Interstate Hotels & Resorts Inc
Interstate Hotels & Resorts — Investor Presentation (May 2006)
32 slides from Interstate Hotels & Resorts's investor presentation, May 24, 2006
Slide 1: Interstate Hotels & Resorts (NYSE: IHR)
(NYSE: IHR) Westin Bonaventure Hotel - Los Angeles, CA The Charles Hotel - Cambridge, MA
Slide 2: Interstate Hotels & Resorts
Interstate Hotels & Resorts Global management company with operations in five countries Largest independent hotel management company in North America 266 hotels, resorts, and conference centers More than 60,000 rooms Increased focus on hotel ownership JV interests in 15 hotels 100% ownership in two
Slide 3: Interstate Overview
Interstate Overview Interstate Overview
Slide 4: IHR Hotel Overview
IHR Hotel Overview IHR Operated Hotel IHR Corporate Offices Hilton Marriott Starwood Intercontinental Carlson Wyndham Independent Other % 0.277 0.253 0.146 0.128 0.043 0.027 0.082 0.046
Slide 5: Interstate Hotels & Resorts: Premier Independent Hotel Management Company
Interstate Hotels & Resorts Alternative to brand management Capacity to add management contracts without adding incremental cost Expansive resources will result in state-of-the-art services for hotel owners Global presence enables worldwide expansion worldwide expansion worldwide expansion worldwide
Slide 6: BridgeStreet Worldwide
BridgeStreet Worldwide Wholly owned subsidiary of Interstate Hotels & Resorts, offering fully furnished one-, two- and three- bedroom apartments for stays of 30+ days Offers approximately 9,000 corporate apartments including network of Global Partners 15 regional offices in the U.S., plus London and
Slide 7: Financial Highlights
Financial Highlights 2004 (actual) 2005 (actual) 2006 (forecast) Revenue* $189M $222M $252M Adjusted EBITDA, excluding non recurring items, special charges and discontinued operations** $27.9M $37.1M $48M Net Income $(5.7)M $12.9M $11.8M EPS $(.19) $.42 $.38 Adjusted Net Income, excluding non recurr
Slide 8: Financial Highlights: Adjusted EBITDA and cash items
Financial Highlights Adjusted EBITDA and certain cash related items 2005 (actual) 2006 (forecast) Adjusted EBITDA, excluding non recurring items, special charges and discontinued operations** $37.1M $48.0M Cash Interest $(7.1)M $(7.3)M Principal Amortization $(5.0)M $(5.0)M Cash Taxes $(1.4)M $(1.5)
Slide 9: Capital Structure (as of March 31, 2006)
Capital Structure (as of March 31, 2006) $99M senior secured credit facility $44M term loan $55M revolver Average cost of debt • 8.6% Market Capitalization: Market Capitalization: Market Capitalization: Market Capitalization: Debt Maturity Rate Sr Term Loan $44.3M Jan 2008 LIBOR + 450 Sr Revolver $1
Slide 10: Market Opportunity - Upper Upscale RevPAR
Market Opportunity-Upper Upscale RevPAR Upper Upscale RevPAR expected to surpass 2000 levels by 2006 Source: PricewaterhouseCoopers, Smith Travel Research
Slide 11: Market Opportunity - Overall Industry Supply and Demand
Market Opportunity - Overall Industry Supply and Demand Demand expected to continue to outpace supply in 2006 Source: Smith Travel Research, PricewaterhouseCoopers Source: PricewaterhouseCoopers, Smith Travel Research
Slide 12: Recent Transactions
ilar Interstate otels & Resorts RECENT TRANSACTIONS
Slide 13: Whole Ownership
WHOLE OWNERSHIP
Slide 14: Recent Transactions: Acquisition of Hilton Concord
Recent Transactions Acquisition of Owned Hotel Hilton Concord 329-room hotel in San Francisco, Calif., East Bay area Acquired February 2005 $29.2M purchase price; $19M mortgage Provides superior return on equity due to elimination of management fee Hilton Concord - Concord, CA
Slide 15: Recent Transactions: Sale of Residence Inn Pittsburgh
Recent Transactions Sale of Owned Hotel Residence Inn Pittsburgh 100% ownership Sold September 2005 $11.0M sale price $2.5M gain on sale $2.5M gain on sale $2.5M gain on sale $2.5M gain on sale $2.5M gain on sale $2.5M gain on sale $2.5M gain on sale Residence Inn, Pittsburgh - Pittsburgh, PA Reside
Slide 16: Recent Transactions: Acquisition of Hilton Durham
Recent Transactions Acquisition of Owned Hotel Hilton Durham 195-room hotel in Durham, NC, proximate to Duke University Acquired November 2005 $13.3M net purchase price with cash and availability on senior credit facility Renovation and repositioning opportunity expected to yield strong IRR Hilton D
Slide 17: Joint Ventures & Investments
JOINT VENTURES & INVESTMENTS
Slide 18: Recent Transactions: Sale of Hilton San Diego Gaslamp Investment
Recent Transactions Sale of Joint Venture Investment Sale of Joint Venture Investment Hilton San Diego Gaslamp 17% equity ownership Sold January 2005 $3.7M gain on sale $1.0M original investment Hilton San Diego Gaslamp - San Diego, CA
Slide 19: Recent Transactions: Investment in Sheraton Myrtle Beach Contract
Recent Transactions Investment in Mgmt Contract Sheraton Myrtle Beach Convention Center Hotel $1.9M total investment : $1.0M investment (key money) $0.9M interest bearing promissory note Commenced management in September 2005 10-year management contract $500K+ annualized management fees Sheraton Myr
Slide 20: Recent Transactions: Sale of Marriott Residence Inn Houston Investment
Recent Transactions Sale of Joint Venture Investment Marriott Residence Inn Houston 25% equity ownership Sold December 2005 $1.1M gain on sale Retained management contract Marriott Residence Inn - Houston, TX Marriott Residence Inn - Houston, TX
Slide 21: Third Party Management
ilur Interstate Hotels & Resorts THIRD PARTY MANAGEMENT
Slide 22: Recent Transactions: Claremont Resort & Spa Management Contract
Recent Transactions New Management Contract The Claremont Resort & Spa Manage 22 hotels for CNL Hospitality Commenced management in July 2005 18 month contract $1M+ annualized management fees Claremont Resort & Spa - Berkeley, CA
Slide 23: Recent Transactions: Residence Inn Times Square Contract
Recent Transactions New Management Contract Residence Inn Times Square Manage four hotels for ownership New construction Opened December 2005 Managed all pre-opening activities 20 year contract $500K+ annualized management fees Residence Inn Times Square, New York, NY
Slide 24: Recent Transactions: Hilton Times Square Contract
Recent Transactions New Management Contract Hilton Times Square Manage 52 for Sunstone Hotel Investors, Inc. (NYSE: SHO) Commenced management March 2006 Nine year contract $500K+ annualized management fees management fees management fees management fees management fees management fees management fee
Slide 25: Growth Strategy
GROWTH STRATEGY
Slide 26: Growth Strategy: Organic Growth
Growth Strategy 2005 RevPAR increased 10.7% over 2004, resulting mostly from increase in ADR. 2006 RevPAR is forecast to increase 7.5% to 9.5% Increase in base management fees ^ Interstate receives a portion of every incremental dollar of gross hotel revenue, whether from increase in ADR or occupanc
Slide 27: Growth Strategy: Investment Options
Growth Strategy Investment Options Joint venture partners Opportunity fund partners 100% ownership Elimination of management fees provides for enhanced returns Increasing Real Estate Holdings Embassy Suites Center City - Philadelphia, PA
Slide 28: Growth Strategy: Joint Venture Investment Criteria
Growth Strategy Joint Venture Investment Criteria $20M to $50M target acquisition price 10% to 25% equity investment 60% to 75% leverage through non-recourse financing Above market management contract Located in top 50 MSAs Will benefit from Interstate's added value Operational/marketing expertise E
Slide 29: Growth Strategy: Acquisition Criteria - 100% Ownership
Growth Strategy: Acquisition Criteria - 100% ownership $15M to $40M target acquisition price 200 to 400 rooms Full-service hotels including Hilton, Marriott, Westin and Sheraton brands Select-service hotels including Residence Inn, Hilton Garden Inn and Homewood Suites brands Hotels with repositioni
Slide 30: Example: $20M Whole Ownership Acquisition
Example: $20M Whole Ownership Acquisition* (In thousands, except ROE) * This chart is meant to be illustrative of a theoretical acquisition. There can be no assurance that such investments can be sourced or, if they are, that these financial results will be achieved. Stabilized Acquisition Price $ 2
Slide 31: Example: $20M Joint Venture, 15% Ownership
Example: $20M Joint Venture, 15% Ownership (In thousands, except ROE) * This chart is meant to be illustrative of a theoretical acquisition. There can be no assurance that such investments can be sourced or, if they are, that these financial results will be achieved. Total JV IHR Share Acquisition P
Slide 32: Investment Highlights
Investment Highlights In third year of lodging recovery Strong RevPAR growth drives higher base and incentive management fees Strategic growth through acquisitions Experienced senior management team Laguna Cliffs Marriott Resort - Dana Point, CA Laguna Cliffs Marriott Resort - Dana Point, CA
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