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