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LaSalle Hotel Properties Reports Third Quarter 2012 Results

This press release, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words “will,” "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. Forward-looking statements in this press release include, among others, statements about outlook for RevPAR, hotel EBITDA margin, adjusted FFO, adjusted EBITDA and derivations thereof and the terms and the renovation plans and future expectations for the Park Central Hotel. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, (i) the Company's dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly, (ii) risks associated with the hotel industry, including competition, increases in wages, energy costs and other operating costs, actual or threatened terrorist attacks, downturns in general and local economic conditions and cancellation of or delays in the completion of anticipated demand generators, (iii) the availability and terms of financing and capital and the general volatility of securities markets, (iv) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws, (v) interest rate increases, (vi) the possible failure of the Company to qualify as a REIT and the risk of changes in laws affecting REITs, (vii) the possibility of uninsured losses, (viii) risks associated with redevelopment and repositioning projects, including delays and cost overruns and (ix) the risk factors discussed in the Company's Annual Report on Form 10-K as updated in its Quarterly Reports. Accordingly, there is no assurance that the Company's expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

For additional information or to receive press releases via e-mail, please visit our website at www.lasallehotels.com .

 
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations and Comprehensive Income

(in thousands, except share data)

(unaudited)

   
For the three months ended For the nine months ended
September 30, September 30,
2012   2011 2012   2011
Revenues:
Hotel operating revenues:
Room $ 167,437 $ 133,152 $ 449,315 $ 356,070
Food and beverage 52,896 50,554 156,298 142,999
Other operating department 15,410   14,256   42,105   37,374  
Total hotel operating revenues 235,743 197,962 647,718 536,443
Other income 1,254   1,166   3,693   3,585  
Total revenues 236,997   199,128   651,411   540,028  
Expenses:
Hotel operating expenses:
Room 39,662 30,920 112,203 86,893
Food and beverage 37,751 34,669 111,488 99,249
Other direct 5,659 5,895 15,843 15,737
Other indirect 54,532   48,411   157,725   136,465  
Total hotel operating expenses 137,604 119,895 397,259 338,344
Depreciation and amortization 31,480 27,765 92,911 83,572
Real estate taxes, personal property taxes and insurance 11,254 9,199 32,930 26,470
Ground rent 2,627 2,485 6,613 5,861
General and administrative 5,172 4,185 14,635 12,919
Acquisition transaction costs 156 153 4,057 574
Other expenses 922   668   2,391   1,749  
Total operating expenses 189,215   164,350   550,796   469,489  
Operating income 47,782 34,778 100,615 70,539
Interest income 2,060 8 2,086 22
Interest expense (14,110 ) (9,856 ) (38,391 ) (29,566 )
Income before income tax expense and discontinued operations 35,732 24,930 64,310 40,995
Income tax expense (4,943 ) (3,125 ) (6,920 ) (5,670 )
Income from continuing operations 30,789   21,805   57,390   35,325  
Discontinued operations:
Income from operations of property disposed of 0 760 0 441
Income tax expense 0   (244 ) 0   (112 )
Net income from discontinued operations 0   516   0   329  
Net income 30,789   22,321   57,390   35,654  
Noncontrolling interests:
Redeemable noncontrolling interest in loss of consolidated entity 0 0 0 2
Noncontrolling interests of common units in Operating Partnership (116 ) 0   (224 ) 0  
Net (income) loss attributable to noncontrolling interests (116 ) 0   (224 ) 2  
Net income attributable to the Company 30,673 22,321 57,166 35,656
Distributions to preferred shareholders (4,166 ) (7,402 ) (17,567 ) (22,550 )
Issuance costs of redeemed preferred shares 0   0   (4,417 ) (731 )
Net income attributable to common shareholders $ 26,507   $ 14,919   $ 35,182   $ 12,375  
 
 
LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations and Comprehensive Income - Continued

(in thousands, except share data)

(unaudited)

 
  For the three months ended   For the nine months ended
September 30, September 30,
2012   2011 2012     2011
Earnings per Common Share - Basic:
Net income attributable to common shareholders before discontinued operations and excluding amounts attributable to unvested restricted shares $ 0.31 $ 0.17 $ 0.41 $ 0.15
Discontinued operations   0.00     0.01     0.00     0.00
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares $ 0.31   $ 0.18   $ 0.41   $ 0.15
Earnings per Common Share - Diluted:
Net income attributable to common shareholders before discontinued operations and excluding amounts attributable to unvested restricted shares $ 0.31 $ 0.17 $ 0.41 $ 0.15
Discontinued operations   0.00     0.01     0.00     0.00
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares $ 0.31   $ 0.18   $ 0.41   $ 0.15
Weighted average number of common shares outstanding:
Basic 85,876,584 84,640,196 85,278,331 80,392,686
Diluted 86,056,957 84,752,112 85,449,543 80,559,299
 
Comprehensive Income:
Net income $ 30,789 $ 22,321 $ 57,390 $ 35,654
Other comprehensive loss:
Unrealized loss on interest rate derivative instruments   (3,839 )   0     (8,534 )   0
Comprehensive income 26,950 22,321 48,856 35,654
Noncontrolling interests:
Redeemable noncontrolling interest in loss of consolidated entity 0 0 0 2
Noncontrolling interests of common units in Operating Partnership   (103 )   0     (195 )   0
Comprehensive (income) loss attributable to noncontrolling interests   (103 )   0     (195 )   2
Comprehensive income attributable to the Company $ 26,847   $ 22,321   $ 48,661   $ 35,656
 
 
LASALLE HOTEL PROPERTIES
FFO and EBITDA
(in thousands, except share/unit data)
(unaudited)
   
 
For the three months ended For the nine months ended
September 30, September 30,
2012   2011 2012   2011
Net income attributable to common shareholders $ 26,507 $ 14,919 $ 35,182 $ 12,375
Depreciation 31,336 27,644 92,483 83,194
Amortization of deferred lease costs 97 69 271 225
Noncontrolling interests:
Redeemable noncontrolling interest in consolidated entity 0 0 0 (2 )
Noncontrolling interests of common units in Operating Partnership 116 0 224 0
Less: Net gain on sale of property 0   (760 ) 0   (760 )
FFO $ 58,056 $ 41,872 $ 128,160 $ 95,032
Management transition and severance costs 614 0 1,540 579
Preferred share issuance costs 0 0 4,417 731
Acquisition transaction costs 156 153 4,057 574
Tax adjustment related to disposition 0 244 0 244
Non-cash ground rent 114 116 342 232
Mezzanine loan discount amortization (491 ) 0   (491 ) 0  
Adjusted FFO $ 58,449   $ 42,385   $ 138,025   $ 97,392  
 
Weighted Average number of common shares and units outstanding:
Basic 86,172,884 84,640,196 85,574,631 80,392,686
Diluted 86,353,257 84,752,112 85,745,843 80,559,299
 
FFO per diluted share/unit $ 0.67 $ 0.49 $ 1.49 $ 1.18
Adjusted FFO per diluted share/unit $ 0.68 $ 0.50 $ 1.61 $ 1.21
 
 
For the three months ended For the nine months ended
September 30, September 30,
2012 2011 2012 2011
Net income attributable to common shareholders $ 26,507 $ 14,919 $ 35,182 $ 12,375
Interest expense 14,110 9,856 38,391 29,566
Income tax expense (1) 4,943 3,369 6,920 5,782
Depreciation and amortization 31,480 27,765 92,911 83,572
Noncontrolling interests:
Redeemable noncontrolling interest in consolidated entity 0 0 0 (2 )
Noncontrolling interests of common units in Operating Partnership 116 0 224 0
Distributions to preferred shareholders 4,166   7,402   17,567   22,550  
EBITDA $ 81,322 $ 63,311 $ 191,195 $ 153,843
Management transition and severance costs 614 0 1,540 579
Preferred share issuance costs 0 0 4,417 731
Acquisition transaction costs 156 153 4,057 574
Net gain on sale of properties 0 (760 ) 0 (760 )
Non-cash ground rent 114 116 342 232
Mezzanine loan discount amortization (491 ) 0   (491 ) 0  
Adjusted EBITDA $ 81,715 $ 62,820 $ 201,060 $ 155,199
Corporate expense 6,190 5,128 17,004 14,968
Interest and other income (3,221 ) (1,172 ) (5,686 ) (3,650 )
Hotel level adjustments, net (246 ) 11,186   (2,011 ) 26,712  
Hotel EBITDA $ 84,438   $ 77,962   $ 210,367   $ 193,229  
 

(1) Includes amounts from discontinued operations.

 
With respect to Hotel EBITDA, the Company believes that excluding the effect of corporate-level expenses, non-cash items, and the portion of these items related to unconsolidated entities, provides a more complete understanding of the operating results over which individual hotels and operators have direct control. We believe property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.
 
Hotel EBITDA includes all properties owned as of September 30, 2012 for the Company's period of ownership in 2012 and the comparable period in 2011. Exceptions: Hotel EBITDA excludes March period of ownership for Hotel Palomar, Washington, DC. Hotel EBITDA for all stated periods excludes any properties the Company has sold.
 
   
LASALLE HOTEL PROPERTIES
Hotel Operational Data
Schedule of Property Level Results
(in thousands)
(unaudited)
 
For the three months ended For the nine months ended
September 30, September 30,
2012   2011 2012   2011
Revenues:
Room $ 167,437 $ 158,797 $ 447,576 $ 424,451
Food and beverage 52,896 55,336 155,797 157,860
Other 15,181   14,821   41,156   39,280
Total hotel revenues 235,514   228,954   644,529   621,591
 
Expenses:
Room 39,663 38,178 111,615 108,117
Food and beverage 37,748 38,925 111,077 112,203
Other direct 5,581 5,973 15,692 16,209
General and administrative 17,035 17,215 49,530 48,668
Sales and marketing 14,241 14,092 42,544 40,808
Management fees 8,360 7,925 21,390 21,037
Property operations and maintenance 7,625 7,869 22,947 22,630
Energy and utilities 6,312 6,653 17,870 18,492
Property taxes 10,480 10,539 29,977 29,545
Other fixed expenses 4,031   3,623   11,520   10,653
Total hotel expenses 151,076   150,992   434,162   428,362
 
Hotel EBITDA $ 84,438   $ 77,962   $ 210,367   $ 193,229
 
Note:
This schedule includes operating data for all properties owned as of September 30, 2012 for the Company's period of ownership in 2012 and the comparable period in 2011. Exceptions: The schedule excludes the March period of ownership for Hotel Palomar, Washington, DC. All stated periods exclude any properties the Company has sold. Hotel EBITDA margin is calculated by dividing hotel EBITDA for the period by the total hotel revenues for the period.
 
 
LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels
(unaudited)

 

   
 
For the three months ended For the nine months ended
September 30, September 30,
2012   2011 2012   2011
Total Portfolio
Occupancy 86.7 % 85.2 % 80.8 % 80.3 %
Increase 1.7 % 0.6 %
ADR $ 205.75 $ 199.21 $ 200.87 $ 192.69
Increase 3.3 % 4.2 %
RevPAR $ 178.43 $ 169.80 $ 162.26 $ 154.80
Increase 5.1 % 4.8 %
 
Note:
This schedule includes operating data for all properties owned as of September 30, 2012 for the Company's period of ownership in 2012 and the comparable period in 2011. All stated periods exclude any properties the Company has sold.
 

Non-GAAP Financial Measures

FFO, EBITDA and Hotel EBITDA

The Company considers the non-GAAP measures of FFO (including FFO per share/unit), EBITDA and hotel EBITDA to be key supplemental measures of the Company's performance and should be considered along with, but not as alternatives to, net income or loss as a measure of the Company's operating performance. 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 real estate industry investors consider FFO, EBITDA and hotel EBITDA to be helpful in evaluating a real estate company's operations.

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