|View printer-friendly version|
|FelCor Reports Fourth Quarter Results|
-Continues Debt Reduction
-Expands Asset Sale Program
IRVING, Texas, Feb 24, 2011 (BUSINESS WIRE) --
FelCor Lodging Trust Incorporated (NYSE: FCH) today reported operating results for the fourth quarter and year ended December 31, 2010.
Fourth Quarter Operating Results:
Same-store RevPAR for 80 consolidated hotels was $79.77, a 5.7% increase compared to the same period in 2009. This increase was driven by a 4.2% occupancy increase to 66.2% and a 1.5% average daily rate ("ADR") increase to $120.47. RevPAR at the Fairmont Copley Plaza (not included in same-store RevPAR) increased 9.3% (to $172.43) and ADR increased 6.9% (to $249.18), compared to the same period in 2009.
"We ended the year on a very strong note. RevPAR for our portfolio grew more than 4% during the year, which was much better than we expected at the outset of 2010. Industry fundamentals continue to improve, and we don't see signs of those trends diminishing in the near future. ADR is becoming a larger portion of the RevPAR growth, and our flow-through from revenue to EBITDA continues to accelerate," said Richard A. Smith, FelCor's President and Chief Executive Officer.
"Last year, we repaid more than $225 million of debt, extended maturities and acquired an iconic hotel in Boston at a substantial discount to replacement cost. FelCor's evolution continues, and we anticipate another active year in 2011. Although we have a strong portfolio today, we remain focused on continuing to improve overall portfolio quality, future growth rates and diversification through asset sales and selective acquisitions in our two target markets (New York and Washington, D.C.)," added Mr. Smith.
Hotel EBITDA was $48.4 million, compared to $41.1 million for the same period in 2009, a 17.9% increase. Hotel EBITDA represents EBITDA for 80 same-store consolidated hotels prior to corporate expenses and joint venture adjustments. Hotel EBITDA margin was 22.0%, a 240 basis point increase compared to the same period in 2009.
Adjusted EBITDA (which includes our pro rata share of joint ventures) was $45.0 million, compared to $30.4 million for the same period in 2009, a 47.8% increase, which was $3 million ahead of the high-end of our guidance. Same-store Adjusted EBITDA was $39.2 million, a 28.5% increase, compared to the prior year period. Same-store Adjusted EBITDA excludes EBITDA from hotels sold and acquired during the year.
Adjusted funds from operations ("FFO") was a loss of $3.6 million or $0.04 per share, compared to an $18.7 million loss, or $0.29 per share, for the same period in 2009.
Net loss attributable to common stockholders was $103.1 million, or $1.08 per share, compared to a $60.4 million loss, or $0.96 per share, for the same period in 2009. Our 2010 net loss includes $86.8 million of impairment charges reflecting the reduced book values on ten non-strategic hotels (three hotels comprise the majority of the impairment), as well as a $7.0 million gain on extinguishment of debt related to the disposition of one hotel, a $1.6 million charge related to the repurchase of $40 million of our senior notes maturing 2011 and a $20.5 million gain related to the sale of our interest in a joint venture. Our 2009 net loss included a $1.1 million loss from debt extinguishment.
Full Year Operating Results:
Same-store RevPAR in 2010 was $85.58, a 4.3% increase compared to 2009. This increase was driven by a 5.8% occupancy increase to 70.5% and a 1.5% ADR decrease to $121.47, compared to 2009.
Hotel EBITDA was $217.8 million, compared to $206.2 million in 2009, a 5.6% increase. Hotel EBITDA represents EBITDA for 80 same-store consolidated hotels prior to corporate expenses and joint venture adjustments. Hotel EBITDA margin was 24.0%, a 32 basis point increase compared to 2009.
Adjusted EBITDA (which includes our pro rata share of joint ventures) was $188.1 million, compared to $178.9 million in 2009, a 5.1% increase. Same-store Adjusted EBITDA was $179.6 million. Same-store Adjusted EBITDA excludes EBITDA from hotels sold and acquired during the year.
Adjusted FFO was a loss of $7.6 million or $0.09 per share, compared to a positive $25.0 million, or $0.39 per share, in 2009.
Net loss attributable to common stockholders was $261.8 million, or $3.25 per share, compared to a $146.8 million loss, or $2.33 per share, in 2009. Our 2010 loss included $173.7 million of impairment charges, $59.4 million of gains from extinguishment of debt, and a $20.5 million gain related to the sale of our interest in an unconsolidated joint venture. Our 2009 loss included a $3.4 million impairment charge, a $910,000 gain from disposition, and a $1.7 million loss from debt extinguishment.
EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA margin, FFO, Adjusted FFO and Adjusted FFO per share are all non-GAAP financial measures. See our discussion of "Non-GAAP Financial Measures" beginning on page 15 for a reconciliation of each of these measures to the most comparable GAAP financial measure and for information regarding the use, limitations and importance of these non-GAAP financial measures.
At December 31, 2010, we had $1.5 billion of consolidated debt and $201.0 million of cash and cash equivalents. We reduced our consolidated debt balance by more than $225 million during 2010.
During the fourth quarter, we repurchased $40 million of our senior notes maturing in June 2011 in separate transactions using excess cash on hand. The remaining $46 million of notes will be repaid with cash on hand.
On December 29, the Embassy Suites in Deerfield, Illinois was transferred to the lender in full satisfaction of the $14 million loan securing that hotel. We recorded a $7.0 million gain on debt extinguishment (which reflects the principal amount of that loan in excess of the value of that hotel, as reflected on our balance sheet). The hotel generated $357,000 of EBITDA during the trailing-twelve-months ended November 2010 (the debt satisfied represents 39 times EBITDA).
We reinstated the current quarterly payment on our preferred stock. On January 31, 2011, we made current quarterly dividend payments on our Series A Cumulative Convertible Preferred Stock and our 8% Series C Cumulative Redeemable Preferred Stock. Seven quarters of preferred dividends remain in arrears, which we plan to pay with proceeds from future asset sales.
"We are very pleased with our accomplishments during the quarter. We reinstated the preferred dividends, as our cash flows have meaningfully improved since the depths of the downturn. We also created shareholder value through the deed-in-lieu of two hotels where the debt balance significantly exceeded the fair value of the hotels. We continue to strengthen our balance sheet by reducing debt and improving liquidity. Furthermore, we are in the process of reestablishing a line of credit with a syndicate of lenders. This line of credit will provide us with greater flexibility to manage our balance sheet while negotiating and completing strategic hotel acquisitions," said Andrew J. Welch, FelCor's Executive Vice President and Chief Financial Officer.
For the quarter and year ended December 31, 2010, we spent $11.6 million and $40.4 million, respectively, on capital improvements at our hotels (including our pro rata share of joint venture expenditures). As part of our long-term capital plan, we anticipate renovating between six and eight core properties each year. In 2011, we will start renovations at six hotels (Embassy Suites - Mandalay Beach Hotel & Resort, Embassy Suites - Napa Valley, Sheraton Society Hill - Philadelphia, Doubletree Guest Suites - Austin, Doubletree Guest Suites - Charlotte-SouthPark and the Renaissance Vinoy Resort & Golf Club), in addition to the more than $20 million redevelopment project at the Fairmont Copley Plaza that will refresh the property and implement various value-enhancing initiatives.
During the fourth quarter, we commenced the second phase of asset sales. This is part of our long-term strategic plan developed in 2006 to further improve our portfolio quality, growth rates and diversification and to reinvest sales proceeds into investments that generate higher returns and increase shareholder value. In October, we began marketing 14 hotels for sale, of which 11 are suburban or airport locations, and seven are located in Texas, Florida and Georgia. The 2010 RevPAR for these hotels was $70.86, or 27% below the remaining portfolio's hotel RevPAR ($90.09). In addition, we shortened the hold period on an additional 21 non-strategic hotels. We will continue to monitor the transaction environment and will bring these hotels to market at the appropriate time.
In December 2010, we sold the 443-room Sheraton Premiere Hotel at Tysons Corner in Vienna, Virginia for $84.5 million in cash. The property was owned in a joint venture between FelCor and Starwood Hotels & Resorts Worldwide Inc. We received $42.3 million in gross proceeds, and there was no debt associated with the hotel. The sale price, approximately $191,000 per key, represented approximately 23 times trailing-twelve-month hotel EBITDA.
Lodging demand growth continues to accelerate and new hotel supply growth is moderating. This supply and demand imbalance is resulting in both occupancy and average rate growth for FelCor and the industry. Our hotels are taking advantage of the growth in corporate and premium segments to remix the customer base and replace the lower rated business with those premium customers. Additionally, our hotels are opportunistically increasing rates where appropriate. New hotel supply growth continues to moderate and is below the historical, long-term average and also compares favorably to prior cycles. Overall, hotel rooms under construction in our markets represent only 1.0% of existing supply, which is below the industry average. These factors are expected to drive accelerating RevPAR and margin growth throughout 2011.
For 2011, we anticipate:
Our 2011 projections are based on 81 consolidated hotels and do not include any future asset sales, acquisitions or other capital transactions. Our 2011 guidance assumes Same-store Adjusted EBITDA growth of between 12 - 18%, compared to 2010 (including Fairmont Copley Plaza's full year EBITDA for both periods).
FelCor, a real estate investment trust, is the nation's largest owner of upper-upscale, all-suite hotels. FelCor owns interests in 82 properties located in major markets throughout 22 states. FelCor's diversified portfolio of hotels and resorts are flagged under global brands such as - Doubletree(R), Embassy Suites Hotels(R), Hilton(R), Fairmont(R), Marriott(R), Renaissance(R), Sheraton(R), Westin(R) and Holiday Inn(R). Additional information can be found on the Company's Web site at www.felcor.com.
We invite you to listen to our fourth quarter earnings Conference Call on Thursday, February 24, 2011, at 11:00 a.m. (Central Time). The conference call will be Webcast simultaneously on FelCor's Web site at www.felcor.com. Interested investors and other parties who wish to access the call can go to FelCor's Web site and click on the conference call microphone icon on either the "Investor Relations" or "News Releases" page. The conference call replay also will be archived on the Company's Web site.
With the exception of historical information, the matters discussed in this news release include "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "continue" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties, and the occurrence of future events, may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Current economic circumstances or an economic slowdown and the impact on the lodging industry, operating risks associated with the hotel business, relationships with our property managers, risks associated with our level of indebtedness and our ability to meet debt covenants in our debt agreements, our ability to complete acquisitions, dispositions and debt refinancing, the availability of capital, the impact on the travel industry from security precautions, our ability to continue to qualify as a Real Estate Investment Trust for federal income tax purposes and numerous other factors may affect future results, performance and achievements. Certain of these risks and uncertainties are described in greater detail in our filings with the Securities and Exchange Commission. Although we believe our current expectations to be based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that actual results will not differ materially. We undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.
The following information is presented in order to help our investors understand FelCor's financial position as of and for the three months and year ended December 31, 2010.
(a) Our consolidated statements of operations and balance sheets have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted. The consolidated statements of operations and balance sheets should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent Annual Report on Form 10-K.
(a) Includes capitalized interest, property taxes, ground leases and certain employee costs.
(a) We purchased an interest rate cap that caps LIBOR at 7.8% and expires November 2011 for a $250 million notional amount.
(b) LIBOR for this loan is subject to a 3% floor. We purchased an interest rate cap that caps LIBOR at 5.0% and expires May 2012 for a $212 million notional amount.
(c) LIBOR for this loan is subject to a 2% floor.
(d) This loan can be extended for as many as two years (to 2013), subject to satisfying certain conditions.
(e) The hotels under this debt are subject to separate loan agreements and are not cross-collateralized.
(f) This loan can be extended for one year, subject to satisfying certain conditions.
(g) These notes have $636 million in aggregate principal outstanding and were sold at a discount that provides an effective yield of 12.875% before transaction costs.
(a) The hotels under this debt are subject to separate loan agreements and are not cross-collateralized.
Hotel Portfolio Composition
The following table illustrates the distribution of 81 consolidated hotels by brand, market and location at December 31, 2010.
(a) Hotel EBITDA is more fully described on page 21.
(b) We acquired the Fairmont Copley Plaza in August 2010, and this table reflects only results of operations for the periods in which we owned the hotel.
The following tables set forth occupancy, ADR and RevPAR for the three months and year ended December 31, 2010 and 2009, and the percentage changes thereto between the periods presented, for 80 same-store consolidated hotels owned for both periods (excludes the Fairmont Copley Plaza acquired in August 2010).
Non-GAAP Financial Measures
We refer in this release to certain "non-GAAP financial measures." These measures, including FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Same-store Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin, are measures of our financial performance that are not calculated and presented in accordance with generally accepted accounting principles ("GAAP"). The following tables reconcile each of these non-GAAP measures to the most comparable GAAP financial measure. Immediately following the reconciliations, we include a discussion of why we believe these measures are useful supplemental measures of our performance and the limitations of such measures.
(a) We have excluded amounts from the Fairmont Copley Plaza acquired in August 2010 for same-store comparison purposes.
(a) Hotel EBITDA as a percentage of same-store hotel operating revenue.
(a) We have excluded amounts from the Fairmont Copley Plaza acquired in August 2010 for same-store comparison purposes.
(a) We have excluded amounts from the Fairmont Copley Plaza acquired in August 2010 for same-store comparison purposes.
(a) Weighted average shares and units are 96.4 million.
(b) Includes pro rata portion of unconsolidated entities.
Substantially all of our non-current assets consist of real estate. 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 consider supplemental measures of performance, which are not measures of operating performance under GAAP, to be helpful in evaluating a real estate company's operations. These supplemental measures are not measures of operating performance under GAAP. However, we consider these non-GAAP measures to be supplemental measures of a hotel REIT's performance and should be considered along with, but not as an alternative to, net income (loss) attributable to FelCor as a measure of our operating performance.
FFO and EBITDA
The White Paper on Funds From Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), defines FFO as net income or loss attributable to parent (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We compute FFO in accordance with standards established by NAREIT. This may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.
EBITDA is a commonly used measure of performance in many industries. We define EBITDA as net income or loss attributable to parent (computed in accordance with GAAP) plus interest expenses, income taxes, depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA on the same basis.
Adjustments to FFO and EBITDA
We adjust FFO and EBITDA when evaluating our performance because management believes that the exclusion of certain additional items, including but not limited to those described below, provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted FFO, and Adjusted EBITDA when combined with GAAP net income attributable to FelCor, EBITDA and FFO, is beneficial to an investor's better understanding of our operating performance.
In addition, to derive Adjusted EBITDA we exclude gains or losses on the sale of depreciable assets because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale of depreciable assets represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.
Hotel EBITDA and Hotel EBITDA Margin
Hotel EBITDA and Hotel EBITDA margin are commonly used measures of performance in the hotel industry and give investors a more complete understanding of the operating results over which our individual hotels and brand/managers have direct control. We believe that Hotel EBITDA and Hotel EBITDA margin are useful to investors by providing greater transparency with respect to two significant measures that we use in our financial and operational decision-making. Additionally, using these measures facilitates comparisons with other hotel REITs and hotel owners. We present Hotel EBITDA and Hotel EBITDA margin by eliminating all revenues and expenses from continuing operations not directly associated with hotel operations, including corporate-level expenses, depreciation and amortization, and expenses related to our capital structure. We eliminate corporate-level costs and expenses because we believe property-level results provide investors with supplemental information into the ongoing operational performance of our hotels and the effectiveness of management on a property-level basis. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, we do not believe that these non-cash expenses, which are based on historical cost accounting for real estate assets, and implicitly assume that the value of real estate assets diminishes predictably over time, accurately reflect an adjustment in the value of our assets. We also eliminate consolidated percentage rent paid to unconsolidated entities, which is effectively eliminated by noncontrolling interests and equity in income from unconsolidated subsidiaries, and include the cost of unconsolidated taxes, insurance and lease expense, to reflect the entire operating costs applicable to our Consolidated Hotels. Hotel EBITDA and Hotel EBITDA margins are presented on a same-store basis and exclude the historical results of operations from the Fairmont Copley Plaza acquired in August 2010.
Use and Limitations of Non-GAAP Measures
Our management and Board of Directors use FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, Hotel EBITDA and Hotel EBITDA margin to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. We use Hotel EBITDA and Hotel EBITDA margin in evaluating hotel-level performance and the operating efficiency of our hotel managers.
The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. Management strongly encourages investors to review our financial information in its entirety and not to rely on a single financial measure.
SOURCE: FelCor Lodging Trust Incorporated
FelCor Lodging Trust Incorporated