• Same-store Adjusted EBITDA
increased 18%
• Increases 2014 Outlook
FelCor Lodging Trust Incorporated (NYSE: FCH) reported operating
results for the quarter ended March 31, 2014.
Highlights
- RevPAR for 49 comparable hotels
increased 7.0%.
- Adjusted FFO per share improved from
$(0.01) to $0.03.
- Adjusted EBITDA increased by
$3.4 million to $41.1 million, and Same-store Adjusted
EBITDA increased by $6.1 million, or 18%, to
$39.9 million.
- Net loss per share improved by $0.09 to
$0.20.
- Two non-strategic hotels were sold for
gross proceeds of $41 million. Five other hotels are under
contract to sell for gross proceeds of $114 million.
“I am very pleased with our performance in the first quarter. We
exceeded our expectations, and RevPAR for our comparable portfolio
once again outperformed the industry,” said Richard A. Smith,
President and Chief Executive Officer of FelCor. “We have
positioned FelCor to deliver sustainable growth by assembling a
high-quality and diverse portfolio, and we will continue to
leverage our strengths to outperform the industry and drive
superior stockholder value.”
Mr. Smith added, “We continue to make very good progress on our
balance sheet restructuring and portfolio positioning, with two
non-strategic hotels sold so far this year and five others under
contract. During 2014, we plan to sell most of our 19 remaining
non-strategic hotels and repay our 2014 debt maturities with the
proceeds. In addition, the Knickerbocker redevelopment remains on
schedule and budget, and we look forward to a strong opening in
early fall.”
Hotel Results
First Quarter 2014 2013
Change Comparable hotels (49) RevPAR $ 112.02
$ 104.73 7.0 % Total hotel revenue, in millions $ 192.6 $ 180.6 6.6
% Hotel EBITDA, in millions $ 44.5 $ 38.9 14.4 % Hotel EBITDA
margin 23.1 % 21.5 % 158 bps
Wyndham Hotels (8)
RevPAR $ 90.99 $ 88.60 2.7 % Total hotel revenue, in millions $
24.6 $ 24.0 2.6 % Hotel EBITDA, in millions $ 6.1 $ 5.1 18.8 %
Hotel EBITDA margin 24.6 % 21.2 % 335 bps
Same-store
hotels (57) RevPAR $ 108.90 $ 102.31 6.4 % Total hotel revenue,
in millions $ 217.2 $ 204.6 6.2 % Hotel EBITDA, in millions $ 50.6
$ 44.0 15.0 % Hotel EBITDA margin 23.3 % 21.5 % 178 bps
RevPAR for our 31 comparable core hotels (39 core hotels that
exclude Wyndham hotels converted from Holiday Inn on March 1,
2013) increased 7.9% compared to the same period in 2013, while
RevPAR for our 18 non-strategic hotels increased 4.5%.
RevPAR for our 49 comparable hotels (31 comparable core hotels
plus 18 non-strategic hotels) was $112.02, a 7.0% increase compared
to the same period in 2013. The increase reflects a
4.9% increase in ADR to $155.85 and a 2.0% increase in
occupancy to 71.9%. Hotel EBITDA for our 49 comparable hotels was
$44.5 million, a 14.4% increase, and Hotel EBITDA margin was
23.1% during the quarter, a 158 basis point increase.
The comparable hotels metric that excludes the
recently-converted Wyndham hotels is the most appropriate measure
to assess the current operating performance of our portfolio.
RevPAR for those eight hotels converted to Wyndham in 2013
increased 2.7% for the first quarter compared to the same period in
2013, a significant improvement from the fourth quarter 2013
decline of 11.6%. We expect revenues at these hotels to grow
meaningfully during 2014 and beyond, as the transitional disruption
subsides. Wyndham Worldwide Corporation has guaranteed minimum
annual NOI for the eight hotels over the ten-year term of the
management agreement. We do not expect the amount funded by Wyndham
under the 2014 guaranty to be significant.
RevPAR for our 57 Same-store hotels (49 comparable hotels plus
the recently-converted Wyndham hotels) was $108.90, a 6.4% increase
compared to the same period in 2013. The increase reflects a 4.8%
increase in ADR to $154.36 and a 1.6% increase in occupancy to
70.5%.
See page 14 for hotel portfolio composition and pages 15 and 20
for more detailed hotel portfolio operating data.
Operating Results
First Quarter $ in millions, except for per
share information
2014 2013
Change Same-store Adjusted EBITDA $ 39.9 $ 33.8 18.0
% Adjusted EBITDA $ 41.1 $ 37.7 9.1 % Adjusted FFO per share $ 0.03
$ (0.01 ) $ 0.04 Net loss per share $ (0.20 ) $ (0.29 ) $ 0.09
Same-store Adjusted EBITDA was $39.9 million, compared to
$33.8 million for the same period in 2013, an 18% increase.
Adjusted EBITDA (which includes Adjusted EBITDA for sold hotels
prior to sale) was $41.1 million compared to
$37.7 million for the same period in 2013, a 9.1%
increase.
Adjusted FFO was $4.1 million, or $0.03 per share, compared
to a loss of $773,000, or $0.01 per share, in 2013. Net loss
attributable to common stockholders was $24.5 million, or
$0.20 per share, in 2014, compared to a net loss of
$35.9 million, or $0.29 per share, in 2013. Net loss in 2014
included a $5.8 million net gain on asset sales.
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 17 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.
Portfolio Repositioning
During 2014, we sold a 232-room Embassy Suites hotel in Atlanta
for $17.2 million and a 218-room Embassy Suites hotel in
Bloomington, Minnesota, for $24 million. Since December 2010, we
have sold 26 non-strategic hotels, for total gross proceeds of $573
million, as part of our portfolio repositioning program.
We also have agreed to sell a 208-room DoubleTree Suites in
Charlotte, North Carolina, for $37 million and a 196-room
DoubleTree Suites in Dana Point, California, for $32.9 million. In
addition, we have executed contracts to sell three hotels for total
gross proceeds of $44.0 million. Of the five hotels currently under
contract, we expect four to sell during the second quarter and one
to sell during the third quarter.
Following the sale of those hotels currently under contract, we
will have 14 remaining non-strategic hotels. Of the remaining
hotels, we are currently marketing three and expect to begin
marketing another hotel later this year. We indirectly own 50%
interests in the other 10 non-strategic hotels, which are owned by
a joint venture with one of our brand-managers. We have made
substantial progress with our partner to unwind that joint venture,
as a consequence of which we would own five of those hotels
outright (our joint venture partner would own the other five). When
the joint venture is unwound (which we are targeting to occur in
the second quarter), we intend to begin marketing those hotels
immediately.
Capital Expenditures
During the quarter, we invested $29.1 million in capital
expenditures at our operating hotels, including approximately
$11.0 million for redevelopment projects and repositioning our
Wyndham hotels.
During 2014, we will invest approximately $60 million in
capital improvements and renovations, concentrated at seven hotels,
as part of our long-term capital plan. In addition, we are
investing approximately $25 million to complete the
repositioning of our Wyndham portfolio. Please see page 12 of this
release for more detail on renovations.
Knickerbocker
We have invested $85.6 million (excluding initial
acquisition costs and capitalized interest) through March 31,
2014 to redevelop the 4+ star Knickerbocker Hotel. Our total
expected project cost remains $240 million (net of historic
tax credits), and we expect the hotel to open in early fall.
The hotel’s executive team is in place and fully engaged to
ensure a successful and strong opening. In early 2014, we finalized
an agreement with Charlie Palmer, one of the nation’s most
recognized master chefs, to manage the food and beverage
operations. In addition, the Knickerbocker will be a member of
Leading Hotels of the World, the largest collection of luxury
hotels.
Our Knickerbocker Hotel joint venture raised $45 million by
selling 3.5% preferred equity through the EB-5 immigrant investor
program. The venture received $41.5 million in proceeds during
the first quarter of 2014, and the remaining $3.5 million will
be received as investors’ visas are approved by the government. We
used our 95% share of the proceeds to repay borrowings under our
line of credit.
Balance Sheet
As of March 31, 2014, we had $1.6 billion of
consolidated debt bearing a 6.3% weighted-average interest rate and
a six-year weighted-average maturity. We had $73.5 million of
cash and cash equivalents and $67.0 million of restricted
cash, of which $51.9 million secured our Knickerbocker
construction loan.
During the quarter, we repaid two loans (each secured by a
different hotel) maturing in 2014 totaling $28 million. We
will use the proceeds from future asset sales to repay additional
debt.
Common Dividend
During the first quarter, we declared a $0.02 per share common
stock dividend, which was paid in April. Future quarterly dividends
will be based on funds available for distribution (“FAD”),
reinvestment opportunities within our portfolio and taxable income,
among other things.
Outlook
Our 2014 outlook reflects continued strong fundamentals for the
lodging industry. Our expected RevPAR growth reflects a premium to
the industry because of both our high-quality diverse portfolio and
continued strong growth at our acquired and recently redeveloped
hotels. We have also increased our RevPAR and EBITDA outlook
primarily to reflect better than expected first quarter results.
Our outlook reflects selling all remaining 19 non-strategic hotels.
Both the low and high end of our guidance assumes the sale of the
five hotels currently under contract (four in the second quarter
and one in the third quarter). The low end of our outlook assumes
that the remaining 14 hotels are sold in the third quarter. The
high end of our outlook assumes two hotels are sold in the third
quarter, and the 12 remaining hotels are sold during the fourth
quarter. Our outlook assumes EBITDA for the Wyndham hotels equates
to the amount of Wyndham’s annual NOI guaranty.
During 2014, we expect:
- RevPAR for comparable hotels (49
hotels) will increase 6.5% to 7.5% and RevPAR for Same-store hotels
(57 hotels) will increase 7.75% to 8.75%;
- Adjusted EBITDA will be in the range of
$206.0 million to $217.0 million;
- Adjusted FFO per share will be $0.53 to
$0.59;
- Net loss attributable to FelCor will be
$30.0 million to $26.5 million; and
- Interest expense, including our pro
rata share from joint ventures, will be $94.0 million to
$97.5 million.
The following table reconciles our 2014 Adjusted EBITDA to
Same-store Adjusted EBITDA outlook (in millions):
Low High Previous Adjusted
EBITDA $ 202.0 $ 217.0 Operations
4.0 3.0 Updated timing of asset sales(a) —
(3.0 )
Current Adjusted EBITDA $ 206.0
$ 217.0 Hotel dispositions(b) (22.0 )
(29.0 )
Core Adjusted EBITDA (40 hotels) $
184.0 $ 188.0 (a)
The decrease in the high end reflects the
lost EBITDA that would be recognized with respect to four hotels
that we previously assumed would sell in the third quarter and we
now assume will be sold during the second quarter.
(b) EBITDA that is forecasted to be generated by 21 hotels that we
assume will be sold from January 1, 2014 through the dates of sale.
About FelCor
FelCor, a real estate investment trust, owns a diversified
portfolio of primarily upper-upscale and luxury hotels that are
located in major and resort markets. FelCor partners with leading
hotel companies to operate its hotels, which are flagged under
globally renowned brands and premier independent hotels. Additional
information can be found on the Company’s website at www.felcor.com.
We invite you to listen to our first quarter earnings Conference
Call on Thursday, May 1, 2014 at 11:00 a.m. (Central Time).
The conference call will be webcast simultaneously on FelCor’s
website at www.felcor.com. Interested
investors and other parties who wish to access the call can go to
FelCor’s website and click on the conference call microphone icon
on the “Investor Relations” page. The conference call replay will
also be archived on the Company’s website.
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.
SUPPLEMENTAL INFORMATION
INTRODUCTION
The following information is presented in order to help our
investors understand FelCor’s financial position as of and for the
three months ended March 31, 2014.
TABLE OF CONTENTS
Page Consolidated Statements of
Operations(a) 8 Consolidated Balance Sheets(a) 9 Consolidated Debt
Summary 10 Schedule of Encumbered Hotels 11 Capital Expenditures 12
Hotels Under Renovation During 2014 12 Supplemental Financial Data
13 Hotel Portfolio Composition 14 Hotel Operating Statistics by
Brand 15 Hotel Operating Statistics by Market 16 Historical
Quarterly Operating Statistics 17 Non-GAAP Financial Measures 17
(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.
Consolidated Statements of
Operations
(in thousands, except per share data)
Three Months Ended March 31, 2014
2013 Revenues: Hotel operating revenue: Room $
169,829 $ 160,507 Food and beverage 39,785 36,943 Other operating
departments 11,408 11,088 Other revenue 327
399 Total revenues 221,349 208,937
Expenses: Hotel departmental expenses: Room 46,733 44,870
Food and beverage 31,187 30,246 Other operating departments 5,603
5,289 Other property-related costs 61,578 59,428 Management and
franchise fees 9,013 9,163 Taxes, insurance and lease expense
23,633 22,164 Corporate expenses 7,825 7,832 Depreciation and
amortization 29,601 29,755 Conversion expenses — 628 Other expenses
2,014 821 Total operating expenses
217,187 210,196 Operating income (loss)
4,162 (1,259 ) Interest expense, net (25,227 ) (26,285 ) Debt
extinguishment (6 ) — Loss before equity in
income from unconsolidated entities (21,071 ) (27,544 ) Equity in
income from unconsolidated entities 643 89
Loss from continuing operations (20,428 ) (27,455 ) Income
from discontinued operations 135 850
Loss before gain on sale of property (20,293 ) (26,605 ) Gain on
sale of property, net 5,457 — Net loss
(14,836 ) (26,605 ) Net loss attributable to noncontrolling
interests in other partnerships 78 240 Net loss attributable to
redeemable noncontrolling interests in FelCor LP 121 180 Preferred
distributions - consolidated joint venture (181 ) —
Net loss attributable to FelCor (14,818 ) (26,185 )
Preferred dividends (9,678 ) (9,678 ) Net loss
attributable to FelCor common stockholders $ (24,496 ) $ (35,863 )
Basic and diluted per common share data: Loss from continuing
operations $ (0.20 ) $ (0.30 ) Net loss $ (0.20 ) $ (0.29 ) Basic
and diluted weighted average common shares outstanding
124,146 123,814
Consolidated Balance Sheets
(in thousands)
March 31, December 31, 2014 2013
Assets Investment in hotels, net of accumulated depreciation
of $915,561 and $929,801 at March 31, 2014 and December 31, 2013,
respectively $ 1,611,247 $ 1,653,267 Hotel development 236,729
216,747 Investment in unconsolidated entities 44,634 46,943 Hotel
held for sale 19,137 16,319 Cash and cash equivalents 73,526 45,645
Restricted cash 67,047 77,227 Accounts receivable, net of allowance
for doubtful accounts of $179 and $262 at March 31, 2014 and
December 31, 2013, respectively 34,486 35,747 Deferred expenses,
net of accumulated amortization of $21,360 and $20,362 at March 31,
2014 and December 31, 2013, respectively 27,635 29,325 Other assets
22,828 23,060 Total assets $ 2,137,269
$ 2,144,280
Liabilities and Equity Debt, net
of discount of $3,190 and $4,714 at March 31, 2014 and December 31,
2013, respectively $ 1,640,628 $ 1,663,226 Distributions payable
11,195 11,047 Accrued expenses and other liabilities 152,103
150,738 Total liabilities 1,803,926
1,825,011 Commitments and contingencies
Redeemable noncontrolling interests in FelCor LP, 618 units issued
and outstanding at March 31, 2014 and December 31, 2013
5,583 5,039 Equity: Preferred stock, $0.01 par
value, 20,000 shares authorized: Series A Cumulative Convertible
Preferred Stock, 12,880 shares, liquidation value of $322,004 and
$322,011, issued and outstanding at March 31, 2014 and December 31,
2013, respectively 309,354 309,362 Series C Cumulative Redeemable
Preferred Stock, 68 shares, liquidation value of $169,950, issued
and outstanding at March 31, 2014 and December 31, 2013 169,412
169,412 Common stock, $0.01 par value, 200,000 shares authorized;
124,186 and 124,051 shares issued and outstanding at March 31, 2014
and December 31, 2013, respectively 1,242 1,240 Additional paid-in
capital 2,354,613 2,354,328 Accumulated other comprehensive income
24,320 24,937 Accumulated deficit (2,596,294 )
(2,568,350 ) Total FelCor stockholders’ equity 262,647 290,929
Noncontrolling interests in other partnerships 24,204 23,301
Preferred equity in consolidated joint venture, liquidation value
of $41,464 40,909 — Total equity
327,760 314,230 Total liabilities and equity $
2,137,269 $ 2,144,280
Consolidated Debt Summary
(dollars in thousands)
EncumberedHotels
InterestRate (%)
Maturity Date
March 31,2014
December 31,2013
Line of credit 9 LIBOR + 3.375 June 2016(a) $ 93,000 $
88,000
Hotel mortgage debt Mortgage debt(b) 3 6.58 July -
August 2014 34,821 35,133 Mortgage debt 1 5.81 July 2016 9,772
9,904 Mortgage debt(b) 4 4.95 October 2022 125,871 126,220 Mortgage
debt 1 4.94 October 2022 31,589 31,714
Senior notes Senior
secured notes 11 10.00 October 2014 230,714 229,190 Senior secured
notes 6 6.75 June 2019 525,000 525,000 Senior secured notes 9 5.625
March 2023 525,000 525,000
Knickerbocker loan(c)
Construction tranche — LIBOR + 4.00 May 2016 12,994 —
Cash collateralized tranche
— LIBOR + 1.25 May 2016 51,867 64,861
Retired debt — — —
— 28,204
Total 44 $ 1,640,628 $ 1,663,226 (a)
Our $225 million line of credit can be extended for one year
(to 2017), subject to satisfying certain conditions. (b) This debt
is comprised of separate non-cross-collateralized loans each
secured by a mortgage of a single hotel. (c) In November 2012, we
obtained an $85.0 million construction loan to finance the
redevelopment of the Knickerbocker Hotel. This loan can be extended
for one year subject to satisfying certain conditions. In January
2014, we drew $13.0 million of the cash collateral to fund
construction costs, leaving $51.9 million of cash collateral to be
drawn before drawing on the remaining $20.1 million available under
the construction loan.
Schedule of
Encumbered Hotels
(dollars in millions)
Consolidated March 31, 2014 Debt
Balance Encumbered Hotels Line of credit $ 93
Charleston Mills House - WYN, Charlotte SouthPark - DT, Dana
Point - DT, Houston Medical Center - WYN, Mandalay Beach - ES,
Miami International Airport - ES, Philadelphia Historic District -
WYN, Pittsburgh University Center - WYN and Santa Monica at the
Pier - WYN CMBS debt(a) $ 35 Austin - DTGS, BWI Airport - ES and
Orlando Airport - HI CMBS debt $ 10 Indianapolis North - ES CMBS
debt(a) $ 126 Birmingham - ES, Ft. Lauderdale - ES, Minneapolis
Airport - ES and Napa Valley - ES CMBS debt $ 32 Deerfield Beach -
ES Senior secured notes (10.00%) $ 231 Atlanta Airport - SH, Boston
Beacon Hill - WYN, Myrtle Beach Resort - ES, Nashville Opryland -
Airport - HI, New Orleans French Quarter - WYN, Orlando Walt Disney
World® - DT, San Diego Bayside - WYN, San Francisco Waterfront -
ES, San Francisco Fisherman’s Wharf - HI, San Francisco Union
Square - MAR and Toronto Airport - HI Senior secured notes (6.75%)
$ 525 Boston Copley - FMT, Indian Wells Esmeralda Resort & Spa
- REN, LAX South - ES, Morgans, Royalton and St. Petersburg Vinoy
Resort & Golf Club - REN Senior secured notes (5.625%) $ 525
Atlanta Buckhead - ES, Boston Marlboro - ES, Burlington - SH,
Dallas Love Field - ES, Milpitas - ES, Myrtle Beach Resort - HIL,
Orlando South - ES, Philadelphia Society Hill - SH and SF South San
Francisco - ES (a) This debt is comprised of separate
non-cross-collateralized loans each secured by a mortgage of a
different hotel.
Capital Expenditures
(in thousands)
Three Months Ended March 31, 2014
2013 Improvements and additions to majority-owned
hotels $ 28,617 $ 23,342 Partners’ pro rata share of additions to
consolidated joint venture hotels (93 ) (158 ) Pro rata share of
additions to unconsolidated hotels 623 337
Total additions to hotels(a) $ 29,147 $ 23,521
(a) Includes capitalized interest, property taxes, property
insurance, ground leases and certain employee costs.
Hotels Under Renovation During
2014
Primary
Areas
Start
Date
End
Date
Burlington - SH guestrooms, exterior Nov-2013 May-2014 San
Francisco Fisherman’s Wharf - HI guestrooms, public areas, F&B
Nov-2013 Mar-2014 San Diego - WYN(a) guestrooms, public areas
Nov-2013 May-2014 San Francisco Waterfront-ES(b) guestrooms,
F&B Dec-2013
Jul-2014
LAX- ES(c) public areas, F&B Feb-2014 May-2014 New Orleans -
WYN(a) guestrooms, public areas
May-2014
Oct-2014
Dallas Love Field - ES guestrooms, F&B
Jun-2014
Sep-2014
Nashville - HI public areas, F&B
Jul-2014
Oct-2014
Ft. Lauderdale - ES(d) guestrooms
Aug-2014
Dec-2014
(a) Repositioning from Holiday Inn to Wyndham. (b) Public
areas renovation completed in May 2013. (c) Guestrooms renovation
completed in February 2013. (d) Public areas renovation completed
in November 2013.
Supplemental
Financial Data
(in thousands, except per share data)
March 31, December 31,
Total Enterprise
Value
2014 2013 Common shares outstanding 124,186 124,051
Units outstanding 618 618 Combined
shares and units outstanding 124,804 124,669 Common stock price $
9.04 $ 8.16
Market capitalization $ 1,128,228
$ 1,017,299 Series A preferred stock(a) 309,354 309,362 Series C
preferred stock(a) 169,412 169,412 Preferred equity - Knickerbocker
joint venture, net(b) 38,864 — Consolidated debt(b) 1,640,628
1,663,226 Noncontrolling interests of consolidated debt (2,694 )
(2,719 ) Pro rata share of unconsolidated debt 73,460 73,179 Hotel
development (236,729 ) (216,747 ) Cash, cash equivalents and
restricted cash(c) (140,573 ) (122,872 )
Total
enterprise value (TEV) $ 2,979,950 $ 2,890,140
(a) Book value based on issue price. (b) Book value based on
issue price, net of noncontrolling interest. (c) Restricted cash
includes $51.9 million of cash fully securing $51.9 million of
outstanding debt assumed when we purchased the Knickerbocker Hotel.
Hotel Portfolio
Composition
The following table illustrates the
distribution of same-store hotels.
Brand
Hotels Rooms
2013 Hotel
OperatingRevenue(in thousands)
2013 HotelEBITDA(in
thousands)(a)
Embassy Suites Hotels 18 4,982 $ 255,744 $ 81,062 Wyndham and
Wyndham Grand(b) 8 2,528 103,931 35,046 Renaissance and Marriott 3
1,321 119,838 21,341 DoubleTree by Hilton and Hilton 3 802 41,106
12,621 Sheraton and Westin 2 673 37,996 10,174 Fairmont 1 383
49,104 7,845 Holiday Inn 2 968 46,403 6,406 Morgans and Royalton 2
285 34,340 3,514
Core hotels 39
11,942 688,462 178,009 Non-strategic hotels(c)
18 5,046 184,125 45,611
Same-store hotels
57 16,988 $ 872,587 $
223,620
Market
San Francisco area 5 1,903 $ 124,825 $ 31,587 Boston 3 916 76,510
17,794 South Florida 3 923 50,011 14,305 Los Angeles area 2 481
23,760 10,451 Myrtle Beach 2 640 37,955 10,120 Tampa 1 361 46,423
7,435 New York area 3 546 48,045 6,761 Philadelphia 2 728 34,271
7,567 Austin 1 188 13,126 5,680 Atlanta 1 316 14,016 5,491 Other
markets 16 4,940 219,520 60,818
Core hotels
39 11,942 688,462 178,009 Non-strategic
hotels(c) 18 5,046 184,125 45,611
Same-store
hotels 57 16,988 $ 872,587 $
223,620
Location
Urban 17 5,310 $ 323,304 $ 81,351 Resort 9 2,733 185,264 41,294
Airport 8 2,621 122,734 37,364 Suburban 5 1,278 57,160
18,000
Core hotels 39 11,942
688,462 178,009 Non-strategic hotels(c) 18 5,046
184,125 45,611
Same-store hotels 57
16,988 $ 872,587 $ 223,620 (a)
Hotel EBITDA is more fully described on page 24. (b) These
hotels were converted to Wyndham on March 1, 2013. (c)
Excludes hotel held for sale as of March
31, 2014.
The following tables set forth occupancy, ADR and RevPAR for the
three months ended March 31, 2014 and 2013, and the percentage
changes therein for the periods presented, for our same-store
Consolidated Hotels.
Hotel Operating Statistics by
Brand
Occupancy (%) Three Months Ended
March 31, 2014 2013
%Variance Embassy Suites Hotels 76.8 74.1 3.7 Renaissance
and Marriott 75.6 74.8 1.1 DoubleTree by Hilton and Hilton 64.4
59.8 7.8 Sheraton and Westin 56.4 58.2 (3.0 ) Fairmont 58.6 60.3
(2.9 ) Holiday Inn 64.5 68.4 (5.7 ) Morgans and Royalton 79.4 81.0
(2.0 )
Comparable core hotels (31) 72.2 70.9
1.8 Non-strategic hotels (18)(a) 71.3 69.7 2.3
Comparable
hotels (49) 71.9 70.5 2.0 Wyndham and
Wyndham Grand(b) 62.9 63.6 (1.0 )
Same-store hotels (57)
70.5 69.5 1.6 ADR ($) Three Months
Ended March 31, 2014 2013 %Variance
Embassy Suites Hotels 166.71 157.30 6.0 Renaissance and Marriott
236.72 221.01 7.1 DoubleTree by Hilton and Hilton 156.22 155.48 0.5
Sheraton and Westin 127.91 125.38 2.0 Fairmont 238.07 221.26 7.6
Holiday Inn 131.81 112.44 17.2 Morgans and Royalton 258.62 260.05
(0.5 )
Comparable core hotels (31) 176.24
166.29 6.0 Non-strategic hotels (18)(a) 117.30 114.77
2.2
Comparable hotels (49) 155.85 148.56
4.9 Wyndham and Wyndham Grand(b) 144.62 139.38 3.8
Same-store hotels (57) 154.36 147.30
4.8 RevPAR ($) Three Months Ended March
31, 2014 2013 %Variance Embassy Suites
Hotels 128.06 116.56 9.9 Renaissance and Marriott 178.95 165.32 8.2
DoubleTree by Hilton and Hilton 100.65 92.96 8.3 Sheraton and
Westin 72.20 72.93 (1.0 ) Fairmont 139.46 133.52 4.4 Holiday Inn
85.01 76.89 10.6 Morgans and Royalton 205.34 210.76 (2.6 )
Comparable core hotels (31) 127.25 117.93
7.9 Non-strategic hotels (18)(a) 83.62 80.00 4.5
Comparable hotels (49) 112.02 104.73
7.0 Wyndham and Wyndham Grand(b) 90.99 88.60 2.7
Same-store hotels (57) 108.90 102.31
6.4 (a) Excludes hotel held for sale as of March 31,
2014. (b) These hotels were converted to Wyndham on March 1, 2013.
Hotel Operating Statistics by
Market
Occupancy (%) Three Months Ended
March 31, 2014 2013
%Variance San Francisco area 72.0 74.3 (3.2 ) Boston 60.8
63.0 (3.4 ) South Florida 91.2 90.8 0.4 Los Angeles area 82.7 76.9
7.5 Myrtle Beach 45.5 37.0 22.9 Tampa 86.1 83.7 2.9 New York area
71.7 73.3 (2.2 ) Philadelphia 59.7 53.0 12.7 Austin 78.4 80.3 (2.4
) Atlanta 75.5 72.3 4.5 Other markets 72.5 70.2 3.2
Comparable
core hotels (31) 72.2
70.9 1.8 ADR ($) Three
Months Ended March 31, 2014 2013
%Variance San Francisco area 188.07 162.38 15.8 Boston
203.68 190.57 6.9 South Florida 205.26 190.78 7.6 Los Angeles area
137.23 136.12 0.8 Myrtle Beach 108.73 108.94 (0.2 ) Tampa 226.08
215.29 5.0 New York area 229.08 218.23 5.0 Philadelphia 148.79
152.21 (2.2 ) Austin 232.97 221.78 5.0 Atlanta 146.50 142.77 2.6
Other markets 154.15 149.13 3.4
Comparable core hotels (31)
176.24 166.29
6.0 RevPAR ($) Three Months
Ended March 31, 2014 2013 %Variance
San Francisco area 135.42 120.73 12.2 Boston 123.91 120.00 3.3
South Florida 187.18 173.22 8.1 Los Angeles area 113.46 104.71 8.4
Myrtle Beach 49.43 40.30 22.6 Tampa 194.74 180.26 8.0 New York area
164.18 159.99 2.6 Philadelphia 88.84 80.65 10.2 Austin 182.67
178.15 2.5 Atlanta 110.64 103.18 7.2 Other markets 111.72 104.74
6.7
Comparable core hotels (31) 127.25
117.93 7.9
Historical Quarterly Operating
Statistics
Occupancy (%) Q2 2013 Q3 2013
Q4 2013 Q1 2014 Comparable core hotels
(31) 79.0 78.9 70.4 72.2 Non-strategic hotels (18)(a) 75.8 74.1
67.6 71.3
Comparable hotels (49) 77.9 77.2
69.5 71.9 Wyndham and Wyndham Grand (8)(b) 71.2 68.7
59.1 62.9
Same-store hotels (57) 76.9 75.9
67.9 70.5 ADR ($) Q2 2013 Q3
2013 Q4 2013 Q1 2014 Comparable core hotels (31)
171.23 171.37 170.40 176.24 Non-strategic hotels (18)(a) 115.39
116.22 113.32 117.30
Comparable hotels (49) 152.27
152.89 151.00 155.85 Wyndham and Wyndham Grand
(8)(b) 148.81 140.19 149.34 144.62
Same-store hotels (57)
151.80 151.18 150.79 154.36
RevPAR ($) Q2 2013 Q3 2013 Q4 2013
Q1 2014 Comparable core hotels (31) 135.30 135.17 120.03
127.25 Non-strategic hotels (18)(a) 87.45 86.12 76.65 83.62
Comparable hotels (49) 118.60 118.05
104.89 112.02 Wyndham and Wyndham Grand (8)(b) 105.95
96.31 88.30 90.99
Same-store hotels (57) 116.72
114.81 102.45 108.90 (a) Excludes hotel
held for sale as of March 31, 2014. (b) These hotels were converted
to Wyndham on March 1, 2013.
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.
Reconciliation of Net Loss to FFO and
Adjusted FFO
(in thousands, except per share data)
Three Months Ended March 31, 2014
2013 Dollars Shares
PerShareAmount
Dollars Shares
PerShareAmount
Net loss $ (14,836 ) $ (26,605 ) Noncontrolling interests
199 420 Preferred distributions - consolidated joint venture (181 )
— Preferred dividends (9,678 ) (9,678 )
Numerator
for basic and diluted loss attributable to common stockholders
(24,496 ) 124,146 $ (0.20 ) (35,863 ) 123,814 $ (0.29 )
Depreciation and amortization 29,601 — 0.24 29,755 — 0.24
Depreciation, discontinued operations and unconsolidated entities
2,675 — 0.02 4,521 — 0.04 Gain on sale of hotels, net of
noncontrolling interests in other partnerships (5,851 ) — (0.05 ) —
— — Loss on sale, unconsolidated entities 33 — — — — —
Noncontrolling interests in FelCor LP (121 ) 618 — (180 ) 621 —
Conversion of unvested restricted stock — 858
— — — —
FFO 1,841 125,622
0.01 (1,767 ) 124,435 (0.01 ) Acquisition costs — — — 23 — — Debt
extinguishment, including discontinued operations 251 — — — — —
Severance costs 400 — — — — — Conversion expenses — — — 628 — —
Variable stock compensation 564 — 0.01 102 — — Pre-opening costs,
net of noncontrolling interests 1,053 — 0.01
241 — —
Adjusted FFO $
4,109 125,622 $ 0.03 $ (773 ) 124,435 $ (0.01 )
Reconciliation of Net Loss to EBITDA,
Adjusted EBITDA and Same-store Adjusted EBITDA
(in thousands)
Three Months Ended March 31, 2014
2013 Net loss $ (14,836 ) $ (26,605 )
Depreciation and amortization 29,601 29,755 Depreciation,
discontinued operations and unconsolidated entities 2,675 4,521
Interest expense 25,242 26,307 Interest expense, discontinued
operations and unconsolidated entities 744 870 Noncontrolling
interests in other partnerships 78 240
EBITDA 43,504 35,088 Debt extinguishment, including
discontinued operations 251 — Acquisition costs — 23 Gain on sale
of hotels, net of noncontrolling interests in other partnerships
(5,851 ) — Loss on sale, unconsolidated entities 33 — Amortization
of fixed stock and directors’ compensation 1,122 1,578 Severance
costs 400 — Conversion expenses — 628 Variable stock compensation
564 102 Pre-opening costs, net of noncontrolling interests
1,053 241
Adjusted EBITDA 41,076 37,660
Adjusted EBITDA from hotels, disposed and held for sale
(1,179 ) (3,852 )
Same-store Adjusted EBITDA $ 39,897
$ 33,808
Hotel EBITDA and
Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended March 31, 2014
2013 Same-store operating revenue: Room $
166,486 $ 157,069 Food and beverage 39,430 36,616 Other operating
departments 11,293 10,959
Same-store
operating revenue 217,209 204,644
Same-store operating
expense: Room 45,926 44,043 Food and beverage 30,896 29,953
Other operating departments 5,566 5,247 Other property related
costs 60,408 58,168 Management and franchise fees 8,865 9,004
Taxes, insurance and lease expense 14,974
14,233
Same-store operating expense 166,635
160,648
Hotel EBITDA $ 50,574 $
43,996
Hotel EBITDA Margin 23.3 % 21.5 %
Three Months Ended March 31, 2014 2013
Hotel EBITDA - Comparable core (31) $ 33,413 $ 28,581 Hotel EBITDA
- Non-strategic (18)(a) 11,111 10,323
Hotel EBITDA - Comparable (49) 44,524 38,904
Hotel EBITDA - Wyndham (8) 6,050 5,092
Hotel EBITDA (57) $ 50,574 $
43,996 Hotel EBITDA Margin - Comparable core
(31) 22.9 % 21.0 % Hotel EBITDA Margin - Non-strategic (18)(a) 23.8
% 23.1 %
Hotel EBITDA Margin - Comparable (49) 23.1
% 21.5 % Hotel EBITDA Margin - Wyndham (8)
24.6 % 21.2 %
Hotel EBITDA Margin (57) 23.3 %
21.5 % (a) Excludes hotel held for sale as of
March 31, 2014.
Reconciliation of Same-store
Operating Revenue and Same-store Operating Expense to Total
Revenue, Total Operating Expense and Operating Income (Loss)
(in thousands)
Three Months Ended March 31, 2014
2013 Same-store operating revenue $ 217,209 $ 204,644
Other revenue 327 399 Revenue from hotels, disposed and held for
sale(a) 3,813 3,894
Total
revenue 221,349 208,937 Same-store operating expense 166,635
160,648 Consolidated hotel lease expense(b) 10,391 9,558
Unconsolidated taxes, insurance and lease expense (1,965 ) (1,898 )
Corporate expenses 7,825 7,832 Depreciation and amortization 29,601
29,755 Conversion expenses — 628 Expenses from hotels, disposed and
held for sale(a) 2,686 2,852 Other expenses 2,014
821
Total operating expense 217,187
210,196
Operating income (loss) $ 4,162
$ (1,259 ) (a) In March 2014, we sold a 218-room
Embassy Suites hotel in Bloomington, Minnesota, for $24 million. In
addition, we have agreed to sell the 208-room DoubleTree Suites in
Charlotte, North Carolina, for $37 million. The hotel is held for
sale on our March 31, 2014 balance sheet, as the purchaser of the
Charlotte hotel paid a non-refundable deposit toward the purchase
price. The closing is scheduled for May. Under recently issued GAAP
accounting guidance, we included the operating performance for
these hotels in continuing operations in our Consolidated
Statements of Operations for the first quarter 2014 and 2013.
However, for purposes of our Non-GAAP reporting metrics, we have
excluded the results of these hotels to provide a meaningful
same-store comparison. (b) Consolidated hotel lease expense
represents the percentage lease expense of our 51% owned operating
lessees. The offsetting percentage lease revenue is included in
equity in income from unconsolidated entities.
Reconciliation of Forecasted Net Loss attributable to FelCor to
Forecasted FFO and EBITDA
(in millions, except per share data)
Full Year 2014 Guidance Low High
Dollars
Per
ShareAmount(a)
Dollars
Per
ShareAmount(a)
Net loss attributable to FelCor(b) $ (30.0 ) $ (26.5
) Preferred dividends (39.0 ) (39.0 )
Net loss
attributable to FelCor common stockholders (69.0 ) $
(0.56
) (65.5 ) $ (0.53 ) Gain on sale of hotels, net (6.0 ) (6.0 )
Depreciation(c) 139.0 143.0
FFO
$ 64.0 $
0.51
$ 71.5 $ 0.57 Pre-opening costs 1.0 1.0 Variable stock compensation
1.0 1.0
Adjusted FFO $ 66.0 $ 0.53 $ 73.5 $
0.59
Net loss attributable to FelCor(b) $
(30.0 ) $ (26.5 ) Depreciation(c) 139.0 143.0 Interest expense(c)
94.0 97.5 Amortization expense 6.0 6.0 Preferred distributions -
consolidated joint venture 1.0 1.0
EBITDA $ 210.0 $ 221.0 Gain on sale of hotels, net (6.0 )
(6.0 ) Pre-opening costs 1.0 1.0 Variable stock compensation
1.0 1.0
Adjusted EBITDA $ 206.0
$ 217.0 (a)
Weighted average shares are 125.7
million.
(b) Excludes any gains or losses on future asset sales. (c)
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 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, amortization and impairment
losses. FFO for unconsolidated partnerships and joint ventures are
calculated 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
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.
- Gains and losses related to
extinguishment of debt and interest rate swaps - We exclude gains
and losses related to extinguishment of debt and interest rate
swaps from FFO and EBITDA because we believe that it is not
indicative of ongoing operating performance of our hotel assets.
This also represents an acceleration of interest expense or a
reduction of interest expense, and interest expense is excluded
from EBITDA.
- Cumulative effect of a change in
accounting principle - Infrequently, the Financial Accounting
Standards Board promulgates new accounting standards that require
the consolidated statements of operations to reflect the cumulative
effect of a change in accounting principle. We exclude these
one-time adjustments in computing Adjusted FFO and Adjusted EBITDA
because they do not reflect our actual performance for that
period.
- Other transaction costs - From time to
time, we periodically incur costs that are not indicative of
ongoing operating performance. Such costs include, but are not
limited to, conversion costs, acquisition costs, pre-opening costs
and severance costs. We exclude these costs from the calculation of
Adjusted FFO and Adjusted EBITDA.
- Variable stock compensation - We
exclude the cost associated with our variable stock compensation.
This cost is subject to volatility related to the price and
dividends of our common stock that does not necessarily correspond
to our operating performance.
In addition, to derive Adjusted EBITDA, we exclude gains or
losses on the sale of depreciable assets and impairment losses
because including them in EBITDA is inconsistent with reporting the
ongoing performance of our remaining assets. Additionally, the gain
or loss on sale of depreciable assets and impairment losses
represents either accelerated depreciation or excess depreciation
in previous periods, and depreciation is excluded from EBITDA. We
also exclude the amortization of our fixed stock and directors’
compensation. While this amortization is included in corporate
expenses and is not separately stated on our statement of
operations, excluding this amortization is consistent with the
EBITDA definition.
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 in a manner consistent with
Adjusted EBITDA, however, we also eliminate all revenues and
expenses from continuing operations not directly associated with
hotel operations, including other income and corporate-level
expenses. We eliminate these additional items 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
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.
Use and Limitations of Non-GAAP Measures
Our management and Board of Directors use FFO, Adjusted FFO,
EBITDA, Adjusted EBITDA, Same-store 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.
FelCor Lodging Trust IncorporatedStephen A. Schafer,
972-444-4912Vice President Strategic Planning & Investor
Relationssschafer@felcor.com
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