UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 7, 2012

 

RLJ LODGING TRUST

(Exact name of registrant as specified in its charter)

 

Maryland

 

001-35169

 

27-4706509

(State or other jurisdiction of incorporation)

 

(Commission File Number)

 

(IRS Employer Identification Number)

 

3 Bethesda Metro Center
Suite 100
Bethesda, MD

 

20814

(Address of principal executive offices)

 

(Zip Code)

 

(301) 280-7777

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02.                                          Results of Operations and Financial Condition.

 

On August 7, 2012, RLJ Lodging Trust (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2012.  A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The information included in this Current Report on Form 8-K (including Exhibit 99.1 hereto) shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01.                                          Financial Statements and Exhibits.

 

(a)  Not applicable.

 

(b)  Not applicable.

 

(c)  Not applicable.

 

(d)  The following exhibits are filed as part of this report:

 

Exhibit Number

 

Description

99.1

 

Press release dated August 7, 2012, issued by RLJ Lodging Trust, providing financial results for the three and six months ended June 30, 2012

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

RLJ LODGING TRUST

 

 

 

 

Date: August 8, 2012

By:

/s/ Thomas J. Baltimore, Jr.

 

 

Thomas J. Baltimore, Jr.

 

 

President, Chief Executive Officer and Trustee

 

3



 

EXHIBIT LIST

 

Exhibit Number

 

Description

99.1

 

Press release dated August 7, 2012, issued by RLJ Lodging Trust, providing financial results for the three and six months ended June 30, 2012.

 

4


Exhibit 99.1

 

 

Press Release

 

RLJ LODGING TRUST REPORTS SECOND QUARTER 2012 RESULTS

- Pro forma RevPAR increases 8.6%, excluding disruption

 

Bethesda, MD, August 7, 2012 — RLJ Lodging Trust (the “Company”) (NYSE: RLJ) today reported results for the three and six months ended June 30, 2012.

 

Quarter Highlights

 

·

Pro forma RevPAR increased 7.1%, ADR increased 5.2% and occupancy increased 1.8%

·

Excluding renovation disruption, Pro forma RevPAR is estimated to have increased an additional 153 basis points to 8.6%

·

Pro forma Hotel EBITDA margin increased 34 basis points to 36.2%

·

Pro forma Consolidated Hotel EBITDA increased 8.3% to $83.6 million

·

Adjusted FFO increased 22.4% to $55.6 million

·

Acquired three hotels in gateway markets: New York City, the San Francisco Bay area, and the Washington D.C. Metro area for $182.7 million

·

Refinanced an $85.0 million first mortgage loan

·

Declared a quarterly cash dividend of $0.165, or $0.66 on an annualized basis

·

Completed a $25.0 million rooms renovation at the DoubleTree by Hilton Hotel Metropolitan New York City, which included adding five new guest rooms

 

“The second quarter marked another successful quarter for RLJ as we again delivered strong RevPAR and margin growth,” commented Thomas J. Baltimore, Jr., President and Chief Executive Officer. “Additionally, we acquired three institutional grade assets that will enhance our portfolio and increase our presence in key gateway markets.”

 

Financial and Operating Results

 

This press release presents 2011 data that combines the financial and operating results of the Company’s predecessor entities prior to the consummation of the Company’s initial public offering (“IPO”) on May 16, 2011, and the results of the Company post-IPO. Pro forma RevPAR, Pro forma Hotel EBITDA, and Pro forma Hotel EBITDA Margin exclude non-comparable hotels that were not open for operation or closed for renovations for comparable periods.  The prefix “pro forma,” as defined by the Company, denotes operating results which include results for periods prior to its ownership.  An explanation of EBITDA, Adjusted EBITDA, Hotel EBITDA, FFO, and Adjusted FFO, as well as reconciliations of those measures to net income or loss, if applicable, is included at the end of this release.

 



 

Pro forma operating statistics assume the Company owned all of its hotels, including the recent acquisitions, since January 1, 2011.  Recent acquisitions are included for the full three and six months for each respective period.

 

Pro forma RevPAR for the three months ended June 30, 2012, increased 7.1% over the comparable period in 2011, driven by an ADR increase of 5.2% and an occupancy increase of 1.8%.  Amongst the Company’s top six markets, the best performers in the quarter were Louisville and Chicago, which experienced RevPAR growth of 13.1% and 8.6%, respectively.  Adjusting for disruption caused by the recent capital investments, the Company estimates that RevPAR growth would have increased by an additional 153 basis points to 8.6%. For the six months ended June 30, 2012, Pro forma RevPAR increased 5.7% over the comparable period in 2011, driven by an ADR increase of 5.1% and an occupancy increase of 0.5%.

 

Pro forma Hotel EBITDA for the three months ended June 30, 2012, increased $6.4 million to $83.7 million, representing an 8.3% increase over the comparable period in 2011.  For the six months ended June 30, 2012, Pro forma Hotel EBITDA increased $8.7 million to $138.4 million, representing a 6.7% increase over the comparable period in 2011.

 

Pro forma Hotel EBITDA Margin for the three months ended June 30, 2012, increased 34 basis points over the comparable period in 2011 to 36.2%.  Adjusting for disruption caused by the recent capital investments, the Company estimates that Pro forma Hotel EBITDA Margin would have increased by an additional 39 basis points to 36.5%.  For the six months ended June 30, 2012, Pro forma Hotel EBITDA Margin increased 20 basis points over the comparable period in 2011 to 33.1%.

 

Pro forma Consolidated Hotel EBITDA, which includes the results of one non-comparable hotel, increased $6.4 million to $83.6 million, representing an 8.3% increase for the three months ended June 30, 2012, over the comparable period in 2011.  For the six months ended June 30, 2012, Pro forma Consolidated Hotel EBITDA, which includes the results of three non-comparable hotels, increased to $140.1 million.

 

Adjusted EBITDA for the three months ended June 30, 2012, increased $6.5 million to $76.1 million, representing a 9.4% increase over the comparable period in 2011.  For the six months ended June 30, 2012, Adjusted EBITDA increased $9.6 million to $125.2 million, representing an 8.3% increase over the comparable period in 2011. For both the three and six months ended June 30, 2012, the impact of the acquisitions made in the quarter was an increase of $1.1 million.

 

Adjusted FFO for the three months ended June 30, 2012, increased $10.2 million to $55.6 million, representing a 22.4% increase over the comparable period in 2011.  For the six months ended June 30, 2012, Adjusted FFO increased $18.7 million to $84.1 million, representing a 28.6% increase over the comparable period in 2011.  For both the three and six months ended June 30, 2012, the impact of the acquisitions made in the quarter was an increase of $1.1 million. Adjusted FFO per diluted share and unit for the three and six months ended June 30, 2012, was $0.52 and $0.79, respectively based on the Company’s diluted weighted-average shares and units outstanding of 106.3 million for each period.

 



 

Non-recurring expenses for the three and six months ended June 30, 2012, were $0.6 million related to a non-cash loss on disposal of furniture, fixtures, and equipment associated with assets under renovation.  These expenses are included in net income and EBITDA, but have been excluded from FFO and Adjusted EBITDA.

 

Net income attributable to common shareholders for the three months ended June 30, 2012, was $18.9 million, compared to a net loss attributable to common shareholders of $2.6 million in the comparable period in 2011.  For the six months ended June 30, 2012, net income attributable to common shareholders was $12.4 million, compared to a net loss attributable to common shareholders of $18.7 million for the comparable period in 2011.  For the three and six months ended June 30, 2012, the impact of the acquisitions made in the quarter was a loss of $2.4 million.

 

Net cash flow from operating activities for the six months ended June 30, 2012, totaled $58.2 million compared to $52.6 million for the comparable period in 2011.

 

Capital Expenditures

 

The Company’s 2012 capital plan to upgrade and/or reposition 45 hotels for approximately $95.0 million is currently in progress.

 

During the second quarter, approximately $9.1 million of additional upgrades were initiated at five hotels.  Year to date, the Company has initiated an estimated $62.6 million of upgrades across 22 hotels, which also includes the recent completion of the $25.0 million rooms renovation at the DoubleTree by Hilton Hotel Metropolitan New York City.

 

Once the remaining 23 assets are completed, the Company’s comprehensive two-year capital program will be substantially complete.

 

Acquisitions

 

For the three months ended June 30, 2012, the Company acquired three focused-service hotels in key gateway markets that exhibit high growth and high barriers-to-entry characteristics: the 187-room Residence Inn by Marriott Bethesda Hotel Downtown, the 226-room Courtyard New York Manhattan/Upper East Side, and the 278-room Hilton Garden Inn San Francisco Oakland/Bay Bridge, for a combined total of $182.7 million.

 

On May 29, 2012, the Company acquired the 187-room Residence Inn Bethesda Downtown in an off-market transaction for a purchase price of $64.5 million, or approximately $345,000 per key. The purchase price represents a forward capitalization rate of approximately 7.1% on the hotel’s projected 2013 net operating income.

 

On May 30, 2012, the Company acquired the 226-room Courtyard New York Manhattan/Upper East Side through a bankruptcy court-ordered sale for a purchase price of $82.0 million, or approximately $363,000 per key. The purchase price represents a forward capitalization rate of approximately 7.5% on the hotel’s projected 2013 net operating income. The Company’s purchase price is considerably lower than other recently traded hotels in Manhattan and is a significant discount to replacement cost.

 



 

On June 11, 2012, the Company acquired the 278-room Hilton Garden Inn San Francisco Oakland/Bay Bridge for a purchase price of $36.2 million, or approximately $130,000 per key. The purchase price represents a forward capitalization rate of approximately 9.4% on the hotel’s projected 2013 net operating income.

 

The acquisitions were funded through a combination of cash available on the Company’s balance sheet and borrowings under its credit facility.

 

Balance Sheet and Capital Structure

 

On May 18, 2012, the Company refinanced two loans that matured in April 2012.  In its place, the Company structured one first mortgage loan totaling $85.0 million.  The loan has a base term of four years and a one-year extension option. The loan is interest only during the base term and bears a floating rate of LIBOR plus 235 basis points.

 

As of June 30, 2012, the Company had $155.6 million of unrestricted cash on its balance sheet and $215.0 million available on its unsecured credit facility.  The Company had $1.4 billion of outstanding debt, including $85.0 million outstanding on its unsecured credit facility.  The Company’s ratio of net debt to Adjusted EBITDA for the trailing twelve month period was 4.9 times and includes the effects of the Company’s three recent acquisitions.

 

Dividends

 

The Company’s Board of Trustees declared a cash dividend of $0.165 per common share of beneficial interest.  The dividend was paid on July 13, 2012, to shareholders of record as of June 29, 2012.

 

2012 Outlook

 

Based on the Company’s second quarter performance, recent acquisition activity, and current trends, the Company is updating its 2012 outlook.  The Company’s outlook excludes potential future acquisitions and dispositions, which could result in a material change to the Company’s outlook.  The Company’s 2012 outlook is also based on a number of other assumptions, many of which are outside the Company’s control and all of which are subject to change.

 

Pro forma operating statistics assume the Company owned all 144 of its hotels since January 1, 2011, including the recent acquisitions.  Pro forma RevPAR growth and Pro forma Hotel EBITDA Margin exclude non-comparable hotels.  Pro forma Consolidated Hotel EBITDA includes approximately $3.5 million of prior ownership Hotel EBITDA from the three recent acquisitions that will not be included in the Company’s corporate Adjusted EBITDA or Adjusted FFO.  For the full year 2012, the Company’s updated outlook is:

 

 

 

Current Outlook

 

Prior Outlook

Pro forma RevPAR growth

 

6.0% to 8.0%

 

6.0% to 8.0%

Pro forma Hotel EBITDA Margin

 

33.5% to 34.5%

 

33.5% to 34.5%

Pro forma Consolidated Hotel EBITDA

 

$280.0 to $300.0 million

 

$270.0 to $290.0 million

 



 

Earnings Call

 

The Company will conduct its quarterly analyst and investor conference call on August 8, 2012, at 10:00 a.m. (Eastern Time).  The conference call can be accessed by dialing (877) 705-6003 or (201) 493-6725 for international participants and requesting RLJ Lodging Trust’s second quarter earnings conference call. Additionally, a live webcast of the conference call will be available through the Company’s website at http://rljlodgingtrust.com.  A replay of the conference call webcast will be archived and available online through the Investor Relations section of the Company’s website.

 

About Us

 

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust focused on acquiring premium-branded, focused-service and compact full-service hotels. The Company’s portfolio consists of 144 hotels in 20 states and the District of Columbia, with more than 21,300 rooms. Additional information may be found on the Company’s website at http://rljlodgingtrust.com.

 

Forward Looking Statements

 

This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.  In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters.  Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control, that may cause actual results to differ significantly from those expressed in any forward-looking statement, including statements related to, among other things, the timing, price or amount of purchases, if any, under the Company’s common stock repurchase program,  the Company’s target leverage ratio, potential acquisitions or dispositions, the completion of the 2012 capital improvement plan, RevPAR growth, EBITDA growth, Hotel EBITDA margins or cash G&A expenses.  All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance.  Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes.  For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Annual report on Form 10-K for the year ended December 31, 2011, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission.

 

###

 

Additional Contacts:

 

Leslie D. Hale, Chief Financial Officer, RLJ Lodging Trust — (301) 280-7707

For additional information or to receive press releases via email, please visit our website:

 

http://rljlodgingtrust.com

 



 

RLJ Lodging Trust

Combined Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Investment in hotel properties, net

 

$

3,016,334

 

$

2,820,457

 

Investment in loans

 

12,531

 

12,633

 

Cash and cash equivalents

 

155,595

 

310,231

 

Restricted cash reserves

 

82,085

 

87,288

 

Hotel receivables, net of allowance of $240 and $150, respectively

 

29,288

 

20,081

 

Deferred financing costs, net

 

9,327

 

9,639

 

Deferred income tax asset

 

1,626

 

1,369

 

Prepaid expense and other assets

 

34,046

 

28,320

 

Total assets

 

$

3,340,832

 

$

3,290,018

 

Liabilities and Equity

 

 

 

 

 

Borrowings under credit facility

 

$

85,000

 

$

 

Mortgage loans

 

1,335,186

 

1,341,735

 

Interest rate swap liability

 

1,421

 

1,796

 

Accounts payable and accrued expense

 

73,892

 

86,213

 

Deferred income tax liability

 

3,292

 

3,314

 

Advance deposits and deferred revenue

 

8,782

 

4,781

 

Accrued interest

 

2,343

 

2,115

 

Distributions payable

 

17,742

 

16,076

 

Total liabilities

 

1,527,658

 

1,456,030

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized; zero shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively.

 

 

 

Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 106,634,076 and 106,279,049 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively.

 

1,067

 

1,063

 

Additional paid-in-capital

 

1,837,231

 

1,835,011

 

Accumulated other comprehensive loss

 

(1,407

)

(1,782

)

Distributions in excess of net earnings

 

(41,803

)

(18,960

)

Total shareholders’ equity

 

1,795,088

 

1,815,332

 

 

 

 

 

 

 

Noncontrolling interest

 

 

 

 

 

Noncontrolling interest in joint venture

 

6,762

 

7,170

 

Noncontrolling interest in Operating Partnership

 

11,324

 

11,486

 

Total noncontrolling interest

 

18,086

 

18,656

 

Total equity

 

1,813,174

 

1,833,988

 

Total liabilities and equity

 

$

3,340,832

 

$

3,290,018

 

 



 

RLJ Lodging Trust

Combined Consolidated Statements of Operations and Comprehensive Income / (Loss)

(Amounts in thousands, except share and per share data)

(unaudited)

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Revenue

 

 

 

 

 

 

 

 

 

Hotel operating revenue

 

 

 

 

 

 

 

 

 

Room revenue

 

$

194,842

 

$

177,903

 

$

353,421

 

$

322,628

 

Food and beverage revenue

 

22,403

 

21,254

 

41,908

 

40,167

 

Other operating department revenue

 

6,012

 

5,114

 

11,121

 

9,645

 

Total revenue

 

223,257

 

204,271

 

406,450

 

372,440

 

 

 

 

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

 

 

 

Hotel operating expense

 

 

 

 

 

 

 

 

 

Room

 

40,967

 

38,133

 

77,897

 

71,741

 

Food and beverage

 

15,508

 

14,870

 

29,948

 

28,289

 

Management fees

 

7,638

 

6,985

 

13,942

 

12,764

 

Other hotel expenses

 

65,156

 

58,897

 

123,714

 

113,184

 

Total hotel operating expense

 

129,269

 

118,885

 

245,501

 

225,978

 

Depreciation and amortization

 

31,454

 

30,702

 

65,151

 

62,453

 

Property tax, insurance and other

 

12,474

 

12,068

 

25,108

 

23,488

 

General and administrative

 

7,481

 

6,165

 

14,741

 

11,175

 

Transaction and pursuit costs

 

2,795

 

634

 

2,814

 

3,332

 

IPO costs

 

 

10,244

 

 

10,244

 

Total operating expense

 

183,473

 

178,698

 

353,315

 

336,670

 

Operating income

 

39,784

 

25,573

 

53,135

 

35,770

 

Other income

 

106

 

69

 

190

 

224

 

Interest income

 

418

 

357

 

837

 

840

 

Interest expense

 

(20,374

)

(27,894

)

(40,555

)

(53,752

)

Loss on disposal

 

(634

)

 

(634

)

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

19,300

 

(1,895

)

12,973

 

(16,918

)

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(281

)

(407

)

(875

)

(688

)

Income (loss) from continuing operations

 

19,019

 

(2,302

)

12,098

 

(17,606

)

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

(159

)

 

(1,131

)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

19,019

 

(2,461

)

12,098

 

(18,737

)

 

 

 

 

 

 

 

 

 

 

Net (income) loss attributable to non-controlling interests

 

 

 

 

 

 

 

 

 

Noncontrolling interest in joint venture

 

38

 

(83

)

408

 

77

 

Noncontrolling interest in common units of Operating Partnership

 

(172

)

21

 

(134

)

21

 

Net income (loss) attributable to the Company

 

18,885

 

(2,523

)

12,372

 

(18,639

)

 

 

 

 

 

 

 

 

 

 

Distributions to preferred unitholders

 

 

(45

)

 

(61

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

 

$

18,885

 

$

(2,568

)

$

12,372

 

$

(18,700

)

 

 

 

 

 

 

 

 

 

 

Basic per common share data:

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common shareholders before discontinued operations

 

$

0.18

 

$

(0.03

)

$

0.11

 

$

(0.22

)

Discontinued operations

 

 

 

 

(0.01

)

Net income (loss) per share attributable to common shareholders

 

$

0.18

 

$

(0.03

)

$

0.11

 

$

(0.23

)

Weighted-average number of common shares

 

105,388,743

 

88,767,570

 

105,360,778

 

81,228,975

 

 

 

 

 

 

 

 

 

 

 

Diluted per common share data:

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common shareholders before discontinued operations

 

$

0.18

 

$

(0.03

)

$

0.11

 

$

(0.22

)

Discontinued operations

 

 

 

 

(0.01

)

Net income (loss) per share attributable to common shareholders

 

$

0.18

 

$

(0.03

)

$

0.11

 

$

(0.23

)

Weighted-average number of common shares

 

105,454,679

 

88,767,570

 

105,414,876

 

81,228,975

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to the Company

 

$

18,885

 

$

(2,523

)

$

12,372

 

$

(18,639

)

Unrealized gain (loss) on interest rate derivatives

 

381

 

(384

)

375

 

812

 

Comprehensive income (loss) attributable to the Company

 

$

19,266

 

$

(2,907

)

$

12,747

 

$

(17,827

)

 



 

RLJ Lodging Trust

Reconciliation of Net Income / (Loss) to Non-GAAP Measures

(Amounts in thousands, except per share data)

(unaudited)

 

FFO and Adjusted FFO

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net income (loss) (1)

 

$

19,019

 

$

(2,461

)

$

12,098

 

$

(18,737

)

Depreciation and amortization

 

31,454

 

30,702

 

65,151

 

62,453

 

Depreciation and amortization, discontinued operations

 

 

983

 

 

1,933

 

Distributions to preferred unitholders

 

 

(45

)

 

(61

)

Loss on disposal

 

634

 

 

634

 

 

Noncontrolling interest in joint venture

 

38

 

(83

)

408

 

77

 

Adjustments related to joint venture (2)

 

(113

)

(75

)

(211

)

(145

)

FFO attributable to common shareholders

 

51,032

 

29,021

 

78,080

 

45,520

 

 

 

 

 

 

 

 

 

 

 

Transaction and pursuit costs

 

2,795

 

634

 

2,814

 

3,332

 

IPO Costs (3)

 

 

10,244

 

 

10,244

 

Amortization of share based compensation

 

1,754

 

639

 

3,213

 

639

 

Other expenses (4)(5)

 

 

4,883

 

 

5,665

 

Adjusted FFO

 

$

55,581

 

$

45,421

 

$

84,107

 

$

65,400

 

 

 

 

 

 

 

 

 

 

 

Adjusted FFO per common share and unit-basic (6)

 

$

0.52

 

N/A

 

$

0.79

 

N/A

 

Adjusted FFO per common share and unit-diluted (6)

 

$

0.52

 

N/A

 

$

0.79

 

N/A

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average common shares and units outstanding (7)

 

106,283

 

89,662

 

106,255

 

82,123

 

Diluted weighted-average common shares and units outstanding (7)

 

106,349

 

89,662

 

106,309

 

82,123

 

 


(1)

Includes net loss of discontinued operations.

(2)

Includes depreciation and amortization expense allocated to the noncontrolling interest in joint venture.

(3)

Includes expenses related to the transfer and assumption of indebtedness and other contractual obligations of our predecessor in connection with the IPO and our formation transactions.

(4)

Includes $4.3 million, for both the three and six months ended June 30, 2011, of incremental interest expense related to the accelerated payoff of mortgage indebtedness.

(5)

Includes $0.6 million and $1.4 million, respectively, for the three and six months ended June 30, 2011 of certain compensation obligations of our predecessor not continued.

(6)

The Company does not reflect Adjusted FFO per common share and unit (basic/diluted) for the three and six months ended June 30, 2011. The Company does not consider the calculation to be meaningful based on the timing of its initial public offering.

(7)

Includes 0.9 million operating partnership units.

 



 

RLJ Lodging Trust

Reconciliation of Net Income / (Loss) to Non-GAAP Measures

(Amounts in thousands)

(unaudited)

 

EBITDA, Adjusted EBITDA, Pro forma Consolidated Hotel EBITDA, and Pro forma Hotel EBITDA

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net income (loss) (1)

 

$

19,019

 

$

(2,461

)

$

12,098

 

$

(18,737

)

Depreciation and amortization

 

31,454

 

30,702

 

65,151

 

62,453

 

Depreciation and amortization, discontinued operations

 

 

983

 

 

1,933

 

Distributions to preferred unitholders

 

 

(45

)

 

(61

)

Interest expense, net (2)

 

20,364

 

27,949

 

40,533

 

53,721

 

Interest expense, net, discontinued operations

 

 

205

 

 

410

 

Income tax expense

 

281

 

407

 

875

 

688

 

Noncontrolling interest in joint venture

 

38

 

(83

)

408

 

77

 

Adjustments related to joint venture (3)

 

(287

)

(249

)

(559

)

(494

)

EBITDA

 

70,869

 

57,408

 

118,506

 

99,990

 

 

 

 

 

 

 

 

 

 

 

Transaction and pursuit costs

 

2,795

 

634

 

2,814

 

3,332

 

IPO costs (4)

 

 

10,244

 

 

10,244

 

Loss on disposal

 

634

 

 

634

 

 

Amortization of share based compensation

 

1,754

 

639

 

3,213

 

639

 

Other expenses (5)

 

 

581

 

 

1,362

 

Adjusted EBITDA

 

$

76,052

 

$

69,506

 

$

125,167

 

$

115,567

 

General and administrative (6)

 

5,727

 

4,945

 

11,528

 

9,174

 

Other income/interest income

 

(515

)

(481

)

(1,006

)

(1,033

)

Operating results from discontinued operations

 

 

(1,029

)

 

(1,214

)

Corporate overhead allocated to properties

 

72

 

125

 

275

 

299

 

Distributions to preferred unitholders

 

 

45

 

 

61

 

Operating results from noncontrolling interest in joint venture

 

249

 

332

 

151

 

417

 

Pro forma adjustments (7)

 

1,787

 

3,540

 

3,504

 

5,011

 

Non-cash amortization (8)

 

250

 

250

 

500

 

500

 

Pro forma Consolidated Hotel EBITDA

 

$

83,621

 

$

77,233

 

$

140,119

 

$

128,782

 

Non-comparable hotels (9)

 

96

 

47

 

(1,670

)

957

 

Pro forma Hotel EBITDA

 

$

83,718

 

$

77,280

 

$

138,449

 

$

129,739

 

 


(1)

Includes net loss of discontinued operations.

(2)

Excludes amounts attributable to investment in loans of $0.4 million and $0.8 million for the three and six months ended June 30, 2012 and 2011, respectively.

(3)

Includes depreciation, amortization and interest expense allocated to the noncontrolling interest in joint venture.

(4)

Includes expenses related to the transfer and assumption of indebtedness and other contractual obligations of our predecessor in connection with the IPO and our formation transactions.

(5)

Includes $0.6 million and $1.4 million, respectively, for the three and six months ended June 30, 2011 of certain compensation obligations of our predecessor not continued.

(6)

General and administrative expenses exclude certain compensation obligations of our predecessor not continued and amortization of share based compensation, which are reflected in Adjusted EBITDA.

(7)

2011 reflects adjustments made to incorporate prior ownership periods for new acquisitions.

(8)

Non cash amortization includes the amortization of management fee expenses.

(9)

Adjustments reflect operating results from properties closed for renovations and properties not open for operations.

 



 

RLJ Lodging Trust

Pro forma Operating Statistics

(unaudited)

 

For the three months ended June 30,

 

 

 

 

 

 

 

 

 

 

 

% of Pro forma

 

 

 

 

 

ADR

 

Occupancy

 

Pro forma RevPAR

 

Hotel EBITDA

 

 

 

# of Hotels

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

Q2 12

 

NYC

 

5

 

$

253.33

 

$

239.81

 

5.6

%

90.0

%

95.3

%

-5.6

%

$

228.08

 

$

228.62

 

-0.2

%

17

%

Chicago

 

21

 

123.67

 

118.65

 

4.2

%

78.1

%

75.0

%

4.2

%

96.60

 

88.98

 

8.6

%

12

%

Austin

 

17

 

122.36

 

115.59

 

5.9

%

76.1

%

75.8

%

0.4

%

93.11

 

87.57

 

6.3

%

10

%

Denver

 

15

 

118.94

 

112.80

 

5.4

%

76.3

%

74.7

%

2.1

%

90.73

 

84.24

 

7.7

%

9

%

Louisville

 

5

 

157.27

 

147.67

 

6.5

%

77.6

%

73.1

%

6.2

%

122.10

 

107.99

 

13.1

%

8

%

Washington DC

 

7

 

172.39

 

168.20

 

2.5

%

84.3

%

81.8

%

3.1

%

145.31

 

137.54

 

5.6

%

8

%

Other

 

73

 

115.50

 

108.34

 

6.6

%

74.3

%

72.6

%

2.3

%

85.84

 

78.71

 

9.1

%

36

%

Total

 

143

 

$

136.09

 

$

129.39

 

5.2

%

77.2

%

75.8

%

1.8

%

$

105.00

 

$

98.07

 

7.1

%

100

%

 

 

 

 

 

 

 

 

 

 

 

% of Pro forma

 

 

 

 

 

ADR

 

Occ

 

RevPAR

 

Hotel EBITDA

 

 

 

# of Hotels

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

Q2 12

 

South

 

63

 

$

129.21

 

$

122.17

 

5.8

%

76.0

%

74.3

%

2.4

%

$

98.22

 

$

90.73

 

8.3

%

43

%

West

 

26

 

116.98

 

109.72

 

6.6

%

77.7

%

75.0

%

3.5

%

90.86

 

82.31

 

10.4

%

16

%

Midwest

 

45

 

112.76

 

106.81

 

5.6

%

74.6

%

72.9

%

2.3

%

84.11

 

77.84

 

8.0

%

20

%

Northeast

 

9

 

226.45

 

216.28

 

4.7

%

86.1

%

88.9

%

-3.2

%

194.89

 

192.29

 

1.4

%

21

%

Total

 

143

 

$

136.09

 

$

129.39

 

5.2

%

77.2

%

75.8

%

1.8

%

$

105.00

 

$

98.07

 

7.1

%

100

%

 

 

 

 

 

 

 

 

 

 

 

% of Pro forma

 

 

 

 

 

ADR

 

Occ

 

RevPAR

 

Hotel EBITDA

 

 

 

# of Hotels

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

Q2 12

 

Focused Service

 

123

 

$

125.86

 

$

118.76

 

6.0

%

77.3

%

75.7

%

2.1

%

$

97.29

 

$

89.89

 

8.2

%

69

%

Compact Full Service

 

19

 

162.28

 

156.40

 

3.8

%

77.4

%

77.0

%

0.4

%

125.57

 

120.49

 

4.2

%

26

%

Full Service

 

1

 

193.66

 

185.77

 

4.2

%

71.7

%

68.6

%

4.5

%

138.93

 

127.53

 

8.9

%

5

%

Total

 

143

 

$

136.09

 

$

129.39

 

5.2

%

77.2

%

75.8

%

1.8

%

$

105.00

 

$

98.07

 

7.1

%

100

%

 

Note:

The schedule above includes Pro forma RevPAR and Pro forma Hotel EBITDA operating statistics for 143 of the Company’s hotels as if they had been owned since January 1, 2011.

The Garden District Hotel remains closed for renovations and therefore has been excluded from 2012 and 2011. Pro forma results reflect 100% of DoubleTree by Hilton Hotel Metropolitan New York City financial results, results have not been adjusted to reflect the 5% noncontrolling interest in the joint venture.

 

The information above has not been audited and is presented only for comparison purposes.

 



 

RLJ Lodging Trust

Pro forma Operating Statistics

(unaudited)

 

For the six months ended June 30,

 

 

 

 

 

 

 

 

 

 

 

% of Pro forma

 

 

 

 

 

ADR

 

Occupancy

 

Pro forma RevPAR

 

Hotel EBITDA

 

 

 

# of Hotels

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

Q2YTD 12

 

NYC

 

5

 

$

222.28

 

$

203.87

 

9.0

%

79.5

%

92.2

%

-13.8

%

$

176.64

 

$

187.96

 

-6.0

%

11

%

Chicago

 

21

 

115.78

 

111.86

 

3.5

%

70.3

%

67.6

%

4.0

%

81.43

 

75.63

 

7.7

%

10

%

Austin

 

17

 

131.36

 

121.07

 

8.5

%

75.5

%

76.1

%

-0.8

%

99.15

 

92.13

 

7.6

%

14

%

Denver

 

15

 

115.95

 

111.14

 

4.3

%

69.6

%

68.8

%

1.1

%

80.70

 

76.48

 

5.5

%

9

%

Louisville

 

5

 

144.53

 

137.51

 

5.1

%

72.7

%

65.5

%

11.0

%

105.06

 

90.01

 

16.7

%

8

%

Washington DC

 

7

 

168.43

 

163.41

 

3.1

%

72.5

%

75.8

%

-4.4

%

122.10

 

123.87

 

-1.4

%

7

%

Other

 

73

 

116.41

 

109.46

 

6.4

%

71.9

%

70.2

%

2.4

%

83.76

 

76.90

 

8.9

%

41

%

Total

 

143

 

$

131.32

 

$

124.96

 

5.1

%

72.6

%

72.2

%

0.5

%

$

95.30

 

$

90.19

 

5.7

%

100

%

 

 

 

 

 

 

 

 

 

 

 

% of Pro forma

 

 

 

 

 

ADR

 

Occ

 

RevPAR

 

Hotel EBITDA

 

 

 

# of Hotels

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

Q2YTD 12

 

South

 

63

 

$

130.20

 

$

122.99

 

5.9

%

74.6

%

73.1

%

2.1

%

$

97.12

 

$

89.85

 

8.1

%

50

%

West

 

26

 

114.32

 

108.60

 

5.3

%

71.5

%

70.1

%

2.0

%

81.76

 

76.12

 

7.4

%

16

%

Midwest

 

45

 

108.92

 

102.61

 

6.1

%

68.3

%

66.3

%

3.0

%

74.39

 

68.06

 

9.3

%

19

%

Northeast

 

9

 

202.04

 

189.08

 

6.9

%

76.2

%

84.9

%

-10.2

%

153.97

 

160.53

 

-4.1

%

15

%

Total

 

143

 

$

131.32

 

$

124.96

 

5.1

%

72.6

%

72.2

%

0.5

%

$

95.30

 

$

90.19

 

5.7

%

100

%

 

 

 

 

 

 

 

 

 

 

 

 

% of Pro forma

 

 

 

 

 

ADR

 

Occ

 

RevPAR

 

Hotel EBITDA

 

 

 

# of Hotels

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

2012

 

2011

 

Var

 

Q2YTD 12

 

Focused Service

 

123

 

$

122.60

 

$

115.85

 

5.8

%

73.0

%

71.4

%

2.2

%

$

89.50

 

$

82.77

 

8.1

%

72

%

Compact Full Service

 

19

 

154.52

 

147.53

 

4.7

%

71.6

%

75.7

%

-5.4

%

110.67

 

111.74

 

-1.0

%

23

%

Full Service

 

1

 

173.06

 

169.77

 

1.9

%

69.2

%

62.0

%

11.6

%

119.68

 

105.24

 

13.7

%

5

%

Total

 

143

 

$

131.32

 

$

124.96

 

5.1

%

72.6

%

72.2

%

0.5

%

$

95.30

 

$

90.19

 

5.7

%

100

%

 

Note:

The schedule above includes Pro forma RevPAR and Pro forma Hotel EBITDA operating statistics for 143 of the Company’s hotels as if they had been owned since January 1, 2011.

Due to conversion upgrades at Fairfield Inn & Suites Washington, DC/Downtown and Courtyard by Marriott Charleston Historic District, these two hotels were excluded for the three months ended March 31, 2012 and 2011.  The Garden District Hotel remains closed for renovations and therefore has been excluded from 2012 and 2011. Pro forma results reflect 100% of DoubleTree by Hilton Hotel Metropolitan New York City financial results, results have not been adjusted to reflect the 5% noncontrolling interest in the joint venture.

 

The information above has not been audited and is presented only for comparison purposes.

 



 

Non-GAAP Financial Measures

 

The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of our performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) Adjusted EBITDA, and (5) Hotel EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of our operating performance.  FFO, Adjusted FFO, EBITDA, Adjusted EBITDA, and Hotel EBITDA as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.

 

Funds From Operations (“FFO”)

 

The Company calculates FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income or loss (calculated in accordance with GAAP), excluding gains or losses from sales of real estate, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations.

 

The Company believes that the presentation of FFO provides useful information to investors regarding our operating performance by excluding the effect of depreciation and amortization, gains or losses from sales for real estate, extraordinary items and the portion of items related to unconsolidated entities, all of which are based on historical cost accounting, and that FFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. The Company’s calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. Additionally, FFO may not be helpful when comparing us to non-REITs. The Company presents FFO attributable to common shareholders, which includes our OP units, because our OP units are redeemable for common shares of beneficial interest.  The Company believes it is meaningful for the investor to understand FFO attributable to all common shares of beneficial interest and OP units.

 

Adjusted FFO

 

The Company further adjusts FFO for certain additional items that are not in NAREIT’s definition of FFO, such as hotel transaction and pursuit costs, the amortization of share based compensation and other nonrecurring expenses that were the result of the IPO and related formation transactions. The Company believes that Adjusted FFO provides investors with another financial measure that may facilitate comparisons of operating performance between periods and between REITs.

 



 

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)

 

EBITDA is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. The Company considers EBITDA useful to an investor in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results.  In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions. The Company presents EBITDA attributable to common shareholders, which includes our OP units, because our OP units are redeemable for common shares of beneficial interest.  The Company believes it is meaningful for the investor to understand EBITDA attributable to all common shares of beneficial interest and OP units.

 

Adjusted EBITDA

 

The Company further adjusts EBITDA for certain additional items such as hotel transaction and pursuit costs, the amortization of share based compensation, disposal of assets and other non-recurring expenses that were the result of the IPO and related formation transactions. The Company believes that Adjusted EBITDA provides investors with another financial measure that can facilitate comparisons of operating performance between periods and between REITs.

 

Hotel EBITDA

 

With respect to Hotel EBITDA, the Company believes that excluding the effect of corporate-level expenses, non-cash items, and the portion of these items related to unconsolidated entities, provides a more complete understanding of the operating results over which individual hotels and operators have direct control. The Company believes property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis.

 

Pro forma Hotel EBITDA includes hotel results from prior ownership periods and excludes non-comparable hotels which were not open for operation or closed for renovations for comparable periods.  Pro forma Consolidated Hotel EBITDA includes hotel results from prior ownership periods and includes non-comparable hotels which were not open for operation or closed for renovations for comparable periods.