BETHESDA, Md., March 1 - DiamondRock Hospitality Company (the "Company") (NYSE: DRH) today announced results of operations for the fiscal year ended December 31, 2005. DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner and acquirer of premium hotels in North America.
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Fourth Quarter 2005 Highlights
* Same-store revenue per available room ("RevPAR") increased 13.1 percent
over the comparable period in 2004 for the twelve hotels addressed in
prior guidance.
* Hotel profit margins increased 269 basis points, as measured by hotel-
level adjusted earnings before interest expense, income taxes,
depreciation and amortization ("Hotel Adjusted EBITDA Margins") for the
twelve hotels.
* Adjusted EBITDA of $21.8 million.
* Adjusted Funds from Operations ("Adjusted FFO") of $15.3 million, or
$0.30 per diluted share.
* Acquired the Orlando Airport Marriott for $70 million.
Full Year 2005 Highlights
* RevPAR increased 11.2 percent over the comparable period in 2004 for the
twelve hotels.
* Hotel Adjusted EBITDA Margins increased 233 basis points for the twelve
hotels.
* Adjusted EBITDA of $47.1 million.
* Adjusted FFO of $31.1 million, or $0.79 per diluted share.
* Completed over $600 million of hotel acquisitions during 2005.
William W. McCarten, chairman and chief executive officer, stated, "2005 was a remarkable year for DiamondRock. We successfully completed our initial public offering and acquired nine additional high quality hotels in a very competitive acquisition environment. Our exclusive acquisition sourcing relationship with Marriott has been a real advantage. In addition to our success at raising and successfully investing our capital, we are very proud of our financial results. Our hotel portfolio is performing well, exceeding our initial underwriting, and we are excited by our prospects in 2006. We believe that our portfolio will continue to benefit from the current strong demand for lodging and the preliminary impact of our value added asset management strategies -- for example, in 2006, we intend to invest $84 million in our hotels, which should deliver value for many years to come."
Comparison with Prior Guidance for Full Year 2005
The following table reflects our prior guidance for the full year 2005 compared to our actual results for 2005:
Prior Guidance Actual
RevPAR Growth (1) 9% - 10% 11.2 %
Hotel Adjusted EBITDA Margin Growth (1) 210 bps - 230 bps 233 bps
Adjusted EBITDA $44M - $46M $47.1M
Adjusted FFO $28.4M - $30.4M $31.1M
(1) Represents pro forma RevPAR growth and Hotel Adjusted EBITDA Margin
growth for the twelve hotels addressed in prior guidance (excludes the
three hotels that we acquired in the second half of 2005 -- Oak Brook
Hills Marriott Resort, SpringHill Suites Atlanta Buckhead and Orlando
Airport Marriott).
Operating Results
Please see "Certain Definitions" and "Non-GAAP Financial Measures" attached to this press release for an explanation of the terms "twelve hotels," "EBITDA," "Adjusted EBITDA," "Hotel Adjusted EBITDA Margin," "FFO" and "Adjusted FFO." Moreover, the discussions of RevPAR, Adjusted EBITDA and Hotel Adjusted EBITDA Margin assume that the acquired hotels were owned by the Company for the entire reporting periods of 2005 and 2004.
Fourth Quarter Results
For the fourth fiscal quarter, beginning September 10, 2005 and ended December 31, 2005, the Company reported:
* Revenues of $104.2 million
* Net income of $1.6 million ($0.03 per diluted share)
* Adjusted EBITDA of $21.8 million
* Adjusted FFO of $15.3 million ($0.30 per diluted share)
RevPAR for the twelve hotels increased 13.1 percent from $95.92 to $108.51 as compared to the same period in 2004, driven by an 11.9 percent increase in the average daily rate and a 0.75 percentage point increase in occupancy. During the fourth quarter we excluded out-of-service rooms related to the renovation at the Torrance Marriott from the RevPAR calculation.
Hotel Adjusted EBITDA Margins for our twelve hotels increased 269 basis points to 25.0 percent over the same period in the prior year.
Full Year 2005 Results
For the fiscal year ended December 31, 2005, the Company reported:
* Revenues of $229.5 million
* Net loss of $7.3 million ($0.19 per diluted share)
* Adjusted EBITDA of $47.1 million
* Adjusted FFO of $31.1 million ($0.79 per diluted share)
RevPAR for our twelve hotels increased 11.2 percent to $109.58 compared to $98.54 in the same period in 2004, driven by a 9.8 percent increase in the average daily rate and a 1 percentage point increase in occupancy. During 2005 we excluded out-of-service rooms related to the renovations at the Courtyard New York/Manhattan Fifth Avenue and the Torrance Marriott from the RevPAR calculation.
Hotel Adjusted EBITDA Margins for our twelve hotels increased 233 basis points to 25.9 percent compared to the same period in the prior year.
2005 Acquisitions
The Company acquired nine hotels during 2005 as follows:
* The Torrance Marriott for a contractual purchase price of $61.5 million.
* A portfolio of four hotels, including the Los Angeles Airport Marriott,
the Renaissance Worthington (Fort Worth), the Marriott Atlanta
Alpharetta Marriott, and the Marriott Frenchman's Reef & Morning Star
Marriott Beach Resort (St. Thomas, USVI) for a contractual purchase
price of $315.0 million.
* The Vail Marriott Mountain Resort & Spa for a contractual purchase price
of $62.0 million.
* The SpringHill Suites Atlanta Buckhead in the Buckhead area of Atlanta,
Georgia for a contractual purchase price of $34.1 million.
* The Oak Brook Hills Resort & Conference Center in Oak Brook, Illinois
for a contractual purchase price of $64.0 million. This hotel was
rebranded as the Oak Brook Hills Marriott Resort.
* The Orlando Airport Marriott for a contractual purchase price of $70
million.
Balance Sheet & Recent Financings
As of December 31, 2005, the Company had total assets of $966.0 million (including $23.1 million of restricted cash available for capital improvement projects) and $431.2 million of total debt. Over 90 percent of our debt is long-term, fixed-rate, single property limited recourse mortgage debt. The Company's debt bears interest at a weighted average rate of 5.6 percent per annum and has a weighted average maturity of 8.3 years.
On July 8, 2005, the Company entered into its senior secured revolving credit facility. The facility has a three-year term and a $75.0 million limit, with an ability to increase the facility up to $250 million with lender approval. As long as the Company maintains a debt-to-asset value of less than 65 percent, outstanding funds on the credit facility will bear interest at LIBOR plus 1.45 percent. Wachovia Bank, Citigroup North America, and Bank of America participated in the credit facility. As of December 31, 2005, the Company's revolving credit facility had $12 million outstanding and $11.4 million reserved in connection with a letter of credit issued in conjunction with the property level debt on the Orlando Airport Marriott to cover renovations.
Recent Developments
We have a commitment from Lehman Brothers Bank to refinance the mortgage loan on the Courtyard Manhattan/Fifth Avenue that would have matured on January 2007. Pursuant to this commitment, we expect to refinance the $23 million existing floating rate loan with a $51 million fixed rate loan that matures in 10 years and is interest only for five years. The interest rate will be fixed upon funding of the loan at the 10-year swap rate plus 90 basis points.
Outlook
The Company is providing guidance, but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the Securities and Exchange Commission. The guidance below includes the estimated disruption impact of the planned $84 million of renovations of our hotels during 2006. Furthermore, the RevPAR and Hotel Adjusted EBITDA margin guidance are presented on a pro forma basis as they assume that the acquired hotels were owned by the Company for the entire comparable reporting periods of 2005. Finally, our guidance does not reflect the impact of any additional hotel acquisitions or dispositions.
For the full year 2006 the Company expects:
* RevPAR to increase in the range of 8 to 10 percent for our fifteen
hotels. The newly built SpringHill Suites Atlanta Buckhead is included
only during comparable periods.
* Hotel Adjusted EBITDA Margins to increase approximately 160 to 210 basis
points for our fifteen. The newly built SpringHill Suites Atlanta
Buckhead is included only during comparable periods.
* Adjusted EBITDA of $92.0 million to $96.0 million.
* Adjusted FFO of $64.4 million to $68.4 million.
* Total capital expenditures of approximately $84 million.
The Company expects that its 2006 results will contribute to full year Adjusted FFO as follows: first quarter of 16-18%, second quarter of 30-32%, third quarter of 19-21% and fourth quarter of 31-33%. The seasonality of the Company's results is partially impacted by our reporting calendar (described in detail beginning on page 6) and by the timing of our 2006 capital expenditures (discussed in detail on page 5).
Dividend Update
Fourth Quarter Dividend
The Company declared a dividend of $0.1725 per share, payable to its common stockholders of record as of December 30, 2005. The dividend was paid on January 17, 2006.
Increased Dividend for First Quarter 2006
The Board of Directors for the Company has approved an increase in the quarterly dividend. A cash dividend of $0.18 per share will be paid to shareholders of record as of March 24, 2006 -- the last day of the Company's first fiscal quarter 2006. The dividend will be paid on April 11, 2006.
2005-06 Major Capital Expenditures
The Company has and continues to make significant capital investments in its hotels. The Company has approximately $84 million of planned capital expenditures during 2006 (please see page 16 for a breakdown of such expenditures by property). The significant capital projects for 2005-06 are as follows:
* Bethesda Marriott Suites: The Company is currently completing
renovations of the guestsuites.
* Courtyard Manhattan Fifth Avenue: The Company substantially completed
the guestroom and corridor renovation during 2005. The renovation of
the lobby and other public spaces will be completed by the second
quarter of 2006.
* Courtyard Manhattan Midtown East: The Company is currently completing
the renovation of guestrooms, lobby, restaurant and meeting space. The
project is expected to be completed by the end of the first quarter of
2006.
* Frenchman's Reef & Morning Star Marriott Beach Resort: The Company
completed in 2005 the replacement of case goods in a portion of the
guestrooms. The Company is currently planning several significant
projects at the hotel during 2006, including additional replacement of
case goods in select rooms and the renovation of guestrooms,
restaurants, and certain meeting space.
* Los Angeles Airport Marriott: In 2005, the Company completed a
renovation of the hotel ballroom, conversion of a food outlet to a
junior ballroom and renovation of the hotel bar. Additionally, the
Company will accelerate the timing of a complete room renovation from
2007 to 2006. The project will consist of the renovation of the hotel
guestrooms and bathrooms and is being funded, in part, by a $1.5 million
non-recoverable contribution from Marriott International. The renovation
is scheduled to begin in April 2006 and be completed by November 2006.
* Marriott Griffin Gate Resort: The Company substantially completed a
renovation of the hotel ballroom, corridors and public space in 2005.
* Oak Brook Hills Marriott Resort: The Company will begin a significant
renovation in the fourth quarter of 2006. The renovation will include
the hotel guestrooms and bathrooms, the hotel main ballroom and meeting
rooms and the hotel lobby.
* Orlando Airport Marriott: The Company will begin a significant
renovation in 2006. The renovation will include the hotel guestrooms and
bathrooms, the hotel meeting rooms and the hotel lobby.
* Torrance Marriott: The Company is currently completing the renovation of
the Torrance Marriott. The initial phase of the project consisted of
the renovation of the hotel guestroom soft goods and bathrooms and the
renovation of the hotel's main ballroom and meeting rooms, which were
completed in January 2006. During the second and third quarter of 2006,
renovations will include the hotel lobby and the conversion of a food
and beverage outlet to meeting space.
* Vail Marriott: The Company is currently evaluating a major renovation of
the hotel ballrooms.
The completed capital projects were accomplished on time and on (or under) budget. The capital projects in process are forecasted to be completed on time and on budget.
Earnings Call
The Company will host a conference call to discuss fourth quarter and full year 2005 results and 2006 guidance on Thursday, March 2, 2006, at 2:00pm. EST. To participate in the live call, investors are invited to dial 1-866-356-4281 (for domestic callers) or 617-597-5395 (for international callers). The participant passcode is 10500447. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company's website at http://www.drhc.com. A replay of the webcast will also be archived on the website for 30 days.
About the Company
DiamondRock Hospitality Company is a self-advised REIT that is an owner and acquirer of premium hotel properties. As of December 31, 2005, the Company owned 15 hotels that comprised 6,119 rooms. The Company has a strategic acquisition sourcing relationship with Marriott International. For further information, please visit the Company's website at http://www.drhc.com.
This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "continue" and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward- looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward- looking statements are made. These risks include, but are not limited to: national and local economic and business conditions, including the potential for additional terrorist attacks, that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to complete planned renovation on budget; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete acquisitions, including, without limitation, the Chicago Marriott; our ability to raise equity capital; the performance of acquired properties after they are acquired; necessary capital expenditures on the acquired properties; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described from time to time in the Company's filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as the date of this release, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
Reporting Periods for Statement of Operations
The results we report in our consolidated statements of operations are based on results of our hotels reported to us by our hotel managers. Our hotel managers use different reporting periods. Marriott International, the manager of the majority of our hotel properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for the first three quarters and sixteen or seventeen weeks for the fourth quarter of the year for its domestic managed hotels. In contrast, Marriott International for its non-domestic hotels (including Frenchman's Reef) and Vail Resorts, our manager of the Vail Marriott, report results on a monthly basis. Additionally, the Company, as a REIT, is required by tax law to report results on a calendar year. As a result, the Company has adopted the reporting periods used by Marriott International for its domestic hotels, except that the fiscal year always ends on December 31 to comply with REIT rules. The first three fiscal quarters end on the same day as Marriott International's fiscal quarters but our fourth quarter ends on December 31 and our full year results, as reported in our statement of operations, always includes the same number of days as the calendar year.
Two consequences of the reporting cycle we have adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) our first and fourth quarters of operations and year-to-date operations may not include the same number of days as reflected in prior years.
While the reporting calendar we adopted is more closely aligned with the reporting calendar used by the manager of a majority of our properties, one final consequence of our calendar is we are unable to report any results for Frenchman's Reef or for the Vail Marriott for the month of operations that ends after our fiscal quarter-end because neither Vail Resorts nor Marriott International make mid- month results available to us. As a result, our quarterly results of operations include results from Frenchman's Reef and the Vail Marriott as follows: first quarter (January and February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December). While this does not affect full-year results, it does affect the reporting of quarterly results.
Reporting Periods for Hotel Operating Statistics and Comparable Hotel Results
In contrast to the reporting periods for our consolidated statement of operations, our hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) and our comparable hotel results are always reported based on the reporting cycle used by Marriott International for our Marriott- managed hotels. This facilitates year-to-year comparisons, as each reporting period will be comprised of the same number of days of operations as in the prior year (except in the case of fourth quarters comprised of seventeen weeks versus sixteen weeks). This means, however, that the reporting periods we use for hotel operating statistics and our comparable hotels results may differ slightly from the reporting periods used for our statements of operations for the first and fourth quarters and the full year. Results from hotel managers reporting on a monthly basis are included in our operating statistics and comparable hotel results consistent with their reporting in our consolidated statement of operations for the hotel operating statistics and comparable hotel results reported herein.
Ground Leases
Three of our hotels are subject to ground leases: Bethesda Marriott Suites, Courtyard Manhattan Fifth Avenue, and Salt Lake City Downtown Marriott. In addition, part of a parking structure at a fourth hotel and two golf courses at two additional hotels are also subject to ground leases. In accordance with GAAP, the Company records rent expense on a straight-line basis for ground leases that provide minimal rental payments that increase in pre-established amounts over the remaining term of the ground lease. For the full year 2005, contractual cash rent payable on the ground leases totaled $1.7 million and the Company recorded approximately $8.8 million in ground rent expense. The non-cash portion of ground rent expense recorded for the full year was $7.1 million.
DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS (Unaudited)
December December
31, 2005 31, 2004
Property and equipment, at cost $899,309,856 $286,727,306
Less: accumulated depreciation (28,747,457) (1,084,867)
870,562,399 285,642,439
Restricted cash 23,109,153 17,482,515
Due from hotel managers 38,964,986 2,626,262
Favorable lease asset, net 10,601,577 -
Purchase deposits and pre-acquisition costs - 3,272,219
Prepaid and other assets 10,495,765 4,340,259
Cash and cash equivalents 9,431,741 76,983,107
Deferred financing costs, net 2,846,661 1,344,378
Total assets $966,012,282 $391,691,179
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debt, at face amount $428,394,735 $177,827,573
Debt premium 2,782,322 2,944,237
Total debt 431,177,057 180,771,810
Deferred income related to key money, net 10,311,322 2,490,385
Unfavorable lease liability, net 5,384,431 5,776,946
Due to hotel managers 22,790,896 3,985,795
Dividends declared and unpaid 8,896,101 -
Accounts payable and accrued expenses 24,064,047 3,078,825
Total other liabilities 71,446,797 15,331,951
Shareholders' Equity:
Preferred stock, $.01 par value; 10,000,000
shares authorized; no shares issued and
outstanding - -
Common stock, $.01 par value; 100,000,000
shares authorized; 50,819,864 and
21,020,100 shares issued and outstanding at
December 31, 2005 and 2004, respectively 508,199 210,201
Additional paid-in capital 491,951,223 197,494,842
Accumulated deficit (29,070,994) (2,117,625)
Total shareholders' equity 463,388,428 195,587,418
Total liabilities and shareholders' $966,012,282 $391,691,179
equity
DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from
(Unaudited) May 6, 2004
Year Ended (Inception) to
December December
31, 2005 31, 2004
Revenues:
Rooms $151,755,924 $5,137,370
Food and beverage 63,261,282 1,507,960
Other 14,433,057 428,534
Total revenues 229,450,263 7,073,864
Operating Expenses:
Rooms 37,432,635 1,455,380
Food and beverage 47,281,237 1,266,827
Management fees 8,107,902 260,724
Other hotel expenses 88,447,484 3,183,959
Depreciation and amortization 27,590,234 1,053,283
Corporate expenses 13,461,528 4,114,165
Total operating expenses 222,321,020 11,334,338
Operating income (loss) 7,129,243 (4,260,474)
Interest income (1,548,635) (1,333,837)
Interest expense 17,367,079 773,101
Total other expenses (income) 15,818,444 (560,736)
Loss before income taxes (8,689,201) (3,699,738)
Income tax benefit 1,353,261 1,582,113
Net loss $(7,335,940) $(2,117,625)
Loss per share:
Basic and diluted $(0.19) $(0.12)
Weighted-average number of common shares
outstanding:
Basic and diluted 39,145,789 18,162,916
DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from
(Unaudited) May 6, 2004
Year Ended (Inception) to
December December
31, 2005 31, 2004
Cash flows from operating activities:
Net loss $(7,335,940) $(2,117,625)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 27,590,234 1,053,283
Amortization of deferred financing
costs as interest 1,343,899 28,615
Non-cash straight-line ground rent 7,120,368 -
Market value adjustment to interest
rate caps (7,837) 25,655
Amortization of debt premium and
unfavorable lease liability (302,179) (10,814)
Amortization of deferred income and
corporate depreciation (115,118) 21,969
Stock-based compensation 6,308,098 1,357,083
Income tax benefit (2,104,371) (1,521,213)
Changes in assets and liabilities:
Prepaid expenses and other assets (832,736) (581,477)
Due to/from hotel managers (15,915,027) (2,626,262)
Accounts payable and accrued expenses 4,076,637 3,545,232
Net cash provided by (used in) operating
activities 19,826,028 (825,554)
Cash flows from investing activities:
Hotel acquisitions (611,604,489) (273,827,972)
Receipt of deferred Key Money 8,008,750 2,500,000
Hotel capital expenditures (18,007,635) -
Change in restricted cash 1,726,776 (480,515)
Purchase deposits and pre-acquisition costs - (3,272,219)
Net cash used in investing activities (619,876,598) (275,080,706)
Cash flows from financing activities:
Proceeds from debt 317,500,000 158,000,000
Repayments of mortgage debt (56,948,685) -
Scheduled mortgage debt principal payments (2,932,838) -
Payment of financing costs (2,846,182) (1,372,993)
Cash paid for interest rate caps - (85,600)
Proceeds from sale of common stock 291,799,785 197,376,548
Payment of costs related to sale of
common stock (3,353,504) (1,028,588)
Payment of dividends (10,719,372) -
Net cash provided by financing activities 532,499,204 352,889,367
Net (decrease) increase in cash and cash
equivalents (67,551,366) 76,983,107
Cash and cash equivalents, beginning of
period 76,983,107 -
Cash and cash equivalents, end of period $9,431,741 $76,983,107
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $15,601,243 $350,979
Cash paid for income taxes $1,005,629 $ -
Non-cash Investing and Financing
Activities:
Repayment of mortgage debt with restricted
cash $7,051,315 $ -
Non-GAAP Financial Measures
We use the following four non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: (1) EBITDA (2) Adjusted EBITDA, (3) FFO and (4) Adjusted FFO.
EBITDA represents net income (loss) excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization) from our operating results. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.
Historical
Fiscal
Quarter Ended Year Ended
December 31, December 31,
2005 2005
Net income (loss) $1,553,658 $(7,335,940)
Interest expense 6,726,091 17,367,079
Income tax benefit (227,762) (1,353,261)
Depreciation and amortization 11,517,708 27,590,234
EBITDA $19,569,695 $36,268,112
Forecast Full Year 2006
Low End High End
Net income $19,900,000 $23,900,000
Interest expense 27,000,000 27,000,000
Income tax expense 600,000 600,000
Depreciation and amortization 37,000,000 37,000,000
EBITDA $84,500,000 $88,500,000
Management also evaluates our performance by reviewing Adjusted EBITDA because the Company believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to a complete understanding of our operating performance. We adjust EBITDA for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA:
* Non-Cash Ground Rent: We exclude the non-cash expense incurred from
straight lining the rent from our ground lease obligations and the non-
cash amortization of our favorable lease asset.
* The impact of fully vested irrevocable commitments to issue 382,500
shares of stock to our five senior executive officers made in connection
with our initial public offering and expensed in the second quarter.
These were grants and do not reflect the underlying performance of the
Company.
* Cumulative effect of a change in accounting principle: Infrequently,
the Financial Accounting Standards Board (FASB) promulgates new
accounting standards that require the consolidated statement of
operations to reflect the cumulative effect of a change in accounting
principle. We exclude these one-time adjustments because they do not
reflect our actual performance for that period.
* Impairment Losses: We exclude the effect of impairment losses recorded
because we believe that including them in EBITDA is not consistent with
reflecting the ongoing performance of our remaining assets. In
addition, we believe that impairment charges are similar to gains
(losses) on dispositions and depreciation expense, both of which are
also excluded from EBITDA.
Historical
Fiscal
Quarter Ended Year Ended
December 31, December 31,
2005 2005
EBITDA $19,569,695 $36,268,112
Non-cash ground rent 2,210,090 7,120,368
Initial public offering stock grants -- 3,736,250
Adjusted EBITDA $21,779,785 $47,124,730
Forecast Full Year 2006
Low End High End
EBITDA $84,500,000 $88,500,000
Non-cash ground rent 7,500,000 7,500,000
Adjusted EBITDA $92,000,000 $96,000,000
We compute FFO in accordance with standards established by NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding gains (losses) from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis). We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. We also use FFO as one measure in determining our results after taking into account the impact of our capital structure.
Historical
Fiscal
Quarter Ended Year Ended
December 31, December 31,
2005 2005
Net income (loss) $1,553,658 $(7,335,940)
Real estate related depreciation and
amortization 11,517,708 27,590,234
FFO $13,071,366 $20,254,294
FFO per Share (Basic and Diluted) $0.26 $0.52
Forecast Full Year 2006
Low End High End
Net income $19,900,000 $23,900,000
Real estate related depreciation and
amortization 37,000,000 37,000,000
FFO $56,900,000 $60,900,000
Management also evaluates our performance by reviewing Adjusted FFO because the Company believes that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding our ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income, is beneficial to a complete understanding of our operating performance. We adjust FFO for the following items, which may occur in any period, and refer to this measure as Adjusted FFO:
* Non-Cash Ground Rent: We exclude the non-cash expense incurred from
straight lining the rent from our ground lease obligations and the non-
cash amortization of our favorable lease asset.
* The impact of fully vested irrevocable commitments to issue 382,500
shares of stock to our five senior executive officers made in connection
with the initial public offering and expensed in the second quarter.
The impact of these grants do not reflect the underlying performance of
the Company.
* Cumulative effect of a change in accounting principle: Infrequently, the
Financial Accounting Standards Board (FASB) promulgates new accounting
standards that require the consolidated statement of operations to
reflect the cumulative effect of a change in accounting principle. We
exclude these one-time adjustments because they do not reflect our
actual performance for that period.
* Impairment Losses: We exclude the effect of impairment losses recorded
because we believe that including them in EBITDA is not consistent with
reflecting the ongoing performance of our remaining assets. In
addition, we believe that impairment charges are similar to gains
(losses) on dispositions and depreciation expense, both of which are
also excluded from EBITDA.
Historical
Fiscal Quarter
Ended Year Ended
December 31, December 31,
2005 2005
FFO
$ 13,071,366 $ 20,254,294
Non-cash ground rent 2,210,090 7,120,368
Initial public offering stock grants -- 3,736,250
Adjusted FFO $ 15,281,456 $ 31,110,912
Adjusted FFO per Share (Basic and
Diluted) $ 0.30 $ 0.79
Forecast Full Year 2006
Low End High End
FFO $56,900,000 $60,900,000
Non-cash ground rent 7,500,000 7,500,000
Adjusted FFO $64,400,000 $68,400,000
Certain Definitions
In this release, when we discuss the "twelve hotels" we are discussing all of our hotels except SpringHill Suites Atlanta Buckhead, the Oak Brook Hills Marriott Resort, and Orlando Airport Marriott. We exclude these hotels from our discussion to enable our investors to compare our performance on a same store basis with the guidance we provided at the end of the third quarter.
In this release, when we discuss "Hotel Adjusted EBITDA," we exclude from Hotel EBITDA the non-cash expense incurred by the hotel due to the straight lining of the rent from our ground lease obligations and the non-cash amortization of our favorable lease asset. Hotel EBITDA represents hotel net income (loss) excluding: (1) interest expense; (2) income taxes; and (3) depreciation and amortization. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.
Market Capitalization as of December 31, 2005
Enterprise Value December 31, 2005
Common equity capitalization (at 12/31/05 closing
price of $11.96/share) $ 621,396,116
Consolidated debt 431,177,057
Cash and cash equivalents (9,431,741)
Total enterprise value $ 1,043,141,432
Dividend Per Share
Common dividend declared (holders of record on
December 30, 2005) $ 0.1725
Share Reconciliation
Common shares outstanding, held by third parties 46,199,193
Common shares outstanding, held by Marriott
International 4,428,571
Common shares outstanding, held by management and
directors 192,100
Subtotal 50,819,864
Unvested restricted stock held by management and
employees 747,000
Share grants under deferred compensation plan held by
corporate officers 389,333
Combined shares outstanding 51,956,197
Debt Summary at December 31, 2005
(dollars in thousands)
Spread
Interest to Outstanding
Property Rate LIBOR Principal Maturity
Courtyard Manhattan /
Midtown East 5.195% Fixed $ 44,131 December 2009
Salt Lake City Marriott
Downtown 5.500% Fixed 38,016 December 2014
Courtyard Manhattan /
Fifth Avenue 7.075% 270bps 23,000 January 2007
Marriott Griffin Gate
Resort 5.110% Fixed 30,442 January 2010
Bethesda Marriott Suites 7.690% Fixed 19,305 February 2023
Los Angeles Airport
Marriott 5.300% Fixed 82,600 June 2015
Marriott Frenchman's Reef 5.440% Fixed 62,500 July 2015
Renaissance Worthington 5.400% Fixed 57,400 June 2015
Orlando Airport Marriott 5.680% Fixed 59,000 December 2015
Credit Facility Borrowings 5.758% 145bps 12,000 July 2008
Total Debt (excluding Debt 5.6% 8.33 yrs.
Premium) (weighted (weighted
average) 428,395 average)
Fixed Interest Rate Debt
to Total Debt 91.8%
Portfolio Composition and Projected Total Investment
Total
Number of Investment
Property Location Year Opened of Rooms(1) (1)
Marriott Atlanta
Alpharetta Atlanta, GA 2000 318 38,833,000
Bethesda Marriott
Suites Bethesda, MD 1990 274 42,185,000
Courtyard
Manhattan/Fifth
Avenue New York, NY 1990 185 41,832,000
Courtyard
Manhattan /
Midtown East New York, NY 1998 307 75,382,000
Frenchman's Reef
& Morning Star
Marriott Beach
Resort St. Thomas, USVI 1973/1984 504 76,106,000
Marriott Griffin
Gate Resort Lexington, KY 1981 408 49,779,000
Los Angeles
Airport Marriott Los Angeles, CA 1973 1,004 114,681,000
Oak Brook Hills
Marriott Resort Oak Brook, IL 1987 384 66,165,000
Orlando Airport
Marriott Orlando, FL 1983 486 71,154,000
Renaissance
Worthington Fort Worth, TX 1981 504 80,811,000
Salt Lake City
Marriott Downtown Salt Lake City, UT 1981 510 51,123,000
SpringHill Suites
Atlanta Buckhead Atlanta, GA 2005 220 34,341,000
The Lodge at
Sonoma, a
Renaissance
Resort and Spa Sonoma, CA 2001 182 32,430,000
Torrance Marriott Los Angeles
County, CA 1985 487 67,421,000
Vail Marriott
Mountain Resort &
Spa Vail, CO 1983/2002 346 65,259,000
Total 6,119 907,502,000
Total
2006 Budgeted Projected Projected
Capital Investment Investment
Property Location Expenditures (2) (3) Per Room
Marriott Atlanta
Alpharetta Atlanta, GA 284,000 39,117,000 123,009
Bethesda Marriott
Suites Bethesda, MD 5,831,000 48,016,000 175,241
Courtyard
Manhattan/Fifth
Avenue New York, NY 2,575,000 44,407,000 240,038
Courtyard
Manhattan /
Midtown East New York, NY 2,667,000 78,049,000 254,231
Frenchman's Reef
& Morning Star
Marriott Beach
Resort St. Thomas, USVI 10,860,000 86,966,000 172,552
Marriott Griffin
Gate Resort Lexington, KY 1,933,000 51,712,000 126,745
Los Angeles
Airport Marriott Los Angeles, CA 18,073,000 132,754,000 132,225
Oak Brook Hills
Marriott Resort Oak Brook, IL 11,483,000 77,648,000 202,208
Orlando Airport
Marriott Orlando, FL 12,235,000 83,389,000 171,582
Renaissance
Worthington Fort Worth, TX 2,853,000 83,664,000 166,000
Salt Lake City
Marriott Downtown Salt Lake City, UT 3,703,000 54,826,000 107,502
SpringHill Suites
Atlanta Buckhead Atlanta, GA 40,000 34,381,000 156,277
The Lodge at
Sonoma, a
Renaissance
Resort and Spa Sonoma, CA 486,000 32,916,000 180,857
Torrance Marriott Los Angeles
County, CA 7,625,000 75,046,000 154,099
Vail Marriott
Mountain Resort &
Spa Vail, CO 3,665,000 68,924,000 199,202
Total 84,313,000 991,815,000 162,088
(1) As of December 31, 2005.
(2) 2006 Budgeted Capital Expenditures represents capital expenditures
regardless of whether they will be paid for through an escrow account
or owner funding.
(3) Total projected investments for each hotel property is the gross book
value of the hotel as of December 31, 2005 plus budgeted 2006 capital
improvements.
Selected Financial and Operating Information by Property
Properties Owned as of December 31, 2005
(in thousands, except selected operating information)
The following tables present, except where noted, selected financial and operating information by property for the fiscal quarter ended December 31, 2005, the period from January 1, 2005 to December 31, 2005, and the comparable periods of 2004. Where relevant, the data is pro forma as it assumes that the hotels were owned by the Company for the entire reporting periods of 2005 and 2004. Hotel Adjusted EBITDA reflects property net operating income excluding corporate expenses, the non-cash expense incurred from straight lining the rent from our ground lease obligations (where applicable), interest expense and depreciation and amortization.
Fiscal Fourth Quarter Full Year
2005 2004 Change 2005 2004 Change
MARRIOTT ATLANTA ALPHARETTA
Average Occupancy 61.2% 58.3% 2.9 pts 60.6% 59.9% 0.8 pts
ADR $131.89 $120.57 9.4% $132.60 $121.20 9.4%
RevPAR $80.74 $70.33 14.8% $80.42 $72.59 10.8%
Total Revenues $4,601 $4,100 12.2% $14,211 $12,915 10.0%
Net Income / (Loss) $1,175 $822 $3,139 $2,413
Plus: Depreciation $437 $405 $1,380 $1,317
Hotel Adjusted
EBITDA $1,612 $1,227 31.4% $4,519 $3,730 21.1%
BETHESDA MARRIOTT SUITES
Average Occupancy 77.9% 75.8% 2.1 pts 77.4% 74.6% 2.8 pts
ADR $162.77 $151.84 7.2% $160.38 $153.74 4.3%
RevPAR $126.83 $115.13 10.2% $124.13 $114.74 8.2%
Total Revenues $5,415 $4,861 11.4% $16,579 $15,504 6.9%
Net Income / (Loss) $(1,603) $(1,830) $(5,503) $(5,941)
Plus: Depreciation $742 $707 $2,363 $2,298
Plus: Interest
Expense $413 $423 $1,368 $1,374
Plus: Non-Cash Ground
Rent $2,006 $2,006 $6,552 $6,552
Hotel Adjusted
EBITDA $1,558 $1,306 19.3% $4,780 $4,284 11.6%
SPRINGHILL SUITES ATLANTA BUCKHEAD
(This property opened for business on July 1, 2005. The results presented
below represent only our period of ownership.)
Average Occupancy 76.9% N/A N/A 65.8% N/A N/A
ADR $104.99 N/A N/A $103.19 N/A N/A
RevPAR $80.74 N/A N/A $67.92 N/A N/A
Total Revenues $2,188 N/A N/A $2,665 N/A N/A
Net Income / (Loss) $584 N/A N/A $578 N/A N/A
Plus: Depreciation $362 N/A N/A $519 N/A N/A
Hotel Adjusted
EBITDA $946 N/A N/A $1,097 N/A N/A
Fiscal Fourth Quarter Full Year
2005 2004 Change 2005 2004 Change
COURTYARD MANHATTAN / FIFTH AVENUE
(This property received the Courtyard brand in January 2005. During the
comparable periods of 2004, the property was branded as a Clarion for a
portion of the period and unaffiliated the remainder.)
Average Occupancy 86.3% 93.6% (7.3 pts) 84.5% 89.3% (4.8 pts)
ADR $265.99 $167.05 59.2% $212.87 $140.96 51.0%
RevPAR $229.59 $156.35 46.8% $179.83 $125.88 42.9%
Total Revenues $4,862 $3,339 45.6% $11,525 $8,753 31.7%
Net Income /
(Loss) $603 $(398) $(564) $(2,172)
Plus: Depreciation $623 $615 $2,130 $1,846
Plus: Interest
Expense $570 $588 $1,548 $1,765
Plus: Non-Cash
Ground Rent $96 $ - $313 $ -
Hotel Adjusted
EBITDA $1,892 $806 134.7% $3,426 $1,439 138.2%
COURTYARD MANHATTAN / MIDTOWN EAST
Average Occupancy 87.8% 89.5% (1.7 pts) 87.9% 89.2% (1.3 pts)
ADR $284.65 $240.20 18.5% $230.52 $199.43 15.6%
RevPAR $249.83 $214.94 16.2% $202.52 $177.85 13.9%
Total Revenues $9,046 $7,757 16.6% $23,814 $20,926 13.8%
Net Income /
(Loss) $2,906 $1,235 $4,504 $1,698
Plus: Depreciation $432 $882 $2,356 $2,866
Plus: Interest
Expense $732 $730 $2,375 $2,372
Hotel Adjusted
EBITDA $4,070 $2,847 43.0% $9,235 $6,936 33.1%
FRENCHMAN'S REEF & MORNING STAR MARRIOTT BEACH RESORT
Average Occupancy 67.4% 57.2% 10.3 pts 78.5% 71.5% 7 pts
ADR $183.48 $184.45 (0.5%) $200.18 $188.49 6.2%
RevPAR $123.72 $105.43 17.3% $157.06 $134.73 16.6%
Total Revenues $12,274 $10,434 17.6% $45,085 $40,207 12.1%
Net Income /
(Loss) $(1,209) $(1,277) $3,735 $1,882
Plus: Depreciation $1,323 $778 $3,407 $2,528
Plus: Interest
Expense $1,057 $1,055 $3,436 $3,429
Hotel Adjusted
EBITDA $1,171 $556 110.6% $10,578 $7,840 34.9%
Fiscal Fourth Quarter Year-to-Date
2005 2004 Change 2005 2004 Change
MARRIOTT GRIFFIN GATE RESORT
Average
Occupancy 59.6% 67.7% (8.1 pts) 63.8% 68.1% (4.2 pts)
ADR $131.00 $115.98 13.0% $122.22 $110.10 11.0%
RevPAR $78.04 $78.46 (0.5%) $78.00 $74.94 4.1%
Total Revenues $7,916 $7,510 5.4% $23,994 $22,722 5.6%
Net Income /
(Loss) $905 1,004 $2,103 $2,043
Plus: Depreciation $693 $549 $2,138 $1,785
Plus: Interest
Expense $495 $493 $1,609 $1,601
Plus: Non-Cash
Ground Rent $2 $ - $5 $ -
Hotel Adjusted
EBITDA $2,094 $2,045 2.4% $5,855 $5,429 7.8%
LOS ANGELES AIRPORT MARRIOTT
Average
Occupancy 72.2% 76.4% (4.3 pts) 77.0% 79.1% (2.1 pts)
ADR $103.09 $97.16 6.1% $101.99 $96.50 5.7%
RevPAR $74.38 $74.24 0.2% $78.52 $76.30 2.9%
Total Revenues $15,004 $15,040 (0.2%) $49,814 $48,593 2.5%
Net Income /
(Loss) $1,321 $1,653 $4,303 $4,137
Plus: Depreciation $1,276 $1,167 $3,993 $3,793
Plus: Interest
Expense $1,376 $1,371 $4,479 $4,455
Hotel Adjusted
EBITDA $3,973 $4,191 (5.2%) $12,775 $12,385 3.1%
OAK BROOK HILLS MARRIOTT RESORT
(This property converted to the Marriott brand in late-July 2005. During
the comparable periods of 2004 and early 2005, the property was
unaffiliated.)
Average
Occupancy 45.9% 50.0% (4 pts) 51.0% 49.1% 1.8 pts
ADR $131.20 $119.81 9.5% $121.85 $121.95 (0.1%)
RevPAR $60.27 $59.85 0.7% $62.13 $59.93 3.7%
Total Revenues $6,493 7,795 (16.7%) $23,326 $23,393 (0.3%)
Net Income /
(Loss) $(1,066) $129 $(473) $143
Plus: Depreciation $1,053 $1,054 $3,499 $3,425
Plus: Non-Cash
Ground Rent $158 $185 $574 $600
Hotel Adjusted
EBITDA $145 $1,368 (89.4%) $3,600 $4,168 (13.6%)
Fiscal Fourth Quarter Full Year
2005 2004 Change 2005 2004 Change
ORLANDO AIRPORT MARRIOTT
(This property was managed by a third-party manager as a Marriott
franchise until DiamondRock purchased in mid-December 2005. Upon
purchase, Marriott International became the manager of the hotel.)
Average Occupancy 77.9% 84.3% (6.4 pts) 78.1% 83.8% (5.7 pts)
ADR $108.11 $95.89 12.7% $103.46 $88.42 17.0%
RevPAR $84.27 $80.88 4.2% $80.79 $74.05 9.1%
Total Revenues $5,003 $5,916 (15.4%) $22,485 $20,701 8.6%
Net Income / (Loss) $1,053 $1,163 $3,175 $2,459
Plus: Depreciation $555 $555 $2,405 $2,405
Hotel Adjusted
EBITDA $1,608 $1,718 (6.4%) $5,580 $4,864 14.7%
SALT LAKE CITY MARRIOTT DOWNTOWN
Average Occupancy 69.6% 66.0% 3.6 pts 71.4% 67.9% 3.5 pts
ADR $118.86 $113.76 4.5% $118.68 $115.51 2.7%
RevPAR $82.68 $75.08 10.1% $84.76 $78.49 8.0%
Total Revenues $7,861 $6,599 19.1% $24,087 $22,073 9.1%
Net Income / (Loss) $596 $62 $1,763 $955
Plus: Depreciation $809 $741 $2,498 $2,407
Plus: Interest
Expense $665 $666 $2,162 $2,164
Hotel Adjusted
EBITDA $2,070 $1,469 41.0% $6,423 $5,527 16.2%
THE LODGE AT SONOMA, A RENAISSANCE RESORT & SPA
Average Occupancy 68.4% 65.2% 3.1 pts 70.4% 65.1% 5.3 pts
ADR $215.92 $192.88 11.9% $204.03 $187.34 8.9%
RevPAR $147.59 $125.82 17.3% $143.65 $122.03 17.7%
Total Revenues $5,423 $4,702 15.3% $16,656 $14,529 14.6%
Net Income / (Loss) $607 $360 $452 $497
Plus: Depreciation $557 $544 $1,787 $1,768
Plus: Interest
Expense $ - $ - $728 $ -
Hotel Adjusted
EBITDA $1,164 $904 28.8% $2,967 $2,265 31.0%
Fiscal Fourth Quarter Year-to-Date
2005 2004 Change 2005 2004 Change
TORRANCE MARRIOTT
Average Occupancy 78.0% 76.5% 1.5 pts 80.9% 77.4% 3.4 pts
ADR $104.36 $100.98 3.4% $103.23 $99.63 3.6%
RevPAR $81.40 $77.23 5.4% $83.49 $77.16 8.2%
Total Revenues $5,967 $6,481 (7.9%) $21,125 $20,564 2.7%
Net Income / (Loss) $(417) $83 $(1,611) $72
Plus: Depreciation $1,533 $1,445 $4,834 $4,697
Plus: Interest
Expense $ - $ - $1,594 $ -
Hotel Adjusted
EBITDA $1,116 $1,528 (27.0%) $4,818 $4,769 1.0%
VAIL MARRIOTT MOUNTAIN RESORT & SPA
Average Occupancy 48.4% 47.3% 1.1 pts 58.7% 60.0% (1.4 pts)
ADR $171.22 $160.37 6.8% $192.06 $178.90 7.4%
RevPAR $82.89 $75.85 9.3% $112.66 $107.42 4.9%
Total Revenues $5,338 $5,332 0.1% $21,373 $21,374 (0.0%)
Net Income / (Loss) $(632) $(493) $2,416 $2,203
Plus: Depreciation $716 $771 $2,319 $2,312
Hotel Adjusted
EBITDA $84 $277 (69.7%) $4,735 $4,515 4.9%
RENAISSANCE WORTHINGTON
Average Occupancy 73.7% 67.7% 6 pts 76.9% 73.0% 3.9 pts
ADR $157.95 $143.94 9.7% $151.48 $138.55 9.3%
RevPAR $116.35 $97.43 19.4% $116.45 $101.15 15.1%
Total Revenues $11,399 $10,039 13.6% $35,648 $32,697 9.0%
Net Income / (Loss) $1,247 $244 $3,054 $1,201
Plus: Depreciation $673 $850 $2,371 $2,762
Plus: Interest
Expense $991 $953 $3,143 $3,096
Hotel Adjusted
EBITDA $2,911 $2,047 42.2% $8,568 $7,058 21.4%
