Strategic Hotels & Resorts Reports Third Quarter 2012 Financial Results

   Strategic Hotels & Resorts Reports Third Quarter 2012 Financial Results

PR Newswire

CHICAGO, Nov. 7, 2012

CHICAGO, Nov. 7, 2012 /PRNewswire/ --Strategic Hotels & Resorts, Inc. (NYSE:
BEE) today reported results for the third quarter ended September 30, 2012.

($ in millions, except per share and operating        Third Quarter
metrics)
Earnings Metrics                                      2012    2011    % Change
Net loss attributable to common shareholders          $(8.6)  $(11.9) N/A
Net loss per diluted share                            $(0.05) $(0.06) N/A
Comparable funds from operations (Comparable FFO)     $17.0   $11.3   50.9%
^(a)
Comparable FFO per diluted share ^(a)                 $0.08   $0.06   33.3%
Comparable EBITDA ^(a)                                $46.6   $43.6   6.7%
Total United States Portfolio Operating Metrics ^(b)
Average Daily Rate (ADR)                              $271.50 $258.06 5.2%
Occupancy                                             77.1%   76.7%   0.4 pts
Revenue per Available Room (RevPAR)                   $209.39 $197.98 5.8%
Total RevPAR                                          $372.08 $352.09 5.7%
EBITDA Margins                                        24.1%   24.1%   N/A
North American Same Store Operating Metrics ^(c)
ADR                                                   $257.57 $246.70 4.4%
Occupancy                                             78.5%   77.6%   0.9 pts
RevPAR                                                $202.27 $191.47 5.6%
Total RevPAR                                          $354.07 $334.68 5.8%
EBITDA Margins                                        23.6%   22.2%   140 bps

(a) Please refer to tables provided later in this press release for a
reconciliation of net loss to Comparable FFO, Comparable FFO per share and
Comparable EBITDA. Comparable FFO, Comparable FFO per share and Comparable
EBITDA are non-GAAP measures and are further explained with the reconciliation
tables.
(b) Operating statistics reflect results from the Company's Total United
States portfolio (see portfolio definitions later in this press release).
(c) Operating statistics reflect results from the Company's North American
same store portfolio (see portfolio definitions later in this press release).

"Our portfolio continued to perform very well during the quarter, with solid
year-over-year growth," said Raymond L. "Rip" Gellein, Jr., Chairman of the
Board and Chief Executive Officer of Strategic Hotels & Resorts, Inc. "The
acquisition of the Essex House hotel was a terrific achievement, with early
indicators showing very positive reception to the JW Marriott brand. Looking
forward, we see positive trends heading into the new year with group pace
significantly ahead of this time last year."

Third Quarter Highlights

  oNet loss attributable to common shareholders was $8.6 million, or $0.05
    per diluted share, in the third quarter of 2012, compared with a loss of
    $11.9 million, or $0.06 per diluted share, in the third quarter of 2011.
  oComparable FFO was $0.08 per diluted share in the third quarter of 2012,
    compared with $0.06 per diluted share in the prior year period.
  oComparable EBITDA was $46.6  million in the third quarter of 2012,
    compared with $43.6 million in the prior year period, a 6.7 percent
    increase between periods.
  oTotal United States portfolio RevPAR increased 5.8 percent in the third
    quarter of 2012, driven by a 5.2 percentage increase in ADR and a 0.4
    percent point increase in occupancy, compared to the third quarter of
    2011. Total RevPAR increased 5.7 percent between periods with non-rooms
    revenue increasing by 5.6 percent between periods.
  oADR growth in the Total United States portfolio was driven by a 5.8
    percent increase in transient ADR compared to the third quarter of 2011
    and a 3.2% increase in group ADR.
  oRevPAR increased 7.2 percent in the third quarter of 2012 in the Company's
    Total United States resort portfolio and 4.4 percent in the Company's
    Total United States urban portfolio, compared to the third quarter of
    2011.
  oNorth American same store RevPAR increased 5.6 percent in the third
    quarter of 2012, driven by a  4.4 percentage increase in ADR and a 0.9
    percent point increase in occupancy. Total RevPAR increased 5.8 percent
    with non-rooms revenue increasing by 6.0 percent between periods.
  oEuropean RevPAR increased 0.1 percent (5.6 percent in constant dollars) in
    the third quarter of 2012, driven by a 1.6 percent increase in ADR (7.2
    percent in constant dollars) offsetting a 1.3 percentage point decrease in
    occupancy between periods. European Total RevPAR increased 0.1 percent in
    the third quarter over the prior year period (5.7 percent in constant
    dollars).
  oTotal United States portfolio EBITDA margins were flat in the third
    quarter of 2012, compared to the third quarter of 2011. EBITDA margins for
    the quarter were impacted by a $2.7 million real estate tax expense
    recorded at the Hotel del Coronado related to prior periods as the result
    of a reassessment of the asset's taxable basis. Excluding this one-time
    charge, Total United States portfolio EBITDA margins expanded by 110 basis
    points in the third quarter of 2012 and North American same store EBITDA
    margins expanded 140 basis points.
  oGroup room nights currently booked for 2012 are 0.1 percent lower than
    room nights booked for 2011 at the same time last year but at rates 3.5
    percent higher, resulting in a 3.3 percent RevPAR increase.

The company reported financial results for the nine month period ended
September 30, 2012 as follows:

  oNet loss attributable to common shareholders was $43.1 million, or $0.22
    per diluted share, compared with net loss attributable to common
    shareholders of $7.8 million, or $0.04 per diluted share, for the nine
    month period ended September 30, 2011.
  oComparable FFO was $0.21 per diluted share compared with $0.09 per diluted
    share in the nine month period ended September 30, 2011.
  oComparable EBITDA was $130.7  million compared with $114.8 million for the
    nine month period ended September 30, 2011, a 13.8 percent increase
    between periods.

Preferred Dividends

On August 30, 2012, the Company's Board of Directors declared a quarterly
dividend of $0.53125 per share of 8.5 percent Series A Cumulative Redeemable
Preferred Stock paid on October 1, 2012 to shareholders of record as of
September 14, 2012, a quarterly dividend of $0.51563 per share of 8.25 percent
Series B Cumulative Redeemable Preferred Stock paid on October 1, 2012 to
shareholders of record as of September 14, 2012 and a quarterly dividend of
$0.51563 per share of 8.25 percent Series C Cumulative Redeemable Preferred
Stock paid on October 1, 2012 to shareholders of record as of September 14,
2012.

Transaction Activity

On September 14, 2012, the Company closed on the acquisition of the JW
Marriott Essex House Hotel in New York City for a gross purchase price of
approximately $362.3 million and established a joint venture arrangement with
affiliates of KSL Capital Partners, LLC to fund the equity portion of the
acquisition. The Company owns 51.0 percent of the joint venture and serves as
managing member and asset manager.

Subsequent Events

On November 1, 2012, the Company closed a $90.0 million non-recourse mortgage
agreement with MetLife secured by the Hyatt Regency La Jolla hotel. Under the
terms of the loan agreement, the $97.5 million mortgage previously encumbering
the property was replaced with a $72.0 million A-Note and an $18.0 million
B-Note that will each mature December 1, 2017. The floating rate A-Note bears
interest at LIBOR plus 400 basis points, subject to a 50 basis point LIBOR
floor, and the B-Note bears interest at a fixed rate of 10.0 percent.

On November 2, 2012, the Company announced that Laurence S. Geller stepped
down as President and Chief Executive Officer of Strategic Hotels & Resorts,
Inc. and member of the Company's Board of Directors effective as of such date.
Raymond L. "Rip" Gellein, Jr., Chairman of the Company's Board of Directors,
was appointed Chief Executive Officer. In addition, Sheli Z. Rosenberg was
appointed lead independent director of the Board.

2012 Guidance

Based on the results of the first three quarters and current forecasts for the
remainder of the year, the Company is reaffirming its guidance range for full
year 2012 RevPAR growth, Total RevPAR growth, Comparable EBITDA, and
Comparable FFO per diluted share.

For the year ending December 31, 2012, the Company anticipates that Comparable
EBITDA will be in the range of $165.0 million to $180.0 million and Comparable
FFO in the range of $0.21 and $0.29 per fully diluted share. Management is
also reaffirming its guidance for North American same store RevPAR growth in
the range between 6.0 percent to 8.0 percent and Total RevPAR growth in the
range between 5.0 percent and 7.0 percent.

Portfolio Definitions

Total United States portfolio hotel comparisons for the third quarter of 2012
are derived from the Company's hotel portfolio at September 30, 2012,
consisting of all 14 properties located in the United States, including
unconsolidated joint ventures, but excluding the JW Marriott Essex House Hotel
which was acquired on September 14, 2012.

North American same store hotel comparisons for the third quarter of 2012 are
derived from the Company's hotel portfolio at September 30, 2012, consisting
of properties located in North America and held for five or more quarters, in
which operations are included in the consolidated results of the Company. As a
result, same store comparisons include 13 properties and exclude the
unconsolidated Hotel del Coronado and Fairmont Scottsdale Princess hotels and
the recently acquired JW Marriott Essex House Hotel which was purchased on
September 14, 2012.

European hotel comparisons for the third quarter of 2012 are derived from the
Company's European owned and leased hotel properties at September 30, 2012,
consisting of the Marriott London Grosvenor Square and the Marriott Hamburg
hotels.

Earnings Call

The Company will conduct its third quarter 2012 conference call for investors
and other interested parties on Thursday, November 8, 2012 at 10:00 a.m.
Eastern Time (ET). Interested individuals are invited to access the call by
dialing 888.679.8040 (toll international: 617.213.4851) with passcode
99633171. To participate on the webcast, log on to the company's website at
http://www.strategichotels.com or
http://edge.media-server.com/m/p/hssa33gr/lan/en.

For those unable to listen to the call live, a taped rebroadcast will be
available beginning at 12:00 p.m. ET on November 8, 2012 through 11:59 p.m. ET
on November 15, 2012. To access the replay, dial 888.286.8010 (toll
international: 617.801.6888) with passcode 77474592. A replay of the call will
also be available on the Internet at http://www.strategichotels.com or
http://www.earnings.com for 30 days after the call.

The Company also produces supplemental financial data that includes detailed
information regarding its operating results. This supplemental data is
considered an integral part of this earnings release. These materials are
available on the Strategic Hotels & Resorts' website at
www.strategichotels.com within the Investor Relations section of the website.

About the Company

Strategic Hotels & Resorts, Inc. is a real estate investment trust (REIT)
which owns and provides value-enhancing asset management of high-end hotels
and resorts in the United States, Mexico and Europe. The Company currently has
ownership interests in 18 properties with an aggregate of 8,271 rooms and
851,600 square feet of meeting space. For a list of current properties and for
further information, please visit the Company's website at
http://www.strategichotels.com.

This press release contains forward-looking statements about Strategic Hotels
& Resorts, Inc. (the "Company"). Except for historical information, the
matters discussed in this press release are forward-looking statements subject
to certain risks and uncertainties. These forward-looking statements include
statements regarding the Company's future financial results, stabilization in
the lodging space, positive trends in the lodging industry and the Company's
continued focus on improving profitability. Actual results could differ
materially from the Company's projections. Factors that may contribute to
these differences include, but are not limited to the following: the effects
of the recent global economic recession upon business and leisure travel and
the hotel markets in which the Company invests; the Company's liquidity and
refinancing demands; the Company's ability to obtain or refinance maturing
debt; the Company's ability to maintain compliance with covenants contained in
the Company's debt facilities; stagnation or further deterioration in economic
and market conditions, particularly impacting business and leisure travel
spending in the markets where the Company's hotels operate and in which the
Company invests, including luxury and upper upscale product; general
volatility of the capital markets and the market price of the Company's shares
of common stock; availability of capital; the Company's ability to dispose of
properties in a manner consistent with the Company's investment strategy and
liquidity needs; hostilities and security concerns, including future terrorist
attacks, or the apprehension of hostilities, in each case that affect travel
within or to the United States, Mexico, Germany, England or other countries
where the Company invests; difficulties in identifying properties to acquire
and completing acquisitions; the Company's failure to maintain effective
internal control over financial reporting and disclosure controls and
procedures; risks related to natural disasters; increases in interest rates
and operating costs, including insurance premiums and real property taxes;
contagious disease outbreaks, such as the H1N1 virus outbreak; delays and
cost-overruns in construction and development; marketing challenges associated
with entering new lines of business or pursuing new business strategies; the
Company's failure to maintain its status as a REIT; changes in the competitive
environment in the Company's industry and the markets where the Company
invests; changes in real estate and zoning laws or regulations; legislative or
regulatory changes, including changes to laws governing the taxation of REITS;
changes in generally accepted accounting principles, policies and guidelines;
and litigation, judgments or settlements.

Additional risks are discussed in the Company's filings with the Securities
and Exchange Commission, including those appearing under the heading "Item 1A.
Risk Factors" in the Company's most recent Form 10-K and subsequent Form
10-Qs. Although the Company believes the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be attained. The forward-looking
statements are made as of the date of this press release, and the Company
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise,
except as required by law.



The following tables reconcile projected 2012 net loss attributable to common
shareholders to projected Comparable EBITDA, Comparable FFO and Comparable FFO
per diluted share ($ in millions, except per share data):

                                                     Low Range  High Range
Net Loss Attributable to Common Shareholders         $(85.9)    $(71.0)
Depreciation and Amortization                        120.3      120.3
Interest Expense                                     83.4       83.4
Income Taxes                                         0.8        0.8
Non-controlling Interests                            (0.3)      (0.2)
Adjustments from Consolidated Affiliates             (9.4)      (9.4)
Adjustments from Unconsolidated Affiliates           27.7       27.7
Preferred Shareholder Dividends                      24.2       24.2
Realized Portion of Deferred Gain on Sale Leasebacks (0.2)      (0.2)
Adjustment for Value Creation Plan                   2.8        2.8
Other Adjustments                                    1.6        1.6
Comparable EBITDA                                    $165.0     $180.0

                                                     Low Range  High Range
Net Loss Attributable to Common Shareholders         $(85.9)    $(71.0)
Depreciation and Amortization                        119.2      119.2
Realized Portion of Deferred Gain on Sale Leasebacks (0.2)      (0.2)
Non-controlling Interests                            (0.3)      (0.1)
Adjustments from Consolidated Affiliates             (5.0)      (5.0)
Adjustments from Unconsolidated Affiliates           15.2       15.2
Adjustment for Value Creation Plan                   2.8        2.8
Other Adjustments                                    (2.8)      (2.8)
Comparable FFO                                       $43.0      $58.1
Comparable FFO per Diluted Share                     $0.21      $0.29





Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)



Consolidated Statements of Operations

(in thousands, except per share data)


                     Three Months Ended September  Nine Months Ended September
                     30,                           30,
                     2012            2011          2012             2011
Revenues:
Rooms                $  119,067      $  110,048    $  323,709       $ 310,330
Food and beverage    63,283          58,664        197,693          195,987
Other hotel          21,040          19,939        59,338           59,860
operating revenue
Lease revenue        1,175           1,255         3,505            3,747
Total revenues       204,565         189,906       584,245          569,924
Operating Costs and
Expenses:
Rooms                32,069          29,283        90,628           85,728
Food and beverage    47,355          45,345        143,065          142,010
Other departmental   52,908          51,358        153,557          155,856
expenses
Management fees      6,182           5,879         18,012           18,203
Other hotel          13,988          12,672        40,360           39,497
expenses
Lease expense        1,114           1,249         3,425            3,702
Depreciation and     25,649          25,526        76,416           86,222
amortization
Corporate expenses   6,956           (2,228)       23,632           24,206
Total operating      186,221         169,084       549,095          555,424
costs and expenses
Operating income     18,344          20,822        35,150           14,500
Interest expense     (19,942)        (21,838)      (58,627)         (67,148)
Interest income      42              41            122              124
Loss on early
extinguishment of    —               (399)         —                (1,237)
debt
Loss on early
termination of
derivative           —               —             —                (29,242)
financial
instruments
Equity in losses of
unconsolidated       (2,257)         (1,867)       (2,054)          (6,266)
affiliates
Foreign currency
exchange (loss)      (996)           (209)         (1,169)          77
gain
Other income, net    436             355           1,365            4,716
Loss before income
taxes and            (4,373)         (3,095)       (25,213)         (84,476)
discontinued
operations
Income tax benefit   600             (867)         (215)            (279)
(expense)
Loss from
continuing           (3,773)         (3,962)       (25,428)         (84,755)
operations
Income (loss) from
discontinued         —               19            (535)            101,215
operations, net of
tax
Net (loss) income    (3,773)         (3,943)       (25,963)         16,460
Net loss (income)
attributable to the
noncontrolling       17              16            126              (70)
interests in SHR's
operating
partnership
Net loss (income)
attributable to the
noncontrolling       1,241           (254)         891              (997)
interests in
consolidated
affiliates
Net (loss) income    (2,515)         (4,181)       (24,946)         15,393
attributable to SHR
Preferred
shareholder          (6,042)         (7,721)       (18,125)         (23,164)
dividends
Net loss
attributable to SHR  $  (8,557)      $  (11,902)   $  (43,071)      $ (7,771)
common shareholders
Basic Loss Per
Share:
Loss from
continuing
operations           $  (0.04)       $  (0.06)     $  (0.22)        $ (0.62)
attributable to SHR
common shareholders
Income (loss) from
discontinued
operations           —               —             —                0.58
attributable to SHR
common shareholders
Net loss
attributable to SHR  $  (0.04)       $  (0.06)     $  (0.22)        $ (0.04)
common shareholders
Weighted average
common shares        206,523         186,146       198,872          173,349
outstanding
Diluted Loss Per
Share:
Loss from
continuing
operations           $  (0.05)       $  (0.06)     $  (0.22)        $ (0.62)
attributable to SHR
common shareholders
Income (loss) from
discontinued
operations           —               —             —                0.58
attributable to SHR
common shareholders
Net loss
attributable to SHR  $  (0.05)       $  (0.06)     $  (0.22)        $ (0.04)
common shareholders
Weighted average
common shares        218,182         186,146       198,872          173,349
outstanding



Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)



Consolidated Balance Sheets

(in thousands, except share data)


                                         September 30, 2012  December 31, 2011
Assets
Investment in hotel properties, net      $   2,001,747       $   1,692,431
Goodwill                                 40,359              40,359
Intangible assets, net of accumulated    30,971              30,635
amortization of $10,295 and $8,915
Investment in unconsolidated affiliates  117,005             126,034
Cash and cash equivalents                82,048              72,013
Restricted cash and cash equivalents     49,026              39,498
Accounts receivable, net of allowance
for doubtful accounts of $1,542 and      55,153              43,597
$1,698
Deferred financing costs, net of
accumulated amortization of $6,308 and   12,846              10,845
$3,488
Deferred tax assets                      2,600               2,230
Prepaid expenses and other assets        55,955              29,047
Total assets                             $   2,447,710       $   2,086,689
Liabilities, Noncontrolling Interests
and Equity
Liabilities:
Mortgages and other debt payable         $   1,185,347       $   1,000,385
Bank credit facility                     124,000             50,000
Accounts payable and accrued expenses    245,149             249,179
Distributions payable                    6,042               72,499
Deferred tax liabilities                 47,305              47,623
Total liabilities                        1,607,843           1,419,686
Noncontrolling interests in SHR's        5,129               4,583
operating partnership
Equity:
SHR's shareholders' equity:
8.50% Series A Cumulative Redeemable
Preferred Stock ($0.01 par value per
share; 4,148,141 shares issued and
outstanding; liquidation preference      99,995              99,995
$25.00 per share plus accrued
distributions and $105,907 and $130,148
in the aggregate)
8.25% Series B Cumulative Redeemable
Preferred Stock ($0.01 par value per
share; 3,615,375 shares issued and
outstanding; liquidation preference      87,064              87,064
$25.00 per share plus accrued
distributions and $92,249 and $112,775
in the aggregate)
8.25% Series C Cumulative Redeemable
Preferred Stock ($0.01 par value per
share; 3,827,727 shares issued and
outstanding; liquidation preference      92,489              92,489
$25.00 per share plus accrued
distributions and $97,667 and $119,377
in the aggregate)
Common shares ($0.01 par value per
share; 350,000,000 and 250,000,000
common shares authorized; 204,308,710    2,043               1,856
and 185,627,199 common shares issued
and outstanding)
Additional paid-in capital               1,735,395           1,634,067
Accumulated deficit                      (1,215,567)         (1,190,621)
Accumulated other comprehensive loss     (58,261)            (70,652)
Total SHR's shareholders' equity         743,158             654,198
Noncontrolling interests in              91,580              8,222
consolidated affiliates
Total equity                             834,738             662,420
Total liabilities, noncontrolling        $   2,447,710       $   2,086,689
interests and equity



Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)



Financial Highlights

Supplemental Financial Data

(in thousands, except per share information)


                                                 September 30, 2012
                                                 Pro Rata Share  Consolidated
Capitalization
Common shares outstanding                        204,309         204,309
Operating partnership units outstanding          853             853
Restricted stock units outstanding               1,370           1,370
Value Creation Plan units outstanding under the  1,239           1,239
deferral program
Combined shares and units outstanding            207,771         207,771
Common stock price at end of period              $  6.01         $ 6.01
Common equity capitalization                     $  1,248,704    $ 1,248,704
Preferred equity capitalization (at $25.00 face  289,102         289,102
value)
Consolidated debt                                1,309,347       1,309,347
Pro rata share of unconsolidated debt            212,275         —
Pro rata share of consolidated debt              (138,648)       —
Cash and cash equivalents                        (82,048)        (82,048)
Total enterprise value                           $  2,838,732    $ 2,765,105
Net Debt / Total Enterprise Value                45.8         %  44.4        %
Preferred Equity / Total Enterprise Value        10.2         %  10.5        %
Common Equity / Total Enterprise Value           44.0         %  45.1        %



Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)


Discontinued Operations
The results of operations of hotels sold are classified as discontinued
operations and segregated in the consolidated statements of operations for all
periods presented. The following hotel was sold during 2011 (in thousands):

Hotel                                         Date Sold     Net Sales Proceeds
Paris Marriott Champs Elysees (Paris          April 6, 2011 $    60,003
Marriott)

The following is a summary of income (loss) from discontinued operations for
the three and nine months ended September 30, 2012 and 2011 (in thousands):

                                                          Nine Months Ended
                        Three Months Ended September 30,
                                                          September 30,
                        2012              2011            2012      2011
Hotel operating         $    —            $    —          $ —       $ 9,743
revenues
Operating costs and     —                 (54)            —         9,456
expenses
Operating income        —                 54              —         287
Foreign currency        —                 —               (535)     51
exchange (loss) gain
Other income, net       —                 —               —         326
Income tax expense      —                 —               —         (379)
(Loss) gain on sale     —                 (35)            —         100,930
Income (loss) from
discontinued            $    —            $    19         $ (535)   $ 101,215
operations



Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)


Investments in Unconsolidated Affiliates
(in thousands)


On January 9, 2006, we purchased a 45% interest in the unconsolidated
affiliate that owns the Hotel del Coronado. On February 4, 2011, we completed
a recapitalization of the unconsolidated affiliate. As part of the
recapitalization, a new unconsolidated affiliate was formed to own the Hotel
del Coronado and to invest cash in the asset. Pursuant to the terms of the
recapitalization, we became a limited partner in the new unconsolidated
affiliate, and our ownership interest in the Hotel del Coronado decreased from
45% to 34.3%. On June 9, 2011, we completed a recapitalization of the Fairmont
Scottsdale Princess hotel. As part of the recapitalization, our ownership
interest in the Fairmont Scottsdale Princess hotel decreased from 100% to 50%.
We account for these investments using the equity method of accounting.

                Three Months Ended September 30,   Three Months Ended September 30,
                2012                               2011
                Hotel del  Fairmont                Hotel del  Fairmont
                           Scottsdale  Total                  Scottsdale  Total
                Coronado                           Coronado
                           Princess                           Princess
Total revenues  $ 44,978   $ 10,607    $ 55,585    $ 43,417   $ 10,280    $ 53,697
(100%)
Property        $ 14,560   $ (2,163)   $ 12,397    $ 16,995   $ (2,452)   $ 14,543
EBITDA (100%)
Equity in earnings
(losses) of
unconsolidated affiliates
(SHR ownership)
Property        $ 4,994    $ (1,082)   $ 3,912     $ 5,830    $ (1,226)   $ 4,604
EBITDA
Depreciation
and             (1,711)    (1,774)     (3,485)     (1,665)    (1,806)     (3,471)
amortization
Interest        (2,522)    (191)       (2,713)     (2,648)    (198)       (2,846)
expense
Other           (19)       (5)         (24)        (83)       (96)        (179)
expenses, net
Income taxes    (74)       —           (74)        (125)      —           (125)
Equity in
earnings
(losses) of     $ 668      $ (3,052)   $ (2,384)   $ 1,309    $ (3,326)   $ (2,017)
unconsolidated
affiliates
EBITDA
Contribution:
Equity in
earnings
(losses) of     $ 668      $ (3,052)   $ (2,384)   $ 1,309    $ (3,326)   $ (2,017)
unconsolidated
affiliates
Depreciation
and             1,711      1,774       3,485       1,665      1,806       3,471
amortization
Interest        2,522      191         2,713       2,648      198         2,846
expense
Income taxes    74         —           74          125        —           125
EBITDA          $ 4,975    $ (1,087)   $ 3,888     $ 5,747    $ (1,322)   $ 4,425
Contribution
FFO
Contribution:
Equity in
earnings
(losses) of     $ 668      $ (3,052)   $ (2,384)   $ 1,309    $ (3,326)   $ (2,017)
unconsolidated
affiliates
Depreciation
and             1,711      1,774       3,485       1,665      1,806       3,471
amortization
FFO             $ 2,379    $ (1,278)   $ 1,101     $ 2,974    $ (1,520)   $ 1,454
Contribution

                Nine Months Ended September 30,     Nine Months Ended September 30,
                2012                                2011
                            Fairmont                            Fairmont
                Hotel del                           Hotel del
                            Scottsdale  Total                   Scottsdale  Total
                Coronado                            Coronado
                            Princess                            Princess
Total revenues  $ 110,332   $ 56,735    $ 167,067   $ 106,404   $ 12,389    $ 118,793
(100%)
Property        $ 33,522    $ 9,743     $ 43,265    $ 34,748    $ (3,196)   $ 31,552
EBITDA (100%)
Equity in losses of
unconsolidated affiliates
(SHR ownership)
Property        $ 11,498    $ 4,871     $ 16,369    $ 12,022    $ (1,598)   $ 10,424
EBITDA
Depreciation
and             (5,098)     (5,321)     (10,419)    (4,963)     (2,257)     (7,220)
amortization
Interest        (7,544)     (589)       (8,133)     (7,382)     (248)       (7,630)
expense
Other           (62)        (44)        (106)       (1,547)     (640)       (2,187)
expenses, net
Income taxes    293         —           293         554         —           554
Equity in
losses of       $ (913)     $ (1,083)   $ (1,996)   $ (1,316)   $ (4,743)   $ (6,059)
unconsolidated
affiliates
EBITDA
Contribution
Equity in
losses of       $ (913)     $ (1,083    $ (1,996)   $ (1,316)   $ (4,743)   $ (6,059)
unconsolidated
affiliates
Depreciation
and             5,098       5,321       10,419      4,963       2,257       7,220
amortization
Interest        7,544       589         8,133       7,382       248         7,630
expense
Income taxes    (293)       —           (293)       (554)       —           (554)
EBITDA          $ 11,436    $ 4,827     $ 16,263    $ 10,475    $ (2,238)   $ 8,237
Contribution
FFO
Contribution
Equity in
losses of       $ (913)     $ (1,083)   $ (1,996)   $ (1,316)   $ (4,743)   $ (6,059)
unconsolidated
affiliates
Depreciation
and             5,098       5,321       10,419      4,963       2,257       7,220
amortization
FFO             $ 4,185     $ 4,238     $ 8,423     $ 3,647     $ (2,486)   $ 1,161
Contribution



Investments in Unconsolidated Affiliates (Continued)

(in thousands)


                                          Spread
Debt                  Interest Rate       over         Loan Amount  Maturity
                                                                    (a)
                                          LIBOR
Hotel del Coronado
CMBS Mortgage and     5.80     %     (b)  480 bp  (b)  $  425,000   March 2016
Mezzanine
Cash and cash                                          (16,219)
equivalents
Net Debt                                               $  408,781
Fairmont Scottsdale
Princess
CMBS Mortgage         0.57     %          36 bp        $  133,000   April 2015
Cash and cash                                          (4,290)
equivalents
Net Debt                                               $  128,710

(a) Includes extension options.
(b) Subject to a 1% LIBOR floor.

                         Effective      LIBOR Cap
Caps                                    Rate       Notional Amount  Maturity
                         Date
Hotel del Coronado
CMBS Mortgage and        February 2011  2.00   %   $   425,000      February
Mezzanine Loan Caps                                                 2013
CMBS Mortgage and        February 2013  2.50   %   $   425,000      March 2013
Mezzanine Loan Caps
Fairmont Scottsdale
Princess
CMBS Mortgage Loan Cap   June 2011      4.00   %   $   133,000      December
                                                                    2013



Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)



Leasehold Information

(in thousands)


                     Three Months Ended September  Nine Months Ended September
                     30,                           30,
                     2012             2011         2012          2011
Paris Marriott (a):
Property EBITDA      $   —            $  —         $  —          $  3,455
Revenue (b)          $   —            $  —         $  —          $  3,455
Lease expense        —                —            —             (3,274)
Less: Deferred gain  —                —            —             (1,214)
on sale-leaseback
Adjusted lease       —                —            —             (4,488)
expense
EBITDA contribution  $   —            $  —         $  —          $  (1,033)
from leasehold
Marriott Hamburg:
Property EBITDA      $   1,508        $  1,734     $  4,404      $  5,034
Revenue (b)          $   1,175        $  1,255     $  3,505      $  3,747
Lease expense        (1,114)          (1,249)      (3,425)       (3,702)
Less: Deferred gain  (49)             (42)         (150)         (151)
on sale-leaseback
Adjusted lease       (1,163)          (1,291)      (3,575)       (3,853)
expense
EBITDA contribution  $   12           $  (36)      $  (70)       $  (106)
from leasehold
Total Leaseholds:
Property EBITDA      $   1,508        $  1,734     $  4,404      $  8,489
Revenue (b)          $   1,175        $  1,255     $  3,505      $  7,202
Lease expense        (1,114)          (1,249)      (3,425)       (6,976)
Less: Deferred gain  (49)             (42)         (150)         (1,365)
on sale-leasebacks
Adjusted lease       (1,163)          (1,291)      (3,575)       (8,341)
expense
EBITDA contribution  $   12           $  (36)      $  (70)       $  (1,139)
from leaseholds

Security Deposit (c):  September 30, 2012  December 31, 2011
Marriott Hamburg       $     2,443         $    2,462

(a) On April 6, 2011, we sold our leasehold interest in the Paris Marriott
hotel. The results of operations for the Paris Marriott hotel have been
classified as discontinued operations for all periods presented.
(b) For the nine months ended September 30, 2011, Revenue for the Paris
Marriott hotel represents Property EBITDA. For the three and nine months ended
September 30, 2012 and 2011, Revenue for the Marriott Hamburg hotel represents
lease revenue.
(c) The security deposit is recorded in prepaid expenses and other assets on
the consolidated balance sheets.



Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)
Non-GAAP Financial Measures


We present five non-GAAP financial measures that we believe are useful to
management and investors as key measures of our operating performance: Funds
from Operations (FFO); FFO—Fully Diluted; Comparable FFO; Earnings Before
Interest Expense, Taxes, Depreciation and Amortization (EBITDA); and
Comparable EBITDA.
EBITDA represents net income (or loss) attributable to SHR common shareholders
excluding: (i) interest expense, (ii) income taxes, including deferred income
tax benefits and expenses applicable to our foreign subsidiaries and income
taxes applicable to sale of assets; (iii) depreciation and amortization; and
(iv) preferred stock dividends. EBITDA also excludes interest expense, income
taxes and depreciation and amortization of our unconsolidated affiliates.
EBITDA is presented on a full participation basis, which means we have assumed
conversion of all redeemable noncontrolling interests of our operating
partnership into our common stock. We believe this treatment of noncontrolling
interests provides useful information for management and our investors and
appropriately considers our current capital structure. We also present
Comparable EBITDA, which eliminates the effect of realizing deferred gains on
our sale leasebacks, as well as the effect of gains or losses on sales of
assets, early extinguishment of debt, impairment losses, foreign currency
exchange gains or losses and the Value Creation Plan expense. We believe
EBITDA and Comparable EBITDA are useful to management and investors in
evaluating our operating performance because they provide management and
investors with an indication of our ability to incur and service debt, to
satisfy general operating expenses, to make capital expenditures and to fund
other cash needs or reinvest cash into our business. We also believe they help
management and investors meaningfully evaluate and compare the results of our
operations from period to period by removing the impact of our asset base
(primarily depreciation and amortization) from our operating results. Our
management also uses EBITDA and Comparable EBITDA as measures in determining
the value of acquisitions and dispositions.


We compute FFO in accordance with standards established by the National
Association of Real Estate Investment Trusts, or NAREIT, with the exception of
impairment of depreciable real estate. NAREIT adopted a definition of FFO in
order to promote an industry-wide standard measure of REIT operating
performance. NAREIT defines FFO as net income (or loss) (computed in
accordance with GAAP) excluding losses or gains from sales of depreciable
property, impairment of depreciable real estate, real estate-related
depreciation and amortization, and our portion of these items related to
unconsolidated affiliates. We also present FFO—Fully Diluted, which is FFO
plus income or loss on income attributable to redeemable noncontrolling
interests in our operating partnership. We also present Comparable FFO, which
is FFO—Fully Diluted excluding the impact of any gains or losses on early
extinguishment of debt, impairment losses, foreign currency exchange gains or
losses and the Value Creation Plan expense. We believe that the presentation
of FFO, FFO—Fully Diluted and Comparable FFO provides useful information to
management and investors regarding our results of operations because they are
measures of our ability to fund capital expenditures and expand our business.
In addition, FFO is widely used in the real estate industry to measure
operating performance without regard to items such as depreciation and
amortization. We also present Comparable FFO per diluted share as a non-GAAP
measure of our performance. We calculate Comparable FFO per diluted share for
a given operating period as our Comparable FFO (as defined above) divided by
the weighted average of fully diluted shares outstanding, excluding shares
related to the JW Marriott Essex House Hotel put option. Dilutive securities
may include shares granted under share-based compensation plans and operating
partnership units. No effect is shown for securities that are anti-dilutive.


We caution investors that amounts presented in accordance with our definitions
of FFO, FFO—Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA may
not be comparable to similar measures disclosed by other companies, since not
all companies calculate these non-GAAP measures in the same manner. FFO,
FFO—Fully Diluted, Comparable FFO, EBITDA, and Comparable EBITDA should not be
considered as an alternative measure of our net income (or loss) or operating
performance. FFO, FFO—Fully Diluted, Comparable FFO, EBITDA, and Comparable
EBITDA may include funds that may not be available for our discretionary use
due to functional requirements to conserve funds for capital expenditures and
property acquisitions and other commitments and uncertainties. Although we
believe that FFO, FFO—Fully Diluted, Comparable FFO, EBITDA, and Comparable
EBITDA can enhance your understanding of our financial condition and results
of operations, these non-GAAP financial measures, when viewed individually,
are not necessarily a better indicator of any trend as compared to comparable
GAAP measures such as net income (or loss) attributable to SHR common
shareholders. In addition, you should be aware that adverse economic and
market conditions might negatively impact our cash flow. We have provided a
quantitative reconciliation of FFO, FFO—Fully Diluted, Comparable FFO, EBITDA,
and Comparable EBITDA to the most directly comparable GAAP financial
performance measure, which is net income (or loss) attributable to SHR common
shareholders.



Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)



Reconciliation of Net Loss Attributable to SHR Common Shareholders to EBITDA
and Comparable EBITDA

(in thousands)


                              Three Months Ended       Nine Months Ended
                              September 30,            September 30,
                              2012        2011         2012         2011
Net loss attributable to SHR  $ (8,557)   $ (11,902)   $ (43,071)   $ (7,771)
common shareholders
Depreciation and              25,649      25,526       76,416       86,222
amortization
Interest expense              19,942      21,838       58,627       67,148
Income taxes—continuing       (600)       867          215          279
operations
Income taxes—discontinued     —           —            —            379
operations
Noncontrolling interests      (17)        (16)         (126)        70
Adjustments from              (1,879)     (1,248)      (4,382)      (5,431)
consolidated affiliates
Adjustments from              7,036       7,162        20,606       16,293
unconsolidated affiliates
Preferred shareholder         6,042       7,721        18,125       23,164
dividends
EBITDA                        47,616      49,948       126,410      180,353
Realized portion of deferred
gain on                       (49)        (42)         (150)        (151)
sale-leaseback—continuing
operations
Realized portion of deferred
gain on                       —           —            —            (1,214)
sale-leaseback—discontinued
operations
Gain on sale of               —           —            —            (2,640)
assets—continuing operations
Loss (gain) on sale of
assets— discontinued          —           35           —            (100,930)
operations
Loss on early extinguishment  —           399          —            1,237
of debt
Loss on early termination of
derivative financial          —           —            —            29,242
instruments
Foreign currency exchange
loss (gain)—continuing        996         209          1,169        (77)
operations (a)
Foreign currency exchange
loss (gain)—discontinued      —           —            535          (51)
operations (a)
Adjustment for Value          (2,013)     (6,921)      2,759        9,078
Creation Plan
Comparable EBITDA             $ 46,550    $ 43,628     $ 130,723    $ 114,847

(a) Foreign currency exchange gains or losses applicable to third-party and
inter-company debt and certain balance sheet items held by foreign
subsidiaries.



Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)



Reconciliation of Net Loss Attributable to SHR Common Shareholders to

Funds From Operations (FFO), FFO—Fully Diluted and Comparable FFO

(in thousands, except per share data)


                              Three Months Ended       Nine Months Ended
                              September 30,            September 30,
                              2012        2011         2012         2011
Net loss attributable to SHR  $ (8,557)   $ (11,902)   $ (43,071)   $ (7,771)
common shareholders
Depreciation and              25,649      25,526       76,416       86,222
amortization
Corporate depreciation        (260)       (279)        (789)        (868)
Gain on sale of               —           —            —            (2,640)
assets—continuing operations
Loss (gain) on sale of
assets—discontinued           —           35           —            (100,930)
operations
Realized portion of deferred
gain on                       (49)        (42)         (150)        (151)
sale-leaseback—continuing
operations
Realized portion of deferred
gain on                       —           —            —            (1,214)
sale-leaseback—discontinued
operations
Deferred tax expense on
realized portion of deferred  —           —            —            379
gain on sale-leasebacks
Noncontrolling interests      (121)       (134)        (374)        (440)
adjustments
Adjustments from              (859)       (663)        (2,185)      (3,822)
consolidated affiliates
Adjustments from              3,792       3,770        11,335       8,023
unconsolidated affiliates
FFO                           19,595      16,311       41,182       (23,212)
Redeemable noncontrolling     104         118          248          510
interests
FFO—Fully Diluted             19,699      16,429       41,430       (22,702)
Non-cash mark to market of    (1,688)     1,146        (4,405)      (487)
interest rate swaps
Loss on early extinguishment  —           399          —            1,237
of debt
Loss on early termination of
derivative financial          —           —            —            29,242
instruments
Foreign currency exchange
loss (gain)—continuing        996         209          1,169        (77)
operations (a)
Foreign currency exchange
loss (gain)—discontinued      —           —            535          (51)
operations (a)
Adjustment for Value          (2,013)     (6,921)      2,759        9,078
Creation Plan
Comparable FFO                $ 16,994    $ 11,262     $ 41,488     $ 16,240
Comparable FFO per diluted    $ 0.08      $ 0.06       $ 0.21       $ 0.09
share
Weighted average diluted      208,696     188,097      201,050      175,974
shares (b)

(a) Foreign currency exchange gains or losses applicable to third-party and
inter-company debt and certain balance sheet items held by foreign
subsidiaries.
(b) Excludes shares related to the JW Marriott Essex House Hotel put option.





Strategic Hotels & Resorts, Inc. and Subsidiaries (SHR)



Debt Summary

(dollars in thousands)


Debt                      Interest Rate   Spread    Loan Amount   Maturity (b)
                                          (a)
North Beach Venture       5.00      %     Fixed     $ 1,476       January 2013
Marriott London           1.70      %     110 bp    114,870       October 2013
Grosvenor Square (c)                      (c)
Bank credit facility      3.21      %     300 bp    124,000       June 2015
Four Seasons Washington,  3.36      %     315 bp    130,000       July 2016
D.C.
Westin St. Francis        6.09      %     Fixed     215,673       June 2017
Fairmont Chicago          6.09      %     Fixed     95,828        June 2017
JW Marriott Essex House   4.75      %     400 bp    190,000       September
Hotel                                                             2017
Hyatt Regency La Jolla    4.50% / 10.00%  400 bp /  90,000        December
(d)                                       Fixed                   2017
InterContinental Miami    3.71      %     350 bp    85,000        July 2018
Loews Santa Monica Beach  4.06      %     385 bp    110,000       July 2018
Hotel
InterContinental Chicago  5.61      %     Fixed     145,000       August 2021
                                                    $ 1,301,847

(a) Spread over LIBOR (0.21% at September 30, 2012). Interest on the JW
Marriott Essex House Hotel loan is subject to a 0.75% LIBOR floor. Interest on
the Hyatt Regency La Jolla loan is subject to a 0.50% LIBOR floor.
(b) Includes extension options.
(c) Principal balance of £71,070,000 at September 30, 2012. Spread over
three-month GBP LIBOR (0.60% at September 30, 2012).
(d) This loan was refinanced on November 1, 2012. The new principal and
interest are reflected in the table. Interest on $72,000,000 is payable at
LIBOR plus 4.00%, subject to a 0.50% LIBOR floor, and interest on $18,000,000
is payable at a fixed rate of 10.00%.

Domestic and European Interest Rate Swaps

                     Fixed Pay Rate  Notional
Swap Effective Date                              Maturity
                     Against LIBOR   Amount
February 2010        4.90     %      $ 100,000   September 2014
February 2010        4.96     %      100,000     December 2014
December 2010        5.23     %      100,000     December 2015
February 2011        5.27     %      100,000     February 2016
                     5.09     %      $ 400,000

                     Fixed Pay Rate     Notional
Swap Effective Date                                  Maturity
                     Against GBP LIBOR  Amount
October 2007         5.72       %         £ 71,070   October 2013

Future scheduled debt principal payments (including extension options and the
refinanced loan at the Hyatt Regency La Jolla) are as follows:

Years ending December 31,                                        Amount
2012 (remainder)                                                 $ 2,148
2013                                                             127,212
2014                                                             13,872
2015                                                             140,246
2016                                                             150,661
Thereafter                                                       867,708
                                                                 $ 1,301,847
Percent of fixed rate debt including U.S. and European swaps     76.1        %
Weighted average interest rate including U.S. and European       6.50        %
swaps (e)
Weighted average maturity of fixed rate debt (debt with          4.07
maturity of greater than one year)

(e) Excludes the amortization of deferred financing costs and the amortization
of the interest rate swap costs.





SOURCE Strategic Hotels & Resorts, Inc.

Website: http://www.strategichotels.com
Contact: Diane Morefield, EVP & Chief Financial Officer, Strategic Hotels &
Resorts, (312) 658-5740, or Jonathan Stanner, Vice President, Capital Markets
& Treasurer, Strategic Hotels & Resorts, (312) 658-5746
 
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