Highland Hospitality Corporation (NYSE: HIH), a newly formed lodging REIT, today reported its consolidated results for the period ended December 31, 2003.
Fourth Quarter Highlights included:
- Successfully completed and upsized our initial public offering, including by virtue of the underwriters' full exercise of their over-allotment option, in which we sold 34,500,000 shares and generated net proceeds of $321 million for the Company after underwriters' discounts.
- Successfully completed private placements, in which we sold an additional 4,550,000 shares and raised an additional $42.3 million for the Company in offering proceeds.
- Acquired five of our seven initial hotel properties by year-end 2003 for aggregate consideration of approximately $153 million in cash and operating partnership units.
The financial results presented below and in the accompanying financial tables are for the period beginning with the closing of our initial public offering and our commencement of operations on December 19, 2003 through December 31, 2003.
Consolidated Financial Results
Consolidated Total Revenue was $0.7 million and Consolidated Net Loss was $(2.7) million, or $(.07) per share, for the period ended December 31, 2003. The Consolidated Net Loss for the period resulted primarily from the following one-time charges relating to the Company's initial public offering, all of which were recorded as General and Administrative expenses: Stock-based compensation expense of $0.5 million and initial public offering related costs and reimbursements to our sponsor, Barcelo Crestline, of $2.0 million.
Funds from operations, or FFO, which is defined as Consolidated Net Loss plus Depreciation and Amortization, was $(2.6) million, or $(.07) per share, and Earnings before Interest, Income Taxes, Depreciation, and Amortization, or EBITDA, was $(2.9) million, or $(.08) per share, for the period ended December 31, 2003.
Both FFO and EBITDA are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission. Management believes both FFO and EBITDA to be key measures of a REIT's performance and should be considered along with, but not as an alternative to, net income and cash flow as a measure of our operating performance. A reconciliation of these non-GAAP financial measures is included in the accompanying financial tables.
Balance Sheet/Liquidity
On December 19, 2003, the Company completed its initial public offering of 30,000,000 shares of common stock. Together with the underwriters' full exercise of their over-allotment option to purchase 4,500,000 additional shares, the Company raised a total of $321 million in net offering proceeds from the initial public offering. In addition to the initial public offering, the Company completed private placement transactions on December 19, 2003 that raised an additional $42.3 million in cash proceeds. The Company used approximately $144 million of cash proceeds to acquire five of its initial seven hotel properties during the period ended December 31, 2003. At December 31, 2003, the Company had $225.6 million of cash on hand. Subsequent to December 31, 2003, the Company acquired the two remaining hotel properties of its initial portfolio by using approximately $36 million of cash proceeds and assuming $17 million of mortgage debt relating to one of the hotel properties. As of February 20, 2004, the Company had approximately $180 million of cash and approximately $17 million of debt on its balance sheet.
The Company is currently in negotiations to obtain a corporate credit facility with several major financial institutions. The facility will be designed to provide the capacity and flexibility to meet its targeted leverage objectives of 40 - 50% debt to capitalization. The Company anticipates that this facility will be closed during the second quarter 2004.
Acquisition Pipeline
The Company acquired five of its initial acquisition properties in December and acquired the remaining two hotel properties in January. The table below lists the key data associated with each of the hotel transactions:
Location/Brand Rooms Price $ MM* Date
Portsmouth, VA Renaissance 250 16.8 12/19/2003
Sugar Land, TX Marriott 300 33.8 12/19/2003
Virginia Beach, VA Hilton Garden Inn 176 20.2 12/19/2003
San Antonio, TX Marriott 252 32.7 12/29/2003
Savannah, GA Hyatt Regency 351 49.2 12/30/2003
Tampa, FL Hilton 238 30.2 01/08/2004
BWI Airport, MD Hilton Garden Inn 158 22.7 01/12/2004
* Represents fair value of consideration paid in the form of cash,
operating partnership units, and in the case of the Tampa, FL Hilton,
the assumption of $17 million of debt
