Holloway Lodging Real Estate Investment Trust reports 2010 second quarter
results
/NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
HALIFAX, Aug. 10 /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 June 30, 2010. All amounts are in Canadian dollars unless otherwise indicated.
OVERVIEW
The key events that have occurred since March 31, 2010 are as follows:
- As Holloway had provided a $1.9 million mezzanine loan to the
Super 8 hotel in Windsor, NS which was in default, the owners
relinquished ownership to Holloway pursuant to a quit claim. Holloway
assumed all the assets and liabilities of the hotel effective June 1,
2010;
- Completed $1.8 million in renovations at its Holiday Inn Express hotels
in Halifax, Kamloops and Myrtle Beach;
- Sold its minority investments in two hotels - Ste-Foy and
Trois-Rivieres, Quebec; and
- Appointed a new independent Trustee, Amy Erixon effective May 25th,
2010.
Operating Results
The following table provides a summary of the operating results for the three and six months ended June 30, 2010 and 2009.
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Three Three Six Six
months months months months
(in $000's except ended ended ended ended
number of units and June 30, June 30, June 30, June 30,
per unit results) 2010 2009 2010 2009
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Hotel revenues 17,291 17,782 33,872 36,246
Hotel expenses 13,028 12,897 25,615 26,577
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Hotel operating income 4,263 4,885 8,257 9,669
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Other expenses 9,044 12,434 18,056 20,821
Provision for (recovery
of) future income taxes (1,176) (1,131) (2,516) (2,231)
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Loss from continuing
operations for the
period (3,605) (6,418) (7,283) (8,921)
Income from discontinued
operations - 132 - 155
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Loss and comprehensive
loss for the period (3,605) (6,286) (7,283) (8,766)
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Weighted average basic
units outstanding 39,135,216 39,135,216 39,135,216 39,135,216
Weighted average
diluted units
outstanding 39,135,216 39,135,216 39,135,216 39,135,216
Basic income (loss)
per unit (0.09) (0.16) (0.19) (0.22)
Diluted income (loss)
per unit (0.09) (0.16) (0.19) (0.22)
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Reconciliation to funds
-----------------------
from operations (FFO)
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Add/(deduct):
Depreciation and
amortization on real
property 3,179 3,319 6,361 6,623
Provision for (recovery
of) future income
taxes, continuing
operations (1,176) (1,131) (2,516) (2,231)
Loss on disposal of
investments in hotel
properties 132 - 132 -
Loss on disposal of
property and equipment 2 - 2 -
Loss on acquisition of
hotel property 47 - 47 -
Provision for impairment
on mezzanine loans and
advances - 4,700 - 4,700
Provision for future
income taxes,
discontinued
operations - 82 - 122
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Funds from operations
- basic and diluted (1,421) 684 (3,257) 448
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Basic FFO per unit (0.04) 0.02 (0.08) 0.01
Diluted FFO per unit (0.04) 0.02 (0.08) 0.01
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Reconciliation to
-----------------
distributable income
--------------------
Add/(deduct):
Depreciation and
amortization - trust
and other assets 46 55 96 140
Accretion of mortgages,
convertible debentures
and deferred financing
fees 794 614 1,473 1,212
Unit-based compensation - 15 15 33
Unrealized foreign
exchange loss (gain) 211 (437) 58 (242)
FF&E reserve (519) (568) (1,016) (1,148)
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Distributable income
- basic and diluted (889) 363 (2,631) 443
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Basic distributable
income per unit (0.02) 0.01 (0.07) 0.01
Diluted distributable
income per unit (0.02) 0.01 (0.07) 0.01
Distributions declared - 0.0525 - 0.105
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Reconciliation of cash
----------------------
flow from operating
-------------------
activities to
-------------
distributable income
--------------------
Cash flow from operating
activities 768 1,340 1,550 1,107
Changes in non-cash
working capital balances 640 (409) (3,165) 484
FF&E reserve (519) (568) (1,016) (1,148)
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Distributable income (889) 363 (2,631) 443
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THREE MONTHS ENDED JUNE 30, 2010 AND 2009
Hotel Revenues
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Three months ended Three months ended
June 30, 2010 June 30, 2009 RevPAR
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Region Occupancy ADR RevPAR Occupancy ADR RevPAR Change
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Atlantic
Canada
($Cdn) 71.90% $114.27 $82.16 70.37% $120.39 $84.72 (3.0%)
Western
Canada
($Cdn) 52.15% $127.77 $66.63 50.48% $139.13 $70.23 (5.1%)
United
States
($US) 69.86% $80.28 $56.08 68.37% $86.00 $58.80 (4.6%)
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Weighted
Average
Total
($Cdn) 56.60% $122.01 $69.06 54.82% $132.49 $72.63 (4.9%)
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The Atlantic Canada RevPAR has decreased 3.0% for the three months ended June 30, 2010, compared to the three months ended June 30, 2009. The decline is attributed to lower room rates across the region. In Moncton, there was an encouraging improvement in demand across a broad range of segments. The Moncton market has had numerous new competitors enter the market in recent years and this has tempered rate growth. In Halifax, there was a market-wide decline in group business in the quarter and this shift resulted in declines in both occupancy and rate. Four of the REIT hotels in Atlantic Canada exceeded their fair market share in the second quarter.
The western Canada RevPAR has decreased 5.1% compared to the second quarter of the prior year. While demand exceeded last years' levels, there has been a significant contraction in rates due to the increased room supply in numerous markets. The largest hotel occupancy declines were in Fort Nelson and High Level. There were strong demand increases in Calgary and Fort St. John and moderate demand growth in Grande Prairie. Average rates have declined across the western region and the decline was most pronounced in Grande Prairie and Slave Lake. Despite this operating environment, several of the REIT's hotels in the western region increased levels of market share and most achieved in excess of their fair market share.
RevPAR for the Holiday Inn Express in Myrtle Beach, South Carolina decreased 4.6% compared to the prior year. The hotel substantially completed renovations in the second quarter. The activity relating to the renovations combined with the decline in leisure and group travel contributed to the decline.
Higher food and beverage revenue in Grande Prairie, Fort McMurray and Calgary was partially offset by lower parking revenue in Calgary and accounted for the net increase 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 increased $0.1 million to $11.5 million when comparing the three months ended June 30, 2010 to the same period in 2009. The increase is primarily attributed to the increased occupancy in the hotels and the resultant increase in cost. Property taxes and insurance expenses have increased marginally for the three months ended June 30, 2010 compared to the second quarter of 2009. Management fees declined $0.1 million to $0.4 million as they are based on the hotel revenues which are lower for the second quarter of 2010 compared to the second quarter of 2009.
Other Expenses
Interest on mortgages and other debt has decreased from $2.8 million to $2.7 million for the three months ended June 30, 2010 compared to the three months ended June 30, 2009 due to the decline in the mortgage principal outstanding. The total interest on the convertible debentures has remained at $1.2 million for the second quarter of 2010. The total of the non-cash accretion of the discount on the convertible debentures, mortgages and deferred financing fees has increased $0.2 million to $0.8 million for the second quarter of 2010 compared to $0.6 million for the second 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. Corporate administrative expenses were $0.7 million for the three months ended June 30, 2010 and $0.5 million for the three months ended June 30, 2009. The increase is primarily a result of legal and consulting expenses of $0.2 million related to the proposed conversion to a corporation.
During the three months ended June 30, 2010 and 2009, the REIT generated interest income of $0.02 million and $0.2 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 June 30, 2010 compared to the second quarter of 2009.
During the second quarter, the REIT sold its minority equity investments in the Super 8 hotels in Ste-Foy and Trois Rivieres, Quebec. These hotels were sold to an arms length party. The REIT incurred a loss on disposal of $0.1 million which may be reduced when the final distribution of the proceeds from the sale are finalized. Also during the second quarter, the owners of the Super 8 hotel in Windsor, NS relinquished ownership of the hotel to Holloway pursuant to a quit claim. Holloway had provided a $1.9 million mezzanine loan to the property which was in default.
In the second quarter of 2009, the REIT recorded a provision for impairment of $4.7 million on the mezzanine loans and advances to the Yorkland Hotel in Toronto, ON. During the second quarter of 2010, this hotel was sold by the receiver.
Distributable Income
Distributable income was ($0.9) million (($0.02) basic and diluted distributable income per unit) for the three months ended June 30, 2010 compared to $0.4 million ($0.01 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 22 hotels with 2,386 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, or Ms. Tracy Sherren, Chief Financial Officer of the REIT, (902) 404-3499
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