Strategic Hotels & Resorts Reports Fourth Quarter and Full Year 2009 Results

Strategic Hotels & Resorts (NYSE: BEE) today reported results for the fourth quarter and year ended December 31, 2009.

Fourth Quarter Recap

Comparable funds from operations (Comparable FFO) was a loss of $0.05 per diluted share compared with income of $0.16 per diluted share in the prior year.

Quarterly Comparable EBITDA was $32.5 million compared with $48.7 million in the prior year.



European Total RevPAR increased 6.2 percent (4.5 percent decrease in constant dollars) and RevPAR increased 10.0 percent (2.7 percent decrease in constant dollars).

North American gross operating profit (GOP) and EBITDA margins contracted 420 basis points and 550 basis points, respectively. North American EBITDA per room declined 36.8 percent.

Full Year 2009 Recap

Comparable FFO was a loss of $0.30 per diluted share compared with income of $1.22 per diluted share in the prior year.

Comparable EBITDA was $120.0 million compared with $234.2 million in the prior year.

North American Total RevPAR decreased 22.0 percent and RevPAR decreased 22.9 percent driven by a 5.9 percentage point decrease in occupancy and a 15.9 percent decrease in ADR. Non-rooms revenue declined by 21.2 percent.

European Total RevPAR decreased 19.7 percent (12.3 percent decrease in constant dollars) and RevPAR decreased 18.9 percent (11.2 percent decrease in constant dollars).

North American GOP margins and EBITDA margins contracted 610 basis points and 710 basis points, respectively. North American EBITDA per room declined 44.8 percent.



Chief Executive Officer Laurence Geller remarked, "GDP growth, which was 5.7 percent in the fourth quarter, has historically driven demand in our industry. This suggests we may have reached the bottom of the current lodging cycle and, along with a recent pickup in short-term group bookings and improving corporate and leisure demand, indicate the potential for a positive second half of 2010.

"More specifically, meeting planners report being more optimistic about the outlook for the economy, and our hotels are reporting increased site visits, which will, at some point, likely translate into bookings. While visibility in the key group segment remains weak we are seeing some evidence of improvement as the rate of our cancellations and attritions are abating."

Financial Results

The company reported fourth quarter 2009 financial results as follows:

Net loss attributable to common shareholders was $72.2 million, or $0.96 per diluted share, compared with a net loss attributable to common shareholders of $285.1 million, or $3.79 per diluted share, in the fourth quarter of 2008.

Comparable EBITDA was $32.5 million compared with $48.7 million in the fourth quarter of 2008.

FFO was a loss of $55.3 million, or $0.73 per diluted share, compared with a loss of $256.8 million or $3.37 per diluted share, in the fourth quarter of 2008. Comparable FFO was a loss of $3.7 million, or $0.05 per diluted share, compared with income of $11.9 million, or $0.16 per diluted share, in the fourth quarter of 2008.



The company reported full year 2009 financial results as follows:

Net loss attributable to common shareholders was $274.8 million, or $3.65 per diluted share, compared with net loss attributable to common shareholders of $348.2 million, or $4.63 per diluted share, in the prior year.

Comparable EBITDA was $120.0 million compared with $234.2 million in the prior year.

FFO was a loss of $155.8 million, or $2.07 per diluted share, compared with a loss of $269.0 million, or $3.53 per diluted share, in the prior year. Comparable FFO for the year was a loss of $22.8 million, or $0.30 per diluted share, compared with income of $93.1 million, or $1.22 per diluted share, in the prior year.



Impairment Losses and Other Charges

Fourth quarter 2009 results include impairment and other charges totaling $49.8 million. Full year 2009 results include impairment charges totaling $130.8 million, of which $30.8 million has been reclassified in discontinued operations. These charges include an impairment charge to goodwill and long lived assets of $72.7 million, a $26.5 million write-down of the company's joint venture investment in the Hotel del Coronado and a $27.7 million write-down of development opportunities in Mexico. These one-time charges have been excluded from Comparable EBITDA, FFO and FFO per share metrics.

Asset Sales and Other Transactions

During the fourth quarter, the company closed on the sale of the Renaissance Le Parc hotel in Paris for a purchase price of euro 35.5 million (approximately $51.5 million) and the Four Seasons Mexico City for $54.0 million. Proceeds from the sales were used to enhance corporate liquidity.

Mr. Geller commented, "As part of our planned balance sheet and liquidity strategies, during the fourth quarter of 2009 we completed two strategically important assets dispositions with the sales of our Renaissance Le Parc hotel in Paris and our Four Seasons in Mexico City. These transactions, in an exceptionally difficult environment, represent a tremendous execution on the part of our team and provide an indication of the underlying desirability of high-end hotels. Gross proceeds from the sales totaled over $100 million and will be used to supplement our corporate liquidity."

During the third quarter, the company entered into a joint venture agreement on its 60-acre ocean front land parcel near the Four Seasons Punta Mita Resort in Nayarit, Mexico. Under the terms of the agreement, the company was released from its final installment payment of $17.5 million, which was due in August 2009, and will receive a preferred position on any future distributions from the partnership.

During the first quarter of 2009, the company completed an amendment to its bank credit facility which reduced the facility's total size to $400.0 million, increased pricing to LIBOR plus 375 basis points and pledged security interests in previously unsecured hotel properties. In return, the company negotiated a reduction of the minimum corporate fixed charge coverage ratio to 0.9 times and an increase in maximum corporate leverage to 80%.

Subsequent Event

Last week, the company entered into an amendment with Aareal Bank AG on the euro 104.0 million non-recourse loan securing the InterContinental Prague hotel. Under the terms of the amendment, the loan remains non-recourse and the loan maturity is extended by three years from its initial maturity of March 2012 to March 2015. During the remainder of the initial term, scheduled principal amortization is removed and the financial performance covenants are effectively waived.

Board of Directors

During the third quarter, the company announced the appointment of new independent directors Raymond Gellein, former President of Starwood Hotels & Resorts' Global Development Group, and Eugene Reilly, President of AMB Property Corporation's Americas division.

2010 Guidance

The company is not providing guidance for 2010 at this time as the current market environment provides insufficient visibility into future operating performance. Certain items should however be considered in 2010 including:

Interest expense of approximately $100.0 million, including amortization of deferred financing costs and the amortization of the loan discount on $180 million of exchangeable notes;

Corporate expenses of $22.0 million to $23.0 million; and

Accrual of unpaid preferred dividends that will reduce income available to common shareholders and Comparable FFO by approximately $7.7 million per quarter.