Cleveland, Ohio, August, 2003 - Boykin Lodging Company (NYSE: BOY), a hotel real estate investment trust (REIT), today announced financial results for the second quarter and six months ended June 30, 2003.
For the second quarter, the Company`s net loss applicable to common shareholders totaled $1.6 million, or $0.09 per fully diluted share, compared with the same period last year when net income totaled $2.9 million, or $0.17 per share. Funds from operations applicable to common shareholders (FFO) for the second quarter totaled $6.5 million, or $0.37 per fully diluted share, a decrease from second-quarter 2002 FFO of $0.53 per share.
Second-quarter 2003 results include the hotel operating results for the Marriott`s Hunt Valley Inn, for which the Taxable REIT Subsidiary (TRS) structure was implemented effective September 1, 2002, while comparative second-quarter 2002 results include lease revenue for the property. The Company sold three hotels during the first six months of 2003, and the operating results of those properties are reflected in the financial statements as discontinued operations for all periods presented.
Revenues for the quarter ended June 30, 2003, were $71.9 million, compared with revenues of $66.2 million for the same period last year. Revenue per available room (RevPAR) for the 30 hotels owned as of the end of the second quarter decreased 2.4% to $59.71 from last year`s $61.15. Occupancy fell to 63.5% from 64.7%, while the average daily room rate decreased 0.5% to $94.06 from $94.50. During the second quarter, there were approximately 3,600 room nights out of service related to renovations, or 0.5% of the Company`s room inventory. For the same period last year, there were approximately 19,500 room nights out of service due to renovation activity, or approximately 2.3% of the Company`s room inventory for the quarter.
For the 26 consolidated properties operated under the TRS structure for both years and owned as of June 30, 2003, RevPAR declined 5.2% to $57.44 for the second quarter of 2003 versus $60.62 for the year-earlier period. The RevPAR change resulted from a 2.6% decrease in occupancy to 63.7% in 2003 from 65.4% in 2002, combined with a 2.8% decrease in the average daily rate of $90.11 in 2003 compared with $92.75 for the same period in the prior year. Hotel profit margins for these properties, defined as hotel operating profit (hotel revenues less hotel operating expenses) as a percentage of hotel revenues, averaged 26.6% for the second quarter of 2003, compared with 30.4% for the 2002 period.
Due to progress made on the White Sand Villas project, the Company began recognizing revenue under the percentage of completion method during 2003. Additionally, the Company closed on the sale of three Sanibel View Villas units during the quarter. Included in second-quarter 2003 results are $7.3 million of revenues and $1.9 million of gross profit related to condominium development and unit sales.
As previously announced, during the second quarter the Company entered into an agreement with Hilton Hotels Corporation to terminate the previously existing long-term management agreement surrounding 10 Doubletree hotels. The transaction resulted in a net gain of approximately $0.2 million, which is recorded within property taxes, insurance and other expenses.
The Company also announced that it is currently in the architecture and design stage of the final phase of the redevelopment of its Pink Shell Beach Resort, which entails the construction of a new 43-unit condominium building. To make way for the tower, the Company expects to demolish two existing low-rise buildings. In connection with these plans, the Company recorded a $1.7 million acceleration of depreciation related to the two buildings during the second quarter of 2003.
The operating results of the Holiday Inn Lake Norman, which was sold during the quarter, are reflected as discontinued operations and totaled a negligible loss of less than $0.1 million, net of minority interest, for the quarter. Also included within second-quarter 2003 discontinued operations is the net loss on the sale of the hotel of $0.4 million, net of minority interest.
Included in the Company`s second-quarter results is a gain on disposition of $0.3 million related to a small portion of land at the Company`s Bellevue, Washington, hotel that was surrendered to the local county as a result of eminent domain action. The Company stated that the surrender of the land does not have an impact on the operations of the hotel.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter, including the Company`s share of EBITDA from unconsolidated joint venture subsidiaries, totaled $14.1 million, a 14.3% decrease from last year`s second-quarter EBITDA of $16.5 million.
The Company`s net loss applicable to common shareholders for the six months ended June 30, 2003, totaled $4.4 million versus net income of $1.0 million for the year-earlier period. Year-to-date revenues through June 30, 2003, totaled $137.7 million, compared with $125.4 million for the six months ended June 30, 2002. RevPAR for the comparable 26 hotels declined 4.3% to $54.50 from last year`s $56.96, as occupancy fell less than one point to 60.7% from 61.4%, and the average daily room rate declined 3.3% to $89.77 from $92.84. During the first six months of 2003, the hotel profit margins of the 26 comparable hotels averaged 24.3%, compared with 28.5% for the previous year. EBITDA, including the Company`s share of EBITDA from unconsolidated joint venture subsidiaries, totaled $24.0 million, an 11.9% decrease from last year`s EBITDA of $27.2 million. For the first six months of 2003, FFO of $9.1 million, or $0.52 per fully diluted share, was below last year`s FFO of $13.3 million, or $0.77 per share for the same period.
Robert W. Boykin, Chairman and Chief Executive Officer, commented, >=While the overall results for the second quarter continued to reflect the difficult hospitality market, our condominium projects at the Pink Shell continued to be a strong part of our business mix. During the quarter, we closed on three more Sanibel View Villas units, bringing the number of units sold to 57 of the 59 available. We are pleased to announce that, during July, we sold the remaining two available units. The construction of the White Sand Villas condominium project is progressing toward an anticipated completion date around year end or shortly thereafter. To date, 89 of the 92 White Sand condominium units have been pre-sold. We are now looking forward to the final phase of the redevelopment of Pink Shell.
Mr. Boykin continued, >
=We are aggressively pursuing our strategy to upgrade our hotel portfolio mix. We have sold four non-core assets so far this year for total proceeds of approximately $24.3 million, including the most recent sale of our hotel in Springfield, Oregon. We are actively identifying and pursuing opportunities to redeploy this capital, consistent with our strategy of investing in hotels in major metropolitan areas and destination resort markets.<=