LASALLE HOTEL PROPERTIES - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number 1-14045

LASALLE HOTEL PROPERTIES

(Exact name of registrant as specified in its charter)


Maryland		36-4219376
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

4800 Montgomery Lane, Suite M25, Bethesda, MD		20814
(Address of principal executive offices)		(Zip Code)

(301) 941-1500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act rule 12b-2). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common and preferred shares as of the latest practicable date.


Class		Outstanding at July 19, 2004
Common Shares of Beneficial Interest ($0.01 par value)		28,018,331
10¹/4% Series A Cumulative Redeemable Preferred Shares ($0.01 par value)		3,991,900
8³/8% Series B Cumulative Redeemable Preferred Shares ($0.01 par value)		1,100,000

TABLE OF CONTENTS


		Page

PART I	Financial Information

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38

Item 4.	Controls and Procedures	39

PART II	Other Information

Item 1.	Legal Proceedings	39

Item 2.	Changes in Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Submission of Matters to a Vote of Security Holders	39

Item 5.	Other Information	40

Item 6.	Exhibits and Reports on Form 8-K	40

	Signatures	42

PART I. Financial Information

Item 1. Financial Statements.

LASALLE HOTEL PROPERTIES

Consolidated Balance Sheets

(Dollars in thousands, except per share data)


	June 30, 2004			December 31, 2003
	*(Unaudited)*
Assets:
Investment in hotel properties, net (Note 2)	$	728,785		$	595,976
Property under development (Note 2)		18,893			14,743
Investment in joint venture (Note 2)		1,679			3,488
Cash and cash equivalents		9,452			34,761
Restricted cash reserves (Note 6)		6,058			21,988
Rent receivable		2,943			2,116
Hotel receivables (net of allowance for doubtful accounts of approximately $444 and $261, respectively)		16,698			10,593
Deferred financing costs, net		4,423			4,195
Deferred tax asset		12,041			10,424
Prepaid expenses and other assets		16,861			9,585
Assets held for sale or sold, net (Note 3)		26,982			35

Total assets	$	844,815		$	707,904

Liabilities and Shareholders’ Equity:
Borrowings under credit facilities (Note 5)	$	70,840		$	—
Bonds payable (Note 5)		42,500			42,500
Mortgage loans (including unamortized premium of zero and $2,015, respectively) (Note 5)		178,729			187,157
Accounts payable and accrued expenses (Note 6)		33,052			26,842
Advance deposits		5,966			3,202
Accrued interest		985			705
Distributions payable		5,124			4,853
Liabilities of assets held for sale or sold (Note 3)		1,176			61

Total liabilities		338,372			265,320

Minority interest in LaSalle Hotel Operating Partnership, L.P. (Note 7)		5,662			5,721
Minority interest in other partnerships		—			10

Commitments and contingencies (Note 6)		—			—

Shareholders’ Equity:
Preferred shares, $.01 par value, 20,000,000 shares authorized, 10¹/4% Series A - 3,991,900 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively (Note 7)		40			40
8³/8% Series B - 1,100,000 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively (Note 7)		11			11
Common shares of beneficial interest, $.01 par value, 100,000,000 shares authorized and 28,019,214 and 24,140,855 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively (Note 7)		280			241
Additional paid-in capital, including offering costs of $29,425 and $28,461 at June 30, 2004 and December 31, 2003, respectively		560,790			485,724
Deferred compensation		(2,796	)		(3,394	)
Accumulated other comprehensive income		1,112			—
Distributions in excess of retained earnings		(58,656	)		(45,769	)

Total shareholders’ equity		500,781			436,853

Total liabilities and shareholders’ equity	$	844,815		$	707,904

The accompanying notes are an integral part of these consolidated financial statements.

LASALLE HOTEL PROPERTIES

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)


	For the three months ended June 30,						For the six months ended June 30,
	2004			2003			2004			2003
Revenues:
Hotel operating revenues:
Room revenue	$	42,974		$	21,873		$	70,873		$	36,363
Food and beverage revenue		24,204			12,691			39,778			21,407
Other operating department revenue		6,823			4,108			10,518			5,934

Total hotel operating revenues		74,001			38,672			121,169			63,704
Participating lease revenue		4,854			5,535			8,427			10,495
Other income (Note 6)		11			394			92			797

Total revenues		78,866			44,601			129,688			74,996

Expenses:
Hotel operating expenses:
Room		10,008			5,607			18,005			10,470
Food and beverage		15,921			8,967			27,664			16,068
Other direct		3,704			2,162			6,431			3,445
Other indirect (Note 10)		19,063			10,933			34,762			19,722

Total hotel operating expenses		48,696			27,669			86,862			49,705

Depreciation and other amortization		9,678			7,772			18,723			15,594
Real estate taxes, personal property taxes and insurance		2,995			2,172			5,743			4,260
Ground rent (Note 6)		831			851			1,602			1,623
General and administrative		1,970			1,794			4,113			3,712
Amortization of deferred financing costs		556			575			1,067			1,157
Impairment of investment in hotel property		—			2,453			—			2,453
Other expenses		133			79			583			79

Total operating expenses		64,859			43,365			118,693			78,583

Operating income (loss)		14,007			1,236			10,995			(3,587	)
Interest income		78			62			151			124
Interest expense		(3,277	)		(3,029	)		(6,563	)		(5,703	)


Income (loss) before income tax benefit (expense), minority interest, equity in earnings of unconsolidated entities and discontinued operations		10,808			(1,731	)		4,583			(9,166	)
Income tax benefit (expense) (Note 11)		(1,497	)		144			1,365			2,800

Income (loss) before minority interest, equity in earnings of unconsolidated entities and discontinued operations		9,311			(1,587	)		5,948			(6,366	)
Minority interest in LaSalle Hotel Operating Partnership, L.P.		(159	)		28			(97	)		139

Income (loss) before equity in earnings of unconsolidated entities and discontinued operations		9,152			(1,559	)		5,851			(6,227	)
Equity in earnings of unconsolidated entities (Note 2)		262			324			14			117

Income (loss) before discontinued operations		9,414			(1,235	)		5,865			(6,110	)
Discontinued operations (Note 3):
Income from operations of property disposed of, including gain on disposal of $37,091		—			36,334			—			37,426
Income from operations of property held for sale		973			600			1,459			650
Minority interest, net of tax		(13	)		(817	)		(22	)		(843	)
Income tax expense (Note 11)		(142	)		(92	)		(124	)		(88	)

Net income from discontinued operations		818			36,025			1,313			37,145

Net income

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