Exhibit 99.1
| | | | |
 | | | | COMPANY CONTACTS: Diane Morefield EVP & Chief Financial Officer Strategic Hotels & Resorts (312) 658-5740 Jonathan Stanner Vice President, Capital Markets & Treasurer Strategic Hotels & Resorts (312) 658-5746 |
FOR IMMEDIATE RELEASE
WEDNESDAY, FEBRUARY 23, 2011
STRATEGIC HOTELS & RESORTS REPORTS FOURTH QUARTER AND
FULL YEAR 2010 RESULTS; SIGNIFICANT BALANCE SHEET
RESTRUCTURING CONTINUES
Company Enters Agreement to Sell Paris Marriott Champs Elysees
Strengthening Operating Fundamentals Drive Improved Performance
CHICAGO – February 23, 2011 –Strategic Hotels & Resorts (NYSE: BEE) today reported results for the fourth quarter and full year ended December 31, 2010. Additionally, the Company announced that it has entered into an agreement to sell its leasehold interest in the Paris Marriott Champs Elysees for total proceeds of €39.7 million (approximately $54.4 million).
Chief Executive Officer Laurence Geller remarked, “2010 was a pivotal and successful year for the Company. We consistently executed upon our stated strategy, resulting in the anticipated convergence of our key operating metrics which turned positive last spring. Moreover, we executed a number of well-timed, strategic initiatives that strengthened our balance sheet, including the $350 million secondary offering completed in May. Among the other accomplishments we achieved in 2010 was the continuance of our planned, methodical exit of Europe, highlighted by the December closing of the InterContinental Prague and the agreement to sell our interest in the Marriott Champs Elysees in Paris on attractive terms.
“In 2011, our competitive position is growing even stronger. Our unique portfolio of high-end properties are in excellent physical condition and are competing in markets where there is negligible new supply. We remain focused on aggressively pursuing the final stage of our disciplined balance sheet restructuring while simultaneously growing rate, occupancy, market share, and margins. Our strategy will continue to produce meaningful financial results and support our goal of providing exceptional shareholder returns,” concluded Geller.
Fourth Quarter Highlights
| • | | Comparable funds from operations (Comparable FFO) was a loss of $0.01 per diluted share compared with a loss of $0.05 per diluted share in the prior year period. Excluding a $5.7 million charge related to the Company’s long-term incentive compensation (Value Creation Plan or VCP), Comparable FFO was $0.03 per diluted share in the fourth quarter of 2010. |
| • | | Comparable EBITDA was $28.7 million compared with $32.5 million in the prior year period. Excluding the $5.7 million charge related to the Company’s VCP, Comparable EBITDA totaled $34.5 million in the fourth quarter of 2010, a 6.2 percent increase between periods. |
| • | | North American revenue per available room (RevPAR) increased 8.1 percent, driven by a 3.3 percentage point increase in occupancy and a 2.8 percent increase in average daily rate (ADR), compared to the fourth quarter 2009. Total revenue per available room (Total RevPAR) increased 8.7 percent with non-rooms revenue increasing by 9.3 percent between periods. |
| • | | European RevPAR increased 5.0 percent (9.9 percent in constant dollars), driven by a 2.0 percentage point increase in occupancy and a 2.4 percent increase in ADR (7.2 percent increase in constant dollars) between periods. European Total RevPAR increased 1.0 percent in the fourth quarter over the prior year period (5.7 percent in constant dollars). The European portfolio excludes results from the InterContinental Prague, which was sold in the fourth quarter, and the Paris Marriott Champs Elysees which is currently under contract for sale. |
| • | | North American EBITDA margins expanded 450 basis points compared to the fourth quarter of 2009. Excluding certain one-time property tax refunds received during the quarter and adjusting for cancellation fees, EBITDA margins expanded 210 basis points in the fourth quarter. |
Full Year 2010 Highlights
| • | | Comparable FFO was a loss of $0.05 per diluted share compared with a loss of $0.30 per diluted share in the prior year period. Excluding a $12.6 million charge related to the Company’s VCP, Comparable FFO was $0.05 per diluted share for the full year 2010. |
| • | | Comparable EBITDA was $119.4 million compared with $120.0 million in the prior year period. Excluding the $12.6 million charge related to the Company’s VCP, Comparable EBITDA was $132.0 million for the full year 2010, a 10.0 percent increase over the prior year. |
| • | | North American RevPAR increased 4.7 percent, driven by a 2.2 percentage point increase in occupancy and a 1.2 percent increase in ADR, compared to the full year 2009. Total RevPAR increased 4.3 percent with non-rooms revenue increasing by 3.9 percent between years. |
| • | | European RevPAR increased 12.1 percent (15.3 percent in constant dollars), driven by a 1.1 percentage point increase in occupancy and a 10.5 percent increase in ADR (13.6 percent increase in constant dollars) between periods. European Total RevPAR increased 7.8 percent in 2010 (10.8 percent in constant dollars). The European portfolio excludes results from the InterContinental Prague, which was sold in the fourth quarter, and the Paris Marriott Champs Elysees, which is currently under contract for sale. |
| • | | North American EBITDA margins expanded 130 basis points compared to the full year 2009. Excluding certain one-time property tax refunds received during the fourth quarter and adjusting for cancellation fees, EBITDA margins expanded 200 basis points in 2010. |
Other Financial Results
The Company reported fourth quarter and full year 2010 earnings results as follows:
| • | | Net loss attributable to common shareholders was $134.8 million, or $0.89 per diluted share, in the fourth quarter of 2010, compared with net loss attributable to common shareholders of $72.2 million, or $0.96 per diluted share, in the fourth quarter of 2009. |
| • | | For the full year, net loss attributable to common shareholders was $261.9 million, or $2.13 per diluted share, compared with a net loss attributable to common shareholders of $274.8 million, or $3.65 per diluted share for the full year 2009. |
2010 Dispositions and Capital Markets Review
| • | | In December, the Company entered into an agreement to sell its leasehold interest in the Paris Marriott Champs Elysees hotel for €26.5 million ($36.3 million). The Company also expects to receive an additional €13.2 million ($18.1 million) related to the release of an existing leasehold guarantee and other closing adjustments for total proceeds of €39.7 million (approximately $54.4 million). The transaction is subject to certain closing conditions and management can make no guarantee of closing. Net of lease expense, the property contributed $3.3 million to Comparable EBITDA and FFO in 2010 and was classified as held for sale in the fourth quarter and full year financial statements. The hotel also contributed approximately $0.4 million in incremental corporate G&A expense in 2010. |
| • | | In December, the Company closed on the disposition of the InterContinental Prague for total consideration of approximately €106.1 million ($141.4 million), which represents the assignment of the property’s third party debt and the interest rate swap liability related to the third party indebtedness. In addition, approximately €2.0 million ($2.7 million) of restricted cash related to the property was released to the Company. |
| • | | In June, the Company completed a cash tender offer to retire 100 percent of the aggregate principal amount of the $180 million, 3.50 percent Exchangeable Senior Notes due 2012 at par, plus accrued and unpaid interest. |
| • | | In May, the Company closed on the sale of 75.9 million shares of common stock at a public offering price of $4.60 per share. Net proceeds to the Company, after deducting underwriting discounts and commissions and expenses related to the offering, were $331.8 million. |
| • | | In May, the Company closed on a seven-year, $317.8 million, non-recourse cross-collateralized mortgage agreement secured by the Westin St. Francis and Fairmont Chicago hotels with a fixed interest rate of 6.09 percent. |
Impairment Losses and Other Charges
Fourth quarter and full year 2010 results include impairment and other charges totaling $141.9 million. These charges include an impairment to the Fairmont Scottsdale Princess of $101.3 million and a $40.6 million impairment to the Company’s original investment in the Hotel del Coronado. These one-time, non-cash charges have been excluded from Comparable EBITDA, FFO and FFO per share metrics.
Subsequent Events
| • | | The Company signed a letter agreement to acquire the Four Seasons Jackson Hole and Four Seasons Silicon Valley from The Woodbridge Company Limited (Woodbridge) in exchange for 15.2 million shares of common stock at an agreed upon issuance price of $6.25 per share, or an implied valuation of $95.0 million. On a full year basis, the hotels are forecasted to earn a combined $8.6 million of EBITDA in 2011, representing an 11.0 times EBITDA multiple. |
| • | | In addition, the Company signed an agreement to privately place and issue 8.0 million shares of common stock at $6.25 per share to Woodbridge resulting in total gross proceeds of $50.0 million. |
| • | | The Company completed a recapitalization of the joint venture that owns the Hotel del Coronado. Under terms of the agreement, a new joint venture has been established between the Company, Blackstone Real Estate Advisors (Blackstone) and KSL Resorts. As part of the recapitalization, which valued the hotel at approximately $590 million, the Company invested approximately $57 million to retain a 34.3 percent ownership position in the joint venture and will remain as asset manager of the hotel. Blackstone is a 60 percent owner and general partner of the joint venture. A $425 million debt financing was originated by Deutsche Bank. |
| • | | The Company amended its revolving credit facility to increase total borrowing capacity. Terms of the amendment include an increase of the advance rate from 45 percent to 55 percent of the borrowing base assets’ appraised values, a reduction in the debt service coverage ratio constant from 8 percent to 7 percent and a reduction of the debt service coverage ratio limit from 1.3 times to 1.2 times. In exchange, the Company agreed to reduce the total committed facility from $400 million to $350 million and reduce the maximum total leverage covenant from 80 percent to 70 percent. Pro forma for the amendment, the Company would have had availability on the revolving credit facility of approximately $320 million at year-end. The Company currently has $52 million outstanding on the credit facility. |
| • | | The Company sold its 50 percent interest in BuyEfficient, an electronic purchasing platform, for $9.0 million. The Company originally made a 50 percent investment in the entity in December 2007 in partnership with Sunstone Hotel Investors, Inc. |
| • | | The Company terminated $125 million of interest rate swaps for a total termination cost of $4.2 million. |
2011 Guidance
For the full year 2011, the Company anticipates that Comparable EBITDA will be in the range of $135.0 million to $150.0 million and Comparable FFO in the range of ($0.02) and $0.07 per fully diluted share.
The Company’s 2011 guidance includes the following assumptions:
| • | | Same Store North American RevPAR and Total RevPAR growth in the range of 7.0 to 9.0 percent. Same Store operating metrics include North American hotels which are included in the Company’s consolidated financial results but exclude the Fairmont Scottsdale Princess; |
| • | | Same Store North American gross operating profit margins between 31 percent and 32 percent and EBITDA margins between 21 percent and 22 percent; |
| • | | Corporate G&A expenses in the range of $21.0 to $23.0 million, excluding any expense from the Company’s Value Creation Plan. The midpoint of the range is approximately flat with 2010 corporate expenses, excluding VCP expense, and a 27 percent reduction from the 2007 peak; |
| • | | For guidance purposes only, the Fairmont Scottsdale Princess is assumed to contribute zero to Comparable EBITDA and FFO beyond the maturity of the property’s debt financing in September. The property is forecasted to contribute $7.1 million to Comparable EBITDA in the first eight months of 2011; |
| • | | Disposition of the Paris Marriott Champs Elysees leasehold position to close at the end of the first quarter; |
| • | | Acquisition of the Four Seasons Silicon Valley and Four Seasons Jackson Hole to close at the end of the first quarter. The two assets are expected to contribute $6.0 million to Comparable EBITDA and FFO in the last three quarters of 2011; |
| • | | Issuance of 23.2 million shares of common equity in exchange for the Four Seasons Silicon Valley and Four Seasons Jackson Hole and $50 million in gross proceeds to be used to pay down outstanding indebtedness. Weighted average diluted shares outstanding for 2011 assumed to be approximately 170 million; |
| • | | Consolidated interest expense in the range of $95 million to $100 million, including approximately $25 million of non-cash interest expense, primarily related to swap financing amortization costs; |
| • | | Capital expenditures totaling approximately $69 million, including spending of $47 million from property furniture, fixtures and equipment (FF&E) reserves and an additional $22 million of owner-funded spending; |
| • | | No additional planned acquisition, disposition or capital raising activity. |
Portfolio Definitions
North American hotel comparisons for the fourth quarter and full year 2010 are derived from the Company’s hotel portfolio at December 31, 2010, consisting of properties in which operations are included in the consolidated results of the Company.
European hotel comparisons for the fourth quarter and full year 2010 are derived from the Company’s European owned and leased hotel properties at December 31, 2010, consisting of the Marriott London Grosvenor Square and the Marriott Hamburg. The InterContinental Prague, which was sold in the fourth quarter of 2010, and Paris Marriott Champs Elysees, which is currently under contract for sale, are excluded from the European portfolio comparisons.
Earnings Call
The Company will conduct its fourth quarter and full-year 2010 conference call for investors and other interested parties on Thursday, February 24, 2011 at 10:00 a.m. Eastern Time (ET). Interested individuals are invited to listen to the call by telephone at 888-713-4205 (toll international: 617-213-4862) with pass code 23050644. To participate on the web cast, log on tohttp://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=176522&eventID=3689615 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 1:00 p.m. ET on February 24, 2011, through 11:59 p.m. ET on March 3, 2011. To access the replay, dial 888-286-8010 (toll international: 617-801-6888) and request replay pin number 40124729. A replay of the call will also be available on the Internet at http://www.strategichotels.com or http://www.earnings.com 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 within the fourth quarter information section.
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, Mexico and Europe. The Company currently has ownership interests in 16 properties with an aggregate of 7,630 rooms. 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 our future financial results, stabilization in the lodging space, positive trends in the lodging industry and our 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: failure to reach agreement with Woodbridge on all business terms and the failure to execute definitive agreements; failure to complete and close on transactions in light of due diligence findings or the failure of closing conditions to be satisfied; ability to obtain, refinance or restructure debt or comply with covenants contained in our debt facilities demand for hotel rooms in our current and proposed market areas; availability of capital; ability to obtain, refinance or restructure debt or comply with covenants contained in our debt facilities; rising interest rates and operating costs; rising insurance premiums; cash available for capital expenditures; competition; economic conditions generally and in the real estate market specifically, including deterioration of economic conditions and the extent of its effect on business and leisure travel and the lodging industry; ability to dispose of existing properties in a manner consistent with our disposition strategy; risks related to natural disasters; the effect of
threats of terrorism and increased security precautions on travel patterns and hotel bookings; the outbreak of hostilities and international political instability; legislative or regulatory changes, including changes to laws governing the taxation of REITs; and changes in generally accepted accounting principles, policies and guidelines applicable to REITs.
Additional risks are discussed in the Company’s filings with the Securities and Exchange Commission, 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 we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
The following tables reconcile projected 2011 net loss 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 Loss Attributable to Common Shareholders | | ($ | 126.5 | ) | | ($ | 111.6 | ) |
Depreciation and Amortization | | | 125.0 | | | | 125.0 | |
Interest Expense | | | 96.3 | | | | 96.3 | |
Income Taxes | | | 3.3 | | | | 3.3 | |
Non-Controlling Interests | | | (0.6 | ) | | | (0.5 | ) |
Adjustments from Consolidated Affiliates | | | (8.0 | ) | | | (8.0 | ) |
Adjustments from Unconsolidated Affiliates | | | 16.2 | | | | 16.2 | |
Preferred Shareholder Dividends | | | 30.9 | | | | 30.9 | |
Realized Portion of Deferred Gain on Sale Leasebacks | | | (1.6 | ) | | | (1.6 | ) |
| | | | | | | | |
Comparable EBITDA | | $ | 135.0 | | | $ | 150.0 | |
| | | | | | | | |
| | | Low Range | | | High Range | |
Net Loss Attributable to Common Shareholders | | ($ | 126.5 | ) | | ($ | 111.6 | ) |
Depreciation and Amortization | | | 123.8 | | | | 123.8 | |
Realized Portion of Deferred Gain on Sale Leasebacks | | | (1.6 | ) | | | (1.6 | ) |
Deferred Tax on Realized Portion of Deferred Gain | | | 0.4 | | | | 0.4 | |
Non-Controlling Interests | | | (0.6 | ) | | | (0.5 | ) |
Adjustments from Consolidated Affiliates | | | (5.2 | ) | | | (5.2 | ) |
Adjustments from Unconsolidated Affiliates | | | 7.1 | | | | 7.1 | |
| | | | | | | | |
Comparable FFO | | ($ | 2.6 | ) | | $ | 12.4 | |
Comparable FFO per Diluted Share | | ($ | 0.02 | ) | | $ | 0.07 | |
Note: No estimate for gain/loss on sale of assets related to asset dispositions. Paris Marriott Champs Elysees results will be classified as discontinued operations in the 2011 financial statements which have not been separately broken out in the above reconciliations.
The following tables reconcile projected second quarter through fourth quarter and full year 2011 net income attributable to common shareholders to projected Comparable EBITDA and Comparable FFO for the Four Seasons Jackson Hole and Four Seasons Silicon Valley (in millions):
| | | | | | | | |
| | | Q2 – Q4 | | | Full Year | |
Net Income Attributable to Common Shareholders | | $ | 3.4 | | | $ | 5.2 | |
Depreciation and Amortization | | | 2.6 | | | | 3.4 | |
| | | | | | | | |
Comparable EBITDA | | $ | 6.0 | | | $ | 8.6 | |
| | | | | | | | |
| | | Q2 – Q4 | | | Full Year | |
Net Income Attributable to Common Shareholders | | $ | 3.4 | | | $ | 5.2 | |
Depreciation and Amortization | | | 2.6 | | | | 3.4 | |
| | | | | | | | |
Comparable FFO | | $ | 6.0 | | | $ | 8.6 | |
Note: Depreciation and amortization has been estimated based on a preliminary purchase price allocation. Any change in allocation will affect the amount of depreciation and amortization expense.
The following tables reconcile projected 2011 net loss attributable to common shareholders to projected Comparable EBITDA and Comparable FFO for the Fairmont Scottsdale Princess for the period between January 1st and August 31st (in millions):
| | | | |
| | | Jan - Aug | |
Net Loss Attributable to Common Shareholders | | ($ | 9.2 | ) |
Depreciation and Amortization | | | 15.0 | |
Interest Expense | | | 1.3 | |
| | | | |
Comparable EBITDA | | $ | 7.1 | |
| | | | |
| | | Jan - Aug | |
Net Loss Attributable to Common Shareholders | | ($ | 9.2 | ) |
Depreciation and Amortization | | | 15.0 | |
| | | | |
Comparable FFO | | $ | 5.8 | |
Note: Interest expense estimate based on the current forward LIBOR curve. The property level debt financing currently has a blended interest rate of LIBOR plus 56 basis points and is scheduled to mature on September 9th.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Statements of Operations
(in thousands, except per share data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Years Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Revenues: | | | | | | | | | | | | | | | | |
Rooms | | $ | 93,885 | | | $ | 87,077 | | | $ | 362,559 | | | $ | 343,891 | |
Food and beverage | | | 66,339 | | | | 59,412 | | | | 238,762 | �� | | | 216,982 | |
Other hotel operating revenue | | | 22,696 | | | | 22,439 | | | | 79,981 | | | | 89,525 | |
Lease revenue | | | 1,608 | | | | 1,345 | | | | 4,991 | | | | 4,858 | |
| | | | | | | | | | | | | | | | |
| | | | |
Total revenues | | | 184,528 | | | | 170,273 | | | | 686,293 | | | | 655,256 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating Costs and Expenses: | | | | | | | | | | | | | | | | |
Rooms | | | 27,204 | | | | 25,379 | | | | 105,142 | | | | 100,642 | |
Food and beverage | | | 47,241 | | | | 42,920 | | | | 171,279 | | | | 160,252 | |
Other departmental expenses | | | 53,467 | | | | 50,375 | | | | 199,336 | | | | 193,699 | |
Management fees | | | 6,093 | | | | 5,897 | | | | 22,911 | | | | 23,386 | |
Other hotel expenses | | | 8,733 | | | | 13,893 | | | | 48,781 | | | | 52,385 | |
Lease expense | | | 1,170 | | | | 1,255 | | | | 4,566 | | | | 4,752 | |
Depreciation and amortization | | | 32,406 | | | | 34,379 | | | | 130,601 | | | | 130,955 | |
Impairment losses and other charges | | | 141,858 | | | | 49,526 | | | | 141,858 | | | | 99,740 | |
Corporate expenses | | | 12,594 | | | | 4,294 | | | | 34,692 | | | | 23,910 | |
| | | | | | | | | | | | | | | | |
| | | | |
Total operating costs and expenses | | | 330,766 | | | | 227,918 | | | | 859,166 | | | | 789,721 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating loss | | | (146,238 | ) | | | (57,645 | ) | | | (172,873 | ) | | | (134,465 | ) |
| | | | |
Interest expense | | | (17,797 | ) | | | (23,255 | ) | | | (86,285 | ) | | | (93,929 | ) |
Interest income | | | 61 | | | | 109 | | | | 430 | | | | 640 | |
Loss on early extinguishment of debt | | | — | | | | — | | | | (925 | ) | | | (883 | ) |
Loss on early termination of derivative financial instruments | | | — | | | | — | | | | (18,263 | ) | | | — | |
Equity in earnings (losses) of joint ventures | | | 10,125 | | | | (426 | ) | | | 13,025 | | | | 1,718 | |
Foreign currency exchange loss | | | (16 | ) | | | (40 | ) | | | (1,410 | ) | | | (896 | ) |
Other income (expenses), net | | | 99 | | | | (305 | ) | | | 2,398 | | | | (137 | ) |
| | | | | | | | | | | | | | | | |
Loss before income taxes and discontinued operations | | | (153,766 | ) | | | (81,562 | ) | | | (263,903 | ) | | | (227,952 | ) |
Income tax expense | | | (1,112 | ) | | | (1,881 | ) | | | (1,408 | ) | | | (3,344 | ) |
| | | | | | | | | | | | | | | | |
Loss from continuing operations | | | (154,878 | ) | | | (83,443 | ) | | | (265,311 | ) | | | (231,296 | ) |
Income (loss) from discontinued operations, net of tax | | | 28,037 | | | | 17,745 | | | | 34,511 | | | | (15,137 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net loss | | | (126,841 | ) | | | (65,698 | ) | | | (230,800 | ) | | | (246,433 | ) |
Net loss attributable to the noncontrolling interests in SHR’s operating partnership | | | 808 | | | | 832 | | | | 1,687 | | | | 3,129 | |
Net (income) loss attributable to the noncontrolling interests in consolidated affiliates | | | (1,080 | ) | | | 403 | | | | (1,938 | ) | | | (641 | ) |
| | | | | | | | | | | | | | | | |
Net loss attributable to SHR | | | (127,113 | ) | | | (64,463 | ) | | | (231,051 | ) | | | (243,945 | ) |
Preferred shareholder dividends | | | (7,722 | ) | | | (7,722 | ) | | | (30,886 | ) | | | (30,886 | ) |
| | | | | | | | | | | | | | | | |
Net loss attributable to SHR common shareholders | | $ | (134,835 | ) | | $ | (72,185 | ) | | $ | (261,937 | ) | | $ | (274,831 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Basic and Diluted Loss Per Share: | | | | | | | | | | | | | | | | |
Loss from continuing operations attributable to SHR common shareholders | | $ | (1.07 | ) | | $ | (1.19 | ) | | $ | (2.41 | ) | | $ | (3.45 | ) |
Income (loss) from discontinued operations attributable to SHR | | | 0.18 | | | | 0.23 | | | | 0.28 | | | | (0.20 | ) |
| | | | | | | | | | | | | | | | |
Net loss attributable to SHR common shareholders | | $ | (0.89 | ) | | $ | (0.96 | ) | | $ | (2.13 | ) | | $ | (3.65 | ) |
| | | | | | | | | | | | | | | | |
Weighted average common shares outstanding | | | 151,663 | | | | 75,426 | | | | 122,933 | | | | 75,267 | |
| | | | | | | | | | | | | | | | |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets
(in thousands, except share data)
| | | | | | | | |
| | | December 31,
2010 | | | December 31,
2009 | |
Assets | | | | | | | | |
Investment in hotel properties, net | | $ | 1,835,451 | | | $ | 2,162,584 | |
Goodwill | | | 40,359 | | | | 75,758 | |
Intangible assets, net of accumulated amortization of $6,536 and $4,400 | | | 32,620 | | | | 34,046 | |
Assets held for sale | | | 45,145 | | | | — | |
Investment in joint ventures | | | 18,024 | | | | 46,745 | |
Cash and cash equivalents | | | 78,842 | | | | 116,310 | |
Restricted cash and cash equivalents | | | 34,618 | | | | 22,829 | |
Accounts receivable, net of allowance for doubtful accounts of $1,922 and $2,657 | | | 35,250 | | | | 54,524 | |
Deferred financing costs, net of accumulated amortization of $15,756 and $12,543 | | | 3,322 | | | | 11,225 | |
Deferred tax assets | | | 4,121 | | | | 34,244 | |
Other assets | | | 34,564 | | | | 39,878 | |
| | | | | | | | |
Total assets | | $ | 2,162,316 | | | $ | 2,598,143 | |
| | | | | | | | |
| | |
Liabilities, Noncontrolling Interests and Equity | | | | | | | | |
Liabilities: | | | | | | | | |
Mortgages payable | | $ | 1,118,281 | | | $ | 1,300,745 | |
Exchangeable senior notes, net of discount | | | — | | | | 169,452 | |
Bank credit facility | | | 28,000 | | | | 178,000 | |
Liabilities of assets held for sale | | | 93,206 | | | | — | |
Accounts payable and accrued expenses | | | 266,773 | | | | 236,269 | |
Deferred tax liabilities | | | 1,732 | | | | 16,940 | |
Deferred gain on sale of hotels | | | 3,930 | | | | 101,852 | |
| | | | | | | | |
Total liabilities | | | 1,511,922 | | | | 2,003,258 | |
Noncontrolling interests in SHR’s operating partnership | | | 5,050 | | | | 2,717 | |
Equity: | | | | | | | | |
SHR’s shareholders’ equity: | | | | | | | | |
8.50% Series A Cumulative Redeemable Preferred Stock ($0.01 par value; 4,488,750 shares issued and outstanding; liquidation preference $25.00 per share and $131,296 in the aggregate) | | | 108,206 | | | | 108,206 | |
8.25% Series B Cumulative Redeemable Preferred Stock ($0.01 par value; 4,600,000 shares issued and outstanding; liquidation preference $25.00 per share and $133,975 in the aggregate) | | | 110,775 | | | | 110,775 | |
8.25% Series C Cumulative Redeemable Preferred Stock ($0.01 par value; 5,750,000 shares issued and outstanding; liquidation preference $25.00 per share and $167,469 in the aggregate) | | | 138,940 | | | | 138,940 | |
Common shares ($0.01 par value; 250,000,000 common shares authorized; 151,305,314 and 75,253,252 common shares issued and outstanding) | | | 1,513 | | | | 752 | |
Additional paid-in capital | | | 1,553,286 | | | | 1,233,856 | |
Accumulated deficit | | | (1,185,294 | ) | | | (954,208 | ) |
Accumulated other comprehensive loss | | | (107,164 | ) | | | (69,341 | ) |
| | | | | | | | |
Total SHR’s shareholders’ equity | | | 620,262 | | | | 568,980 | |
Noncontrolling interests in consolidated affiliates | | | 25,082 | | | | 23,188 | |
| | | | | | | | |
Total equity | | | 645,344 | | | | 592,168 | |
| | | | | | | | |
Total liabilities, noncontrolling interests and equity | | $ | 2,162,316 | | | $ | 2,598,143 | |
| | | | | | | | |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
FINANCIAL HIGHLIGHTS
Supplemental Financial Data
(in thousands, except per share information)
| | | | | | | | |
| | | December 31, 2010 | |
| | | Pro Rata Share | | | Consolidated | |
Capitalization | | | | |
Common shares outstanding | | | 151,305 | | | | 151,305 | |
Operating partnership units outstanding | | | 955 | | | | 955 | |
Restricted stock units outstanding | | | 1,166 | | | | 1,166 | |
| | | | | | | | |
| | |
Combined shares, options and units outstanding | | | 153,426 | | | | 153,426 | |
Common stock price at end of period | | $ | 5.29 | | | $ | 5.29 | |
| | | | | | | | |
| | |
Common equity capitalization | | $ | 811,624 | | | $ | 811,624 | |
Preferred equity capitalization (at $25.00 face value) | | | 370,236 | | | | 370,236 | |
Consolidated debt | | | 1,146,281 | | | | 1,146,281 | |
Pro rata share of unconsolidated debt | | | 265,950 | | | | — | |
Pro rata share of consolidated debt | | | (107,065 | ) | | | — | |
Cash and cash equivalents | | | (78,842 | ) | | | (78,842 | ) |
| | | | | | | | |
| | |
Total enterprise value | | $ | 2,408,184 | | | $ | 2,249,299 | |
| | | | | | | | |
| | |
Net Debt / Total Enterprise Value | | | 50.9 | % | | | 47.4 | % |
Preferred Equity / Total Enterprise Value | | | 15.4 | % | | | 16.5 | % |
Common Equity / Total Enterprise Value | | | 33.7 | % | | | 36.1 | % |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Discontinued Operations
The results of operations of hotels sold or held for sale are classified as discontinued operations and segregated in the consolidated statements of operations for all periods presented. On December 23, 2010, we entered into an agreement to sell our leasehold interest in the Paris Marriott Champs Elysees hotel for an estimated €26,500,000. We also expect to receive an additional €13,200,000 related to the release of an existing leasehold guarantee and other closing adjustments for total proceeds of €39,700,000. No earnest money has been deposited by the buyer, and the sale, subject to certain closing contingencies, is scheduled to close before April 30, 2011. The following hotels were sold during 2010 and 2009 (in thousands):
| | | | | | |
Hotel | | Date Sold | | Net Sales Proceeds | |
InterContinental Prague | | December 15, 2010 | | $ | 3,564 | |
Renaissance Paris Hotel Le Parc Trocadero | | December 21, 2009 | | $ | 50,275 | |
Four Seasons Mexico City | | October 29, 2009 | | $ | 52,156 | |
The following is a summary of income (loss) from discontinued operations, net of tax for the three months and years ended December 31, 2010 and 2009 (in thousands):
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Years Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | |
Hotel operating revenues | | $ | 16,896 | | | $ | 25,213 | | | $ | 68,883 | | | $ | 100,435 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating costs and expenses | | | 14,858 | | | | 18,175 | | | | 55,252 | | | | 79,719 | |
Depreciation and amortization | | | 567 | | | | 2,205 | | | | 5,980 | | | | 13,307 | |
Impairment losses and other charges | | | — | | | | 269 | | | | — | | | | 31,064 | |
| | | | | | | | | | | | | | | | |
Total operating costs and expenses | | | 15,425 | | | | 20,649 | | | | 61,232 | | | | 124,090 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating income (loss) | | | 1,471 | | | | 4,564 | | | | 7,651 | | | | (23,655 | ) |
| | | | |
Interest expense | | | (1,990 | ) | | | (2,138 | ) | | | (9,706 | ) | | | (8,592 | ) |
Interest income | | | 13 | | | | (82 | ) | | | 32 | | | | 101 | |
Loss on early extinguishment of debt | | | (95 | ) | | | — | | | | (95 | ) | | | — | |
Foreign currency exchange (loss) gain | | | (98 | ) | | | (1,710 | ) | | | 7,392 | | | | (1,141 | ) |
Other expenses, net | | | — | | | | (554 | ) | | | — | | | | (554 | ) |
Income tax benefit (expense) | | | 260 | | | | (499 | ) | | | (476 | ) | | | 540 | |
Gain on sale | | | 28,476 | | | | 18,164 | | | | 29,713 | | | | 18,164 | |
| | | | | | | | | | | | | | | | |
Income (loss) from discontinued operations, net of tax | | $ | 28,037 | | | $ | 17,745 | | | $ | 34,511 | | | $ | (15,137 | ) |
| | | | | | | | | | | | | | | | |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Investment in the Hotel del Coronado
(in thousands)
On January 9, 2006, we purchased a 45% interest in the joint venture that owns the Hotel del Coronado(a). We account for this investment using the equity method of accounting.
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Years Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Total revenues (100%) | | $ | 27,932 | | | $ | 19,676 | | | $ | 122,099 | | | $ | 116,297 | |
Property EBITDA (100%) | | $ | 5,629 | | | $ | 5,767 | | | $ | 36,500 | | | $ | 37,988 | |
| | | | |
Equity in earnings (losses) of joint venture (SHR 45% ownership) | | | | | | | | | | | | | | | | |
Property EBITDA | | $ | 2,533 | | | $ | 2,595 | | | $ | 16,425 | | | $ | 17,095 | |
Depreciation and amortization | | | (1,891 | ) | | | (1,973 | ) | | | (7,894 | ) | | | (7,736 | ) |
Interest expense | | | (2,003 | ) | | | (1,874 | ) | | | (7,714 | ) | | | (7,799 | ) |
Gain on extinguishment of debt (b) | | | 11,025 | | | | — | | | | 11,025 | | | | — | |
Other expenses, net | | | (32 | ) | | | (120 | ) | | | (195 | ) | | | (353 | ) |
Income taxes | | | 392 | | | | 469 | | | | 503 | | | | (82 | ) |
| | | | | | | | | | | | | | | | |
Equity in earnings (losses) of joint venture | | $ | 10,024 | | | $ | (903 | ) | | $ | 12,150 | | | $ | 1,125 | |
| | | | | | | | | | | | | | | | |
| | | | |
Comparable EBITDA Contribution from investment in Hotel del Coronado | | | | | | | | | | | | | | | | |
Equity in earnings (losses) of joint venture | | $ | 10,024 | | | $ | (903 | ) | | $ | 12,150 | | | $ | 1,125 | |
Depreciation and amortization | | | 1,891 | | | | 1,973 | | | | 7,894 | | | | 7,736 | |
Interest expense | | | 2,003 | | | | 1,874 | | | | 7,714 | | | | 7,799 | |
Gain on extinguishment of debt (b) | | | (11,025 | ) | | | — | | | | (11,025 | ) | | | — | |
Income taxes | | | (392 | ) | | | (469 | ) | | | (503 | ) | | | 82 | |
| | | | | | | | | | | | | | | | |
Comparable EBITDA Contribution from investment in Hotel del Coronado | | $ | 2,501 | | | $ | 2,475 | | | $ | 16,230 | | | $ | 16,742 | |
| | | | | | | | | | | | | | | | |
| | | | |
Comparable FFO Contribution from investment in Hotel del Coronado | | | | | | | | | | | | | | | | |
Equity in earnings (losses) of joint venture | | $ | 10,024 | | | $ | (903 | ) | | $ | 12,150 | | | $ | 1,125 | |
Depreciation and amortization | | | 1,891 | | | | 1,973 | | | | 7,894 | | | | 7,736 | |
Gain on extinguishment of debt (b) | | | (11,025 | ) | | | — | | | | (11,025 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Comparable FFO Contribution from investment in Hotel del Coronado | | $ | 890 | | | $ | 1,070 | | | $ | 9,019 | | | $ | 8,861 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Debt | | Interest Rate | | | Spread over
LIBOR | | | Loan Amount | | | Maturity | |
CMBS Mortgage and Mezzanine | | | 2.34% | | | | 208 bp | | | $ | 572,500 | | | | January 2011 | |
Revolving Credit Facility | | | 2.76% | | | | 250 bp | | | | 18,500 | | | | January 2011 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | 591,000 | | | | | |
| | | | |
Cash and cash equivalents | | | | | | | | | | | (10,720 | ) | | | | |
| | | | | | | | | | | | | | | | |
| | | | |
Net Debt | | | | | | | | | | $ | 580,280 | | | | | |
| | | | | | | | | | | | | | | | |
| | | | |
Cap | | Effective
Date | | | LIBOR Cap Rate | | | Notional Amount | | | Maturity | |
CMBS Mortgage and Mezzanine Loan and Revolving Credit Facility Cap | | | January 2010 | | | | 2.0 | % | | $ | 630,000 | | | | January 2011 | |
| (a) | On February 4, 2011, we completed a recapitalization of the joint venture that owns the Hotel del Coronado. As part of the recapitalization, a new joint venture was formed to own the Hotel del Coronado and to invest cash in the asset. Pursuant to the terms of the recapitalization, we became a limited partner in the new joint venture, and our ownership interest in the Hotel del Coronado decreased from 45% to 34.3%. In connection with the recapitalization, the new joint venture secured $425,000,000 of five-year debt financing at a rate of LIBOR plus 480 basis points, subject to a 1% LIBOR floor. Additionally, the new joint venture purchased a two-year, 2% LIBOR cap, which was required by the loan. |
| (b) | In December 2010, a $37,500,000 mezzanine layer of the Hotel del Coronado’s debt structure was settled for a discounted pay-off of $13,000,000, which resulted in a gain on the extinguishment of debt of $24,500,000. We recorded our 45% share of the gain equal to $11,025,000. |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Leasehold Information
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Years Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | |
Paris Marriott Champs Elysees (a): | | | | | | | | | | | | | | | | |
Property EBITDA | | $ | 3,753 | | | $ | 4,368 | | | $ | 19,611 | | | $ | 17,739 | |
Revenue (b) | | $ | 3,753 | | | $ | 4,368 | | | $ | 19,611 | | | $ | 17,739 | |
| | | | |
Lease Expense | | | (2,978 | ) | | | (3,236 | ) | | | (11,893 | ) | | | (12,219 | ) |
Less: Deferred Gain on Sale Leaseback | | | (1,144 | ) | | | (1,237 | ) | | | (4,465 | ) | | | (4,685 | ) |
| | | | | | | | | | | | | | | | |
Adjusted Lease Expense | | | (4,122 | ) | | | (4,473 | ) | | | (16,358 | ) | | | (16,904 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
EBITDA Contribution from Leasehold | | $ | (369 | ) | | $ | (105 | ) | | $ | 3,253 | | | $ | 835 | |
| | | | | | | | | | | | | | | | |
| | | | |
Marriott Hamburg: | | | | | | | | | | | | | | | | |
Property EBITDA | | $ | 1,681 | | | $ | 1,567 | | | $ | 6,051 | | | $ | 5,847 | |
Revenue (b) | | $ | 1,608 | | | $ | 1,345 | | | $ | 4,991 | | | $ | 4,858 | |
| | | | |
Lease Expense | | | (1,170 | ) | | | (1,255 | ) | | | (4,566 | ) | | | (4,752 | ) |
Less: Deferred Gain on Sale Leaseback | | | (53 | ) | | | (58 | ) | | | (207 | ) | | | (217 | ) |
| | | | | | | | | | | | | | | | |
Adjusted Lease Expense | | | (1,223 | ) | | | (1,313 | ) | | | (4,773 | ) | | | (4,969 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
EBITDA Contribution from Leasehold | | $ | 385 | | | $ | 32 | | | $ | 218 | | | $ | (111 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Total Leaseholds: | | | | | | | | | | | | | | | | |
Property EBITDA | | $ | 5,434 | | | $ | 5,935 | | | $ | 25,662 | | | $ | 23,586 | |
Revenue (b) | | $ | 5,361 | | | $ | 5,713 | | | $ | 24,602 | | | $ | 22,597 | |
| | | | |
Lease Expense | | | (4,148 | ) | | | (4,491 | ) | | | (16,459 | ) | | | (16,971 | ) |
Less: Deferred Gain on Sale Leaseback | | | (1,197 | ) | | | (1,295 | ) | | | (4,672 | ) | | | (4,902 | ) |
| | | | | | | | | | | | | | | | |
Adjusted Lease Expense | | | (5,345 | ) | | | (5,786 | ) | | | (21,131 | ) | | | (21,873 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
EBITDA Contribution from Leaseholds | | $ | 16 | | | $ | (73 | ) | | $ | 3,471 | | | $ | 724 | |
| | | | | | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | | | | | | | |
| | | | |
| | | December 31,
2010 | | | December 31,
2009 | | | | | | | |
Security Deposits (c): | | | | | | | | | | | | | | | | |
Paris Marriott Champs Elysees | | $ | 14,459 | | | $ | 10,720 | | | | | | | | | |
Marriott Hamburg | | | 2,540 | | | | 7,158 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | $ | 16,999 | | | $ | 17,878 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| (a) | On December 23, 2010, we entered into an agreement to sell our leasehold interest in the Paris Marriott Champs Elysees. No earnest money has been deposited by the buyer, and the sale, subject to certain closing contingencies, is scheduled to close before April 30, 2011. The results of operations for the Paris Marriott have been classified as discontinued operations for all periods presented. |
| (b) | For the three months and years ended December 31, 2010 and 2009, Revenue for the Paris Marriott Champs Elysees represents Property EBITDA. For the three months and years ended December 31, 2010 and 2009, Revenue for the Marriott Hamburg represents lease revenue. |
| (c) | The security deposits are recorded in other assets on the consolidated balance sheets. |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures
In addition to REIT hotel income, five other non-GAAP financial measures are presented for the Company 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. A reconciliation of these measures to net loss attributable to SHR common shareholders, the most directly comparable GAAP measure, is set forth in the following tables.
We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which 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 plus real estate-related depreciation and amortization, and after adjustments for our portion of these items related to unconsolidated partnerships and joint ventures. We also present FFO - Fully Diluted, which is FFO plus income or loss on income attributable to convertible noncontrolling interests. 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, foreign currency exchange gains or losses and other non-recurring charges. 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. Comparable FFO per diluted share, in accordance with NAREIT, is adjusted for the effects of dilutive securities. Dilutive securities may include shares granted under share-based compensation plans, operating partnership units and exchangeable debt securities. No effect is shown for securities that are anti-dilutive.
EBITDA represents net 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; and (iii) depreciation and amortization. EBITDA also excludes interest expense, income taxes and depreciation and amortization of our equity method investments. EBITDA is presented on a full participation basis, which means we have assumed conversion of all convertible noncontrolling interests of our operating partnership into our common stock and includes preferred dividends. We believe this treatment of noncontrolling interests provides more 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 other non-recurring charges. 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 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 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 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 loss attributable to SHR common shareholders.
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net Loss Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Years Ended | |
| | | December 31, | | | December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | |
Net loss attributable to SHR common shareholders | | $ | (134,835 | ) | | $ | (72,185 | ) | | $ | (261,937 | ) | | $ | (274,831 | ) |
Depreciation and amortization - continuing operations | | | 32,406 | | | | 34,379 | | | | 130,601 | | | | 130,955 | |
Depreciation and amortization - discontinued operations | | | 567 | | | | 2,205 | | | | 5,980 | | | | 13,307 | |
Interest expense - continuing operations | | | 17,797 | | | | 23,255 | | | | 86,285 | | | | 93,929 | |
Interest expense - discontinued operations | | | 1,990 | | | | 2,138 | | | | 9,706 | | | | 8,592 | |
Income taxes - continuing operations | | | 1,112 | | | | 1,881 | | | | 1,408 | | | | 3,344 | |
Income taxes - discontinued operations | | | (260 | ) | | | 499 | | | | 476 | | | | (540 | ) |
Noncontrolling interests | | | (808 | ) | | | (832 | ) | | | (1,687 | ) | | | (3,129 | ) |
Adjustments from consolidated affiliates | | | (2,013 | ) | | | (2,647 | ) | | | (7,609 | ) | | | (9,460 | ) |
Adjustments from unconsolidated affiliates | | | 3,673 | | | | 3,498 | | | | 15,563 | | | | 15,934 | |
Preferred shareholder dividends | | | 7,722 | | | | 7,722 | | | | 30,886 | | | | 30,886 | |
| | | | | | | | | | | | | | | | |
EBITDA | | | (72,649 | ) | | | (87 | ) | | | 9,672 | | | | 8,987 | |
Realized portion of deferred gain on sale leaseback - continuing operations | | | (53 | ) | | | (58 | ) | | | (207 | ) | | | (217 | ) |
Realized portion of deferred gain on sale leaseback - discontinued operations | | | (1,144 | ) | | | (1,237 | ) | | | (4,465 | ) | | | (4,685 | ) |
Loss on sale of assets - continuing operations | | | — | | | | 472 | | | | — | | | | 477 | |
Gain on sale of assets - discontinued operations | | | (28,476 | ) | | | (18,164 | ) | | | (29,713 | ) | | | (18,164 | ) |
Impairment losses and other charges - continuing operations | | | 141,858 | | | | 49,526 | | | | 141,858 | | | | 99,740 | |
Impairment losses and other charges - discontinued operations | | | — | | | | 269 | | | | — | | | | 31,064 | |
Impairment losses and other charges - adjustments from consolidated affiliates | | | — | | | | — | | | | — | | | | (169 | ) |
Loss on early extinguishment of debt - continuing operations | | | — | | | | — | | | | 925 | | | | 883 | |
Loss on early extinguishment of debt - discontinued operations | | | 95 | | | | — | | | | 95 | | | | — | |
Loss on early termination of derivative financial instruments | | | — | | | | — | | | | 18,263 | | | | — | |
Gain on extinguishment of debt of unconsolidated affiliate | | | (11,025 | ) | | | — | | | | (11,025 | ) | | | — | |
Foreign currency exchange loss - continuing operations (a) | | | 16 | | | | 40 | | | | 1,410 | | | | 896 | |
Foreign currency exchange loss (gain) - discontinued operations (a) | | | 98 | | | | 1,710 | | | | (7,392 | ) | | | 1,141 | |
| | | | | | | | | | | | | | | | |
Comparable EBITDA | | $ | 28,720 | | | $ | 32,471 | | | $ | 119,421 | | | $ | 119,953 | |
| | | | | | | | | | | | | | | | |
| (a) | Foreign currency exchange gains or losses applicable to third-party and inter-company debt and certain balance sheet items held by foreign subsidiaries. |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Reconciliation of Net 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 | | | Years Ended | |
| | | December 31, | | | December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | |
Net loss attributable to SHR common shareholders | | $ | (134,835 | ) | | $ | (72,185 | ) | | $ | (261,937 | ) | | $ | (274,831 | ) |
Depreciation and amortization - continuing operations | | | 32,406 | | | | 34,379 | | | | 130,601 | | | | 130,955 | |
Depreciation and amortization - discontinued operations | | | 567 | | | | 2,205 | | | | 5,980 | | | | 13,307 | |
Corporate depreciation | | | (303 | ) | | | (304 | ) | | | (1,217 | ) | | | (1,217 | ) |
Loss on sale of assets - continuing operations | | | — | | | | 472 | | | | — | | | | 477 | |
Gain on sale of assets - discontinued operations | | | (28,476 | ) | | | (18,164 | ) | | | (29,713 | ) | | | (18,164 | ) |
Realized portion of deferred gain on sale leaseback - continuing operations | | | (53 | ) | | | (58 | ) | | | (207 | ) | | | (217 | ) |
Realized portion of deferred gain on sale leaseback - discontinued operations | | | (1,144 | ) | | | (1,237 | ) | | | (4,465 | ) | | | (4,685 | ) |
Deferred tax expense on realized portion of deferred gain on sale leasebacks | | | 357 | | | | 386 | | | | 1,393 | | | | 1,462 | |
Noncontrolling interests adjustments | | | (222 | ) | | | (488 | ) | | | (1,159 | ) | | | (1,928 | ) |
Adjustments from consolidated affiliates | | | (1,335 | ) | | | (1,971 | ) | | | (5,979 | ) | | | (7,619 | ) |
Adjustments from unconsolidated affiliates | | | 1,874 | | | | 2,005 | | | | 7,973 | | | | 7,864 | |
| | | | | | | | | | | | | | | | |
FFO | | | (131,164 | ) | | | (54,960 | ) | | | (158,730 | ) | | | (154,596 | ) |
Convertible noncontrolling interests | | | (586 | ) | | | (344 | ) | | | (528 | ) | | | (1,201 | ) |
| | | | | | | | | | | | | | | | |
FFO - Fully Diluted | | | (131,750 | ) | | | (55,304 | ) | | | (159,258 | ) | | | (155,797 | ) |
Impairment losses and other charges - continuing operations | | | 141,858 | | | | 49,526 | | | | 141,858 | | | | 99,740 | |
Impairment losses and other charges - discontinued operations | | | — | | | | 269 | | | | — | | | | 31,064 | |
Impairment losses and other charges - adjustments from consolidated affiliates | | | — | | | | — | | | | — | | | | (169 | ) |
Non-cash mark to market of interest rate swaps - continuing operations | | | (535 | ) | | | — | | | | 9,014 | | | | — | |
Non-cash mark to market of interest rate swaps - discontinued operations | | | (204 | ) | | | — | | | | 25 | | | | — | |
Loss on early extinguishment of debt - continuing operations | | | — | | | | — | | | | 925 | | | | 883 | |
Loss on early extinguishment of debt - discontinued operations | | | 95 | | | | — | | | | 95 | | | | — | |
Loss on early termination of derivative financial instruments | | | — | | | | — | | | | 18,263 | | | | — | |
Gain on extinguishment of debt of unconsolidated affiliate | | | (11,025 | ) | | | — | | | | (11,025 | ) | | | — | |
Foreign currency exchange loss - continuing operations (a) | | | 16 | | | | 40 | | | | 1,410 | | | | 896 | |
Foreign currency exchange loss (gain), net of tax - discontinued operations (a) | | | 95 | | | | 1,731 | | | | (7,421 | ) | | | 596 | |
| | | | | | | | | | | | | | | | |
Comparable FFO | | $ | (1,450 | ) | | $ | (3,738 | ) | | $ | (6,114 | ) | | $ | (22,787 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Comparable FFO per diluted share | | $ | (0.01 | ) | | $ | (0.05 | ) | | $ | (0.05 | ) | | $ | (0.30 | ) |
| | | | | | | | | | | | | | | | |
Weighted average diluted shares | | | 151,663 | | | | 75,426 | | | | 122,933 | | | | 75,267 | |
| | | | | | | | | | | | | | | | |
| (a) | Foreign currency exchange gains or losses applicable to third-party and inter-company debt and certain balance sheet items held by foreign subsidiaries. |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Debt Summary
(dollars in thousands)
| | | | | | | | | | | | | | | | |
Debt | | Interest Rate | | | Spread (a) | | | Loan Amount | | | Maturity (b) | |
Fairmont Scottsdale | | | 0.82% | | | | 56 bp | | | $ | 180,000 | | | | September 2011 | |
InterContinental Chicago | | | 1.32% | | | | 106 bp | | | | 121,000 | | | | October 2011 | |
InterContinental Miami | | | 0.99% | | | | 73 bp | | | | 90,000 | | | | October 2011 | |
Bank credit facility | | | 4.01% | | | | 375 bp | | | | 28,000 | | | | March 2012 | |
Loews Santa Monica Beach Hotel | | | 0.89% | | | | 63 bp | | | | 118,250 | | | | March 2012 | |
Ritz-Carlton Half Moon Bay | | | 0.93% | | | | 67 bp | | | | 76,500 | | | | March 2012 | |
Hyatt Regency La Jolla | | | 1.26% | | | | 100 bp | | | | 97,500 | | | | September 2012 | |
Marriott London Grosvenor Square (c) | | | 1.86% | | | | 110 bp (c) | | | | 117,281 | | | | October 2013 | |
Westin St. Francis | | | 6.09% | | | | Fixed | | | | 220,000 | | | | June 2017 | |
Fairmont Chicago | | | 6.09% | | | | Fixed | | | | 97,750 | | | | June 2017 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | $ | 1,146,281 | | | | | |
| | | | | | | | | | | | | | | | |
| (a) | Spread over LIBOR (0.26% at December 31, 2010). |
| (b) | Includes extension options, including the conditional one-year extension option on the bank credit facility. |
| (c) | Principal balance of £75,190,000 at December 31, 2010. Spread over three-month GBP LIBOR (0.76% at December 31, 2010). |
Domestic and European Interest Rate Swaps
| | | | | | | | | | |
Swap Effective Date | | Fixed Pay Rate
Against LIBOR | | Notional
Amount | | | Maturity | |
March 2009 (d) | | 1.22% | | $ | 50,000 | | | | August 2011 | |
February 2010 (d) | | 4.59% | | | 75,000 | | | | April 2012 | |
February 2010 | | 4.84% | | | 100,000 | | | | July 2012 | |
February 2010 | | 5.50% | | | 75,000 | | | | June 2013 | |
February 2010 | | 5.42% | | | 50,000 | | | | August 2013 | |
February 2010 | | 4.90% | | | 100,000 | | | | September 2014 | |
February 2010 | | 4.96% | | | 100,000 | | | | December 2014 | |
April 2010 | | 5.42% | | | 75,000 | | | | April 2015 | |
December 2010 | | 5.23% | | | 100,000 | | | | December 2015 | |
| | | | | | | | | | |
| | 4.81% | | $ | 725,000 | | | | | |
| | | | | | | | | | |
| (d) | These interest rate swaps were terminated on February 11, 2011. |
| | | | | | | | | | | | | | |
| | | Fixed Pay Rate
Against GBP LIBOR | | | Notional
Amount | | | Maturity |
Swap Effective Date | | Current | | | Future | | | |
October 2007 | | | 3.22 | % | | | 5.72 | % (e) | | £ | 75,190 | | | October 2013 |
| (e) | The fixed pay rate against GBP LIBOR increases in January 2011 through maturity. |
Forward-Starting Interest Rate Swaps
| | | | | | | | |
Swap Effective Date | | Fixed Pay Rate
Against LIBOR | | Notional
Amount | | | Maturity |
February 2011 | | 5.27% | | $ | 100,000 | | | February 2016 |
At December 31, 2010, future scheduled debt principal payments (including extension options) are as follows:
| | | | |
Years ending December 31, | | Amount | |
2011 | | $ | 394,213 | |
2012 | | | 331,860 | |
2013 | | | 119,778 | |
2014 | | | 9,482 | |
2015 | | | 10,075 | |
Thereafter | | | 280,873 | |
| | | | |
| | $ | 1,146,281 | |
| | | | |
| | | | |
Percent of fixed rate debt including U.S. and European swaps | | | ~ 100.0 | % |
Weighted average interest rate including U.S. and European swaps (f) | | | 5.71 | % |
Weighted average maturity of fixed rate debt (debt with maturity of greater than one year) | | | 4.27 | |
| (f) | Excludes the amortization of deferred financing costs and the amortization of the interest rate swap costs. |
