• Portfolio Repositioning Continues to
Provide Strong Growth
• Same-store Adjusted EBITDA Increased
37.7%
FelCor Lodging Trust Incorporated (NYSE: FCH) today reported
operating results for the first quarter ended March 31,
2015.
First Quarter Highlights
- Same-store RevPAR increased 13.1%; core
RevPAR increased 13.5%.
- Adjusted FFO per share improved to
$0.14 from $0.03 in the same quarter in 2014.
- Adjusted EBITDA increased by $8.8
million to $49.9 million; same-store Adjusted EBITDA increased by
$13.6 million, or 37.7%, to $49.7 million.
- Net loss per share improved $0.18 to
$0.02 compared to the same quarter in 2014.
- Opened The Knickerbocker on February
12, a luxury boutique hotel in Manhattan’s Times Square.
- Sold three non-strategic hotels for
gross proceeds of $93.1 million in the quarter and four
additional non-strategic hotels (two with a non-refundable deposit)
are expected to be sold during the second quarter of 2015.
- On April 14, called for redemption of
$170 million of 8% Series C Cumulative Preferred Stock.
“Our strong results this quarter reflect our ongoing execution
to deliver on the promises we made to our shareholders. Our
portfolio repositioning program continues to produce exceptional
returns. Better than expected market share growth, exposure to
outperforming markets and a very robust lodging industry
environment allowed us to beat our expectations,” said Richard A.
Smith, President and Chief Executive Officer of FelCor.
Mr. Smith added, “This outperformance, combined with the ongoing
ramp-ups of the Wyndham portfolio and The Knickerbocker, will drive
incremental stockholder value well into the future. We have only
five remaining non-strategic hotels which we intend to sell
shortly, bringing our portfolio repositioning plan to completion.
We have built a high-quality and well-positioned portfolio that
will continue to outperform the industry. We will also continue to
seek opportunities that provide incremental stockholder value by
further enhancing returns on investments, improving our portfolio
quality and strengthening our balance sheet. Our recent equity
offering typifies this strategy, as we will use the proceeds to
redeem high-cost preferred stock and fund future high-ROI
redevelopment projects.”
First Quarter Hotel Results
First Quarter 2015 2014
Change Core hotels (39) RevPAR $ 135.78 $ 119.58 13.5
% Total hotel revenue, in millions $ 194.7 $ 170.6 14.2 % Hotel
EBITDA, in millions $ 52.4 $ 39.5 32.7 % Hotel EBITDA margin 26.9 %
23.1 % 376 bps
Same-store hotels (43) RevPAR $ 132.86
$ 117.46 13.1 % Total hotel revenue, in millions $ 205.5 $ 180.7
13.7 % Hotel EBITDA, in millions $ 55.9 $ 42.6 31.1 % Hotel EBITDA
margin 27.2 % 23.6 % 362 bps
RevPAR for our 39 core hotels was $135.78, a 13.5% increase over
the same period in 2014. The change reflects a 6.7% increase in ADR
to $181.65 and a 6.4% increase in occupancy to 74.7%. Hotel EBITDA
for our 39 core hotels was up 32.7% to $52.4 million and Hotel
EBITDA margin was 26.9% during the quarter, a 376 basis point
increase. RevPAR for our four non-strategic hotels (five
non-strategic hotels excluding one hotel held for sale at March 31,
2015) grew 7.0% during the quarter.
RevPAR for the eight Wyndham hotels (which were converted from
Holiday Inn on March 1, 2013) was $109.03, up 19.8% from the
same period in 2014. We expect our Wyndham hotels’ revenues and
EBITDA will continue to grow meaningfully during 2015, supported by
the properties’ upper-upscale positioning. Wyndham Worldwide
Corporation has a guaranteed minimum annual NOI for these hotels
over the ten-year terms of their management agreements. We recorded
$411,000 of the guaranty for the three months ended March 31,
2015.
RevPAR for our 43 same-store hotels (39 core hotels plus four
non-strategic hotels) increased 13.1% to $132.86 compared to the
same period in 2014. The change reflects a 6.5% increase in ADR to
$176.97 and a 6.2% increase in occupancy to 75.1%. Hotel EBITDA for
our 43 same-store hotels was $55.9 million, a 31.1% increase, and
Hotel EBITDA margin was 27.2% during the quarter, a 362 basis point
increase.
See page 14 for hotel portfolio composition and pages 15-17 and
20-21 for more detailed hotel portfolio operating data.
First Quarter Operating Results
First Quarter $ in millions, except for per share
information
2015 2014 Change
Same-store Adjusted EBITDA $ 49.7 $ 36.1 37.7 % Adjusted EBITDA $
49.9 $ 41.1 21.4 % Adjusted FFO per share $ 0.14 $ 0.03 $ 0.11 Net
income (loss) per share $ (0.02 ) $ (0.20 ) $ 0.18
Same-store Adjusted EBITDA was $49.7 million, a 37.7% increase
from the same period in 2014. Adjusted EBITDA (which includes
Adjusted EBITDA from sold hotels) was $49.9 million, a 21.4%
increase for the same period in 2014.
Adjusted FFO was $18.3 million ($0.14 per share), compared
to $4.1 million ($0.03 per share) for the same period in 2014.
Net loss attributable to common stockholders was $2.9 million
($0.02 per share) in 2015, compared to a net loss of $24.5
million ($0.20 per share) for the same period in 2014. Net loss in
2015 included a $16.9 million net gain on the sale of our
consolidated hotels, while the net loss in 2014 included a $5.8
million net gain on the sale of consolidated hotels.
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
As part of our portfolio repositioning program, we sold 35
non-strategic hotels for total gross proceeds of $728 million
(reflects our pro rata share) since December 2010. We expect to
complete the repositioning program in the next few months.
During the first quarter of 2015, we sold three hotels - the
225-room Embassy Suites Hotel-Raleigh on February 10, the 536-room
Westin-Dallas Park Central on February 12 and the 261-room Embassy
Suites Hotel-San Antonio Airport on March 17 - for total gross
proceeds of $93.1 million.
We have five non-strategic hotels remaining to be sold, of which
we have agreed to sell four (the 216-room Embassy Suites Hotel-San
Antonio Northwest, the 274-room Embassy Suites Hotel-Charlotte, the
260-room Embassy Suites Hotel-Austin Central and the 288-room
Holiday Inn-Orlando Airport) for total gross proceeds of
$104 million (we hold a non-refundable deposit for two of
these hotels). We are currently marketing the remaining hotel.
Capital Expenditures
During the quarter, we invested $13.8 million in capital
improvements at our hotels (excluding The Knickerbocker). During
2015, we plan to invest approximately $45 million in capital
improvements and renovations, concentrated at five hotels, as part
of our long-term capital plan. Please see page 13 of this release
for more detail on renovations.
The Knickerbocker
The Knickerbocker Hotel (www.theknickerbocker.com), located in the heart of
Manhattan’s Times Square on the corner of 42nd Street and Broadway,
opened on February 12, 2015.
The newly-redeveloped hotel boasts 330 spacious guest rooms,
including 31 suites, a state-of-the-art fitness center, a 2,200
square-foot event space, upscale food and dining options, and a
spectacular 7,500 square-foot rooftop bar and terrace with
unrivaled views of New York City’s skyline. The 4+ star luxury
property is a member of The Leading Hotels of the World.
As of March 31, 2015, we have invested $143.2 million
(excluding initial acquisition costs and capitalized interest) to
redevelop the property.
Balance Sheet
At March 31, 2015, we had $1.5 billion of consolidated debt
bearing a 5.41% weighted-average interest rate and a seven-year
weighted-average maturity. We had $58.9 million of cash and cash
equivalents and $22.2 million of restricted cash, of which $6.3
million secured our Knickerbocker construction loan.
We will use proceeds from selling the five remaining
non-strategic hotels to repay debt.
On April 14, 2015, we sold 18.4 million shares of our common
stock for net proceeds of approximately $199 million. On April 14,
2015, we called all of our outstanding shares of 8% Series C
Cumulative Redeemable Preferred Stock and all depositary shares
representing the Series C Preferred Stock for redemption. These
shares will be redeemed on May 14, 2015 with proceeds from our
recent equity offering, in exchange for our aggregate redemption
price of $170.4 million, which includes accrued dividends. The
remaining net proceeds from our equity offering, along with cash on
hand and proceeds from future asset sales, will be used to fund
future high-ROI redevelopment projects and other growth
opportunities.
Common Dividend
In late 2014, we doubled our quarterly dividend to $0.04 per
share. Future quarterly common stock dividends will be determined
by our Board of Directors based on funds available for
distribution, reinvestment opportunities within our portfolio and
taxable income, among other things.
Outlook
We increased our RevPAR and EBITDA outlook primarily to reflect
better than expected first quarter results. Our 2015 outlook
reflects continuing strong lodging industry fundamentals. We expect
continued robust demand growth reflecting strength in both the
leisure and corporate segments. Consequently, we expect occupancy
will increase, as demand growth broadly outpaces new supply.
Average occupancy for the U.S. is at record levels, allowing for
strong ADR growth. Our projected 2015 RevPAR growth exceeds
projected 2015 overall industry RevPAR growth because of our
high-quality and diverse portfolio, which is over-weighted to
higher growth markets with favorable fundamentals.
Our outlook assumes we sell eight non-strategic hotels during
2015 (including three already sold in the first quarter). The
low-end of our guidance assumes that we sell all five remaining
non-strategic hotels in the second quarter. The high-end of our
guidance assumes that we sell three of the remaining five
non-strategic hotels in the second quarter and the remaining two
non-strategic in the third quarter. Our outlook assumes EBITDA for
the Wyndham hotels equals the amount guaranteed by Wyndham.
During 2015, we expect:
- RevPAR for same-store hotels will
increase 8.5 - 9.5%;
- Adjusted EBITDA will be $240.0 million
- $248.5 million;
- Adjusted FFO per share will be $0.84 -
$0.90;
- Net income attributable to FelCor will
be $34.8 million - $43.1 million; and
- Interest expense, including our pro
rata share from joint ventures, will be approximately
$85.0 million.
The following table reconciles our Adjusted EBITDA outlook (in
millions):
Low Middle High
Previous Adjusted EBITDA (40 hotels) $ 229.5 $ 233.0
$ 236.5 Improved operations 3.0 2.5
2.0
Current Adjusted EBITDA (40 hotels) $
232.5 $ 235.5 $ 238.5 2015 EBITDA of non-strategic hotels(a)
7.5 8.7 10.0
2015 Adjusted
EBITDA $ 240.0 $ 244.2 $ 248.5 (a)
Forecasted EBITDA for the eight non-strategic hotels from January
1, 2015 through the actual or assumed sale dates.
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 Wednesday, April 29, 2015 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, 2015.
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 2015 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, 2015
2014 Revenues: Hotel operating revenue: Room $
162,306 $ 169,829 Food and beverage 39,844 39,785 Other operating
departments 11,135 11,408 Other revenue 410
327 Total revenues 213,695 221,349
Expenses: Hotel departmental expenses: Room 42,511
46,733 Food and beverage 30,696 31,187 Other operating departments
4,449 5,603 Other property related costs 56,895 61,578 Management
and franchise fees 9,085 9,013 Taxes, insurance and lease expense
14,976 23,633 Corporate expenses 8,573 7,825 Depreciation and
amortization 27,772 29,601 Other expenses 4,228
2,014 Total operating expenses 199,185
217,187 Operating income 14,510 4,162 Interest
expense, net (19,481 ) (25,227 ) Debt extinguishment (73 )
(6 ) Loss before equity in income from unconsolidated
entities (5,044 ) (21,071 ) Equity in income from unconsolidated
entities 149 643 Loss from continuing
operations (4,895 ) (20,428 ) Income from discontinued operations
4 135 Loss before gain on sale of
property (4,891 ) (20,293 ) Gain on sale of property, net
16,887 5,457 Net income (loss) 11,996 (14,836
) Net loss (income) attributable to noncontrolling interests in
other partnerships (4,879 ) 78 Net loss attributable to redeemable
noncontrolling interests in FelCor LP 14 121 Preferred
distributions - consolidated joint venture (348 )
(181 ) Net income (loss) attributable to FelCor 6,783 (14,818 )
Preferred dividends (9,678 ) (9,678 ) Net loss
attributable to FelCor common stockholders $ (2,895 ) $ (24,496 )
Basic and diluted per common share data: Loss from continuing
operations $ (0.02 ) $ (0.20 ) Net loss $ (0.02 ) $ (0.20 ) Basic
and diluted weighted average common shares outstanding
124,519 124,146
Consolidated Balance Sheets
(in thousands)
March 31, December 31, 2015 2014
Assets Investment in hotels, net of accumulated depreciation
of $861,796 and $850,687 at March 31, 2015 and December 31, 2014,
respectively $ 1,714,000 $ 1,599,791 Hotel development 143,779
297,466 Investment in unconsolidated entities 14,633 15,095
Hotels held for sale
16,618 47,145 Cash and cash equivalents 58,930 47,147 Restricted
cash 22,172 20,496 Accounts receivable, net of allowance for
doubtful accounts of $185 and $241 at March 31, 2015 and December
31, 2014, respectively 33,794 27,805 Deferred expenses, net of
accumulated amortization of $18,802 and $17,111 at March 31, 2015
and December 31, 2014, respectively 24,119 25,827 Other assets
21,505 23,886 Total assets $ 2,049,550
$ 2,104,658
Liabilities and Equity Debt $
1,543,439 $ 1,585,867 Distributions payable 13,867 13,827 Accrued
expenses and other liabilities 138,095 135,481
Total liabilities 1,695,401 1,735,175
Commitments and contingencies Redeemable noncontrolling
interests in FelCor LP, 611 units issued and outstanding at March
31, 2015 and December 31, 2014 7,026 6,616
Equity: Preferred stock, $0.01 par value, 20,000 shares
authorized: Series A Cumulative Convertible Preferred Stock, 12,879
shares, liquidation value of $321,987, issued and outstanding at
March 31, 2015 and December 31, 2014 309,337 309,337 Series C
Cumulative Redeemable Preferred Stock, 68 shares, liquidation value
of $169,950, issued and outstanding at March 31, 2015 and December
31, 2014 169,412 169,412 Common stock, $0.01 par value, 200,000
shares authorized; 124,872 and 124,605 shares issued and
outstanding at March 31, 2015 and December 31, 2014, respectively
1,249 1,246 Additional paid-in capital 2,354,800 2,353,666
Accumulated deficit (2,538,643 ) (2,530,671 ) Total
FelCor stockholders’ equity 296,155 302,990 Noncontrolling
interests in other partnerships 8,278 18,435 Preferred equity in
consolidated joint venture, liquidation value of $43,371 and
$42,094 at March 31, 2015 and December 31, 2014, respectively
42,690 41,442 Total equity
347,123 362,867 Total liabilities and equity $
2,049,550 $ 2,104,658
Consolidated Debt Summary
(dollars in thousands)
EncumberedHotels
InterestRate (%)
MaturityDate
March 31, 2015
December 31, 2014
Line of credit 8 LIBOR + 3.375 June 2016(a) $ 84,500 $ 111,500 Term
loan 3 LIBOR + 2.50 July 2017(b) 140,000 140,000 Mortgage debt 3
LIBOR + 3.00 March 2017 49,067 51,008 Mortgage debt(c) 4 4.95
October 2022 123,914 124,278 Mortgage debt 1 4.94 October 2022
31,097 31,228 Senior secured notes 6 6.75 June 2019 525,000 525,000
Senior secured notes 9 5.625 March 2023 525,000 525,000 The
Knickerbocker loan:(d) Construction tranche 1 LIBOR + 4.00 May 2016
58,562 58,562 Cash collateralized tranche — LIBOR + 1.25 May 2016
6,299 6,299 Retired debt — — — — 12,992
Total
35 $ 1,543,439 $ 1,585,867 (a) Our $225 million line of
credit can be extended for one year (to 2017), subject to
satisfying certain conditions. (b) This debt can be extended up to
two years, subject to satisfying certain conditions. (c) This debt
is comprised of separate non-cross-collateralized loans each
secured by a mortgage of a single hotel. (d) This construction loan
(total capacity of $85.0 million) was obtained to finance the
redevelopment of The Knickerbocker, and can be extended for one
year subject to satisfying certain conditions.
Schedule of Encumbered Hotels
(dollars in millions)
Consolidated March 31, 2015 Debt
Balance Encumbered Hotels Line of credit $ 85
Charleston Mills House - WYN, Houston Medical Center - WYN,
Mandalay Beach - ES, Miami International Airport - ES, Myrtle Beach
Resort - ES, Philadelphia Historic District - WYN, Pittsburgh
University Center - WYN and Santa Monica at the Pier - WYN Term
loan $ 140 New Orleans French Quarter - WYN, Phoenix Biltmore - ES
and San Francisco Union Square - MAR Mortgage debt $ 49 Austin
Airport - ES, Chicago Lombard - ES and San Antonio NW - ES Mortgage
debt $ 28 Napa Valley - ES Mortgage debt $ 35 Ft. Lauderdale - ES
Mortgage debt $ 24 Birmingham - ES Mortgage debt $ 38 Minneapolis
Airport - ES Mortgage debt $ 31 Deerfield Beach - ES 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
Construction loan
$
65
The Knickerbocker
Capital Expenditures
(in thousands)
Three Months Ended March 31, 2015
2014 Improvements and additions to majority-owned
hotels $ 13,483 $ 28,617 Partners’ pro rata share of additions to
consolidated joint venture hotels (24 ) (93 ) Pro rata share of
additions to unconsolidated hotels 304 623
Total additions to hotels(a) $ 13,763 $ 29,147
(a) Includes capitalized interest, property taxes, property
insurance, ground leases and certain employee costs.
Hotels Under Renovation During
2015
Primary Areas Start Date End Date
Myrtle Beach - HLT meeting space, new F&B outlet Dec-2014
Feb-2015 LAX- ES(a) public areas, F&B, meeting space Feb-2014
May-2015 Nashville - HI guestrooms, public areas, F&B Aug-2014
June-2015 New Orleans - French Quarter Chateau Lemoyne - HI
guestrooms, public areas, exterior May-2015 Dec-2015 Vinoy Resort
& Golf Club - REN meeting space, F&B, golf shop Nov-2015
Jan-2016 (a) Guestrooms renovation completed in 2013.
Supplemental Financial Data
(in thousands, except per share data)
March 31, December 31,
Total Enterprise
Value
2015 2014 Common shares outstanding 124,872 124,605
Units outstanding 611 611 Combined
shares and units outstanding 125,483 125,216 Common stock price $
11.49 $ 10.82
Market capitalization $
1,441,800 $ 1,354,837 Series A preferred stock(a) 309,337 309,337
Series C preferred stock(a) 169,412 169,412 Preferred equity -
Knickerbocker joint venture, net(b) 40,555 39,370 Consolidated
debt(b) 1,543,439 1,585,867 Noncontrolling interests of
consolidated debt (2,928 ) (2,928 ) Pro rata share of
unconsolidated debt 16,951 17,096 Hotel development(c) (143,779 )
(297,466 ) Cash, cash equivalents and restricted cash(d)
(81,102 ) (67,643 )
Total enterprise value (TEV) $
3,293,685 $ 3,107,882 (a) Book value based on
issue price. (b) Book value based on issue price, net of
noncontrolling interest. (c) A portion of the Knickerbocker
investment was placed in service during the first quarter. (d)
Restricted cash includes $6.3 million of cash fully securing $6.3
million of outstanding debt assumed when we purchased The
Knickerbocker.
Hotel Portfolio Composition
Brand
Hotels Rooms
2014 HotelOperating
Revenue(in thousands)
2014 HotelEBITDA(in
thousands)(a)
Embassy Suites Hotels 18 4,982 $ 282,866 $ 94,990 Wyndham and
Wyndham Grand 8 2,528 125,354 43,122 Renaissance and Marriott 3
1,321 128,770 26,086 DoubleTree by Hilton and Hilton 3 802 45,383
15,483 Sheraton 2 673 39,639 10,622 Fairmont 1 383 53,451 10,010
Holiday Inn 2 968 51,511 8,966 Morgans and Royalton 2 285
33,895 3,314
Core hotels 39 11,942 760,869 212,593
Non-strategic hotels(b) 4 1,084 40,148 12,428
Same-store hotels 43 13,026 $ 801,017 $ 225,021
Market
San Francisco area 5 1,903 $ 139,692 $ 39,466 Boston 3 916 85,670
21,832 South Florida 3 923 55,561 17,007 Los Angeles area 2 481
28,696 12,404 Myrtle Beach 2 640 41,149 12,218 Philadelphia 2 728
38,680 9,630 Tampa 1 361 49,358 9,301 New York area 3 546 48,456
7,259 Other markets 18 5,444 273,607 83,476
Core
hotels 39 11,942 760,869 212,593 Non-strategic hotels(b) 4
1,084 40,148 12,428
Same-store hotels 43
13,026 $ 801,017 $ 225,021
Location
Urban 17 5,310 $ 360,177 $ 97,584 Resort 9 2,733 203,370 51,679
Airport 8 2,621 136,144 43,204 Suburban 5 1,278 61,178
20,126
Core hotels 39 11,942 760,869 212,593
Non-strategic hotels(b) 4 1,084 40,148 12,428
Same-store hotels 43 13,026 $ 801,017 $ 225,021 (a)
Hotel EBITDA is more fully described on page 24. (b) Excludes one
hotel held for sale as of March 31, 2015.
Hotel Operating Statistics by
Brand
Occupancy (%) Three Months Ended
March 31, 2015 2014 %Variance
Embassy Suites Hotels 81.1 76.8 5.6 Wyndham and Wyndham Grand 69.0
62.9 9.6 Renaissance and Marriott 80.8 75.6 6.9 DoubleTree by
Hilton and Hilton 69.1 64.4 7.2 Sheraton 58.8 56.4 4.1 Fairmont
61.6 58.6 5.1 Holiday Inn 70.1 64.5 8.6 Morgans and Royalton 73.8
79.4 (7.1 )
Core hotels (39)(a) 74.7 70.2 6.4
Non-strategic hotels (4)(b) 78.7 76.0 3.5
Same-store hotels
(43) 75.1 70.7 6.2
ADR ($) Three Months Ended
March 31, 2015 2014 %Variance Embassy
Suites Hotels 179.02 166.71 7.4 Wyndham and Wyndham Grand 158.09
144.62 9.3 Renaissance and Marriott 251.96 236.72 6.4 DoubleTree by
Hilton and Hilton 162.48 156.22 4.0 Sheraton 125.69 127.91 (1.7 )
Fairmont 250.51 238.07 5.2 Holiday Inn 155.09 131.81 17.7 Morgans
and Royalton 234.84 258.62 (9.2 )
Core hotels (39)(a)
181.65 170.25 6.7 Non-strategic hotels (4)(b) 128.02 123.81 3.4
Same-store hotels (43) 176.97 166.09 6.5
RevPAR ($)
Three Months Ended March 31, 2015 2014
%Variance Embassy Suites Hotels 145.25 128.06 13.4 Wyndham
and Wyndham Grand 109.03 90.99 19.8 Renaissance and Marriott 203.52
178.95 13.7 DoubleTree by Hilton and Hilton 112.26 100.65 11.5
Sheraton 73.88 72.20 2.3 Fairmont 154.20 139.46 10.6 Holiday Inn
108.67 85.01 27.8 Morgans and Royalton 173.22 205.34 (15.6 )
Core hotels (39)(a) 135.78 119.58 13.5 Non-strategic
hotels (4)(b) 100.72 94.12 7.0
Same-store hotels (43) 132.86
117.46 13.1 (a) Excludes The Knickerbocker which opened in
February 2015. (b) Excludes one hotel held for sale as of March 31,
2015.
Hotel Operating Statistics by
Market
Occupancy (%) Three Months Ended
March 31, 2015 2014 %Variance
San Francisco area 82.5 72.0 14.6 Boston 66.5 61.3 8.4 South
Florida 93.3 91.2 2.3 Los Angeles 81.6 82.9 (1.6 ) Myrtle Beach
53.9 45.5 18.7 Philadelphia 49.2 54.5 (9.7 ) Tampa 88.8 86.1 3.1
New York area 70.2 71.7 (2.0 ) Other markets 75.1 70.3 6.8
Core
hotels (39)(a) 74.7 70.2 6.4
ADR ($) Three Months Ended March 31,
2015 2014 %Variance San Francisco area 206.63
188.07 9.9 Boston 197.64 184.06 7.4 South Florida 221.32 205.26 7.8
Los Angeles 170.33 159.17 7.0 Myrtle Beach 112.76 108.73 3.7
Philadelphia 139.82 130.99 6.7 Tampa 251.81 226.08 11.4 New York
area 208.91 229.08 (8.8 ) Other markets 163.82 153.47 6.7
Core
hotels (39)(a) 181.65 170.25
6.7
RevPAR ($) Three Months Ended March
31, 2015 2014 %Variance San Francisco area
170.52 135.42 25.9 Boston 131.40 112.85 16.4 South Florida 206.40
187.18 10.3 Los Angeles 138.98 131.96 5.3 Myrtle Beach 60.83 49.43
23.1 Philadelphia 68.77 71.38 (3.7 ) Tampa 223.53 194.74 14.8 New
York area 146.76 164.18 (10.6 ) Other markets 122.97 107.85 14.0
Core hotels (39)(a) 135.78
119.58 13.5 (a) Excludes The Knickerbocker
which opened in February 2015.
Historical Quarterly Operating
Statistics
Occupancy (%) Q2 2014 Q3 2014
Q4 2014 Q1 2015 Core hotels (39)(a)
80.5 80.3 72.0 74.7 Non-strategic hotels (4)(b) 79.3 74.8 72.3 78.7
Same-store hotels (43) 80.4 79.8 72.0 75.1
ADR
($) Q2 2014 Q3 2014 Q4 2014 Q1 2015
Core hotels (39)(a) 178.94 179.06 175.83 181.65 Non-strategic
hotels (4)(b) 121.38 120.04 120.66 128.02
Same-store hotels
(43) 174.22 174.46 171.22 176.97
RevPAR ($) Q2
2014 Q3 2014 Q4 2014 Q1 2015 Core hotels
(39)(a) 143.98 143.71 126.57 135.78 Non-strategic hotels (4)(b)
96.27 89.82 87.24 100.72
Same-store hotels (43) 140.01
139.22 123.30 132.86 (a) Excludes The Knickerbocker which
opened in February 2015. (b) Excludes one hotel held for sale as of
March 31, 2015.
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 Income (Loss) to FFO and
Adjusted FFO
(in thousands, except per share data)
Three Months Ended March 31, 2015
2014 Dollars Shares
Per ShareAmount
Dollars Shares
Per ShareAmount
Net income (loss) $ 11,996 $ (14,836 ) Noncontrolling
interests (4,865 ) 199 Preferred dividends (9,678 ) (9,678 )
Preferred distributions - consolidated joint venture (348 )
(181 )
Net loss attributable to FelCor common
stockholders (2,895 ) (24,496 ) Less: Dividends declared on
unvested restricted stock (13 ) —
Basic and
diluted earnings per share data (2,908 ) 124,519 $ (0.02 )
(24,496 ) 124,146 $ (0.20 ) Depreciation and amortization 27,772 —
0.22 29,601 — 0.24 Depreciation, unconsolidated entities and other
partnerships 712 — 0.01 2,675 — 0.02 Gain on sale of hotels, net of
noncontrolling interests in other partnerships (11,881 ) — (0.10 )
(5,851 ) — (0.05 ) Loss on sale, unconsolidated entities — — — 33 —
— Noncontrolling interests in FelCor LP (14 ) 611 — (121 ) 618 —
Dividends declared on unvested restricted stock 13 — — — — —
Conversion of unvested restricted stock and units —
1,213 — — 858 —
FFO 13,694 126,343 0.11 1,841 125,622 0.01 Debt
extinguishment, including discontinued operations 73 — — 251 — —
Severance costs — — — 400 — — Variable stock compensation 997 — —
564 — 0.01 Pre-opening costs, net of noncontrolling interests
3,524 — 0.03 1,053 —
0.01
Adjusted FFO $ 18,288 126,343 $
0.14 $ 4,109 125,622 $ 0.03
Reconciliation of Net Income (Loss) to EBITDA, Adjusted
EBITDA and Same-store Adjusted EBITDA
(in thousands)
Three Months Ended March 31, 2015
2014 Net income (loss) $ 11,996 $ (14,836 )
Depreciation and amortization 27,772 29,601 Depreciation,
unconsolidated entities and other partnerships 712 2,675 Interest
expense 19,486 25,242 Interest expense, discontinued operations and
unconsolidated entities 202 744 Noncontrolling interests in other
partnerships (4,879 ) 78
EBITDA 55,289
43,504 Debt extinguishment, including discontinued operations 73
251 Gain on sale of hotels, net of noncontrolling interests in
other partnerships (11,881 ) (5,851 ) Loss on sale, unconsolidated
entities — 33 Amortization of fixed stock and directors’
compensation 1,862 1,122 Severance costs — 400 Variable stock
compensation 997 564 Pre-opening costs, net of noncontrolling
interests 3,524 1,053
Adjusted
EBITDA 49,864 41,076 Adjusted EBITDA from hotels disposed, held
for sale and recently opened (137 ) (4,956 )
Same-store Adjusted EBITDA $ 49,727 $ 36,120
Hotel EBITDA and Hotel EBITDA Margin
(dollars in thousands)
Three Months Ended March 31, 2015
2014 Same-store operating revenue: Room $
155,759 $ 137,696 Food and beverage 38,847 33,005 Other operating
departments 10,894 10,044
Same-store
operating revenue 205,500 180,745
Same-store operating
expense: Room 40,347 37,782 Food and beverage 29,407 26,263
Other operating departments 4,326 4,896 Other property related
costs 53,817 49,150 Management and franchise fees 8,749 7,278
Taxes, insurance and lease expense 12,946
12,730
Same-store operating expense 149,592
138,099
Hotel EBITDA $ 55,908 $
42,646
Hotel EBITDA Margin 27.2 % 23.6 %
Three Months Ended March 31, 2015
2014 Hotel EBITDA - Core (39)(a) $ 52,380 $ 39,464 Hotel
EBITDA - Non-strategic (4)(b) 3,528 3,182
Hotel EBITDA Same-store (43) $ 55,908 $ 42,646
Hotel EBITDA Margin - Core (39)(a) 26.9 % 23.1 % Hotel
EBITDA Margin - Non-strategic (4)(b) 32.6 % 31.2 % Hotel EBITDA
Margin Same-store (43) 27.2 % 23.6 % (a) Excludes The
Knickerbocker which opened in February 2015. (b) Excludes one hotel
held for sale as of March 31, 2015.
Reconciliation of Same-store Operating
Revenue and Same-store Operating Expense to Total
Revenue, Total Operating Expense and
Operating Income
(in thousands)
Three Months Ended March 31, 2015
2014 Same-store operating revenue $ 205,500 $ 180,745
Other revenue 410 327 Revenue from hotels disposed, held for sale
and recently opened(a) 7,785 40,277
Total revenue 213,695 221,349 Same-store operating expense
149,592 138,099 Consolidated hotel lease expense(b) 2,104 10,391
Unconsolidated taxes, insurance and lease expense (572 ) (1,965 )
Corporate expenses 8,573 7,825 Depreciation and amortization 27,772
29,601 Expenses from hotels disposed, held for sale and recently
opened(a) 7,488 31,222 Other expenses 4,228
2,014
Total operating expense 199,185
217,187
Operating income $ 14,510 $
4,162 (a) Under GAAP, we include the operating
performance for disposed, held for sale and recently opened hotels
in continuing operations in our Consolidated Statements of
Operations. 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 Income
attributable to FelCor to Forecasted Adjusted FFO and
Adjusted EBITDA
(in millions, except per share data)
Full Year 2015 Guidance Low High
Dollars
Per
ShareAmount(a)
Dollars
Per
ShareAmount(a)
Net income attributable to FelCor(b) $ 34.8 $ 43.1
Preferred dividends (30.1 ) (30.1 )
Net income
attributable to FelCor common stockholders 4.7 $ 0.03 13.0 $
0.09 Gains on hotel sales, net(b) (11.9 ) (11.9 ) Depreciation(c)
119.3 119.5
FFO $ 112.1 $ 0.80 $
120.6 $ 0.86 Pre-opening costs 3.5 3.5 Variable stock compensation
1.0 1.0 Early extinguishment of debt 0.1 0.1
Adjusted FFO $ 116.7 $ 0.84 $ 125.2 $
0.90
Net income attributable to FelCor(b) $
34.8 $ 43.1 Depreciation(c) 119.3 119.5 Interest expense(c) 85.0
85.0 Preferred distributions - consolidated joint venture
1.5 1.5
EBITDA $ 240.6 $ 249.1
Amortization of stock compensation 6.7 6.7 Gains on hotel sales,
net(b) (11.9 ) (11.9 ) Pre-opening costs 3.5 3.5 Variable stock
compensation 1.0 1.0 Early extinguishment of debt 0.1
0.1
Adjusted EBITDA $ 240.0 $ 248.5
(a) Weighted average shares are 139.2 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, which is included in corporate expenses and is not
separately stated on our statements of operations. Excluding
amortization of our fixed stock and directors’ compensation
maintains consistency 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
We 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. As we present them, these non-GAAP financial measures
may not be comparable to similar non-GAAP financial measures as
presented 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. We
compensate 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. We strongly encourage
investors to review our financial information in its entirety and
not to rely on a single financial measure.
FelCor Lodging Trust IncorporatedStephen A. Schafer,
972-444-4912Senior Vice President, Strategic Planningsschafer@felcor.com
Felcor Lodging (NYSE:FCH)
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