LaSalle Hotel Properties (NYSE:LHO) Q2 2016 Earnings Conference Call - Final Transcript

Jul 21, 2016 • 11:00 am ET

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LaSalle Hotel Properties (NYSE:LHO) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day and welcome to the LHO Second Quarter 2016 Earnings Call. At this time I would like to turn the conference over to Max Leinweber, Director of Finance. Please go ahead.

Executive
Max Leinweber

Thank you, Nicole. Good morning, everyone and welcome to the second quarter 2016 earnings call and webcast for LaSalle Hotel Properties. I'm here today with Mike Barnello, our President and CEO and Ken Fuller, our CFO. Mike will discuss our second quarter results and activities and provide an overview of the industry. Ken will provide details on our portfolio, performance and an update on our balance sheet. Then we will open the call for Q&A.

Before we start, please take note of the following. Any statements that we make today about future results and performance or plans and objectives are forward-looking statements. Actual results may differ as a result of factors, risks and uncertainties over which the Company may have no control. Factors that may cause actual results to differ materially are discussed in the Company's 10-K, quarterly reports and in other reports filed with the SEC. The Company disclaims any obligation or undertaking to update or revise any forward-looking statements. Our SEC reports as well as our press releases are available at our website, LaSalleHotels.com. Our most recent 8-K and yesterday's press release include reconciliations of non-GAAP measures to the most comparable GAAP measures.

With that, I'll turn the call over to Mike Barnello. Mike?

Executive
Mike Barnello

Thanks, Max and thanks everyone for joining our second quarter call. I'd like to start by providing an overview of our performance and activities during the last quarter. During Q2, we had another quarter of stellar operating efficiencies which with the moderate year-over-year improvement in our portfolio's RevPAR, resulted in increases in hotel EBITDA, adjusted EBITDA and FFO per share.

Furthermore, we were active in both the capital markets and the asset transaction market. The transactions we facilitated leave our Company stronger and more flexible including the asset sales which we closed in July. The quarter is reflective of solid execution on all fronts.

I'll speak for a moment about our asset dispositions. First, let's review the Indianapolis Marriott which was an excellent long term investment for us. Over 12 years, this asset provided an average cash-on-cash return of 12% and an unleveraged IRR of 14%. Had we not sold the hotel, we were planning on a $40 million lifecycle renovation which would've been a large additional investment into a noncore market. Including this $40 million of CapEx, this sale represents a 7.9 cap rate on trailing NOI or an 11.3 EBITDA multiple, both of which are very compelling valuation metrics for a noncore market with one of the lowest average RevPARs in our portfolio. In fact, after removing the Indianapolis Marriott from 2015 results, our pro forma RevPAR increases by approximately $4.

The second asset sale is the $80 million mezzanine loan on Shutters and Casa which we sold at par. As with the Indianapolis Marriott, this was a noncore investment, yet