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
Executive
Ken Fuller

growth in several measures. In addition to our asset management team's outstanding job, enabling us to continue to increase hotel EBITDA, corporate adjusted EBITDA, and adjusted FFO per share, our other activities extended our track record of careful stewardship of the balance sheet and the Company.

I'll start by recapping our operational performance. While RevPAR increased 1.7%, our room revenue increased slightly more than that due to keys we added at Gild Hall in a value-enhancing project in which we developed these four rooms well below replacement cost in New York. Our top performing markets during the quarter in terms of RevPAR were Los Angeles and Key West with increases of 17% and 8%, respectively.

Within those markets, the best results were at Grafton, Amarano, Le Parc, Le Montrose, and The Marker Key West. As with the first quarter, during Q2, LA benefited from strong entertainment demand and renovation ramp-up at the Grafton and also continued impact from the unfortunate natural gas leak that occurred in Porter Ranch, which displaced thousands of families.

Our strength in Key West was specific to the revenue management strategy at our two hotels as we significantly outperformed the market. Outside of LA and Key West, our highest RevPAR growth came from Indy, Serrano, and Palomar. Our portfolio-wide RevPAR growth came from occupancy, which further highlights the accomplishment of our asset management team and operators in achieving additional margin expansion to a new record of 38.6%.

Our top performing hotels this quarter in terms of EBITDA margin improvement were the Grafton on Sunset and Le Parc, both of which are in West Hollywood; Amarano, which is in Burbank; Villa Florence in San Francisco; and The Marker in Key West. As a result of these efforts, our hotel EBITDA and our adjusted EBITDA both improved by $5 million. Our adjusted FFO per share grew 4% to $0.95.

Now, I'll provide some additional color on our transactions. During the quarter, we issued 6 million Series A preferred shares for $150 million in proceeds. These shares were priced with a 6.3% coupon and we're proud that this marks the lowest-ever coupon issued by a lodging REIT. In addition to record pricing, we were able to use the full proceeds to reduce the amount outstanding on our line of credit.

Mike provided an overview of our sale of the Indy Marriott, which sold on July 14. Furthermore, in our earnings release yesterday, we included a table which provides the operating statistics for the Indianapolis Marriott including the property's trailing four-quarter RevPAR of just $125, well below that of our portfolio average. With that sale and the sale of the mezz loan on Shutters and Casa, we have lowered our leverage level.

Pro forma for the sale of the Indy Marriott and the mezz loan, we had total debt outstanding of $1.1 billion. Total debt-to-trailing 12 month corporate EBITDA as defined in our senior unsecured credit facility was 2.9 times, which does not include our full cash balance per our