Starwood Hotels & Resorts Announces Record Fourth Quarter and Year-End Financial Results.PHOENIX--(BUSINESS WIRE)--Jan. 27, 1998--
Fourth Quarter Financial Highlights:
-- 115.6% increase in combined funds from operations (FFO) over 1996
-- 66.7% increase in combined FFO per paired share over 1996
-- Internal and external growth fuels 84.4% increase in combined
revenues over 1996
-- Same store REVPAR grows 9.3% over 1996
-- ADR increases by 8.6% over 1996
Financial Summary (Unaudited)
(in 000's, except for FFO per paired share and statistics)
Three Months Ended Year-Ended
12/31/97 12/31/96 12/31/97 12/31/96
Revenues $300,795 $163,156 $933,583 $428,538
Funds From Operations $ 56,292 $ 26,115 $190,057 $ 82,748
FFO Per Paired Share $ 0.85 $ 0.51 $ 3.13 $ 2.13
REVPAR $ 70.02 $ 64.05 $ 72.69 $ 67.33
ADR $ 107.62 $ 99.14 $ 104.41 $ 96.16
Starwood Hotels & Resorts Trust, (the "Trust"), the nation's
largest hotel real estate investment trust and Starwood Hotels &
Resorts, Worldwide, Inc. (the "Corporation", and together with the
Trust, the "Company" or "Starwood Hotels & Resorts") a hotel
management and operating company, whose shares are paired and trade
together on the New York Stock Exchange (NYSE:HOT), today announced
record combined financial results for the fourth quarter and
year-ended December 31, 1997.
For the fourth quarter of 1997, combined funds from operations
(FFO) grew by 115.6% to $56.3 million on combined revenues of $300.8
million, compared with combined FFO of $26.1 million on combined
revenues of $163.2 million for the corresponding period in 1996. On
a per paired share basis, after giving effect to the 3-for-2 stock
split effective January 27, 1997, combined FFO for the fourth quarter
of 1997 increased 66.7% to $0.85 per paired share from $0.51 per
paired share for the same period a year ago.
"Our financial results for this quarter mark an extraordinary end
to an incredible year for Starwood Hotels & Resorts," said Barry S.
Sternlicht, Chairman and Chief Executive Officer of Starwood Hotels &
Resorts Trust. "Despite the management challenges of the pending
integration of Westin, Starwood and ITT Sheraton, the Company was
able to report quarterly results that not only well-exceeded Street
consensus but once again should place HOT at the very top of the list
of the nation's fastest growing REITs with FFO growth per paired
share year over year of approximately 67%. These results are
attributable to the terrific urban, full service upscale and luxury
assets we have acquired over the last three years and the purchase
prices paid for them. It reflects the very high rates of return at
which we have invested shareholder capital. It also reflects the
commitment and the maturation of the Company's hotel operations group
led by the Corporation's Chief Operating Officer, Ted Darnall, who
took over more than 50 hotels during the year and completed their
seamless integration into the Company," continued Mr. Sternlicht.
"These results also reflect the unique benefit of our paired-share
structure as property margin expansion flows directly to our
shareholders and not to a third party lessee or management company.
Most importantly, as it relates to future growth, the quarter does
not reflect the outstanding earnings potential of the REIT's
multi-billion dollar asset base, where capital decisions were
deferred until our brand strategy was formalized. With our brand
strategy and the Company's own property design team in place, led by
Hillary Billings, formerly Vice President of Product Development and
Design at the Pottery Barn, and Stephen Brady, formerly with Banana
Republic, where he directed the design of their Home Line, we expect
the pace of property renovations to accelerate significantly.
Indeed, one of our largest hotels, the Doral Inn, located in the
country's best lodging market -- Manhattan -- was substantially
closed for renovation during the fourth quarter. In addition, in the
two hotels whose renovations were substantially completed in the
third quarter of 1997, the Westin Suites in Philadelphia, and the
Edmond Meany Hotel in Seattle, fourth quarter REVPAR increases in
excess of 20% were achieved. I believe this kind of potential exists
in the majority of the REIT's assets. We look forward to harvesting
our assets' full potential growth throughout 1998 and into 1999,"
concluded Mr. Sternlicht.
For the year-ended December 31, 1997, combined FFO grew by 129.7%
to $190.1 million on combined revenues of $933.6 million, compared
with combined FFO of $82.7 million on combined revenues of $428.5
million for the corresponding period in 1996. On a per paired share
basis, after giving effect to the 3-for-2 stock split effective on
January 27, 1997, combined FFO for the year increased 46.9% to $3.13
per paired share from $2.13 per paired share a year ago. The
increase in revenues of 117.9% reflects both significant external
growth through acquisitions of hotel properties as well as internal
growth from operations of existing properties.
Combined net income was $13.3 million, or $0.25 per paired share
for the fourth quarter ended December 31, 1997, compared with net
income of $7.2 million, or $0.17 per paired share (after giving
effect to the 3-for-2 stock split in January, 1997) for the same
period in 1996. Combined income before extraordinary item was $41.5
million, or $0.85 per paired share for the year-ended December 31,
1997, compared with $25.9 million, or $0.86 per paired share (after
giving effect to the 3-for-2 stock split in January, 1997) for the
same period in 1996. The results for the fourth quarter and
year-ended December 31, 1997 include a charge of approximately $25
million relating to an accrual for a settlement of three interest
rate protection agreements expiring on January 30, 1998. The Company
does not intend to issue the debt anticipated by such agreements due
to various factors including its current financing plans for
completing the merger with ITT Corporation ("ITT").
Significant Performance Improvements
On a same-store-sales basis, results for the fourth quarter of
1997 reflect an increase in revenue per available room (REVPAR) of
9.3% to $70.02 from $64.05 in the corresponding period in 1996; an
increase in average daily rate (ADR) of 8.6% to $107.62 from $99.14
in the corresponding 1996 period; and an increase in occupancy rates
to 65.1% from 64.6% in the corresponding 1996 period. Figures are
based on all hotels owned as of December 31, 1997 and exclude the
Doral Inn in New York, New York which was under substantial
renovation during the quarter and three hotels held for sale.
During the quarter, the Company continued its focus on increasing
gross operating profit (defined as hotel profit before rent, taxes,
insurance, interest, management fees, depreciation and income taxes)
("GOP"). Same-store-sales GOP margins for the three months ended
December 31, 1997 increased almost 300 basis points to 36.0% from
33.1% a year ago.
For the year-ended December 31, 1997, excluding the Doral Inn in
New York, New York which was under substantial renovation during the
fourth quarter and three hotels held for sale, REVPAR increased 8.0%
to $72.69 from $67.33 in the corresponding period in 1996, and ADR
increased 8.6% to $104.41 from $96.16 in the corresponding period in
1996, while occupancy rates decreased slightly to 69.6% from 70.0% in
the corresponding period in 1996. Excluding the above mentioned
hotels and six hotels in Atlanta, Georgia whose results are not
comparable to 1996 due to the nonreccurrence of the Olympic games,
REVPAR increased 9.4% to $73.31 from $67.00 in the corresponding
period in 1996.
Expansion Program Continues
During the fourth quarter of 1997, the Company continued its pace
of acquisitions, acquiring equity interests in four properties
containing approximately 1,340 rooms for approximately $240.0
million. From January 1995 through December 31, 1997, the Company
acquired equity and debt interests in 84 properties containing
approximately 25,000 rooms for approximately $2.4 billion.
In October 1997, the Company acquired the 552-room Radisson Hotel
in Indianapolis, Indiana for approximately $54 million.
In December 1997, the Company acquired the 145-room Westin Aquila
Hotel in Omaha, Nebraska for approximately $14 million; the 512-room
Westin Mission Hills Resort, including two golf courses, located in
Rancho Mirage, California for a total purchase price of approximately
$118 million; and the 132-room Turnberry Hotel, Golf Courses and Spa
located in Ayreshire, Scotland for a total purchase price of
approximately $51.5 million.
On January 2, 1998 the Company completed the previously announced
acquisition of Westin Hotels & Resorts ("Westin") for a combination
of securities, cash and assumed debt with an aggregate value of
approximately $1.8 billion (based on the Company's closing price of
$49.4375 per paired share on September 8, 1997). On January 16, 1998
the Company completed the acquisition of four full-service, luxury
properties located in Aspen, Colorado; New York City, New York;
Washington, D.C.; and Houston, Texas for a total purchase price
valued at approximately $334 million. The Company now owns,
operates, manages, franchises or has mortgage interests in more than
220 hotel properties containing over 77,000 rooms located in more
than 20 countries with an additional 31 hotel and resort projects
under development around the world.
Acquisition of ITT Corporation
In November 1997, the Company agreed to acquire ITT Corporation
for a combination of cash and Paired Shares with an aggregate value
including assumed debt of approximately $14.6 billion, subject to
shareholder approval. Meetings of the shareholders of ITT
Corporation and of the Company to vote on the acquisition are
scheduled in February 1998 and the transaction is scheduled to close
shortly after the shareholders meetings.
Financing
On October 2, 1997, the Company completed the sale of
approximately 2.5 million paired shares at the net price of $53 per
paired share to a group of institutional buyers in a direct
placement. Proceeds from this sale of approximately $131.6 million
were used to pay down existing indebtedness.
On October 15, 1997, the Company completed a private placement of
approximately 2.2 million paired shares, at a net price of $57.25 per
paired share to an affiliate of the Union Bank of Switzerland
("UBS"). Proceeds from this offering of approximately $125.0 million
were used to pay down existing indebtedness.
On January 2, 1998, the Company established a $2.265 billion
credit facility, with Bankers Trust and Chase Manhattan acting as
lead banks. The Company used a portion of the proceeds from the
facility to pay off a $1.2 billion, unsecured revolving credit and
term loan facility, to fund the cash portion of the Westin
acquisition, and to refinance a portion of Westin's existing
indebtedness. The Company has since received commitments from a
group of financial institutions led by Bankers Trust and Chase
Manhattan to expand the facility to $7.0 billion which will be used
to fund the cash portion of the ITT merger, refinance a portion of
its existing indebtedness and for general corporate purposes.
Fourth Quarter Dividend
During the quarter, the Trust declared a dividend of $0.48 per
paired share for the Trust's fourth quarter ending December 31, 1997.
The dividend was paid on January 26, 1998 to shareholders of record
on December 31, 1997. The dividend represents an increase of nearly
55% over the initial dividend rate of $0.31 (adjusted for the 3-for-2
split) adopted after the June 1995 offering, and a payout ratio for
calendar year 1997 of approximately 55%, which is one of the lowest
payout ratios in the REIT industry.
Renovations and Repositionings
The Company is evaluating the acceleration of its renovation
programs as well as the repositioning of many of its assets.
Renovations have begun and should be completed in the summer of 1998
for the Doral Inn in New York which will be expanded by 70 rooms.
Renovations have also been scheduled and should be completed in 1998
and 1999 for the Terrace Garden in Atlanta, Georgia (approximately
$8.5 million), the Atlanta Marque in Atlanta, Georgia (approximately
$6.8 million), the Days Inn at the Philadelphia Airport
(approximately $3.4 million), the Midland Hotel in Chicago, Illinois,
and the Boston Park Plaza in Boston, Massachusetts. Pending the
completion of the ITT transaction, the Company expects to make flag
changes to include the following:
Hotel Park Tuscon, Tuscon, AZ Sheraton
Plaza Hotel & Conference Center, Tuscon, AZ Four Points
Radisson Denver South, Denver, CO Sheraton
Gainesville Radisson, Gainesville, FL Four Points
Sheraton Stamford, Stamford, CT Westin
Tara Stamford Hotel, Stamford, CT Sheraton
The Lennox Inn, Atlanta, GA Four Points
Radisson Plaza & Suite Hotel, Indianapolis, IN Sheraton
Harvey Wichita, Wichita, KS Four Points
Doubletree Guest Suites, Lexington, KY Sheraton Suites
Tara's Ferncroft Conference Resort, Danvers, MA Sheraton
Tara's Colonial Hilton Hotel & Resort, Lynnfield, MA Sheraton
Tara Wayfarer Inn, Bedford, NH Sheraton
Days Inn Philadelphia Airport, Philadelphia, PA Four Points
Omni Waterside Hotel, Norfolk, VA Sheraton
Cherry Creek Inn, Denver, CO Sheraton
With an equity capitalization exceeding $4.2 billion, Starwood
Hotels & Resorts Trust is the largest hotel REIT in the United
States. Shares of the Trust are paired and trade together with
shares of Starwood Hotels & Resorts Worldwide, Inc. Starwood Hotels
& Resorts Worldwide, Inc., leases properties from the Trust and
operates these and other properties directly or through third party
management companies.
-0-
(Note: Statements in this press release which are not historical may
be deemed forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Although Starwood
Hotels & Resorts believes the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that its expectations will be attained.
Factors that could cause actual results to differ materially from
Starwood Hotels & Resorts' expectations include completion of pending
acquisitions, continued availability of acquisitions, the
availability and cost of capital for acquisitions and for
renovations, the ability to maintain existing management, franchise
or representation agreements and to obtain new agreements on current
terms, competition within the lodging industry, the cyclicality of
the real estate business and the hotel business, real estate and
economic conditions, the continuing ability of the Trust to qualify
as a REIT and other risks detailed from time to time in the Starwood
Hotels & Resorts Trust and Starwood Hotels & Resorts Worldwide,
Inc.'s SEC reports, including quarterly reports on Form 10-Q, reports
on Form 8-K and annual reports on Form 10-K)
-0-
STARWOOD HOTELS & RESORTS TRUST AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
UNAUDITED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts and statistics)
Three months ended Twelve months ended
December 31, December 31,
1997 1996 1997 1996
REVENUE
Rooms $174,083 $92,085 $577,318 $260,175
Food and beverage 90,812 45,164 248,072 94,816
Other 20,405 10,606 63,524 30,119
Total hotel revenue 285,300 147,855 888,914 385,110
Gaming 3,611 4,294 15,003 23,630
Interest from mortgage
and other notes 3,104 3,557 13,680 11,262
Rents from leased
hotel properties and
income from investments 182 134 883 822
Management fees and
other income 1,342 1,642 8,068 3,424
Gain on sale of real
estate investments 7,256 5,674 7,035 4,290
300,795 163,156 933,583 428,538
EXPENSES
Rooms 43,868 24,997 141,872 67,017
Food and beverage 63,372 33,340 181,430 72,696
Other 89,996 52,282 290,852 135,302
Total hotel expenses 197,236 110,619 614,154 275,015
Gaming 3,945 4,018 16,499 21,834
Interest 23,896 7,977 65,035 23,337
Depreciation and
amortization 21,175 25,587 125,446 55,745
Administrative and general 8,239 6,486 27,241 16,495
Treasury lock settlement 25,000 - 25,000 -
279,491 154,687 873,375 392,426
Income before minority
interest 21,304 8,469 60,208 36,112
Minority interest 8,006 1,305 18,684 10,238
Income before
extraordinary items 13,298 7,164 41,524 25,874
Extraordinary items
due to early
extinguishment of
debt (net of
minority interest for
1997 and 1996 of
$971,000 and $413,000,
respectively) - - (3,452) 1,077
NET INCOME $13,298 $7,164 $38,072 $26,951
BASIC EARNINGS PER
PAIRED SHARE
Income before
extraordinary items $0.26 $0.18 $0.90 $0.88
Extraordinary items - - (0.07) 0.04
NET INCOME PER
PAIRED SHARE $0.26 $0.18 $0.83 $0.92
EARNINGS PER PAIRED
SHARE ASSUMING DILUTION
Income before
extraordinary items $0.25 $0.17 $0.85 $0.86
Extraordinary items - - (0.07) 0.04
NET INCOME PER PAIRED
SHARE ASSUMING
DILUTION $0.25 $0.17 $0.78 $0.90
Weighted Average
Number of Paired Shares 50,944 40,078 46,022 29,204
Weighted Average Number
of Paired Shares
Assuming Dilution 54,003 41,787 48,663 29,884
FUNDS FROM OPERATIONS
Income before minority
interest and
extraordinary items $21,304 $8,469 $60,208 $36,112
Depreciation and
amortization 21,175 25,587 125,446 55,745
Amortization of
financing costs (992) (1,871) (4,079) (4,548)
Gain on sale of real
estate investments (7,256) (5,674) (7,035) (4,290)
Corporate relocation
costs - 350 - 1,850
Treasury lock
settlement 25,000 - 25,000 -
Minority interest-
consolidated joint
ventures (2,939) (746) (9,483) (2,121)
FUNDS FROM OPERATIONS $56,292 $26,115 $190,057 $82,748
FUNDS FROM
OPERATIONS PER
SHARE $0.85 $0.51 $3.13 $2.13
Weighted Average LP
Units and Paired
Shares Outstanding 65,977 50,775 60,800 38,838
Dividends per Paired
Share $0.48 $0.39 $1.74 $1.36
Payout ratio (dividends
as a percentage of
FFO) 56.5% 76.5% 55.6% 63.8%
Occupancy(a) 65.1% 64.6% 69.6% 70.0%
ADR(a) $107.62 $99.14 $104.41 $96.16
REVPAR(a) $70.02 $64.05 $72.69 $67.33
REVPAR Growth(a) 9.3% 8.0%
(a) Same-store-sales basis, including all hotels owned as of December
31, 1997 and excluding one hotel under renovation during the fourth
quarter and three hotels held for sale.
UNAUDITED BALANCE SHEET INFORMATION
(in thousands)
December 31,
1997
Total assets $3,009,464
Total debt 1,566,014
Total liabilities 1,717,552
Minority interest 270,289
Shareholder's equity $1,021,623
CONTACT: AT THE TRUST: Barry Barry, Welsh Barri, town (1991 pop. 45,053) and port, Vale of Glamorgan, S Wales, on the Bristol Channel. Once a major coal-exporting port, its more diversified export products include cement, flour, and steel products. Sternlicht Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. 203/861-2100; or Ron Noun 1. Ron - a Chadic language spoken in northern Nigeria Bokkos, Daffo West Chadic - a group of Chadic languages spoken in northern Nigeria; Hausa in the most important member Brown Senior VP and CFO See Chief Financial Officer. 602/852-3900 or AT THE CORPORATION: Debi Ford Director of Investor Relations Investor relations The process by which the corporation communicates with its investors. 602/852-3370 or AT THE FINANCIAL RELATIONS BOARD: Daniel Daniel, book of the Bible Daniel, book of the Bible. It combines "court" tales, perhaps originating from the 6th cent. B.C., and a series of apocalyptic visions arising from the time of the Maccabean emergency (167–164 B.C. Saks Saks can refer to several things:
General Information 310/442-0599 |
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