Temple REIT reports 2012 first quarter results and 12.5% increase in cash distribution

WINNIPEG, May 24, 2012 /CNW/ - Temple Real Estate Investment Trust ("Temple REIT") (TSX Venture: TR.UN) today reported its financial results for the quarter ended March 31, 2012.  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 quarter ended March 31, 2012, which may be obtained from the Temple REIT website at www.treit.ca or the SEDAR website at www.sedar.com.

Operating Results

As summarized in the following chart, Temple REIT achieved substantial growth in the majority of key revenue, income and cash flow measurements during the first quarter of 2012.

	Three Months Ended March 31
	2012	2011
Total Revenue *	$21,542,165	$16,666,451
Operating income *	$7,895,880	$5,619,587
Net income (loss) before change in fair value of financial instruments and  income tax expense (recovery)	$(190,893)	$400,465
Net income (loss)	$318,499	$(2,331,035)
Cash flow from operating activities	$696,420	$2,053,770
Distributable income	$4,549,578	$2,108,460
Funds from operations	$1,800,701	$2,137,315
Occupancy **	70%	65%
ADR **	$159.07	$145.60
RevPar **	$111.57	$94.67

*   The "same property" portfolio accounted for 58% of the increase in total revenue and 73% of the total increase in operating income.
** For Q1-2012, the "same property" portfolio occupancy rate was 71% (65% for Q1-2011), ADR was $158.93 ($145.60 for Q1-2011) and  RevPar was $113.46 ($94.67 for Q1-2011).

Net Income

The $2.65 million increase in net income in Q1-2012, compared to Q1-2011, mainly reflects an increase in operating income of $2.28 million and an increase in income related to the change in fair value of financial instruments of $3.36 million, partially offset by the one-time charge for transaction costs of $2.05 million, which is reflected in interest expense.

The change in fair value of financial instruments served to increase net income in Q1-2012 by $0.35 million, compared to a decrease in net income in Q1-2011 of $3.01 million.  The variance in the change in fair value is mainly due to a variance in the change in quarter-ending trading price of the convertible debentures between Q1-2011 and Q1-2012 as well as a change in quarter-ending trading price of marketable securities held by Temple REIT.

The transaction costs of $2.05 million are related to the public offering of Series D convertible debentures that closed on March 1, 2012. Interest expense in Q1-2011 does not include any transaction costs for convertible debentures.

Cash Flow

Cash flow from operating activities in Q1-2012, includes a cash outflow of $4.61 million related to working capital adjustments.  The cash outflow for working capital adjustments mainly reflects a reduction of accounts payable by $3.06 million in the Q1-2012, due to the payment of holdback amounts owing in regard to the renovations at the Sheraton Red Deer Hotel. Excluding working capital adjustments, cash from operating activities increased by $2.61 million in Q1-2012, compared to Q1-2011.

Distributable Income and Funds From Operations

Distributable income in Q1-2012 increased by $2.44 million or 116%, compared to Q1-2011. Distributions represented 57% of distributable income in Q1-2012, compared to 86% in Q1-2011. FFO decreased by $0.34 million or 15.7% in Q1-2012 compared to Q1-2011.

The calculation of distributable income excludes transaction costs for convertible debentures and income/loss charges related to change in fair value of financial instruments, whereas the calculation of FFO includes a reduction for the one-time transaction costs in the amount of $2.05 million.

Financing and Investment Activities

In January 2012, a new $26 million 5.4% first mortgage loan was obtained for the Clearwater Suites Hotel, resulting in net proceeds of approximately $19.6 million. The net proceeds were mainly used to fund the acquisition of the Radisson Inn and Suites in Fort McMurray and the $7 million acquisition of 17% of the trust units of Holloway Lodging REIT.  The market value of the Holloway Lodging REIT units had increased to approximately $11 million as of the market close on May 23, 2012.

On March 1, 2012 Temple REIT raised $54.6 million of new capital, comprised of $34.5 million from a public offering of 7.75% Series D convertible debentures and $20.1 million from a concurrent public offering of trust units. After deducting transaction and issue costs the net proceeds were approximately $51.6 million. The net proceeds were used to retire the remaining $1.8 million of 7.5% Series A convertible debentures on the maturity date of March 31, 2012 and to establish cash reserves for additional hotel acquisitions and working capital purposes.

New Hotel Acquisitions

Inn at the Quay, New Westminster, British Columbia

Temple REIT has entered into a binding agreement to purchase the 126-room Inn at the Quay at a gross purchase price of $17.3 million. The acquisition will be financed by the assumption of the existing mortgage debt of approximately $12 million with the balance in cash. The scheduled closing date is June 1, 2012.

Clearwater Suites Timberlea, Fort McMurray Alberta

On May 1, 2012, Temple REIT acquired a 66-suite extended stay property to be operated as a satellite of the Clearwater Suites Hotel under the name of Clearwater Suites Timberlea.  The $30.5 million acquisition was funded by the assumption of a 5.375% first mortgage loan in the amount of $18.65 million, with the balance in cash.

Portfolio Summary

After the acquisition of the Inn at the Quay and Clearwater Suites Timberlea, as well as the acquisition of the Regina Wingate Inn in December 2011 and the Radisson Inn and Suites in February 2012, the property portfolio of Temple REIT will consist of 14 hotels with a total of 1,708 guest rooms.

In comparison to the property portfolio at March 31, 2011, the expanded portfolio of Temple REIT represents an increase of 444 guest rooms at four new hotels and an increase in annualized operating income potential in the estimated amount of $9 million.

12.5% Distribution Increase

Based on the increased earnings from the four most recent acquisitions, Temple REIT has the capacity to increase its monthly distribution during the fourth quarter. Effective with the September 2012 distribution, payable on October 15, 2012, the Trustees have approved an increase in the monthly distribution from $0.04 to $0.045.

FINANCIAL AND OPERATING STATISTICS
			March 31		December 31
			2012		2011
BALANCE SHEET
		Total Assets	$ 364,226,310		$ 282,552,872
		Total Debt	$ 265,897,592		$ 205,401,561
			Three Months Ended
			March 31
			2012		2011
DISTRIBUTIONS
		Amount  - total	$ 2,583,697		$ 1,817,216
		- per unit	$0.12		$0.10
KEY PERFORMANCE INDICATORS
Operations:
		Occupancy	70%		65%
		ADR	$159.07		$145.60
		RevPar	$111.57		$94.67
		Operating profit margin	37%		34%
Operating results:
		Total revenue	$ 21,542,165		$ 16,666,451
		Operating income	$ 7,895,880		$ 5,619,587
		Net income (loss)	$ 318,499		$ (2,331,035)
Cash flows:
		Cash flow from operating activities	$ 696,420		$ 2,053,770
		Distributable income	$ 4,549,578		$ 2,108,460
		Funds from operations	$ 1,800,701		$ 2,137,315
Financing:
		Weighted average interest rate of debt	6.46%		6.60%
		Weighted average interest of mortgages	5.76%		6.20%
PER UNIT AMOUNTS			Basic		Basic
		Net income (loss)	$0.01		$(0.15)
		Cash from operating activities	$0.03		$0.13
		Distributable income	$0.21		$0.13
		Funds from operations	$0.08		$0.14

Q1-2012 COMPARED TO Q1-2011
Analysis of Net income (loss)
	Three Months Ended
	March 31
						Increase/
		2012		2011		(Decrease)
Revenue
Room revenue		$ 14,792,915		$ 10,460,705		$ 4,332,210
Other hotel revenue		6,749,250		6,205,746		543,504
Total revenue		21,542,165		16,666,451		4,875,714
Hotel operating costs		13,646,285		11,046,864		2,599,421
Operating income		7,895,880		5,619,587		2,276,293
Interest expense, net		5,825,469		3,335,952		2,489,517
Trust expense		183,296		125,832		57,464
Depreciation and amortization		2,078,008		1,757,338		320,670
		(190,893)		400,465		(591,358)
Change in fair value of financial instruments: gain (loss)		346,718		(3,014,012)		3,360,730
Income taxes recovery		162,674		282,512		(119,838)
Net income (loss)		$ 318,499		$ (2,331,035)		$ 2,649,534

Income before change in fair value of financial instruments and income taxes, decreased by $0.59 million in Q1-2012, compared to Q1-2011. The decrease reflects an increase in interest expense (net) of $2.49 million (primarily the result of a one-time charge for transaction costs of $2.05 million) and an increase in depreciation and amortization of $0.32 million, almost entirely offset by an increase in operating income of $2.28 million.

After providing for the change in fair value of financial instruments and income taxes, Temple REIT completed Q1-2012 with a net income of $0.32 million, compared to a net loss of $2.33 million in Q1-2011, representing an increase in income of $2.65 million.

As disclosed in the table below, total room revenue increased by $4.33 million or 41% in Q1-2012, compared to Q1-2011, comprised of an increase of $2.45 million or 23% in "same property" results and $1.88 million which is attributable to new hotel acquisitions. For the "same property" portfolio, $1.87 million or 76% of the $2.45 million "same property" increase is attributable to the Fort McMurray hotel portfolio. All of the other hotels also contributed to the room revenue increase to varying degrees

Other hotel revenue increased by $0.54 million or 9% in Q1-2012, compared to Q1-2011, comprised of an increase of $0.37 million or 6% from the "same property" portfolio and $0.17 million which is attributable to new hotel acquisitions. 

Analysis of Total Hotel Revenues
						Increase/
		Q1-2012		Q1-2011		(Decrease)
Same Properties
Fort McMurray
Room revenue		$ 7,613,925		$ 5,742,713		$ 1,871,212
Other hotel revenue		431,336		425,761		5,575
		$ 8,045,261		$ 6,168,474		$ 1,876,787
Temple Gardens Mineral Spa
Room revenue		$ 2,074,484		$ 1,915,133		$    159,351
Other hotel revenue		1,333,796		1,136,942		196,854
		$ 3,408,280		$ 3,052,075		$    356,205
Chateau Nova
Room revenue		$ 588,287		$ 552,321		$      35,966
Other hotel revenue		39,924		29,968		9,956
		$ 628,211		$ 582,289		$      45,922
Best Western Wayside Inn
Room revenue		$ 1,189,503		$ 968,454		$    221,049
Other hotel revenue		876,847		915,623		(38,776)
		$ 2,066,350		$ 1,884,077		$    182,273
Sheraton Red Deer
Room revenue		$ 1,445,935		$ 1,282,084		$    163,851
Other hotel revenue		3,893,673		3,697,452		196,221
		$ 5,339,608		$ 4,979,536		$    360,072
Total - Same Properties
Room revenue		$ 12,912,134		$ 10,460,705		$ 2,451,429
Other hotel revenue		6,575,576		6,205,746		369,830
Total Hotel Revenue		19,487,710		16,666,451		2,821,259
Newly Acquired Properties
Regina Wingate Inn
Room Revenue		$ 895,049		$ -		$    895,049
Other hotel revenue		115,048		-		115,048
Total hotel revenue		$ 1,010,097		$ -		$ 1,010,097
Radisson Hotel & Suites
Room Revenue		$ 985,732		$ -		$    985,732
Other hotel revenue		58,626		-		58,626
Total hotel revenue		$ 1,044,358		$ -		$ 1,044,358
Total - Newly Acquired Properties
Room revenue		$ 1,880,781		$ -		$ 1,880,781
Other hotel revenue		173,674		-		173,674
Total Hotel Revenue		$ 2,054,455		$ -		$ 2,054,455
Total
Room revenue		$ 14,792,915		$ 10,460,705		$ 4,332,210
Other hotel revenue		6,749,250		6,205,746		543,504
Total hotel revenue		$ 21,542,165		$ 16,666,451		$ 4,875,714

As disclosed in the table below, RevPar for the Fort McMurray "same property" hotel portfolio increased by $27.74 in Q1-2012, compared to Q1-2011, as a result of increases in occupancy levels and average daily room rates.  All of the other hotels also experienced an improvement in RevPar. Overall, RevPar increased by $16.90 or 17.8% in Q1-2012, compared to Q1-2011.

Room Revenue Statistics
		Q1-2012						Q1-2011
		Occ		ADR		RevPar		Occ		ADR		RevPar
Same Properties
Fort McMurray		76%		$ 169.56		$ 129.01		67%		$ 150.71		$ 101.27
Temple Gardens		76%		$ 167.86		$ 127.68		72%		$ 165.71		$ 119.53
Chateau Nova		61%		$ 133.77		$ 80.93		58%		$ 132.93		$ 77.36
Best Western Wayside Inn		76%		$ 133.48		$ 101.31		66%		$ 125.46		$ 83.31
Sheraton Red Deer		50%		$ 133.31		$ 66.12		52%		$ 124.80		$ 65.48
Total - Same Properties		71%		$ 158.93		$ 113.46		65%		$ 145.60		$ 94.67
Newly Acquired Properties
Regina Wingate Inn		65%		$ 127.52		$ 83.27		N/A		N/A		N/A
Radisson Hotel & Suites		64%		$ 192.77		$ 122.89		N/A		N/A		N/A
Total - Newly Acquired Properties		65%		$ 159.75		$ 103.08		N/A		N/A		N/A
Overall Portfolio		70%		$ 159.07		$ 111.57		65%		$ 145.60		$ 94.67

COMPARISON TO PRIOR QUARTER
Analysis of Net Income(loss) - Q1-2012 vs. Q4-2011
						Increase/
		Q1-2012		Q4-2011		(Decrease)
Revenue
Room		$ 14,792,915		$ 10,689,925		$ 4,102,990
Other		6,749,250		8,194,525		(1,445,275)
Total revenue		21,542,165		18,884,450		2,657,715
Hotel operating costs		13,646,285		13,096,732		549,553
Operating income		7,895,880		5,787,718		2,108,162
Interest expense, net		5,825,469		4,489,469		1,336,000
Trust expense		183,296		164,986		18,310
Depreciation and amortization		2,078,008		1,825,512		252,496
		(190,893)		(692,249)		501,356
Loss on disposal of property and equipment		-		(561,151)		561,151
Change in fair value of financial instruments: gain (loss)		346,718		(5,041,993)		5,388,711
Income taxes recovery (expense)		162,674		941,610		(778,936)
Net income		$ 318,499		$ (5,353,783)		$ 5,672,282

Loss, before loss on disposal of property and equipment, change in fair value of financial instruments and income taxes decreased by $0.50 million in Q1-2012, compared to Q4-2011.  The improvement mainly reflects a $2.11 million increase in operating income, partially offset by a $1.34 million increase in interest expense (net). The increase in interest expense reflects an increase in mortgage loan and convertible debenture interest as well as an increase in transaction costs of $0.42 million, relating to the difference between the respective transaction costs of the Series D convertible debentures offering in March 2012 and the Series C convertible debenture offering in November 2011.  In accordance with IFRS, convertible debentures are carried at fair value and transaction costs are charged to interest expense as incurred.

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 increased by $5.67 million, in Q1-2012 compared to Q4-2011.

As disclosed in the following chart, the occupancy level for the Fort McMurray hotel portfolio increased from 59% to 76% in Q1-2012 and the average daily room rate increased by 8%, resulting in an increase in RevPar of $35.75.  For Temple Gardens, RevPar decreased by $1.74 due to a decrease in the occupancy level from 80% to 76%, partially offset by an increase in average daily room rate of $5.48 or 3%. After considering the overall increase in occupancy levels and the overall increase in the average daily room rates, RevPar for the "same property" hotel portfolio was $113.46 in Q1-2012, compared to $91.66 in Q1-2011, an increase of $21.50 (23.4%). RevPar for the overall portfolio increased by $23.13 (26.1%) to $111.57 in Q1-2012, compared to $88.44 in Q4-2011.

Room Revenue Statistics
		Q1-2012						Q4-2011
		Occ		ADR		RevPar		Occ		ADR		RevPar
Same Properties
Fort McMurray		76%		$ 169.56		$ 129.01		59%		$ 156.79		$ 93.26
Temple Gardens		76%		$ 167.86		$ 127.68		80%		$ 162.38		$ 129.42
Chateau Nova		61%		$ 133.77		$ 80.93		56%		$ 138.81		$ 77.97
Best Western Wayside Inn		76%		$ 133.48		$ 101.31		76%		$ 129.34		$ 98.90
Sheraton Red Deer		50%		$ 133.31		$ 66.12		41%		$ 126.16		$ 52.31
Total - Same Properties		71%		$ 158.93		$ 113.46		61%		$ 149.66		$ 91.66
Newly Acquired Properties
Regina Wingate Inn		65%		$ 127.52		$ 83.27		47%		$ 126.39		$ 59.53
Radisson Hotel & Suites		64%		$ 192.77		$ 122.89		N/A		N/A		N/A
Total - Newly Acquired Properties		65%		$ 159.75		$ 103.08		47%		$ 126.39		$ 59.53
Overall Portfolio		70%		$ 159.07		$ 111.57		60%		$ 147.82		$ 88.44

OUTLOOK

During the second half of 2012, Temple has the financial capacity to undertake up to $150 million of additional hotel acquisitions.  Thereafter the REIT will remain focused on achieving earnings growth from the existing portfolio, through hotel acquisitions, accretive capital improvements and efficient use of capital resources with the 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, TR.DB.D 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]