“Our second quarter results were impacted more than we expected by the guestroom renovations at Hotel Roger Williams and Le Montrose and the management transitions at the Donovan House and Hotel Sax,” said Michael D. Barnello, President and Chief Executive Officer of LaSalle Hotel Properties. “Despite that, we are encouraged by the increase in average rate of our portfolio, which grew 5.8 percent for the entire portfolio. In addition, our portfolio delivered significant hotel EBITDA margin growth and achieved our highest-ever reported quarterly hotel EBITDA margin. On the capital markets front, we closed on a very favorable seven-year term loan and have received commitments on a five-year term loan with excellent pricing, which will enable us to reduce the balance on our senior unsecured credit facility.
“The trends in our business remain strong and we continue to be optimistic about the outlook for the second half of the year.”
Acquisition of Mezzanine Loan
On July 13, 2012, the Company invested $67.4 million to acquire the performing mezzanine loan secured by the equity interests in the entities that own Shutters on the Beach and Hotel Casa Del Mar in Santa Monica, California. The Company purchased the debt instrument for 93.6 percent of the $72.0 million face value of the loan.The fixed-rate, interest only coupon on the mezzanine loan is 9.76 percent at par value, which translates to a 10.4 percent interest rate on the Company’s investment. The mezzanine loan is subordinate to a $310.0 million first mortgage loan secured by the properties. Both the first mortgage and the mezzanine loan mature on May 11, 2014. “We are excited to acquire the mezzanine loan related to these two iconic assets,” added Michael D. Barnello. “The Santa Monica market benefits from very favorable demand dynamics and these high-quality hotels have excellent locations within the market. Furthermore, the 10.4 percent yield on our investment is very attractive.”