Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 19, 2017
 
LASALLE HOTEL PROPERTIES
(Exact name of registrant as specified in its charter)
 
Maryland
 
1-14045
 
36-4219376
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
7550 Wisconsin Avenue, 10th Floor
Bethesda, Maryland 20814
(Address of principal executive offices)
Registrant’s telephone number, including area code: (301) 941-1500
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company    ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ¨







ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On July 19, 2017, LaSalle Hotel Properties (the "Company") issued a press release announcing its results of operations for the three and six months ended June 30, 2017. A copy of such press release is furnished as Exhibit 99.1 to this report.
As previously announced and as further detailed in the press release furnished with this report, the Company will conduct a conference call at 11:00 a.m. eastern time on Thursday, July 20, 2017, to discuss its second quarter financial results.
The information in Item 2.02 of this report, including the information in the press release attached as Exhibit 99.1 to this report, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, the information in Item 2.02 of this report, including the information in the press release attached as Exhibit 99.1 to this report, shall not be deemed to be incorporated by reference in the filings of the registrant under the Securities Act of 1933, as amended.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
Exhibit
Number
  
Description
99.1
  
Press release, dated July 19, 2017, issued by LaSalle Hotel Properties providing the results of operations for the three and six months ended June 30, 2017
The information contained in the press release attached as Exhibit 99.1 to this report shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, the information contained in the press release attached as Exhibit 99.1 to this report shall not be deemed to be incorporated by reference in the filings of the registrant under the Securities Act of 1933, as amended.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
LASALLE HOTEL PROPERTIES
 
 
 
Dated: July 19, 2017
 
By:
 
/s/ Kenneth G. Fuller
 
 
 
 
Kenneth G. Fuller
 
 
 
 
Chief Financial Officer, Executive Vice President, Secretary and Treasurer





EXHIBIT INDEX
 
Exhibit
Number
  
Description
99.1
  
Press release, dated July 19, 2017, issued by LaSalle Hotel Properties providing the results of operations for the three and six months ended June 30, 2017



Exhibit


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11702771&doc=3
 
 
 
 
 
 
 
 
News Release

LASALLE HOTEL PROPERTIES REPORTS SECOND QUARTER 2017 RESULTS
Completes Sale of Westin Philadelphia for $135.0 Million

BETHESDA, MD, July 19, 2017 -- LaSalle Hotel Properties (NYSE: LHO) today announced results for the quarter ended June 30, 2017. The Company’s results include the following:

 
Second Quarter
 
Year-to-Date
 
2017
 
2016
 
% Var.
 
2017
 
2016
 
% Var.
 
($'s in millions except per share/unit data)
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to common shareholders(1)
$
55.5

 
$
55.2

 
0.5
 %
 
$
131.6

 
$
61.2

 
115.0
 %
Net income attributable to common shareholders per diluted share(1)
$
0.49

 
$
0.49

 
0.0
 %
 
$
1.16

 
$
0.54

 
114.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
RevPAR(2)
$
227.31

 
$
231.02

 
-1.6
 %
 
$
202.86

 
$
203.27

 
-0.2
 %
Hotel EBITDA Margin(2)
38.2
%
 
38.6
%
 
 
 
33.5
%
 
33.6
%
 
 
Hotel EBITDA Margin Growth(2)
-40 bps

 
 
 
 
 
-5 bps

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Revenues
$
307.0

 
$
351.1

 
-12.6
 %
 
$
561.4

 
$
611.2

 
-8.1
 %
EBITDA(1,2)
$
118.5

 
$
127.6

 
-7.1
 %
 
$
254.1

 
$
190.5

 
33.4
 %
Adjusted EBITDA(2)
$
110.4

 
$
130.5

 
-15.4
 %
 
$
172.2

 
$
195.5

 
-11.9
 %
Note: Adjusted EBITDA in the second quarter of 2016 included $15.6 million for assets that the Company sold between July 2016 and April 2017. Year-to-date adjusted EBITDA in 2016 included $23.0 million for assets that the Company sold between July 2016 and April 2017.

 
 
 
 
 
 
 
 
 
 
 
 
FFO(2)
$
88.5

 
$
104.1

 
-15.0
 %
 
$
137.5

 
$
157.7

 
-12.8
 %
Adjusted FFO(2)
$
91.5

 
$
107.0

 
-14.5
 %
 
$
142.8

 
$
162.7

 
-12.2
 %
FFO per diluted share/unit(2)
$
0.78

 
$
0.92

 
-15.2
 %
 
$
1.21

 
$
1.39

 
-12.9
 %
Adjusted FFO per diluted share/unit(2)
$
0.81

 
$
0.95

 
-14.7
 %
 
$
1.26

 
$
1.44

 
-12.5
 %

(1) 2017 net income and EBITDA (as defined below) include $85.5 million of gains from the sales of the Hotel Deca, Lansdowne Resort, Alexis Hotel, Hotel Triton, and the Westin Philadelphia.

(2) See tables later in this press release, which list adjustments that reconcile net income attributable to common shareholders to earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, funds from operations attributable to common shareholders and unitholders (“FFO”), FFO per share/unit, adjusted FFO, adjusted FFO per share/unit and pro forma hotel EBITDA. EBITDA, adjusted EBITDA, FFO, FFO per share/unit, adjusted FFO, adjusted FFO per share/unit and hotel EBITDA are non-GAAP financial measures. See further discussion of these non-GAAP measures and reconciliations to net income later in this press release. Room revenue per available room (“RevPAR”) is presented on a pro forma basis to reflect hotels in the Company’s current portfolio. See “Statistical Data for the Hotels - Pro Forma” later in this press release.

“Despite softening RevPAR in the face of increasing hotel supply in our markets, we remain proud that our teams are operating with excellent efficiency across the portfolio, as evidenced by our 38.2% hotel EBITDA margin during the second quarter,” said Michael D. Barnello, President and Chief Executive Officer of LaSalle Hotel Properties.





Second Quarter Results
Net Income: The Company’s net income attributable to common shareholders was $55.5 million, which increased 0.5% from the second quarter of 2016.

RevPAR: The Company’s second quarter RevPAR decreased 1.6% to $227.31, driven by a 0.5% decline in average daily rate to $257.86 and a 1.1% reduction in occupancy to 88.2%.

Hotel EBITDA Margin: The Company’s hotel EBITDA margin was 38.2%, which was 40 basis points below that of the comparable prior year period. The Company’s hotel expenses declined by 2.1% from the second quarter of 2016.

Adjusted EBITDA: The Company’s adjusted EBITDA was $110.4 million, a decrease of $20.1 million from the second quarter of 2016. Second quarter 2016 adjusted EBITDA included $15.6 million from six assets the Company sold between July 2016 and April 2017: Indianapolis Marriott Downtown, the mezzanine loan on Shutters on the Beach and Casa Del Mar, Hotel Deca, Lansdowne Resort, Alexis Hotel, and Hotel Triton.

Adjusted FFO: The Company generated adjusted FFO of $91.5 million, or $0.81 per diluted share/unit, compared to $107.0 million, or $0.95 per diluted share/unit, for the comparable prior year period.

Year-to-Date Results
Net Income: The Company’s net income attributable to common shareholders was $131.6 million, which increased 115.0% from the first half of 2016, due in part to $85.5 million in combined gains relating to the sales of Hotel Deca, Lansdowne Resort, Alexis Hotel, Hotel Triton, and Westin Philadelphia.

RevPAR: The Company’s RevPAR was approximately flat, decreasing 0.2% to $202.86. Average daily rate grew by 0.3% to $244.36 and was offset by a 0.5% decline in occupancy to 83.0%.

Hotel EBITDA Margin: The Company’s hotel EBITDA margin was 33.5%, which was a 5 basis point drop from the comparable prior year period. The Company’s hotel expenses declined by 1.7% from the first half of 2016.

Adjusted EBITDA: The Company’s adjusted EBITDA was $172.2 million, a decrease of $23.3 million from the first half of 2016. First half 2016 adjusted EBITDA included $23.0 million from six assets the Company sold between July 2016 and April 2017.

Adjusted FFO: The Company generated adjusted FFO of $142.8 million, or $1.26 per diluted share/unit, compared to $162.7 million, or $1.44 per diluted share/unit, for the comparable prior year period.





Disposition and Investment Activity
Asset Sales: The Company completed two asset sales during the second quarter for $149.3 million, at an average 7.8% trailing net operating income (“NOI”) capitalization rate. The Company will use proceeds from the asset sales for general corporate purposes.

In April 2017, the Company sold its leasehold interest in Hotel Triton in San Francisco, California for $14.3 million, which reflected a 7.8% trailing NOI capitalization rate.

In June 2017, the Company sold the Westin in Philadelphia, Pennsylvania for $135.0 million, which reflected a 7.8% trailing NOI capitalization rate, adjusted for the approximate impact of the Democratic National Convention in July 2016.

Capital Investments: During the quarter, the Company invested $24.7 million of capital in its hotels, of which the majority was for upcoming renovations at the end of 2017. The two largest projects upcoming are lifecycle rooms renovations at Westin Copley Place in Boston, Massachusetts and Paradise Point Resort & Spa in San Diego, California.

Balance Sheet and Capital Markets Activities
Balance Sheet Summary as of June 30, 2017: The Company had total outstanding debt of $1.1 billion, and total net debt to trailing 12 month Corporate EBITDA (as defined in the financial covenant section of the Company’s senior unsecured credit facility, adjusted for all cash and cash equivalents on its balance sheet) was 1.9 times. The Company’s fixed charge coverage ratio was 5.8 times, and its weighted average interest rate for the second quarter was 2.8%. The Company had capacity of $772.5 million available on its credit facilities, in addition to $461.4 million of cash and cash equivalents on its balance sheet.

Series H Preferred Share Redemption: On May 4, 2017, the Company redeemed all 2,750,000 of its issued and outstanding 7.5% Series H Cumulative Redeemable Preferred Shares. The cash redemption price for the shares was $25.00 per share, plus accrued and unpaid dividends through the redemption date.

Share Repurchase: The Company did not acquire any common shares during the second quarter of 2017 or to date during the third quarter of 2017.

Dividend
On June 15, 2017, the Company declared a second quarter 2017 dividend of $0.45 per common share of beneficial interest. The dividend represents an annual run rate of $1.80 per share and a 5.9% yield based on the closing share price on July 18, 2017.







Earnings Call
The Company will conduct its quarterly conference call on Thursday, July 20, 2017 at 11:00 AM eastern time. To participate in the conference call, please dial (877) 857-6163. Additionally, a live webcast of the conference call will be available through the Company’s website. A replay of the conference call webcast will also be archived and available online through the Investor Relations section of the Company’s website.

About LaSalle Hotel Properties
LaSalle Hotel Properties is a leading multi-operator real estate investment trust. The Company owns 41 properties, which are upscale, full-service hotels, totaling approximately 10,400 guest rooms in 11 markets in seven states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale, full-service hotels located in urban, resort and convention markets. LaSalle Hotel Properties seeks to grow through strategic relationships with premier lodging groups, including Hilton Hotels Corporation, Marriott International, Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, Two Roads Hospitality, Davidson Hotel Company, Kimpton Hotel & Restaurant Group, LLC, Accor, HEI Hotels & Resorts, JRK Hotel Group, Inc., Viceroy Hotel Group, Highgate Hotels, Access Hotels & Resorts, and Provenance Hotels.


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," “may,” “plan,” “seek,” “should,” or similar expressions. Forward-looking statements in this press release include, among others, statements about the Company’s asset management strategies, use of sale proceeds and capital expenditure program. 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) risks associated with the hotel industry, including competition for guests and meetings from other hotels and alternative lodging companies, increases in wages, energy costs and other operating costs, potential unionization or union disruption, actual or threatened terrorist attacks, any type of flu or disease-related pandemic and downturns in general and local economic conditions, (ii) the availability and terms of financing and capital and the general volatility of securities markets, (iii) the Company’s dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly, (iv) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act of 1990, as amended, and similar laws, (v) interest rate increases, (vi) the possible failure of the Company to maintain its qualification 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, (ix) the risk of a material failure, inadequacy, interruption or security failure of the Company’s or the hotel managers’ information technology networks and systems, and (x) 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.

# # #
Additional Contacts:
Kenneth G. Fuller or Max D. Leinweber - 301/941-1500
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 six months ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Hotel operating revenues:
 
 
 
 
 
 
 
Room
$
222,385

 
$
245,286

 
$
400,750

 
$
426,706

Food and beverage
59,308

 
79,025

 
111,612

 
135,372

Other operating department
22,118

 
24,457

 
42,485

 
45,100

Total hotel operating revenues
303,811

 
348,768

 
554,847

 
607,178

Other income
3,233

 
2,319

 
6,602

 
4,013

Total revenues
307,044

 
351,087

 
561,449

 
611,191

Expenses:
 
 
 
 
 
 
 
Hotel operating expenses:
 
 
 
 
 
 
 
Room
55,271

 
58,963

 
107,594

 
111,254

Food and beverage
40,132

 
49,994

 
79,280

 
92,902

Other direct
2,654

 
4,973

 
6,838

 
8,656

Other indirect
73,177

 
80,283

 
142,833

 
152,198

Total hotel operating expenses
171,234

 
194,213

 
336,545

 
365,010

Depreciation and amortization
44,066

 
48,841

 
91,329

 
96,469

Real estate taxes, personal property taxes and insurance
14,089

 
16,919

 
30,204

 
33,110

Ground rent
3,823

 
4,108

 
7,208

 
7,921

General and administrative
6,917

 
7,643

 
13,471

 
13,473

Other expenses
1,559

 
2,327

 
3,477

 
4,505

Total operating expenses
241,688

 
274,051

 
482,234

 
520,488

Operating income
65,356

 
77,036

 
79,215

 
90,703

Interest income
315

 
1,676

 
457

 
3,330

Interest expense
(9,423
)
 
(11,482
)
 
(19,250
)
 
(23,349
)
Loss from extinguishment of debt
0

 
0

 
(1,706
)
 
0

Income before income tax expense
56,248

 
67,230

 
58,716

 
70,684

Income tax expense
(5,003
)
 
(7,610
)
 
(230
)
 
(1,990
)
Income before gain on sale of properties
51,245

 
59,620

 
58,486

 
68,694

Gain on sale of properties
11,156

 
0

 
85,514

 
0

Net income
62,401

 
59,620

 
144,000

 
68,694

Net income attributable to noncontrolling interests:
 
 
 
 
 
 
 
Noncontrolling interests in consolidated entities
(8
)
 
(8
)
 
(8
)
 
(8
)
Noncontrolling interests of common units in Operating Partnership
(83
)
 
(81
)
 
(193
)
 
(96
)
Net income attributable to noncontrolling interests
(91
)
 
(89
)
 
(201
)
 
(104
)
Net income attributable to the Company
62,310

 
59,531

 
143,799

 
68,590

Distributions to preferred shareholders
(4,387
)
 
(4,355
)
 
(9,792
)
 
(7,397
)
Issuance costs of redeemed preferred shares
(2,401
)
 
0

 
(2,401
)
 
0

Net income attributable to common shareholders
$
55,522

 
$
55,176

 
$
131,606

 
$
61,193







LASALLE HOTEL PROPERTIES
Consolidated Statements of Operations and Comprehensive Income - Continued
(in thousands, except share data)
(unaudited)

 
For the three months ended
 
For the six months ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Earnings per Common Share - Basic:
 
 
 
 
 
 
 
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
$
0.49

 
$
0.49

 
$
1.16

 
$
0.54

Earnings per Common Share - Diluted:
 
 
 
 
 
 
 
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
$
0.49

 
$
0.49

 
$
1.16

 
$
0.54

Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
112,951,714

 
112,784,976

 
112,937,794

 
112,766,734

Diluted
113,342,151

 
113,113,253

 
113,347,580

 
113,119,556

 
 
 
 
 
 
 
 
Comprehensive Income:
 
 
 
 
 
 
 
Net income
$
62,401

 
$
59,620

 
$
144,000

 
$
68,694

Other comprehensive income:
 
 
 
 
 
 
 
Unrealized loss on interest rate derivative instruments
(1,675
)
 
(5,971
)
 
(551
)
 
(20,223
)
Reclassification adjustment for amounts recognized in net income
498

 
1,730

 
1,483

 
3,510

 
61,224

 
55,379

 
144,932

 
51,981

Comprehensive income attributable to noncontrolling interests:
 
 
 
 
 
 
 
Noncontrolling interests in consolidated entities
(8
)
 
(8
)
 
(8
)
 
(8
)
Noncontrolling interests of common units in Operating Partnership
(82
)
 
(76
)
 
(194
)
 
(75
)
Comprehensive income attributable to noncontrolling interests
(90
)
 
(84
)
 
(202
)
 
(83
)
Comprehensive income attributable to the Company
$
61,134

 
$
55,295

 
$
144,730

 
$
51,898








LASALLE HOTEL PROPERTIES
FFO and EBITDA
(in thousands, except share/unit data)
(unaudited)
 
 
For the three months ended
 
For the six months ended
 
 
June 30,
 
June 30,
 
 
2017
 
2016
 
2017
 
2016
Net income attributable to common shareholders
 
$
55,522

 
$
55,176

 
$
131,606

 
$
61,193

Depreciation
 
43,928

 
48,706

 
91,059

 
96,200

Amortization of deferred lease costs
 
91

 
82

 
170

 
162

Noncontrolling interests:
 
 
 
 
 
 
 
 
Noncontrolling interests in consolidated entities
 
8

 
8

 
8

 
8

Noncontrolling interests of common units in Operating Partnership
 
83

 
81

 
193

 
96

Less: Gain on sale of properties
 
(11,156
)
 
0

 
(85,514
)
 
0

FFO attributable to common shareholders and unitholders
 
$
88,476

 
$
104,053

 
$
137,522

 
$
157,659

Pre-opening, management transition and severance expenses
 
169

 
2,518

 
251

 
4,064

Issuance costs of redeemed preferred shares
 
2,401

 
0

 
2,401

 
0

Loss from extinguishment of debt
 
0

 
0

 
1,706

 
0

Non-cash ground rent
 
460

 
471

 
925

 
948

Adjusted FFO attributable to common shareholders and unitholders
 
$
91,506

 
$
107,042

 
$
142,805

 
$
162,671

Weighted average number of common shares and units outstanding:
 
 
 
 
 
 
 
 
Basic
 
113,096,937

 
112,930,199

 
113,083,017

 
112,911,957

Diluted
 
113,487,374

 
113,258,476

 
113,492,803

 
113,264,779

FFO attributable to common shareholders and unitholders per diluted share/unit
 
$
0.78

 
$
0.92

 
$
1.21

 
$
1.39

Adjusted FFO attributable to common shareholders and unitholders per diluted share/unit
 
$
0.81

 
$
0.95

 
$
1.26

 
$
1.44



 
For the three months ended
 
For the six months ended
 
 
June 30,
 
June 30,
 
 
2017
 
2016
 
2017
 
2016
Net income attributable to common shareholders
 
$
55,522

 
$
55,176

 
$
131,606

 
$
61,193

Interest expense
 
9,423

 
11,482

 
19,250

 
23,349

Loss from extinguishment of debt
 
0

 
0

 
1,706

 
0

Income tax expense
 
5,003

 
7,610

 
230

 
1,990

Depreciation and amortization
 
44,066

 
48,841

 
91,329

 
96,469

Noncontrolling interests:
 
 
 
 
 
 
 
 
Noncontrolling interests in consolidated entities
 
8

 
8

 
8

 
8

Noncontrolling interests of common units in Operating Partnership
 
83

 
81

 
193

 
96

Distributions to preferred shareholders
 
4,387

 
4,355

 
9,792

 
7,397

EBITDA
 
$
118,492

 
$
127,553

 
$
254,114

 
$
190,502

Pre-opening, management transition and severance expenses
 
169

 
2,518

 
251

 
4,064

Issuance costs of redeemed preferred shares
 
2,401

 
0

 
2,401

 
0

Gain on sale of properties
 
(11,156
)
 
0

 
(85,514
)
 
0

Non-cash ground rent
 
460

 
471

 
925

 
948

Adjusted EBITDA
 
$
110,366

 
$
130,542

 
$
172,177

 
$
195,514

Corporate expense
 
8,536

 
7,685

 
17,168

 
14,409

Interest and other income
 
(3,548
)
 
(3,777
)
 
(7,060
)
 
(7,126
)
Pro forma hotel level adjustments, net(1)
 
939

 
(13,566
)
 
(1,743
)
 
(18,724
)
Hotel EBITDA
 
$
116,293

 
$
120,884

 
$
180,542

 
$
184,073


(1) 
Pro forma excludes Mason & Rook Hotel for the period the hotel was closed for renovation during the first quarter of 2016 and the comparable period in 2017. Pro forma excludes Hotel Deca, Lansdowne Resort, Alexis Hotel and Hotel Triton due to their dispositions in 2017 and Indianapolis Marriott Downtown due to its disposition in July 2016. Westin Philadelphia is included for all periods presented.






LASALLE HOTEL PROPERTIES
Hotel Operational Data
Schedule of Property Level Results - Pro Forma(1) 
(in thousands)
(unaudited)

 
 
For the three months ended
 
For the six months ended
 
 
June 30,
 
June 30,
 
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
 
Room
 
$
222,261

 
$
225,827

 
$
391,260

 
$
394,045

Food and beverage
 
59,228

 
66,750

 
106,771

 
116,197

Other
 
22,728

 
20,338

 
40,833

 
38,263

Total hotel revenues
 
304,217

 
312,915

 
538,864

 
548,505

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Room
 
55,061

 
54,963

 
104,748

 
104,472

Food and beverage
 
40,298

 
43,693

 
76,015

 
82,109

Other direct
 
2,702

 
2,662

 
5,213

 
5,116

General and administrative
 
20,753

 
20,635

 
39,186

 
39,027

Information and telecommunications systems
 
4,059

 
4,022

 
8,284

 
7,970

Sales and marketing
 
20,046

 
20,088

 
38,423

 
38,209

Management fees
 
10,938

 
9,857

 
17,722

 
16,631

Property operations and maintenance
 
9,153

 
9,012

 
18,240

 
17,877

Energy and utilities
 
6,348

 
6,264

 
12,801

 
12,559

Property taxes
 
12,531

 
14,074

 
26,372

 
27,600

Other fixed expenses(2)
 
6,035

 
6,761

 
11,318

 
12,862

Total hotel expenses
 
187,924

 
192,031

 
358,322

 
364,432

 
 
 
 
 
 
 
 
 
Hotel EBITDA
 
$
116,293

 
$
120,884

 
$
180,542

 
$
184,073

 
 
 
 
 
 
 
 
 
Hotel EBITDA Margin
 
38.2
%
 
38.6
%
 
33.5
%
 
33.6
%

(1) 
This schedule includes the operating data for the three and six months ended June 30, 2017 for all properties owned by the Company as of June 30, 2017. Mason & Rook Hotel is excluded from the first quarter in both 2016 and 2017 because the hotel was closed for renovation during the entire first quarter of 2016. Pro forma excludes the results of operations of Hotel Deca, Lansdowne Resort, Alexis Hotel and Hotel Triton due to their dispositions in 2017 and Indianapolis Marriott Downtown due to its disposition in July 2016. Pro forma includes Westin Philadelphia.
(2) 
Other fixed expenses includes ground rent expense, but excludes ground rent payments for The Roger and Harbor Court in all periods due to the hotels being subject to capital leases of land and building under GAAP. At The Roger, the base ground rent payments were $100 and $199 for the three months and six months ended June 30, 2017 and 2016, respectively. At Harbor Court, the base and participating ground rent payments were $298 and $586 for the three and six months ended June 30, 2017, respectively, and $337 and $670 for the three and six months ended June 30, 2016, respectively. 








LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels - Pro Forma(1) 
(unaudited)

 
 
For the three months ended
 
For the six months ended
 
 
June 30,
 
June 30,
 
 
2017
 
2016
 
2017
 
2016
Total Portfolio
 
 
 
 
 
 
 
 
Occupancy
 
88.2
 %
 
89.1
%
 
83.0
 %
 
83.4
%
Decrease
 
(1.1
)%
 
 
 
(0.5
)%
 
 
ADR
 
$
257.86

 
$
259.23

 
$
244.36

 
$
243.72

(Decrease) Increase
 
(0.5
)%
 
 
 
0.3
 %
 
 
RevPAR
 
$
227.31

 
$
231.02

 
$
202.86

 
$
203.27

Decrease
 
(1.6
)%
 
 
 
(0.2
)%
 
 


 
For the three months ended June 30, 2017
 
For the six months ended June 30, 2017
Market Detail
RevPAR Variance %
 
Boston
5.8%
 
5.3%
 
Chicago
(5.1)%
 
(3.2)%
 
Key West
(2.9)%
 
(2.5)%
 
Los Angeles
(2.1)%
 
(6.7)%
 
New York
1.1%
 
(0.5)%
 
Other(2)
0.7%
 
2.3%
 
Philadelphia
4.6%
 
2.3%
 
San Diego Downtown
1.3%
 
4.5%
 
San Francisco
(14.2)%
 
(9.3)%
 
Washington, DC(3)
0.0%
 
8.3%
 
Total Portfolio
(1.6)%
 
(0.2)%
 
Total Portfolio Excluding San Francisco
0.8%
 
1.9%

(1) 
Pro forma excludes Mason & Rook Hotel for the period the hotel was closed for renovation during the first quarter of 2016 and the comparable period in 2017. Pro forma excludes Hotel Deca, Lansdowne Resort, Alexis Hotel and Hotel Triton due to their dispositions in 2017 and Indianapolis Marriott Downtown due to its disposition in July 2016. Pro forma includes Westin Philadelphia.
(2) 
Other includes The Heathman Hotel in Portland, OR, Chaminade Resort in Santa Cruz, CA, L’Auberge Del Mar in Del Mar, CA and The Hilton San Diego Resort and Paradise Point Resort in San Diego, CA.
(3) 
Mason & Rook Hotel is excluded for the period the hotel was closed for renovation during the first quarter of 2016 and the comparable period in 2017.








LASALLE HOTEL PROPERTIES
Statistical Data for the Hotels - Pro Forma(1) - Continued
(in millions)
(unaudited)


Prior Year Operating Data (Excluding Hotel Deca, Lansdowne Resort, Alexis Hotel, Hotel Triton, Westin Philadelphia and Indianapolis Marriott Downtown) - 2016 Comparable

 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Full Year
 
2016
 
2016
 
2016
 
2016
 
2016
Occupancy
77.6
%
 
89.1
%
 
90.1
%
 
80.8
%
 
84.4
%
ADR
$
226.48

 
$
259.75

 
$
253.38

 
$
244.77

 
$
246.91

RevPAR
$
175.67

 
$
231.49

 
$
228.31

 
$
197.81

 
$
208.49

 
 
 
 
 
 
 
 
 
 
Total hotel revenues
$
229.2

 
$
304.6

 
$
295.0

 
$
263.1

 
$
1,091.9

Less: Total hotel expenses
168.0

 
187.4

 
187.1

 
179.4

 
721.9

Hotel EBITDA
$
61.2

 
$
117.2

 
$
107.9

 
$
83.7

 
$
370.0

 
 
 
 
 
 
 
 
 
 
Hotel EBITDA Margin
26.7
%
 
38.5
%
 
36.6
%
 
31.8
%
 
33.9
%

Current Year Operating Data (Excluding Hotel Deca, Lansdowne Resort, Alexis Hotel, Hotel Triton and Westin Philadelphia) - 2017 Comparable

 
First Quarter
 
Second Quarter
 
2017
 
2017
Occupancy
77.8
%
 
88.0
%
ADR
$
229.92

 
$
257.94

RevPAR
$
178.81

 
$
226.87

 
 
 
 
Total hotel revenues
$
233.6

 
$
294.1

Less: Total hotel expenses
169.6

 
182.2

Hotel EBITDA
$
64.0

 
$
111.9

 
 
 
 
Hotel EBITDA Margin
27.4
%
 
38.0
%


(1) 
For prior year operating data, pro forma excludes the Mason & Rook Hotel during the first quarter for comparable purposes, due to the hotel being closed for renovation during the first quarter of 2016. Pro forma excludes the results of operations of Hotel Deca, Lansdowne Resort, Alexis Hotel, Hotel Triton and Westin Philadelphia due to their dispositions in 2017 and Indianapolis Marriott Downtown due to its disposition in July 2016.
For current year operating data, pro forma excludes the results of operations of Hotel Deca, Lansdowne Resort, Alexis Hotel, Hotel Triton and Westin Philadelphia due to their dispositions in 2017.









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.
 
The White Paper on FFO approved by NAREIT in April 2002, as revised in 2011, defines FFO as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of properties and items classified by GAAP as extraordinary, plus real estate-related depreciation and amortization and impairment writedowns, and after comparable adjustments for the Company’s portion of these items related to unconsolidated entities and joint ventures. The Company computes FFO consistent with standards established by NAREIT, which 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 the Company.
With respect to FFO, the Company believes that excluding the effect of extraordinary items, real estate-related depreciation and amortization and impairments, and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of limited significance in evaluating current performance, can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. However, FFO may not be helpful when comparing the Company to non-REITs.
With respect to EBITDA, the Company believes that excluding the effect of non-operating expenses and non-cash charges, and the portion of these items related to unconsolidated entities, all of which are also based on historical cost accounting and may be of limited significance in evaluating current performance, can help eliminate the accounting effects of depreciation and amortization, and financing decisions and facilitate comparisons of core operating profitability between periods and between REITs, even though EBITDA also does not represent an amount that accrues directly to common shareholders.
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. The Company believes property-level results provide investors with supplemental information on the ongoing operational performance of its hotels and effectiveness of the third-party management companies operating its business on a property-level basis.
FFO, EBITDA and hotel EBITDA do not represent cash generated from operating activities as determined by GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO, EBITDA and hotel EBITDA are not measures of the Company’s liquidity, nor are FFO, EBITDA and hotel EBITDA indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO, EBITDA and hotel EBITDA may include funds that may not be available for management’s discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of the Company’s operating performance.
Adjusted FFO and Adjusted EBITDA
The Company presents adjusted FFO (including adjusted FFO per share/unit) and adjusted EBITDA, which adjusts for certain additional items including gains on sale of property and impairment losses (to the extent included in EBITDA), acquisition transaction costs, costs associated with the departure of executive officers, costs associated with the recognition of issuance costs related to the calling of preferred shares and certain other items. The Company excludes these items as it believes it allows for meaningful comparisons with other REITs and between periods and is more indicative of the ongoing performance of its assets. As with FFO, EBITDA, and hotel EBITDA, the Company’s calculation of adjusted FFO and adjusted EBITDA may be different from similar adjusted measures calculated by other REITs.
Trailing NOI Capitalization Rate
The Company calculates the weighted average capitalization rate by dividing the aggregate trailing 12-month net operating income of the subject hotels by the aggregate sales prices for such hotels. The Company defines net operating income as hotel revenues (room and other hotel operating revenues) less hotel expenses (hotel operating expenses, real estate and personal property taxes, insurance, ground rent, FF&E reserve, and other hotel expenses).