Lakeview Hotel REIT Reports 2nd quarter Financial Results

/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTIBUTION TO U.S. NEWS WIRE SERVICES/

WINNIPEG, Aug. 27 /CNW/ - Lakeview Hotel Real Estate Investment Trust ("Lakeview REIT") is pleased to report its financial results for the quarter ended June 30, 2010. The following comments in regard to the financial results should be read in conjunction with the June 30, 2010 financial statements and Management Discussion and Analysis which are available on the SEDAR website www.sedar.com and the Lakeview REIT website www.lakeviewreit.com.

Lakeview REIT has seen a slow and steady improvement in operating results since February, 2010, which from management's perspective represented the bottom of the market. Since February there has been a year-over-year increase in monthly room revenues in every month but May. Revenues are still well below the levels they were at when the market had peaked, but the reversal of the downward trend is encouraging and is expected to continue.

The potential exists for significantly improved operating results within the next 18 months. This is based on a combination of factors including overall improving market conditions and from several market specific developments. Market specific developments expected within the next 18 months include a major carbon-capture project near Whitecourt, Alberta; the Nipisi and Mitsue pipeline projects proximate to Slave Lake, Alberta; the Dokie wind project near Chetwynd, British Columbia; the North West Upgrading project which would benefit Lakeview REIT's properties in Sherwood Park and Fort Saskatchewan, Alberta; and anticipated increases in drilling activity in the Pembina Cardium formation which would benefit Drayton Valley and Edson, Alberta hotels.

Lakeview REIT's results are still closely tied to natural gas prices which remain soft and it is unclear when gas pricing will improve. In 2011 the terms will be up on many of the mortgages on properties owned by Lakeview REIT. While Lakeview REIT believes it will be able to renew these mortgages as they come due, the cash flow of the REIT remains constrained and it is unclear what interest rates will be on the mortgage renewals. Renewing mortgages at higher interest rates could create challenges for the REIT.

Following is a comparison of the operating results for the three and six months ended June 30, 2010 and the three and six months ended June 30, 2009:

    
                              Three months ended         Six months ended
                                    June 30                   June 30

                               2010         2009         2010         2009

    Hospitality Revenue
      Room                  7,511,982    7,592,028   14,342,859   15,350,471
      Food & Beverage         734,455      737,379    1,412,571    1,504,435
      Other                   326,666      493,273      761,754    1,011,601
                          ---------------------------------------------------
    Total Revenue           8,573,103    8,822,680   16,517,184   17,866,507
    Expenses               10,360,831   11,071,985   20,501,968   21,586,982
                          ---------------------------------------------------
    Net Income (Loss)
     before future
     income tax
     expense               (1,787,728)  (2,249,305)  (3,984,784)  (3,720,475)
                          ---------------------------------------------------
    Basic and diluted
     income (loss)
     before income
     tax per unit              (0.091)      (0.115)      (0.204)      (0.192)
    Future (Income Tax
     Expense) Recovery              -            -            -            -
    Net (Loss)             (1,787,728)  (2,249,305)  (3,984,784)  (3,720,475)
    Basic and Diluted
     Income (Loss)
     per Unit                  (0.091)      (0.115)      (0.204)      (0.192)
                          ---------------------------------------------------
    Reconciliation to
     funds from
     Operations
    Add (deduct)
    Amortization of income
     properties             1,674,879    1,670,211    3,357,497    3,343,262
    Amortization of
     franchise fees
     and licenses               8,734       27,238       17,468       39,674
    Distributions from
     Lakeview Flag
     Licensing General
     Partnership               19,600      124,460       49,000      297,430
    Income from Lakeview
     Flag Licensing
     General Partnership     (127,725)    (149,909)    (243,104)    (331,298)
    Future income tax
     expense (recovery)             -            -            -            -
                          ---------------------------------------------------
    Funds from Operations    (212,240)    (577,305)    (803,923)    (371,407)
    Basic and diluted
     funds from
     Operations per
     unit                      (0.011)      (0.030)      (0.041)      (0.019)
    Contributions to
     reserve account         (180,754)    (205,015)    (338,374)    (383,199)
                          ---------------------------------------------------
    Adjusted funds from
     Operations              (392,994)    (782,320)  (1,142,297)    (754,606)
    Basic and diluted
     adjusted funds
     from Operations
     per unit                  (0.020)      (0.040)      (0.058)      (0.039)
    Reconciliation to
     distributable
     income
    Accretion on debt
     component of
     convertible
     debentures               284,647      251,951      568,067      504,735
    Accretion of debentures    50,372       45,332       99,433       89,485
    Accretion of mortgages     63,731       52,519      126,995      104,662
    Decretion of mortgages
     receivable                     -       51,217            -       56,877
    Loss on settlement of
     mortgages receivable           -       98,244            -       98,244
    Compensation costs of
     unit options                   -            -            -            -
                          ---------------------------------------------------
    Distributable income        5,756     (283,057)    (347,802)      99,397
    Basic and diluted
     distributable
     income per units           0.000       (0.015)      (0.018)       0.005
    Distributions                   -            -            -      192,748
    

Lakeview REIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbol "LHR.UN". Lakeview REIT receives income from ownership, management and licensing of hotel properties. For further information on Lakeview REIT please visit our website www.lakeviewreit.com.

The TSX Venture Exchange nor its Regulation Service Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

%SEDAR: 00020441E

For further information: Keith Levit, President, or Avrum Senensky, Executive Vice President, Tel: [phone], Fax: [phone], Email [email protected]