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Strategic Hotels & Resorts Reports First Quarter 2014 Financial Results

   Strategic Hotels & Resorts Reports First Quarter 2014 Financial Results

Strong operating results lead to 19.5% increase in Comparable EBITDA and 220
basis points of EBITDA margin expansion

PR Newswire

CHICAGO, May 7, 2014

CHICAGO, May 7, 2014 /PRNewswire/ -- Strategic Hotels & Resorts, Inc. (NYSE:
BEE) today reported results for the first quarter ended March 31, 2014.

($ in millions, except per share and operating        First Quarter
metrics)
Earnings Metrics                                      2014    2013    % Change
Net income/(loss) attributable to common shareholders $217.2  $(23.4) N/A
Net income/(loss) per diluted share                   $0.97   $(0.12)  N/A
Comparable funds from operations (Comparable FFO)     $12.2   $2.3    435.8%
^(a)
Comparable FFO per diluted share ^(a)                 $0.06   $0.01   500.0%
Comparable EBITDA ^(a)                                $41.2   $34.5   19.5%
Total United States Portfolio Operating Metrics ^(b)
Average Daily Rate (ADR)                              $284.66 $270.76 5.1%
Occupancy                                             68.8%   68.1%   0.7 pts
Revenue per Available Room (RevPAR)                   $195.96 $184.41 6.3%
Total RevPAR                                          $384.39 $352.05 9.2%
EBITDA Margins                                        20.2%   18.0%   220 bps

    Please refer to the tables provided later in this press release for a
    reconciliation of net income/(loss) to Comparable FFO, Comparable FFO per
(a) 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).

"Our first quarter was highly productive from both an operating and
transaction perspective," noted Raymond L. "Rip" Gellein, Chairman and Chief
Executive Officer of Strategic Hotels & Resorts, Inc. "We experienced 6.3
percent RevPAR growth, which would have been approximately 9 percent when
adjusted for displacement for several room renovation projects, and total
RevPAR increased 9.2 percent on the strength of ancillary group revenue during
the quarter. In addition, the Company executed the sale of both the Four
Seasons Punta Mita Resort and the Marriott London Grosvenor Square hotel, and
redeployed the capital to redeem the Series A preferred stock, acquire the
remaining 50% joint venture interest in the Fairmont Scottsdale Princess
resort and reduce outstanding debt by approximately $190 million. We are
extremely pleased with the results of the quarter and are increasing our
guidance range for Total RevPAR growth to reflect the strength in non-rooms
spending and raising our Comparable FFO per share guidance range to reflect
our recent balance sheet activity. All other guidance ranges are being
maintained," summarized Gellein.

First Quarter Highlights

  oTotal consolidated revenues were $194.7 million in the first quarter of
    2014, a 7.4 percent increase over the prior year period.
  oTotal United States portfolio RevPAR increased 6.3 percent in the first
    quarter of 2014, driven by a 5.1 percent increase in ADR and a 0.7
    percentage point increase in occupancy compared to the first quarter of
    2013. Total RevPAR increased 9.2 percent between periods with non-rooms
    revenue increasing by 12.0 percent between periods.
  oTotal United States portfolio EBITDA margins expanded 220 basis points in
    the first quarter of 2014, compared to the first quarter of 2013.
  oComparable FFO was $0.06 per diluted share in the first quarter of 2014,
    compared with $0.01 per diluted share in the prior year period, a 500.0
    percent increase over the prior year period. 
  oComparable EBITDA was $41.2  million in the first quarter of 2014,
    compared with $34.5 million in the prior year period, a 19.5 percent
    increase between periods. 
  oNet income attributable to common shareholders was $217.2 million, or
    $0.97 per diluted share, in the first quarter of 2014, compared with net
    loss attributable to common shareholders of $23.4 million, or $0.12 per
    diluted share, in the first quarter of 2013. This increase included
    $233.9 million in gains from asset sales, net of taxes, and the
    consolidation of an affiliate during the quarter.
  oGroup occupied room nights in the Total United States portfolio increased
    6.3 percent, offsetting a 3.7 percent decrease in transient occupied room
    nights, in the first quarter of 2014 compared to the first quarter of
    2013. Group ADR increased 2.8 percent and transient ADR increased 7.3
    percent compared to the first quarter of 2013.
  oGroup room nights currently booked for 2014 are 5.3 percent higher
    compared to room nights booked for 2013 at the same time last year, with
    rates 3.2 percent higher, resulting in an 8.7 percent RevPAR increase.

Preferred Equity Dividends & Redemption

On March 3, 2014, the Company's board of directors declared a quarterly
dividend of $0.51563 per share of 8.25 percent Series B Cumulative Redeemable
Preferred Stock paid on March 31, 2014 to shareholders of record as of the
close of business on March 14, 2014 and a quarterly dividend of $0.51563 per
share of 8.25 percent Series C Cumulative Redeemable Preferred Stock paid on
March 31, 2014 to shareholders of record as of the close of business on March
14, 2014.

On April 3, 2014, the Company completed the redemption of all of the
outstanding 4,148,141 shares of its 8.50 percent Series A Cumulative
Redeemable Preferred Stock (the "Series A Preferred Shares"). The Series A
Preferred Shares were redeemed at par value of $25.00 per share, plus accrued
and unpaid dividends in the amount of $0.54896 per share, for a total
redemption cost of $105,980,688. The redemption of the Series A Preferred
Shares eliminated approximately $6.5 million in dividend payments in 2014 and
$8.8 million of dividend payments on an annual basis.

Transaction Activity

On February 28, 2014, the Company closed on the sale of the Four Seasons Punta
Mita Resort and adjacent La Solana land parcel for $200.0 million. The
Company used the net proceeds after taxes to redeem the Series A Preferred
Shares and reduce indebtedness under its revolving credit facility.

On March 31, 2014, the Company closed on the sale of the Marriott London
Grosvenor Square hotel for £125.15 million ($207.7 million), or approximately
£528,000 per key ($877,000). Net proceeds from the transaction totaled
approximately £57.9 million ($96.2 million), after the repayment of
property-level net debt of £67.3 million ($112.2 million).

Also on March 31, 2014, the Company closed on the acquisition of the remaining
50 percent ownership interest in the Fairmont Scottsdale Princess resort for
approximately $90.6 million, representing a net purchase price of
approximately $288.0 million, or $440,000 per key.

Subsequent Events

On April 21, 2014, the Company paid $22.7 million to terminate its $400.0
million notional value interest rate swap portfolio, which will reduce cash
interest expense by approximately $11.5 million in 2014. The swap portfolio
had a weighted average LIBOR interest rate of 5.09 percent. As a result of
the swap terminations, the Company will record $8.9 million of non-cash
interest expense in the last nine months of the year related to the
amortization of the swaps' remaining Other Comprehensive Income ("OCI")
balance. This non-cash interest expense will be added back for purposes of
reporting Comparable FFO and Comparable FFO per fully diluted share and is
reflected in the Company's revised guidance ranges.

On April 25, 2014, the Company closed on a new $300.0 million stock secured
credit facility with an accordion feature allowing for additional borrowing
capacity up to $400.0 million. The facility's interest rate is based upon a
leverage-based pricing grid ranging from LIBOR plus 175 basis points to LIBOR
plus 250 basis points. The initial pricing is LIBOR plus 200 basis points,
representing a 75 basis point decline from the Company's previous credit
facility.

2014 Guidance

Based on the results of the first quarter of 2014 and current forecasts for
the remainder of the year, management is maintaining its guidance ranges for
full year 2014 RevPAR growth, EBITDA margin expansion and Comparable EBITDA,
and increasing its guidance range for full year 2014 Total RevPAR growth and
Comparable FFO per fully diluted share.

For the full-year ending December 31, 2014, the Company is providing the
following guidance ranges:

Guidance Metrics                Previous Range          Revised Range
RevPAR                          5.0% - 7.0%             5.0% - 7.0%
Total RevPAR                    4.5% - 6.5%             5.0% - 7.0%
EBITDA Margin expansion         120 – 200 basis points  120 – 200 basis points
Comparable EBITDA               $210M - $230M           $210M - $230M
Comparable FFO per diluted      $0.50 - $0.60           $0.57 - $0.67
share

Portfolio Definitions

Total United States portfolio hotel comparisons for the first quarter of 2014
are derived from the Company's hotel portfolio at March 31, 2014, consisting
of all 15 properties located in the United States, including unconsolidated
joint ventures. 

Earnings Call

The Company will conduct its first quarter 2014 conference call for investors
and other interested parties on Thursday, May 8, 2014 at 10:00 a.m. Eastern
Time (ET). Interested individuals are invited to access the call by dialing
800.299.9086 (toll international: 617.786.2903 with passcode 15895989. 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/wznf5ahg/lan/en 15 minutes before the call to
download the necessary software.

For those unable to listen to the call live, a taped rebroadcast will be
available beginning at 2 p.m. ET on May 8, 2014 through 11:59 p.m. ET on May
15, 2014. To access the replay, 888.286.8010 (toll international:
617.801.6888) with passcode 76977708. 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.

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 and Europe. The Company currently has
ownership interests in 16 properties with an aggregate of 7,862 rooms and
835,000 square feet of multi-purpose meeting and banqueting space. For a list
of current properties and for further information, please visit the Company's
website at 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, refinance or extend
maturing debt; the Company's ability to maintain compliance with covenants
contained in its debt facilities; stagnation or 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 its 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, or Germany 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; 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 2014 net income 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 Income Attributable to Common Shareholders       $221.4     $241.4
Depreciation and Amortization                        118.4      118.4
Interest Expense                                     76.8       76.8
Income Taxes                                         2.0        2.0
Non-controlling Interests                            1.1        1.1
Adjustments from Consolidated Affiliates             (16.1)     (16.1)
Adjustments from Unconsolidated Affiliates           17.2       17.2
Preferred Shareholder Dividends                      17.6       17.6
Preferred Stock Redemption Liability                 3.7        3.7
Realized Portion of Deferred Gain on Sale Leasebacks (0.2)      (0.2)
Gain on Sale of Asset                                (155.8)    (155.8)
Gain on Consolidation of Affiliate                   (78.1)     (78.1)
Other Adjustments                                    2.0        2.0
Comparable EBITDA                                    $210.0     $230.0
                                                     Low Range  High Range
Net Income Attributable to Common Shareholders       $221.4     $241.4
Depreciation and Amortization                        117.5      117.5
Realized Portion of Deferred Gain on Sale Leasebacks (0.2)      (0.2)
Gain on Sale of Asset                                (155.8)    (155.8)
Gain on Consolidation of Affiliate                   (78.1)     (78.1)
Non-controlling Interests                            0.9        0.9
Adjustments from Consolidated Affiliates             (8.6)      (8.6)
Adjustments from Unconsolidated Affiliates           9.2        9.2
Interest Rate Swap OCI Amortization                  8.9        8.9
Preferred Stock Redemption Liability                 3.7        3.7
Other Adjustments                                    1.6        1.6
Comparable FFO                                       $120.5     $140.5
Comparable FFO per Diluted Share                     $0.57      $0.67



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



Consolidated Statements of Operations

(in thousands, except per share data)
                                                  Three Months Ended March 31,
                                                  2014            2013
Revenues:
Rooms                                             $  103,100      $  98,264
Food and beverage                                 70,017          62,057
Other hotel operating revenue                     20,239          19,659
Lease revenue                                     1,299           1,200
Total revenues                                    194,655         181,180
Operating Costs and Expenses:
Rooms                                             33,707          31,763
Food and beverage                                 54,603          51,550
Other departmental expenses                       53,579          51,181
Management fees                                   5,778           5,010
Other hotel expenses                              15,678          14,889
Lease expense                                     1,258           1,176
Depreciation and amortization                     22,205          24,908
Corporate expenses                                7,193           5,763
Total operating costs and expenses                194,001         186,240
Operating income (loss)                           654             (5,060)
Interest expense                                  (18,274)        (19,663)
Interest income                                   27              10
Equity in earnings of unconsolidated affiliates   4,445           1,345
Foreign currency exchange gain (loss)             2               (86)
Gain on consolidation of affiliate                78,117          —
Other income, net                                 423             132
Income (loss) before income taxes and             65,394          (23,322)
discontinued operations
Income tax expense                                (39)            (13)
Income (loss) from continuing operations          65,355          (23,335)
Income from discontinued operations, net of tax   158,435         1,989
Net Income (Loss)                                 223,790         (21,346)
Net (income) loss attributable to the
noncontrolling interests in SHR's operating       (849)           87
partnership
Net loss attributable to the noncontrolling       4,041           3,852
interests in consolidated affiliates
Net Income (Loss) attributable to SHR             226,982         (17,407)
Preferred shareholder dividends                   (9,824)         (6,041)
Net Income (Loss) Attributable to SHR Common      $  217,158      $  (23,448)
Shareholders
Basic Income (Loss) Per Common Share:
Income (loss) from continuing operations          $  0.29         $  (0.12)
attributable to SHR common shareholders
Income from discontinued operations attributable  0.76            0.01
to SHR common shareholders
Net income (loss) attributable to SHR common      $  1.05         $  (0.11)
shareholders
Weighted average shares of common stock           206,983         206,981
outstanding
Diluted Income (Loss) Per Common Share:
Income (loss) from continuing operations          $  0.25         $  (0.13)
attributable to SHR common shareholders
Income from discontinued operations attributable  0.72            0.01
to SHR common shareholders
Net income (loss) attributable to SHR common      $  0.97         $  (0.12)
shareholders
Weighted average shares of common stock           219,368         218,710
outstanding



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



Consolidated Balance Sheets

(in thousands, except share data)
                                                    March 31,     December 31,

                                                    2014          2013
Assets
Investment in hotel properties, net                 $ 2,033,812   $ 1,795,338
Goodwill                                            38,128        38,128
Intangible assets, net of accumulated amortization  3,877         29,502
of $6,158 and $11,753
Assets held for sale                                —             135,901
Investment in unconsolidated affiliates             76,779        104,973
Cash and cash equivalents                           166,892       73,655
Restricted cash and cash equivalents                81,698        75,916
Accounts receivable, net of allowance for doubtful  52,691        39,660
accounts of $486 and $606
Deferred financing costs, net of accumulated        6,800         8,478
amortization of $11,539 and $12,354
Prepaid expenses and other assets                   32,572        35,600
Total assets                                        $ 2,493,249   $ 2,337,151
Liabilities, Noncontrolling Interests and Equity
Liabilities:
Mortgages and other debt payable, net of discount   $ 1,161,263   $ 1,163,696
Bank credit facility                                30,000        110,000
Liabilities of assets held for sale                 —             17,027
Accounts payable and accrued expenses               203,699       189,889
Preferred stock redemption liability                103,704       —
Distributions payable                               2,277         —
Deferred tax liabilities                            45,957        46,137
Total liabilities                                   1,546,900     1,526,749
Commitments and contingencies
Noncontrolling interests in SHR's operating         8,124         7,534
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
$25.00 per share plus accrued distributions and
$103,704 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
$90,384 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
$95,693 in the aggregate)
Common stock ($0.01 par value per share;
350,000,000 shares of common stock authorized;      2,058         2,056
205,792,726 and 205,582,838 shares of common stock
issued and outstanding)
Additional paid-in capital                          1,696,148     1,705,306
Accumulated deficit                                 (1,007,970)   (1,234,952)
Accumulated other comprehensive loss                (22,328)      (41,445)
Total SHR's shareholders' equity                    847,461       710,513
Noncontrolling interests in consolidated            90,764        92,355
affiliates
Total equity                                        938,225       802,868
Total liabilities, noncontrolling interests and     $ 2,493,249   $ 2,337,151
equity



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



Financial Highlights



Supplemental Financial Data

(in thousands, except per share information)
                                                 March 31, 2014
                                                 ProRataShare  Consolidated
Capitalization
Shares of common stock outstanding               205,793         205,793
Operating partnership units outstanding          797             797
Restricted stock units outstanding               1,619           1,619
Combined shares and units outstanding            208,209         208,209
Common stock price at end of period              $  10.19        $ 10.19
Common equity capitalization                     $  2,121,650    $ 2,121,650
Preferred equity capitalization (at $25.00 face  186,078         186,078
value)
Preferred stock redemption liability             103,704         103,704
Consolidated debt                                1,193,755       1,193,755
Pro rata share of unconsolidated debt            172,900         —
Pro rata share of consolidated debt              (132,791)       —
Cash and cash equivalents                        (166,892)       (166,892)
Total enterprise value                           $  3,478,404    $ 3,438,295
Net Debt / Total Enterprise Value                33.7         %  32.9        %
Preferred Equity / Total Enterprise Value        5.3          %  5.4         %
Common Equity / Total Enterprise Value           61.0         %  61.7        %



Discontinued Operations

(in thousands)
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 hotels were sold during the three months
ended March 31, 2014:
Hotel                Location         DateSold         SalesProceeds
Four Seasons
Punta Mita Resort    Punta Mita,      February 28,      $  203,197,000
and La Solana        Mexico           2014
land parcel
Marriott London      London,          March 31, 2014    $  208,306,000    (a)
Grosvenor Square     England

    There was an outstanding balance of £67,301,000 ($112,150,000) on the
(a) mortgage loan secured by the Marriott London Grosvenor Square hotel, which
    was repaid at the time of closing. The net proceeds we received were
    $96,156,000.



The following is a summary of income from discontinued operations for the
three months ended March 31, 2014 and 2013 (in thousands):
                                    Three Months Ended March 31,
                                    2014                    2013
Hotel operating revenues            $    17,767             $    20,287
Operating costs and expenses        11,485                  13,722
Depreciation and amortization       1,275                   2,310
Total operating costs and           12,760                  16,032
expenses
Operating income                    5,007                   4,255
Interest expense                    (1,326)                 (1,823)
Interest income                     2                       2
Loss on early extinguishment of     (272)                   —
debt
Foreign currency exchange gain      32                      326
Income tax expense                  (833)                   (771)
Gain on sale, net of tax            155,825                 —
Income from discontinued            $    158,435            $    1,989
operations



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



Investments in Unconsolidated Affiliates

(in thousands)
We have a 36.4% ownership interest in the Hotel del Coronado hotel that we account
for using the equity method of accounting. We had a 50.0% ownership interest in the
Fairmont Scottsdale Princess hotel that we accounted for using the equity method of
accounting until we acquired the remaining 50.0% ownership interest on March 31,
2014. For purposes of this analysis, the operating results reflect the 50.0%
ownership interest we held in the Fairmont Scottsdale Princess hotel prior to March
31, 2014.
                Three Months Ended March 31,      Three Months Ended March 31, 2013
                2014
                Hotel del  Fairmont               Hotel del   Fairmont
                           Scottsdale  Total                  Scottsdale  Total
                Coronado                          Coronado
                           Princess                           Princess
Total revenues  $ 34,042   $  35,006   $ 69,048   $ 30,330    $  30,956   $ 61,286
(100%)
Property        $ 9,559    $  13,191   $ 22,750   $ 7,874     $  9,569    $ 17,443
EBITDA (100%)
Equity in (losses) earnings of
unconsolidated affiliates (SHR
ownership)
Property        $ 3,351    $  6,595    $ 9,946    $ 2,864     $  4,785    $ 7,649
EBITDA
Depreciation
and             (1,955)    (1,551)     (3,506)    (1,865)     (1,840)     (3,705)
amortization
Interest        (1,900)    (168)       (2,068)    (2,490)     (194)       (2,684)
expense
Other           (4)        (30)        (34)       (16)        (8)         (24)
expenses, net
Income taxes    230        —           230        94          —           94
Equity in
(losses)
earnings of     $ (278)    $  4,846    $ 4,568    $ (1,413)   $  2,743    $ 1,330
unconsolidated
affiliates
EBITDA
Contribution:
Equity in
(losses)
earnings of     $ (278)    $  4,846    $ 4,568    $ (1,413)   $  2,743    $ 1,330
unconsolidated
affiliates
Depreciation
and             1,955      1,551       3,506      1,865       1,840       3,705
amortization
Interest        1,900      168         2,068      2,490       194         2,684
expense
Income taxes    (230)      —           (230)      (94)        —           (94)
EBITDA          $ 3,347    $  6,565    $ 9,912    $ 2,848     $  4,777    $ 7,625
Contribution
FFO
Contribution:
Equity in
(losses)
earnings of     $ (278)    $  4,846    $ 4,568    $ (1,413)   $  2,743    $ 1,330
unconsolidated
affiliates
Depreciation
and             1,955      1,551       3,506      1,865       1,840       3,705
amortization
FFO             $ 1,677    $  6,397    $ 8,074    $ 452       $  4,583    $ 5,035
Contribution



Investments in Unconsolidated Affiliates (Continued)

(in thousands)
                                      Spreadover
Debt                 InterestRate                   LoanAmount  Maturity(a)
                                      LIBOR
Hotel del Coronado
CMBS Mortgage and    3.80     %       365bp         $  475,000   March2018
Mezzanine
Cash and cash                                        (9,799)
equivalents
Net Debt                                             $  465,201

(a) Includes extension options.



                       Effective
Caps                               LIBORCapRate  NotionalAmount  Maturity
                       Date
Hotel del Coronado
CMBS Mortgage and      March 2013  3.00     %      $   475,000      March 2015
Mezzanine Loan Caps



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



Leasehold Information

(in thousands)
                                               Three Months Ended March 31,
                                               2014             2013
Marriott Hamburg:
Property EBITDA                                $   1,512        $  1,396
Revenue (a)                                    $   1,299        $  1,200
Lease expense                                  (1,258)          (1,176)
Less: Deferred gain on sale-leaseback          (53)             (51)
Adjusted lease expense                         (1,311)          (1,227)
Comparable EBITDA contribution from leasehold  $   (12)         $  (27)



                       March 31,  December 31,
Security Deposit (b):
                       2014       2013
Marriott Hamburg       $  2,616   $   2,611

(a) For the three months ended March31, 2014 and 2013, Revenue for the
    Marriott Hamburg hotel represents lease revenue.
(b) 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 certain other charges that are highly variable
from year to year. 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 certain other charges that are highly variable from year to year.
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 Income (Loss) Attributable to SHR Common Shareholders to
EBITDA and Comparable EBITDA

(in thousands)
                                          Three Months Ended March 31,
                                          2014                 2013
Net income (loss) attributable to SHR     $    217,158         $   (23,448)
common shareholders
Depreciation and                          22,205               24,908
amortization—continuing operations
Depreciation and                          1,275                2,310
amortization—discontinued operations
Interest expense—continuing operations    18,274               19,663
Interest expense—discontinued             1,326                1,823
operations
Income taxes—continuing operations        39                   13
Income taxes—discontinued operations      833                  771
Income taxes—sale of assets               20,451               —
Noncontrolling interests                  849                  (87)
Adjustments from consolidated             (3,675)              (3,554)
affiliates
Adjustments from unconsolidated           5,290                6,316
affiliates
Preferred shareholder dividends           9,824                6,041
EBITDA                                    293,849              34,756
Realized portion of deferred gain on      (53)                 (51)
sale-leaseback
Gain on consolidation of affiliate        (78,117)             —
Gain on sale of assets—discontinued       (176,276)            —
operations
Loss on early extinguishment of           272                  —
debt—discontinued operations
Foreign currency exchange (gain)          (2)                  86
loss—continuing operations (a)
Foreign currency exchange                 (32)                 (326)
gain—discontinued operations (a)
Activist shareholder costs                1,533                —
Comparable EBITDA                         $    41,174          $   34,465

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



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



Reconciliation of Net Income (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 March 31,
                                                  2014            2013
Net income (loss) attributable to SHR common      $  217,158      $  (23,448)
shareholders
Depreciation and amortization—continuing          22,205          24,908
operations
Depreciation and amortization—discontinued        1,275           2,310
operations
Corporate depreciation                            (123)           (131)
Gain on consolidation of affiliate                (78,117)        —
Gain on sale of assets, net of tax—discontinued   (155,825)       —
operations
Realized portion of deferred gain on              (53)            (51)
sale-leaseback
Noncontrolling interests adjustments              (98)            (127)
Adjustments from consolidated affiliates          (1,835)         (1,641)
Adjustments from unconsolidated affiliates        3,506           3,706
FFO                                               8,093           5,526
Redeemable noncontrolling interests               947             40
FFO—Fully Diluted                                 9,040           5,566
Non-cash mark to market of interest rate          (2,294)         (2,298)
swaps—continuing operations
Non-cash mark to market of interest rate          —               (746)
swaps—discontinued operations
Loss on early extinguishment of                   272             —
debt—discontinued operations
Foreign currency exchange (gain) loss—continuing  (2)             86
operations (a)
Foreign currency exchange gain—discontinued       (32)            (326)
operations (a)
Activist shareholder costs                        1,533           —
Excess of redemption liability over carrying      3,709           —
amount of Series A Preferred Stock
Comparable FFO                                    $  12,226       $  2,282
Comparable FFO per fully diluted share            $  0.06         $  0.01
Weighted average diluted shares (b)               209,583         209,895

    Foreign currency exchange gains or losses applicable to third-party and
(a) 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                    InterestRate   Spread(a)  LoanAmount   Maturity (b)
North Beach Venture     5.00      %     Fixed       $ 1,469       January 2015
Bank credit facility    3.15      %     300 bp      30,000        June 2015
(c)
Fairmont Scottsdale     0.51      %     36 bp       117,000       April 2015
Princess (d)
Four Seasons            3.30      %     315 bp      130,000       July 2016
Washington, D.C.
Westin St. Francis      6.09      %     Fixed       209,588       June 2017
Fairmont Chicago        6.09      %     Fixed       93,124        June 2017
JW Marriott Essex       4.75      %     400 bp      185,826       September
House Hotel                                                       2017
Hyatt Regency La Jolla  4.50% / 10.00%  400 bp /    89,306        December
(e)                                     Fixed                     2017
InterContinental Miami  3.65      %     350 bp      85,000        July 2018
Loews Santa Monica      4.00      %     385 bp      108,500       July 2018
Beach Hotel
InterContinental        5.61      %     Fixed       143,943       August2021
Chicago
                                                    1,193,756
Unamortized discount                                (2,493
(d)
                                                    $ 1,191,263

    Spread over LIBOR (0.15% at March31, 2014). Interest on the JW Marriott
(a) 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.
    On April 25, 2014, the Company entered into a new $300,000,000 secured
(c) bank credit facility, which replaced the previous secured bank credit
    facility.
    On March 31, 2014, the Company acquired the remaining 50.0% equity
    interest in the Fairmont Scottsdale Princess hotel, increasing its equity
    ownership to 100.0%. In connection with the acquisition, the Company
    consolidated the hotel and assumed the mortgage loan secured by the
(d) Fairmont Scottsdale Princess hotel. The Company recorded the mortgage loan
    at its fair value, which included a debt discount of $2,493.000. The
    discount will be amortized on a straight-line basis through the loan's
    maturity date of April 2015 and will be included in interest expense in
    the consolidated statements of operations.
    Interest on $72,000,000 is payable at LIBOR plus 4.00%, subject to a 0.50%
(e) LIBOR floor, and interest on $17,306,000 is payable at a fixed rate of
    10.00%.



Interest Rate Swaps (f)
                     FixedPayRate  Notional
Swap Effective Date                               Maturity
                     AgainstLIBOR   Amount
February 2010        4.90       %    $  100,000   September 2014
February 2010        4.96       %    100,000      December2014
December 2010        5.23       %    100,000      December2015
February 2011        5.27       %    100,000      February2016
                     5.09       %    $  400,000

(f) All interest rate swaps were terminated in April 2014 for $22,700,000.



Debt Summary (Continued)

(dollars in thousands)
Future scheduled debt principal payments (including extension options) are as
follows:
Years ending December31,                                         Amount
2014 (remainder)                                                  $ 3,279
2015                                                              154,498
2016                                                              139,783
2017                                                              577,037
2018                                                              185,015
Thereafter                                                        134,144
                                                                  1,193,756
Unamortized discount                                              (2,493
                                                                  $  1,191,263
Percent of fixed rate debt including swaps                        72.5
Weighted average interest rate including swaps (g)                6.16
Weighted average maturity of fixed rate debt (debt with maturity  3.67
of greater than one year)

(g) 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: COMPANY, 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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