LaSalle Hotel Properties (LHO)

LHO 
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LaSalle Hotel Properties (LHO)

Q3 2009 Earnings Call

October 22, 2009 9:00 am ET

Executives

Michael Barnello – President and Chief Executive Officer

Hans Weger – Chief Financial Officer

Analysts

Ryan Meliker – Morgan Stanley

Chris Woronka – Deutsche Bank Securities

Michael Salinsky – RBC Capital Markets

Bill Crow – Raymond James

Patrick Scholes – Friedman, Billings, Ramsey & Co.

Andrew Wittman – Robert W. Baird & Co.

David Kath – Oppenheimer & Co.

Daniel Donlan – Janney Montgomery Scott

Jeff Donnelly – Wells Fargo Securities,

Presentation

Operator

Welcome to the LaSalle Hotel Properties third quarter 2009 conference call. (Operator Instructions). At this time, I would like to turn the call over to Mr. Michael Barnello, President and Chief Executive Officer.

Michael Barnello

Welcome to the third quarter earnings call and Webcast for LaSalle Hotel Properties. Here with me today is Hans Weger, our Chief Financial Officer. Today, Hans will provide some detail on financial performance in the quarter and I will follow and discuss the company's activities in the quarter, the performance of our assets and our trends relative to those of the industry. We will then open the call up to Q&A. Hans?

Hans Weger

Before we begin, I'd first like to make the following remarks. Any statement that we make today about future results and performance or plans and objectives are forward-looking statements as results may differ as a result of factors, risks, and uncertainties over which the company may have no control.

Factors that may cause actual results to differ materially are discussed in the company's 10-K for 2008, quarterly reports and its other reports filed with the SEC. The company disclaims any obligation or undertaking to update or revise any forward-looking statements.

Our SEC report as well as our press releases are available at our Web site, www.lasallehotels.com. Our most recent 8-K in yesterday's press release include reconciliations of non-GAAP measures such as funds from operations to the most comparable GAAP measures.

Third quarter funds from operations or FFO was $30.7 million as compared to $39.9 million in the prior year. FFO per diluted share was $0.49 compared to $0.99 in the third quarter of 2008. EBITDA for the third quarter decreased to $48.4 million from $60 million in the prior year period.

RevPAR for the total portfolio decreased 19.7% in the third quarter. The RevPAR decrease was a result of 17.6% decline in ADR to $167.36 and a 2.5% drop in occupancy to 79.4%. Our hotel portfolio generated $49.5 million of EBITDA in the third quarter of 2009 versus EBITDA of $67 million for the same period of 2008, a decline of 26.1%.

The portfolio-wide EBITDA margin in the third quarter was 30.8% and was limited to a decline of 388 basis points compared to the prior year despite a 19.7% drop in RevPAR. For the nine months ended September 30th, 2009, FFO was $74.9 million compared to $97.1 million for the same period in 2008, or a $1.45 per diluted share compared to $2.41 per diluted share for the same period in the prior year.

FFO for the nine months ended September 30th, 2009 included $5.7 million in after-tax income for the recognition of prior termination cure payments for the previous manager of the company's Seaview Resort and $1 million fee for exchanging the 7.25 Series C Cumulative Redeemable Preferred Shares of Beneficial Interest for an equal number of 7.25% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest, the Preferred Share Exchange.

EBITDA for the nine months ended September 30th decreased to $129.2 million from $155 million for the prior year period. EBITDA for the nine months ended September 30th, 2009 included $9.5 million for pre-tax income related to the Seaview Marriot or the Seaview Resort and the $1 million fee for the Preferred Share Exchange.

Room revenue per available room decreased 18.8% for the nine months ended September 30th, 2009 to $123.98 versus the same prior year period. The RevPAR decline was due to an ADR decrease of 14% to $173 and an occupancy decline of 5.5% to 71.7%.

For the nine months ended September 30th, the company's hotels generated $125.4 million of EBITDA compared with $167.9 million for the same period last year, a decline of 25.3%. The portfolio-wide hotel EBITDA margin was 28.2% and was limited to a 346 basis point decline from the same prior year period.

As of the end of the third quarter, the company has total outstanding debt of $660.2 million at an average interest rate for the quarter of 5.1%. During the third quarter, we retired all outstanding debts on our $450 million senior unsecured credit facility. The company has an aggregate $470.5 million available on our combined credit facilities.

As of September 30th, 2009, total debt to trailing 12-month corporate EBITDA as defined in our senior unsecured credit facility equaled 3.8 times and trailing month corporate EBITDA to interest coverage ratio was 4.2 times.

On September 15th, we announced a quarterly dividend of $0.01 per common share for the third quarter 2009. The third quarter dividend was paid on October 15th to common shareholders of record on September 30th, 2009.

I would now like to turn the call over to Mike to discuss the recently completed quarter. Mike?

Michael Barnello

In the third quarter, as a result of the continuing weak economic environment, the lodging industry remained challenged. While the rate of decline and demand slowed during the quarter, it did so at the expanse of average daily rates. Specifically, demand declined 5% for the third quarter as compared to an 8% drop in the first half of 2009. While demand is yet to turn positive, the slower rate of decline is certainly encouraging.

When we look at our major segments of demand, our weakness remains most pronounced on the group side as corporations in particular have dramatically reduced the number and size of their meetings, the number of employees attending conventions and meetings and the length of stays.

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