LaSalle Hotel Properties Investor Presentation As of November 13, 2007
Disclaimer This presentation has been prepared for informational purposes only from information supplied by LaSalle Hotel Properties ( LHO or the Company ) and from third-party sources indicated herein. Such third-party information has not been independently verified. The Company makes no representation or warranty, expressed or implied, as to the accuracy or completeness of such information. This presentation also includes certain statements, estimates and projections provided by LHO management with respect to the anticipated future performance of LHO, including forward-looking statements within the meaning of 21E of the Securities Exchange Act of 1934. Such statements, estimates and projections reflect various assumptions by LHO management concerning anticipated results and have been included solely for illustrative purposes. No representations are made as to the accuracy of such statements, estimates or projections, which necessarily involve known and unknown risks, uncertainties and other factors that, in some ways, are beyond management s control. Such factors include the risk factors discussed in the Company s SEC filings. Accordingly, actual results may vary materially from the projected results contained herein and you should not rely on any forward-looking statements made herein or made in connection with this presentation. The Company shall have no obligation or undertaking to update or revise any forward-looking statements to reflect any change in Company expectations or results, or any change in events. This presentation includes disclosure of non-gaap measures, including funds from operations ("FFO") and earnings before interest, taxes, depreciation and amortization ( EBITDA ). The Company considers FFO and EBITDA to be key supplemental measures of the Company s performance, and they should be considered along with, but not as alternatives to, net income as a measure of the Company s operating performance. Neither FFO nor EBITDA represents cash generated from operating activities determined by GAAP and should not be considered as alternatives to net income, cash flow from operations or any other operating performance measure prescribed by GAAP. Neither FFO nor EBITDA is a measure of the Company s liquidity, nor is FFO or EBITDA indicative of funds available to fund the Company s cash needs, including its ability to make cash distributions. Please refer to the Company's filings with the Securities and Exchange Commission and its earnings releases, which are available at www.lasallehotels.com, for disclosure of the Company's net income, for reconciliations of FFO and EBITDA to net income and for additional detail on the Company's use of non-gaap measures.
Table of Contents Company Overview Asset Management Portfolio Investment Strategies Investment Summaries and Returns Opportunities for Future Growth Summary 3
Company Overview Onyx Hotel 4
Company Overview Mission To provide a reliable stream of income with moderate long-term earnings growth to our shareholders through opportunistic investments in high-quality lodging properties. LHO Basics Diversified high-quality portfolio with 31 upscale and luxury assets LaSalle Hotel Properties seeks to invest in high quality, upscale and luxury full-service hotels in high barrier-to-entry urban, resort and convention markets while lowering risk through: Diversification Conservative balance sheet management Research-based investments Regular investment in existing assets Income company focused on long-term shareholder value Monthly dividends to shareholders $2.04 annualized dividend Disciplined adherence to stringent investment criteria and objectives Professional hotel investors, asset managers, capital allocators and financial experts, not operators Exquisite design, quality and service enhancements to provide guests with an experience, elevating consumer satisfaction and generating guest loyalty Superior results and returns since April 1998 IPO Hotel Solamar Hilton San Diego Resort 5
Company Overview Corporate Strategy Earning attractive returns through the ownership of and redevelopment into highquality upscale and luxury full-service hotels located in major urban, resort and convention markets. LaSalle Hotel Properties is an income-focused company that creates shareholder value through a strategic portfolio of lodging assets, thorough research-based investments, asset management, redevelopment and conservative financial management. Consistency: same mission statement and executive management team since 1998 Internal and external investment and redevelopment to achieve revenue growth Hands-on asset management Return on investment and cash on cash investment criteria Conservative balance sheet management: low leverage company Geographic Diversification Seattle San Francisco Minneapolis Chicago NYC Boston Newport Atlantic City Santa Cruz Indianapolis Leesburg DC LA SD Dallas 31 HOTELS IN 14 MARKETS IN 11 STATES AND THE DISTRICT OF COLUMBIA 8 TARGET URBAN MARKETS 6
Company Overview Balance Sheet Strategy Match fund new investments Maintain Debt to EBITDA ratio of less than 5.0 times Utilize fixed/variable rate debt structure to hedge risk Utilize secured debt for primary, long-term debt requirements Provide strategic flexibility by utilizing unsecured line Stagger debt maturities to lower risk Target preferred equity at 10%-15% of Enterprise Value Enterprise Value Amount % of Total Total Debt $844.7 29% Preferred Equity & Units (1) 380.5 13% Common Equity (2) 1,691.6 58% Total Enterprise Value $2,916.7 100% (1) Based on balance sheet value of Series B shares ($27.5MM), Series D shares ($79.3MM), Series E shares ($87.5MM), Series C preferred units ($58.7MM), Series F preferred units ($27.5MM) and Series G shares ($100.0MM). (2) Based on market value of 40.2MM fully diluted shares at $42.08 on September 30, 2007. 7
Company Overview Over the years, LaSalle Hotel Properties has successfully executed its strategies to generate long-term shareholder returns. $6.00 $5.00 FFO/Share CAGR 12.5% EBITDA/Share CAGR 12.8% Dividend/Share CAGR 34.7% Ann. Dividend/Share CAGR 19.4% $4.69 $5.14 $4.00 $3.50 $3.00 $3.13 $2.87 $2.25 $2.82 $2.65 $2.54 $2.00 $1.00 $1.74 $1.74 $1.28 $1.95 $1.56 $1.08 $0.90 $0.84 $0.44 $0.00 $3.50 $3.00 02 03 04 05 06 07(F) 02 03 04 05 06 07(F) 02 03 04 05 06 07(F) FFO/Share EBITDA/Share Dividend/Share FFO/Share $3.13 Dividend $2.87 $2.50 $2.25 $2.00 $1.50 $1.74 $1.28 $1.74 $1.56 $1.95 $1.00 $0.84 $0.90 $1.08 $0.50 $0.44 $0.00 2002 2003 2004 2005 2006 2007 (E) FFO/Share Dividend Coverage 4.0x 1.5x 1.9x 2.1x 1.8x 1.6x Note: 2002 2006 FFO/share reflects reported information. 2007(E) FFO/Share reflects midpoint of company outlook of $3.11 - $3.15. 8
Company Overview LaSalle Hotel Properties has consistently provided a premium return to shareholders compared to its REIT peers and major stock indices. 350% 300% 321% Total Shareholder Return: September 2002 September 2007 250% 200% 163% 163% 150% 138% 137% 100% 71% 105% 105% 50% 0% LHO HST FCH RMS REIT NASDAQ Rus 2000 S&P 500 Dow Jones 350% 300% 309% Total Shareholder Return: April 1998 September 2007 250% 222% 200% 150% 100% 93% 89% 85% 50% 60% 51% 0% -50% -6% LHO HST FCH RMS REIT Rus 2000 Dow Jones S&P 500 NASDAQ 9
Asset Management Grafton on Sunset 10
Asset Management Hands-on Asset Management 4 dedicated asset managers for 31 hotels Active executive management involvement Regular, continuous communication and visits with property operating team Impact profitability and cash flow by presenting revenue-generating and cost minimizing programs to operators; not solely reliant on operator ideas and programs Comprehensive knowledge of the hotel s positioning, the market and the lodging industry Independent versus Brand Strategically determine the best operator for the asset and continually track operators performance Size, investment plans, business mix and demand generators determine if a brand is beneficial and if so which brand Executive management periodically reviews each asset to ensure the onsite operator is the best fit for the market, the asset and the Company s expectations 13 Operating Relationships Maintaining numerous operating relationships results in: A variety of many, many best practices and ideas No limitations on potential acquisitions due to management More favorable management terms Better alignment between the operator and the owner Operators, new and existing, frequently bring new hotel investment opportunities to LHO Terminable Management Contracts Two-thirds of LHO s assets have cancelable management agreements. Throughout the length of the investment, a terminable-at-will operating relationship: Aligns interests between manager and owner Enhances flexibility Physical asset alterations Hotel operations Performance improvement Hotel executive team Trades at a premium to hotels with non-cancelable contracts Increases attractiveness to buyers Generates a larger pool of buyers 11
Portfolio Investment Strategies Hotel Viking 12
Portfolio Investment Strategies Overview Through experience, LHO has found that strategic diversification of assets maximizes short and long term income growth while minimizing risk. External Investment Strategies Upscale and luxury full-service assets Urban, resort and convention markets Operator diversification Unique competitive advantages Potential upside opportunities through repositioning, flag and/or operator change and asset management Meet IRR and cash on cash return hurdles Internal Investment Strategies Repositioning/redevelopment to improve market position and/or create a unique product with very attractive returns Renovations intended to generate revenue and/or increase profitability Aggressive, hands-on asset management to drive revenue growth and increase profitability Proactive rather than reactive capital investment Meet IRR and cash on cash return hurdles Diversification by EBITDA Hilton 11% Hyatt 4% Westin 26% Holiday Inn* 5% Urban 40% Resort 23% Marriott 9% Sheraton 3% Independent 42% Convention 37% Brand & Operator Washington D.C. 19% Boston 17% Seattle 2% Chicago 14% Market Segment Los Angeles 7% NYC 2% San Diego 20% Other 19% Major Market *Holiday Inns becoming independents **Property EBITDA reflects TTM ending September 30, 2007 13
External Investment Strategies Upscale and Luxury Full-Service Assets LaSalle Hotel Properties seeks to invest in full-service upscale and luxury properties in urban and resort locations as they offer the greatest customer diversity with favorable returns, market dynamics and risk levels. Highest Barriers to Entry New development costs generally exceed acquisition prices Long and lengthening construction periods Land: large requirement, highest cost and competitive uses Complicated operations Most difficult to finance ground up development Ability to Differentiate Product Higher income and more sophisticated customers Create an experience Repositioning and/or Brand Conversion Design sells Pricing Power Average RevPAR growth from 1988 through 2006 for upper upscale hotels is 3.8 percent versus 3.4 percent for US hotels Diversified Customer Base Group, transient, business and leisure Favorable Exit Opportunities Higher quality is more desirable Independent Hotels LHO has 19 independent hotels (soon to be 21 upon the repositioning of two Holiday Inn hotels) in 9 markets in 6 states and the District of Columbia Consumers are demanding more personalized, higher quality goods and services of all kinds and are willing to pay a premium over commoditized products LHO s independent, high style hotels fuse functionality and design to create a unique, personalized experience LHO Independents LHO Brands Rooms ADR RevPAR EBITDA/Room EBITDA Margin 3,232 $199.23 $144.38 $25.5K 31.9% 5,074 $187.10 $138.70 $23.2K 29.5% 240 bps EBITDA Margin premium **Includes hotels owned as of December 31, 2006, for the full year 2006. Excludes LaGuardia Marriott due to 2007 sale. 14
External Investment Strategies Why Urban? LHO targets urban, resort and convention markets with the highest ADR, occupancy and barriers to entry. While many companies claim to buy in urban markets, LHO has narrowed its definition of urban to the urban core and urban nodes where barriers to entry and demand are at their highest for the entire MSA. Smith Travel Research Definition of Urban Properties located in urban areas with populations greater than 150,000. LHO s Urban Focus Major Cities (Primarily Top Ten) Significant Barriers to Entry 24-Hour Markets live, work, play Multiple Demand Generators Convention, group, business and leisure transient Alternative real estate uses provide value protection Urban grid walkin around markets Urban Supply and Demand Growth 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% Supply Growth 88-06 Avg: 1.6% Demand Growth 88-06 Avg: 2.0% RevPAR Growth 88-06 Avg: 4.7% -6% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Between 1988 and 2006, urban RevPAR growth has averaged 4.7% versus the industry RevPAR growth of 3.4%. 15
External Investment Strategies Urban Focus: LHO s Urban Grid versus MSA Occupancy Comparison 90% 85% LHO Portfolio Average: 73.5% STR Urban Average: 68.4% STR Top 25 Markets Average: 68.7% STR U.S. Average: 63.4% 82.8% 85.0% MSA Urban Tracts 80% 75% 77.1% 76.3% 73.3% 76.8% 75.1% 73.9% 74.0% 74.1% 72.9% 70% 71.0% 68.4% 67.1% 67.5% 70.5% 65% 60% DC Boston San Diego Chicago LA NYC Seattle San Fran Location is everything in real estate. On average, for LHO s target markets, occupancy rates in 2006 ran nearly 400 bps higher in the urban core compared to each market s respective MSA. 16
External Investment Strategies Urban Focus: LHO s Urban Grid versus MSA RevPAR Comparison $250 $225 $200 LHO Portfolio Average: $140.91 STR Urban Average: $93.49 STR Top 25 Markets Average: $81.82 STR U.S. Average: $61.69 $198.85 $224.02 MSA Urban Tracts $175 $150 $134.80 $144.27 $132.96 $132.68 $149.64 $125 $100 $96.42 $94.81 $95.88 $82.46 $85.50 $79.50 $111.97 $114.04 $100.57 $75 $50 DC Boston San Diego Chicago LA NYC Seattle San Fran Guests are willing to pay a premium to stay in the urban core. In 2006, urban earned nearly $40 more in RevPAR, or 37 percent, versus the MSA. 17
Portfolio Investment Strategies Financial Hurdles To maximize investment potential while minimizing risk, LaSalle Hotel Properties has specific financial return requirements that consider the investment environment and the specifics of each asset. 9 percent unlevered IRR hurdle, with higher return IRR requirements for repositionings 8 percent cash on cash requirement, with lower COC return requirements for repositionings Disposition Strategy LaSalle Hotel Properties has disposed of seven hotels since its inception. The sale of a property is carefully evaluated to ensure it maximizes shareholder value in the long-term. To date, the Company utilizes four key criteria to drive dispositions. Suburban market location Offer we can t refuse Fundamental change in the market Misalignment of interests with long-term, inflexible non-cancelable manager San Diego Paradise Point Westin Michigan Avenue Hotel Rouge 18
Capital Investment Portfolio Investment Strategies The Company takes a proactive approach to renovating assets and investing capital throughout the cycle to ensure consistent quality. A majority of the capital invested each year is return-generating with similar hurdles to external investment. Currently, 16 of the Company s 31 hotels should experience growth in future years due to repositioning projects, LHO s asset management and/or new facilities. $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 9 Renovation/Repositioning Refurbishment 26 23 13 22 21 7 10 9 8 7 7 14 18 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 (F) Repositioning Capital Reaches Hotel Description Investment Stabilization 1 Onyx New Hotel Ramp Up 2007 2 Le Montrose Renovation $8.6MM 2007 3 Solamar New Hotel Ramp Up 2008 4 Amarano Recent Acquisition/Asset Management 2008 5 Sheraton Bloomington Brand Conversion & Renovation $10.5MM 2009 6 San Diego Paradise Point Meeting Space Redevelopment $9.1MM 2009 7 Deca Conversion & Repositioning $2.6MM 2009 8 Lansdowne Resort Repositioning & Renovation $60.0MM 2010 9 Viking Repositioning & Renovation $6.6MM 2010 10 Alexis Repositioning & Renovation $10.0MM 2010 11 Chaminade Resort Repositioning & Renovation $11.5MM 2010 12 Holiday Inn on the Hill Upper Upscale, Independent Repositioning $15.0MM 2010 13 Donovan House Conversion & Repositioning $35.0MM 2010 14 Sax Conversion & Repositioning $23.0MM 2011 15 Holiday Inn Wall Street Luxury, Independent Repositioning $10.0MM 2011 16 Hilton San Diego Resort Repositioning & Renovation $17.0MM 2011 $218.9MM **Red indicates hotels currently undergoing ramp up period; blue indicates ongoing or future capital projects. 29 45 45 90 35 19
Portfolio Investment Strategies Reaching Stabilization Onyx New Hotel Acquisition Ramp up Le Montrose $8.6MM Renovation Solamar New Hotel Acquisition Ramp up Amarano Acquisition/Asset Management Ramp up Silver Period of renovation, repositioning or non-ownership Copper Ramp up period Blue Ongoing/Future capital ramp up period Sheraton Bloomington $10.5MM Conversion & Renovation San Diego Paradise Point $9.1MM Meeting Space Redevelopment Hotel Deca $2.6MM Conversion & Repositioning Lansdowne Resort $60.0MM Repositioning & Renovation Viking $6.6MM Repositioning & Renovation Alexis Hotel $10.0MM Repositioning & Renovation Chaminade $11.5MM Repositioning & Renovation H.I. on the Hill $15.0 Upper Upscale, Independent Repositioning Donovan House $35.0MM Conversion & Repositioning Hotel Sax $23.0MM Conversion & Repositioning Holiday Inn Wall Street $10.0M Luxury, Independent Repositioning Hilton San Diego Resort $17.0MM Repositioning & Renovation 2006 2007 2008 2009 2010 2011 20
Investment Summaries and Returns LHO anticipates higher than average growth from the significant capital investments in 16 properties that will be ramping up between 2008 and 2011. The Company has a proven track record of generating attractive returns on its investments through comprehensive and individualized redevelopment and asset management, developing a portfolio of hotels that have and should continue to outperform the industry. 16 Hotels with Holiday Inn Future Growth Lansdowne Hotel Sax on the Hill 2007(F) COC (1) 8.0% 7.5% 6.2% 11.7% Stabilized Year COC (2) 13.2% 13.1% 13.0% 16.9% 2011(F) COC 13.3% 13.1% 13.0% 16.9% COC (Acq. - 2011F) 10.7% 9.5% 10.2% 11.9% IRR (Acq. - 2011F) (3) 16.6% 14.0% 20.5% 18.2% Notes: Forecasted returns are unlevered and include approximately $1.1 billion of initial investment capital and subsequent capital investments. (1) 2007(F) COC includes no income and a $75.2 million capital base for Donovan House. (2) Stabilized COC returns reflect weighted average for 16 hotels with future growth and stabilization between 2008 & 2011. (3) IRR for 16 hotels with future growth is weighted by percentage of capital invested for the duration of the hold period. 21
Case Studies Investment Summaries and Returns Lansdowne Resort Hotel Sax Holiday Inn on the Hill Lansdowne Resort 22
Lansdowne Resort 44050 Woodbridge Parkway, Leesburg, VA 20176 Investment Overview Initial Investment ($000s) Cost/Key(296) Hotel $107,930 $364,628 Golf Development 7,870 Subtotal $115,800 Additional Costs 1,069 $116,869 Acquired Lansdowne Resort on June 17, 2003 Acquisition Price: $115.8 million Location: Leesburg, VA Washington Dulles International Airport (12 miles) Washington DC (30 miles) 296 Guestrooms, 3 Restaurants, Health Club, Spa Tennis Courts, Indoor and Outdoor Pools, Golf Pro-shop 18-hole Championship Robert Trent Jones, Jr. Golf Course, 18-hole Greg Norman-designed, to-be-developed Championship Course 240,000 sf of FAR Rights Investment Strategies Reposition as the premier luxury destination resort in the Mid-Atlantic region Drive income stream through resort performance and Golf Club 23
Lansdowne Resort 44050 Woodbridge Parkway, Leesburg, VA 20176 Investment Strategy $60 million redevelopment to reposition Lansdowne Resort and Conference Center as the premier destination resort and golf club in the Mid-Atlantic region. Renovation Renovated entire resort and repositioned to luxury level Developed additional 18-hole and 9-hole executive Greg Norman golf courses Built 43,000 sf luxury clubhouse with ballroom Added destination spa and resort pool complex Expanded Lansdowne Golf Club concept to include social memberships The 476-acre resort went through a complete $60 million redevelopment resulting in a luxury product. Guestrooms and Corridors: $6MM 5 Pool Aquatic Complex: $4MM Exterior, Lobby and Public Space: $4MM 18-hole Greg Norman Championship Golf Course: $22MM 43,000 sf Clubhouse: $14MM 14,000 sf Spa Mineralé: $5MM 9-hole Greg Norman Executive Golf Course: $3MM Ballroom and Pre-function Space: $2MM Asset Management Since acquisition, LHO has closely guided designers and consultants to develop the new luxury product. As different phases of the renovation work were completed, the Asset Management team worked with Benchmark Hospitality, the onsite operator, to drive sales growth and market the new product. Lansdowne Golf Club Price-tiered memberships Addition of 18-hole and executive 9-hole Greg Norman golf courses Social membership option for non-golfers to enjoy resort s luxury spa, health club, restaurants, aquatic complex and tennis facilities Potential income growth from social members upgrading to full membership Future Growth Continuing to develop the Resort s customer base Building loyalty among group and transient customers Growing the Golf Club s membership base from 80 pre-sold to 390 now to 800 at capacity 24
Lansdowne Resort 44050 Woodbridge Parkway, Leesburg, VA 20176 Investment Summary Initial Investment $ 116,869 Capital Investment* 52,551 Total (Acq - 2011F) $ 169,420 Stabilized Year 2011 RevPAR Penetration at Acquisition 98.8% Stabilized RevPAR Penetration 113.6% Hold Period 9 Years Unlevered IRR 14.0% *Capital Investment reflects investment beyond a 4.0 percent FF&E reserve. Competitive Set: Marriott Conference Center Westfields (Chantilly, VA) Hyatt Regency Reston (Reston, VA) Doubletree Roanoke Conference Center (Roanoke, VA) Preferred Kingsmill Resort (Williamsburg, VA) The Greenbrier (White Sulphur Springs, WV) Hyatt Regency Chesapeake Bay Resort (Cambridge, MD) Hotel Hershey (Hershey, PA) Marriott Seaview Resort & Spa (Galloway, NJ) Marriott Princeton Conference Center @ Forrestal (Princeton, NJ) 15.0% Cash Returns Unlevered Average Cash on Cash: 9.5% 12.4% 13.1% 12.0% 10.8% 9.0% 9.0% 8.4% 6.2% 6.4% 6.4% 7.5% 6.0% 3.0% Unlevered COC 0.0% 2003 2004 2005 2006 2007(F) 2008(F) 2009(F) 2010(F) 2011(F) 25
Lansdowne Resort 44050 Woodbridge Parkway, Leesburg, VA 20176 Since acquisition, we have invested approximately $60MM to create the premier destination resort and golf club in the mid-atlantic region. 26
Hotel Sax 333 North Dearborn Street, Chicago, IL 60610 Investment Overview Initial Investment ($000s) Cost/Key (353) Hotel $84,500 $239,377 Retail 23,000 $199/SF Parking 7,000 $7,813/space Subtotal 114,500 Additional Costs 1,755 $116,255 Acquired the House of Blues Hotel, Marina City Retail and Marina City Parking Towers on March 1, 2006 Acquisition Price: $114.5 million 15-story, 353-guestroom Hotel 115,000 sf of Retail, Restaurants & Undeveloped Space 896 Parking Spaces in Marina City Residential Towers Location: Downtown Chicago Investment Strategies Renovate & Reposition Hotel as a Luxury Product Increase Income Stream through Aggressive Asset Management 27
Hotel Sax 333 North Dearborn Street, Chicago, IL 60610 At acquisition, the House of Blues Hotel was underperforming competitors and not optimizing its location, real estate and unique access to Marina City restaurants and entertainment venues. The surrounding River North area is undergoing dramatic growth and improvement that should benefit the property. House of Blues Hotel (Singin the Blues) Hotel Sax (Tootin the Horn) 28
Hotel Sax 333 North Dearborn Street, Chicago, IL 60610 Investment Strategy At the time of acquisition, the hotel was underperforming its competitors significantly in rate and the Marina City retail space was 20 percent vacant. LaSalle Hotel Properties saw numerous opportunities to grow profitability. Reposition Hotel as a Luxury Product Select Gemstone International as New Operator Rename the Hotel and Add Ballroom and Meeting Space Lease Vacant Retail Space Increase Income Stream through Aggressive Asset Management Repositioning A $23 million complete repositioning commenced in 2006, and as of September 2007, the guestrooms, lobby and Crimson Lounge had been completed and the hotel had been renamed Hotel Sax. Though experiencing significant displacement during the renovation, guest reception of the finished product has been extremely favorable. Parking Towers (May November 2006) Structural improvements Re-bid operating agreement to increase cash flow by 50 percent Guestrooms, Lobby & Crimson Lounge (January June 2007) Redesigned with a sophistication meets the avant-garde style Repositioned hotel to cater to a higher end clientele to drive rate Technologically-advanced Meeting and Ballroom Space Creation (July December 2007) 5,000 sf of awkward meeting space prohibited hotel from capturing one of Chicago s largest customer segments Conversion of 20,000 sf of undeveloped space into state of the art meeting and ballroom space Lease-up of 23,000 sf of Vacant Retail Space Luxury level hotel repositioning enables strategic selection of higher caliber tenants 20,000 sf successfully leased to two restaurants since acquisition Increased retail occupancy anticipated to increase net income by over $1 million 29
Hotel Sax 333 North Dearborn Street, Chicago, IL 60610 Investment Summary Initial Investment Hotel $ 84,500 Retail 23,000 Parking 7,000 Subtotal 114,500 Additional Costs 1,755 Capital Investment* 21,445 Total (Acq- 2011) $ 137,700 Stabilized Year 2011 RevPAR Penetration at Acquisition 87.6% Stabilized RevPAR Penetration 111.1% Hold Period 6 Years Unlevered IRR 20.5% *Capital Investment reflects investment beyond a 4.0 percent FF&E reserve. Competitive Set: W Hotel Lake Shore Drive Downtown Hotel 71 Hotel Monaco Chicago The James Hotel Westin Chicago River North Preferred Hard Rock Hotel Chicago 15.0% Cash Returns Unlevered Average Cash on Cash: 10.2% 12.6% 13.0% 12.0% 11.1% 9.0% 9.1% 8.6% 6.2% 6.0% 3.0% 0.0% Unlevered COC 2006 2007(F) 2008(F) 2009(F) 2010(F) 2011(F) 30
Hotel Sax 333 North Dearborn Street, Chicago, IL 60610 Lobby Crimson Lounge Guestroom Hotel Sax will emerge as a leader in the luxury Chicago market upon reaching stabilization three to four years following the completion of the $23.0 million repositioning. LaSalle anticipates a 6-year unlevered IRR of 20.5 percent and an average unlevered cash on cash return of 10.2 percent. 31
Holiday Inn on the Hill 415 New Jersey Ave NW, Washington, DC 20001 Investment Overview Acquired June 1, 2001 Acquisition Price: $44 million Location: Washington, DC Closest hotel to the US Capitol 343 guestrooms, 11,000 sf of meeting space, restaurant, rooftop pool, parking garage and fitness center Primary business: government, association, commercial transient, group, leisure Close proximity to US Capitol, Smithsonian Museums and Union Station Investment Strategies Value-add Capital Investment through a Redesigned Product Increase Income Stream through Aggressive Asset Management Initial Investment ($000s) Cost/Key(343) Hotel $44,000 $128,280 Additional Costs 1,051 $45,051 Holiday Inn over the Hill Holiday Inn on the Hill 32
Holiday Inn on the Hill 415 New Jersey Ave NW, Washington, DC 20001 Investment Strategy The Holiday Inn on the Hill met LaSalle Hotel Properties external investment criteria. Attractive 12.3 percent cap rate based on purchase price and 10.8 cap rate on trailing twelve months ended March 31, 2001 and including renovations Excellent, irreplaceable location within Washington, DC CBD Free of management encumbrances Potential income stream growth through renovations and aggressive asset management Unique competitive advantage of higher than market weekend occupancy from Holiday Inn reservation system Beyond Holiday Inn Upon acquisition, the Company invested $6.5 million to create a unique, upscale, high style product well beyond the Holiday Inn standards, driving 25 percent of the $3.1 million EBITDA improvement from 2003 2006. Stylish design and quality level generated premium rates from mid week business travelers Holiday Inn reservation system continued to drive weekend business Asset Management Since the renovation was completed in 2003, LHO s in-house asset management team has successfully implemented programs to drive top line growth and profitability. 35 percent increase in ADR 300 basis point improvement in EBITDA margins Future Plans Going forward, the Company sees additional potential to drive profitability through repositioning the hotel as an upscale, independent property. $15 million renovation to reposition hotel as an upper upscale, independent hotel in 2008 Stylish Denihan Hospitality Group of New York City (Benjamin and Affinia Hotels) replaced Crestline as the operator in 2007 and is assisting on the repositioning In acquiring the Holiday Inn on the Hill, the Company saw opportunity to increase market share and profitability through asset management and a redesigned product. 33
Holiday Inn on the Hill 415 New Jersey Ave NW, Washington, DC 20001 Investment Summary Initial Investment $ 45,051 Capital Investment* 20,007 Total (Acq - 2011F) $ 65,058 Stabilized Year 2011 2006 RevPAR Penetration** 90.4% Stabilized RevPAR Penetration 107.6% Hold Period 11 Years Unlevered IRR 18.2% Competitive Set: Holiday Inn Washington Capitol Hill Washington Court Hotel Hyatt Regency Washington Capitol Hill Suites Phoenix Park Hotel Hotel George *Capital Investment reflects investment beyond a 4.0 percent FF&E reserve. ** 2006 RevPAR Penetration represents penetration prior to repositioning as an upscale, independent hotel. 18.0% 15.0% Cash Returns Unlevered Average Cash on Cash: 11.9% 15.0% 16.9% 16.9% 12.5% 12.0% 9.0% 6.0% 9.0% 8.1% 10.4% 6.3% 11.0% 11.7% 11.4% 3.0% Unlevered COC 0.0% 2001 2002 2003 2004 2005 2006 2007(F) 2008(F) 2009(F) 2010(F) 2011(F) In 2007, LHO selected Denihan Hospitality Group out of Manhattan to operate the hotel. A $15 million renovation began in fall 2007 and the asset will be repositioned as an upper upscale, independent hotel and renamed in Q2 2008. 34
Investment Summaries & Returns Hotel Madera Le Montrose Hotel Alexis Hotel Chaminade Resort Hotel Deca 35
Opportunities for Future Growth Hotel Deca 36
Opportunities for Future Growth Hotel Amarano 7,336 sf of developable land undergoing analysis for highest and best use Chaminade Resort Undeveloped land that may one day be sold or developed by the Company Lansdowne Resort 240,000 sf of FAR San Diego Paradise Point Underutilized land that, if permitted, could be used for up to 50 additional guestrooms Hotel Deca Underutilized surface parking lot adjacent to hotel with development potential Hilton San Diego Resort Underutilized land that could be developed into a 10,000 sf ballroom LaSalle Hotel Properties is well positioned to continue to capitalize on its capabilities in opportunistic redevelopment, aggressive asset management and intelligent investment. Chaminade Resort 37
Summary Alexis Hotel 38
Points of Differentiation Mission Income company first Strategy Research driven Value added Invest in upscale and luxury properties in high barrier to entry urban, resort and convention markets; focus on 8 institutional-quality major markets best long-term performance Orientation Professional investors, asset managers and redevelopers, not operators we are very active and involved Dividend Policy Cash flow driven Not REIT minimum Balance Sheet Strategy Much lower leverage Mix variable / fixed rate Internal Growth Significant recent, current and future investments in renovations and repositionings to deliver continued enhanced performance Performance #1 in total shareholder returns since 4/30/98 IPO #1 in total shareholder returns for 5 years ending 9/30/07 Product Quality Stays in forefront of product and service enhancements Design sells Provide the customer an experience 39
Points of Differentiation Consistency Strategies Management Team Execution Performance Reduce Risk Invest in best long-term performing segments and markets upscale and luxury fullservice urban, resort and convention; focus on 8 major high quality urban markets with strong long-term institutional interest and real estate downside protection Acquire individual assets, generally avoid portfolios Maintain consistent strategies Diversify by Geography Type of property (customer) Brands/Independents Operator Continuously invest capital in assets Keep financial leverage low on high operating leverage businesses Utilize floating rate debt as natural cyclical hedge Align operators with terminable management agreements 40
For more information and a copy of this presentation, please visit www.lasallehotels.com For questions, please contact: Justin Boutwell VP of Finance & Investor Relations 301.941.1516 jboutwell@lasallehotels.com