WINNIPEG, Nov. 24 /CNW/ - Temple Real Estate Investment Trust ("Temple REIT") (TSX Venture: TR.UN) today reported its financial results for the quarter ended September 30, 2010. The following comments in regard to the financial position and operating results of TREIT should be read in conjunction with the Management Discussion & Analysis and the financial statements for the quarter ended September 30, 2010, which may be obtained from the TREIT website at www.treit.ca or the SEDAR website at www.sedar.com.
During the third quarter of 2010, Temple REIT experienced an improvement in its quarterly operating results in comparison to both the third quarter of 2009 and the second quarter of 2010. As summarized in the following chart, the improvement compared to both the third quarter of 2009 and the second quarter of 2010 is reflected in an increase in operating income, cash flow and distributable income as well as in a reduction in the net loss.
Three Months Ended | |||||
September 30 2010 |
September 30 2009 |
Increase/ (Decrease) |
June 30 2010 |
Increase/ (Decrease) |
|
Operating income | $5,970,831 | $5,852,451 | $118,380 | $5,159,067 | $811,764 |
Net income (loss) | $(51,292) | $(180,211) | $128,919 | $(762,054) | $710,762 |
Per unit | $(0.00) | $(0.01) | $0.01 | $(0.06) | $0.06 |
Cash flow from operating activities, before changes in non cash operating items | $2,216,365 | $1,876,783 | $339,582 | $1,366,863 | $849,502 |
Distributable income | $1,642,328 | $1,329,414 | $312,914 | $815,469 | $826,859 |
Per unit | $0.13 | $0.10 | $0.03 | $0.06 | $0.07 |
The positive operating results during the third quarter of 2010 are mainly due to an increase in total hotel revenue as a result of the improvement in the overall occupancy level of the entire hotel portfolio. The reduction in the mortgage loan debt of the Trust which has occurred since the third quarter of 2009 and the corresponding decrease in interest expense is also a main contributing factor in regard to the improvement in cash flow for the third quarter of 2010, compared to the third quarter of 2009.
Key events, which have occurred during the third quarter of 2010, are as follows:
- Total hotel revenue during Q3-10 increased by $0.87 million (5.8%) and $0.66 million (4.3%), compared to Q3-09 and Q2-10, respectively
- Total occupancy during Q3-10 increased to 61% from 55% in both of Q3-09 and Q2-10, representing a 10.9% increase.
- RevPar increased by $6.78 (7.9%) to $92.83 in Q3-10 from $86.05 in Q2-10 and was relatively unchanged from $92.95 in Q3-09.
- Distributable income increased by $0.31 million (23.5%) to $1.64 million in Q3-10 from $1.33 million in Q3-09. Compared to Q2-10, distributable income increased by $0.83 million (101.5%).
Notwithstanding the positive and improving results for the third quarter of 2010, the 2010 nine month results reflect an unfavourable variance compared to 2009 given that the general state of the hotel market was considerably weaker during the first six months of 2010, compared to the first six months of 2009, particularly in Fort McMurray where six of Temple REIT's ten hotels are located.
FINANCIAL AND OPERATING STATISTICS |
||||
Three Months Ended | Nine Months Ended | |||
September 30 | September 30 | |||
2010 | 2009 | 2010 | 2009 | |
DISTRIBUTIONS | ||||
Amount - total | $ 1,282,535 | $ 1,282,535 | $ 3,847,605 | $ 5,127,474 |
- per unit | $ 0.10 | $ 0.10 | $ 0.30 | $ 0.40 |
BALANCE SHEET | ||||
Total Assets | $ 264,362,877 | $ 269,856,838 | $ 264,362,877 | $ 269,856,838 |
Total Long-Term Debt and Convertible Debentures | $ 200,950,188 | $ 197,767,461 | $ 200,950,188 | $ 197,767,461 |
KEY PERFORMANCE INDICATORS | ||||
Operations: | ||||
Occupancy | 61% | 55% | 56% | 54% |
ADR | $152.97 | $169.73 | $155.54 | $176.58 |
RevPar | $92.83 | $92.95 | $86.78 | $95.44 |
Operating profit margin | 36% | 37% | 34% | 39% |
Operating results: | ||||
Total revenue | $ 16,401,067 | $ 15,639,078 | $ 47,136,205 | $ 49,687,869 |
Operating income | $ 5,970,831 | $ 5,852,451 | $ 16,002,246 | $ 19,131,889 |
Net income (loss) | $ (51,292) | $ (180,211) | $ (1,799,597) | $ 1,486,187 |
Cash flows: | ||||
Distributable income | $ 1,642,328 | $ 1,329,414 | $ 3,007,928 | $ 6,405,027 |
Funds from operations | $ 1,717,823 | $ 1,479,309 | $ 3,098,726 | $ 7,037,450 |
Financing: | ||||
Weighted average interest rate of long-term debt | 6.46% | 6.96% | 6.46% | 6.96% |
PER UNIT AMOUNTS | Basic and Diluted | Basic and Diluted | Basic and Diluted | Basic and Diluted |
Net income (loss) | $(0.00) | $(0.01) | $(0.14) | $0.12 |
Distributable income | $0.13 | $0.10 | $0.23 | $0.50 |
Funds from operations | $0.13 | $0.12 | $0.24 | $0.55 |
2010 COMPARED TO 2009
Analysis of Net Income (Loss) | ||||||
Three Months Ended | Nine Months Ended | |||||
September 30 | September 30 | |||||
Increase/ | Increase/ | |||||
2010 | 2009 | (Decrease) | 2010 | 2009 | (Decrease) | |
Hotel revenue | ||||||
Room | $ 10,595,157 | $ 10,176,999 | $ 418,158 | $ 29,359,141 | $ 31,093,887 | $ (1,734,746) |
Other | 5,294,620 | 4,842,004 | 452,616 | 16,250,800 | 16,479,132 | (228,332) |
Total hotel revenue | 15,889,777 | 15,019,003 | 870,774 | 45,609,941 | 47,573,019 | (1,963,078) |
Interest and other income | 511,290 | 620,075 | (108,785) | 1,526,264 | 2,114,850 | (588,586) |
Total revenue | 16,401,067 | 15,639,078 | 761,989 | 47,136,205 | 49,687,869 | (2,551,664) |
Hotel operating costs | 10,430,236 | 9,786,627 | 643,609 | 31,133,959 | 30,555,980 | 577,979 |
Operating income | 5,970,831 | 5,852,451 | 118,380 | 16,002,246 | 19,131,889 | (3,129,643) |
Finance expense | 4,064,614 | 4,092,162 | (27,548) | 12,139,423 | 11,314,059 | 825,364 |
Trust expense | 48,952 | 65,302 | (16,350) | 632,342 | 489,602 | 142,740 |
Amortization | 1,745,342 | 1,639,661 | 105,681 | 5,234,968 | 4,829,954 | 405,014 |
111,923 | 55,326 | 56,597 | (2,004,487) | 2,498,274 | (4,502,761) | |
Change in marketable securities | (48,600) | (196,275) | 147,675 | (71,250) | (287,025) | 215,775 |
Income taxes recovery (expense) | (114,615) | (39,262) | (75,353) | 276,140 | (725,062) | 1,001,202 |
Net income (loss) | $ (51,292) | $ (180,211) | $ 128,919 | $ (1,799,597) | $ 1,486,187 | $ (3,285,784) |
Comparison of Third Quarter Results
In comparison to the third quarter of 2009, income, before taxes and the change in value of marketable securities, increased by approximately $56,600 during the third quarter of 2010. The increase mainly reflects an increase in operating income of $118,400 largely offset by an increase in amortization expense of $105,700. Finance expense and trust expense also decreased by $27,500 and $16,400, respectively.
After providing for taxes and the change in value of marketable securities, Temple REIT completed the third quarter of 2010 with a loss of approximately $51,300, representing an improvement of $128,900 compared to the third quarter of 2009.
Room Revenue Statistics | ||||||
Three Months Ended September 30 | ||||||
2010 | 2009 | |||||
Occ | ADR | RevPar | Occ | ADR | RevPar | |
Fort McMurray | 56% | $ 167.86 | $ 93.50 | 51% | $ 196.07 | $ 99.58 |
Temple Gardens | 84% | $ 161.72 | $ 135.68 | 85% | $ 158.58 | $ 135.11 |
Chateau Nova | 64% | $ 127.59 | $ 82.00 | 60% | $ 140.76 | $ 84.41 |
Best Western Wayside Inn | 74% | $ 129.60 | $ 96.12 | 60% | $ 125.91 | $ 75.42 |
Capri Centre | 45% | $ 119.53 | $ 54.23 | 34% | $ 129.10 | $ 43.72 |
Overall portfolio | 61% | $ 152.97 | $ 92.83 | 55% | $ 169.73 | $ 92.95 |
Comparison of Nine-Month Results
In comparison to the first nine months of 2009, income, before taxes and the change in value of marketable securities, decreased by $4.50 million during the first nine months of 2010. The decrease is mainly due to a decrease in operating income of $3.13 million, an increase in financing expense of $0.83 million and an increase in amortization expense of $0.41 million. Trust expense also increased by $0.14 million.
After providing for taxes and the change in value of marketable securities, Temple REIT completed the first nine months of 2010 with a loss of $1.80 million, representing a decrease in income of $3.29 million compared to the first nine months of 2009.
Room Revenue Statistics | ||||||
Nine Months Ended September 30 | ||||||
2010 | 2009 | |||||
Occ | ADR | RevPar | Occ | ADR | RevPar | |
Fort McMurray | 53% | $ 170.06 | $ 90.65 | 53% | $ 204.71 | $ 107.48 |
Temple Gardens | 79% | $ 160.73 | $ 126.60 | 80% | $ 157.49 | $ 125.62 |
Chateau Nova | 55% | $ 135.38 | $ 74.28 | 53% | $ 145.69 | $ 77.33 |
Best Western Wayside Inn | 56% | $ 126.68 | $ 71.28 | 52% | $ 127.09 | $ 65.68 |
Capri Centre | 46% | $ 121.65 | $ 55.59 | 39% | $ 134.33 | $ 52.92 |
Overall Portfolio | 56% | $ 155.54 | $ 86.78 | 54% | $ 176.58 | $ 95.44 |
COMPARISON TO PRIOR QUARTER
Analysis of Net Income - Q3 2010 vs. Q2 2010 | |||
Three Months Ended | Increase | ||
Q3 2010 | Q2 2010 | (Decrease) | |
Hotel revenue | |||
Room | $ 10,595,157 | $ 9,732,697 | $ 862,460 |
Other | 5,294,620 | 5,497,137 | (202,517) |
Total hotel revenue | 15,889,777 | 15,229,834 | 659,943 |
Interest and other income | 511,290 | 524,287 | (12,997) |
Total revenue | 16,401,067 | 15,754,121 | 646,946 |
Hotel operating expenses | 10,430,236 | 10,595,054 | (164,818) |
Operating income | 5,970,831 | 5,159,067 | 811,764 |
Finance expense | 4,064,614 | 4,001,516 | 63,098 |
Trust expense | 48,952 | 219,383 | (170,431) |
Amortization | 1,745,342 | 1,745,028 | 314 |
111,923 | (806,860) | 918,783 | |
Decrease in value of marketable securities | (48,600) | (117,225) | (68,625) |
Income taxes recovery (expense) | (114,615) | 162,031 | 276,646 |
Net loss | $ (51,292) | $ (762,054) | $ 710,762 |
Income before taxes and the change in value of marketable equity securities, improved by $0.92 million during the third quarter of 2010, compared to the second quarter of 2010. The improvement in income mainly reflects an increase in operating income and a decrease in trust expense, partially offset by an increase in finance expense. Operating income increased by $0.81 million or 16% mainly as a result of an increase in hotel revenue of $0.66 million and a decrease in hotel operating expenses of $0.16 million.
The increase in hotel revenue is mainly due to an increase in both room revenue and other hotel revenue throughout the hotel portfolio with the exception of the Capri Centre. The increase in room revenue mainly reflects an improvement in occupancy levels. As disclosed in the following chart, with the exception of the Capri Centre, occupancy levels improved throughout the hotel portfolio during the third quarter of 2010. The Best Western Wayside Inn achieved the most notable improvement with the occupancy level increasing from 53% during the second quarter of 2010, to 74% during the third quarter. The decrease in occupancy level at the Capri Centre is due to the seasonal reduction in demand, which is typically associated with the hotel in the summer months. After considering the overall increase in occupancy levels and the overall decrease in the average daily room rates, the RevPar of the hotel portfolio was $92.83 per room during the third quarter of 2010, compared to $86.05 per room during the second quarter of 2010.
Room Revenue Statistics | ||||||
Three Months Ended | ||||||
Q3 2010 | Q2 2010 | |||||
Occ | ADR | RevPar | Occ | ADR | RevPar | |
Fort McMurray | 56% | $ 167.86 | $ 93.50 | 53% | $ 169.98 | $ 90.69 |
Temple Gardens | 84% | $ 161.72 | $ 135.68 | 76% | $ 160.22 | $ 121.45 |
Chateau Nova | 64% | $ 127.59 | $ 82.00 | 54% | $ 137.32 | $ 73.83 |
Best Western Wayside Inn | 74% | $ 129.60 | $ 96.12 | 53% | $ 123.20 | $ 65.30 |
Capri Centre | 45% | $ 119.53 | $ 54.23 | 50% | $ 121.54 | $ 60.40 |
Overall portfolio | 61% | $ 152.97 | $ 92.83 | 55% | $ 155.18 | $ 86.05 |
The decrease in hotel operating expenses mainly reflects a decrease in total operating expenses at the Capri Centre, largely offset by an increase in hotel operating expenses at the Best Western Wayside Inn. During the third quarter of 2010, trust expense decreased by $0.17 million compared to the second quarter of 2010, while finance expense increased by approximately 63,000.
OUTLOOK
Mortgage Financing
Temple REIT has successfully renewed $12.8 million of mortgage loan debt maturing during the fourth quarter of this year.
Sheraton Hotel and Convention Centre - Red Deer
Temple REIT is undertaking extensive guest room improvements and building upgrades to the Capri Centre in Red Deer, Alberta, at a budgeted cost of $8 million. The upgrade/improvement program is being undertaken as part of the process to re-brand the Capri Centre under the "Sheraton" hotel banner. The "eco-friendly" improvements will involve new guest room designs, which were created by the in-house design team for Sheraton. The new room designs are based on extensive in-room behaviour research, which indicated a desire, by guests for a greater level of "stylish functionality". According to the design team for Sheraton, the new rooms will be "highly functional, globally relevant and designed to reflect the distinct personality of the Sheraton brand hotels." The new rooms at the Capri Centre will serve as the prototype for the new Sheraton room design in the Canadian market. The upgrade/improvement program is expected to be completed in 2011 at which time the Capri Centre will be renamed the "Sheraton Red Deer" and be the prime hotel property in central Alberta.
Outlook
The growth in hotel revenue, which has occurred during the second and third quarters of 2010, is expected to continue in the fourth quarter of the year and into 2011. Temple REIT's portfolio of hotel properties is located in Alberta, Saskatchewan and the Northwest Territories, which markets benefit from the demand for the natural resources. Management believes that each hotel is well positioned to outperform the Canadian hotel market in future years.
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, TR.DB.B and TR.DB.S (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. 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: (204) 475-9090, Fax: (204) 452-5505, Email: [email protected]
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