CHICAGO, Feb. 23, 2015 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE: BEE) today reported results for the fourth quarter and full year ended December 31, 2014.
($ in millions, except per share and operating metrics) Fourth Quarter -------------- Earnings Metrics 2014 2013 % Change ---------------- ---- ---- -------- Net income (loss) attributable to common shareholders $1.4 $3.2 (56.2)% Net income (loss) per diluted share $0.01 $0.02 (50.0)% Comparable funds from operations (Comparable FFO) (a) $44.2 $28.7 53.9% Comparable FFO per diluted share (a) $0.17 $0.14 21.4% Comparable EBITDA (a) $63.7 $58.3 9.2% Same Store United States Operating Metrics (b) ------------------------ Average Daily Rate (ADR) $302.34 $285.47 5.9% Occupancy 72.8% 71.8% 1.0 pts Revenue per Available Room (RevPAR) $220.03 $205.08 7.3% Total RevPAR (c) $420.42 $393.23 6.9% EBITDA Margins (c) 24.0% 22.4% 160 bps ----------------- ---- ---- -------
($ in millions, except per share and operating metrics) Full Year --------- Earnings Metrics 2014 2013 % Change ---------------- ---- ---- -------- Net income (loss) attributable to common shareholders $320.4 $(13.2) N/A Net income (loss) per diluted share $1.30 $(0.06) N/A Comparable FFO (a) $161.3 $89.5 80.2% Comparable FFO per diluted share (a) $0.68 $0.43 58.1% Comparable EBITDA (a) $249.0 $213.2 16.8% Same Store United States Operating Metrics (b) ------------------------ ADR $300.00 $284.32 5.5% Occupancy 75.4% 74.8% 0.6 pts RevPAR $226.13 $212.73 6.3% Total RevPAR (c) $421.38 $392.40 7.4% EBITDA Margins (c) 25.1% 23.5% 160 bps ----------------- ---- ---- -------
(a) Please refer to tables provided later in this press release for a reconciliation of net (loss)/income attributable to common shareholders to Comparable FFO, Comparable FFO per share and Comparable EBITDA. Comparable FFO, Comparable FFO per share and Comparable EBITDA are non- GAAP measures and are further explained within the reconciliation tables. (b) Operating statistics reflect results from the Company's Same Store United States portfolio (see portfolio definitions later in this press release). (c) Total RevPAR and EBITDA Margin statistics have been modified to take into account certain adjustments, including those related to the adoption of the Uniform System of Accounts for the Lodging Industry, Eleventh Revised Edition (the "USALI Eleventh Revised Edition"). Both metrics exclude payments recognized pursuant to the JW Marriott Essex House NOI guarantee of $12.8 million and $5.8 million in 2013 and 2014, respectively. EBITDA margins also exclude amortization of the below market hotel management agreement related to the Hotel del Coronado of $0.6 million and $1.2 million for the three months and year ended December 31, 2014, respectively.
"Our positive expectations for 2014 were far exceeded in a number of ways," said Raymond L. "Rip" Gellein, Jr., Chairman and Chief Executive Officer of Strategic Hotels & Resorts, Inc. "Across the portfolio, our luxury, irreplaceable hotels continued to perform at the highest levels, driving exceptional results in virtually all key metrics. Positive demand drivers and limited competitive supply clearly were a benefit, complemented by our proven asset management expertise which drove significant RevPAR and Total RevPAR results. Throughout the year, we continued to deliver on our core strategy by wholly-refocusing our portfolio in the United States and strengthening our balance sheet. We completed $3.5 billion in transactions that further strengthened the overall quality of our portfolio and allowed us to further enhance the balance sheet, significantly reducing leverage. As a result of this combined activity, we achieved a 58% year-over-year increase in FFO per share.
"As we look ahead, we are ideally positioned for strategic, accretive growth in 2015 that will add to our unique collection of best-in-class assets. We remain very bullish on our business, given our proven ability to extract continuing value from our properties, the dearth of new supply coming online to compete with our hotels, the overall improving economic environment, and growing demand trends that favor the compelling value proposition of our portfolio," concluded Gellein.
Fourth Quarter Highlights
-- Total consolidated revenues were $313.0 million in the fourth quarter of 2014, a 35.0 percent increase over the prior year period. This increase was primarily driven by the consolidation of both the Hotel del Coronado and Fairmont Scottsdale Princess. -- Net income attributable to common shareholders was $1.4 million, or $0.01 per diluted share, in the fourth quarter of 2014, compared with $3.2 million, or $0.02 per diluted share, in the fourth quarter of 2013. Fourth quarter 2014 results include a $2.0 million loss on early extinguishment of debt. This charge and other one-time items have been excluded from Comparable EBITDA, FFO, and FFO per share. -- Comparable FFO was $0.17 per fully diluted share in the fourth quarter of 2014 compared with $0.14 per fully diluted share in the prior year period, a 21.4 percent increase over the prior year period. -- Comparable EBITDA was $63.7 million in the fourth quarter of 2014 compared with $58.3 million in the prior year period, a 9.2 percent increase. -- Same Store United States portfolio RevPAR increased 7.3 percent in the fourth quarter of 2014, driven by a 5.9 percent increase in ADR and a 1.0 percentage point increase in occupancy compared to the fourth quarter of 2013. Total RevPAR increased 6.9 percent between periods with non-rooms revenue increasing 6.5 percent between periods. -- Group occupied room nights in the Same Store United States portfolio increased 6.6 percent, offsetting a 2.2 percent decline in transient occupied rooms in the fourth quarter of 2014 compared to the fourth quarter of 2013. Transient ADR increased 6.4 percent compared to the fourth quarter of 2013 and group ADR increased 5.7 percent compared to the fourth quarter of 2013. -- Same Store United States portfolio EBITDA margins expanded 160 basis points in the fourth quarter of 2014 compared to the fourth quarter of 2013. EBITDA margins in both years have been adjusted to exclude payments recorded pursuant to the JW Marriott Essex House NOI guarantee, the amortization of the below market hotel management agreement related to the Hotel del Coronado, and other adjustments related to the adoption of the USALI Eleventh Revised Edition to improve comparability between years.
Full Year Highlights
-- Total consolidated revenues were $1.1 billion in 2014, a 26.1 percent increase over the prior year period. This increase was primarily driven by the consolidation of both the Hotel del Coronado and Fairmont Scottsdale Princess. -- Net income attributable to common shareholders was $320.4 million, or $1.30 per diluted share in 2014 compared with a net loss attributable to common shareholders of $13.2 million, or $0.06 per diluted share, in the prior year. Full year 2014 results include gains on sales of assets totaling $156.8 million, net of taxes, and gains on consolidation of affiliates of $143.5 million. These gains, and other one-time items, have been excluded from Comparable EBITDA, FFO, and FFO per share. -- Comparable FFO was $0.68 per fully diluted share in 2014 compared with $0.43 per fully diluted share in the prior year, a 58.1 percent increase. -- Comparable EBITDA was $249.0 million in 2014 compared with $213.2 million in the prior year, a 16.8 percent increase. -- Same Store United States portfolio RevPAR increased 6.3 percent in 2014, driven by a 5.5 percent increase in ADR and a 0.6 percentage point increase in occupancy, compared to the full year 2013. Total RevPAR increased 7.4 percent between periods with non-rooms revenue increasing 8.6 percent between periods. -- Group occupied room nights in the Same Store United States portfolio increased 6.5 percent, offsetting a 3.4 percent decline in transient occupied room nights compared to 2013. Transient ADR increased 7.0 percent in 2014 and group ADR increased 4.3 percent compared to 2013. -- Same Store United States portfolio EBITDA margins expanded 160 basis points in 2014 compared to the full year 2013. EBITDA margins in both years have been adjusted to exclude payments recorded pursuant to the JW Marriott Essex House NOI guarantee, the amortization of the below market hotel management agreement related to the Hotel del Coronado, and other adjustments related to the adoption of the USALI Eleventh Revised Edition to improve comparability between years.
Preferred Dividends and Redemptions
On January 5, 2015, the Company completed the redemption of all of the outstanding 3,615,375 shares of its 8.25 percent Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Shares") at a redemption price of $25.00 per share, plus accrued and unpaid dividends in the amount of $0.028646 per share, for a total redemption cost of $90.5 million. The redemption of the Series B Preferred Shares eliminated approximately $7.5 million of dividend payments on an annual basis.
On December 5, 2014, the Company's Board of Directors declared a quarterly dividend of $0.51563 per share of 8.25 percent Series B Cumulative Redeemable Preferred Stock paid on December 31, 2014 to shareholders of record as of the close of business on December 15, 2014.
On July 3, 2014, the Company completed the redemption of all of the outstanding 3,827,727 shares of its 8.25 percent Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Shares") at a redemption price of $25.00 per share, plus accrued and unpaid dividends in the amount of $0.01719 per share, for a total redemption cost of $95.8 million. The redemption of the Series C Preferred Shares eliminated $7.9 million in dividend payments on an annual basis.
On April 3, 2014, the Company completed the redemption of all of the outstanding 4,148,141 shares of its 8.50 percent Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Shares") at a redemption price of $25.00 per share, plus accrued and unpaid dividends in the amount of $0.54896 per share, for a total redemption cost of $106.0 million. The redemption of the Series A Preferred Shares eliminated $8.8 million of dividend payments on an annual basis.
In total, the Company redeemed all of its previously outstanding $289.1 million of preferred stock eliminating $24.2 million of dividend payments on an annual basis.
2014 Transaction Activity
-- On December 30, 2014, the Company, along with its joint venture partner, closed on a $225.0 million loan secured by the JW Marriott Essex House hotel. The loan bears annual interest at LIBOR plus 295 basis points and has a five-year term, including extension options. -- On December 9, 2014, the Company closed on the acquisition of the Four Seasons Resort Scottsdale at Troon North for $140.0 million, which includes 13.8-acres of developable land zoned for an additional 88 hotel keys and potential residential usage. -- On December 2, 2014, the Company closed on an underwritten public offering of 20.0 million shares of common stock at a gross public offering price of $12.70 per share. The Company received $254.0 million from the offering. -- On August 29, 2014, the Company closed on a $115.0 million loan secured by the InterContinental Miami hotel. The loan bears annual interest at a fixed rate of 3.99 percent and has a 10-year term. -- On June 30, 2014, the Company closed on a $120.0 million loan secured by the Four Seasons Washington, D.C. hotel. The loan bears interest at a floating rate of LIBOR plus 225 basis points and has a five-year term, including extension options. -- On June 11, 2014, the Company closed on the acquisition of the 63.6 percent ownership interest in the Hotel del Coronado that it did not previously own for $210.0 million in cash and became fully obligated under the $475.0 million loan encumbering the property. -- On June 2, 2014, the Company closed on an underwritten public offering of 41.4 million shares of common stock at a public offering price of $10.50 per share, including 5.4 million shares of common stock issued pursuant to the exercise in full of the underwriters' over-allotment option. The Company received $416.6 million from the offering after deducting underwriting discounts and commissions and transaction expenses related to the offering. -- On May 29, 2014, the Company closed on a $120.0 million loan secured by the Loews Santa Monica Beach Hotel. The loan bears annual interest at a floating rate of LIBOR plus 255 basis points and has a seven-year term, including extension options. -- On April 25, 2014, the Company closed on a new $300.0 million stock secured 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 175 basis points to LIBOR plus 250 basis points. -- On April 21, 2014, the Company paid $22.7 million to terminate its $400.0 million notional value interest rate swap portfolio. The swap portfolio had a weighted average LIBOR interest rate of 5.09 percent. -- On March 31, 2014, the Company closed on the sale of the Marriott London Grosvenor Square hotel for £125.15 million ($207.7 million). Net proceeds from the transaction totaled approximately £58.1 million ($96.5 million), after the repayment of property-level net debt of £67.0 million ($113.3 million). -- Also on March 31, 2014, the Company closed on the acquisition of the remaining 50 percent ownership interest in the Fairmont Scottsdale Princess resort for approximately $90.6 million, representing a net purchase price of approximately $288.0 million, or $440,000 per key. -- On February 28, 2014, the Company closed on the sale of the Four Seasons Punta Mita Resort and adjacent La Solana land parcel for $200.0 million.
Subsequent Events
-- On January 29, 2015, the Company closed on the acquisition of the Montage Laguna Beach for $360.0 million. As part of the transaction, the Company issued 7.3 million shares of common stock to an affiliated designee of the seller, priced at $13.61 per share, or an implied valuation of $100.0 million. In addition, the Company assumed a $150.0 million mortgage loan encumbering the property, priced at an annual fixed interest rate of 3.90 percent, which matures in August 2021.
2015 Guidance
The guidance presented takes into account various accounting changes as stipulated by the industry's Uniform System of Accounts for the Lodging Industry, Eleventh Revised Edition (the "USALI Eleventh Revised Edition"), which became effective in January 2015. Guidance for 2015 RevPAR, Total RevPAR and EBITDA margin expansion has been presented to reflect changes compared to the prior year as if these 2014 statistics included the USALI Eleventh Revised Edition changes. Actual RevPAR, Total RevPAR and EBITDA margin changes from prior year may differ slightly. The Company will present 2014 RevPAR, Total RevPAR and EBITDA margins on an as reported basis and on a pro forma basis, which will include the USALI Eleventh Revised Edition changes.
For the full year ending December 31, 2015, the Company is providing the following guidance ranges for its Same Store and Total United States portfolios.
Operating Metrics ----------------- RevPAR 5.0% - 7.0% Total RevPAR 4.0% - 6.0% EBITDA Margin expansion 50 - 100 basis points Corporate Metrics ----------------- Comparable EBITDA $300M - $320M Comparable FFO per diluted share $0.77 - $0.85
Full year 2015 RevPAR and Total RevPAR growth guidance ranges have been reduced by approximately 40 basis points as the result of anticipated displacement related to renovation activity.
The Company is additionally providing the following guidance for 2015:
-- Corporate general and administrative expenses in the range of $24.0 million to $26.0 million; -- Consolidated interest expense in the range of $90 million to $95 million, including approximately $14 million of non-cash interest expense; -- Capital expenditures totaling approximately $95 million to $105 million, including spending of $55 million from property-level furniture, fixtures and equipment (FF&E) reserves and an additional $40 million to $50 million of owner-funded spending; and -- No effect from any additional acquisition, disposition or capital raising activity that may occur during the year.
Portfolio Definitions
Same Store United States portfolio hotel comparisons for the fourth quarter and full year 2014 are derived from the Company's hotel portfolio at December 31, 2014, consisting of 15 properties located in the United States, but excluding the Four Seasons Resort Scottsdale at Troon North which was acquired on December 9, 2014.
Total United States portfolio hotel comparisons for the full year 2015 are derived from the Company's current hotel portfolio, consisting of all 17 properties located in the United States, including the Four Seasons Resort Scottsdale at Troon North and the Montage Laguna Beach, which were acquired on December 9, 2014 and January 29, 2015, respectively.
Earnings Call
The Company will conduct its fourth quarter and full-year 2014 conference call for investors and other interested parties on Tuesday, February 24, 2015 at 10:00 a.m. Eastern Time (ET). Interested individuals are invited to listen to the call by dialing 877.546.5019 (toll international: 857.244.7551 with passcode 12693566). To participate on the webcast, log on to http://edge.media-server.com/m/p/qeeib75x/lan/en 15 minutes before the call to download the necessary software. For those unable to listen to the call live, a taped rebroadcast will be available beginning at 2:00 p.m. ET on February 24, 2015 through 11:59 p.m. ET on March 3, 2015. To access the replay, dial 888.286.8010 (toll international: 617.801.6888) with passcode 45106390. A replay of the call will also be available on the Internet at http://www.strategichotels.com or http://www.reuters.com/finance/markets/earnings for 30 days after the call.
The Company also produces supplemental financial data that includes detailed information regarding its operating results. This supplemental data is considered an integral part of this earnings release. These materials are available on the Strategic Hotels & Resorts' website at www.strategichotels.com.
About the Company
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 and Europe. The Company currently has ownership interests in 18 properties with an aggregate of 8,325 rooms and 875,000 square feet of meeting space. For a list of current properties and for further information, please visit the Company's website at http://www.strategichotels.com.
This press release contains forward-looking statements about Strategic Hotels & Resorts, Inc. (the "Company"). Except for historical information, the matters discussed in this press release are forward-looking statements subject to certain risks and uncertainties. These forward-looking statements include statements regarding the Company's future financial results, positive trends in the lodging industry and the Company's continued focus on improving profitability. Actual results could differ materially from the Company's projections. Factors that may contribute to these differences include, but are not limited to the following: the effects of economic conditions and disruption in financial markets upon business and leisure travel and the hotel markets in which the Company invests; the Company's liquidity and refinancing demands; the Company's ability to obtain, refinance or extend maturing debt; the Company's ability to maintain compliance with covenants contained in its debt facilities; stagnation or deterioration in economic and market conditions, particularly impacting business and leisure travel spending in the markets where the Company's hotels operate and in which the Company invests, including luxury and upper upscale product; general volatility of the capital markets and the market price of the Company's shares of common stock; availability of capital; the Company's ability to dispose of properties in a manner consistent with its investment strategy and liquidity needs; hostilities and security concerns, including future terrorist attacks, or the apprehension of hostilities, in each case that affect travel within or to the United States, Germany or other countries where the Company invests; difficulties in identifying properties to acquire and completing acquisitions; the Company's failure to maintain effective internal control over financial reporting and disclosure controls and procedures; risks related to natural disasters; increases in interest rates and operating costs, including insurance premiums and real property taxes; contagious disease outbreaks; delays and cost-overruns in construction and development; marketing challenges associated with entering new lines of business or pursuing new business strategies; the Company's failure to maintain its status as a REIT; changes in the competitive environment in the Company's industry and the markets where the Company invests; changes in real estate and zoning laws or regulations; legislative or regulatory changes, including changes to laws governing the taxation of REITs; changes in generally accepted accounting principles, policies and guidelines; and litigation, judgments or settlements.
Additional risks are discussed in the Company's filings with the SEC, including those appearing under the heading "Item 1A. Risk Factors" in the Company's most recent Form 10-K and subsequent Form 10-Qs. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. The forward-looking statements are made as of the date of this press release, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
The following tables reconcile projected 2015 net income attributable to common shareholders to projected Comparable EBITDA, Comparable FFO and Comparable FFO per diluted share ($ in millions, except per share data):
Low Range High Range --------- ---------- Net Income Attributable to Common Shareholders $50.1 $70.1 Depreciation and Amortization 158.9 158.9 Interest Expense 93.3 93.3 Income Taxes 8.1 8.1 Non-controlling Interests 0.2 0.2 Adjustments from Consolidated Affiliates (12.6) (12.6) Preferred Shareholder Dividends 0.1 0.1 Realized Portion of Deferred Gain on Sale Leasebacks (0.2) (0.2) Other Adjustments 2.1 2.1 --- --- Comparable EBITDA $300.0 $320.0
Low Range High Range --------- ---------- Net Income Attributable to Common Shareholders $50.1 $70.1 Depreciation and Amortization 158.3 158.3 Realized Portion of Deferred Gain on Sale Leasebacks (0.2) (0.2) Non-controlling Interests 0.2 0.2 Adjustments from Consolidated Affiliates (5.9) (5.9) Interest Rate Swap OCI Amortization 10.3 10.3 Other Adjustments 2.7 2.7 --- --- Comparable FFO 215.5 235.5 Comparable FFO per Diluted Share $0.77 $0.85
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Consolidated Statements of Operations (in thousands, except per share data) Three Months Ended Years Ended December 31, December 31, ------------ 2014 2013 2014 2013 ---- ---- ---- ---- Revenues: Rooms $154,862 $119,894 $582,969 $479,734 Food and beverage 118,936 78,433 385,623 287,557 Other hotel operating revenue 37,679 32,107 115,084 91,355 Lease revenue 1,524 1,385 5,406 5,161 ----- ----- ----- ----- Total revenues 313,001 231,819 1,089,082 863,807 ------- ------- --------- ------- Operating Costs and Expenses: Rooms 45,084 34,655 168,256 138,946 Food and beverage 85,317 58,141 277,962 221,388 Other departmental expenses 75,762 54,423 270,219 213,714 Management fees 11,342 7,167 36,331 25,000 Other hotel expenses 17,810 14,627 67,058 58,435 Lease expense 1,140 1,234 4,873 4,818 Depreciation and amortization 36,493 23,207 119,688 96,712 Impairment losses and other charges - - - 728 Corporate expenses 7,102 7,013 26,898 25,176 ----- ----- ------ ------ Total operating costs and expenses 280,050 200,467 971,285 784,917 ------- ------- ------- ------- Operating income 32,951 31,352 117,797 78,890 Interest expense (22,414) (18,839) (82,119) (77,189) Interest income 146 12 269 53 Loss on early extinguishment of debt (2,010) - (2,619) - Equity in (losses) earnings of unconsolidated affiliates (30) (265) 5,237 2,987 Foreign currency exchange (loss) gain (41) 16 (116) 42 Gain on consolidation of affiliates 20 - 143,471 - Other (expenses) income, net (130) (359) 952 (314) ---- ---- --- ---- Income before income taxes and discontinued operations 8,492 11,917 182,872 4,469 Income tax expense (584) (86) (1,200) (156) ---- --- ------ ---- Income from continuing operations 7,908 11,831 181,672 4,313 Income from discontinued operations, net of tax 276 3,834 159,378 5,574 --- ----- ------- ----- Net Income 8,184 15,665 341,050 9,887 Net income attributable to the noncontrolling interests in SHR's operating partnership (24) (60) (1,221) (38) Net (income) loss attributable to the noncontrolling interests in consolidated affiliates (1,458) (6,341) 4,654 1,126 ------ ------ ----- ----- Net Income Attributable to SHR 6,702 9,264 344,483 10,975 Preferred shareholder dividends (5,289) (6,041) (24,084) (24,166) ------ ------ ------- ------- Net Income (Loss) Attributable to SHR Common Shareholders $1,413 $3,223 $320,399 $(13,191) ====== ====== ======== ======== Basic Income (Loss) Per Common Share: Income (loss) from continuing operations attributable to SHR common shareholders $0.01 $ - $0.69 $(0.09) Income from discontinued operations attributable to SHR common shareholders - 0.02 0.68 0.03 --- ---- ---- ---- Net income (loss) attributable to SHR common shareholders $0.01 $0.02 $1.37 $(0.06) ===== ===== ===== ====== Weighted average shares of common stock outstanding 254,813 206,814 233,528 206,334 ======= ======= ======= ======= Diluted Income (Loss) Per Common Share: Income (loss) from continuing operations attributable to SHR common shareholders $0.01 $ - $0.65 $(0.09) Income from discontinued operations attributable to SHR common shareholders - 0.02 0.65 0.03 --- ---- Net income (loss) attributable to SHR common shareholders $0.01 $0.02 $1.30 $(0.06) ===== ===== ===== ====== Weighted average shares of common stock outstanding 256,104 206,814 243,558 206,334 ======= ======= ======= =======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Consolidated Balance Sheets (in thousands, except share data) December 31, ------------ 2014 2013 ---- ---- Assets Investment in hotel properties, net $2,828,400 $1,795,338 Goodwill 38,128 38,128 Intangible assets, net of accumulated amortization of $7,288 and $11,753 94,324 29,502 Assets held for sale - 135,901 Investment in unconsolidated affiliates 22,850 104,973 Cash and cash equivalents 442,613 73,655 Restricted cash and cash equivalents 81,510 75,916 Accounts receivable, net of allowance for doubtful accounts of $492 and $606 51,382 39,660 Deferred financing costs, net of accumulated amortization of $7,814 and $12,354 11,440 8,478 Deferred tax assets 1,729 - Prepaid expenses and other assets 46,781 35,600 ------ ------ Total assets $3,619,157 $2,337,151 ========== ========== Liabilities, Noncontrolling Interests and Equity Liabilities: Mortgages and other debt payable, net of discount $1,705,778 $1,163,696 Bank credit facility - 110,000 Liabilities of assets held for sale - 17,027 Accounts payable and accrued expenses 224,505 189,889 Preferred stock redemption liability 90,384 - Distributions payable 104 - Deferred tax liabilities 46,137 46,137 ------ ------ Total liabilities 2,066,908 1,526,749 Commitments and contingencies Noncontrolling interests in SHR's operating partnership 10,500 7,534 Equity: SHR's shareholders' equity: 8.50% Series A Cumulative Redeemable Preferred Stock ($0.01 par value per share; 0 and 4,148,141 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $0 and $103,704 in the aggregate) - 99,995 8.25% Series B Cumulative Redeemable Preferred Stock ($0.01 par value per share; 3,615,375 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $90,488 and $90,384 in the aggregate) - 87,064 8.25% Series C Cumulative Redeemable Preferred Stock ($0.01 par value per share; 0 and 3,827,727 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $0 and $95,693 in the aggregate) - 92,489 Common stock ($0.01 par value per share; 350,000,000 shares of common stock authorized; 267,435,799 and 205,582,838 shares of common stock issued and outstanding) 2,674 2,056 Additional paid-in capital 2,348,284 1,705,306 Accumulated deficit (890,469) (1,234,952) Accumulated other comprehensive loss (13,032) (41,445) ------- ------- Total SHR's shareholders' equity 1,447,457 710,513 Noncontrolling interests in consolidated affiliates 94,292 92,355 ------ ------ Total equity 1,541,749 802,868 --------- ------- Total liabilities, noncontrolling interests and equity $3,619,157 $2,337,151 ========== ==========
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Financial Highlights Supplemental Financial Data (in thousands, except per share information) December 31, 2014 ----------------- Pro Rata Share Consolidated -------------- ------------ Capitalization -------------- Shares of common stock outstanding 267,436 267,436 Operating partnership units outstanding 794 794 Restricted stock units outstanding 2,030 2,030 ----- ----- Combined shares and units outstanding 270,260 270,260 Common stock price at end of period $13.23 $13.23 ------ ------ Common equity capitalization $3,575,540 $3,575,540 Preferred stock redemption liability 90,384 90,384 Consolidated debt 1,706,401 1,706,401 Pro rata share of consolidated debt (151,750) - Cash and cash equivalents (442,613) (442,613) -------- -------- Total enterprise value $4,777,962 $4,929,712 ========== ========== Net Debt /Total Enterprise Value 25.2% 27.5% Common Equity /Total Enterprise Value 74.8% 72.5%
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Discontinued Operations
The results of operations of hotels sold are classified as discontinued operations and segregated in the consolidated statements of operations for all periods presented. The following hotels were sold during the year ended December 31, 2014:
Hotel Location Date Sold Sales Proceeds Gain on sale ----- -------- --------- -------------- ------------ Four Seasons Punta Mita Resort and La Solana land parcel Punta Mita, Mexico February 28, 2014 $206,867,000 $63,879,000 Marriott London Grosvenor Square London, England March 31, 2014 $209,407,000 (a) $92,889,000
(a) There was an outstanding balance of BPS67,301,000 ($112,150,000) on the mortgage loan secured by the Marriott London Grosvenor Square hotel, which was repaid at the time of closing. The net proceeds we received were $97,257,000.
The following is a summary of income from discontinued operations for the three months and years ended December 31, 2014 and 2013 (in thousands):
Three Months Ended December 31, Years Ended December 31, ------------------------------- ------------------------ 2014 2013 2014 2013 ---- ---- ---- ---- Hotel operating revenues $ - $22,918 $17,767 $74,170 --- --- ------- ------- ------- Operating costs and expenses - 15,154 11,485 51,295 Depreciation and amortization - 2,352 1,275 9,306 Total operating costs and expenses - 17,506 12,760 60,601 --- ------ ------ ------ Operating income - 5,412 5,007 13,569 Interest expense - (1,566) (1,326) (7,087) Interest income - 2 2 6 Loss on early extinguishment of debt - - (272) - Foreign currency exchange (loss) gain - (150) 32 1 Other income, net - 375 - 375 Income tax expense - (239) (833) (1,290) Gain on sale, net of tax 276 - 156,768 - --- --- ------- --- Income from discontinued operations, net of tax $276 $3,834 $159,378 $5,574 ==== ====== ======== ======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Investments in Unconsolidated Affiliates (in thousands) We had a 36.4% equity ownership interest in the Hotel del Coronado that we accounted for using the equity method of accounting until we acquired the remaining 63.6% equity ownership interest not previously owned by us on June 11, 2014. We had a 50.0% equity ownership interest in the Fairmont Scottsdale Princess hotel that we accounted for using the equity method of accounting until we acquired the remaining 50.0% equity ownership interest not previously owned by us on March 31, 2014. For purposes of this analysis, the operating results reflect the 36.4% equity ownership interest we held in the Hotel del Coronado prior to June 11, 2014 and the 50.0% equity ownership interest we held in the Fairmont Scottsdale Princess hotel prior to March 31, 2014. Three Months Ended December 31, 2014 Three Months Ended December 31, 2013 ------------------------------------ ------------------------------------ Hotel del Fairmont Total Hotel del Fairmont Scottsdale Scottsdale Total Coronado Princess Coronado Princess -------- -------- -------- -------- Total revenues (100%) $ - $ - $ - $33,115 $23,634 $56,749 Property EBITDA (100%) $ - $ - $ - $8,668 $4,111 $12,779 Equity in (losses) earnings of unconsolidated affiliates (SHR ownership) Property EBITDA $ - $ - $ - $3,153 $2,056 $5,209 Depreciation and amortization - - - (1,917) (1,565) (3,482) Interest expense - - - (1,941) (193) (2,134) Other expenses, net - - - (14) (23) (37) Income taxes - - - 85 - 85 --- --- --- --- --- --- Equity in (losses) earnings of unconsolidated affiliates $ - $ - $ - $(634) $275 $(359) === === === === === === ===== ==== ===== EBITDA Contribution: Equity in (losses) earnings of unconsolidated affiliates $ - $ - $ - $(634) $275 $(359) Depreciation and amortization - - - 1,917 1,565 3,482 Interest expense - - - 1,941 193 2,134 Income taxes - - - (85) - (85) --- --- --- --- --- --- EBITDA Contribution $ - $ - $ - $3,139 $2,033 $5,172 === === === === === === ====== ====== ====== FFO Contribution: Equity in (losses) earnings of unconsolidated affiliates $ - $ - $ - $(634) $275 $(359) Depreciation and amortization - - - 1,917 1,565 3,482 --- --- --- ----- ----- ----- FFO Contribution $ - $ - $ - $1,283 $1,840 $3,123 === === === === === === ====== ====== ====== Year Ended December 31, 2014 Year Ended December 31, 2013 ---------------------------- ---------------------------- Hotel del Fairmont Total Hotel del Fairmont Total Coronado Scottsdale Coronado Scottsdale Princess Princess -------- -------- Total revenues (100%) $67,863 $35,006 $102,869 $148,482 $93,133 $241,615 Property EBITDA (100%) $20,761 $13,191 $33,952 $47,155 $18,883 $66,038 Equity in earnings of unconsolidated affiliates (SHR ownership) Property EBITDA $7,426 $6,595 $14,021 $17,152 $9,442 $26,594 Depreciation and amortization (3,526) (1,551) (5,077) (7,564) (6,570) (14,134) Interest expense (3,418) (168) (3,586) (8,325) (778) (9,103) Other expenses, net (25) (30) (55) (242) (58) (300) Income taxes 143 - 143 (191) - (191) --- --- --- ---- --- ---- Equity in earnings of unconsolidated affiliates $600 $4,846 $5,446 $830 $2,036 $2,866 ==== ====== ====== ==== ====== ====== EBITDA Contribution Equity in earnings of unconsolidated affiliates $600 $4,846 $5,446 $830 $2,036 $2,866 Depreciation and amortization 3,526 1,551 5,077 7,564 6,570 14,134 Interest expense 3,418 168 3,586 8,325 778 9,103 Income taxes (143) - (143) 191 - 191 ---- --- ---- --- --- --- EBITDA Contribution $7,401 $6,565 $13,966 $16,910 $9,384 $26,294 ====== ====== ======= ======= ====== ======= FFO Contribution Equity in earnings of unconsolidated affiliates $600 $4,846 $5,446 $830 $2,036 $2,866 Depreciation and amortization 3,526 1,551 5,077 7,564 6,570 14,134 ===== ===== ===== ===== ===== ====== FFO Contribution $4,126 $6,397 $10,523 $8,394 $8,606 $17,000 ====== ====== ======= ====== ====== =======
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Leasehold Information (in thousands) Three Months Ended December 31, Years Ended December 31, ------------------------------- ------------------------ 2014 2013 2014 2013 ---- ---- ---- ---- Marriott Hamburg: Property EBITDA $1,573 $1,741 $6,529 $6,298 Revenue (a) $1,524 $1,385 $5,406 $5,161 Lease expense (1,140) (1,234) (4,873) (4,818) Less: Deferred gain on sale-leaseback (48) (53) (207) (207) --- --- ---- ---- Adjusted lease expense (1,188) (1,287) (5,080) (5,025) Comparable EBITDA contribution from leasehold $336 $98 $326 $136 ==== === ==== ====
Security Deposit (b): December 31, December 31, 2014 2013 ------------- ------------- Marriott Hamburg $2,299 $2,611
(a) For the three months and years ended December 31, 2014 and 2013, Revenue for the Marriott Hamburg hotel represents lease revenue. (b) The security deposit is recorded in prepaid expenses and other assets on the consolidated balance sheets.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures
We present five non-GAAP financial measures that we believe are useful to management and investors as key measures of our operating performance: Funds from Operations (FFO); FFO--Fully Diluted; Comparable FFO; Earnings Before Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and Comparable EBITDA.
EBITDA represents net income (or loss) attributable to SHR common shareholders excluding: (i) interest expense, (ii) income taxes, including deferred income tax benefits and expenses applicable to our foreign subsidiaries and income taxes applicable to sale of assets; (iii) depreciation and amortization; and (iv) preferred stock dividends. EBITDA also excludes interest expense, income taxes and depreciation and amortization of our unconsolidated affiliates. EBITDA is presented on a full participation basis, which means we have assumed conversion of all redeemable noncontrolling interests of our operating partnership into our common stock. We believe this treatment of noncontrolling interests provides useful information for management and our investors and appropriately considers our current capital structure. We also present Comparable EBITDA, which eliminates the effect of realizing deferred gains on our sale leasebacks, as well as the effect of gains or losses on sales of assets, early extinguishment of debt, impairment losses, foreign currency exchange gains or losses and certain other charges that are highly variable from year to year. We believe EBITDA and Comparable EBITDA are useful to management and investors in evaluating our operating performance because they provide management and investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe they help management and investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our asset base (primarily depreciation and amortization) from our operating results. Our management also uses EBITDA and Comparable EBITDA as measures in determining the value of acquisitions and dispositions.
We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT adopted a definition of FFO in order to promote an industry-wide standard measure of REIT operating performance. NAREIT defines FFO as net income (or loss) (computed in accordance with GAAP) excluding losses or gains from sales of depreciable property, impairment of depreciable real estate, real estate-related depreciation and amortization, and our portion of these items related to unconsolidated affiliates. We also present FFO--Fully Diluted, which is FFO plus income or loss on income attributable to redeemable noncontrolling interests in our operating partnership. We also present Comparable FFO, which is FFO--Fully Diluted excluding the impact of any gains or losses on early extinguishment of debt, impairment losses on non-depreciable assets, foreign currency exchange gains or losses and certain other charges that are highly variable from year to year. We believe that the presentation of FFO, FFO--Fully Diluted and Comparable FFO provides useful information to management and investors regarding our results of operations because they are measures of our ability to fund capital expenditures and expand our business. In addition, FFO is widely used in the real estate industry to measure operating performance without regard to items such as depreciation and amortization. We also present Comparable FFO per diluted share as a non-GAAP measure of our performance. We calculate Comparable FFO per diluted share for a given operating period as our Comparable FFO (as defined above) divided by the weighted average of fully diluted shares outstanding, excluding shares related to the JW Marriott Essex House Hotel put option. Dilutive securities may include shares granted under share-based compensation plans and operating partnership units. No effect is shown for securities that are anti-dilutive.
We caution investors that amounts presented in accordance with our definitions of FFO, FFO--Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP measures in the same manner. FFO, FFO--Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA should not be considered as an alternative measure of our net income (or loss) or operating performance. FFO, FFO--Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures and property acquisitions and other commitments and uncertainties. Although we believe that FFO, FFO--Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA can enhance your understanding of our financial condition and results of operations, these non-GAAP financial measures, when viewed individually, are not necessarily a better indicator of any trend as compared to comparable GAAP measures such as net income (or loss) attributable to SHR common shareholders. In addition, you should be aware that adverse economic and market conditions might negatively impact our cash flow. We have provided a quantitative reconciliation of FFO, FFO--Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA to the most directly comparable GAAP financial performance measure, which is net income (or loss) attributable to SHR common shareholders.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Reconciliation of Net Income (Loss) Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA (in thousands) Three Months Ended December 31, Years Ended December 31, ------------------------------- ------------------------ 2014 2013 2014 2013 ---- ---- ---- ---- Net income (loss) attributable to SHR common shareholders $1,413 $3,223 $320,399 $(13,191) Depreciation and amortization- continuing operations 36,493 23,207 119,688 96,712 Depreciation and amortization- discontinued operations - 2,352 1,275 9,306 Interest expense-continuing operations 22,414 18,839 82,119 77,189 Interest expense-discontinued operations - 1,566 1,326 7,087 Income taxes-continuing operations 584 86 1,200 156 Income taxes-discontinued operations - 239 833 1,290 Income taxes-sale of assets - - 20,451 - Noncontrolling interests 24 60 1,221 38 Adjustments from consolidated affiliates (4,072) (3,589) (15,756) (14,604) Adjustments from unconsolidated affiliates (13) 5,553 8,419 23,489 Preferred shareholder dividends 5,289 6,041 24,084 24,166 ----- ----- ------ ------ EBITDA 62,132 57,577 565,259 211,638 Realized portion of deferred gain on sale-leaseback (48) (53) (207) (207) Loss (gain) on sale of assets- continuing operations - 430 (729) 1,185 Gain on sale of assets- discontinued operations (276) - (177,219) - Gain on consolidation of affiliates (20) - (143,471) - Impairment losses and other charges - - - 728 Loss on early extinguishment of debt-continuing operations 2,010 - 2,619 - Loss on early extinguishment of debt-discontinued operations - - 272 - Foreign currency exchange loss (gain)-continuing operations (a) 41 (16) 116 (42) Foreign currency exchange loss (gain)-discontinued operations (a) - 150 (32) (1) Non-cash interest rate derivative activity 91 - 218 - Amortization of below market hotel management agreement 582 - 1,203 - Activist shareholder costs (1) 342 1,636 342 Hotel acquisitions costs 182 - 182 - Adjustments from consolidated affiliates (985) (85) (881) (455) ---- --- ---- ---- Comparable EBITDA $63,708 $58,345 $248,966 $213,188 ======= ======= ======== ========
(a) Foreign currency exchange gains or losses applicable to certain balance sheet items held by foreign subsidiaries.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Reconciliation of Net Income (Loss) Attributable to SHR Common Shareholders to Funds From Operations (FFO), FFO-Fully Diluted and Comparable FFO (in thousands, except per share data) Three Months Ended December 31, Years Ended December 31, ------------------------------- ------------------------ 2014 2013 2014 2013 ---- ---- ---- ---- Net income (loss) attributable to SHR common shareholders $1,413 $3,223 $320,399 $(13,191) Depreciation and amortization- continuing operations 36,493 23,207 119,688 96,712 Depreciation and amortization- discontinued operations - 2,352 1,275 9,306 Corporate depreciation (125) (125) (495) (508) Loss (gain) on sale of assets- continuing operations - 430 (729) 1,185 Gain on sale of assets, net of tax- discontinued operations (276) - (156,768) - Gain on consolidation of affiliates (20) - (143,471) - Realized portion of deferred gain on sale-leaseback (48) (53) (207) (207) Noncontrolling interests adjustments (100) (123) (398) (400) Adjustments from consolidated affiliates (2,216) (1,813) (8,188) (7,378) Adjustments from unconsolidated affiliates - 3,482 5,077 14,135 --- ----- ----- ------ FFO 35,121 30,580 136,183 99,654 Redeemable noncontrolling interests 124 183 1,619 438 --- --- ----- --- FFO-Fully Diluted 35,245 30,763 137,802 100,092 Impairment losses and other charges - - - 728 Non-cash interest rate derivative activity-continuing operations 3,204 (2,355) 6,335 (9,228) Non-cash interest rate derivative activity-discontinued operations - (141) - (2,389) Loss on early extinguishment of debt- continuing operations 2,010 - 2,619 - Loss on early extinguishment of debt- discontinued operations - - 272 - Foreign currency exchange loss (gain)-continuing operations (a) 41 (16) 116 (42) Foreign currency exchange loss (gain)-discontinued operations (a) - 150 (32) (1) Amortization of debt discount 623 - 1,869 - Amortization of below market hotel management agreement 582 - 1,203 - Activist shareholder costs (1) 342 1,636 342 Hotel acquisition costs 182 - 182 - Excess of redemption liability over carrying amount of redeemed preferred stock 3,321 - 10,233 - Adjustments from consolidated affiliates (985) - (985) - Comparable FFO $44,222 $28,743 $161,250 $89,502 ======= ======= ======== ======= Comparable FFO per fully diluted share $0.17 $0.14 $0.68 $0.43 ===== ===== ===== ===== Weighted average diluted shares (b) 257,334 209,800 236,092 209,328 ======= ======= ======= =======
(a) Foreign currency exchange gains or losses applicable to certain balance sheet items held by foreign subsidiaries. (b) Excludes shares related to the JW Marriott Essex House Hotel put option.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR) Debt Summary (dollars in thousands) Debt Interest Rate Spread (a) Loan Amount Maturity (b) ---- ------------- --------- ----------- ----------- Fairmont Scottsdale Princess (c) 0.53% 36 bp $117,000 April 2015 Westin St. Francis 6.09% Fixed 209,588 June 2017 Fairmont Chicago 6.09% Fixed 93,124 June 2017 Hyatt Regency La Jolla (d) 4.50% / 10.00% 400 bp / Fixed 89,247 December 2017 Hotel del Coronado (e) 3.82% 365 bp 475,000 March 2018 Bank credit facility (f) 2.17% 200 bp - April 2019 Four Seasons Washington, D.C. (g) 2.42% 225 bp 120,000 June 2019 JW Marriott Essex House Hotel (h) 3.12% 295 bp 225,000 January 2020 Loews Santa Monica Beach Hotel (i) 2.72% 255 bp 120,000 May 2021 InterContinental Chicago 5.61% Fixed 142,442 August 2021 InterContinental Miami (j) 3.99% Fixed 115,000 September 2024 1,706,401 Unamortized discount (c) (623) ---- $1,705,778 ==========
(a) Spread over LIBOR (0.17% at December 31, 2014). See (d) below for interest on the Hyatt Regency La Jolla loan. (b) Includes extension options. (c) On March 31, 2014, we acquired the remaining 50.0% equity interest in the Fairmont Scottsdale Princess hotel, resulting in the Fairmont Scottsdale Princess hotel becoming wholly-owned by us. In connection with the acquisition, we consolidated the Fairmont Scottsdale Princess hotel and became fully obligated under the entire mortgage loan secured by the Fairmont Scottsdale Princess hotel. We recorded the mortgage loan at its fair value, which included a debt discount, which is being amortized as additional interest expense over the maturity period of the loan. We are evaluating financing alternatives given the impending maturity date. (d) Interest on $72,000,000 of the total principal amount is paid monthly at an annual rate of LIBOR plus 4.00%, subject to a 0.50% LIBOR floor, and interest on $17,247,000 of the total principal amount is paid monthly at an annual fixed rate of 10.00%. (e) On June 11, 2014, we acquired the remaining 63.6% equity interest in the Hotel del Coronado, resulting in the Hotel del Coronado becoming wholly-owned by us. In connection with the acquisition, we consolidated the Hotel del Coronado and became fully obligated under the entire outstanding balance of the mortgage and mezzanine loans secured by the Hotel del Coronado. (f) On April 25, 2014, we entered into a new $300,000,000 secured bank credit facility, which replaced the previous secured bank credit facility. (g) On June 30, 2014, we refinanced the loan secured by the Four Seasons Washington, D.C. hotel and entered into a new $120,000,000 limited recourse loan agreement. (h) On December 30, 2014, we refinanced the mortgage loan secured by the JW Marriott Essex House Hotel and entered into a new $225,000,000 limited recourse loan agreement. (i) On May 29, 2014, we refinanced the loan secured by the Loews Santa Monica Beach Hotel and entered into a new $120,000,00 limited recourse loan agreement. (j) On July 7, 2014, we paid off the outstanding balance on the prior mortgage loan secured by the InterContinental Miami hotel. We entered into a new $115,000,000 loan secured by the InterContinental Miami hotel on August 29, 2014.
Debt Summary (Continued) (dollars in thousands) Future scheduled debt principal payments (including extension options) are as follows: Years ending December 31, Amount ------------------------- ------ 2015 $118,796 2016 2,031 2017 394,131 2018 477,299 2019 122,433 Thereafter 591,711 ------- 1,706,401 Unamortized discount (623) ---- $1,705,778 Percent of fixed rate debt 33.8% Weighted average interest rate (k) 3.98% Weighted average maturity of fixed rate debt (debt with maturity of greater than one year) 4.91
(k) Excludes the amortization of deferred financing costs.
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SOURCE Strategic Hotels & Resorts, Inc.