Temple REIT reports 2009 third quarter results

WINNIPEG , Nov. 24 /CNW/ - Temple Real Estate Investment Trust ("TREIT") (TSX Venture: TR.UN) today reported its financial results for the quarter ended September 30, 2009 . The following comments in regard to the financial position and operating results of TREIT should be read in conjunction with the September 30, 2009 Management Discussion & Analysis and the financial statements for the quarter ended September 30, 2009 , which may be obtained from the TREIT website at www.treit.ca or the SEDAR website at www.sedar.com.

    
    2009 THIRD QUARTER SUMMARY

    Financial

    Q3 2009 compared to Q2 2009:

    -  Revenue per available room (RevPar) at the Fort McMurray properties
       decreased by 7.9%, from $108.13 to $99.58
    -  Overall, RevPar decreased by 1.9%, from $94.80 to $92.95
    -  Operating income decreased by approximately $0.65 million or 10% to
       $5.85 million
    -  Operating profit margin decreased to 37% compared to 40% in Q2
    -  Net income decreased by $1.01 million resulting in a net loss in Q3 of
       $0.18 million
    -  Distributable income decreased by $1.14 million (46.2%) to
       $1.33 million or $0.10 per unit, representing a payout ratio of 96.5%
       for the quarter
    -  Funds from operations (FFO) decreased by $1.23 million (45.4%) to
       $1.48 million or $0.12 per unit, representing a payout ratio of 86.7%
       for the quarter

    Capital Structure

    -  Weighted average interest rate on the aggregate long-term debt of
       6.95% at September 30, 2009, compared to 6.34% at June 30, 2009
    -  Mortgage loan debt to appraised property value ratio of 57% at
       September 30, 2009, based on appraisals completed for six properties
       (47% of total appraised value) in 2009, for two properties (24% of
       total appraised value) in 2008 and three properties (29% of total
       appraised value) completed in 2007
    

Throughout 2009, the occupancy level of the Fort McMurray hotel portfolio has been negatively impacted by the slowdown of development activity in the oil sands industry. During the third quarter of 2009, the occupancy level of the Fort McMurray portfolio decreased to 51%, compared to 54% in the second quarter of 2009 and 52% in the first quarter of 2009. Six of the ten hotels owned by TREIT are located in Fort McMurray.

    
    FINANCIAL AND OPERATING STATISTICS
    -------------------------------------------------------------------------
                          Three Months Ended           Nine Months Ended
                             September 30                 September 30
                      -------------------------------------------------------
                              2009          2008          2009          2008
                      -------------------------------------------------------

    DISTRIBUTIONS
      Amount - total  $  1,282,535  $  3,758,437  $  5,127,474  $  9,087,610
             - per
                unit  $       0.10  $       0.30  $       0.40  $       0.80

    BALANCE SHEET
      Total Assets    $269,856,838  $236,932,294  $269,856,838  $236,932,294
      Total Long-Term
       Debt and
       Convertible
       Debentures     $197,767,461  $160,613,346  $197,767,461  $160,613,346

    KEY PERFORMANCE
     INDICATORS
    Operations:
      Occupancy             54.76%        73.78%        54.05%        74.58%
      ADR             $     169.73  $     185.07  $     176.58  $     183.05
      RevPar          $      92.95  $     136.54  $      95.44  $     136.51
      Operating profit
       margin               37.42%        51.27%        38.50%        52.50%

    Operating results:
      Total revenue   $ 15,639,078  $ 15,323,120  $ 49,687,869  $ 41,856,539
      Operating
       income         $  5,852,451  $  7,897,240  $ 19,131,889  $ 22,021,906
      Net income      $   (180,211) $  2,978,257  $  1,486,187  $  8,074,915

    Cash flows:
      Distributable
       income         $  1,329,415  $  4,250,825  $  6,405,028  $ 11,665,552
      Funds from
       operations     $  1,479,309  $  4,429,554  $  7,037,450  $ 12,066,758

    Financing:
      Weighted average
       interest rate of
       long-term debt        6.95%         6.43%         6.95%         6.43%

    PER UNIT AMOUNTS

                   Basic Diluted  Basic Diluted  Basic Diluted  Basic Diluted
                  ------ -------  ----- -------  ----- -------  ----- -------
    Net income    $(0.01) $(0.01) $0.24   $0.22  $0.12   $0.12  $0.73   $0.68
    Distributable
     income       $ 0.10   $0.10  $0.34   $0.26  $0.50   $0.50  $1.05   $0.80
    Funds from
     operations    $0.12   $0.12  $0.36   $0.28  $0.55   $0.55  $1.09   $0.83
    

TREIT completed the third quarter of 2009 with operating income of $5.85 million , compared to operating income of $7.90 million in the third quarter of 2008. The decrease in operating income mainly reflects a decrease in the occupancy level of the Fort McMurray hotels, partially offset by an incremental operating income from the Capri Centre, which was acquired by TREIT on December 30, 2008 .

TREIT incurred a loss, before taxes, of $0.14 million during Q3-09, compared to an income, before taxes, of $3.21 million in Q3-08. The decrease in income mainly reflects the decrease in operating income, as well as a $0.99 million increase in financing expense and a loss of $0.20 million pertaining to a decrease in the value of marketable securities. The increase in financing expense was anticipated and mainly reflects incremental interest expense in regard to the mortgage financing for the Capri Centre acquisition and the 68-room expansion of the Merit Hotel, and an increase in second mortgage loan financing costs for the Clearwater Suites hotel. The 68 expansion rooms at the Merit Hotel were delivered August 1, 2009 .

The third quarter cash flow results generally correspond to the income results, with cash from operating activities, excluding changes in non-cash operating items, decreasing by $2.91 million , compared to the third quarter of 2008. Notwithstanding the decline in overall results, TREIT generated sufficient cash flow to fully fund the distribution, which was declared for the third quarter of 2009.

    
    COMPARISON TO PRECEDING QUARTER

    Analysis of Net Income - Q3-09 vs. Q2-09
    -------------------------------------------------------------------------
                           Three Months Ended         Increase (Decrease)
                      -------------------------------------------------------
                      September 30       June 30        Amount             %
                      ------------- ------------- ------------- -------------
    Hotel revenue
      Room            $ 10,176,999  $ 10,333,821  $   (156,822)         (2)%
      Other              4,842,004     5,668,100      (826,096)        (15)%
                      ------------- ------------- ------------- -------------

      Total hotel
       revenue          15,019,003    16,001,921      (982,918)         (6)%

    Interest and other
     income                620,075       778,448      (158,373)        (20)%
                      ------------- ------------- ------------- -------------

      Total revenue     15,639,078    16,780,369    (1,141,291)         (7)%

    Hotel operating
     expenses            9,786,627    10,279,359      (492,732)         (5)%
                      ------------- ------------- ------------- -------------

    Operating income     5,852,451     6,501,010      (648,559)        (10)%

    Finance expense      4,092,162     3,541,697       550,465          16 %
    Trust expense           65,302       225,491      (160,189)        (71)%
    Amortization         1,639,661     1,595,755        43,906           3 %
                      ------------- ------------- ------------- -------------
                            55,326     1,138,067    (1,082,741)        (95)%
    Change in
     marketable
     securities            196,275       (26,175)      222,450        (850)%
    Income taxes            39,262       336,219      (296,957)        (88)%
                      ------------- ------------- ------------- -------------

    Net income (loss) $   (180,211) $    828,023  $ (1,008,234)       (122)%
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------
    

In comparison to the second quarter of 2009, the third quarter results for 2009 reflect a $0.65 million decrease in operating income and a $1.31 million decrease in net income, before taxes. The decrease mainly reflects an increase in financing expense and a decrease in other hotel revenue.

The increase in financing expense of $0.55 million during the third quarter of 2009 was primarily due to the additional mortgage debt associated with the expansion of the Merit Hotel and an increase in the interest rate on the second mortgage loan of the Clearwater Suites hotel, effective August 1, 2009 . Other hotel revenue decreased by $0.83 million during Q3-09 of which $0.66 million was attributable to the Capri Centre. The decrease in other hotel revenue at the Capri Centre mainly reflects the seasonal nature of the demand for the conference centre and the resulting impact on demand for rooms and other amenities.

OUTLOOK

In November 2009 , TREIT initiated a public offering of convertible debentures in order to raise capital for the primary purpose of repaying higher cost mortgage loan debt and extending the debt maturities of TREIT. The public offering encompasses 5 Year, 8.75% Senior Secured Convertible Debentures in the minimum amount of $10 million , with a maximum amount of $15 million . TREIT intends to use the net proceeds from the debenture offering to prepay $9.2 million of higher cost mortgage debt maturing in 2010 and for general working capital purposes.

    
    ABOUT TREIT
    -----------
    

TREIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbols TR.UN (Trust Units), TR.DB.A (Series A Convertible Debentures) and TR.DB.B (Series B Convertible Debentures). The objective of TREIT is to provide Unitholders with stable cash distributions from investment in a geographically diversified Canadian portfolio of hotel properties and related assets. There are currently 12,825,352 trust units outstanding. For further information on TREIT, please visit our website at www.treit.ca.

This press release contains certain statements that could be considered as forward-looking information. The forward-looking information is subject to certain risks and uncertainties, which could result in actual results differing materially from the forward-looking statements.

The TSX Venture Exchange has not reviewed or approved the contents of this press release and does not accept responsibility for the adequacy or accuracy of this press release.

For further information: Arni Thorsteinson, Chief Executive Officer, or Gino Romagnoli, Investor Relations, Tel: [phone], Fax: [phone], Email: [email protected]