LaSalle Hotel Properties Reports Third Quarter Results

October 21, 2009 4:35 PM EDT

Company Reports 30.8 Percent Hotel EBITDA Margin for the Quarter

BETHESDA, Md.--(BUSINESS WIRE)-- LaSalle Hotel Properties (NYSE: LHO) today reported net income to common shareholders of $3.4 million, or $0.05 per diluted share for the quarter ended September 30, 2009 compared to net income of $12.5 million, or $0.30 per diluted share for the third quarter of 2008.

For the quarter ended September 30, 2009, the Company generated funds from operations ("FFO") of $30.7 million versus $39.9 million for the third quarter of 2008. On a per diluted share basis, FFO for the third quarter was $0.49, compared to $0.99 for the same period of 2008.

The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for the third quarter of 2009 were $48.4 million as compared to $60.0 million for the third quarter of 2008.

Room revenue per available room ("RevPAR") in the third quarter of 2009 was $132.82, which was a decrease of 19.7 percent compared to the same period of 2008. Average daily rate ("ADR") declined 17.6 percent from the third quarter of 2008 to $167.36, while occupancy fell 2.5 percent to 79.4 percent.

"While 2009 continues to be an incredibly challenging year, it appears that the pace of demand deterioration has begun to ease," stated Michael Barnello, President and Chief Executive Officer of LaSalle Hotel Properties. "Despite meaningful decreases in our revenues in the quarter and during the year, our management team and our operators have worked diligently to control expenses and limit margin erosion."

The Company's hotels generated $49.5 million of EBITDA for the quarter ended September 30, 2009 compared with $67.0 million for the same period of 2008. Hotel revenues declined 16.8 percent while hotel expenses were reduced by 11.9 percent. As a result, the hotel EBITDA margin was 30.8 percent for the quarter ended September 30, 2009, which is a decline of 388 basis points compared to the same period last year.

As of September 30, 2009, the Company had total outstanding debt of $660.2 million and the Company had no outstanding balance on its senior unsecured credit facility. Total debt to trailing 12 month Corporate EBITDA (as defined in the Company's senior unsecured credit facility) equaled 3.8 times as of September 30, 2009. For the quarter, the Company's weighted average interest rate was 5.1 percent. As of September 30, 2009, based on the Company's covenants under its senior unsecured credit facility, the Company's EBITDA to interest coverage ratio was 4.2 times and its fixed charge coverage ratio was 2.1 times. At the end of the third quarter, the Company had $23.3 million of cash and cash equivalents on its balance sheet and an aggregate of $470.5 million available on its credit facilities.

For the nine months ended September 30, 2009, the Company reported a net loss to common shareholders of $7.2 million compared to net income of $18.2 million for the same period of 2008. For the nine months ended September 30, 2009, FFO was $74.9 million, or $1.45 per diluted share compared to $97.1 million, or $2.41 per diluted share for the same period of 2008. For the nine months ended September 30, 2009, net income and FFO included $5.7 million of after-tax income related to the recognition of prior termination cure payments from the previous manager of the Company's Seaview Resort and a $1.0 million fee for exchanging 2,348,888 7.25% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest for 2,348,888 7.25% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest (the "Preferred Share Exchange").

EBITDA for the nine months ended September 30, 2009 decreased to $129.2 million from $155.0 million for the nine months ended September 30, 2008. For the nine months ended September 30, 2009, EBITDA included $9.5 million of pre-tax income related to the recognition of prior termination cure payments and the $1.0 million fee related to the Preferred Share Exchange.

RevPAR decreased 18.8 percent for the nine months ended September 30, 2009 to $123.98 versus the same prior year period. ADR declined 14.0 percent from the nine months ended September 30, 2008 to $173.00, while occupancy fell 5.5 percent to 71.7 percent during the same period.

For the nine months ended September 30, 2009, the Company's hotels generated $125.4 million of EBITDA compared with $167.9 million for the same period last year. During the nine months ended September 30, 2009, hotel revenues declined 16.1 percent, while hotel expenses were reduced by 11.9 percent. As a result, the hotel EBITDA margin was 28.2 percent for the nine months ended September 30, 2009 and was limited to a decline of 346 basis points compared to the same period last year.

Third Quarter Highlights

On September 14, 2009, the Company announced that Michael D. Barnello was named as its Chief Executive Officer pursuant to the previously announced succession plan, which was accelerated after Jon E. Bortz resigned September 13, 2009. Additionally, Alfred L. Young was appointed Chief Operating Officer of the Company effective November 3, 2009 and Lead Trustee Stuart L. Scott was named acting Chairman of the Board.

On September 15, 2009, the Company announced a quarterly dividend of $0.01 per common share for the third quarter of 2009. The third quarter dividend was paid on October 15, 2009 to common shareholders of record on September 30, 2009.

2009 Outlook

Due to uncertain general economic conditions and the lack of visibility related to the economy, travel industry and our business, the Company remains unable to provide a full outlook for 2009 at this time. However, the Company expects the year to continue to be difficult and forecasts the following for 2009:

    --  Average outstanding fully diluted shares of 54.6 million;
    --  Interest expense of $38.0 million to $39.0 million including $1.0
        million in amortization of deferred financing costs ($38.6 million to
        $39.6 million excluding the effect of $0.6 million of capitalized
        interest);
    --  Preferred dividends of $26.4 million and preferred unit distributions of
        $0.4 million; and
    --  General and administrative expenses of $14.8 million to $15.2 million,
        including $4.0 million of non-cash expense.

Earnings Call

The Company will conduct its quarterly conference call on Thursday, October 22, 2009 at 9:00 AM EDT. To participate in the conference call, please dial (800) 347-6109. Additionally, a live webcast of the conference call will be available through the Company's website. To access, log on to http://www.lasallehotels.com. A replay of the conference call will be archived and available online through the Investor Relations section of http://www.lasallehotels.com.

LaSalle Hotel Properties is a leading multi-operator real estate investment trust owning 31 upscale full-service hotels, totaling approximately 8,500 guest rooms in 14 markets in 11 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 companies, including Westin Hotels and Resorts, Sheraton Hotels & Resorts Worldwide, Inc., Hilton Hotels Corporation, Outrigger Lodging Services, Noble House Hotels & Resorts, Hyatt Hotels Corporation, Benchmark Hospitality, White Lodging Services Corporation, Gemstone Hotels & Resorts, LLC, Thompson Hotels, Sandcastle Resorts & Hotels, Davidson Hotel Company, Denihan Hospitality Group, Dolce Hotels and Resorts and the Kimpton Hotel & Restaurant Group, LLC.

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 "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. Forward-looking statements in this press release include, among others, statements about diluted shares outstanding, interest expense, preferred dividends and distributions and general and administrative expenses. 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

(Dollars in thousands, except per share data)

(unaudited)

                          For the three months ended   For the nine months ended

                          September 30,                September 30,

                          2009         2008            2009         2008

Revenues:

Hotel operating
revenues:

Room                      $ 103,791    $ 127,245       $ 287,476    $ 334,946

Food and beverage           43,270       49,082          125,952      133,498

Other operating             14,367       15,766          37,133       39,655
department

Total hotel operating       161,428      192,093         450,561      508,099
revenues

Participating lease         -            1,393           -            11,957
revenue

Other income                1,279        2,120           14,480       6,160

Total revenues              162,707      195,606         465,041      526,216

Expenses:

Hotel operating
expenses:

Room                        24,922       27,790          69,770       76,638

Food and beverage           29,501       32,761          86,050       90,631

Other direct                6,512        7,071           17,044       18,399

Other indirect              40,921       48,653          121,543      134,739

Total hotel operating       101,856      116,275         294,407      320,407
expenses

Depreciation and            27,290       27,372          82,331       78,932
amortization

Real estate taxes,
personal property taxes     7,964        7,098           23,653       25,764
and insurance

Ground rent                 1,890        2,241           4,891        5,786

General and                 2,296        5,108           10,822       12,936
administrative

Lease termination           -            4,269           -            4,269
expense

Other expenses              292          650             2,088        2,154

Total operating expenses    141,588      163,013         418,192      450,248

Operating income            21,119       32,593          46,849       75,968

Interest income             14           20              43           129

Interest expense            (9,172  )    (12,379 )       (28,919 )    (36,210 )

Income before income tax    11,961       20,234          17,973       39,887
expense

Income tax expense          (1,831  )    (767    )       (5,135  )    (650    )

Net income                  10,130       19,467          12,838       39,237

Noncontrolling
interests:

Redeemable
noncontrolling interest     2            6               21           11
in loss of consolidated
entity

Noncontrolling interest
of common units in          (13     )    (53     )       (22     )    (106    )
Operating Partnership

Noncontrolling interest
of preferred units in       -            (1,262  )       (367    )    (4,021  )
Operating Partnership

Net income attributable
to noncontrolling           (11     )    (1,309  )       (368    )    (4,116  )
interests

Net income attributable     10,119       18,158          12,470       35,121
to the Company

Distributions to            (6,688  )    (5,625  )       (19,699 )    (16,873 )
preferred shareholders

Net income (loss)
attributable to common    $ 3,431      $ 12,533        $ (7,229  )  $ 18,248
shareholders

LASALLE HOTEL PROPERTIES

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(unaudited)

                           For the three months ended  For the nine months ended

                           September 30,               September 30,

                           2009        2008            2009        2008

Earnings per Common Share
- Basic:

Net income (loss)
attributable to common
shareholders excluding     $ 0.05      $ 0.30          $ (0.14)    $ 0.44
amounts attributable to
unvested restricted
shares

Earnings per Common Share
- Diluted:

Net income (loss)
attributable to common
shareholders excluding     $ 0.05      $ 0.30          $ (0.14)    $ 0.44
amounts attributable to
unvested restricted
shares

Weighted average number
of common shares
outstanding:

Basic                      63,002,718  40,264,498      51,590,702  40,035,102

Diluted                    63,078,201  40,350,444      51,667,101  40,152,485

LASALLE HOTEL PROPERTIES

FFO and EBITDA

(Dollars in thousands, except share data)

(unaudited)

                 For the three months ended       For the nine months ended

                 September 30,                    September 30,

                 2009            2008             2009            2008

Net income
(loss)
attributable to  $ 3,431         $ 12,533         $ (7,229     )  $ 18,248
common
shareholders

Depreciation       27,107          27,042           81,797          78,205

Amortization of
deferred lease     109             287              309             591
costs

Noncontrolling
interests:

Redeemable
noncontrolling
interest in        (2         )    (6         )     (21        )    (11        )
consolidated
entity

Noncontrolling
interest of
common units in    13              53               22              106
Operating
Partnership

FFO              $ 30,658        $ 39,909         $ 74,878        $ 97,139

Weighted
average number
of common
shares and
units
outstanding:

Basic              63,060,196      40,368,028       51,656,483      40,138,632

Diluted            63,135,679      40,453,974       51,732,882      40,256,015

                 For the three months ended       For the nine months ended

                 September 30,                    September 30,

                 2009            2008             2009            2008

Net income
(loss)
attributable to  $ 3,431         $ 12,533         $ (7,229     )  $ 18,248
common
shareholders

Interest           9,172           12,379           28,919          36,210
expense

Income tax         1,831           767              5,135           650
expense

Depreciation
and                27,290          27,372           82,331          78,932
amortization

Noncontrolling
interests:

Redeemable
noncontrolling
interest in        (2         )    (6         )     (21        )    (11        )
consolidated
entity

Noncontrolling
interest of
common units in    13              53               22              106
Operating
Partnership

Noncontrolling
interest of
preferred units    -               1,262            367             4,021
in Operating
Partnership

Distributions
to preferred       6,688           5,625            19,699          16,873
shareholders

EBITDA           $ 48,423        $ 59,985         $ 129,223       $ 155,029

Corporate          2,832           10,090           13,026          20,349
expense

Interest and       (1,293     )    (2,140     )     (14,523    )    (6,289     )
other income

Participating
lease              -               52               -               482
adjustments,
net

Hotel level
adjustments,       (445       )    (960       )     (2,368     )    (1,714     )
net

Hotel EBITDA     $ 49,517        $ 67,027         $ 125,358       $ 167,857

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 for the three and nine months ended September 30, 2008 includes
the operating data for all properties leased to LHL and to third parties for
the three and nine months ended September 30, 2008. For the three and nine
months ended September 30, 2009, all properties were leased to LHL. Hotel
EBITDA includes adjustments made for periods when hotels were closed for
renovations for presentation of comparable information.

LASALLE HOTEL PROPERTIES

Hotel Operational Data

Schedule of Property Level Results

(Dollars in thousands)

(unaudited)

                         For the three months ended  For the nine months ended

                         September 30,               September 30,

                         2009       2008             2009       2008

Revenues

Room                     $ 103,793  $ 128,799        $ 284,667  $ 350,732

Food and beverage        43,270     49,368           125,639    141,004

Other                    13,708     15,090           34,769     39,059

Total hotel revenues     160,771    193,257          445,075    530,795

Expenses

Room                     24,923     28,306           69,071     80,062

Food and beverage        29,501     32,801           85,718     94,433

Other direct             6,341      6,929            16,614     18,625

General and              11,894     14,334           35,873     42,256
administrative

Sales and marketing      10,583     12,747           32,229     37,637

Management fees          5,984      8,100            16,043     19,417

Property operations and  5,910      6,574            17,256     19,626
maintenance

Energy and utilities     5,682      6,376            16,464     17,878

Property taxes           7,097      6,583            21,364     23,103

Other fixed expenses     3,339      3,480            9,085      9,901

Total hotel expenses     111,254    126,230          319,717    362,938

Hotel EBITDA             $ 49,517   $ 67,027         $ 125,358  $ 167,857

Note:

This schedule includes the operating data for all properties leased to LHL as
of September 30, 2009, excluding the Donovan House for the first quarter (as it
was not open during the first quarter of 2008) and Chaminade Resort, which is
excluded from January (closed for renovations in January 2008).

LASALLE HOTEL PROPERTIES

Statistical Data for the Hotels

(unaudited)

                       For the three months ended   For the nine months ended

                       September 30,                September 30,

                       2009         2008            2009         2008

 Total Portfolio

 Occupancy               79.4   %     81.4   %        71.7   %     75.8   %

 Increase/(Decrease)     (2.5   %)                    (5.5   %)

 ADR                   $ 167.36     $ 203.19        $ 173.00     $ 201.20

 Increase/(Decrease)     (17.6  %)                    (14.0  %)

 RevPAR                $ 132.82     $ 165.32        $ 123.98     $ 152.60

 Increase/(Decrease)     (19.7  %)                    (18.8  %)

Note:

This schedule includes the operating data for all properties leased to LHL as of
September 30, 2009, excluding the Donovan House for the first quarter (as it was
not open during the first quarter of 2008) and Chaminade Resort, which is
excluded from January (closed for renovations in January 2008).

LASALLE HOTEL PROPERTIES

Statistical Data for the Hotels

(unaudited)

Prior Year Operating Data

            First Quarter  Second   Third Quarter  Fourth Quarter  Full Year
                           Quarter

            2008           2008     2008           2008            2008

Occupancy   64.8%          81.0%    81.4%          64.7%           73.0%

ADR         $182.12        $213.97  $203.19        $193.46         $199.45

RevPAR      $117.94        $173.40  $165.32        $125.19         $145.61

Note:

This schedule includes historical operating data for the owned hotels open and
operating as of December 31, 2008 (excludes the Donovan House for the first
quarter and Chaminade Resort for January, as these properties were closed for
renovations during those periods in 2008).

    Source: LaSalle Hotel Properties

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