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, |
| | | 2012 | | 2011 | | 2012 | | 2011 |
| Revenues: | | | | | | | | |
| Rooms | | $ | 123,051 |
| | $ | 99,985 |
| | $ | 446,760 |
| | $ | 410,315 |
|
| Food and beverage | | 76,164 |
| | 71,207 |
| | 273,857 |
| | 267,194 |
|
| Other hotel operating revenue | | 23,584 |
| | 21,047 |
| | 82,922 |
| | 80,907 |
|
| Lease revenue | | 1,273 |
| | 1,675 |
| | 4,778 |
| | 5,422 |
|
| Total revenues | | 224,072 |
| | 193,914 |
| | 808,317 |
| | 763,838 |
|
| Operating Costs and Expenses: | | | | | | | | |
| Rooms | | 34,268 |
| | 28,359 |
| | 124,896 |
| | 114,087 |
|
| Food and beverage | | 56,508 |
| | 50,018 |
| | 199,573 |
| | 192,028 |
|
| Other departmental expenses | | 58,424 |
| | 51,808 |
| | 211,981 |
| | 207,664 |
|
| Management fees | | 6,972 |
| | 6,516 |
| | 24,984 |
| | 24,719 |
|
| Other hotel expenses | | 16,482 |
| | 14,311 |
| | 56,842 |
| | 53,808 |
|
| Lease expense | | 1,155 |
| | 1,163 |
| | 4,580 |
| | 4,865 |
|
| Depreciation and amortization | | 27,048 |
| | 25,840 |
| | 103,464 |
| | 112,062 |
|
| Impairment losses and other charges | | 18,843 |
| | — |
| | 18,843 |
| | — |
|
| Corporate expenses | | 8,225 |
| | 15,650 |
| | 31,857 |
| | 39,856 |
|
| Total operating costs and expenses | | 227,925 |
| | 193,665 |
| | 777,020 |
| | 749,089 |
|
| Operating (loss) income | | (3,853 | ) | | 249 |
| | 31,297 |
| | 14,749 |
|
| Interest expense | | (16,862 | ) | | (19,299 | ) | | (75,489 | ) | | (86,447 | ) |
| Interest income | | 95 |
| | 49 |
| | 217 |
| | 173 |
|
| Loss on early extinguishment of debt | | — |
| | — |
| | — |
| | (1,237 | ) |
| Loss on early termination of derivative financial instruments | | — |
| | — |
| | — |
| | (29,242 | ) |
| Equity in losses of unconsolidated affiliates | | (11,431 | ) | | (2,949 | ) | | (13,485 | ) | | (9,215 | ) |
| Foreign currency exchange gain (loss) | | 94 |
| | (79 | ) | | (1,075 | ) | | (2 | ) |
| Other income, net | | 455 |
| | 1,051 |
| | 1,820 |
| | 5,767 |
|
| Loss before income taxes and discontinued operations | | (31,502 | ) | | (20,978 | ) | | (56,715 | ) | | (105,454 | ) |
| Income tax expense | | (796 | ) | | (691 | ) | | (1,011 | ) | | (970 | ) |
| Loss from continuing operations | | (32,298 | ) | | (21,669 | ) | | (57,726 | ) | | (106,424 | ) |
| Income (loss) from discontinued operations, net of tax | | — |
| | 357 |
| | (535 | ) | | 101,572 |
|
| Net loss | | (32,298 | ) | | (21,312 | ) | | (58,261 | ) | | (4,852 | ) |
| Net loss attributable to the noncontrolling interests in SHR's operating partnership | | 58 |
| | 99 |
| | 184 |
| | 29 |
|
| Net loss (income) attributable to the noncontrolling interests in consolidated affiliates | | 1,880 |
| | 614 |
| | 2,771 |
| | (383 | ) |
| Net loss attributable to SHR | | (30,360 | ) | | (20,599 | ) | | (55,306 | ) | | (5,206 | ) |
| Preferred shareholder dividends | | (6,041 | ) | | 4,682 |
| | (24,166 | ) | | (18,482 | ) |
| Net loss attributable to SHR common shareholders | | $ | (36,401 | ) | | $ | (15,917 | ) | | $ | (79,472 | ) | | $ | (23,688 | ) |
| Basic Loss Per Share: | | | | | | | | |
| Loss from continuing operations attributable to SHR common shareholders | | $ | (0.18 | ) | | $ | (0.09 | ) | | $ | (0.40 | ) | | $ | (0.70 | ) |
| Income (loss) from discontinued operations attributable to SHR common shareholders | | — |
| | — |
| | — |
| | 0.57 |
|
| Net loss attributable to SHR common shareholders | | $ | (0.18 | ) | | $ | (0.09 | ) | | $ | (0.40 | ) | | $ | (0.13 | ) |
| Weighted average common shares outstanding | | 206,836 |
| | 186,151 |
| | 201,109 |
| | 176,576 |
|
| Diluted Loss Per Share: | | | | | | | | |
| Loss from continuing operations attributable to SHR common shareholders | | $ | (0.18 | ) | | $ | (0.09 | ) | | $ | (0.40 | ) | | $ | (0.70 | ) |
| Income (loss) from discontinued operations attributable to SHR common shareholders | | — |
| | — |
| | — |
| | 0.57 |
|
| Net loss attributable to SHR common shareholders | | $ | (0.18 | ) | | $ | (0.09 | ) | | $ | (0.40 | ) | | $ | (0.13 | ) |
| Weighted average common shares outstanding | | 206,836 |
| | 186,151 |
| | 201,109 |
| | 176,576 |
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Consolidated Balance Sheets
(in thousands, except share data)
|
| | | | | | | | |
| | | December 31, |
| | | 2012 | | 2011 |
| Assets | | | | |
| Investment in hotel properties, net | | $ | 1,970,560 |
| | $ | 1,692,431 |
|
| Goodwill | | 40,359 |
| | 40,359 |
|
| Intangible assets, net of accumulated amortization of $10,812 and $8,915 | | 30,631 |
| | 30,635 |
|
| Investment in unconsolidated affiliates | | 112,488 |
| | 126,034 |
|
| Cash and cash equivalents | | 80,074 |
| | 72,013 |
|
| Restricted cash and cash equivalents | | 58,579 |
| | 39,498 |
|
| Accounts receivable, net of allowance for doubtful accounts of $1,602 and $1,698 | | 45,620 |
| | 43,597 |
|
| Deferred financing costs, net of accumulated amortization of $7,049 and $3,488 | | 11,695 |
| | 10,845 |
|
| Deferred tax assets | | 2,203 |
| | 2,230 |
|
| Prepaid expenses and other assets | | 54,208 |
| | 29,047 |
|
| Total assets | | $ | 2,406,417 |
| | $ | 2,086,689 |
|
| Liabilities, Noncontrolling Interests and Equity | | | | |
| Liabilities: | | | | |
| Mortgages and other debt payable | | $ | 1,176,297 |
| | $ | 1,000,385 |
|
| Bank credit facility | | 146,000 |
| | 50,000 |
|
| Accounts payable and accrued expenses | | 228,397 |
| | 249,179 |
|
| Distributions payable | | — |
| | 72,499 |
|
| Deferred tax liabilities | | 47,275 |
| | 47,623 |
|
| Total liabilities | | 1,597,969 |
| | 1,419,686 |
|
| Noncontrolling interests in SHR’s operating partnership | | 5,463 |
| | 4,583 |
|
| Commitments and contingencies | | | | |
| Equity: | | | | |
| SHR’s shareholders’ equity: | | | | |
| 8.50% Series A Cumulative Redeemable Preferred Stock ($0.01 par value per share; 4,148,141 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $103,704 and $130,148 in the aggregate) | | 99,995 |
| | 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 $90,384 and $112,775 in the aggregate) | | 87,064 |
| | 87,064 |
|
| 8.25% Series C Cumulative Redeemable Preferred Stock ($0.01 par value per share; 3,827,727 shares issued and outstanding; liquidation preference $25.00 per share plus accrued distributions and $95,693 and $119,377 in the aggregate) | | 92,489 |
| | 92,489 |
|
| Common shares ($0.01 par value per share; 350,000,000 and 250,000,000 common shares authorized; 204,308,710 and 185,627,199 common shares issued and outstanding) | | 2,043 |
| | 1,856 |
|
| Additional paid-in capital | | 1,730,535 |
| | 1,634,067 |
|
| Accumulated deficit | | (1,245,927 | ) | | (1,190,621 | ) |
| Accumulated other comprehensive loss | | (58,871 | ) | | (70,652 | ) |
| Total SHR’s shareholders’ equity | | 707,328 |
| | 654,198 |
|
| Noncontrolling interests in consolidated affiliates | | 95,657 |
| | 8,222 |
|
| Total equity | | 802,985 |
| | 662,420 |
|
| Total liabilities, noncontrolling interests and equity | | $ | 2,406,417 |
| | $ | 2,086,689 |
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Financial Highlights
Supplemental Financial Data
(in thousands, except per share information)
|
| | | | | | | | |
| | | December 31, 2012 |
| | | Pro Rata Share | | Consolidated |
| Capitalization | | | | |
| Common shares outstanding | | 204,309 |
| | 204,309 |
|
| Operating partnership units outstanding | | 853 |
| | 853 |
|
| Restricted stock units outstanding | | 1,610 |
| | 1,610 |
|
| Value Creation Plan units outstanding under the deferral program | | 1,301 |
| | 1,301 |
|
| Combined shares and units outstanding | | 208,073 |
| | 208,073 |
|
| Common stock price at end of period | | $ | 6.40 |
| | $ | 6.40 |
|
| Common equity capitalization | | $ | 1,331,667 |
| | $ | 1,331,667 |
|
| Preferred equity capitalization (at $25.00 face value) | | 289,102 |
| | 289,102 |
|
| Consolidated debt | | 1,322,297 |
| | 1,322,297 |
|
| Pro rata share of unconsolidated debt | | 221,200 |
| | — |
|
| Pro rata share of consolidated debt | | (135,160 | ) | | — |
|
| Cash and cash equivalents | | (80,074 | ) | | (80,074 | ) |
| Total enterprise value | | $ | 2,949,032 |
| | $ | 2,862,992 |
|
| Net Debt / Total Enterprise Value | | 45.0 | % | | 43.4 | % |
| Preferred Equity / Total Enterprise Value | | 9.8 | % | | 10.1 | % |
| Common Equity / Total Enterprise Value | | 45.2 | % | | 46.5 | % |
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 hotel was sold during 2011 (in thousands):
|
| | | | |
| | | |
| Hotel | Date Sold | Net Sales Proceeds |
| Paris Marriott Champs Elysees (Paris Marriott) | April 6, 2011 | $ | 60,003 |
|
The following is a summary of income (loss) from discontinued operations for the three months and years ended December 31, 2012 and 2011 (in thousands):
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | Years Ended December 31, |
| | | 2012 | | 2011 | | 2012 | | 2011 |
| Hotel operating revenues | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 9,743 |
|
| Operating costs and expenses | | — |
| | — |
| | — |
| | 9,456 |
|
| Operating income | | — |
| | — |
| | — |
| | 287 |
|
| Foreign currency exchange (loss) gain | | — |
| | — |
| | (535 | ) | | 51 |
|
| Other income, net | | — |
| | — |
| | — |
| | 326 |
|
| Income tax expense | | — |
| | — |
| | — |
| | (379 | ) |
| Gain on sale | | — |
| | 357 |
| | — |
| | 101,287 |
|
| Income (loss) from discontinued operations | | $ | — |
| | $ | 357 |
| | $ | (535 | ) | | $ | 101,572 |
|
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Investments in Unconsolidated Affiliates
(in thousands)
On February 4, 2011, we completed a recapitalization of the unconsolidated affiliate that owns the Hotel del Coronado. Pursuant to the terms of the recapitalization, our ownership interest in the Hotel del Coronado decreased from 45% to 34.3%. On December 17, 2012, we acquired an additional interest in the entity increasing our ownership to 36.4%. On June 9, 2011, we completed a recapitalization of the Fairmont Scottsdale Princess hotel. As part of the recapitalization, our ownership interest in the Fairmont Scottsdale Princess hotel decreased from 100% to 50%. We account for these investments using the equity method of accounting.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, 2012 | | Three Months Ended December 31, 2011 |
| | | Hotel del Coronado | | Fairmont Scottsdale Princess | | Total | | Hotel del Coronado | | Fairmont Scottsdale Princess | | Total |
| Total revenues (100%) | | $ | 29,888 |
| | $ | 20,546 |
| | $ | 50,434 |
| | $ | 30,324 |
| | $ | 18,322 |
| | $ | 48,646 |
|
| Property EBITDA (100%) | | $ | 7,201 |
| | $ | 3,034 |
| | $ | 10,235 |
| | $ | 7,697 |
| | $ | 2,052 |
| | $ | 9,749 |
|
| Equity in losses of unconsolidated affiliates (SHR ownership) | | | | | | | | | | |
| Property EBITDA | | $ | 2,491 |
| | $ | 1,517 |
| | $ | 4,008 |
| | $ | 2,640 |
| | $ | 1,026 |
| | $ | 3,666 |
|
| Depreciation and amortization | | (1,797 | ) | | (1,823 | ) | | (3,620 | ) | | (1,674 | ) | | (1,765 | ) | | (3,439 | ) |
| Interest expense | | (2,549 | ) | | (189 | ) | | (2,738 | ) | | (2,515 | ) | | (204 | ) | | (2,719 | ) |
| Other expenses, net | | (7,869 | ) | | (111 | ) | | (7,980 | ) | | (22 | ) | | (17 | ) | | (39 | ) |
| Income taxes | | 90 |
| | — |
| | 90 |
| | (49 | ) | | — |
| | (49 | ) |
| Equity in losses of unconsolidated affiliates | | $ | (9,634 | ) | | $ | (606 | ) | | $ | (10,240 | ) | | $ | (1,620 | ) | | $ | (960 | ) | | $ | (2,580 | ) |
| EBITDA Contribution: | | | | | | | | | | | | |
| Equity in losses of unconsolidated affiliates | | $ | (9,634 | ) | | $ | (606 | ) | | $ | (10,240 | ) | | $ | (1,620 | ) | | $ | (960 | ) | | $ | (2,580 | ) |
| Depreciation and amortization | | 1,797 |
| | 1,823 |
| | 3,620 |
| | 1,674 |
| | 1,765 |
| | 3,439 |
|
| Termination fee | | 7,820 |
| | — |
| | 7,820 |
| | — |
| | — |
| | — |
|
| Interest expense | | 2,549 |
| | 189 |
| | 2,738 |
| | 2,515 |
| | 204 |
| | 2,719 |
|
| Income taxes | | (90 | ) | | — |
| | (90 | ) | | 49 |
| | — |
| | 49 |
|
| EBITDA Contribution | | $ | 2,442 |
| | $ | 1,406 |
| | $ | 3,848 |
| | $ | 2,618 |
| | $ | 1,009 |
| | $ | 3,627 |
|
| FFO Contribution: | | | | | | | | | | | | |
| Equity in losses of unconsolidated affiliates | | $ | (9,634 | ) | | $ | (606 | ) | | $ | (10,240 | ) | | $ | (1,620 | ) | | $ | (960 | ) | | $ | (2,580 | ) |
| Depreciation and amortization | | 1,797 |
| | 1,823 |
| | 3,620 |
| | 1,674 |
| | 1,765 |
| | 3,439 |
|
| Termination fee | | 7,820 |
| | — |
| | 7,820 |
| | — |
| | — |
| | — |
|
| FFO Contribution | | $ | (17 | ) | | $ | 1,217 |
| | $ | 1,200 |
| | $ | 54 |
| | $ | 805 |
| | $ | 859 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2012 | | Year Ended December 31, 2011 |
| | | Hotel del Coronado | | Fairmont Scottsdale Princess | | Total | | Hotel del Coronado | | Fairmont Scottsdale Princess | | Total |
| Total revenues (100%) | | $ | 140,220 |
| | $ | 77,281 |
| | $ | 217,501 |
| | $ | 136,727 |
| | $ | 30,711 |
| | $ | 167,438 |
|
| Property EBITDA (100%) | | $ | 40,722 |
| | $ | 12,777 |
| | $ | 53,499 |
| | $ | 42,445 |
| | $ | (1,144 | ) | | $ | 41,301 |
|
| Equity in losses of unconsolidated affiliates (SHR ownership) | | | | | | | | | | |
| Property EBITDA | | $ | 13,989 |
| | $ | 6,389 |
| | $ | 20,378 |
| | $ | 14,662 |
| | $ | (572 | ) | | $ | 14,090 |
|
| Depreciation and amortization | | (6,895 | ) | | (7,145 | ) | | (14,040 | ) | | (6,637 | ) | | (4,022 | ) | | (10,659 | ) |
| Interest expense | | (10,093 | ) | | (778 | ) | | (10,871 | ) | | (9,897 | ) | | (452 | ) | | (10,349 | ) |
| Other expenses, net | | (7,931 | ) | | (155 | ) | | (8,086 | ) | | (1,569 | ) | | (657 | ) | | (2,226 | ) |
| Income taxes | | 383 |
| | — |
| | 383 |
| | 505 |
| | — |
| | 505 |
|
| Equity in losses of unconsolidated affiliates | | $ | (10,547 | ) | | $ | (1,689 | ) | | $ | (12,236 | ) | | $ | (2,936 | ) | | $ | (5,703 | ) | | $ | (8,639 | ) |
| EBITDA Contribution | | | | | | | | | | | | |
| Equity in losses of unconsolidated affiliates | | $ | (10,547 | ) | | $ | (1,689 | ) | | $ | (12,236 | ) | | $ | (2,936 | ) | | $ | (5,703 | ) | | $ | (8,639 | ) |
| Depreciation and amortization | | 6,895 |
| | 7,145 |
| | 14,040 |
| | 6,637 |
| | 4,022 |
| | 10,659 |
|
| Termination fee | | 7,820 |
| | — |
| | 7,820 |
| | — |
| | — |
| | — |
|
| Interest expense | | 10,093 |
| | 778 |
| | 10,871 |
| | 9,897 |
| | 452 |
| | 10,349 |
|
| Income taxes | | (383 | ) | | — |
| | (383 | ) | | (505 | ) | | — |
| | (505 | ) |
| EBITDA Contribution | | $ | 13,878 |
| | $ | 6,234 |
| | $ | 20,112 |
| | $ | 13,093 |
| | $ | (1,229 | ) | | $ | 11,864 |
|
| FFO Contribution | | | | | | | | | | | | |
| Equity in losses of unconsolidated affiliates | | $ | (10,547 | ) | | $ | (1,689 | ) | | $ | (12,236 | ) | | $ | (2,936 | ) | | $ | (5,703 | ) | | $ | (8,639 | ) |
| Depreciation and amortization | | 6,895 |
| | 7,145 |
| | 14,040 |
| | 6,637 |
| | 4,022 |
| | 10,659 |
|
| Termination fee | | 7,820 |
| | — |
| | 7,820 |
| | — |
| | — |
| | — |
|
| FFO Contribution | | $ | 4,168 |
| | $ | 5,456 |
| | $ | 9,624 |
| | $ | 3,701 |
| | $ | (1,681 | ) | | $ | 2,020 |
|
Investments in Unconsolidated Affiliates (Continued)
(in thousands)
|
| | | | | | | | | | | | | | | |
| Debt | | Interest Rate | | | | Spread over LIBOR | | | | Loan Amount | | Maturity (a) |
| Hotel del Coronado | | | | | | | | | | | | |
| CMBS Mortgage and Mezzanine | | 5.80 | % | | (b) | | 480 bp | | (b) | | $ | 425,000 |
| | March 2016 |
| Cash and cash equivalents | | | | | | | | | | (7,929 | ) | | |
| Net Debt | | | | | | | | | | $ | 417,071 |
| | |
| Fairmont Scottsdale Princess | | | | | | | | | | | | |
| CMBS Mortgage | | 0.57 | % | | | | 36 bp | | | | $ | 133,000 |
| | April 2015 |
| Cash and cash equivalents | | | | | | | | | | (4,626 | ) | | |
| Net Debt | | | | | | | | | | $ | 128,374 |
| | |
| |
| (a) | Includes extension options. |
| |
| (b) | Subject to a 1% LIBOR floor. |
|
| | | | | | | | | | | |
| Caps | | Effective Date | | LIBOR Cap Rate | | Notional Amount | | Maturity |
| Hotel del Coronado | | | | | | | | |
| CMBS Mortgage and Mezzanine Loan Caps | | February 2011 | | 2.00 | % | | $ | 425,000 |
| | February 2013 |
| CMBS Mortgage and Mezzanine Loan Caps | | February 2013 | | 2.50 | % | | $ | 425,000 |
| | March 2013 |
| Fairmont Scottsdale Princess | | | | | | | | |
| CMBS Mortgage Loan Cap | | June 2011 | | 4.00 | % | | $ | 133,000 |
| | December 2013 |
Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Leasehold Information
(in thousands)
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | Years Ended December 31, |
| | | 2012 | | 2011 | | 2012 | | 2011 |
| Paris Marriott (a): | | | | | | | | |
| Property EBITDA | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3,455 |
|
| Revenue (b) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3,455 |
|
| | | | | | | | | |
| Lease expense | | — |
| | — |
| | — |
| | (3,274 | ) |
| Less: Deferred gain on sale-leaseback | | — |
| | — |
| | — |
| | (1,214 | ) |
| Adjusted lease expense | | — |
| | — |
| | — |
| | (4,488 | ) |
| | | | | | | | | |
| EBITDA contribution from leasehold | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (1,033 | ) |
| | | | | | | | | |
| Marriott Hamburg: | | | | | | | | |
| Property EBITDA | | $ | 1,472 |
| | $ | 1,568 |
| | $ | 5,876 |
| | $ | 6,603 |
|
| Revenue (b) | | $ | 1,273 |
| | $ | 1,675 |
| | $ | 4,778 |
| | $ | 5,422 |
|
| | | | | | | | | |
| Lease expense | | (1,155 | ) | | (1,163 | ) | | (4,580 | ) | | (4,865 | ) |
| Less: Deferred gain on sale-leaseback | | (50 | ) | | (66 | ) | | (200 | ) | | (217 | ) |
| Adjusted lease expense | | (1,205 | ) | | (1,229 | ) | | (4,780 | ) | | (5,082 | ) |
| | | | | | | | | |
| EBITDA contribution from leasehold | | $ | 68 |
| | $ | 446 |
| | $ | (2 | ) | | $ | 340 |
|
| | | | | | | | | |
| Total Leaseholds: | | | | | | | | |
| Property EBITDA | | $ | 1,472 |
| | $ | 1,568 |
| | $ | 5,876 |
| | $ | 10,058 |
|
| Revenue (b) | | $ | 1,273 |
| | $ | 1,675 |
| | $ | 4,778 |
| | $ | 8,877 |
|
| | | | | | | | | |
| Lease expense | | (1,155 | ) | | (1,163 | ) | | (4,580 | ) | | (8,139 | ) |
| Less: Deferred gain on sale-leasebacks | | (50 | ) | | (66 | ) | | (200 | ) | | (1,431 | ) |
| Adjusted lease expense | | (1,205 | ) | | (1,229 | ) | | (4,780 | ) | | (9,570 | ) |
| | | | | | | | | |
| EBITDA contribution from leaseholds | | $ | 68 |
| | $ | 446 |
| | $ | (2 | ) | | $ | (693 | ) |
|
| | | | | | | | |
| | | December 31, |
| Security Deposit (c): | | 2012 | | 2011 |
| Marriott Hamburg | | $ | 2,507 |
| | $ | 2,462 |
|
| |
| (a) | On April 6, 2011, we sold our leasehold interest in the Paris Marriott hotel. The results of operations for the Paris Marriott hotel have been classified as discontinued operations for all periods presented. |
| |
| (b) | For the year ended December 31, 2011, Revenue for the Paris Marriott hotel represents Property EBITDA. For the three months and years ended December 31, 2012 and 2011, Revenue for the Marriott Hamburg hotel represents lease revenue. |
| |
| (c) | 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, with the exception of impairment of depreciable real estate. 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, 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 Loss Attributable to SHR Common Shareholders to EBITDA and Comparable EBITDA
(in thousands)
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | Years Ended December 31, |
| | | 2012 | | 2011 | | 2012 | | 2011 |
| Net loss attributable to SHR common shareholders | | $ | (36,401 | ) | | $ | (15,917 | ) | | $ | (79,472 | ) | | $ | (23,688 | ) |
| Depreciation and amortization | | 27,048 |
| | 25,840 |
| | 103,464 |
| | 112,062 |
|
| Interest expense | | 16,862 |
| | 19,299 |
| | 75,489 |
| | 86,447 |
|
| Income taxes—continuing operations | | 796 |
| | 691 |
| | 1,011 |
| | 970 |
|
| Income taxes—discontinued operations | | — |
| | — |
| | — |
| | 379 |
|
| Noncontrolling interests | | (58 | ) | | (99 | ) | | (184 | ) | | (29 | ) |
| Adjustments from consolidated affiliates | | (4,217 | ) | | (1,302 | ) | | (8,599 | ) | | (6,733 | ) |
| Adjustments from unconsolidated affiliates | | 6,956 |
| | 6,928 |
| | 27,562 |
| | 23,221 |
|
| Preferred shareholder dividends | | 6,041 |
| | (4,682 | ) | | 24,166 |
| | 18,482 |
|
| EBITDA | | 17,027 |
| | 30,758 |
| | 143,437 |
| | 211,111 |
|
| Realized portion of deferred gain on sale-leaseback—continuing operations | | (50 | ) | | (66 | ) | | (200 | ) | | (217 | ) |
| Realized portion of deferred gain on sale-leaseback—discontinued operations | | — |
| | — |
| | — |
| | (1,214 | ) |
| Gain on sale of assets—continuing operations | | — |
| | — |
| | — |
| | (2,640 | ) |
| Gain on sale of assets—discontinued operations | | — |
| | (357 | ) | | — |
| | (101,287 | ) |
| Impairment losses and other charges | | 18,843 |
| | — |
| | 18,843 |
| | — |
|
| Loss on early extinguishment of debt | | — |
| | — |
| | — |
| | 1,237 |
|
| Loss on early termination of derivative financial instruments | | — |
| | — |
| | — |
| | 29,242 |
|
| Foreign currency exchange (gain) loss—continuing operations (a) | | (94 | ) | | 79 |
| | 1,075 |
| | 2 |
|
| Foreign currency exchange loss (gain)—discontinued operations (a) | | — |
| | — |
| | 535 |
| | (51 | ) |
| Adjustment for Value Creation Plan | | (1,352 | ) | | 9,529 |
| | 1,407 |
| | 18,607 |
|
| Severance charges | | 2,485 |
| | — |
| | 2,485 |
| | — |
|
| Management agreement termination fee (b) | | 7,820 |
| | — |
| | 7,820 |
| | — |
|
| Comparable EBITDA | | $ | 44,679 |
| | $ | 39,943 |
| | $ | 175,402 |
| | $ | 154,790 |
|
| |
| (a) | Foreign currency exchange gains or losses applicable to third-party and inter-company debt and certain balance sheet items held by foreign subsidiaries. |
| |
| (b) | Our share of the Hotel del Coronado management agreement termination fee included in both equity in losses of unconsolidated affiliates and net loss attributable to the noncontrolling interests in consolidated affiliates. |
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 December 31, | | Years Ended December 31, |
| | | 2012 | | 2011 | | 2012 | | 2011 |
| Net loss attributable to SHR common shareholders | | $ | (36,401 | ) | | $ | (15,917 | ) | | $ | (79,472 | ) | | $ | (23,688 | ) |
| Depreciation and amortization | | 27,048 |
| | 25,840 |
| | 103,464 |
| | 112,062 |
|
| Corporate depreciation | | (190 | ) | | (273 | ) | | (979 | ) | | (1,141 | ) |
| Gain on sale of assets—continuing operations | | — |
| | — |
| | — |
| | (2,640 | ) |
| Gain on sale of assets—discontinued operations | | — |
| | (357 | ) | | — |
| | (101,287 | ) |
| Realized portion of deferred gain on sale-leaseback—continuing operations | | (50 | ) | | (66 | ) | | (200 | ) | | (217 | ) |
| Realized portion of deferred gain on sale-leaseback—discontinued operations | | — |
| | — |
| | — |
| | (1,214 | ) |
| Deferred tax expense on realized portion of deferred gain on sale-leasebacks | | — |
| | — |
| | — |
| | 379 |
|
| Noncontrolling interests adjustments | | (127 | ) | | (135 | ) | | (501 | ) | | (575 | ) |
| Adjustments from consolidated affiliates | | (1,906 | ) | | (664 | ) | | (4,091 | ) | | (4,486 | ) |
| Adjustments from unconsolidated affiliates | | 3,923 |
| | 3,740 |
| | 15,258 |
| | 11,763 |
|
| FFO | | (7,703 | ) | | 12,168 |
| | 33,479 |
| | (11,044 | ) |
| Redeemable noncontrolling interests | | 69 |
| | 36 |
| | 317 |
| | 546 |
|
| FFO—Fully Diluted | | (7,634 | ) | | 12,204 |
| | 33,796 |
| | (10,498 | ) |
| Impairment losses and other charges | | 18,843 |
| | — |
| | 18,843 |
| | — |
|
| Non-cash mark to market of interest rate swaps | | (7,833 | ) | | (1,696 | ) | | (12,238 | ) | | (2,183 | ) |
| Loss on early extinguishment of debt | | — |
| | — |
| | — |
| | 1,237 |
|
| Loss on early termination of derivative financial instruments | | — |
| | — |
| | — |
| | 29,242 |
|
| Foreign currency exchange (gain) loss—continuing operations (a) | | (94 | ) | | 79 |
| | 1,075 |
| | 2 |
|
| Foreign currency exchange loss (gain)—discontinued operations (a) | | — |
| | — |
| | 535 |
| | (51 | ) |
| Adjustment for Value Creation Plan | | (1,352 | ) | | 9,529 |
| | 1,407 |
| | 18,607 |
|
| Severance charges | | 2,485 |
| | — |
| | 2,485 |
| | — |
|
| Management agreement termination fee (b) | | 7,820 |
| | — |
| | 7,820 |
| | — |
|
| Comparable FFO | | $ | 12,235 |
| | $ | 20,116 |
| | $ | 53,723 |
| | $ | 36,356 |
|
| Comparable FFO per fully diluted share | | $ | 0.06 |
| | $ | 0.11 |
| | $ | 0.26 |
| | $ | 0.20 |
|
| Weighted average diluted shares (c) | | 209,307 |
| | 188,340 |
| | 203,605 |
| | 179,319 |
|
| |
| (a) | Foreign currency exchange gains or losses applicable to third-party and inter-company debt and certain balance sheet items held by foreign subsidiaries. |
| |
| (b) | Our share of the Hotel del Coronado management agreement termination fee included in both equity in losses of unconsolidated affiliates and net loss attributable to the noncontrolling interests in consolidated affiliates. |
| |
| (c) | 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) |
| Marriott London Grosvenor Square (c) | | 1.62 | % | | 110 bp (c) | | $ | 115,468 |
| | October 2013 |
| North Beach Venture | | 5.00 | % | | Fixed | | 1,476 |
| | January 2014 |
| Bank credit facility | | 3.21 | % | | 300 bp | | 146,000 |
| | June 2015 |
| Four Seasons Washington, D.C. | | 3.36 | % | | 315 bp | | 130,000 |
| | July 2016 |
| Westin St. Francis | | 6.09 | % | | Fixed | | 214,186 |
| | June 2017 |
| Fairmont Chicago | | 6.09 | % | | Fixed | | 95,167 |
| | June 2017 |
| JW Marriott Essex House Hotel | | 4.75 | % | | 400 bp | | 190,000 |
| | September 2017 |
| Hyatt Regency La Jolla (d) | | 4.50% / 10.00% |
| | 400 bp / Fixed | | 90,000 |
| | December 2017 |
| InterContinental Miami | | 3.71 | % | | 350 bp | | 85,000 |
| | July 2018 |
| Loews Santa Monica Beach Hotel | | 4.06 | % | | 385 bp | | 110,000 |
| | July 2018 |
| InterContinental Chicago | | 5.61 | % | | Fixed | | 145,000 |
| | August 2021 |
| | | | | | | $ | 1,322,297 |
| | |
| |
| (a) | Spread over LIBOR (0.21% at December 31, 2012). Interest on the JW Marriott Essex House Hotel loan is subject to a 0.75% LIBOR floor. Interest on the Hyatt Regency La Jolla loan is subject to a 0.50% LIBOR floor. |
| |
| (b) | Includes extension options. |
| |
| (c) | Principal balance of £71,070,000 at December 31, 2012. Spread over three-month GBP LIBOR (0.52% at December 31, 2012). |
| |
| (d) | Interest on $72,000,000 is payable at LIBOR plus 4.00%, subject to a 0.50% LIBOR floor, and interest on $18,000,000 is payable at a fixed rate of 10.00%. |
Domestic and European Interest Rate Swaps
|
| | | | | | | | | |
| Swap Effective Date | | Fixed Pay Rate Against LIBOR | | Notional Amount | | Maturity |
| February 2010 | | 4.90 | % | | $ | 100,000 |
| | September 2014 |
| February 2010 | | 4.96 | % | | 100,000 |
| | December 2014 |
| December 2010 | | 5.23 | % | | 100,000 |
| | December 2015 |
| February 2011 | | 5.27 | % | | 100,000 |
| | February 2016 |
| | | 5.09 | % | | $ | 400,000 |
| | |
|
| | | | | | | | | | | |
| Swap Effective Date | | Fixed Pay Rate Against GBP LIBOR | | Notional Amount | | Maturity |
| October 2007 | | 5.72 | % | | | | £ | 71,070 |
| | October 2013 |
Future scheduled debt principal payments (including extension options) are as follows:
|
| | | | |
| Years ending December 31, | | Amount |
| 2013 | | $ | 126,334 |
|
| 2014 | | 15,348 |
|
| 2015 | | 162,246 |
|
| 2016 | | 150,661 |
|
| 2017 | | 549,516 |
|
| Thereafter | | 318,192 |
|
| | | $ | 1,322,297 |
|
| | | |
| Percent of fixed rate debt including U.S. and European swaps | | 74.8 | % |
| Weighted average interest rate including U.S. and European swaps (e) | | 6.45 | % |
| Weighted average maturity of fixed rate debt (debt with maturity of greater than one year) | | 4.21 |
|
(e) Excludes the amortization of deferred financing costs and the amortization of the interest rate swap costs.
