 130,542 | $ | 125,183 | $ | 195,514 | $ | 182,363 | ||||||||
Corporate expense | 7,685 | 7,656 | 14,409 | 14,642 | ||||||||||||
Interest and other income | (3,777 | ) | (1,900 | ) | (7,126 | ) | (3,186 | ) | ||||||||
Pro forma hotel level adjustments, net(1) | 15 | (1,625 | ) | (33 | ) | 2,132 | ||||||||||
Hotel EBITDA | $ | 134,465 | $ | 129,314 | $ | 202,764 | $ | 195,951 | ||||||||
LASALLE HOTEL PROPERTIES Hotel Operational Data Schedule of Property Level Results - Pro Forma(1) (in thousands) (unaudited) |
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For the three months ended | For the six months ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Revenues: | ||||||||||||||||||||
Room | $ | 245,286 | $ | 240,959 | $ | 426,708 | $ | 416,563 | ||||||||||||
Food and beverage | 79,025 | 74,970 | 135,372 | 137,660 | ||||||||||||||||
Other | 24,336 | 22,121 | 44,602 | 40,134 | ||||||||||||||||
Total hotel revenues | 348,647 | 338,050 | 606,682 | 594,357 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Room | 58,963 | 56,175 | 111,253 | 105,640 | ||||||||||||||||
Food and beverage | 49,992 | 49,492 | 92,901 | 95,497 | ||||||||||||||||
Other direct | 4,854 | 4,860 | 8,515 | 8,666 | ||||||||||||||||
General and administrative | 22,426 | 21,768 | 42,608 | 41,737 | ||||||||||||||||
Information and telecommunications systems | 4,581 | 4,250 | 8,963 | 8,528 | ||||||||||||||||
Sales and marketing | 23,153 | 22,157 | 44,012 | 42,594 | ||||||||||||||||
Management fees | 10,926 | 11,541 | 18,557 | 19,220 | ||||||||||||||||
Property operations and maintenance | 9,907 | 9,817 | 19,736 | 19,643 | ||||||||||||||||
Energy and utilities | 7,180 | 7,300 | 14,451 | 15,048 | ||||||||||||||||
Property taxes | 15,275 | 14,579 | 29,654 | 28,709 | ||||||||||||||||
Other fixed expenses | 6,925 | 6,797 | 13,268 | 13,124 | ||||||||||||||||
Total hotel expenses | 214,182 | 208,736 | 403,918 | 398,406 | ||||||||||||||||
Hotel EBITDA | $ | 134,465 | $ | 129,314 | $ | 202,764 | $ | 195,951 | ||||||||||||
Hotel EBITDA Margin | 38.6 | % | 38.3 | % | 33.4 | % | 33.0 | % | ||||||||||||
LASALLE HOTEL PROPERTIES Statistical Data for the Hotels - Pro Forma(1) (unaudited) |
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For the three months ended | For the six months ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Total Portfolio | ||||||||||||||||||||
Occupancy | 88.7 | % | 87.0 | % | 82.3 | % | 80.7 | % | ||||||||||||
Increase | 2.0 | % | 2.0 | % | ||||||||||||||||
ADR | $ | 251.58 | $ | 252.14 | $ | 237.62 | $ | 238.05 | ||||||||||||
Decrease | (0.2 | )% | (0.2 | )% | ||||||||||||||||
RevPAR | $ | 223.13 | $ | 219.31 | $ | 195.56 | $ | 192.11 | ||||||||||||
Increase | 1.7 | % | 1.8 | % | ||||||||||||||||
For the three months ended June 30, 2016 |
For the six months ended June 30, 2016 |
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Market Detail | RevPAR Variance % | |||||||||||||||||||
Boston | 3.2% | -1.8% | ||||||||||||||||||
Chicago | 2.4% | -0.4% | ||||||||||||||||||
Key West | 7.8% | 3.7% | ||||||||||||||||||
Los Angeles | 17.0% | 18.1% | ||||||||||||||||||
New York | -6.5% | -2.8% | ||||||||||||||||||
Other(2) | 9.3% | 3.1% | ||||||||||||||||||
Philadelphia | -1.3% | 0.2% | ||||||||||||||||||
San Diego | -2.6% | -4.4% | ||||||||||||||||||
San Francisco | -0.5% | 5.1% | ||||||||||||||||||
Seattle | 1.2% | -0.7% | ||||||||||||||||||
Washington, DC(3) | 1.3% | 1.6% | ||||||||||||||||||
Washington, DC excluding Mason & Rook Hotel | 2.8% | 2.5% | ||||||||||||||||||
(1) Pro forma to include the results of operations of the Park Central San Francisco and The Marker Waterfront Resort under previous ownership for the comparable period in 2015, and exclude the Mason & Rook Hotel for the period the hotel was closed for renovation in 2016 and the comparable period in 2015. |
(2) Other includes Indianapolis, IN, Portland, OR, Santa Cruz, CA and Lansdowne, VA. |
(3) For the three months ended June 30, 2016 and 2015, Washington, DC RevPAR includes the Mason & Rook Hotel. However, for the six months ended June 30, 2016 and 2015, the Mason & Rook Hotel is excluded from the three months ended March 31, 2016 and 2015, due to the hotel closure and renovation in 2016. |
LASALLE HOTEL PROPERTIES Statistical Data for the Hotels - Pro Forma(1) - Continued (in millions) (unaudited) |
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Prior Year Operating Data (Excluding Indianapolis Marriott Downtown) - 2016 Comparable |
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First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Full Year | |||||||||||||||||||||
2015 | 2015 | 2015 | 2015 | 2015 | |||||||||||||||||||||
Occupancy | 74.7 | % | 87.9 | % | 86.2 | % | 77.8 | % | 81.7 | % | |||||||||||||||
ADR | $ | 223.82 | $ | 255.01 | $ | 250.34 | $ | 242.07 | $ | 243.70 | |||||||||||||||
RevPAR | $ | 167.22 | $ | 224.26 | $ | 215.77 | $ | 188.34 | $ | 199.18 | |||||||||||||||
Total hotel revenues | $ | 245.5 | $ | 325.2 | $ | 314.3 | $ | 279.0 | $ | 1,164.0 | |||||||||||||||
Less: Total hotel expenses | 182.4 | 200.8 | 199.6 | 190.7 | 773.5 | ||||||||||||||||||||
Hotel EBITDA | $ | 63.1 | $ | 124.4 | $ | 114.7 | $ | 88.3 | $ | 390.5 | |||||||||||||||
Hotel EBITDA Margin | 25.7 | % | 38.3 | % | 36.5 | % | 31.6 | % | 33.5 | % | |||||||||||||||
Indianapolis Marriott Downtown: Actual Trailing 4 Quarters Selected Statistics |
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Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Trailing 4Q | |||||||||||||||||||||
RevPAR | $ | 110.29 | $ | 121.14 | $ | 117.37 | $ | 150.64 | $ | 124.76 | |||||||||||||||
Total hotel revenues | $ | 11.3 | $ | 13.1 | $ | 11.7 | $ | 15.6 | $ | 51.7 | |||||||||||||||
Less: Total hotel expenses | 10.3 | 11.2 | 8.8 | 10.3 | 40.6 | ||||||||||||||||||||
Net income | 1.0 | 1.9 | 2.9 | 5.3 | 11.1 | ||||||||||||||||||||
Interest expense | 1.5 | 1.5 | 0.0 | 0.0 | 3.0 | ||||||||||||||||||||
Depreciation | 1.0 | 1.0 | 1.0 | 1.0 | 4.0 | ||||||||||||||||||||
Hotel EBITDA | $ | 3.5 | $ | 4.4 | $ | 3.9 | $ | 6.3 | $ | 18.1 | |||||||||||||||
Hotel EBITDA Margin | 31.0 | % | 33.6 | % | 33.3 | % | 40.4 | % | 35.0 | % | |||||||||||||||
Non-GAAP Financial Measures
FFO, EBITDA and Hotel EBITDA
The Company considers the non-GAAP measures of FFO (including FFO per share/unit), EBITDA and hotel EBITDA to be key supplemental measures of the Company's performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company's operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO, EBITDA and hotel EBITDA to be helpful in evaluating a real estate company's operations.
The White Paper on FFO approved by NAREIT in April 2002, as revised in 2011, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of properties and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization and impairment writedowns, and after comparable adjustments for the Company's portion of these items related to unconsolidated entities and joint ventures. The Company computes FFO consistent with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company.
With respect to FFO, the Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization and impairments, and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs.
With respect to EBITDA, the Company believes that excluding the effect of non-operating expenses and non-cash charges, and the portion of these items related to unconsolidated entities, all of which are also based on historical cost accounting and may be of limited significance in evaluating current performance, can help eliminate the accounting effects of depreciation and amortization, and financing decisions and facilitate comparisons of core operating profitability between periods and between REITs, even though EBITDA also does not represent an amount that accrues directly to common shareholders.
With respect to hotel EBITDA, the Company believes that excluding the effect of corporate-level expenses, non-cash items, and the portion of these items related to unconsolidated entities, provides a more complete understanding of the operating results over which individual hotels and operators have direct control. The Company believes property-level results provide investors with supplemental information on the ongoing operational performance of its hotels and effectiveness of the third-party management companies operating its business on a property-level basis.
FFO, EBITDA and hotel EBITDA do not represent cash generated from operating activities as determined by GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO, EBITDA and hotel EBITDA are not measures of the Company's liquidity, nor are FFO, EBITDA and hotel EBITDA indicative of funds available to fund the Company's cash needs, including its ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO, EBITDA and hotel EBITDA may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the Company's operating performance.
Adjusted FFO and Adjusted EBITDA
The Company presents adjusted FFO (including adjusted FFO per share/unit) and adjusted EBITDA, which adjusts for certain additional items including gains on sale of property and impairment losses (to the extent included in EBITDA), acquisition transaction costs, costs associated with the departure of executive officers, costs associated with the recognition of issuance costs related to the calling of preferred shares and certain other items. The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its assets. As with FFO, EBITDA, and hotel EBITDA, the Company’s calculation of adjusted FFO and adjusted EBITDA may be different from similar adjusted measures calculated by other REITs.