Boykin Lodging Company (NYSE: BOY), a hotel real estate investment trust, today announced financial results for the second quartersecond quarter and six months periods ended June 30, 2002.
For the 2002 second quarter of 2002, funds from operations (FFO) of $10.8 million, or $0.54 per fully-diluted share, exceeded the consensus of analystsð estimates by __eight cents per share.by and the Company`s guidance. The Company attributed its results to a combination of revenues at the high end of itsthe expected range, combined with better than expected marginsWhile corporate business and personaleisurel traveldemand continued to be soft during this period, the Company was able to maintain its profitability because of tight continue cost controls initiatives implemented at the properties after September 11thand the implementation of a Taxable REIT Subsidiary (TRS) structure..
Boykin`s 2002 second quarter fully diluted FFO per share declined 21.7% from the pro forma second quarter 2001 FFO of $0.69 per share. Pro forma results for 2001 are stated as if the acquisition of the leases of the Company`s properties by a Taxable REIT Subsidiary (TRS) had occurred The implementation of the Taxable REIT Subsidiary (TRS) structure at the start of this year has resulted in a significant change in the basis of presentation of the financial statements of the Company. The revenues and expenses of the Company now reflect the operating results of the consolidated properties operated through a TRS, whereas prior to 2002, the revenues of the Company reflected only the lease income from these properties. Due to this significant change in presentation, for ease of comparison, the results for the three and six month periods ended June 30, 2001 are presented in this release on a pro forma basis as if the TRS structure was implemented onon January 1, 2001.
Revenues for the three months ended June 30, 2002 were $68.6 million, compared with pro forma revenues of $72.4 million recorded infor the same period last year. Revenue per available room (RevPAR) for all 33 hotels declined 10.6% to $59.79 from last year`s $66.90. , as Ooccupancy fell four points, to 64.6% from 68.8%, while . Tthe average daily room rate declined 4.8%, to $92.58 from $97.29. Excluding the Chicago, Illinois property, which continued to is undergoing major renovation, s that will continue until the beginning of Septemberinto the third quarter, the RevPAR decline was 7.3%. Renovation activities at this property and a small number of rooms at the Meadowlands property, that have been completed, During the second quarter, there were resulted in approximately 19,000 room nights out of service related to renovations, or 2.3% of the Company`s room inventory for the quarter. Last year during the second quarter 3,100 room nights were out of service due to renovation activity.
Gross operating profit after management fees averaged 30.0% for the 2002 second quarter for consolidatedat the properties operated under the TRS structure, averaged 300.0% for the 2002 second quarter, compared towith 0300.02% on afor the pro forma basis for the previous year2001 period. For these properties, Bbased upon the 6.3% decrease in related hotel revenues and a 9.6% decrease in EBITDA, the flow-through to EBITDA was 1.52 times.
EBITDA for the Junesecond quarter, including the Company`s share of EBITDA from unconsolidated joint venture subsidiaries, totaled $00.016.8 million, a 14.300.0% decrease from last year`s second quarter pro forma of $00.019.6 million.
For the 2002 second quarter of 2002, net income was $2.9 million or $0.17 per share,, down from compared to the same period last year when pro forma net income was just totaledover $5.0 million, or $0.29 per share.
For the first six months of 2002, FFO of $15.7 million was below the same period last year`s pro forma FFO of $21.4 million. On a fully-diluted per share basis, first half 2002 FFO declined to $0.78 compared with last year`s pro forma FFO of $1.07. Revenues for the six months ended June 30, 2002 were $129.5 million, compared with pro forma revenues of $139.0 million recorded forin the same period last year. RevPAR for the portfolio declined to $55.03 from last year`s $63.36, as occupancy fell nearly six points to 59.8% from 65.5%. The average daily room rate declined 4.9% to $92.06 from $96.79. During the first six months of 2002, the gross operating profit averaged 27.9%, compared with 28.1% on a pro forma basis for the previous year. EBITDA, including the Company`s share of EBITDA from unconsolidated joint venture subsidiaries, totaled $27.4 million, a 17.7% decrease from last year`s pro forma of $33.3 million.
Robert W. Boykin, Chairman and Chief Executive Officer stated, “While we continue to are operateing in a challenging environment, the trends continue to improve. We were able to maintain strong margins despite the RevPAR declines by maintaining our focus on cost control. Looking forward, while expectations for an economic recovery are cautious, we continue to expect improvement in RevPAR trends on a quarter over quarter basis.”
During the second quarter, the Company continued the renovation of its Chicago property, and expects to complete the renovation during the third quarter. The Company also announced that it is commencing construction of the White Sand Villas condominium project, located on the Gulf of Mexico in Fort Myers Beach, Florida. Over half of the units are pre-sold, and completion of the 92-unit tower is planned for the end of next yearThe Company currently has commitments from prospective buyers to purchase over half of the units upon completion of construction, which is expected to occur in late 2003. The first phase of construction, involving the removal of __ 38 rental cottages, is currently underway.
The Company also announced that it intends to establish ancillary conference centers atwithin certain of its existing properties. Mr. Boykin statcommented, “We constantly review our portfolio for ways to increase revenues and EBITDA, and as part of this process have identified an opportunity to increase demand at certain of our hotels by establishing IACC (International Association of Conference Centers) -approved ancillary conference center facilities in those properties. The addition of IACC-approved conferencethese centers is anticipated to serve the needs of corporations and businesses requiring state of the art for training facilities and off-site conference centers and thus substantially improve hotel business traffic. with a relatively modest capital investment. To date, we have identified fourthreeseveral hotels in our portfolio that meet established market criteria and may benefit from these types of facilities development of state-of-the-art conference centers. We are currently moving forward with this concept at our Berkeley property. with the anticipation that the rRenovations to upgrade the current facilities are expected to be completed and and IACC accreditation received would be completed induring the first quarter of next year.”
At June 30, 2002, Boykin had $___23.0 million of cash and cash equivalents, and total consolidated debt of $___318.9 million. The Company`s pro rata share of the debt inof unconsolidated joint ventures totaled $_______21.8 million. The Company had $40.0 million outstanding on its line of credit. The Company expects to exercise its option to extend its $45 million term loan, which matures in October of 2002, to July of 2003. The extension does not require lender approval. To finance the construction of the White Sand Villas, the Company is in the final stages of negotiations with lenders for a $23.3 million construction loan to be secured by the project. Additionally, the Company is currently reviewing refinancing options for the 2003 maturity of its bank facilities.