DRH_8K_12.31.2013


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 25, 2014
 
 
DiamondRock Hospitality Company
(Exact name of registrant as specified in charter)
 
 
 
 
 
 
 
 
Maryland
 
001-32514
 
20-1180098
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
3 Bethesda Metro Center, Suite 1500
Bethesda, MD 20814
(Address of Principal Executive Offices) (Zip Code)
(240) 744-1150
(Registrant’s telephone number, including area code)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





The information in this Current Report on Form 8-K, including the exhibits attached hereto, is being furnished and shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.
ITEM 2.02. Results of Operations and Financial Condition.
On February 25, 2014, DiamondRock Hospitality Company (the “Company”) issued a press release announcing its financial results for the quarter and year ended December 31, 2013 (the “Press Release”). The text of the Press Release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are included with this report:
 
 
 
 
Exhibit No.
  
Description
 
 
99.1
  
Press release dated February 25, 2014.





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
DIAMONDROCK HOSPITALITY COMPANY
 
 
 
 
Date: February 25, 2014
 
 
 
By:
 
/s/ William J. Tennis
 
 
 
 
 
 
William J. Tennis
 
 
 
 
 
 
Executive Vice President, General Counsel and Corporate Secretary







Exhibit 99.1 4Q 2013



COMPANY CONTACT    

Sean Mahoney
(240) 744-1150

FOR IMMEDIATE RELEASE

Tuesday, February 25, 2014

DIAMONDROCK HOSPITALITY COMPANY REPORTS FOURTH QUARTER AND FULL YEAR 2013 RESULTS
Introduces 2014 Outlook with RevPAR Growth of 9% to 11%
Announces 21% Dividend Increase
Capital Improvement Plan Substantially Complete
BETHESDA, Maryland, Tuesday, February 25, 2014 – DiamondRock Hospitality Company (the “Company”) (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 26 premium hotels in the United States, today announced results of operations for the fourth quarter and full year ended December 31, 2013. The Company also announced a 21% increase to its quarterly dividend commencing with the first quarter 2014.

2013 Operating Results    
RevPAR: RevPAR was $138.11, an increase of 1.4% from 2012. Excluding the New York City hotels under renovation during 2013, the Company's RevPAR increased 5.3% from 2012.
Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 25.80%, a decrease of 143 basis points from 2012. Excluding the New York City hotels under renovation during 2013, the Company's Hotel Adjusted EBITDA margin increased 45 basis points from 2012.
Adjusted EBITDA: Adjusted EBITDA was $196.9 million.
Adjusted FFO: Adjusted FFO was $139.3 million and Adjusted FFO per diluted share was $0.71.
Dividends: The Company declared four quarterly dividends totaling $0.34 per share during 2013 and returned approximately $65 million to shareholders.
Fourth Quarter 2013 Highlights
RevPAR: RevPAR was $139.98, an increase of 3.3% from 2012.
Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 25.81%, a decrease of 188 basis points from 2012.
Adjusted EBITDA: Adjusted EBITDA was $49.3 million.
Adjusted FFO: Adjusted FFO was $33.5 million and Adjusted FFO per diluted share was $0.17.
Lexington Hotel Renovation: The Company completed its comprehensive renovation of the Lexington Hotel New York City during the fourth quarter. The feedback from guests and meeting planners post-renovation has been very favorable.




Non-Core Hotel Disposition: The Company sold the 487-room Torrance Marriott South Bay for proceeds of approximately $76 million, which represented a 5.8% cap rate on the hotel's net operating income.
Salt Lake City Refinancing: The Company entered into a new $63 million mortgage loan secured by the Salt Lake City Marriott. The loan has a term of seven years and bears interest at a fixed rate of 4.25%.
Dividends: The Company declared a quarterly dividend of $0.085 per share during the fourth quarter.
Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, “In 2013 we focused on repositioning DiamondRock for meaningful growth in 2014 and beyond. We are pleased to announce that we have substantially completed our $140 million capital program, which included a number of transformational projects such as the comprehensive renovation and rebranding of the Lexington Hotel. Importantly, we don't expect any meaningful renovation disruption in 2014. Our successful strategic initiatives in 2013 have positioned the Company for a strong 2014, as we look for performance to be bolstered by accelerated RevPAR growth, strong group pace, renovation tailwinds and our intensified asset management efforts.”
Operating Results    
Please see “Certain Definitions” and “Non-GAAP Financial Measures” attached to this press release for an explanation of the terms “EBITDA,” “Adjusted EBITDA,” “Hotel Adjusted EBITDA Margin,” “FFO” and “Adjusted FFO.”

For the quarter ended December 31, 2013 (92 days), the Company reported the following:
 
Fourth Quarter
 
 
2013
 
2012 Pro Forma2
Change

ADR 1

$194.12

 

$187.04

3.8
%
Occupancy 1
72.1
%
 
72.4
%
(0.3) percentage points

RevPAR 1

$139.98

 

$135.50

3.3
%
Total Revenue 1
$201.5 million

 
$190.8 million

5.6
%
Hotel Adjusted EBITDA Margin 1
25.81
%
 
27.69
%
(188) basis points

Adjusted EBITDA
$49.3 million

 
 
 
Adjusted FFO
$33.5 million

 
 
 
Adjusted FFO per diluted share

$0.17

 
 


 
 
 
 
 
1Excludes the Torrance Marriott South Bay, which was sold in November 2013 and reported in discontinued operations.
2 Pro forma to (a) include the operating results of the Company’s Marriott-managed hotels from October 6, 2012 to December 31, 2012 (87 days) and all other hotels from October 1, 2012 to December 31, 2012, (b) assume the hotels acquired in 2012 were owned as of January 1, 2012 and (c) exclude the results of hotels sold.

The year-over-year comparability of the Company's fourth quarter results is impacted by the change in its reporting calendar. For the Company's Marriott-managed hotels, the 2013 fourth quarter includes 5 more days than the pro forma 2012 fourth quarter, which results in the 2013 fourth quarter including approximately 3% additional available room nights as compared to the pro forma 2012 fourth quarter.




2



For the year ended December 31, 2013, the Company reported the following:
 
Year Ended December 31,
 
 
2013
 
2012 Pro Forma2
Change

ADR 1

$183.85

 

$178.50

3.0
%
Occupancy 1
75.1
%
 
76.3
%
(1.2) percentage points

RevPAR 1

$138.11

 

$136.27

1.4
%
Total Revenue 1
$799.7 million

 
$779.5 million

2.6
%
Hotel Adjusted EBITDA Margin 1
25.80
%
 
27.23
%
(143) basis points

Adjusted EBITDA
$196.9 million

 
 
 
Adjusted FFO
$139.3 million

 
 
 
Adjusted FFO per diluted share

$0.71

 
 


 
 
 
 
 
1Excludes the Torrance Marriott South Bay, which was sold in November 2013 and reported in discontinued operations.
2 Pro forma to assume the hotels acquired in 2012 were owned as of January 1, 2012 and exclude the results of hotels sold.

The Company’s operating results for the year ended December 31, 2013 were significantly impacted by the displacement of over 86,000 room nights at its three New York City hotels under renovation, the Lexington Hotel, Courtyard Manhattan Midtown East and Courtyard Fifth Avenue. The renovations of the two Courtyards were completed during the second quarter of 2013 and the renovation of the Lexington Hotel was completed in October 2013. The following are selected operating results for the Company excluding these three hotels:
 
Year Ended December 31,
 
 
2013
 
2012 Pro Forma2
Change

ADR 1

$176.37

 

$170.43

3.5
%
Occupancy 1
75.7
%
 
74.4
%
1.3 percentage points

RevPAR 1

$133.56

 

$126.79

5.3
%
Total Revenue 1
$718.0 million

 
$680.6 million

5.5
%
Hotel Adjusted EBITDA 1
$191.0 million

 
$177.9 million

7.3
%
Hotel Adjusted EBITDA Margin 1
26.60
%
 
26.15
%
45 basis points

 
 
 
 
 
1Excludes the Torrance Marriott South Bay, which was sold in November 2013 and reported in discontinued operations.
2 Pro forma to assume the hotels acquired in 2012 were owned as of January 1, 2012 and exclude the results of hotels sold.

Capital Expenditures

The Company has substantially completed its $140 million capital improvement program. During the year ended December 31, 2013, the Company spent approximately $107.3 million on these capital improvements. The following is an update on the most significant capital projects.

Lexington Hotel New York: The Company completed its comprehensive renovation of the Lexington Hotel in October 2013. The hotel joined Marriott's Autograph Collection during August 2013 and has increased average daily rates by approximately $40 from the comparable period in 2012.
Manhattan Courtyards: The Company completed the renovation of the guest rooms, corridors and guest bathrooms at the Courtyard Manhattan/Midtown East and Courtyard Manhattan/Fifth Avenue. The renovation at the Courtyard Midtown East included the addition of 5 new guest rooms.
Westin Washington D.C.: A comprehensive $17 million renovation commenced in October 2013 and was substantially completed in February 2014.
Westin San Diego: A comprehensive $14.5 million renovation commenced in October 2013 and was substantially completed in January 2014.

3



Hilton Minneapolis: A $13 million renovation of the guest rooms, guest bathrooms and corridors commenced in November 2013 and will be substantially complete during the first quarter of 2014.
Hilton Boston: A $7 million renovation of the guest rooms, corridors, public areas, and meeting space commenced in October 2013 and was substantially completed at the end of 2013.
Hilton Burlington: A $6 million renovation of the lobby, corridors, guest rooms and outdoor space commenced in November 2013 and was substantially completed in February 2014.

The Company expects to spend approximately $95 million on capital improvements at its hotels in 2014, of which approximately $45 million relates to the completion of 2013 capital projects in early 2014 and approximately $50 million relates to new 2014 capital projects.

Salt Lake City Marriott Refinancing

The Company entered into a new $63 million mortgage loan secured by the Salt Lake City Marriott in October
2013. The new loan has a term of seven years and bears interest at a fixed rate of 4.25%. As part of the refinancing,
the Company prepaid the $27.3 million mortgage loan previously secured by the hotel, which had a fixed interest
rate of 5.5 % and a maturity date of January 2015. The cost of prepaying the loan through defeasance was
approximately $1.5 million, which is added back to Adjusted EBITDA and Adjusted FFO. The Company used
the proceeds from the new loan to repay the prior loan and to create additional investment capacity for the
acquisition of the Hilton Garden Inn Times Square Central.

Sale of Torrance Marriott South Bay    

On November 21, 2013, the Company sold the 487-room Torrance Marriott South Bay for approximately $76 million, which included credit for the hotel's replacement reserve. The proceeds from the sale will be used to create investment capacity for the acquisition of the Hilton Garden Inn Times Square Central. The Torrance Marriott South Bay generated $5.4 million of Hotel Adjusted EBITDA during the year ended December 31, 2013.
Balance Sheet
As of December 31, 2013, the Company had $144.6 million of unrestricted cash on hand and approximately $1.1 billion of total debt, which consists solely of property-specific mortgage debt. The Company has no outstanding borrowings on its $200 million senior unsecured credit facility.

Dividends

The Company’s Board of Directors declared a quarterly dividend of $0.085 per share to stockholders of record as of December 31, 2013. The dividend was paid on January 10, 2014. The Company increased its quarterly dividend for 2014 by 21% and its Board of Directors declared a dividend of $0.1025 per share for stockholders of record as of March 31, 2014.

Outlook and Guidance
The Company is providing annual guidance for 2014, 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 U.S. Securities and Exchange Commission.  The Company’s outlook assumes the Hilton Garden Inn Times Square Central opens in August 2014. The 2014 Pro Forma RevPAR growth excludes the Hilton Garden Inn Times Square Central, which is expected to positively impact the Company's RevPAR by approximately 75 basis points.

Based on the above assumptions, the Company expects its full year 2014 results to be as follows:

4



Metric
Low End
High End
Pro Forma RevPAR Growth

9 percent
11 percent
Adjusted EBITDA

$230 million
$240 million
Adjusted FFO

$169 million
$176 million
Adjusted FFO per share
(based on 196.5 million shares)

$0.86 per share
$0.90 per share

The Company expects approximately16% of full year 2014 Adjusted EBITDA to be earned during the first quarter of 2014.

The midpoint of the guidance range above implies Hotel Adjusted EBIDTA margin growth of over 250 basis points. For comparison purposes, the Company's Pro Forma RevPAR growth outlook excluding the New York City hotels under renovation during 2013 is 5.5 percent to 7.5 percent.

Earnings Call
The Company will host a conference call to discuss its fourth quarter and full year results on Tuesday, February 25, 2014, at 9:00 a.m. Eastern Time (ET). To participate in the live call, investors are invited to dial 866-318-8618 (for domestic callers) or 617-399-5137 (for international callers). The participant passcode is 29044846. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company’s website at www.drhc.com or www.earnings.com. A replay of the webcast will also be archived on the website for thirty days.

About the Company
DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 26 premium quality hotels with over 11,100 rooms. The Company has strategically positioned its hotels to generally be operated under the leading global brands such as Hilton, Marriott, and Westin. For further information on the Company and its portfolio, please visit DiamondRock Hospitality Company’s website at 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 “believe,” “expect,” “intend,” “project,” “forecast,” “plan” 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 the Company’s hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of the Company’s indebtedness; relationships with property managers; the 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; risks associated with the development of a hotel by a third-party developer; and other risk factors contained 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 of 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.

5





DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED BALANCE SHEETS
As of December 31, 2013 and December 31, 2012
(in thousands, except share and per share amounts)

 
2013
 
2012
 
 
 
 
ASSETS
 
 
 
Property and equipment, at cost
$
3,168,088

 
$
3,131,175

Less: accumulated depreciation
(600,555
)
 
(519,721
)
 
2,567,533

 
2,611,454

Deferred financing costs, net
7,702

 
9,724

Restricted cash
89,106

 
76,131

Due from hotel managers
69,353

 
68,532

Note receivable
50,084

 
53,792

Favorable lease assets, net
39,936

 
40,972

Prepaid and other assets (1)
79,474

 
73,814

Cash and cash equivalents
144,584

 
9,623

Total assets
$
3,047,772

 
$
2,944,042

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities:
 
 
 
Mortgage debt
$
1,091,861

 
$
968,731

Senior unsecured credit facility

 
20,000

Total debt
1,091,861

 
988,731

 
 
 
 
Deferred income related to key money, net
23,707

 
24,362

Unfavorable contract liabilities, net
78,093

 
80,043

Due to hotel managers
54,225

 
51,003

Dividends declared and unpaid
16,981

 
15,911

Accounts payable and accrued expenses (2)
102,214

 
88,879

Total other liabilities
275,220

 
260,198

Stockholders’ Equity:
 
 
 
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding

 

Common stock, $0.01 par value; 400,000,000 shares authorized; 195,470,791 and 195,145,707 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively
1,955

 
1,951

Additional paid-in capital
1,979,613

 
1,976,200

Accumulated deficit
(300,877
)
 
(283,038
)
Total stockholders’ equity
1,680,691

 
1,695,113

Total liabilities and stockholders’ equity
$
3,047,772

 
$
2,944,042


(1) 
Includes $39.4 million of deferred tax assets, $26.9 million for the Hilton Garden Inn Times Square purchase deposit, $8.1 million of prepaid expenses and $5.1 million of other assets as of December 31, 2013.
(2) 
Includes $59.0 million of deferred ground rent, $11.0 million of deferred tax liabilities, $11.7 million of accrued property taxes, $8.6 million of accrued capital expenditures and $11.9 million of other accrued liabilities as of December 31, 2013.

6



 
DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Quarters Ended December 31, 2013 and December 31, 2012 and
the Years Ended December 31, 2013 and December 31, 2012
(in thousands, except per share amounts)


 
Fiscal Quarter Ended December 31,
 
Year Ended December 31,
 
 
 
 
 
2013
 
2012
 
2013
 
2012
 
 
Revenues:
(Unaudited)
 
(Unaudited)
 
 
 
 
Rooms
$
142,864

 
$
183,215

 
$
558,751

 
$
509,902

Food and beverage
47,239

 
61,024

 
193,043

 
174,963

Other
11,364

 
14,993

 
47,894

 
42,022

Total revenues
201,467

 
259,232

 
799,688

 
726,887

Operating Expenses:
 
 
 
 
 
 
 
Rooms
38,573

 
46,248

 
151,040

 
135,437

Food and beverage
33,194

 
41,891

 
136,454

 
124,890

Management fees
6,621

 
9,410

 
25,546

 
24,307

Other hotel expenses
71,241

 
88,396

 
284,523

 
254,265

Impairment loss

 

 

 
30,844

Depreciation and amortization
25,374

 
36,409

 
103,895

 
97,004

Hotel acquisition costs

 
246

 

 
10,591

Corporate expenses
4,971

 
5,384

 
23,072

 
21,095

Total operating expenses
179,974

 
227,984

 
724,530

 
698,433

Operating profit
21,493

 
31,248

 
75,158

 
28,454

Other Expenses (Income):
 
 
 
 
 
 
 
Interest income
(1,724
)
 
(29
)
 
(6,328
)
 
(305
)
Interest expense
14,769

 
17,061

 
57,279

 
53,771

Loss (gain) on early extinguishment of debt
1,492

 

 
1,492

 
(144
)
Total other expenses, net
14,537

 
17,032

 
52,443

 
53,322

Income (loss) from continuing operations before income taxes
6,956

 
14,216

 
22,715

 
(24,868
)
Income tax (expense) benefit
(128
)
 
1,400

 
1,113

 
6,793

Income (loss) from continuing operations
6,828

 
15,616

 
23,828

 
(18,075
)
Income from discontinued operations, net of income taxes
22,727

 
1,012

 
25,237

 
1,483

Net income (loss)
29,555

 
16,628

 
49,065

 
(16,592
)
Earnings (loss) earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
0.03

 
$
0.08

 
$
0.12

 
$
(0.10
)
Discontinued operations
0.12

 
0.00

 
0.13

 
0.01

Basic and diluted earnings (loss) per share
$
0.15

 
$
0.08

 
$
0.25

 
$
(0.09
)



7



Non-GAAP Financial Measures

We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. EBITDA, Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.

EBITDA and FFO

EBITDA represents net income 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. In addition, covenants included in our indebtedness use EBITDA as a measure of financial compliance. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.

The Company computes FFO in accordance with standards established by NAREIT, which defines FFO as net income determined in accordance with GAAP, excluding gains or losses from sales of properties and impairment losses, plus depreciation and amortization. The Company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of the Company's operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. The Company also uses FFO as one measure in assessing its results.

Adjustments to EBITDA and FFO

We adjust EBITDA and FFO when evaluating our performance because we believe that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA and Adjusted FFO, when combined with GAAP net income, EBITDA and FFO, is beneficial to an investor's complete understanding of our operating performance. We adjust EBITDA and FFO for the following items:

Non-Cash Ground Rent: We exclude the non-cash expense incurred from the straight line recognition of rent from our ground lease obligations and the non-cash amortization of our favorable lease assets.
Non-Cash Amortization of Favorable and Unfavorable Contracts: We exclude the non-cash amortization of the favorable management contract assets recorded in conjunction with our acquisitions of the Westin Washington D.C. City Center, Westin San Diego, and Hilton Burlington and the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with our acquisitions of the Bethesda Marriott Suites, the Chicago Marriott Downtown, the Renaissance Charleston and the Lexington Hotel New York. The amortization of the favorable and unfavorable contracts does not reflect the underlying operating performance of our hotels.
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 the effect of these one-time adjustments because they do not reflect its actual performance for that period.
Gains or Losses from Early Extinguishment of Debt: We exclude the effect of gains or losses recorded on the early extinguishment of debt because we believe they do not accurately reflect the underlying performance of the Company.
Acquisition Costs:  We exclude acquisition transaction costs expensed during the period because we believe they do not reflect the underlying performance of the Company.
Allerton Loan: In 2012, due to the uncertainty of the timing of the bankruptcy resolution, we excluded both cash interest payments received and the legal costs incurred as a result of the bankruptcy proceedings from our calculation of Adjusted EBITDA and Adjusted FFO. Due to the settlement of the bankruptcy proceedings and amended and restated loan, we commenced recognizing interest income in 2013, which includes the amortization of the difference between the carrying basis of the old loan and face value of the new loan. Cash payments received during 2010 and 2011 that were included in Adjusted EBITDA and Adjusted FFO and reduced the carrying basis of the loan are now deducted from Adjusted EBITDA and Adjusted FFO on a straight-line basis over the anticipated five-year term of the new loan.

8



Other Non-Cash and /or Unusual Items:  From time to time we incur costs or realize gains that we do not believe reflect the underlying performance of the Company. Such items include, but are not limited to, new hotel pre-opening costs, contract termination fees and severance costs. In 2012, we excluded the franchise termination fee paid to Radisson Hotels International, Inc. for the Lexington Hotel New York. In 2013, we excluded the severance costs associated with the departure of our former President and Chief Operating Officer, as well as the write off of unamortized key money, net of a termination payment, related to the termination of the Oak Brook Hills Resort management agreement.
In addition, to derive Adjusted EBITDA we exclude gains or losses on sales of properties and impairment losses because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our hotels. Additionally, the gains or losses on sales of properties and impairment losses represent either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.

In addition, to derive Adjusted FFO we exclude any fair value adjustments to debt instruments. Specifically, we exclude the impact of the non-cash amortization of the debt premium recorded in conjunction with the acquisition of the JW Marriott Denver at Cherry Creek and fair market value adjustments to the Company's interest rate cap agreement.

The following tables are reconciliations of our U.S. GAAP net income to EBITDA and Adjusted EBITDA (in thousands):
 
Fiscal Quarter Ended December 31,
 
Year Ended December 31,
 
 
 
 
 
 
 
 
 
 
 
2013
 
 
2012
 
2013
 
 
2012
Net income (loss)
$
29,555

 
 
$
16,628

 
$
49,065

 
 
$
(16,592
)
Interest expense (1)
14,769

 
 
17,061

 
57,279

 
 
56,068

Income tax expense (benefit) (2)
928

 
 
(1,242
)
 
(16
)
 
 
(6,046
)
Real estate related depreciation (3)
25,374

 
 
37,350

 
105,655

 
 
101,498

EBITDA
70,626

 
 
69,797

 
211,983

 
 
134,928

Non-cash ground rent
1,677

 
 
2,074

 
6,787

 
 
6,694

Non-cash amortization of favorable and unfavorable contract liabilities, net
(424
)
 
 
(357
)
 
(1,487
)
 
 
(1,653
)
(Gain) loss on sale of hotel properties
(22,733
)
 
 
61

 
(22,733
)
 
 
(9,479
)
Loss (gain) on early extinguishment of debt
1,492

 
 

 
1,492

 
 
(144
)
Acquisition costs

 
 
246

 

 
 
10,591

Reversal of previously recognized Allerton income
(291
)
 
 

 
(1,163
)
 
 

Allerton loan legal fees

 
 
476

 

 
 
2,493

Write-off of key money
(1,082
)
 
 

 
(1,082
)
 
 

Franchise termination fee

 
 

 

 
 
750

Impairment losses (4)

 
 

 

 
 
45,534

Severance costs

 
 

 
3,065

 
 

Adjusted EBITDA
$
49,265

 
 
$
72,297

 
$
196,862

 
 
$
189,714


(1)
Includes $2.3 million of interest expense reported in discontinued operations for the year ended December 31, 2012.
(2)
Includes $0.8 million of income tax expense reported in discontinued operations for the fiscal quarter ended December 31, 2013 and $1.1 million of income tax expense reported in discontinued operations for the year ended December 31, 2013. Includes $0.2 million of income tax expense reported in discontinued operations for the fiscal quarter ended December 31, 2012 and $0.7 million of income tax expense reported in discontinued operations for the year ended December 31, 2012.
(3)
Includes $1.8 million of depreciation expense reported in discontinued operations for the year ended December 31, 2013. Includes $0.9 million of depreciation expense reported in discontinued operations for the quarter ended December 31, 2012 and $4.5 million of depreciation expense reported in discontinued operations for the year ended December 31, 2012.
(4)
Includes impairment losses of $14.7 million reported in discontinued operations for the year ended December 31, 2012.

9



 
 
 
 
 
Guidance (in 000s)
 
 
 
Full Year 2014
 
 
 
 
 
Low End
 
High End
Net income (1)
 
 
 
 
$
69,163

 
$
76,663

Interest expense
 
 
 
 
59,200

 
59,100

Income tax expense (benefit)
 
 
 
 
1,400

 
4,500

Real estate related depreciation and amortization
 
 
 
 
95,500

 
95,000

EBITDA

 

 
225,263

 
235,263

Non-cash ground rent
 
 
 
 
6,400

 
6,400

Non-cash amortization of favorable and unfavorable contracts, net
 
 
 
 
(1,400
)
 
(1,400
)
Reversal of previously recognized Allerton income
 
 
 
 
(1,163
)
 
(1,163
)
Pre-opening costs
 
 
 
 
900

 
900

Adjusted EBITDA

 

 
$
230,000

 
$
240,000

(1)
Net income includes approximately $6.6 million of interest income related to the Allerton loan and approximately $21.0 million of corporate expenses.

The following tables are reconciliations of our U.S. GAAP net income to FFO and Adjusted FFO (in thousands):
 
Fiscal Quarter Ended December 31,
 
Year Ended December 31,
 
 
 
 
 
 
 
 
 
 
 
2013
 
 
2012
 
2013
 
 
2012
Net income (loss)
$
29,555

 
 
$
16,628

 
$
49,065

 
 
$
(16,592
)
Real estate related depreciation (1)
25,374

 
 
37,350

 
105,655

 
 
101,498

Impairment losses (2)

 
 

 

 
 
45,534

(Gain) loss on sale of hotel properties
(22,733
)
 
 
61

 
(22,733
)
 
 
(9,479
)
FFO
32,196

 
 
54,039

 
131,987

 
 
120,961

Non-cash ground rent
1,677

 
 
2,074

 
6,787

 
 
6,694

Non-cash amortization of unfavorable contract liabilities, net
(424
)
 
 
(357
)
 
(1,487
)
 
 
(1,653
)
Loss (gain) on early extinguishment of debt
1,492

 
 

 
1,492

 
 
(144
)
Acquisition costs

 
 
246

 

 
 
10,591

Reversal of previously recognized Allerton income
(291
)
 
 

 
(1,163
)
 
 

Allerton loan legal fees

 
 
476

 

 
 
2,493

Write-off of key money
(1,082
)
 
 

 
(1,082
)
 
 

Franchise termination fee

 
 

 

 
 
750

Severance costs

 
 

 
3,065

 
 

Fair value adjustments to debt instruments
(65
)
 
 
(28
)
 
(298
)
 
 
471

Adjusted FFO
$
33,503

 
 
$
56,450

 
$
139,301

 
 
$
140,163

Adjusted FFO per share
$
0.17

 
 
$
0.29

 
$
0.71

 
 
$
0.78


(1)
Includes $1.8 million of depreciation expense reported in discontinued operations for the year ended December 31, 2013. Includes $0.9 million of depreciation expense reported in discontinued operations for the quarter ended December 31, 2012 and $4.5 million of depreciation expense reported in discontinued operations for the year ended December 31, 2012.
(2)
Includes impairment losses of $14.7 million reported in discontinued operations in the year ended December 31, 2012.

10



 
 
 
 
 
Guidance (in 000s)
 
 
 
Full Year 2014
 
 
 
 
 
Low End
 
High End
Net income (1)
 
 
 
 
$
69,163

 
$
76,663

Real estate related depreciation and amortization
 
 
 
 
95,500

 
95,000

FFO

 

 
164,663

 
171,663

Non-cash ground rent
 
 
 
 
6,400

 
6,400

Non-cash amortization of favorable and unfavorable contracts, net
 
 
 
 
(1,400
)
 
(1,400
)
Reversal of previously recognized Allerton income
 
 
 
 
(1,163
)
 
(1,163
)
Pre-opening costs
 
 
 
 
900

 
900

Fair value adjustments to debt instruments
 
 
 
 
(400
)
 
(400
)
Adjusted FFO

 

 
$
169,000

 
$
176,000

Adjusted FFO per share
 
 
 
 
$
0.86

 
$
0.90

(1)
Net income includes approximately $6.6 million of interest income related to the Allerton loan and approximately $21.0 million of corporate expenses.

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

Certain Definitions
In this release, when we discuss “Hotel Adjusted EBITDA,” we exclude from Hotel EBITDA the non-cash expense incurred by the hotels due to the straight lining of the rent from our ground lease obligations, the non-cash amortization of our favorable lease assets and other contracts, the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with the acquisitions of the Bethesda Marriott Suites, the Chicago Marriott Downtown, the Renaissance Charleston and the Lexington Hotel New York. Hotel EBITDA represents hotel net income 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. Net debt is calculated as total debt outstanding less unrestricted cash.

11




DIAMONDROCK HOSPITALITY COMPANY
HOTEL OPERATING DATA
Schedule of Property Level Results
(in thousands)
(unaudited)

 
Quarter Ended December 31,
 
Year Ended December 31,
 
 
 
Pro Forma
 
%
 
 
 
Pro Forma
 
%
 
2013
 
2012 (1)
 
Change
 
2013
 
2012 (2)
 
Change
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rooms
$
142,864

 
$
134,365

 
6.3
 %
 
$
558,751

 
$
552,568

 
1.1
 %
Food and beverage
47,239

 
45,148

 
4.6
 %
 
193,043

 
181,891

 
6.1
 %
Other
11,364

 
11,258

 
0.9
 %
 
47,894

 
44,998

 
6.4
 %
Total revenues
201,467

 
190,771

 
5.6
 %
 
799,688

 
779,457

 
2.6
 %
Operating Expenses:
 
 
 
 
 
 
 
 
 
 
 
Rooms departmental expenses
$
38,573

 
$
34,347

 
12.3
 %
 
$
151,040

 
$
144,111

 
4.8
 %
Food and beverage departmental expenses
33,194

 
31,445

 
5.6
 %
 
136,454

 
129,361

 
5.5
 %
Other direct departmental
5,092

 
4,896

 
4.0
 %
 
21,933

 
20,941

 
4.7
 %
General and administrative
16,903

 
15,151

 
11.6
 %
 
64,204

 
61,759

 
4.0
 %
Utilities
6,466

 
6,675

 
(3.1
)%
 
28,163

 
27,764

 
1.4
 %
Repairs and maintenance
9,457

 
8,511

 
11.1
 %
 
36,808

 
34,670

 
6.2
 %
Sales and marketing
18,060

 
16,076

 
12.3
 %
 
67,582

 
66,728

 
1.3
 %
Base management fees
4,949

 
4,973

 
(0.5
)%
 
19,324

 
19,745

 
(2.1
)%
Incentive management fees
1,672

 
1,834

 
(8.8
)%
 
6,222

 
5,557

 
12.0
 %
Property taxes
9,324

 
8,775

 
6.3
 %
 
40,045

 
36,462

 
9.8
 %
Ground rent
3,746

 
3,513

 
6.6
 %
 
14,985

 
14,603

 
2.6
 %
Other fixed expenses
3,277

 
3,008

 
8.9
 %
 
11,886

 
10,856

 
9.5
 %
Total hotel operating expenses
$
150,713

 
$
139,204

 
8.3
 %
 
$
598,646

 
$
572,557

 
4.6
 %
Hotel EBITDA
50,754

 
51,567

 
(1.6
)%
 
201,042

 
206,900

 
(2.8
)%
Non-cash ground rent
1,677

 
1,583

 
5.9
 %
 
6,787

 
6,783

 
0.1
 %
Non-cash amortization of unfavorable contract liabilities
(424
)
 
(317
)
 
33.8
 %
 
(1,487
)
 
(1,409
)
 
5.5
 %
Hotel Adjusted EBITDA
$
52,007

 
$
52,833

 
(1.6
)%
 
$
206,342

 
$
212,274

 
(2.8
)%

(1)
Pro forma to (a) include the operating results of the Company’s Marriott-managed hotels from October 6, 2012 to December 31, 2012 and all other hotels from October 1, 2012 to December 31, 2012, (b) assume the hotels acquired in 2012 were owned as of January 1, 2012, and (c) exclude the operating results of hotels sold.
(2)
Pro forma to (a) assume the hotels acquired in 2012 were owned as of January 1, 2012, and (b) exclude the operating results of hotels sold.



12



Market Capitalization as of December 31, 2013
(in thousands, except per share data)

Enterprise Value
 
 
 
 
 
Common equity capitalization (at December 31, 2013 closing price of $11.55/share)
 
$
2,265,302

Consolidated debt
 
1,091,861

Cash and cash equivalents
 
(144,584)

Total enterprise value
 
$
3,212,579

Share Reconciliation
 
 
 
 
 
Common shares outstanding
 
195,471

Unvested restricted stock held by management and employees
 
583

Share grants under deferred compensation plan held by directors
 
76

Combined shares outstanding
 
196,130




Debt Summary as of December 31, 2013
(dollars in thousands)

Property
 
Interest Rate
 
Term
 
Outstanding Principal
 
Maturity
Courtyard Manhattan / Midtown East
 
8.810%
 
Fixed
 
$
41,530

 
October 2014
Salt Lake City Marriott Downtown
 
4.250%
 
Fixed
 
62,771

 
November 2020
Courtyard Manhattan / Fifth Avenue
 
6.480%
 
Fixed
 
49,591

 
June 2016
Los Angeles Airport Marriott
 
5.300%
 
Fixed
 
82,600

 
July 2015
Frenchman’s Reef Marriott
 
5.440%
 
Fixed
 
57,671

 
August 2015
Renaissance Worthington
 
5.400%
 
Fixed
 
53,804

 
July 2015
Orlando Airport Marriott
 
5.680%
 
Fixed
 
56,778

 
January 2016
Chicago Marriott Downtown
 
5.975%
 
Fixed
 
208,417

 
April 2016
Hilton Minneapolis
 
5.464%
 
Fixed
 
94,874

 
May 2021
JW Marriott Denver at Cherry Creek
 
6.470%
 
Fixed
 
39,692

 
July 2015
Lexington Hotel New York
 
LIBOR + 3.00
 
Variable
 
170,368

 
March 2015
Westin Washington D.C. City Center
 
3.990%
 
Fixed
 
72,421

 
January 2023
The Lodge at Sonoma
 
3.960%
 
Fixed
 
30,607

 
April 2023
Westin San Diego
 
3.940%
 
Fixed
 
70,194

 
April 2023
Debt premium (1)
 
 
 
 
 
543

 
 
Total mortgage debt
 
 
 
 
 
$
1,091,861

 
 
 
 
 
 
 
 
 
 
 
Senior unsecured credit facility
 
LIBOR + 1.90
 
Variable
 
-

 
January 2017
Total debt
 
 
 
$
1,091,861

 
 

(1)
Non-cash GAAP adjustment recorded upon the assumption of the mortgage loan secured by the JW Marriott Denver Cherry Creek in 2011.

13



Pro Forma Operating Statistics – Fourth Quarter (1)
 
 
ADR
 
Occupancy
 
RevPAR
 
Hotel Adjusted EBITDA Margin
 
 
4Q 2013
4Q 2012
B/(W)
 
4Q 2013
4Q 2012
B/(W)
 
4Q 2013
4Q 2012
B/(W)
 
4Q 2013
4Q 2012
B/(W)
Atlanta Alpharetta Marriott
 
$
148.33

$
138.92

6.8
 %
 
69.0
%
64.8
%
4.2
 %
 
$
102.37

$
89.99

13.8
 %
 
37.41
 %
27.95
%
946 bps
Bethesda Marriott Suites
 
$
152.65

$
167.73

(9.0
)%
 
66.9
%
60.8
%
6.1
 %
 
$
102.19

$
102.04

0.1
 %
 
23.43
 %
24.08
%
-65 bps
Boston Westin
 
$
235.69

$
226.21

4.2
 %
 
64.4
%
63.1
%
1.3
 %
 
$
151.71

$
142.83

6.2
 %
 
26.14
 %
25.28
%
86 bps
Hilton Boston Downtown
 
$
246.06

$
228.79

7.5
 %
 
71.7
%
63.2
%
8.5
 %
 
$
176.35

$
144.58

22.0
 %
 
28.36
 %
26.56
%
180 bps
Hilton Burlington
 
$
153.42

$
146.53

4.7
 %
 
70.5
%
71.1
%
(0.6
)%
 
$
108.16

$
104.24

3.8
 %
 
35.57
 %
33.10
%
247 bps
Renaissance Charleston
 
$
194.86

$
171.36

13.7
 %
 
86.7
%
83.7
%
3.0
 %
 
$
168.96

$
143.36

17.9
 %
 
37.01
 %
31.34
%
567 bps
Hilton Garden Inn Chelsea
 
$
258.71

$
262.00

(1.3
)%
 
93.9
%
98.5
%
(4.6
)%
 
$
242.95

$
258.15

(5.9
)%
 
48.34
 %
50.80
%
-246 bps
Chicago Marriott
 
$
207.30

$
205.61

0.8
 %
 
75.0
%
74.9
%
0.1
 %
 
$
155.51

$
153.95

1.0
 %
 
23.48
 %
26.61
%
-313 bps
Chicago Conrad
 
$
223.92

$
228.29

(1.9
)%
 
77.8
%
79.9
%
(2.1
)%
 
$
174.24

$
182.38

(4.5
)%
 
34.46
 %
30.07
%
439 bps
Courtyard Denver Downtown
 
$
167.12

$
160.72

4.0
 %
 
78.8
%
81.8
%
(3.0
)%
 
$
131.75

$
131.41

0.3
 %
 
43.53
 %
44.75
%
-122 bps
Courtyard Fifth Avenue
 
$
304.14

$
315.61

(3.6
)%
 
88.4
%
96.5
%
(8.1
)%
 
$
268.83

$
304.67

(11.8
)%
 
30.00
 %
39.29
%
-929 bps
Courtyard Midtown East
 
$
307.83

$
308.72

(0.3
)%
 
88.3
%
89.5
%
(1.2
)%
 
$
271.68

$
276.28

(1.7
)%
 
41.16
 %
40.48
%
68 bps
Frenchman's Reef
 
$
227.75

$
211.33

7.8
 %
 
76.3
%
72.9
%
3.4
 %
 
$
173.68

$
154.00

12.8
 %
 
16.11
 %
13.25
%
286 bps
JW Marriott Denver Cherry Creek
 
$
234.65

$
229.00

2.5
 %
 
78.6
%
77.8
%
0.8
 %
 
$
184.49

$
178.06

3.6
 %
 
30.13
 %
28.99
%
114 bps
Los Angeles Airport Marriott
 
$
112.63

$
107.68

4.6
 %
 
82.8
%
83.0
%
(0.2
)%
 
$
93.22

$
89.40

4.3
 %
 
13.32
 %
15.57
%
-225 bps
Hilton Minneapolis
 
$
147.35

$
150.08

(1.8
)%
 
64.2
%
67.9
%
(3.7
)%
 
$
94.60

$
101.93

(7.2
)%
 
22.63
 %
27.18
%
-455 bps
Oak Brook Hills Resort
 
$
120.94

$
119.53

1.2
 %
 
42.1
%
45.7
%
(3.6
)%
 
$
50.94

$
54.60

(6.7
)%
 
(10.10
)%
2.41
%
-1251 bps
Orlando Airport Marriott
 
$
96.68

$
98.78

(2.1
)%
 
76.6
%
70.3
%
6.3
 %
 
$
74.07

$
69.45

6.7
 %
 
24.80
 %
23.06
%
174 bps
Hotel Rex
 
$
181.95

$
182.92

(0.5
)%
 
83.2
%
79.4
%
3.8
 %
 
$
151.38

$
145.20

4.3
 %
 
27.24
 %
35.85
%
-861 bps
Salt Lake City Marriott
 
$
138.71

$
123.70

12.1
 %
 
58.8
%
60.6
%
(1.8
)%
 
$
81.59

$
75.01

8.8
 %
 
23.79
 %
24.63
%
-84 bps
The Lodge at Sonoma
 
$
250.39

$
229.58

9.1
 %
 
69.4
%
69.9
%
(0.5
)%
 
$
173.77

$
160.44

8.3
 %
 
25.71
 %
22.63
%
308 bps
Torrance Marriott South Bay
 
$
115.36

$
110.81

4.1
 %
 
85.8
%
77.5
%
8.3
 %
 
$
99.00

$
85.92

15.2
 %
 
22.98
 %
25.76
%
-278 bps
Vail Marriott
 
$
296.20

$
250.41

18.3
 %
 
55.6
%
50.6
%
5.0
 %
 
$
164.69

$
126.76

29.9
 %
 
30.01
 %
19.83
%
1018 bps
Lexington Hotel New York
 
$
268.22

$
232.56

15.3
 %
 
87.7
%
95.5
%
(7.8
)%
 
$
235.30

$
222.18

5.9
 %
 
28.59
 %
44.90
%
-1631 bps
Westin San Diego
 
$
150.16

$
144.22

4.1
 %
 
69.5
%
74.7
%
(5.2
)%
 
$
104.29

$
107.66

(3.1
)%
 
19.62
 %
26.00
%
-638 bps
Westin Washington D.C. City Center
 
$
203.40

$
194.98

4.3
 %
 
60.0
%
68.0
%
(8.0
)%
 
$
121.98

$
132.67

(8.1
)%
 
28.26
 %
30.63
%
-237 bps
Renaissance Worthington
 
$
169.94

$
172.43

(1.4
)%
 
66.4
%
61.4
%
5.0
 %
 
$
112.77

$
105.88

6.5
 %
 
30.19
 %
28.83
%
136 bps
Total
 
$
191.90

$
185.22

3.6
 %
 
72.4
%
72.6
%
(0.2
)%
 
$
139.01

$
134.39

3.4
 %
 
25.77
 %
27.67
%
-190 bps
Total Excluding Torrance (2)
 
$
194.12

$
187.04

3.8
 %

72.1
%
72.4
%
(0.3
)%

$
139.98

$
135.50

3.3
 %

25.81
 %
27.69
%
-188 bps

(1)
The pro forma operating data includes the operating results for each of the Company’s hotels assuming they were owned since January 1, 2012. 4Q 2012 includes the operating results of the Company’s Marriott-managed hotels from October 6, 2012 to December 31, 2012 (87 days) and all other hotels from October 1, 2012 to December 31, 2012.
(2)
Excludes the Torrance Marriott South Bay that was sold during 2013.

14



Pro Forma Operating Statistics – Full Year (1)
 
 
ADR
 
Occupancy
 
RevPAR
 
Hotel Adjusted EBITDA Margin
 
 
YTD 2013
YTD 2012
B/(W)
 
YTD 2013
YTD 2012
B/(W)
 
YTD 2013
YTD 2012
B/(W)
 
YTD 2013
YTD 2012
B/(W)
Atlanta Alpharetta Marriott
 
$
148.12

$
139.59

6.1
 %
 
73.8
%
66.0
%
7.8
 %
 
$
109.37

$
92.11

18.7
 %
 
34.72
%
29.90
%
482 bps
Bethesda Marriott Suites
 
$
161.18

$
166.08

(3.0
)%
 
61.9
%
64.8
%
(2.9
)%
 
$
99.71

$
107.69

(7.4
)%
 
23.00
%
26.08
%
-308 bps
Boston Westin
 
$
207.60

$
203.85

1.8
 %
 
74.5
%
73.3
%
1.2
 %
 
$
154.60

$
149.46

3.4
 %
 
24.59
%
23.39
%
120 bps
Hilton Boston Downtown
 
$
226.68

$
220.59

2.8
 %
 
80.4
%
76.0
%
4.4
 %
 
$
182.26

$
167.68

8.7
 %
 
31.89
%
35.92
%
-403 bps
Hilton Burlington
 
$
159.43

$
156.57

1.8
 %
 
74.1
%
73.8
%
0.3
 %
 
$
118.16

$
115.55

2.3
 %
 
39.87
%
37.13
%
274 bps
Renaissance Charleston
 
$
191.27

$
180.50

6.0
 %
 
87.5
%
85.1
%
2.4
 %
 
$
167.31

$
153.58

8.9
 %
 
35.05
%
34.36
%
69 bps
Hilton Garden Inn Chelsea
 
$
231.99

$
217.77

6.5
 %
 
95.9
%
96.1
%
(0.2
)%
 
$
222.51

$
209.30

6.3
 %
 
45.34
%
44.02
%
132 bps
Chicago Marriott
 
$
205.83

$
200.80

2.5
 %
 
76.2
%
74.1
%
2.1
 %
 
$
156.86

$
148.78

5.4
 %
 
23.40
%
23.50
%
-10 bps
Chicago Conrad
 
$
217.76

$
212.28

2.6
 %
 
81.6
%
80.6
%
1.0
 %
 
$
177.61

$
171.18

3.8
 %
 
32.14
%
29.52
%
262 bps
Courtyard Denver Downtown
 
$
168.42

$
159.29

5.7
 %
 
83.4
%
84.6
%
(1.2
)%
 
$
140.47

$
134.83

4.2
 %
 
44.89
%
45.46
%
-57 bps
Courtyard Fifth Avenue
 
$
277.14

$
274.04

1.1
 %
 
80.1
%
91.7
%
(11.6
)%
 
$
221.92

$
251.29

(11.7
)%
 
21.68
%
30.96
%
-928 bps
Courtyard Midtown East
 
$
275.73

$
269.79

2.2
 %
 
82.3
%
86.7
%
(4.4
)%
 
$
226.81

$
233.91

(3.0
)%
 
31.66
%
34.59
%
-293 bps
Frenchman's Reef
 
$
239.69

$
228.17

5.0
 %
 
82.1
%
78.7
%
3.4
 %
 
$
196.78

$
179.48

9.6
 %
 
20.09
%
19.51
%
58 bps
JW Marriott Denver Cherry Creek
 
$
239.27

$
227.24

5.3
 %
 
80.4
%
76.4
%
4.0
 %
 
$
192.39

$
173.69

10.8
 %
 
30.38
%
29.72
%
66 bps
Los Angeles Airport Marriott
 
$
113.33

$
109.11

3.9
 %
 
86.5
%
86.7
%
(0.2
)%
 
$
98.09

$
94.64

3.6
 %
 
19.33
%
18.49
%
84 bps
Hilton Minneapolis
 
$
145.56

$
143.19

1.7
 %
 
72.3
%
72.6
%
(0.3
)%
 
$
105.21

$
103.99

1.2
 %
 
26.86
%
27.12
%
-26 bps
Oak Brook Hills Resort
 
$
122.44

$
120.39

1.7
 %
 
56.8
%
56.6
%
0.2
 %
 
$
69.55

$
68.12

2.1
 %
 
8.78
%
9.69
%
-91 bps
Orlando Airport Marriott
 
$
99.85

$
103.82

(3.8
)%
 
75.5
%
72.2
%
3.3
 %
 
$
75.38

$
74.97

0.5
 %
 
23.29
%
23.53
%
-24 bps
Hotel Rex
 
$
187.88

$
178.93

5.0
 %
 
84.4
%
84.8
%
(0.4
)%
 
$
158.66

$
151.72

4.6
 %
 
30.99
%
36.58
%
-559 bps
Salt Lake City Marriott
 
$
142.26

$
134.07

6.1
 %
 
67.1
%
66.4
%
0.7
 %
 
$
95.51

$
89.07

7.2
 %
 
31.54
%
29.64
%
190 bps
The Lodge at Sonoma
 
$
254.13

$
235.86

7.7
 %
 
74.2
%
72.1
%
2.1
 %
 
$
188.52

$
170.05

10.9
 %
 
25.71
%
21.81
%
390 bps
Torrance Marriott South Bay
 
$
116.79

$
110.53

5.7
 %
 
84.4
%
83.5
%
0.9
 %
 
$
98.57

$
92.25

6.9
 %
 
25.13
%
26.07
%
-94 bps
Vail Marriott
 
$
243.94

$
225.47

8.2
 %
 
67.7
%
63.7
%
4.0
 %
 
$
165.25

$
143.72

15.0
 %
 
30.21
%
27.82
%
239 bps
Lexington Hotel New York
 
$
224.92

$
205.70

9.3
 %
 
62.4
%
94.8
%
(32.4
)%
 
$
140.26

$
195.01

(28.1
)%
 
9.03
%
35.99
%
-2696 bps
Westin San Diego
 
$
153.50

$
149.32

2.8
 %
 
82.7
%
79.3
%
3.4
 %
 
$
126.98

$
118.40

7.2
 %
 
29.72
%
30.03
%
-31 bps
Westin Washington D.C. City Center
 
$
192.13

$
193.77

(0.8
)%
 
73.5
%
73.2
%
0.3
 %
 
$
141.19

$
141.93

(0.5
)%
 
31.35
%
34.44
%
-309 bps
Renaissance Worthington
 
$
170.73

$
161.04

6.0
 %
 
65.4
%
68.3
%
(2.9
)%
 
$
111.70

$
109.93

1.6
 %
 
30.68
%
29.26
%
142 bps
Total
 
$
181.03

$
175.71

3.0
 %
 
75.5
%
76.6
%
(1.1
)%
 
$
136.62

$
134.62

1.5
 %
 
25.79
%
27.20
%
-141 bps
Total Excluding Torrance (2)
 
$
183.85

$
178.50

3.0
 %
 
75.1
%
76.3
%
(1.2
)%
 
$
138.11

$
136.27

1.4
 %
 
25.80
%
27.23
%
-143 bps
Total Excluding NY Renovations and Torrance (3)
 
$
176.37

$
170.43

3.5
 %

75.7
%
74.4
%
1.3
 %

$
133.56

$
126.79

5.3
 %

26.60
%
26.15
%
45 bps

(1)
The pro forma operating data includes the operating results for each of the Company’s hotels assuming they were owned since January 1, 2012.
(2)
Excludes the Torrance Marriott South Bay that was sold during 2013.
(3)
Excludes three hotels in New York City under renovation during the year ended December 31, 2013; the Lexington Hotel New York, Courtyard Manhattan Midtown East and Courtyard Fifth Avenue as well as the Torrance Marriott South Bay that was sold during 2013.

15



Hotel Adjusted EBITDA Reconciliation
 
 
Fourth Quarter 2013
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
4,306

 
$
1,207

$
404

$

$

$
1,611

Bethesda Marriott Suites
 
$
3,743

 
$
(1,028
)
$
371

$

$
1,534

$
877

Boston Westin
 
$
18,768

 
$
2,743

$
2,160

$

$
3

$
4,906

Hilton Boston Downtown
 
$
6,371

 
$
255

$
1,510

$

$
42

$
1,807

Hilton Burlington
 
$
3,365

 
$
325

$
849

$

$
23

$
1,197

Renaissance Charleston
 
$
3,207

 
$
814

$
405

$

$
(32
)
$
1,187

Hilton Garden Inn Chelsea
 
$
3,879

 
$
1,373

$
502

$

$

$
1,875

Chicago Marriott
 
$
24,959

 
$
395

$
2,627

$
3,233

$
(395
)
$
5,860

Chicago Conrad
 
$
6,655

 
$
1,335

$
958

$

$

$
2,293

Courtyard Denver Downtown
 
$
2,325

 
$
743

$
269

$

$

$
1,012

Courtyard Fifth Avenue
 
$
4,597

 
$
45

$
430

$
852

$
52

$
1,379

Courtyard Midtown East
 
$
8,198

 
$
1,719

$
679

$
976

$

$
3,374

Frenchman's Reef
 
$
13,868

 
$
(193
)
$
1,601

$
826

$

$
2,234

JW Marriott Denver Cherry Creek
 
$
5,595

 
$
591

$
515

$
580

$

$
1,686

Los Angeles Airport Marriott
 
$
13,950

 
$
(404
)
$
1,127

$
1,135

$

$
1,858

Minneapolis Hilton
 
$
11,462

 
$
(587
)
$
1,963

$
1,351

$
(133
)
$
2,594

Oak Brook Hills Resort
 
$
4,376

 
$
(1,059
)
$
510

$

$
107

$
(442
)
Orlando Airport Marriott
 
$
5,251

 
$
(321
)
$
794

$
829

$

$
1,302

Hotel Rex
 
$
1,520

 
$
181

$
233

$

$

$
414

Salt Lake City Marriott
 
$
5,869

 
$
17

$
755

$
624

$

$
1,396

The Lodge at Sonoma
 
$
5,375

 
$
694

$
372

$
316

$

$
1,382

Vail Marriott
 
$
7,104

 
$
1,524

$
608

$

$

$
2,132

Lexington Hotel New York
 
$
16,444

 
$
(172
)
$
3,132

$
1,781

$
(40
)
$
4,701

Westin San Diego
 
$
5,908

 
$
(726
)
$
1,124

$
715

$
46

$
1,159

Westin Washington D.C. City Center
 
$
5,754

 
$
1

$
802

$
778

$
45

$
1,626

Renaissance Worthington
 
$
8,618

 
$
1,172

$
675

$
753

$
2

$
2,602

Total (2)
 
$
201,467


$
10,644

$
25,375

$
14,749

$
1,254

$
52,007

(1)
The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of favorable lease assets, and the non-cash amortization of unfavorable contract liabilities.
(2)
Excludes the Torrance Marriott South Bay that was sold during 2013.


16



Pro Forma Hotel Adjusted EBITDA Reconciliation
 
 
Fourth Quarter 2012 (1)
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (2)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
3,664

 
$
652

$
372

$

$

$
1,024

Bethesda Marriott Suites
 
$
3,443

 
$
(1,115
)
$
479

$

$
1,465

$
829

Boston Westin
 
$
18,369

 
$
2,704

$
1,938

$

$
2

$
4,644

Hilton Boston Downtown
 
$
5,256

 
$
(391
)
$
1,745

$

$
42

$
1,396

Hilton Burlington
 
$
3,281

 
$
32

$
1,031

$

$
23

$
1,086

Renaissance Charleston
 
$
2,572

 
$
479

$
356

$

$
(29
)
$
806

Hilton Garden Inn Chelsea
 
$
4,142

 
$
1,667

$
437

$

$

$
2,104

Chicago Marriott
 
$
24,452

 
$
702

$
3,128

$
3,041

$
(365
)
$
6,506

Chicago Conrad
 
$
6,758

 
$
1,184

$
848

$

$

$
2,032

Courtyard Denver Downtown
 
$
2,297

 
$
789

$
239

$

$

$
1,028

Courtyard Fifth Avenue
 
$
4,953

 
$
810

$
283

$
805

$
48

$
1,946

Courtyard Midtown East
 
$
7,754

 
$
1,665

$
535

$
939

$

$
3,139

Frenchman's Reef
 
$
12,977

 
$
(598
)
$
1,535

$
783

$

$
1,720

JW Marriott Denver Cherry Creek
 
$
5,160

 
$
494

$
435

$
567

$

$
1,496

Los Angeles Airport Marriott
 
$
12,681

 
$
(403
)
$
1,316

$
1,061

$

$
1,974

Minneapolis Hilton
 
$
12,169

 
$
402

$
1,771

$
1,303

$
(169
)
$
3,307

Oak Brook Hills Resort
 
$
4,270

 
$
(76
)
$
68

$

$
111

$
103

Orlando Airport Marriott
 
$
4,640

 
$
(431
)
$
716

$
785

$

$
1,070

Hotel Rex
 
$
1,470

 
$
253

$
274

$

$

$
527

Salt Lake City Marriott
 
$
5,229

 
$
215

$
690

$
383

$

$
1,288

The Lodge at Sonoma
 
$
4,433

 
$
660

$
343

$

$

$
1,003

Vail Marriott
 
$
5,382

 
$
513

$
554

$

$

$
1,067

Lexington Hotel New York
 
$
15,336

 
$
(850
)
$
5,884

$
1,808

$
44

$
6,886

Westin San Diego
 
$
6,192

 
$
265

$
1,298

$

$
47

$
1,610

Westin Washington D.C. City Center
 
$
6,235

 
$
341

$
1,523

$

$
46

$
1,910

Renaissance Worthington
 
$
7,656

 
$
826

$
664

$
715

$
2

$
2,207

Total (3)
 
$
190,771


$
10,789

$
28,462

$
12,190

$
1,267

$
52,833

(1)
The pro forma operating data includes the operating results for each the Company’s hotels assuming they were owned as of January 1, 2012 and includes the operating results of the Company’s Marriott-managed hotels from October 6, 2012 to December 31, 2012 and all other hotels from October 1, 2012 to December 31, 2012.
(2)
The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets and the non-cash amortization of our unfavorable contract liabilities.
(3)
Excludes the Torrance Marriott South Bay that was sold during 2013.

17



Hotel Adjusted EBITDA Reconciliation
 
 
Full Year 2013
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
17,976

 
$
4,620

$
1,622

$

$

$
6,242

Bethesda Marriott Suites
 
$
13,992

 
$
(4,616
)
$
1,628

$

$
6,206

$
3,218

Boston Westin
 
$
76,126

 
$
10,175

$
8,532

$

$
9

$
18,716

Hilton Boston Downtown
 
$
26,356

 
$
2,418

$
5,819

$

$
167

$
8,404

Hilton Burlington
 
$
14,252

 
$
2,215

$
3,376

$

$
91

$
5,682

Renaissance Charleston
 
$
12,410

 
$
2,880

$
1,596

$

$
(126
)
$
4,350

Hilton Garden Inn Chelsea
 
$
14,081

 
$
4,328

$
2,056

$

$

$
6,384

Chicago Marriott
 
$
100,380

 
$
(269
)
$
12,490

$
12,851

$
(1,587
)
$
23,485

Chicago Conrad
 
$
26,706

 
$
4,825

$
3,759

$

$

$
8,584

Courtyard Denver Downtown
 
$
9,770

 
$
3,329

$
1,057

$

$

$
4,386

Courtyard Fifth Avenue
 
$
15,085

 
$
(1,953
)
$
1,614

$
3,396

$
213

$
3,270

Courtyard Midtown East
 
$
26,875

 
$
2,048

$
2,553

$
3,908

$

$
8,509

Frenchman's Reef
 
$
62,439

 
$
2,777

$
6,465

$
3,299

$

$
12,541

JW Marriott Denver Cherry Creek
 
$
22,139

 
$
2,376

$
2,001

$
2,349

$

$
6,726

Los Angeles Airport Marriott
 
$
58,608

 
$
1,729

$
5,099

$
4,503

$

$
11,331

Minneapolis Hilton
 
$
50,097

 
$
809

$
7,779

$
5,401

$
(532
)
$
13,457

Oak Brook Hills Resort
 
$
22,412

 
$
271

$
1,265

$

$
431

$
1,967

Orlando Airport Marriott
 
$
20,365

 
$
(1,689
)
$
3,126

$
3,305

$

$
4,742

Hotel Rex
 
$
6,274

 
$
1,017

$
927

$

$

$
1,944

Salt Lake City Marriott
 
$
26,117

 
$
3,450

$
2,982

$
1,806

$

$
8,238

The Lodge at Sonoma
 
$
21,355

 
$
3,030

$
1,475

$
986

$

$
5,491

Vail Marriott
 
$
29,432

 
$
6,471

$
2,421

$

$

$
8,892

Lexington Hotel New York
 
$
39,757

 
$
(15,427
)
$
12,142

$
6,824

$
52

$
3,591

Westin San Diego
 
$
28,095

 
$
1,682

$
4,309

$
2,171

$
187

$
8,349

Westin Washington D.C. City Center
 
$
25,981

 
$
(188
)
$
5,034

$
3,116

$
182

$
8,144

Renaissance Worthington
 
$
32,608

 
$
4,223

$
2,768

$
3,006

$
8

$
10,005

Total (2)
 
$
799,688

 
$
40,531

$
103,895

$
56,921

$
5,301

$
206,342

Total Excluding NY Renovations (3)
 
$
717,971


$
55,863

$
87,586

$
42,793

$
5,036

$
190,972

(1)
The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of favorable lease assets, and the non-cash amortization of unfavorable contract liabilities.
(2)
Excludes the Torrance Marriott South Bay that was sold during 2013.
(3)
Excludes three hotels in New York City under renovation during the year ended December 31, 2013; the Lexington Hotel New York, Courtyard Manhattan Midtown East and Courtyard Fifth Avenue.

18



Pro Forma Hotel Adjusted EBITDA Reconciliation
 
 
Full Year 2012 (1)
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (2)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
15,340

 
$
3,237

$
1,350

$

$

$
4,587

Bethesda Marriott Suites
 
$
14,928

 
$
(4,447
)
$
2,073

$

$
6,267

$
3,893

Boston Westin
 
$
72,755

 
$
8,312

$
8,700

$

$
7

$
17,019

Hilton Boston Downtown
 
$
24,225

 
$
2,864

$
5,671

$

$
167

$
8,702

Hilton Burlington
 
$
14,000

 
$
1,758

$
3,349

$

$
91

$
5,198

Renaissance Charleston
 
$
11,379

 
$
2,512

$
1,524

$

$
(126
)
$
3,910

Hilton Garden Inn Chelsea
 
$
13,387

 
$
3,999

$
1,894

$

$

$
5,893

Chicago Marriott
 
$
96,735

 
$
(1,663
)
$
12,978

$
13,003

$
(1,581
)
$
22,737

Chicago Conrad
 
$
25,580

 
$
4,083

$
3,469

$

$

$
7,552

Courtyard Denver Downtown
 
$
9,393

 
$
3,067

$
1,028

$
175

$

$
4,270

Courtyard Fifth Avenue
 
$
17,202

 
$
(17
)
$
1,693

$
3,443

$
207

$
5,326

Courtyard Midtown East
 
$
27,787

 
$
3,291

$
2,372

$
3,949

$

$
9,612

Frenchman's Reef
 
$
55,752

 
$
1,086

$
6,421

$
3,372

$

$
10,879

JW Marriott Denver Cherry Creek
 
$
20,076

 
$
1,686

$
1,867

$
2,414

$

$
5,967

Los Angeles Airport Marriott
 
$
56,728

 
$
173

$
5,800

$
4,514

$

$
10,487

Minneapolis Hilton
 
$
49,075

 
$
835

$
7,622

$
5,524

$
(671
)
$
13,310

Oak Brook Hills Resort
 
$
21,946

 
$
(863
)
$
2,504

$

$
486

$
2,127

Orlando Airport Marriott
 
$
20,047

 
$
(1,665
)
$
3,024

$
3,359

$

$
4,718

Hotel Rex
 
$
5,960

 
$
1,288

$
892

$

$

$
2,180

Salt Lake City Marriott
 
$
24,136

 
$
2,613

$
2,876

$
1,664

$

$
7,153

The Lodge at Sonoma
 
$
18,994

 
$
2,637

$
1,506

$

$

$
4,143

Vail Marriott
 
$
25,503

 
$
4,731

$
2,363

$

$

$
7,094

Lexington Hotel New York
 
$
53,905

 
$
(1,238
)
$
13,798

$
6,695

$
145

$
19,400

Westin San Diego
 
$
26,288

 
$
3,489

$
4,217

$

$
189

$
7,895

Westin Washington D.C. City Center
 
$
26,196

 
$
3,889

$
4,950

$

$
182

$
9,021

Renaissance Worthington
 
$
32,140

 
$
3,460

$
2,871

$
3,061

$
11

$
9,403

Total (3)
 
$
779,457

 
$
49,117

$
106,812

$
51,173

$
5,374

$
212,274

Total Excluding NY Renovations (4)
 
$
680,563


$
47,081

$
88,949

$
37,086

$
5,022

$
177,936

(1)
The pro forma operating data includes the operating results for each of the Company’s hotels assuming they were owned since January 1, 2012.
(2)
The non-cash adjustments include expenses incurred by the hotels due to the straight lining of the rent from ground lease obligations, the non-cash amortization of our favorable lease assets and the non-cash amortization of our unfavorable contract liabilities.
(3)
Excludes the Torrance Marriott South Bay that was sold during 2013.
(4)
Excludes three hotels in New York City under renovation during the year ended December 31, 2013; the Lexington Hotel New York, Courtyard Manhattan Midtown East and Courtyard Fifth Avenue.

19