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Strategic Hotels & Resorts, Inc. Q1 2010 Earnings Call Transcript

Strategic Hotels & Resorts, Inc. Q1 2010 Earnings Call Transcript

Strategic Hotels & Resorts, Inc. (BEE)

Q1 2010 Earnings Call

May 6, 2010 10:00 a.m. ET

Executives

TST Recommends

Jon Stanner - VP of Corporate Finance

Laurence Geller - President and CEO

Diane Morefield - CFO and EVP

Analysts

Will Marks - JMP Securities

Smedes Rose - KBW

Presentation

Operator

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» Strategic Hotels & Resorts Q4 2009 Earnings Conference Call
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» Strategic Hotels & Resorts Inc. Q1 2009 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Q1 2010 Strategic Hotels & Resorts Earnings Conference Call. My name is Colby [ph] and I will be your coordinator today. At this time, all participants are in listen-only mode. (Operator Instructions) We will accept your questions at the end of this conference. As a reminder, today's call is being recorded.

I would now like to turn the call over to Mr. Jon Stanner, Vice President of Corporate Finance. Please proceed.

Jon Stanner

Thank you, and good morning, everyone. Welcome to Strategic Hotels & Resorts first quarter 2010 earnings conference call. Our press release and supplemental financials were distributed yesterday. These are available on the company's website at strategichotels.com within the Investor Relations section.

We are also hosting a live webcast of today's call, which can be accessed in the same section of the site and a replay of today's call will be available for one month.

Before we get underway, I would like to say that this conference call will contain forward-looking statements under federal securities laws. These statements are based on current expectations, estimates, and projections about the market and the industry in which the company operates, in addition to management's beliefs and assumptions. Forward-looking statements are not guarantees of performance and actual operating results may be affected by a wide variety of factors. For a list of these factors, please refer to the forward-looking statement notice, included within our SEC filings.

In the press release and supplemental financials, the Company has reconciled all non-GAAP financial measures, to the directly comparable GAAP measures in accordance with Reg G requirements.

I would now like to introduce the members of our management team here with me today, Laurence Geller, President and Chief Executive Officer, and Diane Morefield, our recently appointed Chief Financial Officer. Laurence?

Laurence Geller

Yeah, thank you Jon. Good morning and welcome to our first quarter earnings call. Yesterday we’ve reported comparable EBITDA of 22 million and an FFO per share loss is $0.15, which is flat to last year, and RevPAR decline of 4.3% and the total RevPAR decline of 3.7%.

Well most of our key operating metrics, predictably declined this quarter, we have begin to see meaningful improvement in our forward indicators and demand appears to be growing across the entire spectrum of our customer base.

In last quarter’s conference call, we posed the question of how soon rising economic activity would drive increased demand for high-end lodging, while we were cautiously optimistic at that time, we are pleasantly surprised that the velocity at which the nation recovery seems to be occurring, without March appearing, that have been the focal month to this phase of the cycle with RevPAR up over 3.6% after two months of negative RevPAR for us. Our industry’s luxury RevPAR growth turned positive on February, the 28, after some 96 weeks of negative growth.

Our margin performance for the quarter was very satisfactory and it was a direct result of the implementation about sustainable productivity enhancement measures, which have supported our margins during the down-turn, and should measurably increment margin expansion as the recovery progresses.

During our last report, we discussed our goal to derisk the balance sheet, and since that time, we’ve taken several important steps towards extending our maturities.

Most notably yesterday, we closed on a refinancing of two mortgages, totaling 344 million, with a new 318 million loan, bearing an interest rate of just over 6%. And importantly, maturity extended out till 2017.

Diane will discuss this transaction in more detail. But we’re very pleased with the execution of this transaction, which speaks not only to the quality and potential of the properties themselves, but importantly to the strengths of our relationships with not only this specific lender, but our lending group in general.

I’d like now to introduce our new CFO, Diane Morefield, who many of will remember for her days at Equity International and Equity Office Properties. We are truly delighted to have Diane join our team at this important threshold in our company’s life.

On a personal note, I am personally thrilled about our partnership going forward. After Diane has walked you through the quarter’s results and provided a balance sheet update, I’ll close with some additional thoughts on the outlook for our industry and for our company in particular. Diane?

Diane Morefield

Thank you, Laurence and good morning everyone. I am very excited to be here and to be participating on my first earnings call, since joining Laurence and the team here at Strategic Hotels a few ago. I also look forward to working with all of you.

Turning to our first quarter results, our first quarter ultimately turned out to be a tale of monthly progress, as Laurence mentioned, our RevPAR growth improved sequentially by month from negative 16% in January to negative 0.4% for February and finishing at a positive 3.6% in March.

You may recall that on the fourth quarter 2009 earnings call, at the end of February, with essentially two-thirds of the first quarter of 2010, already on the book, we said we expected RevPAR in the first quarter to decline by between 5.5% to 7%.

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