Holloway Lodging Real Estate Investment Trust reports 2011 year end results

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HALIFAX, March 14, 2012 /CNW/ - Holloway Lodging Real Estate Investment Trust (TSX: HLR.UN) ("Holloway" or the "REIT") today announced its financial results for the year ended December 31, 2011.  All amounts are in Canadian dollars unless otherwise indicated.  Readers should refer to Holloway's audited consolidated financial statements as at December 31, 2011 and its management discussion and analysis which are available on Holloway's website at www.hlreit.com and on SEDAR at www.sedar.com.

Key Events - Q4, 2011

• Results improved for the fourth quarter of 2011 compared to the fourth quarter of 2010 as follows (in millions where indicated except percentages):

		2011		2010		$ Increase (Decrease)		% Change
Hotel revenues - same store		$18.7 M		$16.8 M		$1.9 M		11.3%
Revenue per available room - same store		$78.88		$70.24		$8.64		12.3%
Hotel operating income before depreciation		$5.8 M		$4.4 M		$1.4 M		31.8%
Hotel operating income margin		30.7%		23.7%		-		7.0 pts
Funds from operations		$3.2 M		($0.8 M)		$4.0 M		500.0%
Distributable income		$1.2 M		($0.5 M)		$1.7 M		340.0%

• The REIT repurchased $3.2 million face value of the 2012 Debentures for $2.2 million resulting in a gain on repurchase of $1.0 million;
• The REIT settled $3.3 million face value of its promissory notes for $1.9 million resulting in a gain on repurchase of $1.4 million; and
• On December 22, 2011, the REIT announced that it would convert all outstanding 2012 Debentures into trust units on January 23, 2012.

Debt Reduction Actions

Beginning in the third quarter of 2011, the REIT focused on reducing its indebtedness and improving its balance sheet.  The REIT made significant progress in this endeavor by taking the following actions:

• Sold the Radisson® Suite hotel and Holiday Inn Express® hotel, both in Halifax, Nova Scotia and used the net proceeds from such sales to partially repay its 8.0% convertible debentures maturing on August 1, 2011, to repay amounts outstanding under its secured credit facility maturing March 31, 2013 (the "Bridge Loan") and to repurchase at a discount to their face value its 6.5% convertible debentures maturing on June 30, 2012 (the "2012 Debentures").
• Repurchased additional 2012 Debentures at a discount to their face value.  During the third and fourth quarters, the REIT repurchased $5.2 million of 2012 Debentures for a purchase price of $3.6 million.
• Settled all of its outstanding promissory notes at a discount to their face value. The REIT repurchased $2.8 million of interest-bearing promissory notes for $1.8 million and added that balance to the amount outstanding under the Bridge Loan rather than paying cash. The REIT also repurchased $0.5 million of non-interest-bearing promissory notes for $0.1 million in cash.
• Announced the conversion into trust units of $46.7 million of 2012 Debentures. This occurred on January 23, 2012 resulting in 714,224,023 trust units being issued to holders of the 2012 Debentures.

As a result of these actions along with the sale of the 5 Calgary Downtown Suites hotel in Calgary, Alberta and the Radisson® Hotel and Suites in Fort McMurray, Alberta which were sold in January and February 2012, respectively, the REIT reduced its indebtedness by $109 million between June 30, 2011 and February 29, 2012. This also resulted in the REIT achieving an improved debt service coverage ratio.

From an operational perspective, the fourth quarter was also positive for the REIT as hotel demand from oil and gas related crews was strong. While the first half of 2011 saw occupancy increases at many of our hotels, the second half of 2011 achieved both occupancy and rate increases. This created improved hotel operating margins as reflected in the REIT's financial results.

Outlook

The REIT continues to be cautiously optimistic about the performance of its hotels in the coming quarters. While we do not expect material improvement at our Atlantic Canada hotels, we are seeing continued positive developments at our Western Canada hotels. The performance of the Western Canada hotels fluctuates based on oil and gas exploration and development and infrastructure projects in the surrounding areas. According to the Canadian Association of Oilwell Drilling Contractors, the number of active oil rigs in 2011 increased by 27% compared to 2010, and the number of wells to be drilled in Alberta is expected to increase by 9% in 2012 versus 2011. This trend bodes well for the REIT's Western Canada hotels. There are also several infrastructure and pipeline projects underway or anticipated in Alberta and, to a lesser extent, in British Columbia that will provide ongoing demand for several of the REIT's hotels.

In recent quarters, the REIT's priority was to improve its balance sheet and create a capital structure that is better suited to the cyclical nature of the hotel industry.  The REIT expects to continue reducing its indebtedness.  In coming quarters, the REIT will focus on operational improvements and executing select capital projects at its hotels.

Operating Results

The following table provides a summary of the operating results for the three months and years ended December 31, 2011 and 2010.

	Three months ended				Years ended
(in $000's except number of units and per unit results)	December 31, 2011		December 31, 2010		December 31, 2011		December 31, 2010
Hotel revenues	18,765		18,406		78,398		73,448
Hotel expenses	13,007		14,048		55,219		54,171
Hotel depreciation and amortization	2,420		2,575		9,903		10,188
Hotel operating income	3,338		1,783		13,276		9,089
Other expenses	4,190		5,210		21,679		22,144
Recovery of deferred income taxes	-		-		-		(2,516)
Net loss for the periods	(852)		(3,427)		(8,403)		(10,539)
Weighted average basic and diluted units outstanding	39,380,422		39,135,216		39,166,443		39,135,216
Basic and diluted loss per unit	(0.02)		(0.09)		(0.21)		(0.27)
Reconciliation to funds from operations (FFO)
Add/(deduct):
Depreciation and amortization on real property	2,376		2,529		9,725		10,007
Recovery of deferred income taxes	-		-		-		(2,516)
Provision for impairment of loan receivable	1,235		-		1,235		-
Provision for impairment of minority interest investments in hotel properties	-		-		-		423
Loss on disposal of minority interest investments in hotel properties	187		-		187		49
Provision for impairment of hotel properties	3,265		-		3,265		-
Reversal of impairment of assets held-for-sale	(2,567)		-		(2,567)		-
(Gain) loss on acquisition or disposal of hotel properties	(421)		84		1,528		144
Funds from operations	3,223		(814)		4,970		(2,432)
Basic and diluted FFO per unit	0.08		(0.02)		0.13		(0.06)
Reconciliation to distributable income
Add/(deduct):
Depreciation and amortization - trust assets	45		49		182		190
Accretion of mortgages, bridge loan, convertible debentures and deferred financing fees	672		800		3,274		3,093
Fair value adjustment of Class B LP units and derivative liabilities	(148)		3		(252)		(53)
Gain on repurchase of convertible debentures and settlement of promissory notes	(2,192)		-		(2,698)		-
Unit-based compensation	126		-		188		15
FF&E reserve	(563)		(552)		(2,352)		(2,204)
Distributable income	1,163		(514)		3,312		(1,391)
Basic and diluted distributable income per unit	0.03		(0.01)		0.08		(0.04)
Reconciliation of cash generated from operating activities to distributable income
Net cash generated from operating activities	3,877		510		6,261		2,850
Changes in items of working capital	(1,730)		(472)		(597)		(2,037)
FF&E reserve	(563)		(552)		(2,352)		(2,204)
Mortgage penalty refund	(421)		-		-		-
Distributable income	1,163		(514)		3,312		(1,391)

Q4 Operating Results

The following table provides the REIT's hotel operating margins for its portfolio for the three months ended December 31, 2011 and 2010.

		Three months ended
(in $000's except percentages, # of rooms available and HOI per available room)		December 31, 2011		December 31, 2010		Variance
Hotel revenues		18,765		18,406		359
Hotel operating expenses excluding depreciation		11,692		12,420		(728)
Hotel gross margin		7,073		5,986		1,087
Percentage		37.7%		32.5%		5.2 pts
Hotel overhead expenses		1,315		1,628		(313)
Hotel operating income before depreciation (HOI)		5,758		4,358		1,400
Hotel operating income margin		30.7%		23.7%		7.0 pts

This table includes the operations of the twenty hotels for the full quarter and the prior year.

		Three months ended
		December 31, 2011					December 31, 2010							RevPAR
Region		Occ.		ADR		RevPAR		Occ.		ADR		RevPAR		Change
Atlantic Canada ($Cdn)		42.64%		$106.42		$45.38		53.66%		$106.21		$56.99		(20.4%)
Western Canada ($Cdn)		69.35%		$125.26		$86.87		62.54%		$119.84		$74.95		15.9%
United States ($US)		46.13%		$66.13		$30.50		38.77%		$68.22		$26.45		15.3%
Weighted Average Total ($Cdn)		64.87%		$121.60		$78.88		60.21%		$116.66		$70.24		12.3%

Holloway Lodging Real Estate Investment Trust
Holloway is a real estate investment trust focused on 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 18 hotels with 1,747 rooms.  Holloway's trust units trade on the Toronto Stock Exchange under the symbol HLR.UN.

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 14, 2012 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. 

Mr. Michael Rapps, Chairman of the REIT at [phone] or Jane Rafuse, Chief Financial Officer of the REIT at [phone]