Temple REIT reports 2011 operating results

WINNIPEG, April 24, 2012 /CNW/ - Temple Real Estate Investment Trust ("Temple REIT") (TSX Venture: TR.UN) today reported its financial results for the year ended December 31, 2011.  The following comments in regard to the financial position and operating results of Temple REIT should be read in conjunction with the Management Discussion & Analysis and the financial statements for the year ended December 31, 2011, which may be obtained from the Temple REIT website at www.treit.ca or the SEDAR website at www.sedar.com.

HIGHLIGHTS FOR 2011

Operating Results

Temple REIT achieved substantial growth in key revenue, income and cash flow measurements during 2011. A summary of the 2011 and 2010 comparatives is provided below:

• Total revenue: Increased by $7.63 million or 12%;
• Operating income: Increased by $2.94 million or 14%;
• Net income, before loss on disposal of property and equipment, change in fair value of financial instruments and income tax expense (recovery): Increased by $3.48 million or 305%;
• Cash flow from operating activities: Increased by $9.40 million or 172%;
• Distributable Income: Increased by $5.23 million or 134%; and
• Funds From Operations (FFO): Increased by $3.49 million or 60%.

Comparison of Operating Statistics

	2011	2010	Change 2011 Over 2010	2011 Payout Ratio	2010 Payout Ratio
Occupancy ADR RevPar Distributable Income ^(1) Funds From Operations ^(1)	65% $145.84 $94.62 $0.50 $0.51	56% $153.92 $85.55 $0.30 $0.45	9% $(8.08) $9.07 $0.20 $0.06	86.09% 84.76%	131.80% 88.78%
Operating Profit Margin	34%	33%	1%

⁽¹⁾ Amounts based on weighted average number of units outstanding for the year.

Sheraton Red Deer Hotel

After undergoing $12 million of renovations, Temple REIT's largest hotel, the Sheraton Red Deer in Red Deer, Alberta, officially reopened under the "Sheraton" hotel banner in December 2011. The newly renovated Sheraton Red Deer Hotel features 241 remodelled guest rooms and suites, including the addition of 24 new rooms, as well as a renovated conference centre encompassing 14 meeting rooms, a ballroom and an exhibit hall. As the only four star hotel and conference centre in central Alberta, the Sheraton Red Deer Hotel is expected to be a significant contributor to "same property" income growth in 2012 and beyond.

Regina Wingate Inn

On December 1, 2011, Temple REIT acquired the Regina Wingate Inn at a purchase price of $16.15 million, funded by $12 million of 5.04% mortgage loan debt with the balance in cash. The seven-storey hotel, which opened in 2008, contains 118 guestrooms and is located in downtown Regina directly across from the Casino Regina and two blocks from the proposed site of the new football stadium.

Best Western Wayside Inn

During 2012, Temple REIT completed $0.41 million of capital expenditures at the Best Western Wayside Inn in Lloydminster, Alberta, consisting primarily of guest room upgrades. The improvements contributed to a 25% increase in the RevPar of the hotel during 2011.

Unit and Convertible Debenture Offerings 

During 2011, Temple REIT raised $43 million of new capital, comprised of $20 million from a public offering of trust units in February 2011 and $23 million from a public offering of 8% Series C convertible debentures in November 2011. After deducting transaction and issue costs the net proceeds were approximately $40 million.

The net proceeds were primarily used to retire higher cost interest-only interim debt, reduce the balance of the 6.83% first mortgage loan of the Clearwater Hotel by $23 million, fund the equity component of the Regina Wingate Inn acquisition and for working capital. The reduction of the mortgage loan debt for the Clearwater Hotel included a "temporary" pay down of $14 million in November 2011. The $14 million payment was effectively returned to Temple REIT in January 2012 upon the refinancing of the Clearwater Hotel first mortgage loan.

Cash Distributions

Effective April 1, 2011, Temple REIT changed from a quarterly distribution policy to a monthly distribution policy. Effective October 1, 2011, the monthly distribution was increased from $0.03334 per unit to $0.04 per unit, representing an increase from $0.40 per unit to $0.48 per unit on an annual basis. Total distributions in 2011 were $0.42 per unit, compared to $0.40 per unit in 2010.

FINANCIAL AND OPERATING STATISTICS
	December 31	December 31
	2011	2010
BALANCE SHEET
Total Assets	$ 282,552,872	$ 260,481,436
Total Debt	$ 205,401,561	$ 204,494,094

	Year Ended December 31
	2011	2010
DISTRIBUTIONS
Amount - total	$ 7,858,090	$ 5,132,561
- per unit	$ 0.42	$ 0.40
KEY PERFORMANCE INDICATORS
Operations:
Occupancy	65%	56%
ADR	$145.84	$153.92
RevPar	$94.62	$85.55
Operating profit margin	34%	33%
Operating results:
Total revenue	$ 71,184,450	$ 63,550,644
Operating income	$23,988,804	$ 21,050,000
Net loss	$ (3,031,746)	$(3,558,762)
Cash flows:
Cash flow from operating activities	$ 14,871,248	$ 5,473,970
Distributable income	$   9,128,046	$ 3,894,264
Funds from operations	$   9,270,711	$ 5,780,911
Financing:
Weighted average interest rate of debt	6.49%	6.81%
Weighted average interest mortgages	5.84%	6.47%

PER UNIT AMOUNTS	Basic	Basic
Net loss	$(0.17)	$(0.27)
Cash from operating activities	$0.82	$0.42
Distributable income	$0.50	$0.30
Funds from operations	$0.51	$0.45

2011 COMPARED TO 2010

Analysis of Net loss
	Year Ended
	December 31
			Increase/
	2011	2010	(Decrease)
Revenue
Room revenue	$ 44,320,658	$ 38,803,869	$ 5,516,789
Other hotel revenue	26,863,792	24,746,775	2,117,017
Total revenue	71,184,450	63,550,644	7,633,806
Hotel operating costs	47,195,646	42,500,644	4,695,002
Operating income	23,988,804	21,050,000	2,938,804
Interest expense, net	13,706,476	14,439,558	(733,082)
Trust expense	804,026	770,047	33,979
Depreciation	7,135,550	6,981,053	154,497
	2,342,752	(1,140,658)	3,483,410
Loss on disposal of property and equipment	(561,151)	-	(561,151)
Change in fair value of financial instruments: gain (loss)	(4,985,238)	(3,050,197)	(1,935,041)
Income taxes recovery (expense)	171,891	632,093	(460,202)
Net loss	$ (3,031,746)	$ (3,558,762)	$ 527,016

Income, before loss on disposal of property and equipment, change in fair value of financial instruments and income taxes, increased by $3.48 million during 2011 compared to 2010. The increase is mainly due to an increase in operating income of $2.94 million and a decrease in interest expense, net of $0.73 million.

After providing for the loss on disposal of property and equipment, change in fair value of financial instruments and income taxes, Temple REIT completed 2011 with a net loss of $3.03 million, compared to a net loss of $3.56 million, representing a decrease in net loss of $0.53 million.

During 2011, Temple REIT recorded an expense of approximately $5 million as a result of a change in the fair value of financial instruments, compared to an expense of approximately $3 million in 2010. The change in fair value mainly reflects an increase in the trading price of the Series B and Series S convertible debentures during 2011. The expense related to the change in fair value represents a non-cash transaction which does not impact operating cash flow.

As disclosed in the following chart, room revenue increased during 2011 by $5.52 million or 14%, compared to 2010 with $4.17 million or 76% of the increase attributable to the Fort McMurray hotel portfolio.  All of the hotels, with the exception of the Sheraton Red Deer contributed to the room revenue increase, including the Best Western Wayside Inn which achieved a room revenue increase of $0.86 million (16% of the total room revenue increase) and newly acquired Regina Wingate Inn which generated room revenue of $0.22 million (4% of the total room revenue increase) during the month of December 2011.

Other hotel revenue increased by $2.12 million or 9% during 2011, compared to 2010.  The increase in other hotel revenue is mainly attributable to the Best Western Wayside Inn, Temple Gardens Mineral Spa and the Sheraton Red Deer.

Analysis of Total Hotel Revenues
	Year Ended December 31
			Increase/
	2011	2010	(Decrease)
Fort McMurray
Room revenue	$ 24,716,077	$ 20,546,911	$ 4,169,166
Other hotel revenue	1,761,014	1,642,706	118,308
	$ 26,477,091	$ 22,189,617	$ 4,287,474
Temple Gardens Mineral Spa
Room revenue	$ 8,198,137	$ 8,103,496	$      94,641
Other hotel revenue	5,369,219	4,719,422	649,797
	$ 13,567,356	$ 12,822,918	$    744,438
Chateau Nova
Room revenue	$ 2,270,405	$ 2,091,740	$     178,665
Other hotel revenue	113,979	87,657	26,322
	$ 2,384,384	$ 2,179,397	$     204,987
Best Western Wayside Inn
Room revenue	$ 4,368,848	$ 3,504,651	$     864,197
Other hotel revenue	4,193,353	3,527,523	665,830
	$ 8,562,201	$ 7,032,174	$  1,530,027
Sheraton Red Deer
Room revenue	$ 4,549,447	$ 4,557,071	$       (7,624)
Other hotel revenue	15,398,138	14,769,467	628,671
	$ 19,947,585	$ 19,326,538	$     621,047
Regina Wingate Inn
Room revenue	$ 217,744	$ N/A	$     217,744
Other hotel revenue	28,089	N/A	28,089
	$ 245,833	$ N/A	$     245,833
Total
Room revenue	$ 44,320,658	$ 38,803,869	$ 5,516,789
Other hotel revenue	26,863,792	24,746,775	2,117,017
Total hotel revenue	$ 71,184,450	$ 63,550,644	$ 7,633,806

As disclosed in the table below, RevPar for the Fort McMurray hotel portfolio increased by $18.26 during 2011, compared to 2010, mainly due to an increase in the occupancy level, partially offset by a decrease in the average daily room rate (ADR).  RevPar for the Best Western Wayside Inn increased by $18.52 during 2011, compared to 2010, mainly due to an increase in the occupancy level. The renovations at the Sheraton Red Deer and the temporary removal of a number of guest rooms from the market during the process of completing guest room upgrades resulted in a decrease in room revenue during the second half of 2011 and served to offset the revenue increases which were achieved by the hotel during the first half of 2011.

Room Revenue Statistics
	Year Ended December 31
	2011			2010
	Occ	ADR	RevPar	Occ	ADR	RevPar
Fort McMurray	69%	$ 153.57	$ 106.69	53%	$ 167.10	$ 88.43
Temple Gardens	77%	$ 164.04	$ 126.76	77%	$ 160.83	$ 124.17
Chateau Nova	58%	$ 134.87	$ 77.98	53%	$ 135.39	$ 71.69
Best Western Wayside Inn	73%	$ 126.74	$ 92.84	59%	$ 126.66	$ 74.32
Sheraton Red Deer	46%	$ 121.08	$ 55.69	47%	$ 123.18	$ 57.60
Regina Wingate Inn	47%	$ 126.39	$ 59.53	N/A%	$ N/A	$ N/A
Overall Portfolio	65%	$ 145.84	$ 94.62	56%	$ 153.92	$ 85.55

COMPARISON TO PRIOR QUARTER

Analysis of Net Income - Q4-2011 vs. Q3-2011 and Q4-2010
			Increase/		Increase/
	Q4-2011	Q3-2011	(Decrease)	Q4-2010	(Decrease)
Revenue
Room	$ 10,689,925	$ 11,278,617	$ (588,692)	$ 9,444,728	$ 1,245,197
Other	8,194,525	5,651,297	2,543,228	7,230,881	963,644
Total revenue	18,884,450	16,929,914	1,954,536	16,675,609	2,208,841
Hotel operating costs	13,096,732	11,301,394	1,795,338	11,366,685	1,730,047
Operating income	5,787,718	5,628,520	159,198	5,308,924	478,794
Interest expense, net	4,489,469	2,783,519	1,705,950	3,633,207	856,262
Trust expense	164,986	118,991	45,995	137,705	27,281
Depreciation	1,825,512	1,778,011	47,501	1,746,085	79,427
	(692,249)	947,999	(1,640,248)	(208,073)	(484,176)
Loss on disposal of property and equipment	(561,151)	-	(561,151)	-	(561,151)
Change in fair value of financial instruments: gain (loss)	(5,041,993)	2,040,855	(7,082,848)	(2,465,573)	(2,576,420)
Income taxes recovery (expense)	941,610	(504,206)	1,445,816	385,900	555,710
Net income	$ (5,353,783)	$ 2,484,648	$ (7,838,431)	$ (2,287,746)	$ (3,066,037)

Income before loss on disposal of property and equipment, change in fair value of financial instruments and income taxes decreased by $1.64 million during Q4-2011, compared to Q3-2011.  The decrease in income mainly reflects a $1.71 million increase in interest expense, net. The increase in interest expense mainly comprised of transaction costs of $1.62 million relating to the November 2011 convertible debenture issuance.  In accordance with IFRS, convertible debentures are carried at fair value and transaction costs are charged to interest expense as incurred.

During Q4-2011, operating income increased by $0.16 million or 3%, compared to Q3-2011.  The increase in operating income is mainly due to an increase in operating income at the Sheraton Red Deer reflecting an increase in room and other revenue upon completion of the guest room upgrades.

As disclosed in the following chart, the occupancy level of the Sheraton Red Deer increased from 32% in Q3-2011 to 41% in Q4-2011, while the average daily room rate increased by 18.0%.  For the Fort McMurray hotel portfolio, the occupancy level decreased from 73% to 59%, while the average daily room rate increased by a marginal amount.  The remainder of the hotel portfolio experienced a decrease in the occupancy level and an increase in the average daily room rate.  After considering the overall decrease in occupancy levels and the overall increase in the average daily room rates, the RevPar of the hotel portfolio was $88.44 during Q4-2011, compared to $101.40 during Q3-2011.

Room Revenue Statistics
	Three Months Ended
	Q4 2011			Q3 2011
	Occ	ADR	RevPar	Occ	ADR	RevPar
Fort McMurray	59%	$ 156.79	$ 93.26	73%	$ 153.90	$ 112.55
Temple Gardens	80%	$ 162.38	$ 129.42	85%	$ 159.26	$ 135.00
Chateau Nova	56%	$ 138.81	$ 77.97	60%	$ 130.97	$ 78.32
Best Western Wayside Inn	76%	$ 129.34	$ 98.90	82%	$ 124.66	$ 102.18
Sheraton Red Deer	41%	$ 126.16	$ 52.31	32%	$ 106.94	$ 34.29
Regina Wingate Inn	47%	$ 126.39	$ 59.53	N/A%	$ N/A	$ N/A
Overall portfolio	60%	$ 147.82	$ 88.44	69%	$ 146.18	$ 101.40

After reflecting income tax expense, the loss on disposal of property and equipment and the loss associated with the change in fair value financial instruments, net income decreased by $7.84 million, during Q4-2011 compared to Q3-2011.  The variance in the fair value loss of $5.04 million during Q4-2011, compared to the fair value gain of $2.04 million during Q3-2011, served to decrease income for the fourth quarter of 2011 by $7.08 million, compared to Q3-2011.  The variance in fair value mainly reflects an increase in the quarter-ended trading price of the convertible debentures in Q4-2011, compared to Q3-2011.

OUTLOOK

During 2012, Temple REIT will remain focused on achieving earnings growth through new hotel acquisitions, accretive hotel improvements and efficient use of capital resources. Improving market conditions in Fort McMurray, the re-opening of the Sheraton Red Deer Hotel and reduced mortgage interest costs are expected to result in further growth in operating income for the "same property" portfolio.

The growth expectations for 2012 are bolstered by a number of positive events which have occurred subsequent to December 31, 2011, as follows:

Financing Activities

• In January 2012, a new 5.4% first mortgage loan of $26 million was obtained for the Clearwater Hotel, resulting in net proceeds of approximately $19.6 million.
• On March 1, 2012 Temple REIT raised $54.63 million of new capital through a public offering, comprised of $34.5 million of 7.75% convertible debentures and $20.13 million of trust units. After deducting transaction and issue costs the net proceeds were approximately $51.6 million.

Investment Activities

On January 25, 2012 Temple REIT acquired approximately 17% of the issued and outstanding trust units of Holloway Lodging REIT at a purchase price of $7,040,000. ($0.055 per trust unit). Holloway Lodging REIT is also a "hotel REIT" and its portfolio includes a number of hotel properties primarily located in northern Alberta.

After including the units which Temple REIT acquired in 2008, Temple REIT ownership interest in Holloway Lodging REIT increased to approximately 21% of the total issued and outstanding units. The trust unit acquisition represents an indirect investment in a large portfolio of hotel properties with the potential for capital gains or other growth opportunities.

On February 1, 2012, Temple REIT acquired the Radisson Hotel and Suites in Fort McMurray, Alberta at a purchase price of $25.1 million, funded by $15 million of first mortgage loan debt with the balance in cash. The five-storey hotel contains 134 guest rooms, including 28 suites, as well as meeting facilities, heated indoor pool, full-service restaurant and other amenities. Temple REIT will be undertaking a $2.7 million capital expenditure program at the hotel over a period of approximately 18 months.

In summary, Temple REIT is well positioned to expand its asset base and achieve earnings growth in 2012 with the primary investment objective of increasing distributable income and maximizing long-term unit value

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, TR.DB.C 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.

 

 

 

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