Lasalle CEO Discusses Q3 2010 Results - Earnings Call Transcript

Lasalle Hotel Properties ( LHO)

Q3 2010 Earnings Call Transcript

October 21, 2010 9:00 am ET

Executives

Michael Barnello – President and CEO

Hans Weger – CFO

Analysts

Ryan Meliker – Morgan Stanley

David Loeb – Baird

Jeffrey Donnelly – Wells Fargo

Michael Salinsky – RBC Capital Markets

Dan Donlan – Janney Capital Markets

Shaun Kelley – Bank of America/Merrill Lynch

Tim Wengerd – Deutsche Bank

Josh Attie – Citi

Presentation

Operator

Good day, and welcome to this LaSalle Hotel Properties third quarter 2010 conference call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Mr. Barnello, Chairman and Chief Executive Officer. Please go ahead.

Mi chael Barnello

Thank you, Denise. Good morning, everyone, and welcome to the third quarter earnings call and webcast for LaSalle Hotel Properties. Here with me today is Hans Weger, our Chief Financial Officer.

In addition to providing the financial results of our third quarter, Hans and I will discuss the company's activities in the quarter, the performance of our assets, and the trends affecting them. We will also discuss our outlook for the remainder of 2010 for the industry and for our company. We will then open up the call to Q&A. Hans?

Hans Weger

Thanks Mike. Good morning. Before we begin, I would first like to make the following remarks. Any statements that we make today about future results and performance or plans and objectives are forward-looking statements. Actual results may differ as a result of factors, risks and uncertainties over which the company may have no control.

Factors that may cause actual results to differ materially are discussed in the company's 10-K for 2009, quarterly reports and its other reports filed with the SEC. The company disclaims any obligation or undertaking to update or revise any forward-looking statements.

Our SEC reports as well as our press release are available at our website, www.lasallehotels.com. Our most recent 8-K and the yesterday's press release include reconciliations of non-GAAP measures such as funds from operations to the most comparable GAAP measures.

Third quarter funds from operations or FFO was $8.5 million as compared to $30.5 million in the prior year. FFO per diluted share was $0.12 compared to $0.49 in the third quarter of 2009. For the third quarter of 2010, it included $23.6 million impairment loss related to the sale of the Seaview Resort and a $600,000 worth of transaction cost.

EBITDA for the third quarter increased to $55 million from $48.4 million in the prior year. EBITDA for the third quarter of 2010 included the $29.2 million gain on sale related to the sale of The Westin City Center Dallas, partially offset by the $23.6 million impairment loss related to the sale of the Seaview Resort and a $600,000 of transaction cost.

RevPAR for the total portfolio grew 6.3% in the third quarter. The RevPAR growth was a result of 5.8% increase in ADR to $181.64 and a 0.5% increase in occupancy to 81.7%. Our portfolio generated $52.7 million of EBITDA in the third quarter of 2010 versus EBITDA of $49.6 million for the same period of 2009, an increase of 6.4%. The portfolio-wide hotel EBITDA margin in the third quarter was 31.4%, an increase of 44 basis points compared to the prior year.

For the nine months ended September 30, 2010, FFO was $45.8 million compared to $74.9 million for the same period in 2009, or $0.67 per diluted share compared to $1.45 per diluted share for the same prior year period. FFO included the $23.6 million impairment loss related to the sale of the Seaview Resort and $2 million of transaction costs.

For the nine months ended September 30, 2009, net loss and FFO included $5.7 million of after-tax income related to the recognition of prior termination cure payments and a $1 million fee for exchanging the Series C Cumulative Redeemable Preferred Shares of Beneficial Interest for the Series G Cumulative Redeemable Preferred Shares of Beneficial Interest, the Preferred Share Exchange.

EBITDA for the nine months ended September 30, 2010 decreased to $125.4 million from $129.2 million for the nine months ended September 30, 2009. For the nine months ended September 30, 2010, EBITDA included the $29.2 million gain on sale related to the sale of The Westin City Center Dallas, partially offset by the $23.6 million impairment loss related to the sale of Seaview Resort and the $2 million of transaction costs.

For the nine months ended September 30, 2009, EBITDA included $9.5 million of pretax income related to the recognition of prior termination cure payments and the $1 million fee related to the Preferred Share Exchange. Room revenue per available room increased 2.6% for the nine months ended September 30, 2010 to $133.80 versus the same prior year period. The RevPAR growth was due to an ADR increase 0.1% to $177.46 and occupancy increase of 2.5% to 75.4%.

For the nine months ended September 30, 2010, the company’s hotels generated $127.9 million of EBITDA compared with $127.6 million for the same period last year, an increase of 0.2%. The portfolio-wide EBITDA margin was 28.5% and was limited to 58 basis point decline in the same period last year.

As of the end of the third quarter, the company had total outstanding debt of $759.5 million at an average interest rate for the quarter of 4.9%, including the $135 million outstanding on our senior unsecured credit facility. At the end of the third quarter, the company had an aggregate $333.8 million available on our combined credit facilities.

As of September 30, 2009, total debt to trailing 12-month Corporate EBITDA, as defined in our senior unsecured credit facility, equaled 4.3 times. And trailing 12-month Corporate EBITDA to interest coverage ratio was 4.5 times.

During August, the company sold 3.3 million common shares through our ATM program for net proceeds of $74.9 million. On September 1, we sold Seaview Resort for $20 million and purchased three hotels in separate transactions for an aggregate purchase price of $292.5 million, which Mike will discuss later in the call.

On September 14, we announced the Board increased the quarterly dividend from $0.01 to $0.11 per common share for the third quarter of 2010. The third quarter dividend was paid on October 15 to common shareholders of record on September 30, 2010.

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