DRH_8K_6.30.2014


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):
August 8, 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 August 8, 2014, DiamondRock Hospitality Company (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2014 (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 August 8, 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: August 8, 2014
 
 
 
By:
 
/s/ William J. Tennis
 
 
 
 
 
 
William J. Tennis
 
 
 
 
 
 
Executive Vice President, General Counsel and Corporate Secretary







Exhibit 99.1 2Q 2014



COMPANY CONTACT    

Sean Mahoney
(240) 744-1150

FOR IMMEDIATE RELEASE

Friday, August 8, 2014

DIAMONDROCK HOSPITALITY COMPANY REPORTS SECOND QUARTER 2014 RESULTS AND RAISES FULL YEAR GUIDANCE
Pro Forma RevPAR Increased 11.9% and Hotel Adjusted EBITDA Increased 17.3%
BETHESDA, Maryland, Friday, August 8, 2014 – DiamondRock Hospitality Company (the “Company”) (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 25 premium hotels in the United States, today announced results of operations for the quarter ended June 30, 2014.

Highlights
Pro Forma RevPAR: Pro Forma RevPAR was $169.21, an increase of 11.9% from 2013.
Pro Forma Hotel Adjusted EBITDA Margin: Pro Forma Hotel Adjusted EBITDA margin was 32.53%, an increase of 243 basis points from 2013.
Pro Forma Hotel Adjusted EBITDA: Pro Forma Hotel Adjusted EBITDA was $74.7 million, an increase of 17.3% from 2013.
Adjusted EBITDA: Adjusted EBITDA was $70.9 million, an increase of 13.6% from 2013.
Adjusted FFO: Adjusted FFO was $51.9 million and Adjusted FFO per diluted share was $0.26.
Dividends: The Company declared a quarterly dividend of $0.1025 per share during the second quarter.

Recent Developments
Allerton Prepayment: The $58.5 million senior mortgage loan secured by the Allerton Hotel Chicago was prepaid at par during the second quarter.
Litigation Settlement: The Company settled a litigation claim against certain contractors involved with the original construction of the Westin Boston Waterfront Hotel, which resulted in a net gain of $11.0 million during the second quarter.
Hotel Refinancing: The Company refinanced the Courtyard Manhattan/Midtown East in July 2014 with a new $86.0 million mortgage bearing interest at 4.4%.

Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, “Our strong second quarter results reflect the initial impact of our significant investments to reposition DiamondRock's portfolio of the past year. Additionally, the combination of our successful internal initiatives to drive performance and an extended lodging recovery enable us to raise our full year guidance. The Company will benefit from the




forthcoming acquisition of the Hilton Garden Inn Times Square Central and recent actions taken to lower our cost of capital. As we continue to execute on our strategy, strengthen our portfolio, and reap the benefits of completed renovations, we remain confident in our ability to deliver growth and strong shareholder returns across the full lodging cycle.”
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.” Discussions of “Pro Forma” exclude the Oak Brook Hills Resort, which was sold in April 2014.

For the quarter ended June 30, 2014, the Company reported the following:
 
 Second Quarter
 
 
2014
 
2013
Change

Pro Forma ADR

$202.15

 

$190.20

6.3
%
Pro Forma Occupancy
83.7
%
 
79.5
%
4.2 percentage points

Pro Forma RevPAR

$169.21

 

$151.27

11.9
%
Pro Forma Hotel Adjusted EBITDA Margin
32.53
%
 
30.10
%
243 basis points

Adjusted EBITDA
$70.9 million

 
$62.4 million

$8.5 million

Adjusted FFO
$51.9 million

 
$43.2 million

$8.7 million

Adjusted FFO per diluted share

$0.26

 

$0.22


$0.04


For the six months ended June 30, 2014, the Company reported the following:
 
Year To Date
 
 
2014
 
2013
Change

Pro Forma ADR

$192.20

 

$182.10

5.5
%
Pro Forma Occupancy
78.8
%
 
75.4
%
3.4 percentage points

Pro Forma RevPAR

$151.53

 

$137.37

10.3
%
Pro Forma Hotel Adjusted EBITDA Margin
28.04
%
 
26.29
%
175 basis points

Adjusted EBITDA
$108.2 million

 
$96.7 million

$11.5 million

Adjusted FFO
$81.4 million

 
$70.0 million

$11.4 million

Adjusted FFO per diluted share

$0.41

 

$0.36


$0.05


Hilton Garden Inn Times Square Update

The Company is under contract to purchase the 282-room hotel being constructed in Times Square for a fixed price of approximately $127 million, or $450,000 per key. The hotel will be branded a Hilton Garden Inn and be operated by Highgate Hotels, the largest operator of hotels in New York City. The balance of the acquisition price, which is approximately $100 million, is expected to be with corporate cash on hand. The Company currently expects the hotel to open during September and continues to expect the hotel to generate approximately $5.0 million of Hotel Adjusted EBITDA during 2014.
Courtyard Manhattan/Midtown East Refinancing

In July 2014, the Company entered into a new $86 million mortgage loan secured by the Courtyard Manhattan/Midtown East. The new loan has a term of 10 years and bears interest at a fixed rate of 4.4%. The new loan is interest-only for the first two years after which principal will amortize over 30 years. The hotel was previously encumbered by a $41.3 million mortgage loan bearing interest at 8.81%.


2



Sale of Oak Brook Hills Resort    

As disclosed in its previous earnings announcement, the Company sold the 386-room Oak Brook Hills Resort to an unaffiliated third party for $30.1 million on April 14, 2014. In connection with the sale, the Company provided $4 million of seller financing. The Company recognized a net gain on the sale of the hotel of approximately $1.3 million, which is excluded from Adjusted EBITDA and Adjusted FFO.
Allerton Loan Prepayment

The $58.5 million senior mortgage loan secured by the Allerton Hotel Chicago was prepaid at par on May 21, 2014. In connection with the prepayment, the Company recognized a gain of $13.6 million, which is excluded from Adjusted EBITDA and Adjusted FFO.

Westin Boston Waterfront Hotel Litigation Settlement

In May 2014, the Company settled a legal action alleging certain issues related to the original construction of the Westin Boston Waterfront Hotel with the contractors and their insurers for $14.0 million in full and complete satisfaction of its claims against the contractors. The settlement resulted in a net gain of $11.0 million, which is excluded from Adjusted EBITDA and Adjusted FFO. The Company recorded the settlement net of a $1.2 million contingency fee paid to legal counsel and $1.8 million of legal fees and other costs incurred over the course of the legal proceedings. The $1.8 million of legal fees and other costs were previously recorded as corporate expenses and the repayment of those costs through the settlement proceeds is recorded as a reduction of corporate expenses during the three months ended June 30, 2014.

Capital Expenditures

The Company has spent approximately $40.4 million on capital improvements during the six months ended June 30, 2014. The majority of the capital improvements related to the substantial completion of the Company's $140 million capital improvement program, which included the comprehensive renovations of the Westin Washington D.C. City Center, Westin San Diego, Hilton Boston and Hilton Burlington, as well as the guest room renovation at the Hilton Minneapolis.

The Company continues to expect to spend approximately $95 million on capital improvements at its hotels in 2014, of which approximately $45 million relates to the completion of the $140 million capital improvement program and approximately $50 million relates to new 2014 capital projects. The Company does not expect any material disruption from capital projects in 2014.
Balance Sheet
As of June 30, 2014, the Company had $253.9 million of unrestricted cash on hand and approximately $1.1 billion of total debt, which consists primarily of property-specific mortgage debt as well as $41.3 million outstanding borrowings under the Company's $200 million senior unsecured credit facility. As of today, the Company has over $240 million of unrestricted cash on hand and no outstanding borrowings under its senior unsecured credit facility.

Dividends

The Company’s Board of Directors declared a quarterly dividend of $0.1025 per share to stockholders of record as of June 30, 2014. The dividend was paid on July 10, 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

3



Central opens in September 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.

The Company is increasing its full year 2014 guidance to incorporate its second quarter outperformance. The Company now expects the full year 2014 results to be as follows:
Metric
Previous Guidance
Revised Guidance
Low End
High End
Low End
High End
Pro Forma RevPAR Growth

9 percent
11 percent
9.5 percent
11.5 percent
Adjusted EBITDA

$223 million
$233 million
$225.5 million
$235.5 million
Adjusted FFO

$163 million
$170 million
$165 million
$172 million
Adjusted FFO per share
(based on 196.5 million shares)

$0.83 per share
$0.87 per share
$0.84 per share
$0.88 per share

The Company expects approximately 26% of full year 2014 Adjusted EBITDA and Adjusted FFO to be earned during the third quarter 2014.

The midpoint of the guidance range above implies Hotel Adjusted EBITDA margin growth of over 265 basis points. The Company also increased its Pro Forma RevPAR growth outlook excluding the New York City hotels under renovation during 2013 to 6 percent to 8 percent.

Earnings Call
The Company will host a conference call to discuss its second quarter results on Friday, August 8, 2014, at 10:00 a.m. Eastern Time (ET). To participate in the live call, investors are invited to dial 866-318-8613 (for domestic callers) or 617-399-5132 (for international callers). The participant passcode is 15358818. 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 25 premium quality hotels with over 10,700 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

4



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
(in thousands, except share and per share amounts)

 
June 30, 2014
 
December 31, 2013
 
(unaudited)
 
 
ASSETS
 
 
 
Property and equipment, at cost
$
3,159,166

 
$
3,168,088

Less: accumulated depreciation
(623,339
)
 
(600,555
)
 
2,535,827

 
2,567,533

Deferred financing costs, net
6,310

 
7,702

Restricted cash
95,672

 
89,106

Due from hotel managers
81,819

 
69,353

Note receivable

 
50,084

Favorable lease assets, net
34,576

 
39,936

Prepaid and other assets (1)
83,618

 
79,474

Cash and cash equivalents
253,900

 
144,584

Total assets
$
3,091,722

 
$
3,047,772

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities:
 
 
 
Mortgage debt
$
1,084,412

 
$
1,091,861

Senior unsecured credit facility
41,320

 

Total debt
1,125,732

 
1,091,861

 
 
 
 
Deferred income related to key money, net
23,162

 
23,707

Unfavorable contract liabilities, net
77,157

 
78,093

Due to hotel managers
51,531

 
54,225

Dividends declared and unpaid
20,395

 
16,981

Accounts payable and accrued expenses (2)
96,626

 
102,214

Total other liabilities
268,871

 
275,220

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; 195,698,858 and 195,470,791 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively
1,957

 
1,955

Additional paid-in capital
1,980,498

 
1,979,613

Accumulated deficit
(285,336
)
 
(300,877
)
Total stockholders’ equity
1,697,119

 
1,680,691

Total liabilities and stockholders’ equity
$
3,091,722

 
$
3,047,772




(1) 
Includes $39.4 million of deferred tax assets, $26.9 million of purchase deposits on the Hilton Garden Inn Times Square, $9.8 million of prepaid expenses and $7.5 million of other assets as of June 30, 2014.
(2) 
Includes $61.9 million of deferred ground rent, $8.3 million of deferred tax liabilities, $9.7 million of accrued property taxes, $5.2 million of accrued capital expenditures and $11.5 million of other accrued liabilities as of June 30, 2014.

6



 
DIAMONDROCK HOSPITALITY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Rooms
$
165,088

 
$
150,059

 
$
294,824

 
$
270,439

Food and beverage
52,182

 
55,573

 
100,793

 
99,590

Other
12,664

 
12,382

 
24,401

 
23,847

Total revenues
229,934

 
218,014

 
420,018

 
393,876

Operating Expenses:
 
 
 
 
 
 
 
Rooms
41,143

 
38,037

 
79,248

 
73,217

Food and beverage
34,693

 
36,974

 
69,193

 
69,816

Management fees
8,459

 
7,184

 
13,752

 
11,918

Other hotel expenses
72,393

 
72,543

 
144,869

 
140,200

Depreciation and amortization
25,126

 
26,607

 
50,249

 
52,858

Corporate expenses
4,690

 
5,301

 
9,878

 
13,146

Gain on insurance proceeds
(608
)
 

 
(1,271
)
 

Gain on litigation settlement, net
(10,999
)
 

 
(10,999
)
 

Total operating expenses
174,897

 
186,646

 
354,919

 
361,155

Operating profit
55,037

 
31,368

 
65,099

 
32,721

Other Expenses (Income):
 
 
 
 
 
 
 
Interest income
(957
)
 
(1,659
)
 
(2,609
)
 
(2,944
)
Interest expense
14,600

 
14,456

 
29,125

 
28,040

Gain on sale of hotel property
(1,290
)
 

 
(1,290
)
 

Gain on prepayment of note receivable
(13,550
)
 

 
(13,550
)
 

Total other (income) expenses, net
(1,197
)
 
12,797

 
11,676

 
25,096

Income from continuing operations before income taxes
56,234

 
18,571

 
53,423

 
7,625

Income tax (expense) benefit
(4,318
)
 
(4,451
)
 
2,530

 
1,695

Income from continuing operations
51,916

 
14,120

 
55,953

 
9,320

Income from discontinued operations, net of taxes

 
952

 

 
1,625

Net income
51,916

 
15,072

 
55,953

 
10,945

Earnings earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
0.27

 
$
0.07

 
$
0.29

 
$
0.05

Discontinued operations

 
0.01

 

 
0.01

Basic earnings per share
$
0.27

 
$
0.08

 
$
0.29

 
$
0.06



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: We exclude the gain from the prepayment of the loan in 2014. Prior to the prepayment, cash payments received during 2010 and 2011 that were included in Adjusted EBITDA and Adjusted FFO and reduced the carrying basis of the loan were deducted from Adjusted EBITDA and Adjusted FFO, calculated based on a straight-line basis over the anticipated term of the loan.
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, pre-opening costs, contract

8



termination fees, severance costs, and gains from legal settlements, including the $11.0 million gain on the settlement of the Westin Boston Waterfront litigation, or insurance proceeds.
In addition, to derive Adjusted EBITDA we exclude gains or losses on dispositions and impairment losses because we believe that including them in EBITDA does not reflect the ongoing performance of our hotels. Additionally, the gains or losses on dispositions 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):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
 
 
 
 
 
2014
 
2013
 
2014
 
2013
Net income (loss)
$
51,916

 
$
15,072

 
$
55,953

 
$
10,945

Interest expense
14,600

 
14,456

 
29,125

 
28,040

Income tax expense (benefit) (1)
4,318

 
4,606

 
(2,530
)
 
(1,537
)
Real estate related depreciation and amortization (2)
25,126

 
27,193

 
50,249

 
54,026

EBITDA
95,960

 
61,327

 
132,797

 
91,474

Non-cash ground rent
1,596

 
1,717

 
3,292

 
3,410

Non-cash amortization of favorable and unfavorable contract liabilities, net
(353
)
 
(354
)
 
(705
)
 
(709
)
Gain on sale of hotel property
(1,290
)
 

 
(1,290
)
 

Gain on insurance proceeds
(608
)
 

 
(1,271
)
 

Gain on litigation settlement (3)
(10,999
)
 

 
(10,999
)
 

Gain on prepayment of note receivable
(13,550
)
 

 
(13,550
)
 

Reversal of previously recognized Allerton income
(162
)
 
(291
)
 
(453
)
 
(581
)
Acquisition costs
45

 
14

 
81

 
24

Pre-opening costs
272

 

 
286

 

Severance costs

 

 

 
3,065

Adjusted EBITDA
$
70,911

 
$
62,413

 
$
108,188

 
$
96,683


(1)
Includes $0.2 million of income tax expense reported in discontinued operations for the three and six months ended June 30, 2013.
(2)
Includes $0.6 million and $1.2 million of depreciation expense reported in discontinued operations for the three and six months ended June 30, 2013, respectively.
(3)
Includes $14.0 million of settlement proceeds, net of a $1.2 million contingency fee paid to our legal counsel and $1.8 million of legal fees and other costs incurred over the course of the legal proceedings. The $1.8 million of legal fees and other costs were previously recorded as corporate expenses and the repayment of those costs through the settlement proceeds is recorded as a reduction of corporate expenses during the three months ended June 30, 2014.
  

9



 
Full Year 2014 Guidance
 
Low End
 
High End
Net income
$
91,463

 
$
98,963

Interest expense
59,200

 
59,100

Income tax expense
900

 
4,000

Real estate related depreciation and amortization
95,500

 
95,000

EBITDA
247,063

 
257,063

Non-cash ground rent
6,400

 
6,400

Non-cash amortization of favorable and unfavorable contracts, net
(1,400
)
 
(1,400
)
Gain on sale of hotel property
(1,290
)
 
(1,290
)
Gain on insurance proceeds
(1,271
)
 
(1,271
)
Gain on litigation settlement
(10,999
)
 
(10,999
)
Gain on prepayment of note receivable
(13,550
)
 
(13,550
)
Reversal of previously recognized Allerton income
(453
)
 
(453
)
Acquisition costs
200

 
200

Pre-opening costs
800

 
800

Adjusted EBITDA
$
225,500

 
$
235,500



The following tables are reconciliations of our U.S. GAAP net income to FFO and Adjusted FFO (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
 
 
 
 
 
2014
 
2013
 
2014
 
2013
Net income (loss)
$
51,916

 
$
15,072

 
$
55,953

 
$
10,945

Real estate related depreciation and amortization (1)
25,126

 
27,193

 
50,249

 
54,026

  Gain on sale of hotel property
(1,290
)
 

 
(1,290
)
 

FFO
75,752

 
42,265

 
104,912

 
64,971

Non-cash ground rent
1,596

 
1,717

 
3,292

 
3,410

Non-cash amortization of unfavorable contract liabilities, net
(353
)
 
(354
)
 
(705
)
 
(709
)
Gain on insurance proceeds
(608
)
 

 
(1,271
)
 

Gain on litigation settlement (2)
(10,999
)
 

 
(10,999
)
 

Gain on prepayment of note receivable
(13,550
)
 

 
(13,550
)
 

Acquisition costs
45

 
14

 
81

 
24

Pre-opening costs
272

 

 
286

 

Reversal of previously recognized Allerton income
(162
)
 
(291
)
 
(453
)
 
(581
)
Severance costs

 

 

 
3,065

Fair value adjustments to debt instruments
(90
)
 
(125
)
 
(175
)
 
(191
)
Adjusted FFO
$
51,903

 
$
43,226

 
$
81,418

 
$
69,989

Adjusted FFO per share
$
0.26

 
$
0.22

 
$
0.41

 
$
0.36


(1)
Includes $0.6 million and $1.2 million of depreciation expense reported in discontinued operations for the three and six months ended June 30, 2013, respectively.
(2)
Includes $14.0 million of settlement proceeds, net of a $1.2 million contingency fee paid to our legal counsel and $1.8 million of legal fees and other costs incurred over the course of the legal proceedings. The $1.8 million of legal fees and other costs were previously recorded as corporate expenses and the repayment of those costs through the settlement proceeds is recorded as a reduction of corporate expenses during the three months ended June 30, 2014.

10



 
Full Year 2014 Guidance
 
Low End
 
High End
Net income
$
91,463

 
$
98,963

Real estate related depreciation and amortization
95,500

 
95,000

Gain on sale of hotel property
(1,290
)
 
(1,290
)
FFO
185,673

 
192,673

Non-cash ground rent
6,400

 
6,400

Non-cash amortization of favorable and unfavorable contracts, net
(1,400
)
 
(1,400
)
Gain on insurance proceeds
(1,271
)
 
(1,271
)
Gain on litigation settlement
(10,999
)
 
(10,999
)
Gain on prepayment of note receivable
(13,550
)
 
(13,550
)
Reversal of previously recognized Allerton income
(453
)
 
(453
)
Acquisition costs
200

 
200

Pre-opening costs
800

 
800

Fair value adjustments to debt instruments
(400
)
 
(400
)
Adjusted FFO
$
165,000

 
$
172,000

Adjusted FFO per share
$
0.84

 
$
0.88


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, and the non-cash amortization of our unfavorable contract liabilities. 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 - Pro Forma (1) 
(in thousands)
(unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
% Change
 
2014
 
2013
 
% Change
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rooms
$
164,944

 
$
147,198

 
12.1
 %
 
$
293,807

 
$
265,878

 
10.5
 %
Food and beverage
52,010

 
52,681

 
(1.3
)%
 
99,604

 
95,046

 
4.8
 %
Other
12,687

 
11,721

 
8.2
 %
 
24,349

 
23,061

 
5.6
 %
Total revenues
229,641

 
211,600

 
8.5
 %
 
417,760

 
383,985

 
8.8
 %
Operating Expenses:
 
 
 
 
 
 
 
 
 
 
 
Rooms departmental expenses
$
41,120

 
$
37,103

 
10.8
 %
 
$
78,680

 
$
71,601

 
9.9
 %
Food and beverage departmental expenses
34,572

 
34,947

 
(1.1
)%
 
68,118

 
66,269

 
2.8
 %
Other direct departmental
4,763

 
5,278

 
(9.8
)%
 
10,083

 
10,505

 
(4.0
)%
General and administrative
17,001

 
15,062

 
12.9
 %
 
32,842

 
29,848

 
10.0
 %
Utilities
6,346

 
6,801

 
(6.7
)%
 
13,517

 
13,579

 
(0.5
)%
Repairs and maintenance
8,986

 
9,037

 
(0.6
)%
 
17,884

 
17,609

 
1.6
 %
Sales and marketing
15,147

 
13,490

 
12.3
 %
 
28,452

 
25,417

 
11.9
 %
Franchise fees
3,817

 
2,985

 
27.9
 %
 
7,125

 
5,833

 
22.1
 %
Base management fees
5,581

 
5,010

 
11.4
 %
 
10,270

 
9,191

 
11.7
 %
Incentive management fees
2,876

 
2,003

 
43.6
 %
 
3,441

 
2,470

 
39.3
 %
Property taxes
9,428

 
10,831

 
(13.0
)%
 
19,593

 
20,403

 
(4.0
)%
Ground rent
3,730

 
3,605

 
3.5
 %
 
7,448

 
7,266

 
2.5
 %
Other fixed expenses
2,806

 
3,014

 
(6.9
)%
 
5,622

 
5,517

 
1.9
 %
Total hotel operating expenses
$
156,173

 
$
149,166

 
4.7
 %
 
$
303,075

 
$
285,508

 
6.2
 %
Hotel EBITDA
73,468

 
62,434

 
17.7
 %
 
114,685

 
98,477

 
16.5
 %
Non-cash ground rent
1,580

 
1,609

 
(1.8
)%
 
3,169

 
3,195

 
(0.8
)%
Non-cash amortization of unfavorable contract liabilities
(353
)
 
(354
)
 
(0.3
)%
 
(705
)
 
(709
)
 
(0.6
)%
Hotel Adjusted EBITDA
$
74,695

 
$
63,689

 
17.3
 %
 
$
117,149

 
$
100,963

 
16.0
 %

(1) 
Pro forma to exclude hotels sold in 2014 and 2013.




12



Market Capitalization as of June 30, 2014
(in thousands)

Enterprise Value
 
 
 
 
 
Common equity capitalization (at June 30, 2014 closing price of $12.82/share)
 
$
2,517,274

Consolidated debt
 
1,125,732

Cash and cash equivalents
 
(253,900)

Total enterprise value
 
$
3,389,106

Share Reconciliation
 
 
 
 
 
Common shares outstanding
 
195,699

Unvested restricted stock held by management and employees
 
559

Share grants under deferred compensation plan held by directors
 
97

Combined shares outstanding
 
196,355




Debt Summary as of June 30, 2014
(dollars in thousands)

Property
 
Interest Rate
 
Term
 
Outstanding Principal
 
Maturity
Courtyard Manhattan / Midtown East (1)
 
8.810%
 
Fixed
 
$
41,315

 
October 2014
Lexington Hotel New York
 
LIBOR + 3.00
 
Variable
 
170,368

 
March 2015
Los Angeles Airport Marriott
 
5.300%
 
Fixed
 
82,600

 
July 2015
Renaissance Worthington
 
5.400%
 
Fixed
 
53,334

 
July 2015
JW Marriott Denver at Cherry Creek
 
6.470%
 
Fixed
 
39,226

 
July 2015
Frenchman’s Reef Marriott
 
5.440%
 
Fixed
 
57,136

 
August 2015
Orlando Airport Marriott
 
5.680%
 
Fixed
 
56,353

 
January 2016
Chicago Marriott Downtown
 
5.975%
 
Fixed
 
206,799

 
April 2016
Courtyard Manhattan / Fifth Avenue
 
6.480%
 
Fixed
 
49,282

 
June 2016
Salt Lake City Marriott Downtown
 
4.250%
 
Fixed
 
62,179

 
November 2020
Hilton Minneapolis
 
5.464%
 
Fixed
 
93,980

 
May 2021
Westin Washington D.C. City Center
 
3.990%
 
Fixed
 
71,533

 
January 2023
The Lodge at Sonoma
 
3.960%
 
Fixed
 
30,377

 
April 2023
Westin San Diego
 
3.940%
 
Fixed
 
69,568

 
April 2023
Debt premium (2)
 
 
 
 
 
362

 
 
Total mortgage debt
 
 
 
 
 
$
1,084,412

 
 
Senior unsecured credit facility (3)
 
LIBOR + 1.90
 
Variable
 
41,320

 
January 2017
Total debt
 
 
 
$
1,125,732

 
 
(1) We prepaid the mortgage loan in full on July 1, 2014.
(2) Non-cash GAAP adjustment recorded upon the assumption of the mortgage loan secured by the JW Marriott Denver Cherry Creek in 2011.
(3) Draw on the credit facility was used to fund the prepayment of the mortgage loan secured by the Courtyard Manhattan/Midtown East on July 1, 2014. As permitted under our credit facility, the mortgage was transferred to the credit facility until the closing of the new mortgage loan on July 18, 2014.    


13



Operating Statistics – Second Quarter
 
 
ADR
 
Occupancy
 
RevPAR
 
Hotel Adjusted EBITDA Margin
 
 
2Q 2014
2Q 2013
B/(W)
 
2Q 2014
2Q 2013
B/(W)
 
2Q 2014
2Q 2013
B/(W)
 
2Q 2014
2Q 2013
B/(W)
Atlanta Alpharetta Marriott
 
$
160.85

$
150.62

6.8
 %
 
73.9
%
79.8
%
(5.9
)%
 
$
118.83

$
120.23

(1.2
)%
 
35.49
 %
37.27
 %
-178 bps
Bethesda Marriott Suites
 
$
169.79

$
167.70

1.2
 %
 
77.6
%
74.1
%
3.5
 %
 
$
131.68

$
124.24

6.0
 %
 
33.70
 %
32.39
 %
131 bps
Boston Westin
 
$
244.25

$
222.10

10.0
 %
 
87.1
%
86.7
%
0.4
 %
 
$
212.79

$
192.52

10.5
 %
 
34.51
 %
33.37
 %
114 bps
Hilton Boston Downtown
 
$
281.25

$
242.09

16.2
 %
 
94.0
%
85.2
%
8.8
 %
 
$
264.32

$
206.33

28.1
 %
 
42.31
 %
38.56
 %
375 bps
Hilton Burlington
 
$
164.39

$
161.90

1.5
 %
 
78.5
%
73.4
%
5.1
 %
 
$
129.06

$
118.88

8.6
 %
 
42.16
 %
43.37
 %
-121 bps
Renaissance Charleston
 
$
232.47

$
209.51

11.0
 %
 
95.4
%
92.4
%
3.0
 %
 
$
221.86

$
193.65

14.6
 %
 
41.13
 %
39.40
 %
173 bps
Hilton Garden Inn Chelsea
 
$
245.18

$
249.87

(1.9
)%
 
97.3
%
97.9
%
(0.6
)%
 
$
238.45

$
244.59

(2.5
)%
 
45.70
 %
49.99
 %
-429 bps
Chicago Marriott
 
$
228.09

$
233.79

(2.4
)%
 
81.6
%
83.1
%
(1.5
)%
 
$
186.21

$
194.17

(4.1
)%
 
30.03
 %
28.24
 %
179 bps
Chicago Conrad
 
$
248.55

$
246.72

0.7
 %
 
88.8
%
89.7
%
(0.9
)%
 
$
220.61

$
221.26

(0.3
)%
 
40.14
 %
41.80
 %
-166 bps
Courtyard Denver Downtown
 
$
192.74

$
181.22

6.4
 %
 
83.5
%
86.4
%
(2.9
)%
 
$
161.03

$
156.53

2.9
 %
 
51.23
 %
49.40
 %
183 bps
Courtyard Fifth Avenue
 
$
299.58

$
284.76

5.2
 %
 
89.7
%
72.8
%
16.9
 %
 
$
268.74

$
207.21

29.7
 %
 
31.90
 %
19.66
 %
1224 bps
Courtyard Midtown East
 
$
299.12

$
285.49

4.8
 %
 
93.4
%
77.2
%
16.2
 %
 
$
279.36

$
220.26

26.8
 %
 
38.96
 %
30.37
 %
859 bps
Frenchman's Reef
 
$
218.75

$
223.59

(2.2
)%
 
89.4
%
86.6
%
2.8
 %
 
$
195.47

$
193.58

1.0
 %
 
22.24
 %
18.61
 %
363 bps
JW Marriott Denver Cherry Creek
 
$
260.20

$
245.56

6.0
 %
 
84.2
%
82.7
%
1.5
 %
 
$
219.17

$
202.99

8.0
 %
 
33.34
 %
31.72
 %
162 bps
Lexington Hotel New York
 
$
259.45

$
215.96

20.1
 %
 
94.0
%
50.6
%
43.4
 %
 
$
243.98

$
109.17

123.5
 %
 
37.96
 %
(3.02
)%
4098 bps
Los Angeles Airport Marriott
 
$
125.61

$
113.41

10.8
 %
 
89.1
%
89.3
%
(0.2
)%
 
$
111.88

$
101.24

10.5
 %
 
21.17
 %
26.23
 %
-506 bps
Hilton Minneapolis
 
$
153.53

$
158.82

(3.3
)%
 
85.8
%
82.6
%
3.2
 %
 
$
131.68

$
131.24

0.3
 %
 
31.84
 %
35.39
 %
-355 bps
Oak Brook Hills Resort
 
$
84.52

$
123.39

(31.5
)%
 
33.8
%
62.2
%
(28.4
)%
 
$
28.58

$
76.73

(62.8
)%
 
(69.02
)%
7.97
 %
-7699 bps
Orlando Airport Marriott
 
$
101.68

$
96.83

5.0
 %
 
79.7
%
75.5
%
4.2
 %
 
$
81.03

$
73.12

10.8
 %
 
22.16
 %
26.15
 %
-399 bps
Hotel Rex
 
$
193.88

$
183.81

5.5
 %
 
89.0
%
88.2
%
0.8
 %
 
$
172.64

$
162.17

6.5
 %
 
33.83
 %
32.64
 %
119 bps
Salt Lake City Marriott
 
$
141.95

$
141.94

 %
 
70.2
%
75.5
%
(5.3
)%
 
$
99.71

$
107.10

(6.9
)%
 
32.34
 %
34.91
 %
-257 bps
The Lodge at Sonoma
 
$
261.79

$
252.76

3.6
 %
 
86.5
%
79.4
%
7.1
 %
 
$
226.35

$
200.81

12.7
 %
 
32.33
 %
27.94
 %
439 bps
Vail Marriott
 
$
160.65

$
137.79

16.6
 %
 
48.8
%
55.9
%
(7.1
)%
 
$
78.40

$
77.01

1.8
 %
 
7.61
 %
(1.99
)%
960 bps
Westin San Diego
 
$
163.55

$
152.30

7.4
 %
 
87.4
%
87.4
%
 %
 
$
143.02

$
133.09

7.5
 %
 
32.50
 %
34.32
 %
-182 bps
Westin Washington D.C. City Center
 
$
213.86

$
212.42

0.7
 %
 
83.5
%
86.0
%
(2.5
)%
 
$
178.60

$
182.76

(2.3
)%
 
38.29
 %
40.22
 %
-193 bps
Renaissance Worthington
 
$
176.59

$
174.64

1.1
 %
 
70.0
%
65.7
%
4.3
 %
 
$
123.63

$
114.69

7.8
 %
 
34.60
 %
34.56
 %
4 bps
Total
 
$
201.91

$
189.94

6.3
 %
 
83.4
%
79.4
%
4.0
 %
 
$
168.49

$
150.89

11.7
 %
 
32.40
 %
30.01
 %
239 bps
Pro Forma Total (1)
 
$
202.15

$
190.20

6.3
 %
 
83.7
%
79.5
%
4.2
 %
 
$
169.21

$
151.27

11.9
 %
 
32.53
 %
30.10
 %
243 bps
Pro Forma Total Excluding NYC Renovations (2)
 
$
191.42

$
184.42

3.8
 %
 
82.5
%
81.9
%
0.6
 %
 
$
157.87

$
151.07

4.5
 %
 
31.81
 %
31.58
 %
23 bps

(1) Excludes the Oak Brook Hills Resort sold in April 2014.
(2) Also excludes the three New York City hotels under renovation in 2013.

14



Operating Statistics – Year to Date
 
 
ADR
 
Occupancy
 
RevPAR
 
Hotel Adjusted EBITDA Margin
 
 
YTD 2014
YTD 2013
B/(W)
 
YTD 2014
YTD 2013
B/(W)
 
YTD 2014
YTD 2013
B/(W)
 
YTD 2014
YTD 2013
B/(W)
Atlanta Alpharetta Marriott
 
$
165.84

$
148.70

11.5
 %
 
70.5
%
76.4
%
(5.9
)%
 
$
116.93

$
113.62

2.9
 %
 
35.30
 %
36.28
 %
-98 bps
Bethesda Marriott Suites
 
$
167.91

$
171.63

(2.2
)%
 
66.3
%
61.5
%
4.8
 %
 
$
111.28

$
105.51

5.5
 %
 
26.97
 %
26.80
 %
17 bps
Boston Westin
 
$
221.08

$
201.73

9.6
 %
 
76.1
%
75.2
%
0.9
 %
 
$
168.24

$
151.69

10.9
 %
 
25.90
 %
23.62
 %
228 bps
Hilton Boston Downtown
 
$
234.08

$
208.53

12.3
 %
 
88.4
%
79.2
%
9.2
 %
 
$
206.96

$
165.20

25.3
 %
 
33.51
 %
30.41
 %
310 bps
Hilton Burlington
 
$
144.01

$
143.80

0.1
 %
 
71.4
%
67.8
%
3.6
 %
 
$
102.78

$
97.56

5.4
 %
 
34.73
 %
35.45
 %
-72 bps
Renaissance Charleston
 
$
208.13

$
197.37

5.5
 %
 
91.5
%
86.7
%
4.8
 %
 
$
190.49

$
171.22

11.3
 %
 
36.19
 %
36.44
 %
-25 bps
Hilton Garden Inn Chelsea
 
$
210.94

$
215.12

(1.9
)%
 
94.4
%
97.0
%
(2.6
)%
 
$
199.08

$
208.68

(4.6
)%
 
38.26
 %
43.07
 %
-481 bps
Chicago Marriott
 
$
199.04

$
203.06

(2.0
)%
 
69.8
%
72.9
%
(3.1
)%
 
$
139.02

$
148.11

(6.1
)%
 
19.81
 %
21.07
 %
-126 bps
Chicago Conrad
 
$
210.89

$
210.74

0.1
 %
 
80.3
%
80.6
%
(0.3
)%
 
$
169.42

$
169.82

(0.2
)%
 
27.56
 %
27.85
 %
-29 bps
Courtyard Denver Downtown
 
$
183.36

$
167.70

9.3
 %
 
82.5
%
83.0
%
(0.5
)%
 
$
151.19

$
139.26

8.6
 %
 
47.41
 %
44.35
 %
306 bps
Courtyard Fifth Avenue
 
$
260.95

$
260.81

0.1
 %
 
87.2
%
68.6
%
18.6
 %
 
$
227.66

$
178.95

27.2
 %
 
20.70
 %
10.28
 %
1042 bps
Courtyard Midtown East
 
$
261.88

$
255.23

2.6
 %
 
90.0
%
75.7
%
14.3
 %
 
$
235.57

$
193.14

22.0
 %
 
30.56
 %
22.02
 %
854 bps
Frenchman's Reef
 
$
273.65

$
267.81

2.2
 %
 
90.3
%
88.5
%
1.8
 %
 
$
247.18

$
237.04

4.3
 %
 
29.76
 %
26.16
 %
360 bps
JW Marriott Denver Cherry Creek
 
$
248.52

$
236.45

5.1
 %
 
81.7
%
79.2
%
2.5
 %
 
$
203.16

$
187.38

8.4
 %
 
31.46
 %
28.85
 %
261 bps
Lexington Hotel New York
 
$
225.90

$
187.61

20.4
 %
 
87.5
%
54.6
%
32.9
 %
 
$
197.60

$
102.45

92.9
 %
 
25.57
 %
(7.64
)%
3321 bps
Los Angeles Airport Marriott
 
$
125.11

$
113.69

10.0
 %
 
91.1
%
85.7
%
5.4
 %
 
$
114.00

$
97.39

17.1
 %
 
21.91
 %
22.20
 %
-29 bps
Hilton Minneapolis
 
$
138.01

$
140.82

(2.0
)%
 
71.4
%
72.2
%
(0.8
)%
 
$
98.48

$
101.67

(3.1
)%
 
21.57
 %
26.97
 %
-540 bps
Oak Brook Hills Resort
 
$
101.88

$
113.51

(10.2
)%
 
25.1
%
46.2
%
(21.1
)%
 
$
25.57

$
52.47

(51.3
)%
 
(71.01
)%
(9.73
)%
-6128 bps
Orlando Airport Marriott
 
$
111.88

$
104.10

7.5
 %
 
85.3
%
81.2
%
4.1
 %
 
$
95.39

$
84.48

12.9
 %
 
29.83
 %
27.85
 %
198 bps
Hotel Rex
 
$
188.90

$
178.38

5.9
 %
 
83.7
%
82.7
%
1.0
 %
 
$
158.09

$
147.47

7.2
 %
 
29.04
 %
29.22
 %
-18 bps
Salt Lake City Marriott
 
$
144.34

$
144.51

(0.1
)%
 
68.7
%
71.5
%
(2.8
)%
 
$
99.21

$
103.36

(4.0
)%
 
31.49
 %
35.10
 %
-361 bps
The Lodge at Sonoma
 
$
240.46

$
228.11

5.4
 %
 
72.7
%
71.3
%
1.4
 %
 
$
174.83

$
162.66

7.5
 %
 
22.96
 %
20.10
 %
286 bps
Vail Marriott
 
$
298.18

$
265.54

12.3
 %
 
67.7
%
72.5
%
(4.8
)%
 
$
201.73

$
192.51

4.8
 %
 
39.42
 %
36.37
 %
305 bps
Westin San Diego
 
$
163.72

$
153.72

6.5
 %
 
84.7
%
86.0
%
(1.3
)%
 
$
138.75

$
132.22

4.9
 %
 
31.52
 %
33.15
 %
-163 bps
Westin Washington D.C. City Center
 
$
210.80

$
202.87

3.9
 %
 
69.0
%
78.1
%
(9.1
)%
 
$
145.39

$
158.49

(8.3
)%
 
30.16
 %
35.13
 %
-497 bps
Renaissance Worthington
 
$
178.05

$
174.38

2.1
 %
 
71.0
%
65.2
%
5.8
 %
 
$
126.44

$
113.70

11.2
 %
 
35.26
 %
33.00
 %
226 bps
Total
 
$
191.62

$
181.24

5.7
 %
 
77.8
%
74.9
%
2.9
 %
 
$
149.00

$
135.66

9.8
 %
 
27.51
 %
25.90
 %
161 bps
Pro Forma Total (1)
 
$
192.20

$
182.10

5.5
 %
 
78.8
%
75.4
%
3.4
 %
 
$
151.53

$
137.37

10.3
 %
 
28.04
 %
26.29
 %
175 bps
Pro Forma Total Excluding NYC Renovations (2)
 
$
185.10

$
178.08

3.9
 %
 
77.6
%
77.1
%
0.5
 %
 
$
143.72

$
137.35

4.6
 %
 
28.29
 %
28.08
 %
21 bps

(1) Excludes the Oak Brook Hills Resort sold in April 2014.
(2) Also excludes the three New York City hotels under renovation in 2013.


15



Hotel Adjusted EBITDA Reconciliation
 
 
Second Quarter 2014
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
4,581

 
$
1,219

$
407

$

$

$
1,626

Bethesda Marriott Suites
 
$
4,413

 
$
(414
)
$
360

$

$
1,541

$
1,487

Boston Westin
 
$
25,514

 
$
6,611

$
2,191

$

$
2

$
8,804

Hilton Boston Downtown
 
$
9,305

 
$
2,833

$
1,062

$

$
42

$
3,937

Hilton Burlington
 
$
3,961

 
$
1,225

$
422

$

$
23

$
1,670

Renaissance Charleston
 
$
4,075

 
$
1,300

$
408

$

$
(32
)
$
1,676

Hilton Garden Inn Chelsea
 
$
3,766

 
$
1,229

$
492

$

$

$
1,721

Chicago Marriott
 
$
29,534

 
$
2,820

$
3,255

$
3,192

$
(397
)
$
8,870

Chicago Conrad
 
$
8,188

 
$
2,322

$
965

$

$

$
3,287

Courtyard Denver Downtown
 
$
2,754

 
$
1,137

$
274

$

$

$
1,411

Courtyard Fifth Avenue
 
$
4,543

 
$
120

$
439

$
838

$
52

$
1,449

Courtyard Midtown East
 
$
8,318

 
$
1,585

$
685

$
971

$

$
3,241

Frenchman's Reef
 
$
16,246

 
$
1,240

$
1,563

$
810

$

$
3,613

JW Marriott Denver Cherry Creek
 
$
6,032

 
$
922

$
517

$
572

$

$
2,011

Lexington Hotel New York
 
$
17,124

 
$
1,473

$
3,265

$
1,732

$
31

$
6,501

Los Angeles Airport Marriott
 
$
16,762

 
$
1,449

$
977

$
1,123

$

$
3,549

Minneapolis Hilton
 
$
14,833

 
$
1,108

$
2,423

$
1,321

$
(129
)
$
4,723

Oak Brook Hills Resort
 
$
297

 
$
(220
)
$

$

$
15

$
(205
)
Orlando Airport Marriott
 
$
5,546

 
$
(184
)
$
599

$
814

$

$
1,229

Hotel Rex
 
$
1,673

 
$
372

$
194

$

$

$
566

Salt Lake City Marriott
 
$
6,759

 
$
750

$
745

$
691

$

$
2,186

The Lodge at Sonoma
 
$
6,517

 
$
1,415

$
382

$
310

$

$
2,107

Vail Marriott
 
$
4,101

 
$
(201
)
$
513

$

$

$
312

Westin San Diego
 
$
7,446

 
$
576

$
1,097

$
701

$
46

$
2,420

Westin Washington D.C. City Center
 
$
8,093

 
$
1,042

$
1,249

$
761

$
47

$
3,099

Renaissance Worthington
 
$
9,557

 
$
1,924

$
643

$
738

$
2

$
3,307

Total
 
$
229,938

 
$
33,653

$
25,127

$
14,574

$
1,243

$
74,490

Pro Forma Total (2)
 
$
229,641

 
$
33,873

$
25,127

$
14,574

$
1,228

$
74,695

(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 our favorable lease assets, and the non-cash amortization of our unfavorable contract liabilities.
(2) 
Excludes the Oak Brook Hills Resort sold in April 2014.


16



Pro Forma Hotel Adjusted EBITDA Reconciliation
 
 
Second Quarter 2013
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
4,848

 
$
1,399

$
408

$

$

$
1,807

Bethesda Marriott Suites
 
$
4,189

 
$
(575
)
$
375

$

$
1,557

$
1,357

Boston Westin
 
$
24,595

 
$
6,076

$
2,128

$

$
3

$
8,207

Hilton Boston Downtown
 
$
7,401

 
$
1,376

$
1,436

$

$
42

$
2,854

Hilton Burlington
 
$
3,618

 
$
704

$
842

$

$
23

$
1,569

Renaissance Charleston
 
$
3,533

 
$
1,026

$
398

$

$
(32
)
$
1,392

Hilton Garden Inn Chelsea
 
$
3,873

 
$
1,462

$
474

$

$

$
1,936

Chicago Marriott
 
$
29,911

 
$
2,328

$
3,317

$
3,201

$
(398
)
$
8,448

Chicago Conrad
 
$
8,374

 
$
2,576

$
924

$

$

$
3,500

Courtyard Denver Downtown
 
$
2,686

 
$
1,064

$
263

$

$

$
1,327

Courtyard Fifth Avenue
 
$
3,504

 
$
(648
)
$
436

$
848

$
53

$
689

Courtyard Midtown East
 
$
6,418

 
$
346

$
622

$
981

$

$
1,949

Frenchman's Reef
 
$
16,843

 
$
657

$
1,654

$
824

$

$
3,135

JW Marriott Denver Cherry Creek
 
$
5,748

 
$
746

$
488

$
589

$

$
1,823

Lexington Hotel New York
 
$
7,623

 
$
(5,125
)
$
3,184

$
1,681

$
30

$
(230
)
Los Angeles Airport Marriott
 
$
15,192

 
$
1,490

$
1,372

$
1,123

$

$
3,985

Minneapolis Hilton
 
$
15,481

 
$
2,309

$
1,936

$
1,349

$
(116
)
$
5,478

Oak Brook Hills Resort
 
$
816

 
$
12

$
38

$

$
15

$
65

Orlando Airport Marriott
 
$
4,918

 
$
(335
)
$
795

$
826

$

$
1,286

Hotel Rex
 
$
1,596

 
$
291

$
230

$

$

$
521

Salt Lake City Marriott
 
$
7,001

 
$
1,315

$
735

$
394

$

$
2,444

The Lodge at Sonoma
 
$
5,609

 
$
883

$
369

$
315

$

$
1,567

Vail Marriott
 
$
4,381

 
$
(692
)
$
605

$

$

$
(87
)
Westin San Diego
 
$
7,570

 
$
774

$
1,064

$
713

$
47

$
2,598

Westin Washington D.C. City Center
 
$
8,188

 
$
880

$
1,590

$
777

$
46

$
3,293

Renaissance Worthington
 
$
8,500

 
$
1,486

$
699

$
751

$
2

$
2,938

Total
 
$
212,416

 
$
21,825

$
26,382

$
14,372

$
1,272

$
63,754

Pro Forma Total (2)
 
$
211,600

 
$
21,813

$
26,344

$
14,372

$
1,257

$
63,689

(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 our favorable lease assets and the non-cash amortization of our unfavorable contract liabilities.
(2) 
Excludes the Oak Brook Hills Resort sold in April 2014.


17



Hotel Adjusted EBITDA Reconciliation
 
 
Year to Date 2014
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
9,164

 
$
2,425

$
810

$

$

$
3,235

Bethesda Marriott Suites
 
$
7,564

 
$
(1,774
)
$
723

$

$
3,091

$
2,040

Boston Westin
 
$
41,898

 
$
6,460

$
4,386

$

$
4

$
10,850

Hilton Boston Downtown
 
$
14,764

 
$
2,690

$
2,173

$

$
84

$
4,947

Hilton Burlington
 
$
6,374

 
$
1,296

$
873

$

$
45

$
2,214

Renaissance Charleston
 
$
7,036

 
$
1,803

$
806

$

$
(63
)
$
2,546

Hilton Garden Inn Chelsea
 
$
6,302

 
$
1,428

$
983

$

$

$
2,411

Chicago Marriott
 
$
45,991

 
$
(2,830
)
$
6,370

$
6,364

$
(794
)
$
9,110

Chicago Conrad
 
$
12,751

 
$
1,599

$
1,915

$

$

$
3,514

Courtyard Denver Downtown
 
$
5,161

 
$
1,902

$
545

$

$

$
2,447

Courtyard Fifth Avenue
 
$
7,662

 
$
(1,056
)
$
869

$
1,670

$
103

$
1,586

Courtyard Midtown East
 
$
13,987

 
$
954

$
1,375

$
1,945

$

$
4,274

Frenchman's Reef
 
$
38,594

 
$
6,794

$
3,077

$
1,615

$

$
11,486

JW Marriott Denver Cherry Creek
 
$
11,249

 
$
1,359

$
1,031

$
1,149

$

$
3,539

Lexington Hotel New York
 
$
27,787

 
$
(2,943
)
$
6,526

$
3,460

$
63

$
7,106

Los Angeles Airport Marriott
 
$
33,601

 
$
3,175

$
1,953

$
2,234

$

$
7,362

Minneapolis Hilton
 
$
23,474

 
$
(1,977
)
$
4,663

$
2,636

$
(258
)
$
5,064

Oak Brook Hills Resort
 
$
2,263

 
$
(2,113
)
$
383

$

$
123

$
(1,607
)
Orlando Airport Marriott
 
$
12,507

 
$
883

$
1,226

$
1,622

$

$
3,731

Hotel Rex
 
$
3,096

 
$
484

$
415

$

$

$
899

Salt Lake City Marriott
 
$
13,753

 
$
1,449

$
1,505

$
1,377

$

$
4,331

The Lodge at Sonoma
 
$
10,321

 
$
988

$
764

$
618

$

$
2,370

Vail Marriott
 
$
17,588

 
$
5,894

$
1,040

$

$

$
6,934

Westin San Diego
 
$
14,719

 
$
966

$
2,185

$
1,398

$
91

$
4,640

Westin Washington D.C. City Center
 
$
13,350

 
$
48

$
2,364

$
1,519

$
95

$
4,026

Renaissance Worthington
 
$
19,067

 
$
3,959

$
1,288

$
1,472

$
4

$
6,723

Total
 
$
420,023

 
$
33,863

$
50,248

$
29,079

$
2,588

$
115,542

Pro Forma Total (2)
 
$
417,760

 
$
35,976

$
49,865

$
29,079

$
2,465

$
117,149


(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 our favorable lease assets, and the non-cash amortization of our unfavorable contract liabilities.
(2) 
Excludes the Oak Brook Hills Resort sold in April 2014.


18



Hotel Adjusted EBITDA Reconciliation
 
 
Year to Date 2013
 
 
 
 
 
Plus:
Plus:
Plus:
Equals:
 
 
Total Revenues
 
Net Income / (Loss)
Depreciation
Interest Expense
Non-Cash Adjustments (1)
Hotel Adjusted EBITDA
Atlanta Alpharetta Marriott
 
$
9,379

 
$
2,590

$
813

$

$

$
3,403

Bethesda Marriott Suites
 
$
7,235

 
$
(2,058
)
$
882

$

$
3,115

$
1,939

Boston Westin
 
$
38,481

 
$
4,837

$
4,247

$

$
5

$
9,089

Hilton Boston Downtown
 
$
11,964

 
$
686

$
2,868

$

$
84

$
3,638

Hilton Burlington
 
$
5,927

 
$
373

$
1,683

$

$
45

$
2,101

Renaissance Charleston
 
$
6,298

 
$
1,572

$
786

$

$
(63
)
$
2,295

Hilton Garden Inn Chelsea
 
$
6,606

 
$
1,898

$
947

$

$

$
2,845

Chicago Marriott
 
$
47,326

 
$
(2,175
)
$
6,556

$
6,386

$
(796
)
$
9,971

Chicago Conrad
 
$
12,540

 
$
1,657

$
1,836

$

$

$
3,493

Courtyard Denver Downtown
 
$
4,798

 
$
1,605

$
523

$

$

$
2,128

Courtyard Fifth Avenue
 
$
6,039

 
$
(1,927
)
$
750

$
1,689

$
109

$
621

Courtyard Midtown East
 
$
11,183

 
$
(690
)
$
1,200

$
1,953

$

$
2,463

Frenchman's Reef
 
$
37,314

 
$
4,865

$
3,254

$
1,643

$

$
9,762

JW Marriott Denver Cherry Creek
 
$
10,591

 
$
905

$
966

$
1,184

$

$
3,055

Lexington Hotel New York
 
$
14,305

 
$
(10,863
)
$
6,346

$
3,361

$
63

$
(1,093
)
Los Angeles Airport Marriott
 
$
29,331

 
$
1,558

$
2,720

$
2,233

$

$
6,511

Minneapolis Hilton
 
$
24,979

 
$
439

$
3,872

$
2,691

$
(266
)
$
6,736

Oak Brook Hills Resort
 
$
4,294

 
$
(842
)
$
300

$

$
124

$
(418
)
Orlando Airport Marriott
 
$
11,187

 
$
(49
)
$
1,520

$
1,645

$

$
3,116

Hotel Rex
 
$
2,930

 
$
394

$
462

$

$

$
856

Salt Lake City Marriott
 
$
13,710

 
$
2,551

$
1,471

$
790

$

$
4,812

The Lodge at Sonoma
 
$
9,445

 
$
812

$
733

$
353

$

$
1,898

Vail Marriott
 
$
16,659

 
$
4,858

$
1,201

$

$

$
6,059

Westin San Diego
 
$
14,886

 
$
1,987

$
2,117

$
737

$
94

$
4,935

Westin Washington D.C. City Center
 
$
14,332

 
$
211

$
3,177

$
1,555

$
92

$
5,035

Renaissance Worthington
 
$
16,540

 
$
2,554

$
1,403

$
1,497

$
4

$
5,458

Total
 
$
388,279

 
$
17,748

$
52,633

$
27,717

$
2,610

$
100,545

Pro Forma Total (2)
 
383,985

 
$
18,590

$
52,333

$
27,717

$
2,486

$
100,963

(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 our favorable lease assets, and the non-cash amortization of our unfavorable contract liabilities.
(2) 
Excludes the Oak Brook Hills Resort sold in April 2014.




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