Holloway Lodging Real Estate Investment Trust reports 2010 first quarter
results
/NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
HALIFAX, May 13 /CNW/ - Holloway Lodging Real Estate Investment Trust (TSX: HLR.UN, HLR.DB and HLR.DB.A) ("Holloway" or the "REIT") today announced its financial results for the three months ended March 31, 2010. All amounts are in Canadian dollars unless otherwise indicated.
OVERVIEW
The key events that have occurred since December 31, 2009 are as follows:
- Refinanced two mortgages for $10.5 million for a five year term at a
fixed interest rate of 6.6%. Holloway has no other debt maturities
until mid 2011;
- Made significant progress on renovations at its Holiday Inn Express
hotels in Halifax, Kamloops and Myrtle Beach; these upgrades to
guestrooms and public areas will enhance the guest experience and
improve the competitiveness of these hotels;
- Announced an agreement to convert to a corporation, subject to
unitholder approval which is being sought at the Annual General Meeting
on May 25th, 2010;
- Announced the departure of President and Chief Operating Officer,
Michael Jackson effective March 19th, 2010; and
- Appointed a new Trustee, Richard Grimaldi effective April 15th, 2010.
Operating Results
The following table provides a summary of the operating results for the three months ended March 31, 2010 and 2009.
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Three Three
months ended months ended
(in $000's except number of March 31, March 31,
units and per unit results) 2010 2009
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Hotel revenues 16,581 18,464
Hotel expenses 12,587 13,680
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Hotel operating income 3,994 4,784
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Other expenses 9,013 8,387
Provision for (recovery of) future income
taxes (1,340) (1,100)
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Loss from continuing operations for the period (3,679) (2,503)
Income from discontinued operations - 23
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Loss and comprehensive loss for the period (3,679) (2,480)
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Weighted average basic units outstanding 39,135,216 39,135,216
Weighted average diluted units outstanding 39,135,216 39,135,216
Basic income (loss) per unit (0.09) (0.06)
Diluted income (loss) per unit (0.09) (0.06)
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Reconciliation to funds from operations (FFO)
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Add/(deduct):
Depreciation and amortization on real property 3,182 3,304
Provision for (recovery of) future income taxes (1,340) (1,060)
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Funds from operations - basic and diluted (1,837) (236)
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Basic FFO per unit (0.05) (0.01)
Diluted FFO per unit (0.05) (0.01)
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Reconciliation to distributable income
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Add/(deduct):
Depreciation and amortization - trust and other
assets 50 86
Accretion of mortgages, convertible debentures
and deferred financing fees 679 598
Unit-based compensation 15 18
Unrealized foreign exchange loss (gain) (153) 193
FF&E reserve (497) (580)
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Distributable income - basic and diluted (1,743) 79
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Basic distributable income per unit (0.04) 0.00
Diluted distributable income per unit (0.04) 0.00
Distributions declared - 0.0525
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Reconciliation of cash flow from operating
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activities to distributable income
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Cash flow from operating activities 697 (233)
Changes in non-cash working capital balances (1,943) 892
FF&E reserve (497) (580)
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Distributable income (1,743) 79
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THREE MONTHS ENDED MARCH 31, 2010 AND 2009
Hotel Revenues
Three months ended Three months ended
March 31, 2010 March 31, 2009
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Occu- Occu- RevPAR
Region pancy ADR RevPAR pancy ADR RevPAR Change
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Atlantic
Canada
($Cdn) 57.61% $112.82 $65.00 55.96% $114.21 $63.91 1.7%
Western
Canada
($Cdn) 53.94% $131.41 $70.88 56.34% $143.12 $80.63 (12.1%)
United
States
($US) 38.42% $66.56 $25.57 45.03% $71.88 $32.37 (21.0%)
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Weighted
Average
Total
($Cdn) 53.81% $125.75 $67.67 55.72% $135.98 $75.77 (10.7%)
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The Atlantic Canada RevPAR has increased 1.7% for the three months ended March 31, 2010 compared to the three months ended March 31, 2009. Three of the four hotels in Atlantic Canada achieved or exceeded last years' RevPAR.
In Moncton, there was good occupancy growth particularly in the group segment. The market city-wide has shown encouraging occupancy growth versus the same period in the prior year.
In Truro, an additional 45% room supply increase last year continues to be absorbed in the market and this has a dampening effect on average rates.
In downtown Halifax, the practice of rate discounts seems to have abated and market-wide there was growth in both occupancy and average rate. The Radisson Halifax achieved solid RevPAR growth. In suburban Halifax the market performed slightly below the prior year, however the Holiday Inn Express maintained last years' RevPAR performance and thus grew its market share.
All four of the REIT hotels in Atlantic Canada exceeded their fair market share in the first quarter.
The western Canada RevPAR has decreased 12.1%. While there has been some upturn in activity in the oil and gas sector, the increase was not of a sufficient magnitude to offset the increased room supply in many of the markets where Holloway has hotels.
The largest hotel occupancy declines were in Slave Lake, Whitecourt and in three out of four hotels in Grande Prairie. While the rate of decline in occupancy has slowed and several markets recorded occupancy increases compared to the prior year, the average rates continue to compress. In many markets the competitive set are deeply discounting rates to sustain an occupancy base. This is particularly pronounced in Slave Lake, Grande Prairie, Fort St. John and Calgary. In both High Level and Grande Prairie, new competitors entered the market in the quarter.
Despite this operating environment, many of the REIT's hotels in the western region increased levels of market share and most achieved well in excess of their fair market share.
The RevPAR for the Holiday Inn Express in Myrtle Beach, South Carolina decreased 21.0%. The hotel is currently undergoing renovations, which are expected to be completed in the second quarter. The activity relating to the renovations combined with the ongoing recession in the U.S. contributed to the business decline.
Lower food and beverage revenue in Slave Lake along with lower parking revenue in Calgary accounted for the decline in other revenue.
Hotel Expenses
Operating expenses include wages, supplies and overhead expenses such as repairs and maintenance, sales and marketing and administrative expenses related to the operations of the hotel. These expenses have decreased $1.0 million when comparing the three months ended March 31, 2010 to the same period in 2009. Substantial savings were achieved as a result of lower wage costs, cost containment in operating expenses and from cost reductions in administration and marketing.
Property taxes and insurance expenses have declined $0.1 million for the three months ended March 31, 2010 compared to the first quarter of 2009, as several properties experienced lower property taxes.
Management fees are based on the hotel revenues which are lower for the first quarter of 2010 compared to the first quarter of 2009.
Other Expenses
Interest on mortgages and other debt and accretion of deferred financing fees has decreased $0.1 million to $2.7 million for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 due to the decline in the mortgage principal outstanding. The total of the non-cash accretion of the discount on the convertible debentures, mortgages and deferred financing fees has increased $0.1 million to $0.7 million for the first quarter of 2010 compared to $0.6 million for the first quarter of 2009, as the non-cash accretion on the convertible debentures has increased. The accretion increases over the term to the maturity dates of the debentures. The total interest on the convertible debentures has remained at $1.2 million for the first quarter of 2010 and 2009.
Corporate administrative expenses were $1.3 million for the three months ended March 31, 2010 and $0.6 million for the three months ended March 31, 2009. The increase is primarily a result of severance expenses. On March 19, 2010, the REIT announced the departure of its President and Chief Operating Officer.
During the three months ended March 31, 2010 and 2009, the REIT generated interest income of $0.04 million and $0.3 million respectively from loans receivable and the investment of cash balances. There was lower interest revenue from the loan to Pacrim Hospitality Services Inc. as the interest rate on this loan is currently 1%.
The unrealized foreign exchange gain/loss represents the conversion of the US-denominated mortgage on the Holiday Inn Express in Myrtle Beach into Canadian dollars.
Depreciation and amortization has decreased marginally for the three months ended March 31, 2010 compared to the first quarter of 2009.
The REIT's income from discontinued operations during the first quarter of 2010 was $0 compared with $0.1 million for the prior year, which represents the income from the Wingate by Wyndham hotel in Calgary, AB, which was sold on October 5, 2009.
Distributable Income
Distributable income was ($1.7) million (($0.04) basic and diluted distributable income per unit) for the three months ended March 31, 2010 compared to $0.1 million ($0.00 basic and diluted distributable income per unit) for the same period in 2009. Distributable income will fluctuate due to market conditions, the seasonality in the hospitality industry and the timing of acquisitions and disposals.
Holloway Lodging Real Estate Investment Trust
Holloway is a real estate investment trust focused on acquiring, owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets. Holloway currently owns 21 hotels with 2,320 rooms. Holloway's units and convertible debentures trade on the Toronto Stock Exchange under the symbols HLR.UN, HLR.DB and HLR.DB.A, respectively.
This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the future financial position, property acquisition strategies and opportunities, business strategy, financial results and plans and objectives of the REIT. Particularly, statements regarding the REIT's future operating results, property acquisition strategies and opportunities and economic performance are forward-looking statements. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward looking-information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what the REIT currently expects and there can be no assurance that such statements will prove to be accurate. Some of these risks and uncertainties are described under "Risk Factors" in Holloway's Annual Information Form ("AIF"), dated March 26, 2010 which is available at www.sedar.com. The REIT does not intend to update or revise any such forward-looking information should its assumptions and estimates change.
%SEDAR: 00023845E
For further information: Mr. Glenn Squires, Chief Executive Officer of the REIT, (902) 404-3499; Ms. Tracy Sherren, Chief Financial Officer of the REIT, (902) 404-3499
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