þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the fiscal year ended December 31, 2009 | ||
OR
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from to |
Maryland | 20-1180098 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification Number) | |
6903 Rockledge Drive, Suite 800 | 20817 | |
Bethesda, Maryland | (Zip Code) | |
(Address of Principal Executive Offices) |
Title of Each Class
|
Name of Exchange on Which Registered
|
|||
Common Stock, $.01 par value | New York Stock Exchange |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
2
Item 1. | Business |
| high-quality urban- and destination resort-focused branded hotel real estate; | |
| conservative capital structure; and | |
| thoughtful asset management. |
3
| We completed a follow-on public offering of our common stock during the second quarter of 2009. The net proceeds to us, after deduction of offering costs, were approximately $82.1 million. | |
| We initiated two separate $75 million controlled equity offering programs, raising net proceeds as of December 31, 2009 of $123.1 million through the sale of 16.1 million shares of our common stock at an average price of $7.72 per share. | |
| We repaid the entire $57 million outstanding on our senior unsecured credit facility during 2009. As of December 31, 2009 we have no outstanding borrowings on our senior unsecured credit facility. | |
| We refinanced the mortgage on our Courtyard Manhattan/Midtown East hotel with a $43.0 million secured loan from Massachusetts Mutual Life Insurance Company, which matures on October 1, 2014. | |
| We repaid the $27.9 million loan secured by the Griffin Gate Marriott with corporate cash during the fourth quarter of 2009. The loan was scheduled to mature on January 1, 2010. |
4
| We repaid the $5 million loan secured by the Bethesda Marriott Suites with corporate cash during the fourth quarter of 2009. The mortgage debt was scheduled to mature in July 2010. | |
| We paid 90% of our 2009 dividend in shares of our common stock, as permitted by the Internal Revenue Services Revenue Procedure 2009-15, as amplified and superseded by Revenue Procedure 2010-12, which preserved approximately $37 million of corporate cash. | |
| We focused on minimizing capital spending during 2009. Our 2009 capital expenditures were $24.7 million, of which only $4.6 million was funded from corporate cash and the balance funded from escrow reserves. |
5
6
7
8
9
Item 1A. | Risk Factors |
10
| paying a portion of our dividend in common stock, | |
| selling one or more hotels, | |
| incurring property-level debt or | |
| issuing common stock. |
11
| dependence on business and commercial travelers and tourism, both of which vary with consumer and business confidence in the strength of the general economy; |
12
| competition from other hotels that may be located in our markets; | |
| an over-supply or over-building of hotels in our markets, which could adversely affect occupancy rates and revenues at our properties; | |
| increases in energy and transportation costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists; | |
| increases in operating costs due to inflation and other factors that may not be offset by increased room rates; and | |
| changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance. |
13
| adverse changes in international, national, regional and local economic and market conditions; | |
| changes in supply of competitive hotels; | |
| changes in interest rates and in the availability, cost and terms of debt financing; | |
| changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances; | |
| the ongoing need for capital improvements, particularly in older structures; | |
| changes in operating expenses; and | |
| civil unrest, acts of God, including earthquakes, floods, hurricanes and other natural disasters and acts of war or terrorism, including the consequences of terrorist acts such as those that occurred on September 11, 2001, which may result in uninsured losses. |
14
| construction cost overruns and delays; | |
| a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available to us on affordable terms; | |
| the renovation investment not resulting in the returns on investment that we expect; | |
| disruptions in the operations of the hotel as well as in demand for the hotel while capital improvements are underway; and | |
| disputes with franchisors/hotel managers regarding compliance with relevant management/franchise agreements. |
15
16
17
18
| certain competitors of the manager; | |
| purchasers who are insufficiently capitalized; or | |
| purchasers who might jeopardize certain liquor or gaming licenses. |
| obtain the consent of the lender; | |
| pay a fee equal to a fixed percentage of the outstanding loan balance; and | |
| pay any costs incurred by the lender in connection with any such assignment or transfer. |
19
20
21
| our cash flow from operations will be insufficient to make required payments of principal and interest; | |
| we may be vulnerable to adverse economic and industry conditions; | |
| we may be required to dedicate a substantial portion of our cash flow from operations to the repayment of our debt, thereby reducing the cash available for distribution to our stockholders, funds available for operations and capital expenditures, future investment opportunities or other purposes; | |
| the terms of any refinancing is likely not as favorable as the terms of the debt being refinanced; and | |
| the use of leverage could adversely affect our stock price and the ability to make distributions to our stockholders. |
22
| our knowledge of the contamination; | |
| the timing of the contamination; | |
| the cause of the contamination; or | |
| the party responsible for the contamination of the property. |
23
| the enactment of laws prohibiting or restricting the foreign ownership of property; | |
| laws restricting us from removing profits earned from activities within the foreign country to the United States, including the payment of distributions, i.e., nationalization of assets located within a country; | |
| variations in the currency exchange rates, mostly arising from revenues made in local currencies; | |
| change in the availability, cost and terms of mortgage funds resulting from varying national economic policies; | |
| changes in real estate and other tax rates and other operating expenses in particular countries; and | |
| more stringent environmental laws or changes in such laws. |
24
25
26
27
| the extent of investor interest in our securities; | |
| the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; | |
| the underlying asset value of our hotels; | |
| investor confidence in the stock and bond markets, generally; | |
| national and local economic conditions; | |
| changes in tax laws; | |
| our financial performance; and | |
| general stock and bond market conditions. |
Item 1B. | Unresolved Staff Comments |
28
47
74
F-33
Item 2.
Our
Properties
% Change
Number of
from 2008
Rooms
Occupancy
ADR ($)
RevPAR ($)
RevPAR
Chicago, Illinois
1,198
74.2
%
$
175.12
$
129.92
(14.8
)%
Los Angeles, California
1,004
73.5
%
106.58
78.39
(19.0
)%
Boston, Massachusetts
793
67.9
%
194.46
132.05
(6.0
)%
Atlanta, Georgia
521
60.8
%
131.96
80.25
(15.5
)%
Salt Lake City, Utah
510
52.0
%
131.66
68.40
(22.9
)%
Fort Worth, Texas
504
65.0
%
161.48
104.91
(17.9
)%
St. Thomas, U.S. Virgin Islands
502
81.6
%
212.52
173.39
(8.8
)%
Austin, Texas
492
59.4
%
146.03
86.68
(21.6
)%
Los Angeles County, California
487
73.5
%
107.82
79.22
(18.4
)%
Orlando, Florida
486
73.1
%
102.77
75.08
(12.2
)%
Lexington, Kentucky
408
62.6
%
124.57
78.00
(16.2
)%
Oak Brook, Illinois
386
43.0
%
114.92
49.47
(28.4
)%
Atlanta, Georgia
369
67.7
%
100.29
67.91
(19.3
)%
Vail, Colorado
346
56.2
%
205.19
115.30
(24.5
)%
Atlanta, Georgia
318
60.0
%
122.60
73.53
(16.6
)%
East
New York, New York
312
85.3
%
222.50
189.72
(29.0
)%
Chicago, Illinois
311
74.8
%
187.34
140.10
(22.3
)%
Bethesda, Maryland
272
63.7
%
167.61
106.83
(20.0
)%
New York, New York
185
88.7
%
232.61
206.28
(21.8
)%
Sonoma, California
182
61.9
%
193.23
119.52
(23.2
)%
9,586
67.7
%
$
154.45
$
104.60
(17.6
)%
29
Total
Year
Number of
Total
Investment
Opened
Rooms
Investment
Per Room
Chicago, Illinois
1978
1,198
$
343,446
$
286,683
Los Angeles, California
1973
1,004
134,699
134,162
Boston, Massachusetts
2006
793
351,111
442,763
Atlanta, Georgia
1983
521
132,583
254,478
Salt Lake City, Utah
1981
510
63,959
125,410
Fort Worth, Texas
1981
504
87,914
174,433
St. Thomas, U.S. Virgin Islands
1973/1984
502
91,403
182,078
Austin, Texas
1986
492
113,568
230,829
Los Angeles County, California
1985
487
76,459
157,000
Orlando, Florida
1983
486
83,851
172,533
Lexington, Kentucky
1981
408
60,583
148,488
Oak Brook, Illinois
1987
386
82,435
213,562
Atlanta, Georgia
1987
369
65,880
178,537
Vail, Colorado
1983/2002
346
70,149
202,743
Atlanta, Georgia
2000
318
41,013
128,972
New York, New York
1998
312
80,225
257,131
Chicago, Illinois
2001
311
125,599
403,855
Bethesda, Maryland
1990
272
48,918
179,846
New York, New York
1990
185
45,987
248,578
Sonoma, California
2001
182
36,817
202,291
9,586
$
2,136,599
$
222,887
30
31
32
33
34
35
36
Date of
Agreement
Initial Term
Number of Renewal Terms
6/2005
20 years
Three ten-year periods
9/2000
30 years
Two ten-year periods
6/2009
10 years
None
12/2004
21 years
Two ten-year periods
5/2004
20 years
Four ten-year periods
3/2006
32 years
Two ten-year periods
11/2005
10 years
Two five-year periods
12/2004
30 years
None
11/2004
30 years
Two ten-year periods
9/2000
30 years
Two ten-year periods
9/2000
40 years
Two ten-year periods
12/2004
20 years
One ten-year period
7/2005
30 years
None
11/2005
30 years
None
9/2000
30 years
Two ten-year periods
12/2001
30 years
Three fifteen-year periods
10/2004
20 years
One ten-year period
1/2005
40 years
None
6/2005
20 years
Three ten-year periods
6/2005
15
1
/
2
years
None
37
Base Management
Incentive
Fee(1)
Management Fee(2)
3%
20%(3)
3%
25%(4)
2.5%
10%(5)
3%
50%(6)
2.5%
20%(7)
3%
20%(8)
2.5%(9)
15%(10)
5.5%(11)
25%(12)
5%
25%(13)
3%
25%(14)
3%
25%(15)
3%
20%(16)
3%
20% or 30%(17)
3%
20% or 25%(18)
3%
25%(19)
3%
20%(20)
3%
20%(21)
3%
20%(22)
3%
20%(23)
3%
20%(24)
(1)
As a percentage of gross revenues.
(2)
Based on a percentage of hotel operating profits above a
negotiated return on our invested capital as more fully
described in the following footnotes.
(3)
Calculated as a percentage of operating profits in excess of the
sum of (i) $5.9 million and (ii) 10.75% of
certain capital expenditures.
(4)
Calculated as a percentage of operating profits in excess of the
sum of (i) $4.1 million and (ii) 10.75% of
certain capital expenditures.
(5)
Calculated as a percentage of operating profits after a pre-set
dollar amount of owners priority beginning in 2010. The
owners priority is $3.0 million in 2010,
$3.7 million on 2011, $4.2 million in 2012,
$4.7 million in 2013, $5.0 million in 2014. In 2015
and thereafter, the owners priority adjusts annually based
upon CPI. The incentive management fee cannot exceed 1.5% of
total revenue.
(6)
Calculated as a percentage of operating profits in excess of the
sum of (i) the payment of certain loan procurement costs,
(ii) 10.75% of certain capital expenditures, (iii) an
agreed-upon
return on certain expenditures and (iv) the value of
certain amounts paid into a reserve account established for the
replacement, renewal and addition of certain hotel goods. The
owners priority expires in 2027.
(7)
Calculated as a percentage of operating profits in excess of the
sum of (i) actual debt service and (ii) 15% of
cumulative and compounding return on equity, which resets with
each sale.
(8)
Calculated as 20% of net operating income before base management
fees. There is no owners priority.
(9)
The base management fee will increase to 3% for fiscal year 2010
and thereafter.
(10)
Calculated as a percentage of operating profits after a pre-set
dollar amount ($8.7 million in 2009 and $8.8 million
in 2010) of owners priority. Beginning in fiscal year
2011, the incentive management fee will be based on 103% of the
prior year cash flow.
38
(11)
The base management fee will be equal to 5.5% of gross revenues
for fiscal years 2010 through 2014 and 6% for fiscal year 2015
and thereafter until the expiration of the agreement. Beginning
in 2011, the base management fee may increase to 6.0% at the
beginning of the next fiscal year if operating profits equal or
exceed $5.0 million.
(12)
Calculated as a percentage of operating profits in excess of the
sum of (i) $5.5 million and (ii) 12% of certain
capital expenditures, less 5% of the total real estate tax bill
(for as long as the hotel is leased to a party other than the
manager).
(13)
Calculated as a percentage of operating profits in excess of the
sum of (i) $7.9 million and (ii) 10.75% of
certain capital expenditures.
(14)
Calculated as a percentage of operating profits in excess of the
sum of (i) $9.2 million and (ii) 10.75% of
certain capital expenditures.
(15)
Calculated as a percentage of operating profits in excess of the
sum of (i) $10.3 million and (ii) 10.75% of
certain capital expenditures.
(16)
Calculated as a percentage of operating profits in excess of the
sum of (i) $6.1 million and (ii) 10.75% of
certain capital expenditures.
(17)
Calculated as a percentage of operating profits in excess of the
sum of (i) $8.1 million and (ii) 10.75% of
certain capital expenditures. The percentage of operating
profits is 20% except from 2011 through 2021 when it is 30%.
(18)
Calculated as a percentage of operating profits in excess of the
sum of (i) $8.9 million and (ii) 10.75% of
certain capital expenditures. The percentage of operating
profits is 20% except from 2011 through 2021 when it is 25%.
(19)
Calculated as a percentage of operating profits in excess of the
sum of (i) $7.6 million and (ii) 10.75% of
certain capital expenditures.
(20)
Calculated as a percentage of operating profits in excess of the
sum of (i) $6.2 million and (ii) 10.75% of
capital expenditures.
(21)
Calculated as a percentage of operating profits in excess of the
sum of (i) $3.6 million and (ii) 10.75% of
capital expenditures.
(22)
Calculated as a percentage of operating profits in excess of the
sum of (i) $7.5 million and (ii) 10.75% of
certain capital expenditures.
(23)
Calculated as a percentage of operating profits in excess of the
sum of (i) $10.3 million and (ii) 10.75% of
certain capital expenditures.
(24)
Calculated as a percentage of operating profits in excess of the
sum of (i) $7.4 million and (ii) 11% of certain
capital expenditures. The incentive management fee rises to 25%
if the hotel achieves operating profits in excess of 15% of our
invested capital.
39
Date of
Initial
Agreement
Term(1)
6/2005
16 years
6% of gross room sales plus 3% of gross food and beverage sales
5/2006
20 years
7% of gross room sales plus 2% of food and beverage sales
(1)
There are no renewal options under either franchise agreement.
The Bethesda Marriott Suites hotel is subject to a ground lease
that runs until 2087. There are no renewal options.
The Courtyard Manhattan/Fifth Avenue is subject to a ground
lease that runs until 2085, inclusive of one
49-year
renewal option.
The Salt Lake City Marriott Downtown is subject to two ground
leases: one ground lease covers the land under the hotel and the
other ground lease covers the portion of the hotel that extends
into the City Creek Project. The term of the ground lease
covering the land under the hotel runs through 2056, inclusive
of our renewal options, and the term of the ground lease
covering the extension runs through 2017. In 2009, we acquired a
21% interest in the land under the hotel for approximately
$0.9 million.
The Westin Boston Waterfront is subject to a ground lease that
runs until 2099. There are no renewal options.
The golf course that is part of the Marriott Griffin Gate Resort
is subject to a ground lease covering approximately
54 acres. The ground lease runs through 2033, inclusive of
our renewal options. We have the right, beginning in 2013 and
upon the expiration of any
5-year
renewal term, to purchase the property covered by such ground
lease for an amount ranging from $27,500 to $37,500 per acre,
depending on which renewal term has expired. The ground lease
also grants us the right to purchase the leased property upon a
third party offer to purchase such property on the same terms
and conditions as the third party offer. We are also the
sub-sublessee
under another minor ground lease of land adjacent to the golf
course, with a term expiring in 2020.
The golf course that is part of the Oak Brook Hills Marriott
Resort is subject to a ground lease covering approximately
110 acres. The ground lease runs through 2045 including
renewal options.
40
Ground leases under hotel:
Bethesda Marriott Suites
Through 10/2087
$483,161(2)
Courtyard Manhattan/Fifth Avenue(3)(4)
10/2007-9/2017
$906,000
10/2017-9/2027
1,132,812
10/2027-9/2037
1,416,015
10/2037-9/2047
1,770,019
10/2047-9/2057
2,212,524
10/2057-9/2067
2,765,655
10/2067-9/2077
3,457,069
10/2077-9/2085
4,321,336
Salt Lake City Marriott
Downtown
Greater of $132,000 or 2.6%
(Ground lease for hotel)
Through-12/2056
of annual gross room sales
(Ground lease for extension)
1/2008-12/2012
$10,277
1/2013-12/2017
11,305
Westin Boston Waterfront Hotel(5) (Base Rent)
Through-5/2012
$0
6/2012-5/2016
500,000
6/2016-5/2021
750,000
6/2021-5/2026
1,000,000
6/2026-5/2031
1,500,000
6/2031-5/2036
1,750,000
6/2036-6/2099
No base rent
(Percentage Rent)
Through-6/2016
0% of annual gross revenue
7/2016-6/2026
1.0% of annual gross revenue
7/2026-6/2036
1.5% of annual gross revenue
7/2036-6/2046
2.75% of annual gross revenue
7/2046-6/2056
3.0% of annual gross revenue
7/2056-6/2066
3.25% of annual gross revenue
7/2066-6/2099
3.5% of annual gross revenue
Ground leases under parking garage:
Renaissance Worthington
Through-7/2012
$36,613
8/2012-7/2022
40,400
8/2022-7/2037
46,081
8/2037-7/2052
51,764
8/2052-7/2056
57,444
Ground leases under golf course:
Marriott Griffin Gate Resort
9/2003-8/2008
$90,750
9/2008-8/2013
99,825
9/2013-8/2018
109,800
9/2018-8/2023
120,750
9/2023-8/2028
132,750
9/2028-8/2033
147,000
Oak Brook Hills Marriott Resort
10/1985-9/2025
$1 (6)
41
(1)
These terms assume our exercise of all renewal options.
(2)
Represents rent for the year ended December 31, 2009. Rent
will increase annually by 5.5%.
(3)
The ground lease term is 49 years. We have the right to
renew the ground lease for an additional 49 year term on
the same terms then applicable to the ground lease.
(4)
The total annual rent includes the fixed rent noted in the table
plus a percentage rent equal to 5% of gross receipts for each
lease year, but only to the extent that 5% of gross receipts
exceeds the minimum fixed rent in such lease year. There was no
such percentage rent earned during the year ended
December 31, 2009.
(5)
Total annual rent under the ground lease is capped at 2.5% of
hotel gross revenues during the initial 30 years of the
ground lease.
(6)
We have the right to extend the term of this lease for two
consecutive renewal terms of ten years each with rent at then
market value.
Principal
Balance
Amortization
(in thousands)
Debt per Key
Interest Rate
Maturity Date
Provisions
$
61,422
$122,355
5.44%
August 2015
30 years
82,600
82,271
5.30%
July 2015
Interest Only
51,000
275,676
6.48%
June 2016
30 years
(1)
42,949
137,657
8.81%
October 2014
30 years
59,000
121,399
5.68%
January 2016
30 years
(2)
33,108
64,918
5.50%
January 2015
20 years
57,103
113,300
5.40%
July 2015
30 years
(3)
219,595
183,301
5.975%
April 2016
30 years
(4)
83,000
168,699
5.507%
December 2016
Interest Only
97,000
186,180
5.503%
December 2016
Interest Only
LIBOR + 1.25%
February 2011
(5)
Interest Only
$
786,777
(1)
The debt has a five-year interest only period that commenced in
May 2006. After the expiration of that period, the debt will
amortize based on a thirty-year schedule.
(2)
The debt has a five-year interest only period that commenced in
December 2005. After the expiration of that period, the debt
will amortize based on a thirty-year schedule.
42
(3)
The debt had a four-year interest only period that expired in
July 2009. The debt is currently amortizing based on a
thirty-year schedule.
(4)
The debt had a 3.5 year interest only period that expired
in October 2009. The debt is currently amortizing based on a
thirty-year schedule.
(5)
The senior unsecured credit facility matures in February 2011.
Subject to certain conditions, including being in compliance
with all financial covenants, we have a one-year extension
option that will extend the maturity to 2012.
Item 3.
Legal
Proceedings
Item 4.
Submission
of Matters to a Vote of Security Holders
Item 5.
Market
for our common stock and related stockholder
matters
Price Range
High
Low
$
15.14
$
11.50
$
14.41
$
11.72
$
12.07
$
8.65
$
9.93
$
2.63
$
5.35
$
2.67
$
7.75
$
3.61
$
7.72
$
5.28
$
8.92
$
7.26
$
9.78
$
7.90
90% of our REIT taxable income determined without regard to the
dividends paid deduction, plus;
90% of the excess of our net income from foreclosure property
over the tax imposed on such income by the U.S. Internal
Revenue Code of 1986, as amended (the Code), minus;
Any excess non-cash income.
43
Number of Securities
Remaining Available for
Number of Securities
Weighted-Average
Future Issuance Under
to be Issued Upon Exercise
Exercise Price of
Equity Compensation Plans
of Outstanding Options,
Outstanding Options,
(Excluding Securities
Warrants and Rights
Warrants and Rights
Reflected in Column (a))
(a)
(b)
(c)
300,225
$
12.59
4,881,639
300,225
$
12.59
4,881,639
44
May 25,
December 31,
December 31,
December 31,
December 31,
December 31,
2005
2005
2006
2007
2008
2009
$
100.00
$
117.58
$
185.72
$
163.19
$
59.00
$
101.97
$
100.00
$
111.73
$
151.85
$
126.32
$
78.36
$
100.78
$
100.00
$
106.07
$
122.82
$
129.58
$
81.64
$
103.24
45
Item 6.
Selected
Financial Data
Year Ended
December 31,
December 31,
December 31,
December 31,
December 31,
2009
2008
2007
2006
2005
Historical (in thousands, except for per share data)
$
365,039
$
444,070
$
456,719
$
316,051
$
149,336
177,345
211,475
217,505
143,259
63,196
33,297
37,689
36,709
25,741
14,254
575,681
693,234
710,933
485,051
226,786
97,089
105,868
104,672
73,110
36,801
124,046
145,181
147,463
96,053
47,257
231,838
257,038
253,817
182,556
95,647
2,542
695
18,317
13,987
13,818
12,403
13,462
82,729
78,156
74,315
51,192
27,072
556,561
600,925
594,085
415,314
220,239
19,120
92,309
116,848
69,737
6,547
(368
)
(1,648
)
(2,399
)
(4,650
)
(1,548
)
51,609
50,404
51,445
36,934
17,367
(359
)
(32,121
)
43,553
68,161
37,453
(9,272
)
21,031
9,376
(5,264
)
(3,750
)
1,200
(11,090
)
52,929
62,897
33,703
(8,072
)
5,412
1,508
736
$
(11,090
)
$
52,929
$
68,309
$
35,211
$
(7,336
)
46
Year Ended
December 31,
December 31,
December 31,
December 31,
December 31,
2009
2008
2007
2006
2005
Historical (in thousands, except for per share data)
$
(0.10
)
$
0 .56
$
0.66
$
0.49
$
(0.21
)
$
$
$
0.06
$
0.02
$
0.02
$
(0.10
)
$
0 .56
$
0.72
$
0.51
$
(0.19
)
$
0.33
$
0 .75
$
0.96
$
0.72
$
0.38
$
71,639
$
131,085
$
140,003
$
87,573
$
20,254
$
102,217
$
172,113
$
200,150
$
127,890
$
36,268
As of December 31,
2009
2008
2007
2006
2005
(In thousands)
$
1,862,087
$
1,920,216
$
1,938,832
$
1,686,426
$
870,562
177,380
13,830
29,773
19,691
9,432
2,215,491
2,102,536
2,131,627
1,818,965
966,011
786,777
878,353
824,526
843,771
431,177
253,208
206,551
226,819
190,266
71,446
1,175,506
1,017,632
1,080,282
784,928
463,388
(1)
Corporate expenses for the year ended December 31, 2009
include non-recurring charges of approximately $2.6 million
related to the retirement of our Executive Chairman and the
termination of our Executive Vice President and General Counsel.
(2)
We paid 90% of the 2009 dividend in shares of common stock and
the remainder in cash as permitted by the Internal Revenue
Services Revenue Procedure
2009-15.
All
of our other dividends have been paid in cash.
(3)
FFO, as defined by the National Association of Real Estate
Investment Trusts (NAREIT), is net income (loss)
determined in accordance with GAAP, excluding gains (losses)
from sales of property, plus real estate related depreciation
and amortization and after adjustments for unconsolidated
partnerships and joint ventures (which are calculated to reflect
FFO on the same basis). The calculation of FFO may vary from
entity to entity, thus our presentation of FFO may not be
comparable to other similarly titled measures of other reporting
companies. FFO is not intended to represent cash flows for the
period. FFO has not been presented as an alternative to
operating income, but as an indicator of operating performance,
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP.
Year Ended December 31,
2009
2008
2007
2006
2005
(In thousands)
$
(11,090
)
$
52,929
$
68,309
$
35,211
$
(7,336
)
82,729
78,156
75,477
52,362
27,590
(3,783
)
$
71,639
$
131,085
$
140,003
$
87,573
$
20,254
(a)
Amounts for the years ended December 31, 2007, 2006, and
2005 include $1.2 million, $1.2 million and
$0.5 million, respectively, of depreciation expense
included in discontinued operations.
(4)
EBITDA is defined as net income (loss) before interest, taxes,
depreciation and amortization. We believe it is a useful
financial performance measure for us and for our stockholders
and is a complement to net income and other financial
performance measures provided in accordance with GAAP. We use
EBITDA to measure the financial performance of our operating
hotels because it excludes expenses such as depreciation and
amortization, taxes and interest expense, which are not
indicative of operating performance. By excluding interest
expense, EBITDA measures our financial performance irrespective
of our capital structure or how we finance our properties and
operations. By excluding depreciation and amortization expense,
which can vary from hotel to hotel based on a variety of factors
unrelated to the hotels financial performance, we can more
accurately assess the financial performance of our hotels. Under
GAAP, hotels are recorded at historical cost at the time of
acquisition and are depreciated on a straight-line basis. By
excluding depreciation and amortization, we believe EBITDA
provides a basis for measuring the financial performance of
hotels unrelated to historical cost. However, because EBITDA
excludes depreciation and amortization, it does not measure the
capital we require to maintain or preserve our fixed assets. In
addition, because EBITDA does not reflect interest expense, it
does not take into account the total amount of interest we pay
on outstanding debt nor does it show trends in interest costs
due to changes in our borrowings or changes in interest rates.
EBITDA, as calculated by us, may not be comparable to EBITDA
reported by other companies that do not define EBITDA exactly as
we define the term. Because we use EBITDA to evaluate our
financial performance, we reconcile it to net income (loss)
which is the most comparable financial measure calculated and
presented in accordance with GAAP. EBITDA does not represent
cash generated from operating activities determined in
accordance with GAAP, and should not be considered as an
alternative to operating income or net income determined in
accordance with GAAP as an indicator of performance or as an
alternative to cash flows from operating activities as an
indicator of liquidity. The following is a reconciliation
between net income (loss) and EBITDA (in thousands):
Year Ended December 31,
2009
2008
2007
2006
2005
(In thousands)
$
(11,090
)
$
52,929
$
68,309
$
35,211
$
(7,336
)
51,609
50,404
51,445
36,934
17,367
(21,031
)
(9,376
)
4,919
3,383
(1,353
)
82,729
78,156
75,477
52,362
27,590
$
102,217
$
172,113
$
200,150
$
127,890
$
36,268
(a)
Amounts for the years ended December 31, 2007, 2006, and
2005 include $0.3 million, $0.4 million and
$0.2 million, respectively, of income tax benefit included
in discontinued operations.
(b)
Amounts for the years ended December 31, 2007, 2006, and
2005 include $1.2 million, $1.2 million and
$0.5 million, respectively, of depreciation expense
included in discontinued operations.
48
Item 7.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
high-quality urban- and destination resort-focused branded hotel
real estate;
conservative capital structure; and
thoughtful asset management.
49
We completed a follow-on public offering of our common stock
during the second quarter of 2009. The net proceeds to us, after
deduction of offering costs, were approximately
$82.1 million.
We initiated two separate $75 million controlled equity
offering programs, raising net proceeds as of December 31,
2009 of $123.1 million through the sale of
16.1 million shares of our common stock at an average price
of $7.72 per share.
We repaid the entire $57 million outstanding on our senior
unsecured credit facility during 2009. As of December 31,
2009, we have no outstanding borrowings on our senior unsecured
credit facility.
We refinanced the mortgage on our Courtyard Manhattan/Midtown
East hotel with a $43.0 million secured loan from
Massachusetts Mutual Life Insurance Company, which matures on
October 1, 2014.
We repaid the $27.9 million loan secured by the Griffin
Gate Marriott with corporate cash during the fourth quarter of
2009. The loan was scheduled to mature on January 1, 2010.
We repaid the $5 million loan secured by the Bethesda
Marriott Suites with corporate cash during the fourth quarter of
2009. The mortgage debt was scheduled to mature in July 2010.
We paid 90% of our 2009 dividend in shares of our common stock,
as permitted by the Internal Revenue Services Revenue
Procedure
2009-15,
as
amplified and superseded by Revenue Procedure
2010-12,
which preserved $37 million of corporate cash.
We focused on minimizing capital spending during 2009. Our 2009
capital expenditures were $24.7 million, of which only
$4.6 million was funded from corporate cash and the balance
funded from escrow reserves.
50
Occupancy percentage;
Average Daily Rate (or ADR);
Revenue Per Available Room (or RevPAR);
Earnings Before Interest, Income Taxes, Depreciation and
Amortization (or EBITDA); and
Funds From Operations (or FFO).
51
52
% Change
Number of
from 2008
Rooms
Occupancy
ADR ($)
RevPAR ($)
RevPAR
Chicago, Illinois
1,198
74.2
%
$
175.12
$
129.92
(14.8
)%
Los Angeles, California
1,004
73.5
%
106.58
78.39
(19.0
)%
Boston, Massachusetts
793
67.9
%
194.46
132.05
(6.0
)%
Atlanta, Georgia
521
60.8
%
131.96
80.25
(15.5
)%
Salt Lake City, Utah
510
52.0
%
131.66
68.40
(22.9
)%
Fort Worth, Texas
504
65.0
%
161.48
104.91
(17.9
)%
St. Thomas, U.S. Virgin Islands
502
81.6
%
212.52
173.39
(8.8
)%
Austin, Texas
492
59.4
%
146.03
86.68
(21.6
)%
Los Angeles County, California
487
73.5
%
107.82
79.22
(18.4
)%
Orlando, Florida
486
73.1
%
102.77
75.08
(12.2
)%
Lexington, Kentucky
408
62.6
%
124.57
78.00
(16.2
)%
Oak Brook, Illinois
386
43.0
%
114.92
49.47
(28.4
)%
Atlanta, Georgia
369
67.7
%
100.29
67.91
(19.3
)%
Vail, Colorado
346
56.2
%
205.19
115.30
(24.5
)%
Atlanta, Georgia
318
60.0
%
122.60
73.53
(16.6
)%
New York, New York
312
85.3
%
222.50
189.72
(29.0
)%
Chicago, Illinois
311
74.8
%
187.34
140.10
(22.3
)%
Bethesda, Maryland
272
63.7
%
167.61
106.83
(20.0
)%
New York, New York
185
88.7
%
232.61
206.28
(21.8
)%
Sonoma, California
182
61.9
%
193.23
119.52
(23.2
)%
9,586
67.7
%
$
154.45
$
104.60
(17.6
%)
Year Ended December 31,
2009
2008
% Change
$
365,039
$
444,070
(17.8
)%
177,345
211,475
(16.1
)%
33,297
37,689
(11.7
)%
$
575,681
$
693,234
(17.0
)%
53
Year Ended December 31,
2009
2008
% Change
$
86.7
$
96.2
(9.9
)%
65.5
73.0
(10.3
)%
48.2
54.7
(11.9
)%
47.7
59.1
(19.3
)%
29.6
35.2
(15.9
)%
21.8
27.4
(20.4
)%
29.2
35.7
(18.2
)%
19.6
24.6
(20.3
)%
23.3
28.2
(17.4
)%
30.5
38.3
(20.4
)%
22.6
31.7
(28.7
)%
20.8
25.1
(17.1
)%
20.7
27.8
(25.5
)%
19.5
24.9
(21.7
)%
13.9
18.1
(23.2
)%
20.8
24.4
(14.8
)%
14.7
18.3
(19.7
)%
14.1
18.0
(21.7
)%
14.1
17.6
(19.9
)%
12.4
14.9
(16.8
)%
$
575.7
$
693.2
(17.0
)%
Year Ended December 31,
2009
2008
% Change
67.7
%
71.8
%
(4.1) percentage points
$
154.45
$
176.73
(12.6)%
$
104.60
$
126.95
(17.6)%
54
Year Ended
Year Ended
December 31, 2009
December 31, 2008
$ in millions
% of Total
$ in millions
% of Total
$
92.9
25.5
%
$
131.1
29.5
%
134.1
36.7
%
163.5
36.8
%
138.0
37.8
%
149.5
33.7
%
$
365.0
100.0
%
$
444.1
100.0
%
Year Ended December 31,
2009
2008
% Change
$
97.1
$
105.9
(8.3
)%
124.0
145.2
(14.6
)%
29.8
31.8
(6.3
)%
51.9
57.1
(9.1
)%
24.5
27.8
(11.9
)%
28.6
30.4
(5.9
)%
42.1
47.6
(11.6
)%
15.3
18.9
(19.0
)%
4.3
9.7
(55.7
)%
25.8
23.9
8.0
%
1.9
2.0
(5.0
)%
7.7
7.8
(1.3
)%
$
453.0
$
508.1
(10.8
)%
55
56
Year Ended December 31,
2008
2007
% Change
$
444,070
$
456,719
(2.8
)%
211,475
217,505
(2.8
)%
37,689
36,709
2.7
%
$
693,234
$
710,933
(2.5
)%
Year Ended December 31,
2008
2007
% Change
71.8
%
74.0
%
(2.2) percentage points
$
176.73
$
177.49
(0.4)%
$
126.95
$
131.33
(3.3)%
57
Year Ended December 31,
2008
2007
% Change
$
105.9
$
104.7
1.1
%
145.2
147.5
(1.6
)%
31.8
30.0
6.0
%
57.1
58.1
(1.7
)%
27.8
26.1
6.5
%
30.4
29.4
3.4
%
47.6
47.4
0.4
%
18.9
19.5
(3.1
)%
(0.8
)
(100.0
)%
9.7
11.1
(12.6
)%
23.9
23.3
2.6
%
2.0
1.9
5.3
%
7.8
7.8
0.0
%
$
508.1
$
506.0
0.4
%
58
$
6,483
1,284
3,783
345
$
5,412
59
We completed a follow-on public offering of our common stock
during the second quarter of 2009. The net proceeds to us, after
deduction of offering costs, were approximately
$82.1 million.
We initiated two separate $75 million controlled equity
offering programs, raising net proceeds as of December 31,
2009 of $123.1 million through the sale of
16.1 million shares of our common stock at an average price
of $7.72 per share.
We repaid the entire $57 million outstanding on our senior
unsecured credit facility during 2009. As of December 31,
2009, we have no outstanding borrowings on our senior unsecured
credit facility.
We refinanced the mortgage on our Courtyard Manhattan/Midtown
East hotel with a $43.0 million secured loan from
Massachusetts Mutual Life Insurance Company, which matures on
October 1, 2014.
We repaid the $27.9 million loan secured the Griffin Gate
Marriott with corporate cash during the fourth quarter of 2009.
The loan was scheduled to mature on January 1, 2010.
We repaid the $5 million loan secured by the Bethesda
Marriott Suites with corporate cash during the fourth quarter of
2009. The mortgage debt was scheduled to mature in July 2010.
We paid 90% of our 2009 dividend in shares of our common stock,
as permitted by the Internal Revenue Services Revenue
Procedure
2009-15,
as
amplified and superseded by Revenue Procedure
2010-12,
which preserved $37 million of corporate cash.
We focused on minimizing capital spending during 2009. Our 2009
capital expenditures were $24.7 million, of which only
$4.6 million was funded from corporate cash and the balance
funded from escrow reserves.
60
Leverage Ratio
60% or Greater
55% to 60%
50% to 55%
Less Than 50%
0.65
%
0.45
%
0.25
%
0.00
%
1.55
%
1.45
%
1.25
%
0.95
%
Actual at
December 31,
Covenant
2009
65%
50.3%
1.6x
1.76x
$892.3 million
$1.5 billion
35%
0.0%
(1)
Maximum leverage ratio is determined by dividing the
total debt outstanding by the net asset value of our corporate
assets and hotels. Hotel level net asset values are calculated
based on the application of a contractual capitalization rate
(which range from 7.5% to 8.0%) to the trailing twelve month
hotel net operating income.
(2)
Tangible net worth is defined as the gross book
value of our real estate assets and other corporate assets less
our total debt and all other corporate liabilities.
61
Actual at
December 31,
Covenant
2009
1.5x
N/A
65%
0.0%
4
10
$150 million
$529.0 million
90%
100%
EBITDA Change from 2009
Covenant
-5%
-10%
-15%
-20%
65
%
53
%
55
%
58
%
62
%
1.6
x
1.7
x
1.5
x
1.4
x
1.4x
62
63
90% of our REIT taxable income determined without regard to the
dividends paid deduction, plus
90% of the excess of our net income from foreclosure property
over the tax imposed on such income by the Code, minus
any excess non-cash income.
64
Dividend per
Share
December 21, 2006
$
0.18
March 23, 2007
$
0.24
June 15, 2007
$
0.24
September 7, 2007
$
0.24
December 31, 2007
$
0.24
March 21, 2008
$
0.25
June 13, 2008
$
0.25
September 5, 2008
$
0.25
December 28, 2009
$
0.33
65
Year Ended
2009
2008
2007
(In thousands)
$
(11,090
)
$
52,929
$
68,309
51,609
50,404
51,445
(21,031
)
(9,376
)
4,919
82,729
78,156
75,477
$
102,217
$
172,113
$
200,150
(1)
Amounts for the year ended December 31, 2007 include
$0.3 million of income tax benefit included in discontinued
operations.
(2)
Amounts for the year ended December 31, 2007 include
$1.2 million of depreciation expense included in
discontinued operations.
Year Ended December 31,
2009
2008
2007
(In thousands)
$
(11,090
)
$
52,929
$
68,309
82,729
78,156
75,477
(3,783
)
$
71,639
$
131,085
$
140,003
(1)
Amounts for the year ended December 31, 2007 include
$1.2 million of depreciation expense included in
discontinued operations.
66
67
Payments Due by Period
Less Than
1 to 3
4 to 5
Total
1 Year
Years
Years
After 5 Years
(In thousands)
$
1,064,494
$
52,417
$
107,084
$
148,031
$
756,962
645,570
3,486
5,572
5,000
631,512
$
1,710,064
$
55,903
$
112,656
$
153,031
$
1,388,474
Item 7a.
Quantitative
and Qualitative Disclosures About Market Risk and Risk
Factors
68
Item 8.
Financial
Statements and Supplementary Data
Item 9.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 9A.
Controls
and Procedures
Item 9B.
Other
Information
Item 10.
Directors
and Executive Officers of the Registrant
Item 11.
Executive
Compensation
Item 12.
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Item 13.
Certain
Relationships and Related Transactions
Item 14.
Principal
Accounting Fees and Services
69
Item 15.
Exhibits
and Financial Statement Schedules
70
By:
Title:
Executive Vice President, General
By:
Title:
Chief Executive Officer
By:
Title:
President and Chief Operating Officer and Director
By:
Title:
Executive Vice President and
Chief Financial Officer
By:
Title:
Chairman
71
Title:
Director
By:
Title:
Lead Director
By:
Title:
Director
By:
Title:
Director
72
Exhibit
3
.1.1
Articles of Amendment and Restatement of the Articles of
Incorporation of DiamondRock Hospitality Company
(
incorporated by reference to the Registrants
Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123065)
)
3
.1.2
Amendment to the Articles of Amendment and Restatement of the
Articles of Incorporation of DiamondRock Hospitality Company
(
incorporated by reference to the Registrants Current
Report on
Form 8-K
filed with the Securities and Exchange Commission on
January 10, 2007
)
3
.2.1
Third Amended and Restated Bylaws of DiamondRock Hospitality
Company (
incorporated by reference to the Registrants
Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 17, 2009
)
4
.1
Form of Certificate for Common Stock for DiamondRock Hospitality
Company (
incorporated by reference to the Registrants
Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123065)
)
10
.1
Agreement of Limited Partnership of DiamondRock Hospitality
Limited Partnership, dated as of June 4, 2004
(
incorporated by reference to the Registrants Quarterly
Report on
Form 10-Q/A
filed with the Securities and Exchange Commission on
December 7, 2009
)
10
.2
Form of Hotel Management Agreement (
incorporated by reference
to the Registrants Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123065)
)
10
.3
Form of TRS Lease (
incorporated by reference to the
Registrants Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123065)
)
10
.4*
2004 Stock Option and Incentive Plan (
incorporated by
reference to the Registrants Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123065)
)
10
.5*
Form of Restricted Stock Award Agreement (
incorporated by
reference to the Registrants Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123065)
)
10
.6*
Form of Incentive Stock Option Agreement (
incorporated by
reference to the Registrants Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123065)
)
10
.7*
Form of Non-Qualified Stock Option Agreement (
incorporated by
reference to the Registrants Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123065)
)
10
.8*
Form of Deferred Stock Award Agreement (
incorporated by
reference to the Registrants Registration Statement on
Form S-11
filed with the Securities and Exchange Commission (File
no. 333-123809
)
10
.9
Amended and Restated Credit Agreement, dated as of
February 28, 2007 by and among DiamondRock Hospitality
Limited Partnership, DiamondRock Hospitality Company, Wachovia
Bank, National Association, as Agent, Wachovia Capital Markets,
LLC, as Sole Lead Arranger and as Book Manager, each of Bank of
America, N.A., Calyon New York Branch and The Royal Bank Of
Scotland PLC, as a Syndication Agent, and Citicorp North
America, Inc., as Documentation Agent (
incorporated by
reference to the Registrants Quarterly Report on
Form 10-Q/A
filed with the Securities and Exchange Commission on
December 7, 2009
)
10
.10*
Form of Severance Agreement, dated as of March 9, 2007
(
incorporated by reference to the Registrants Current
Report on
Form 8-K
filed with the Securities and Exchange Commission on
March 9, 2007
)
10
.11*
Form of Stock Appreciation Right (
incorporated by reference
to the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on May 6,
2008
)
10
.12*
Form of Dividend Equivalent Right (
incorporated by reference
to the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on May 6,
2008
)
73
Exhibit
10
.13
First Amendment to Amended and Restated Credit Agreement, dated
as of December 15, 2008 by and among DiamondRock
Hospitality Limited Partnership, DiamondRock Hospitality
Company, Wachovia Bank, National Association, as Agent, Wachovia
Capital Markets, LLC, as Sole Lead Arranger and as Book Manager,
each of Bank of America, N.A., KeyBank National Association and
The Royal Bank Of Scotland PLC, as a Syndication Agent, and
Citigroup North America, Inc., as Documentation Agent and Wells
Fargo, National Association and Merrill Lynch Bank USA, as
lenders (
incorporated by reference to the Registrants
Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 15, 2008
)
10
.14*
Form of Amendment No. 1 to Dividend Equivalent Rights
Agreement under the DiamondRock Hospitality Company 2004 Stock
Option and Incentive Plan (
incorporated by reference to the
Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 30, 2008
)
10
.15
Purchase Agreement, dated April 13, 2009, by and among
DiamondRock Hospitality Company, DiamondRock Hospitality Limited
Partnership, and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, and Wachovia
Capital Markets, LLC (
incorporated by reference to the
Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
April 15, 2009
)
10
.16
Sales Agreement, dated July 27, 2009, by and among
DiamondRock Hospitality Company, DiamondRock Hospitality Limited
Partnership, and Cantor Fitzgerald & Co.
(
incorporated by reference to the Registrants Quarterly
Report on
Form 10-Q/A
filed with the Securities and Exchange Commission on
December 7, 2009
)
10
.17
Sales Agreement, dated October 19, 2009, by and among
DiamondRock Hospitality Company, DiamondRock Hospitality Limited
Partnership, and Cantor Fitzgerald & Co.
(
incorporated by reference to the Registrants Quarterly
Report on
Form 10-Q/A
filed with the Securities and Exchange Commission on
December 7, 2009
)
10
.18*
Form of Indemnification Agreement (
incorporated by reference
to the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 16, 2009
)
10
.19
Severance Letter, dated as of December 16, 2009, by and
between DiamondRock Hospitality Company and Michael D. Schecter
(
incorporated by reference to the Registrants Current
Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 16, 2009
)
10
.20*
Letter Agreement, dated as of December 9, 2009, by and
between DiamondRock Hospitality Company and William J. Tennis
10
.21*
Form of Severance Agreement
12
.1
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends
21
.1
List of DiamondRock Hospitality Company Subsidiaries
23
.1
Consent of KPMG LLP
31
.1
Certification of Chief Executive Officer Required by
Rule 13a-14(a)
of the Securities Exchange Act of 1934, as amended.
31
.2
Certification of Chief Financial Officer Required by
Rule 13a-14(a)
of the Securities Exchange Act of 1934, as amended.
32
.1
Certification of Chief Executive Officer and Chief Financial
Officer Required by
Rule 13a-14(b)
of the Securities Exchange Act of 1934, as amended.
*
Exhibit is a management contract or compensatory plan or
arrangement.
INDEX TO FINANCIAL STATEMENTS
Page
F-2
F-3
F-5
F-6
F-7
F-8
F-9
F-32
F-1
F-2
F-3
F-4
F-5
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2009, 2008 and
2007
2009
2008
2007
(In thousands, except share amounts)
$
365,039
$
444,070
$
456,719
177,345
211,475
217,505
33,297
37,689
36,709
575,681
693,234
710,933
97,089
105,868
104,672
124,046
145,181
147,463
19,556
28,569
29,764
212,282
228,469
224,053
2,542
695
82,729
78,156
74,315
18,317
13,987
13,818
556,561
600,925
594,085
19,120
92,309
116,848
(368
)
(1,648
)
(2,399
)
51,609
50,404
51,445
(359
)
51,241
48,756
48,687
(32,121
)
43,553
68,161
21,031
9,376
(5,264
)
(11,090
)
52,929
62,897
5,412
$
(11,090
)
$
52,929
$
68,309
$
(0.10
)
$
0.56
$
0.66
0.06
$
(0.10
)
$
0.56
$
0.72
107,404,074
93,064,790
94,199,814
107,404,074
93,116,162
94,265,245
F-6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY
Years Ended December 31, 2009, 2008 and
2007
Common Stock
Additional
Accumulated
Shares
Par Value
Paid-In Capital
Deficit
Total
(In thousands, except share amounts)
76,191,632
$
762
$
826,918
$
(42,752
)
$
784,928
18,342,500
183
317,372
317,555
358
(91,733
)
(91,375
)
196,681
2
863
865
68,309
68,309
94,730,813
$
947
$
1,145,511
$
(66,176
)
$
1,080,282
(4,800,000
)
(48
)
(48,776
)
(48,824
)
437
(70,563
)
(70,126
)
119,451
2
3,369
3,371
52,929
52,929
90,050,264
$
901
$
1,100,541
$
(83,810
)
$
1,017,632
(749
)
(749
)
(41,890
)
(41,890
)
280,265
3
6,625
6,628
33,968,894
339
204,636
204,975
(11,090
)
(11,090
)
124,299,423
$
1,243
$
1,311,053
$
(136,790
)
$
1,175,506
F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2009, 2008 and
2007
2009
2008
2007
(In thousands)
$
(11,090
)
$
52,929
$
68,309
82,729
78,156
75,477
145
164
172
930
808
779
7,720
7,755
7,823
(3,783
)
2,542
695
(359
)
(1,720
)
(1,720
)
(1,807
)
(564
)
(557
)
(392
)
797
1,803
(894
)
6,937
3,981
3,584
(21,566
)
(10,128
)
2,952
(430
)
(2,183
)
(347
)
10,513
1,773
(6,795
)
520
(1,773
)
1,217
3,872
(1,196
)
959
80,538
129,501
148,698
(331,325
)
35,405
(874
)
(24,692
)
(65,116
)
(56,412
)
5,000
5,250
(2,465
)
3,449
(4,210
)
(28,031
)
(56,667
)
(351,292
)
43,000
5,000
(73,409
)
(18,392
)
(57,000
)
(116,000
)
(108,000
)
173,000
108,000
(4,167
)
(3,173
)
(3,233
)
(1,972
)
(1,219
)
(123
)
(1,237
)
205,642
317,935
(667
)
(380
)
(1,057
)
(49,434
)
(2,720
)
(80
)
(93,047
)
(82,325
)
111,043
(88,777
)
212,676
163,550
(15,943
)
10,082
13,830
29,773
19,691
$
177,380
$
13,830
$
29,773
$
47,595
$
49,614
$
50,560
$
1,023
$
1,080
$
1,867
$
19
$
259
$
50
$
41,810
$
$
22,922
F-8
1.
Organization
2.
Summary
of Significant Accounting Policies
F-9
F-10
F-11
F-12
3.
Property
and Equipment
December 31,
December 31,
2009
2008
$
220,445
$
219,590
7,994
7,994
1,671,821
1,658,227
270,042
259,154
1,009
1,651
2,171,311
2,146,616
(309,224
)
(226,400
)
$
1,862,087
$
1,920,216
4.
Favorable
Lease Assets
As of December 31,
As of December 31,
2009
2008
Carrying
Carrying
Amount
Fair Value
Amount
Fair Value
(In thousands)
(In thousands)
$
9,513
$
9,513
$
12,055
$
12,055
F-13
5.
Capital
Stock
F-14
6.
Stock
Incentive Plan
Weighted-Average
Number of
Grant Date Fair
Shares
Value
461,527
$
12.57
199,885
17.99
(314,787
)
11.27
346,625
16.88
406,767
10.92
(147,583
)
16.31
605,809
13.02
1,517,435
2.82
(7,184
)
14.61
(396,684
)
9.77
1,719,376
$
4.76
F-15
Weighted-Average
Number of
Grant Date Fair
SARs/DERs
Value
300,225
$
6.62
300,225
6.62
300,225
$
6.62
F-16
7.
(Loss)
Earnings Per Share
F-17
2009
2008
2007
$
(11,090
)
$
52,929
$
68,309
(389
)
(483
)
$
(11,090
)
$
52,540
$
67,826
(5,412
)
$
( 11,090
)
$
52,540
$
62,414
107,404,074
93,064,790
94,199,814
(0.10
)
$
0.56
$
0.66
0.06
$
(0.10
)
$
0.56
$
0.72
$
(11,090
)
$
52,929
$
68,309
(389
)
(483
)
$
(11,090
)
$
52,540
$
67,826
(5,412
)
$
(11,090
)
$
52,540
$
62,414
107,404,074
93,064,790
94,199,814
51,372
65,431
107,404,074
93,116,162
94,265,245
$
(0.10
)
$
0.56
$
0.66
0.06
$
(0.10
)
$
0.56
$
0.72
F-18
8.
Debt
Maturity
Amortization
Principal Balance
Debt per Key
Interest Rate
Date
Provisions
(In thousands)
$
61,422
$
122,355
5.44%
August 2015
30 years
82,600
82,271
5.30%
July 2015
Interest Only
51,000
275,676
6.48%
June 2016
30 years
(1)
42,949
137,657
8.81%
October 2014
30 years
59,000
121,399
5.68%
January 2016
30 years
(2)
33,108
64,918
5.50%
January 2015
20 years
57,103
113,300
5.40%
July 2015
30 years
(3)
219,595
183,301
5.975%
April 2016
30 years
(4)
83,000
168,699
5.507%
December 2016
Interest Only
97,000
186,180
5.503%
December 2016
Interest Only
LIBOR + 1.25%
February 2011
(5)
Interest Only
$
786,777
5.86%
(1)
The debt has a five-year interest only period that commenced in
May 2006. After the expiration of that period, the debt will
amortize based on a thirty-year schedule.
(2)
The debt has a five-year interest only period that commenced in
December 2005. After the expiration of that period, the debt
will amortize based on a thirty-year schedule.
(3)
The debt had a four-year interest only period that expired in
July 2009. The debt is currently amortizing based on a
thirty-year schedule.
F-19
(4)
The debt had a 3.5 year interest only period that expired
in October 2009. The debt is currently amortizing based on a
thirty-year schedule.
(5)
The senior unsecured credit facility matures in February 2011.
The Company has a one year extension option that will extend the
maturity to 2012.
$
5,902
7,257
7,930
8,486
50,081
707,121
$
786,777
F-20
Leverage Ratio
60% or Greater
55% to 60%
50% to 55%
Less Than 50%
0.65
%
0.45
%
0.25
%
0.00
%
1.55
%
1.45
%
1.25
%
0.95
%
Actual at
December 31,
Covenant
2009
65%
50.3%
1.6x
1.76x
$892.3 million
$1.5 billion
Unhedged floating rate debt as a
percentage of total indebtedness
35%
0.0%
(1)
Maximum leverage ratio is determined by dividing the
total debt outstanding by the net asset value of our corporate
assets and hotels. Hotel level net asset values are calculated
based on the application of a contractual capitalization rate
(which range from 7.5% to 8.0%) to the trailing twelve month
hotel net operating income.
(2)
Tangible net worth is defined as the gross book
value of the Companys real estate assets and other
corporate assets less the Companys total debt and all
other corporate liabilities.
Actual at
December 31,
Covenant
2009
1.5x
N/A
65%
0.0%
4
10
$150 million
$529.0 million
Percentage of total asset value owned by borrowers or
guarantors
90%
100%
F-21
9.
Discontinued
Operations
Year Ended
December 31,
2007
$
6,483
1,284
3,783
345
$
5,412
10.
Dividends
Dividend per
Share
March 21, 2008
$
0.25
June 13, 2008
$
0.25
September 5, 2008
$
0.25
December 28, 2009
$
0.33
11.
Income
Taxes
F-22
Year Ended
December 31,
December 31,
December 31,
2009
2008
2007
$
$
$
901
535
665
752
87
314
535
752
1,967
(17,299
)
(8,330
)
1,803
(3,882
)
(1,978
)
426
(385
)
180
723
(21,566
)
(10,128
)
2,952
$
(21,031
)
$
(9,376
)
$
4,919
(1)
Amounts for the year ended December 31, 2007 includes
$0.3 million of income tax benefit included in discontinued
operations.
Year Ended
December 31,
December 31,
December 31,
2009
2008
2007
$
(11,243
)
$
15,663
$
23,856
(7,757
)
(24,565
)
(20,353
)
(2,176
)
(854
)
766
(126
)
267
1,037
271
113
(42
)
$
(21,031
)
$
(9,376
)
$
5,264
F-23
December 31,
December 31,
2009
2008
$
7,824
$
8,065
41,213
16,208
3,017
3,017
52,054
27,290
(4,260
)
(4,260
)
(19,137
)
(16,123
)
(23,397
)
(20,383
)
$
28,657
$
6,907
12.
Relationships
with Managers
F-24
Date of
Initial
Agreement
Term
Number of Renewal Terms
6/2005
20 years
Three ten-year periods
9/2000
30 years
Two ten-year periods
6/2009
10 years
None
12/2004
21 years
Two ten-year periods
5/2004
20 years
Four ten-year periods
3/2006
32 years
Two ten-year periods
11/2005
10 years
Two five-year periods
12/2004
30 years
None
11/2004
30 years
Two ten-year periods
9/2000
30 years
Two ten-year periods
9/2000
40 years
Two ten-year periods
12/2004
20 years
One ten-year period
7/2005
30 years
None
11/2005
30 years
None
9/2000
30 years
Two ten-year periods
12/2001
30 years
Three fifteen-year periods
10/2004
20 years
One ten-year period
1/2005
40 years
None
6/2005
20 years
Three ten-year periods
6/2005
15
1
/
2
years
None
F-25
Base Management
Incentive
Fee(1)
Management Fee(2)
3
%
20%(3)
3
%
25%(4)
2.5
%
10%(5)
3
%
50%(6)
2.5
%
20%(7)
3
%
20%(8)
2.5
%(9)
15%(10)
5.5
%(11)
25%(12)
5
%
25%(13)
3
%
25%(14)
3
%
25%(15)
3
%
20%(16)
3
%
20% or 30%(17)
3
%
20% or 25%(18)
3
%
25%(19)
3
%
20%(20)
3
%
20%(21)
3
%
20%(22)
3
%
20%(23)
3
%
20%(24)
(1)
As a percentage of gross revenues.
(2)
Based on a percentage of hotel operating profits above a
negotiated return on our invested capital as more fully
described in the following footnotes.
(3)
Calculated as a percentage of operating profits in excess of the
sum of (i) $5.9 million and (ii) 10.75% of
certain capital expenditures.
(4)
Calculated as a percentage of operating profits in excess of the
sum of (i) $4.1 million and (ii) 10.75% of
certain capital expenditures.
(5)
Calculated as a percentage of operating profits after a pre-set
dollar amount of owners priority beginning in 2010. The
owners priority is $3.0 million in 2010,
$3.7 million on 2011, $4.2 million in 2012,
$4.7 million in 2013, $5.0 million in 2014. In 2015
and thereafter, the owners priority adjusts annually based
upon CPI. The incentive management fee cannot exceed 1.5% of
total revenue.
(6)
Calculated as a percentage of operating profits in excess of the
sum of (i) the payment of certain loan procurement costs,
(ii) 10.75% of certain capital expenditures, (iii) an
agreed-upon
return on certain expenditures and (iv) the value of
certain amounts paid into a reserve account established for the
replacement, renewal and addition of certain hotel goods. The
owners priority expires in 2027.
(7)
Calculated as a percentage of operating profits in excess of the
sum of (i) actual debt service and (ii) 15% of
cumulative and compounding return on equity, which resets with
each sale.
(8)
Calculated as 20% of net operating income before base management
fees. There is no owners priority.
(9)
The base management fee will increase to 3% for fiscal year 2010
and thereafter.
F-26
(10)
Calculated as a percentage of operating profits after a pre-set
dollar amount ($8.7 million in 2009 and $8.8 million
in 2010) of owners priority. Beginning in fiscal year
2011, the incentive management fee will be based on 103% of the
prior year cash flow.
(11)
The base management fee will be equal to 5.5% of gross revenues
for fiscal years 2010 through 2014 and 6% for fiscal year 2015
and thereafter until the expiration of the agreement. Beginning
in 2011, the base management fee may increase to 6.0% at the
beginning of the next fiscal year if operating profits equal or
exceed $5.0 million.
(12)
Calculated as a percentage of operating profits in excess of the
sum of (i) $5.5 million and (ii) 12% of certain
capital expenditures, less 5% of the total real estate tax bill
(for as long as the hotel is leased to a party other than the
manager).
(13)
Calculated as a percentage of operating profits in excess of the
sum of (i) $7.9 million and (ii) 10.75% of
certain capital expenditures.
(14)
Calculated as a percentage of operating profits in excess of the
sum of (i) $9.2 million and (ii) 10.75% of
certain capital expenditures.
(15)
Calculated as a percentage of operating profits in excess of the
sum of (i) $10.3 million and (ii) 10.75% of
certain capital expenditures.
(16)
Calculated as a percentage of operating profits in excess of the
sum of (i) $6.1 million and (ii) 10.75% of
certain capital expenditures.
(17)
Calculated as a percentage of operating profits in excess of the
sum of (i) $8.1 million and (ii) 10.75% of
certain capital expenditures. The percentage of operating
profits is 20% except from 2011 through 2021 when it is 30%.
(18)
Calculated as a percentage of operating profits in excess of the
sum of (i) $8.9 million and (ii) 10.75% of
certain capital expenditures. The percentage of operating
profits is 20% except from 2011 through 2021 when it is 25%.
(19)
Calculated as a percentage of operating profits in excess of the
sum of (i) $7.6 million and (ii) 10.75% of
certain capital expenditures.
(20)
Calculated as a percentage of operating profits in excess of the
sum of (i) $6.2 million and (ii) 10.75% of
capital expenditures.
(21)
Calculated as a percentage of operating profits in excess of the
sum of (i) $3.6 million and (ii) 10.75% of
capital expenditures.
(22)
Calculated as a percentage of operating profits in excess of the
sum of (i) $7.5 million and (ii) 10.75% of
certain capital expenditures.
(23)
Calculated as a percentage of operating profits in excess of the
sum of (i) $10.3 million and (ii) 10.75% of
certain capital expenditures.
(24)
Calculated as a percentage of operating profits in excess of the
sum of (i) $7.4 million and (ii) 11% of certain
capital expenditures. The incentive management fee rises to 25%
if the hotel achieves operating profits in excess of 15% of our
invested capital.
F-27
Date of
Initial
Agreement
Term(1)
6/2005
16 years
6% of gross room sales plus 3% of gross food and beverage sales
5/2006
20 years
7% of gross room sales plus 2% of food and beverage sales
(1)
There are no renewal options under either franchise agreement.
13.
Commitments
and Contingencies
F-28
The Bethesda Marriott Suites is subject to a ground lease that
runs until 2087. There are no renewal options.
The Courtyard Manhattan/Fifth Avenue is subject to a ground
lease that runs until 2085, inclusive of one
49-year
renewal option.
The Salt Lake City Marriott Downtown is subject to two ground
leases: one ground lease covers the land under the hotel and the
other ground lease covers the portion of the hotel that extends
into the Crossroads Plaza Mall. The term of the ground lease
covering the land under the hotel runs through 2056, inclusive
of our renewal options, and the term of the ground lease
covering the extension runs through 2017. In 2009, we acquired a
21% interest in the land under the hotel for approximately
$0.9 million. This gives us the right of first refusal in
the event that the other owners want to sell their interests in
the entity and the right to veto the sale of the land to a third
party.
The Westin Boston Waterfront is subject to a ground lease that
runs until 2099. There are no renewal options.
The golf course which is part of the Marriott Griffin Gate
Resort is subject to a ground lease covering approximately
54 acres. The ground lease runs through 2033, inclusive of
our renewal options. We have the right, beginning in 2013 and
upon the expiration of any
5-year
renewal term, to purchase the property covered by such ground
lease for an amount ranging from $27,500 to $37,500 per acre,
depending on which renewal term has expired. The ground lease
also grants us the right to purchase the leased property upon a
third party offer to purchase such property on the same terms
and conditions as the third party offer. We are also the
sub-sublessee
under another minor ground lease of land adjacent to the golf
course, with a term expiring in 2020.
The golf course which is part of the Oak Brook Hills Marriott
Resort is subject to a ground lease covering approximately
110 acres. The ground lease runs through 2045 including
renewal options.
F-29
3,486
2,845
2,727
2,571
2,429
631,512
$
645,570
14.
Fair
Value of Financial Instruments
As of December 31,
As of December 31,
2009
2008
Carrying
Carrying
Amount
Fair Value
Amount
Fair Value
(In thousands)
(In thousands)
$
786,777
$
670,936
$
878,353
$
750,899
15.
Segment
Information
Revenues
Investment
2009
2008
2007
2009
2008
2007
(In thousands)
(In thousands)
$
128,125
$
148,254
$
159,062
$
551,481
$
542,628
$
519,859
68,484
84,176
84,138
211,158
209,130
206,648
56,746
68,425
73,381
239,475
237,307
233,947
65,517
72,993
68,879
351,111
350,010
339,391
48,159
54,729
54,725
91,403
87,138
86,030
36,672
49,730
50,313
126,213
124,956
123,940
171,978
214,927
220,435
565,758
559,294
543,148
$
575,681
$
693,234
$
710,933
$
2,136,599
$
2,110,463
$
2,052,963
F-30
16.
Quarterly
Operating Results (Unaudited)
2009 Quarter Ended
March 27
June 19
September 11
December 31
(In thousands, except per share data)
$
118,544
$
143,607
$
137,800
$
175,730
$
118,400
$
133,484
$
130,589
$
174,088
$
144
$
10,123
$
7,211
$
1,642
$
(5,293
)
$
2,457
$
761
$
(9,015
)
$
(0.06
)
$
0.02
$
0.01
$
(0.07
)
2008 Quarter Ended
March 23
June 15
September 7
December 31
(In thousands, except per share data)
$
132,863
$
181,016
$
161,395
$
217,960
$
121,152
$
147,277
$
140,841
$
191,655
$
11,711
$
33,739
$
20,554
$
26,305
$
5,177
$
21,755
$
12,212
$
13,785
$
0.05
$
0.23
$
0.13
$
0.15
F-31
Schedule III Real Estate and
Accumulated Depreciation
As of December 31, 2009 (in thousands)
Costs
Initial Cost
Capitalized
Gross Amount at End of Year
Building and
Subsequent to
Building and
Accumulated
Net Book
Year of
Depreciation
Encumbrances
Land
Improvements
Acquisition
Land
Improvements
Total
Depreciation
Value
Acquisition
Life
$
$
3,951
$
22,720
$
251
$
3,951
$
22,971
$
26,922
$
(4,170
)
$
22,752
2004
40 Years
(42,949
)
16,500
54,812
1,246
16,500
56,058
72,558
(7,056
)
65,502
2004
40 Years
(33,108
)
45,815
2,058
855
47,018
47,873
(5,870
)
42,003
2004
40 Years
(51,000
)
34,685
1,790
36,475
36,475
(4,597
)
31,878
2004
40 Years
7,869
33,352
2,123
7,869
35,475
43,344
(4,418
)
38,926
2004
40 Years
45,656
1,052
46,708
46,708
(5,823
)
40,885
2004
40 Years
7,241
48,232
3,791
7,241
52,023
59,264
(6,422
)
52,842
2005
40 Years
3,623
33,503
239
3,623
33,742
37,365
(3,828
)
33,537
2005
40 Years
(61,422
)
17,713
50,697
1,979
17,713
52,676
70,389
(5,834
)
64,555
2005
40 Years
(82,600
)
24,100
83,077
3,502
24,100
86,579
110,679
(9,721
)
100,958
2005
40 Years
(57,103
)
15,500
63,428
948
15,500
64,376
79,876
(7,236
)
72,640
2005
40 Years
5,800
52,463
1,237
5,800
53,700
59,500
(6,007
)
53,493
2005
40 Years
9,500
39,128
2,295
9,500
41,423
50,923
(4,601
)
46,322
2005
40 Years
(59,000
)
9,769
57,803
1,981
9,769
59,784
69,553
(6,007
)
63,546
2005
40 Years
(219,595
)
36,900
347,921
16,649
36,900
364,570
401,470
(33,473
)
367,997
2006
40 Years
7,490
51,124
709
7,490
51,833
59,323
(4,765
)
54,558
2006
40 Years
31,650
76,961
1,350
31,650
78,311
109,961
(6,110
)
103,851
2006
40 Years
(97,000
)
12,701
110,461
1,724
12,701
112,185
124,886
(8,603
)
116,283
2006
40 Years
(83,000
)
9,283
93,815
1,273
9,283
95,088
104,371
(7,265
)
97,106
2006
40 Years
273,696
15,124
288,820
288,820
(20,834
)
267,986
2007
40 Years
$
(786,777
)
$
219,590
$
1,619,349
$
61,321
$
220,445
$
1,679,815
$
1,900,260
$
(162,640
)
$
1,737,620
F-32
Schedule III Real Estate and Accumulated
Depreciation (Continued)
As of December 31, 2009 (in thousands)
$
1,604,227
273,696
12,433
(31,979
)
1,858,377
27,434
$
1,885,811
855
15,382
(1,788
)
$
1,900,260
$
38,507
41,549
(1,699
)
78,357
41,693
120,050
42,590
$
162,640
/s/ Mark W. Brugger
|
||
Chief Executive Officer
|
/s/ William J. Tennis
|
(i) | The conclusion of the acquisition (whether by a merger or otherwise) by any Person (other than a Qualified Affiliate), in a single transaction or a series of related transactions, of Beneficial Ownership of more than 50% of (1) the REITs outstanding common stock (the Common Stock ) or (2) the combined voting power of the REITs outstanding securities entitled to vote generally in the election of directors (the Outstanding Voting Securities ); | ||
(ii) | The merger or consolidation of the REIT with or into any other Person other than a Qualified Affiliate, if the directors immediately prior to the merger or consolidation cease to be the majority of the Board of Directors at anytime within 12 months of the completion of the merger or consolidation; | ||
(iii) | Any one or a series of related sales or conveyances to any Person or Persons (including a liquidation or dissolution) other than any one or more Qualified Affiliates of all or substantially all of the assets of the REIT or the Operating Partnership; or | ||
(iv) | Incumbent Directors cease, for any reason, to be a majority of the members of the Board of Directors, where an Incumbent Director is (1) an individual who is a member of the Board of Directors on the effective date of this Agreement or (2) any new director whose appointment by the Board of Directors or whose nomination for election by the stockholders was approved by a majority of the persons who were already Incumbent Directors at the time of such appointment, election or approval, other than any individual who assumes office initially as a result of an actual or |
- 2 -
threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors or as a result of an agreement to avoid or settle such a contest or solicitation. |
- 3 -
- 4 -
(i) | a pro-rata bonus for the fiscal year determined through the Date of Termination and calculated based on the target bonus for such fiscal year to be paid within 90 days after the Date of Termination; | ||
(ii) | an amount equal to (A) two times (B) the sum of (I) the Executives base salary in effect immediately prior to the Date of Termination, and (II) the Executives target annual bonus (collectively, the Cash Severance ) to be paid within 90 days after the date of Termination; | ||
(iii) | continued payment by the REIT for health insurance coverage for the Executive and the Executives spouse and dependents for 18 months, consistent with COBRA following the Date of Termination to the same extent that the REIT paid for such coverage immediately prior to the termination of the Executives employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable and/or the REITs insurer refuses to continue coverage during the 18 month period, the REIT thereafter shall be obliged only to pay monthly to the Executive an amount which, after reduction for applicable income and employment taxes, is equal to the monthly COBRA premium for such insurance for the remainder of such severance period. | ||
(iv) | vesting as of the Date of Termination of 100% of all unvested time-based restricted stock awards, to the extent permitted by law. The treatment of equity compensation awards that are not time based vesting (such as restricted stock which vests based on one or more performance metrics) granted after the effective date of this agreement will be specified in the individual grant agreements and/or the applicable plans covering such awards. |
(i) | a pro-rata bonus, payable within 90 days after the Date of Termination, for the fiscal year determined through the Date of Termination and calculated based on the target bonus for such fiscal year; | ||
(ii) | continued payment by the REIT for health insurance coverage for the Executive and the Executives spouse and dependents for 18 months, consistent with COBRA, following the Date of Termination to the same extent that the REIT paid for such |
- 5 -
coverage immediately prior to the termination of the Executives employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable and/or the REITs insurer refuses to continue coverage during the 18 month period, the REIT thereafter shall be obliged only to pay monthly to the Executive an amount which, after reduction for applicable income and employment taxes, is equal to the monthly COBRA premium for such insurance for the remainder of such severance period. | |||
(iii) | vesting as of the Date of Termination of 100% of all unvested time-based restricted stock awards, to the extent permitted by law. The treatment of equity compensation awards that are not time based vesting (such as restricted stock which vests based on one or more performance metrics) granted after the effective date of this agreement will be specified in the individual grant agreements and/or the applicable plans covering such awards. |
(i) | a pro-rata bonus, payable within 90 days after the date of termination, for the fiscal year determined through the Date of Termination and calculated based on the target bonus for such fiscal year; and | ||
(ii) | notwithstanding the Retirement by the Executive, all unvested time-based restricted stock awards shall continue to vest at the times and on the terms as set forth in the relevant restricted stock award agreements as if the Executive remained continuously employed by the REIT from the Date of Termination through each such vesting date. The treatment of non-time-based equity compensation awards (such as restricted stock which vests based on one or more performance metrics) granted after the effective date of this agreement will be specified in individual grant agreements and/or the applicable plans covering such awards. |
- 6 -
(i) | If the reduction of the Severance Payments to the maximum amount that could be paid to the Executive without giving rise to the Excise Tax (the Safe Harbor Cap ) would provide the Executive with a greater after tax benefit than if such amounts were not reduced, then the amounts payable to the Executive under this Agreement shall be reduced (but not below zero) to the Safe Harbor Cap. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the payments of cash orginating under Section 3 (a)-3(d) hereof, and then by reducing other payments to the extent permitted by any applicable plan and/or agreement. | ||
(ii) | If the reduction for the Severance Payments to the Safe Harbor Cap would not result in a greater after tax result to the Executive, no amounts payable under this agreement shall be reduced pursuant to this provision. | ||
(iii) | The determination of whether the Excise Tax is payable and the amount thereof shall be made in writing in good faith by a nationally recognized independent certified public accounting firm selected by the REIT and approved by the Executive, such approval not to be unreasonably withheld (the Accounting Firm ). For purposes of making the calculations required by this Section 3(e), to the extent not otherwise specified herein, reasonable assumptions and approximations may be made with respect to applicable taxes and reasonable, good faith interpretations of the Code may be relied upon. The REIT and the Executive shall furnish such information and documents as may be reasonably requested in connection with the performance of the calculations under this Section 3(e). The REIT shall bear all costs incurred in connection with the performance of the calculations contemplated by this Section 3(e). |
- 7 -
- 8 -
- 9 -
(i) | If to the REIT, to: | ||
DiamondRock Hospitality Company
6903 Rockledge Drive, Suite 800 Bethesda, MD 20817 Facsimile: (240) 744-1199 Attn: 1) Lead Director; 2) Chairman of the Board and 3) Chairman of the Compensation Committee |
|||
(ii) | If to the Executive, to: |
- 10 -
- 11 -
DIAMONDROCK HOSPITALITY COMPANY | ||||||
|
||||||
|
By: | |||||
|
|
|||||
|
||||||
EXECUTIVE | ||||||
|
||||||
- 12 -
Year Ended | ||||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||
(in thousands) | ||||||||||||
(Loss) Income from Continuing Operations Before Income Taxes
|
$ | (32,121 | ) | $ | 43,553 | $ | 68,161 | |||||
Fixed Charges
|
54,670 | 53,698 | 54,514 | |||||||||
Amortization of Capitalized Interest
|
175 | 166 | 159 | |||||||||
Capitalized Interest
|
(19 | ) | (259 | ) | (50 | ) | ||||||
|
||||||||||||
Earnings
|
$ | 22,705 | $ | 97,158 | $ | 122,784 | ||||||
|
||||||||||||
Fixed Charges:
|
||||||||||||
|
||||||||||||
Interest Expense
|
$ | 51,609 | $ | 50,404 | $ | 51,445 | ||||||
Portion of Rent Related to Interest
|
3,042 | 3,035 | 3,019 | |||||||||
Capitalized Interest
|
19 | 259 | 50 | |||||||||
|
||||||||||||
Fixed Charges
|
54,670 | 53,698 | 54,514 | |||||||||
|
||||||||||||
Preferred Stock Dividends
|
| | | |||||||||
|
||||||||||||
Combined Fixed Charges and Preferred Stock Dividends
|
$ | 54,670 | $ | 53,698 | $ | 54,514 | ||||||
|
||||||||||||
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
|
0.4 | 1.8 | 2.3 | |||||||||
Jurisdiction of | ||
Company | Organization | |
Bloodstone TRS, Inc.
|
Delaware | |
DiamondRock Alpharetta Owner, LLC
|
Delaware | |
DiamondRock Alpharetta Tenant, LLC
|
Delaware | |
DiamondRock Atlanta Perimeter Owner, LLC
|
Delaware | |
DiamondRock Atlanta Perimeter Tenant, LLC
|
Delaware | |
DiamondRock Bethesda General, LLC
|
Delaware | |
DiamondRock Bethesda Limited, LLC
|
Delaware | |
DiamondRock Bethesda Owner Limited Partnership
|
Maryland | |
DiamondRock Bethesda Tenant, LLC
|
Delaware | |
DiamondRock Boston Expansion Owner, LLC
|
Delaware | |
DiamondRock Boston Owner, LLC
|
Delaware | |
DiamondRock Boston Retail Owner, LLC
|
Delaware | |
DiamondRock Boston Tenant, LLC
|
Delaware | |
DiamondRock Buckhead Owner, LLC
|
Delaware | |
DiamondRock Buckhead Tenant, LLC
|
Delaware | |
DiamondRock Cayman Islands, Inc.
|
Cayman Islands | |
DiamondRock Chicago Conrad Owner, LLC
|
Delaware | |
DiamondRock Chicago Conrad Tenant, LLC
|
Delaware | |
DiamondRock Chicago Owner, LLC
|
Delaware | |
DiamondRock Chicago Tenant, LLC
|
Delaware | |
DiamondRock East 40th Street NYC Owner Holdings, LLC
|
Delaware | |
DiamondRock East 40th Street NYC Owner, LLC
|
Delaware | |
DiamondRock East 40th Street NYC Tenant, LLC
|
Delaware | |
DiamondRock Frenchmans Holdings, LLC
|
Delaware | |
DiamondRock Frenchmans Owner, Inc.
|
U.S. Virgin Islands | |
DiamondRock Griffin Gate Owner, LLC
|
Delaware | |
DiamondRock Griffin Gate Tenant, LLC
|
Delaware | |
DiamondRock Hospitality Limited Partnership
|
Delaware | |
DiamondRock Hospitality, LLC
|
Delaware | |
DiamondRock LAX Owner, LLC
|
Delaware | |
DiamondRock LAX Tenant, LLC
|
Delaware | |
DiamondRock Manhattan/Midtown East Owner, LLC
|
Delaware | |
DiamondRock Manhattan/Midtown East Tenant, LLC
|
Delaware | |
DiamondRock Oak Brook Owner, LLC
|
Delaware | |
DiamondRock Oak Brook Tenant, LLC
|
Delaware | |
DiamondRock Orlando Airport Owner, LLC
|
Delaware | |
DiamondRock Orlando Airport Tenant, LLC
|
Delaware | |
DiamondRock Salt Lake City Fee Owner, LLC
|
Delaware | |
DiamondRock Salt Lake Owner, LLC
|
Delaware | |
DiamondRock Salt Lake Tenant, LLC
|
Delaware | |
DiamondRock Sonoma Owner, LLC
|
Delaware | |
DiamondRock Sonoma Tenant, LLC
|
Delaware | |
DiamondRock Torrance Owner, LLC
|
Delaware | |
DiamondRock Torrance Tenant, LLC
|
Delaware | |
DiamondRock Vail Owner, LLC
|
Delaware | |
DiamondRock Vail Tenant, LLC
|
Delaware | |
DiamondRock Waverly Owner, LLC
|
Delaware | |
DiamondRock Waverly Tenant, LLC
|
Delaware | |
DRH Austin Owner General, LLC
|
Delaware | |
DRH Austin Owner Limited, LLC
|
Delaware | |
DRH Austin Owner Limited Partnership
|
Delaware | |
DRH Austin Tenant General, LLC
|
Delaware | |
DRH Austin Tenant Limited, LLC
|
Delaware | |
DRH Austin Tenant Limited Partnership
|
Delaware | |
DRH Worthington Owner General, LLC
|
Delaware | |
DRH Worthington Owner Limited, LLC
|
Delaware | |
DRH Worthington Owner Limited Partnership
|
Delaware | |
DRH Worthington Tenant General, LLC
|
Delaware | |
DRH Worthington Tenant Limited, LLC
|
Delaware | |
DRH Worthington Tenant Limited Partnership
|
Delaware |
1. |
I have reviewed this Annual Report on Form 10-K of DiamondRock Hospitality Company;
|
||
2. |
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
|
||
3. |
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
|
||
4. |
The registrants other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
|
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
|
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Mark W. Brugger | ||||
Mark W. Brugger | ||||
Chief Executive Officer
(Principal Executive Officer) |
||||
1. | I have reviewed this Annual Report on Form 10-K of DiamondRock Hospitality Company; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Sean M. Mahoney | ||||
Sean M. Mahoney | ||||
Executive Vice President and
Chief Financial Officer (Principal Financial and Accounting Officer) |
||||
/s/ Mark W. Brugger
|
/s/ Sean M. Mahoney
|
|||
Chief Executive Officer
|
Executive Vice President and | |||
February 26, 2010
|
Chief Financial Officer
February 26, 2010 |