LaSalle Unveils 2003 Strategy, Heavy On Upgrades, Repositioning

NEW YORK— LaSalle Hotel Properties Chairman and CEO Jon Bortz unveiled a conservative strategy for the REIT this year that included an emphasis on upgrading and maintaining existing assets instead of taking on more hotels. The news came as part of a roundtable discussion at the Salomon Smith Barney 2003 REIT CEO Conference. “We’re happy remaining a small company,” said Bortz. “We feel that by keeping our portfolio at 17 hotels we are able to really focus on our existing stock and get a greater return for our shareholders.” In February of last year the company did a $100 million perpetual preferred offering that was used to pay down LaSalle’s line of credit and to complete the redevelopment of its Washington, D.C. boutique hotel collection, which consists of four properties. As a result, by the close of 2002 the company had $271 million in debt, according to Bortz. “If you look at our historical capital expenditures, you’ll find that we’ve done a lot of repositioning within our portfolio,” he said. “We like to buy assets that we can have an impact on.” For example, the company took its San Diego resort from a 2.5-star resort to a 4.5-star resort, he noted. “There’s lower risk to investing in existing assets as opposed to buying new assets because you know those assets well. Over the last four years, we invested $122 million in our existing portfolio, which amounts to about $25,000 to $30,000 a room.” This year LaSalle is planning to spend $28 million— $8 million would represent improvements and replacements, while the remaining $20 million would go toward capital investments to reposition existing assets, reported Bortz. “We have a $75 million investment in our boutique collection in Washington D.C. right now,” he said. “This year we expect a 10% EBITA yield on that investment. We also completed a $6.5 million renovation on the Holiday Inn on the Hill two weeks ago. The reaction has been very good and we expect a considerable yield there as well. “At present we’re in the process of doing a $5 million upgrade of our Viking Hotel Resort in Newport, RI,” Bortz said. “We’re redeveloping all of our lower-level meeting space, adding a spa, upgrading the pool, installing a new exercise facility, and doing minor room upgrades to take the property to a four-star level. This will give us the ability to focus more on group business there. LaSalle is also in the process of re-flagging its Meridien property in Dallas as a Westin. The company expects to spend between $3 million and $4 million as part of that conversion, Bortz said. “Our expectation is that the process there would take place within the next 90 days. In addition, the company has its New Orleans property under contract for sale, he said. “The net price is expected to be $91.5 million. Those funds will be redeployed to acquire future assets.” Sometime in the future the company has plans to dispose of its one or two remaining hotels that are suburban in nature to focus on urban upscale properties, said Bortz. No timetable for those transactions was provided at presstime.