RLJ Lodging Trust Reports Third Quarter 2011 Results

RLJ Lodging Trust (NYSE: RLJ) today reported results for the quarter ended September 30, 2011.

“We are very pleased by the overall performance of our portfolio as we continue to demonstrate the resilience of our portfolio and the effectiveness of our asset management team”

This press release presents data combining the financial and operating results of the Company’s predecessor entity prior to the consummation of the Company’s initial public offering (“IPO”) and the results of the Company post-IPO. The Company completed its IPO and related formation transactions on May 16, 2011.

Third Quarter Highlights

• Pro forma RevPAR increased 8.0%, ADR increased 4.5% and occupancy increased 3.3%
• Pro forma Hotel EBITDA margin increased 109 basis points to 33.8%
• Declared a quarterly cash dividend of $0.15, or $0.60 on an annualized basis
• Net income attributable to common shareholders for the quarter ended September 30, 2011, was $31.3 million

“We are very pleased by the overall performance of our portfolio as we continue to demonstrate the resilience of our portfolio and the effectiveness of our asset management team,” commented Thomas J. Baltimore, Jr., President and Chief Executive Officer. “We posted solid results once again and are performing in-line with the expectations we have communicated, despite the uncertain economic times. As we continue to execute on our strategic plan and as we begin to realize the benefits of our recent renovations and conversions, we are confident in our ongoing growth.”

Financial and Operating Results

Pro forma RevPAR, Hotel EBITDA, and Hotel EBITDA margins include hotel results from prior ownership periods and exclude hotels not open for operation or closed for renovations for comparable periods. Actual results for the three and nine months ended September 30, 2011, reflect New York LaGuardia Airport Marriott in discontinued operations. An explanation of EBITDA, Adjusted EBITDA, FFO, Adjusted FFO and Hotel EBITDA, as well as reconciliations of those measures to net income or loss, if applicable, is included at the end of this release.

Pro forma room revenue per available room (“RevPAR”) for the quarter increased 8.0% over the comparable period in 2010, driven by an average daily rate (“ADR”) increase of 4.5% and an occupancy increase of 3.3%. Amongst the Company’s top performers in the quarter were New York and Washington DC/Baltimore, which experienced RevPAR growth of 16.2% and 8.8%, respectively. For the nine months ended September 30, 2011, RevPAR increased 8.4% over the comparable period in 2010.

Pro forma Hotel EBITDA margin for the quarter increased 109 basis points to 33.8%. For the nine months ended September 30, 2011, Hotel EBITDA margin increased 183 basis points to 33.5% over the comparable period in 2010.

Pro forma Hotel EBITDA for the quarter increased $6.5 million to $66.6 million, representing a 10.9% increase over the comparable period in 2010. For the nine months ended September 30, 2011, pro forma Hotel EBITDA, increased $23.0 million to $190.2 million, representing a 13.8% increase over the comparable period in 2010. Pro forma Consolidated Hotel EBITDA, which includes the results of non-comparable hotels, was $66.6 million and $191.1 million for the three and nine months ending September 30, 2011, respectively.

Adjusted EBITDA for the quarter increased $17.3 million to $61.9 million, representing a 38.8% increase over the comparable period in 2010. For the nine months ended September 30, 2011, Adjusted EBITDA increased $62.3 million to $176.7 million, representing a 54.4% increase over the comparable period in 2010.

Adjusted FFO for the quarter was $39.4 million, compared to $22.7 million, in the comparable period in 2010. For the nine months ended September 30, 2011, Adjusted FFO was $104.1 million compared to $49.1 million in the comparable period in 2010.

Non-recurring expenses for the quarter were de minimis. For the nine months ended September 30, 2011, non-recurring expenses include: $10.3 million related to IPO expenses, $4.3 million of expenses associated with the extinguishment of $472.6 million of debt, and $1.4 million of expenses relating to the predecessor entity. These expenses are included in net income, EBITDA and FFO, but have been excluded from Adjusted EBITDA and Adjusted FFO, as applicable.

Net income attributable to common shareholders for the quarter ended September 30, 2011, was $31.3 million, compared to a net loss of $8.5 million in the comparable period in 2010. For the nine months ended September 30, 2011, net income attributable to common shareholders was $12.6 million compared to a net loss attributable to common shareholders of $12.2 million in the comparable period in 2010. The three and nine months ended September 30, 2011, includes $23.5 million of gain associated with the deed in lieu transfer of the New York LaGuardia Airport Marriott. The nine months ended September 30, 2010, include $23.7 million in gains associated with the sale of six hotels.

Net cash flow provided by operating activities totaled $90.6 million for the nine months ended September 30, 2011, compared to $47.0 million for the nine months ended September 30, 2010.

Capital Expenditures

In 2011, the Company authorized renovation projects totaling $115.0 million. The 2011 capital improvement program is largely focused on upgrading and/or repositioning 24 hotels acquired in 2010 and 2011, including seven brand conversions. The balance of the renovations will include brand related upgrades at other select hotels.

During the third quarter, the Company initiated approximately $19.0 million of renovation projects, bringing the amount of released capital to a total of approximately $72.0 million year-to-date. The Company expects to release the remaining capital in the fourth quarter.

Balance Sheet and Capital Structure

As of September 30, 2011, the Company had $368.5 million of cash on its balance sheet. The outstanding debt balance as of September 30, 2011, was approximately $1.3 billion. The Company’s ratio of net debt to trailing twelve month (“TTM”) Adjusted EBITDA was 4.3 times.

There was no outstanding balance on the Company’s $300.0 million unsecured credit facility as of September 30, 2011.

Dividends

The Company’s Board of Trustees declared a cash dividend of $0.15 per common share of beneficial interest, payable on October 14, 2011, to shareholders of record, as of September 30, 2011.

Subsequent Events

On October 21, 2011, the Company refinanced a $140.0 million term loan, which was scheduled to mature in November 2011. In its place, the Company structured five independent first mortgage loans totaling $142.0 million. The base term for each mortgage is interest only and bears a floating rate of LIBOR plus 360 basis points. The term of the new loans is three years with two, one-year extension options.

On October 27, 2011, the Company acquired the 176-room Courtyard by Marriott Charleston Historic District for a purchase price of $42.0 million from Noble Investment Group. The purchase price represents a cost of approximately $239,000 per key, which is a substantial discount to replacement cost, and an 8.3% forward 12 month capitalization rate. The Company purchased this asset with cash available on its balance sheet.

On November 4, 2011, the Company's Board of Trustees authorized a share repurchase program to acquire up to $100.0 million of the Company's common shares.

2011 Outlook

The Company is reaffirming its previously issued guidance. These estimates reflect management’s view of current market conditions. The Company’s outlook excludes the New York LaGuardia Airport Marriott and the Company’s recent acquisition of the Courtyard by Marriott Charleston Historic District. It also excludes potential future acquisitions and dispositions, which could result in a change in the Company’s outlook. For the full year 2011, the Company anticipates:

• Pro forma RevPAR growth between 7.0% and 9.0%
• Pro forma Consolidated Hotel EBITDA between $249.0 million and $261.0 million
• Pro forma Hotel EBITDA margin between 33.0% and 34.0%
• Corporate cash G&A expenses between $19.0 million and $20.0 million

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust focused on acquiring premium-branded, focused service and compact full-service hotels. The Company’s portfolio consists of 141 hotels in 20 states and the District of Columbia, with a total of more than 20,600 rooms. 

 

RLJ Lodging Trust
Combined Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
(unaudited)
			September 30,					December 31,
				2011					2010
Assets
Investment in hotel properties, net			$	2,760,784				$	2,626,690
Investment in loans				12,685					12,840
Property and equipment, net				1,147					1,585
Cash and cash equivalents				368,461					267,454
Restricted cash reserves				89,590					70,520
Hotel receivables, net of allowance of $246 and $406, respectively				27,299					19,556
Deferred financing costs, net				8,628					9,298
Deferred income tax asset				1,453					799
Prepaid expense and other assets				28,583					37,082
Total assets			$	3,298,630				$	3,045,824
Liabilities and Owners' Equity
Mortgage loans			$	1,202,817				$	1,747,077
Term loan				140,000					-
Interest rate swap liability				2,326					3,820
Accounts payable and accrued expense				78,095					60,973
Deferred income tax liability				1,453					799
Advance deposits and deferred revenue				4,995					5,927
Accrued interest				2,099					3,495
Distributions payable				16,079					-
Total liabilities				1,447,864					1,822,091
Equity
Partners' capital
Fund II general partner				-					(13,409	)
Fund II limited partners				-					433,013
Fund III general partner				-					(23,328	)
Fund III limited partners				-					811,918
Members' capital
Class A members				-					6,592
Class B members				-					4,751
Fund II - Series A preferred units, no par value, 12.5%, 250 units authorized, issued and outstanding at May 16, 2011 and December 31, 2010, respectively				-					189
Fund III - Series A preferred units, no par value, 12.5%, 250 units authorized, issued and outstanding at May 16, 2011 and December 31, 2010, respectively				-					190
Accumulated other comprehensive loss				(2,312	)				(3,806	)
Shareholders' equity:
Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized; zero shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively				-					-
Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 106,300,067 and zero shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively				1,063					-
Additional paid-in-capital				1,835,041					-
Distributions in excess of net earnings				(1,745	)				-
Total shareholders' equity				1,834,359					-
Noncontrolling interest
Noncontrolling interest in joint venture				7,068					7,623
Noncontrolling interest in Operating Partnership				11,651					-
Total noncontrolling interest				18,719					7,623
Total equity				1,850,766					1,223,733
Total liabilities and equity			$	3,298,630				$	3,045,824

RLJ Lodging Trust
Combined Consolidated Statements of Operations
(Amounts in thousands, except share and per share data)
(unaudited)
		For the three months ended												For the nine months ended
		September 30,												September 30,
			2011						2010						2011						2010
Revenue
Hotel operating revenue
Room revenue			$	172,589					$	119,134					$	495,217					$	327,672
Food and beverage revenue				19,497						13,870						59,664						41,749
Other operating department revenue				5,165						3,448						14,810						9,394
Total revenue				197,251						136,452						569,691						378,815
Expense
Hotel operating expense
Room				39,012						25,304						110,753						70,278
Food and beverage				13,479						9,443						41,767						28,016
Management fees				6,755						4,828						19,519						13,497
Other hotel expenses				59,559						41,532						172,744						115,948
Total hotel operating expense				118,805						81,107						344,783						227,739
Depreciation and amortization				29,026						24,422						91,479						70,465
Property tax, insurance and other				12,463						9,677						35,951						27,417
General and administrative				6,329						4,647						17,504						14,547
Transaction and pursuit costs				282						5,455						3,614						7,438
IPO Costs				89						-						10,333						-
Total operating expense				166,994						125,308						503,664						347,606
Operating income				30,257						11,144						66,027						31,209
Other income				518						177						742						411
Interest income				424						2,730						1,264						2,889
Interest expense				(21,664	)					(21,580	)					(75,415	)					(64,760	)
Income (Loss) from continuing operations before income taxes				9,535						(7,529	)					(7,382	)					(30,251	)
Income tax expense				(858	)					(382	)					(1,546	)					(898	)
Income (Loss) from continuing operations				8,677						(7,911	)					(8,928	)					(31,149	)
Income (loss) from discontinued operations				22,970						(619	)					21,838						19,034
Net income (loss)				31,647						(8,530	)					12,910						(12,115	)
Net loss (income) attributable to non-controlling interests
Noncontrolling interest in joint venture				(22	)					-						55						-
Noncontrolling interest in common units of Operating Partnership				(306	)					-						(285	)					-
Net income (loss) attributable to the Company				31,319						(8,530	)					12,680						(12,115	)
Distributions to preferred unitholders				-						(16	)					(61	)					(48	)
Net income (loss) attributable to common shareholders			$	31,319					$	(8,546	)				$	12,619					$	(12,163	)
Basic and diluted per common share data:
Net income (loss) per share attributable to common shareholders before discontinued operations - basic and diluted			$	0.08											$	(0.10	)
Discontinued operations				0.22												0.24
Net income per share attributable to common shareholders - basic and diluted			$	0.30											$	0.14
Weighted-average number of common shares - basic and diluted				105,228,305												89,316,830

RLJ Lodging Trust
Reconciliation of Net Income (Loss) to Non-GAAP Measures
(Amounts in thousands)
(unaudited)
FFO and Adjusted FFO
			For the three months ended								For the nine months ended
			September 30,								September 30,
			2011				2010				2011				2010
Net income (loss)			$	31,647			$	(8,530	)		$	12,910			$	(12,115	)
Depreciation and amortization				29,026				24,422				91,479				70,465
Distributions to preferred unitholders				-				(16	)			(61	)			(48	)
(Income) loss from discontinued operations				(22,970	)			619				(21,838	)			(19,034	)
Noncontrolling interest in joint venture				(22	)							55
FFO				37,681				16,495				82,545				39,268
Transaction and pursuit costs				282				5,455				3,614				7,438
IPO costs (1)				89				-				10,333				-
Amortization of share based compensation				1,322				-				1,962				-
Nonrecurring expenses (2)(3)				-				782				5,665				2,345
Adjusted FFO			$	39,374			$	22,732			$	104,119			$	49,051

(1) Includes nonrecurring expenses for the transfer and assumption of indebtedness and other contractual obligations of the RLJ predecessor.

(2) Includes zero and $4.3 million, for the three and nine months ended September 30, 2011, respectively, of incremental interest expense related to the accelerated payoff of mortgage indebtedness.

(3) Includes zero and $1.4 million, for the three and nine months ended September 30, 2011 and $0.8 million and $2.3 million for the three and nine months ended September 30, 2010 of certain general and administrative expenses of the RLJ predecessor.

RLJ Lodging Trust
Reconciliation of Net Income (Loss) to Non-GAAP Measures
(Amounts in thousands)
(unaudited)
EBITDA, Adjusted EBITDA, and Pro Forma Hotel EBITDA
			For the three months ended								For the nine months ended
			September 30,								September 30,
				2011				2010				2011				2010
Net income (loss)			$	31,647			$	(8,530	)		$	12,910			$	(12,115	)
Depreciation and amortization				29,026				24,422				91,479				70,465
Distributions to preferred unitholders				-				(16	)			(61	)			(48	)
Interest expense, net (1)(2)				21,651				21,468				75,371				64,489
Income tax expense				858				382				1,546				898
Noncontrolling interest in joint venture				(22	)			-				55				-
EBITDA				83,160				37,726				181,300				123,689
Transaction and pursuit costs				282				5,455				3,614				7,438
IPO Costs (2)				89				-				10,333				-
(Income) loss from discontinued operations				(22,970	)			619				(21,838	)			(19,034	)
Amortization of share based compensation				1,322				-				1,962				-
Nonrecurring expenses (3)				-				782				1,363				2,345
Adjusted EBITDA			$	61,883			$	44,582			$	176,734			$	114,438
General and administrative (4)				5,007				3,865				14,179				12,202
Other Income/Interest Income				(929	)			(2,795	)			(1,962	)			(3,029	)
Corporate Overhead allocated to properties				345				161				641				343
Distributions to preferred unitholders				-				16				61				48
Noncontrolling interest in joint venture				22				-				(55	)			-
Pro forma adjustments (5)				-				14,014				777				42,750
Management fee non-cash amortization				250				250				750				750
Pro forma Consolidated Hotel EBITDA			$	66,578			$	60,093			$	191,125			$	167,502
Non-comparable hotels (6)				36				-				(883	)			(291	)
Pro forma Hotel EBITDA			$	66,614			$	60,093			$	190,242			$	167,211

(1) Excludes amounts attributable to investment in loans of $411 and $1.2 million for the three and nine months ended September 30, 2011 and $2.6 million for both the three and nine months ended September 30, 2010, respectively.

(2) Includes nonrecurring expenses for the transfer and assumption of indebtedness and other contractual obligations of the RLJ predecessor.

(3) Includes zero and $1.4 million, for the three and nine months ended September 30, 2011 and $0.8 million and $2.3 million for the three and nine months ended September 30, 2010 of certain general and administrative expenses of the RLJ predecessor.

(4) General and administrative expenses exclude nonrecurring expenses and amortization of share based compensation, which are reflected in Adjusted EBITDA.

(5) Reflects adjustments made to incorporate prior ownership periods for new acquisitions

(6) Adjustments to reflect properties closed for renovations and properties not open for operation.

RLJ Lodging Trust
Pro forma Operating Statistics
For the three months ended September 30,
				ADR									Occupancy									RevPAR									% of EBITDA
Market		# of Hotels			2011			2010		Var			2011			2010			Var				2011			2010		Var			2011
NYC		4		$	233.73		$	208.96		11.9	%		97.3	%		93.6	%		3.9	%		$	227.44		$	195.68		16.2	%		19	%
Chicago		21			117.89			115.19		2.3	%		79.2	%		79.9	%		-0.9	%			93.34			92.03		1.4	%		14	%
Austin		17			113.65			107.67		5.6	%		70.4	%		68.2	%		3.2	%			80.00			73.44		8.9	%		10	%
Denver		15			114.37			109.28		4.7	%		80.8	%		78.7	%		2.7	%			92.40			85.97		7.5	%		13	%
Louisville		5			117.76			112.94		4.3	%		73.3	%		67.4	%		8.8	%			86.37			76.17		13.4	%		6	%
Washington DC/Baltimore		6			146.68			141.54		3.6	%		80.6	%		76.8	%		5.0	%			118.25			108.68		8.8	%		6	%
Other		71			103.25			101.24		2.0	%		70.5	%		67.8	%		3.9	%			72.77			68.66		6.0	%		32	%
Total		139		$	122.75		$	117.42		4.5	%		75.2	%		72.9	%		3.3	%		$	92.37		$	85.54		8.0	%		100	%
				ADR									Occupancy									RevPAR									% of EBITDA
Region		# of Hotels			2011			2010		Var			2011			2010			Var				2011			2010		Var			2011
South		62		$	111.68		$	107.96		3.4	%		68.2	%		65.7	%		3.8	%		$	76.22		$	70.97		7.4	%		33	%
West		25			110.97			106.97		3.7	%		80.1	%		77.6	%		3.1	%			88.84			83.03		7.0	%		20	%
Midwest		45			106.73			104.57		2.1	%		77.9	%		74.9	%		4.0	%			83.15			78.34		6.1	%		25	%
Northeast		7			210.40			188.53		11.6	%		90.4	%		90.0	%		0.4	%			190.14			169.76		12.0	%		22	%
Total		139		$	122.75		$	117.42		4.5	%		75.2	%		72.9	%		3.3	%		$	92.37		$	85.54		8.0	%		100	%

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