EXHIBIT 99
WINSTON HOTELS, INC.
2626 Glenwood Avenue o Suite 200 [WINSTON HOTELS INC. LOGO]
RALEIGH, NORTH CAROLINA 27608
www.winstonhotels.com
NYSE: WXH
FOR FURTHER INFORMATION:
AT WINSTON HOTELS:
Patti L. Bell Contact: Jerry Daly or Carol McCune (Media)
Director of Investor Relations (703) 435-6293
& Administration (jerry@dalygray.com,carol@dalygray.com)
(919) 510-8003
pbell@winstonhotels.com
For Immediate Release
WINSTON HOTELS REPORTS FIRST QUARTER 2004 RESULTS
RALEIGH, N.C., May 5, 2004--Winston Hotels, Inc. (NYSE: WXH), a real
estate investment trust (REIT) and owner of premium limited-service, upscale
extended-stay and full-service hotels, today announced results for the three
months ended March 31, 2004.
Net income (loss) applicable to common shareholders was $0.3 million
for the first quarter of 2004, or $0.01 per share, compared to $(0.2) million,
or $(0.01) per share, for the same period a year earlier. During the first
quarter of 2004, the company issued 3.68 million shares of its 8.00% Series B
Cumulative Preferred Stock, receiving net proceeds of approximately $88.9
million. Approximately $76.1 million of the proceeds were used to fully
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redeem the company's then outstanding 3.0 million shares of 9.25% Series A
Cumulative Preferred Stock, plus accrued dividends. The costs capitalized as
part of the original issuance of the Series A Cumulative Preferred Stock totaled
approximately $1.72 million, and have been recorded as a reduction in net income
applicable to common shares for the first quarter of 2004.
Funds from operations (FFO) decreased 6.4 percent to $4.4 million, or
$0.16 per common share, for the first quarter of 2004, compared to $4.7 million,
or $0.22 per common share, for the first quarter of 2003. The company's reported
FFO is calculated in accordance with the NAREIT definition. Accordingly, FFO for
the first quarter of 2004 has been reduced by $1.72 million to reflect the
original issuance costs of the Series A Preferred Stock.
In its February 12, 2004 press release, the company provided its AFFO
expectations for the first quarter of 2004 as a range of $0.14 to $0.16 per
common share. This guidance was based upon an adjusted definition of FFO
followed by the company. Under this reporting method previously used by the
company, AFFO for the first quarter of 2004 totaled $0.19. This amount does not
include the following: a reduction for the original issuance costs of the Series
A Preferred Stock totaling $1.72 million, the income tax benefit for the period
totaling $644,000, and the net settlement payment totaling $269,000 received by
the company upon assumption of the lease for the Secaucus, NJ Holiday Inn. The
company intends to solely report FFO (together with net income) in accordance
with the current NAREIT definition going forward and will no longer base
quarterly or annual per share estimates on an Adjusted FFO, or AFFO.
"It appears that 2003 marked the bottom of the cycle for the hotel
industry, which seems to be recovering after a protracted three-year period of
declining business travel demand," said Bob Winston, chief executive officer.
"We continued to execute our three-pronged growth
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strategy focused on selected acquisitions, subordinated debt financing and
improving operating performance at our hotels. We believe this strategy will
continue to serve us well in all phases of the economic cycle."
ACQUISITIONS/DEVELOPMENT/DISPOSITIONS
- - In the first quarter of 2004, together with New Castle Hotels, the
company's joint venture with Charlesbank Capital Partners, LLC acquired
its fourth hotel, the 158-room Ramada Plaza Hotel in Shelton, CT. The
property is undergoing extensive renovations and is expected to open as
a Courtyard by Marriott in the first quarter of 2005. The fully
renovated cost of the project is expected to be approximately $14
million. The total cost of the four hotels the company has invested in
through its Charlesbank joint venture is approximately $44 million. The
company owns 15 percent of the Charlesbank joint venture. "We currently
are reviewing several additional opportunities for the joint venture,
with our target profile being hotels with strong turn-around
potential," Winston said.
- - In the first quarter of 2004, the company acquired the remaining
ownership interest in two Hilton Garden Inn hotels located in Evanston,
IL, and Windsor, CT, from its former joint venture partner, Regent
Partners. The equity buyout was based on an imputed combined value of
$37.5 million for both hotels. "We continue to seek properties for our
general portfolio and are pleased with our pipeline of opportunities,"
Winston noted.
- - During the first quarter, the company continued construction of a
147-room Courtyard by Marriott in Chapel Hill, NC. The company owns a
48.78 percent interest in the joint venture that owns the property,
which is expected to open in the summer of 2004.
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- - The company sold the 118-room Hampton Inn in Wilmington, NC for $3.4
million, net of closing costs, in February 2004. The sale is part of
the company's ongoing efforts to recycle its capital to yield higher
returns on its investments.
DEBT INVESTMENT FINANCING PROGRAM
- - In the first quarter of 2004, the company continued its focus on
originating and acquiring subordinated hotel debt, providing a $2.4
million mezzanine loan to finance the acquisition of the 200-room
Sheraton Hotel in Atlantic Beach, NC, a popular beach resort. This
financing was the company's fourth hotel loan. "We are targeting
subordinated hotel loans between 60 percent and 85 percent of a
project's value, hotels with 100 to 425 rooms and single-asset loan
amounts that range from $1 million to $15 million. We also seek to
underwrite and acquire the junior mezzanine portion of loans that are
originated in the marketplace under Collateralized Mortgage-Backed
Securities (CMBS) programs," said Joe Green, president and CFO. "We
have an active hotel debt financing pipeline; however, these loans are
complex transactions that require significant due diligence, time and
negotiations to complete."
INTERNAL GROWTH/FIRST QUARTER OPERATING STATISTICS
Revenue per available room (RevPAR) improved 7.1 percent in the first
quarter of 2004, with a 5.0 percent increase in occupancy and a 2.1 percent
improvement in average daily room rate (ADR), compared to the same period a year
earlier. "We continue to work closely with our management companies, and
aggressively asset manage our hotels.
BALANCE SHEET CHANGES
In February 2004, the company issued 3.68 million shares of 8.00%
Series B Cumulative Preferred Stock at $25 per share. Concurrently, the company
redeemed for cash all 3.0 million
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outstanding shares of its 9.25% Series A Cumulative Preferred Stock for $25 per
share, or $75 million, plus accrued and unpaid dividends. The redemption price
and accrued dividends of the 9.25% Series A Cumulative Preferred Stock were paid
with the net proceeds of the company's offering of its 8.00% Series B Cumulative
Preferred Stock. Additional remaining net proceeds of approximately $12.8
million were used to reduce borrowings under the company's line of credit and
for general corporate purposes.
The Financial Accounting Standards Board issued FASB Interpretation No.
46, ("FIN 46") "Consolidation of Variable Interest Entities, an interpretation
of Accounting Research Bulletin No. 51 (ARB No. 51)," in January 2003 and a
further interpretation of FIN 46 in December 2003 ("FIN 46-R" and FIN 46,
collectively "FIN 46"). The company currently participates in four joint-venture
arrangements to own and develop hotel properties: 1) the Marsh Landing joint
venture that owns one hotel; 2) a recently formed joint venture, which is
developing the Chapel Hill, North Carolina hotel; 3) a joint venture with
Charlesbank Partners and Concord Hospitality Enterprises Company that owns 3
hotels, and 4) a joint venture with Charlesbank Partners and a partnership led
by New Castle Hotels that owns one hotel. As a result of the issuance of FIN 46,
the company has consolidated the operations of the Marsh Landing and Chapel Hill
joint ventures for the quarter ended March 31, 2004. The provisions of FIN 46
are not expected to have any impact on the company's debt covenants.
"We currently have approximately $87 million available under our $125
million corporate line of credit," said Green. "We believe that we have the
flexibility and creativity to respond rapidly to investment opportunities as the
hotel industry begins to recover." Financial Highlights for the Quarter Ended
March 31, 2004
- - Net income (loss) applicable to common shareholders was $0.3 million
for the first quarter of 2004, versus $(0.2) million for the prior
year's first quarter.
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- - FFO payout ratio was 75.9 percent on a trailing 12-month basis.
- - Operating margins increased to 39.2 percent in the 2004 first quarter,
compared to 38.8 percent in the same quarter for 2003.
- - Based on information provided by Smith Travel Research, RevPAR yield
for the quarter ended March 31, 2004 for the company's portfolio was
approximately 111 percent, up from 109 percent in the same period a
year earlier, indicating that the company's portfolio achieved
disproportionately greater RevPAR than its competition.
During the first quarter, the company declared a regular cash dividend
of $0.15 per common share. The company also declared a cash dividend of $0.20
per share of Series B Preferred Stock. The preferred cash dividend was for the
period from February 24, 2004 (the issuance date of the new Series B Cumulative
Preferred Stock) through March 31, 2004.
"We continue to evaluate our dividend policy on a quarterly basis, and
remain comfortable with current dividend levels," Green said. "The amount of the
company's common dividend will continue to be determined each quarter, based
upon the operating results of that quarter, general economic conditions and
other operating trends and is determined at the sole discretion of our board of
directors.
OUTLOOK AND GUIDANCE
"The hotel industry appears to be recovering," Green said. "Because we
believe that we are in the early phase of a recovery and the precise timing of
potential investments in subordinate debt and hotel properties is unknown,
long-term visibility regarding our earnings for 2004 remains difficult. We will
continue to forecast the upcoming quarter until we believe that we have better
clarity on the economy and our investment strategies materialize."
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For the second quarter of this year, the company forecasts net income
available to common shareholders per share of $0.12 to 0.14, compared to $0.08
for the second quarter of 2003. For the 2004 second quarter, we expect an
increase in RevPAR of 3 percent to 5 percent and a slight improvement in gross
operating profit margins, compared to the second quarter of 2003. FFO per share
for the second quarter of 2004 is expected to be between $0.28 and $0.30,
compared to FFO per share of $0.31 for the second quarter of 2003. The expected
FFO per share for the second quarter of 2004 and the FFO per share of $0.31 for
the second quarter of 2003 are calculated using the NAREIT definition of FFO.
This guidance assumes no additional acquisitions or placement of debt during the
second quarter of 2004.
Winston Hotels' first quarter investor conference call is scheduled for
9 a.m. EST today, May 5, 2004. The call also will be simulcast over the Internet
via the company's Web site, www.winstonhotels.com. The replay will be available
on the company's Web site for 30 days and via telephone for seven days by
calling (800) 475-6701, access code 729676.
ABOUT THE COMPANY
Raleigh, North Carolina-based Winston Hotels, Inc. is a real estate
investment trust specializing in the development, acquisition, and repositioning
of, and provision of subordinated financing to, premium limited-service, upscale
extended-stay and full-service hotels, with a portfolio increasingly weighted
toward the leading brands in the lodging industry's upscale segment. The company
currently owns or is invested in 50 hotels with an aggregate of 7,069 rooms in
16 states, which includes: 45 wholly owned properties with an aggregate of 6,388
rooms; a 49 percent ownership interest in one joint-venture hotel with 118
rooms; and a 13.05 percent ownership interest in four joint-venture hotels with
563 rooms. The company also has issued mezzanine loans to owners of four hotels
with 591 rooms. In addition, the company owns
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a 48.78 percent ownership interest in one joint venture that is developing a
hotel with 147 rooms which we expect to open this summer. The company does not
hold an ownership interest in any of the hotels for which it has provided
mezzanine financing. For more information about Winston Hotels, visit the
Winston Hotels Web site at www.winstonhotels.com
NOTE ABOUT FORWARD-LOOKING STATEMENTS
In addition to historical information, this press release contains
forward-looking statements. The reader can identify these statements by use of
words like "may," "will," "expect," "project," "anticipate," "estimate,"
"target," "believe," or "continue" or similar expressions, including without
limitation its acquisition and disposition plans for hotel properties, its hotel
lending plans, its dividend policy, and its estimated net income, Earnings per
share, FFO and RevPAR for the 2004 second quarter. These statements represent
the company's judgment and are subject to risks and uncertainties that could
cause actual operating results to differ materially from those expressed or
implied in the forward looking statements including, but not limited to, changes
in general economic conditions, lower occupancy rates, lower average daily
rates, acquisition risks, development risks including risk of construction
delay, cost overruns, occupancy and other governmental permits, zoning, the
increase of development costs in connection with projects that are not pursued
to completion, the risk of non-payment of mezzanine loans, or the failure to
make additional hotel debt investments and investments in hotels. Other risks
are discussed in the company's filings with the Securities and Exchange
Commission, including but not limited to its Annual Report on Form 10-K for the
year ended December 31, 2003.
NOTES ABOUT NON-GAAP FINANCIAL MEASURES
This press release includes certain non-GAAP financial measures as defined under
Securities and Exchange Commission ("SEC") rules. As required by SEC rules, the
company has provided a reconciliation in this press release of each non-GAAP
financial measure to its most directly comparable GAAP measure. We believe that
these non-GAAP measures, when combined with the company's primary GAAP
presentations required by the SEC, help improve our equity holders' ability to
understand our operating performance and make it easier to compare the results
of our company with other hotel REITs. A description of each is provided below.
(A further description of certain of these non-GAAP measures can be found in our
annual report on Form 10-K for the year ended December 31, 2003.)
FFO
Funds from operations ("FFO"), as defined by the National Association of Real
Estate Investment Trusts ("NAREIT"), is net income (loss) (determined in
accordance with generally accepted accounting principles, or "GAAP"), excluding
gains (losses) from sales of property, plus depreciation and amortization and
after adjustments for unconsolidated partnerships and joint ventures (which are
calculated to reflect FFO on the same basis). The Company has
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adopted this definition of FFO and will no longer report information based on
adjustments to FFO, or AFFO, effective January 1, 2004. The calculation of FFO
may vary from entity to entity, and as such the presentation of FFO by the
company may not be comparable to other similarly titled measures of other
reporting companies. FFO is not intended to represent cash flows for the period.
FFO has not been presented as an alternative to operating income, and should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP.
FFO is a supplemental industry-wide measure of REIT operating performance, the
definition of which was first proposed by NAREIT in 1991 (and clarified in 1995,
1999 and 2002) in response to perceived drawbacks associated with net income
under GAAP as applied to REITs. Since the introduction of the definition by
NAREIT, the term has come to be widely used by REITs. Historical cost accounting
for real estate assets implicitly assumes that the value of real estate assets
diminishes predictably over time. Since real estate values instead have
historically risen or fallen with market conditions, most industry investors
have considered presentations of operating results for real estate companies
that use historical GAAP cost accounting to be insufficient by themselves.
Accordingly, the company believes FFO (combined with the company's primary GAAP
presentations required by the SEC) helps improve our investors' ability to
understand the company's operating performance. The company only uses FFO as a
supplemental measure of operating performance.
The company computes FFO Payout Ratio by dividing common dividends per share
paid over the last twelve months by trailing twelve-month FFO per share for the
same period.
REVPAR
RevPAR is an acronym for Revenue Per Available Room, which is determined by
multiplying average daily rate by occupancy percentage for any given period.
RevPAR does not include food and beverage or other ancillary revenues such as
parking, telephone, or other guest services generated by the property. Similar
to the reporting periods for the company's statement of operations, hotel
operating statistics (i.e., RevPAR, average daily rate and average occupancy)
are always reported on a quarter to date and/or year to date basis.
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WINSTON HOTELS, INC.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
MARCH 31, DECEMBER 31,
2004 2003
------------ ------------
(unaudited)
Land $ 44,441 $ 44,788
Buildings and improvements 374,757 377,109
Furniture and equipment 48,007 51,323
------------ ------------
Operating properties 467,205 473,220
Less accumulated depreciation 125,742 128,540
------------ ------------
341,463 344,680
Properties under development 6,080 3,521
------------ ------------
Net investment in hotel properties 347,543 348,201
Assets held for sale 2,100 2,100
Corporate FF&E, net 544 621
Cash 7,082 5,623
Accounts receivable 3,660 2,505
Lease revenue receivable -- 179
Notes receivable 7,416 5,016
Investment in joint ventures 2,203 1,607
Deferred expenses, net 2,782 2,935
Prepaid expenses and other assets 7,811 8,653
Deferred tax asset 10,465 9,821
------------ ------------
Total assets $ 391,606 $ 387,261
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Due to banks $ 37,900 $ 29,200
Long-term debt 82,599 91,284
Accounts payable and accrued expenses 11,448 11,484
Distributions payable 4,882 5,870
------------ ------------
Total liabilities 136,829 137,838
------------ ------------
Minority interest 10,681 17,489
------------ ------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
3,000,000 shares issued and outstanding -- 30
Preferred stock, $.01 par value, 5,000,000 shares authorized,
3,680,000 shares issued and outstanding (liquidation preference
of $92,736) 37 --
Common stock, $.01 par value, 50,000,000 shares authorized,
26,340,292 and 26,270,805 shares issued and outstanding 264 263
Additional paid-in capital 323,387 307,089
Accumulated other comprehensive loss -- (33)
Unearned compensation (1,005) (527)
Distributions in excess of earnings (78,587) (74,888)
------------ ------------
Total shareholders' equity 244,096 231,934
------------ ------------
Total liabilities and shareholders' equity $ 391,606 $ 387,261
============ ============
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WINSTON HOTELS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Three
Months Ended Months Ended
March 31, March 31,
2004 2003
------------ ------------
Revenue:
Rooms $ 29,896 $ 25,849
Food and beverage 1,960 1,686
Other operating departments 1,010 1,091
Percentage lease revenue 692 810
Interest and other income 361 366
------------ ------------
Total revenue 33,919 29,802
------------ ------------
Hotel operating expenses:
Rooms 6,777 6,075
Food and beverage 1,469 1,305
Other operating departments 734 736
Undistributed operating expenses:
Property operating expenses 7,195 5,951
Real estate taxes and property and casualty insurance 1,678 1,698
Franchise costs 2,154 1,811
Maintenance and repair 1,864 1,585
Management fees 740 548
Percentage lease expense -- 908
General and administrative 1,631 1,485
Depreciation 4,520 4,595
Amortization 329 221
------------ ------------
Total operating expenses 29,091 26,918
------------ ------------
Operating income 4,828 2,884
Interest expense 1,731 1,962
------------ ------------
Income before allocation to minority interest, allocation to
consolidated joint ventures, income taxes, and equity
in income (loss) of unconsolidated joint ventures 3,097 922
Income (loss) allocation to minority interest 4 (12)
Income allocation to consolidated joint ventures 184 --
Income tax benefit (718) (488)
Equity in income (loss) of unconsolidated joint ventures (21) 135
------------ ------------
Income from continuing operations 3,606 1,557
Discontinued operations:
Loss from discontinued operations (101) (24)
Gain on sale of discontinued operations 285 --
Loss on impairment of asset held for sale (23) --
------------ ------------
Net income 3,767 1,533
Preferred stock distribution (1,795) (1,734)
Loss on redemption of Series A Preferred Stock (1,720) --
------------ ------------
Net income (loss) applicable to common shareholders $ 252 $ (201)
============ ============
Income (loss) per common share:
Basic and diluted:
Loss from continuing operations $ -- $ (0.01)
Income from discontinued operations 0.01 --
------------ ------------
Net income (loss) per common share $ 0.01 $ (0.01)
============ ============
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WINSTON HOTELS, INC.
RECONCILIATION AND CALCULATION OF FFO AND FFO PAYOUT RATIO
(in thousands, except per share data)
For the
For the Trailing Twelve
Quarter Ended Months Ended,
March 31, March 31,
2004 2003 2004
-------- -------- ---------------
Net income $ 3,767 $ 1,533 $ 9,939
Minority interest allocation 3 (12) 275
Gain on sale of discontinued operations (299) -- (299)
Minority interest allocation of gain on sale of
discontinued operations 14 -- 14
Minority interest allocation of losses from
discontinued operations (5) (1) (22)
Depreciation 4,225 4,595 17,316
Depreciation from discontinued operations 19 126 85
Depreciation from joint ventures 207 194 868
Loss on redemption of Series A Preferred Stock (1,720) -- (1,720)
Preferred stock dividend (1,795) (1,734) (6,999)
-------- -------- ---------------
FUNDS FROM OPERATIONS (FFO) $ 4,416 $ 4,701 $ 19,457
-------- -------- ---------------
Weighted average common
shares outstanding assuming dilution 27,578 21,372 24,620
-------- -------- ---------------
FFO PER SHARE $ 0.16 $ 0.22 $ 0.79
======== ======== ===============
-------- -------- ---------------
COMMON DIVIDEND PER SHARE $ 0.15 $ 0.15 $ 0.60
======== ======== ===============
FFO PAYOUT RATIO:
(based on a twelve-month basis)
FFO per share - 4/1/03 through 3/31/04: $ 0.79
Common dividends paid per share - 4/1/03
through 3/31/04 0.60
---------------
75.9%
===============
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2004 SECOND QUARTER GUIDANCE
RECONCILIATION OF NET INCOME TO FFO
(in thousands, except per share data)
GUIDANCE RANGE
LOW HIGH
-------- --------
Net Income $ 5,100 $ 5,600
Depreciation 4,100 4,100
Depreciation from joint ventures 400 400
Minority interest allocation 100 100
Preferred stock dividend (1,840) (1,840)
--------------------
FUNDS FROM OPERATIONS (FFO) $ 7,860 $ 8,360
====================
Weighted average common
shares assuming dilution 27,600 27,600
FFO PER SHARE $ 0.28 $ 0.30
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WINSTON HOTELS, INC.
REPORT OF THE THREE MONTHS ENDING MARCH 31
REVPAR PERFORMANCE FOR 47 HOTELS(1)
THREE MONTHS ENDING MARCH 31
2004 2003 % CH
COMBINED BRANDS
Comfort Inn/Suites & Quality Suites $39.94 $35.36 13.0%
Courtyard, Fairfield Inn, Residence Inn, SpringHill $50.20 $46.71 7.5%
Hampton Inn/Suites $48.74 $47.32 3.0%
Hilton Garden Inn $69.71 $60.78 14.7%
Holiday Inn Express/Select $46.19 $44.26 4.4%
Homewood Suites $67.64 $65.83 2.7%
REGION
South Atlantic $48.00 $45.90 4.6%
East North Central $58.58 $49.24 19.0%
West South Central $45.60 $41.46 10.0%
Mountain $67.75 $60.54 11.9%
New England $58.12 $50.40 15.3%
Middle Atlantic $66.10 $63.18 4.6%
SEGMENT
Upscale $63.24 $58.73 7.7%
Mid-scale w/ F&B $50.68 $46.97 7.9%
Mid-scale w/o F&B $43.43 $40.94 6.1%
SERVICE
Limited-service $43.43 $40.94 6.1%
Full-service $57.43 $51.95 10.5%
Extended-stay $66.10 $64.11 3.1%
TOTAL FOR 47 HOTELS $51.88 $48.42 7.1%
(1) Includes the company's 45 wholly owned hotels as of March 31, 2004, as well
as two joint venture hotels the company has held an ownership interest in for
all periods presented. These joint venture hotels include the Ponte Vedra, FL
Hampton Inn, and the West Des Moines, IA Fairfield Inn & Suites.
Excludes three joint venture hotels, in which the company owns a 13.05 percent
interest through the Charlesbank joint venture. These hotels include the
Beachwood, OH Courtyard by Marriott, acquired in June 2002, the Houston, TX Best
Western Park Place Suites, acquired in September 2003, and the Shelton, CT
Ramada Inn acquired in March 2004. The company did not hold an ownership
interest in these properties, or the properties were not open for the entire
periods presented, and therefore they are excluded from the table above.
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