Holloway Lodging REIT reports second quarter results, reinstatement of distribution and commencement of normal course issuer bid
/Not for distribution on U.S. newswire services or for dissemination in the United States/
HALIFAX, Aug. 13, 2012 /CNW/ - Holloway Lodging Real Estate Investment Trust (TSX: HLR.UN) ("Holloway") today announced financial results for the three months ended June 30, 2012, the reinstatement of its distribution after 3 years and the commencement of a normal course issuer bid. All amounts are in Canadian dollars unless otherwise indicated. Readers should refer to Holloway's unaudited interim consolidated condensed financial statements as at June 30, 2012 and its management discussion and analysis which are available on Holloway's website at www.hlreit.com and on SEDAR at www.sedar.com.
Key Events - Q2, 2012
- Holloway recorded increased revenue, net operating income, funds from operations and distributable income in the three months ended June 30, 2012 compared to the three months ended June 30, 2011:
(In millions where indicated except
percentages and per room
|2012||2011||$ INCREASE||% CHANGE|
|Hotel revenues - same store||$13.3 M||$12.7 M||$0.6 M||4.7%|
|Revenue per available room - same store||$78.07||$73.85||$4.22||5.7%|
|Hotel operating income per available room before depreciation||$26.00||$25.22||$0.78||3.1%|
|Hotel operating income margin||30.5%||27.8%||-||2.7ppt|
|Funds from operations||$1.5 M||$0.1 M||$1.4 M||1400%|
|Distributable income||$1.3 M||$0.4 M||$0.9 M||
- During the second quarter, Holloway received $3.1 million from the repayment of the vendor take-back loan receivable related to the sale of the Radisson® Hotel and Suites in Fort McMurray, AB and $0.5 million from the release of a holdback related to the sale of the Calgary Downtown Suites Hotel in Calgary, AB.
- On June 29, 2012, Holloway closed the sale of the Super 8® hotel located in Three Hills, AB for $4.5 million. After repayment of the mortgage and closing costs, the net cash proceeds were $0.7 million. The REIT recorded a gain on sale of $1.1 million.
- During the second quarter, the REIT reduced its debt by $7.5 million, including fully repaying its line of credit.
Subsequent to June 30, 2012, Holloway:
- Sold its minority interest in the Super 8® hotel in Amherst, NS for proceeds of $0.2 million.
- Negotiated a $0.4 million penalty-free prepayment on the mortgage on the Super 8® hotel in Truro, NS. As a result, Holloway expects to save $0.1 million of interest during the remaining term of the mortgage.
At August 13, 2012, Holloway has cash on hand of $4.1 million and debt of $108.9 million.
Reinstatement of Distribution
The Board of Trustees has decided to reinstate its distribution after 3 years due to the material improvement in Holloway's business and capital structure. The Board of Trustees has declared a quarterly distribution of $0.03 per trust unit, payable on September 17, 2012 to unitholders of record on August 31, 2012.
The Board of Trustees believes that this level of distribution can be supported through a full business cycle while providing Holloway with sufficient excess cash to pursue other initiatives, particularly further debt reduction and selective hotel acquisitions. Over the next several quarters, the Board of Trustees will monitor Holloway's distribution policy and will assess the merits of increasing the distribution depending on business conditions.
Michael Rapps, Chairman of Holloway, stated: "The reinstatement of our distribution is a significant milestone and indicates how far Holloway has come in improving its business, balance sheet and cash flow profile. We have deliberately reinstated our distribution at a conservative level and will consider increasing the distribution in coming quarters depending on business conditions, expectations for spending in the oil and gas industry and alternative opportunities to deploy our cash in a manner that is accretive to our unitholders."
Normal Course Issuer Bid
Holloway also announced today that the Toronto Stock Exchange (the "TSX") has approved Holloway's notice of intention to make a normal course issuer bid for up to 1,083,805 of its trust units, representing 10% of Holloway's public float of trust units as of August 13, 2012. During the period from April 29, 2011 to April 28, 2012, Holloway purchased 2,550 units on a post-consolidated basis under a prior normal course issuer bid. The weighted average price paid was $3.96 per unit.
Pursuant to the notice, Holloway may, over the 12 month period commencing on August 15, 2012 and ending on August 14, 2013 (or on such earlier date as Holloway completes its purchases pursuant to the bid or provides notice of cancellation), purchase trust units through the facilities of the TSX at prevailing market prices in accordance with the rules and policies of the TSX. All trust units purchased by Holloway under the normal course issuer bids will be cancelled. At August 13, 2012, Holloway had a total of 18,839,260 trust units issued and outstanding. The average daily trading volume of the trust units during the last six months ending on July 31, 2012 was 63,182 trust units. Daily purchases will be limited to 15,795 trust units, other than block purchase exceptions.
Holloway believes that, on occasion, the trust units trade at prices that do not reflect their underlying value. Accordingly, management believes that the purchase of trust units pursuant to the normal course issuer bid may generate a higher return than alternative uses of capital and represents a potential opportunity to deploy capital in a manner that is accretive to unitholders.
Holloway continues to be cautiously optimistic about the performance of its hotels in the coming quarters. While we do not expect material improvement at our three Atlantic Canadian hotels, we are seeing continued positive developments at our Western Canadian hotels as well as our sole US hotel. A number of large-scale infrastructure projects have been proposed in Northern Alberta and British Columbia that, if approved, are expected to benefit several of Holloway's hotels.
In recent quarters, significant progress has been achieved in reducing Holloway's total debt, which now consists exclusively of mortgages on 16 of its 17 hotels. Holloway will look to further reduce this mortgage debt as mortgages mature and as other opportunities arise. Holloway will continue to focus on operational efficiencies and completing capital upgrades at its hotels. Holloway will also seek to selectively acquire additional hotels to the extent such acquisitions are accretive to Holloway's cash flow and net asset value.
The following table provides a summary of the operating results for the three and six months ended June 30, 2012 and 2011.
|Three months ended||Six months ended|
|(in $000's except number of units and per unit results)||
|Hotel operating income before depreciation||4,131||5,474||9,719||10,146|
|Provision for (recovery of) deferred income taxes||-||-||-||-|
|Income (loss) for the periods||669||(2,943)||5,391||(6,184)|
|Weighted average basic units outstanding||18,840,410||978,380||16,682,147||978,380|
|Weighted average diluted units outstanding||18,840,410||978,380||16,682,147||978,380|
|Basic income (loss) per unit||0.04||(3.01)||0.32||(6.32)|
|Diluted income (loss) per unit||0.04||(3.01)||0.32||(6.32)|
|Reconciliation to funds from operations (FFO)|
|Add / (deduct):|
|Depreciation and amortization on real property||1,932||2,517||3,875||5,038|
|Provision for (recovery of) deferred income taxes||-||-||-||-|
|(Gain) loss on disposal of hotel properties||(1,059)||498||(5,657)||498|
|Funds from operations - basic and diluted||1,542||72||3,609||(648)|
|Basic FFO per unit||0.08||0.07||0.22||(0.66)|
|Diluted FFO per unit||0.08||0.07||0.22||(0.66)|
|Reconciliation to distributable income|
|Depreciation and amortization - trust and other assets||45||46||87||93|
|Accretion of mortgages, loan due to a related party, convertible debentures and deferred financing fees||52||862||654||1,704|
|Fair value adjustment on Class B LP units and derivative liability||21||-||33||(31)|
|Distributable income - basic and diluted||1,262||390||3,491||(36)|
|Basic distributable income per unit||0.07||0.40||0.21||(0.04)|
|Diluted distributable income per unit||0.07||0.40||0.21||(0.04)|
|Reconciliation of cash generated from operating activities to distributable income|
|Net cash generated from operating activities||1,928||2,204||407||2,510|
|Changes in items of working capital||(260)||(1,223)||3,992||(1,292)|
|Write off of deferred financing fee||-||-||-||(100)|
Holloway Lodging Real Estate Investment Trust
Holloway is a real estate investment trust focused on owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets. Holloway currently owns 17 hotels with 1,665 rooms. Holloway's trust units trade on the Toronto Stock Exchange under the symbol HLR.UN.
This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to Holloway's future outlook and anticipated events or results and may include statements regarding the future financial position, property acquisition or disposal strategies and opportunities, business strategy, financial results and plans and objectives of Holloway. Particularly, statements regarding Holloway's future distribution policy, the potential acquisition of hotels and the expected results of approved infrastructure projects are forward-looking statements. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward looking-information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what Holloway currently expects and there can be no assurance that such statements will prove to be accurate. Some of these risks and uncertainties are described under "Risk Factors" in Holloway's Annual Information Form ("AIF"), dated March 14, 2012 which is available at www.sedar.com. Holloway does not intend to update or revise any such forward-looking information should its assumptions and estimates change.
SOURCE: HOLLOWAY LODGING REAL ESTATE INVESTMENT TRUSTFor further information:
Please contact Michael Rapps, Chairman, or Jane Rafuse, Chief Financial Officer, at (902) 404-3499.