Holloway Lodging Real Estate Investment Trust reports 2011 third quarter results and comments on upcoming convertible debenture maturity

Not for distribution on U.S. newswire services or for dissemination in the United States

HALIFAX, Nov. 10, 2011 /CNW/ - Holloway Lodging Real Estate Investment Trust (TSX: HLR.UN HLR.DB.A) ("Holloway" or the "REIT") today announced its financial results for the three and nine months ended September 30, 2011.  All amounts are in Canadian dollars unless otherwise indicated.  Readers should refer to Holloway's unaudited consolidated financial statements as at September 30, 2011 and its management discussion and analysis which are available on Holloway's website at www.hlreit.com and on SEDAR at www.sedar.com.

Highlights - Q3, 2011

  • Results improved for the third quarter of 2011 compared to the third quarter of 2010 as follows:
    • Same store revenue increased 10.6% or $2.0 million;
    • Same store revenue per available room increased 11.3% to $91.76 from $82.48;
    • Hotel operating income before depreciation increased 8.8% or $0.6 million;
    • Hotel operating income margin increased 2.8 percentage points to 34.4% from 31.6%;
    • Funds from operations increased 52% or $0.8 million;
    • Distributable income increased 19% or $0.3 million;
  • Holloway repaid at maturity $20.2 million of convertible debentures using proceeds from the sale of the Radisson Suite hotel in Halifax, NS and proceeds from a secured credit agreement;
  • Holloway sold the Holiday Inn Express hotel in Halifax, NS for $6.5 million. After repayment of the mortgage and closing costs, Holloway received net cash proceeds of $2.6 million; and
  • During the third quarter, Holloway repurchased $2.0 million face value of its 6.5% convertible debentures for $1.5 million resulting in a gain on repurchase of $0.5 million.

Upcoming Maturity of Convertible Debentures

Holloway has approximately $48.2 million principal amount of 6.5% convertible debentures that mature on June 30, 2012 (the "Debentures"). Since implementing its normal course issuer bid in April 2011, Holloway has reduced the principal amount of Debentures outstanding by over $3.6 million.

At the present time, the REIT does not have sufficient cash resources available to repay all of the outstanding Debentures when they mature. As well, Holloway does not expect to be in a position to repay or refinance all of the outstanding principal amount of Debentures when they mature.

The Board of Trustees and management of Holloway are reviewing various options to address the maturity of the Debentures. These options include:

  • Repaying a portion of the principal amount of Debentures, including by disposing of one or more hotel properties. At thepresent time, 11 of the REIT's 20 hotels are financed by mortgages that are part of commercial mortgage backedsecurities pools; the REIT does not intend to dispose of any of these hotels at the present time due to the terms and conditions of such mortgages. To the extent the REIT disposes of any of its hotels or other assets, it is required, pursuant to the terms of its secured credit facility, to apply at least 75% of the net proceeds resulting from such dispositions to the repayment of amounts outstanding under such facility;

  • Refinancing all or a portion of the principal amount of Debentures;

  • Pursuing an extension of the maturity date of the Debentures;

  • Reducing the principal amount of Debentures outstanding prior to maturity through normal course issuer bids and/or other permitted purchases;

  • Satisfying all or a portion of the principal amount of the Debentures at maturity, or redeeming all or a portion of the principal amount of the Debentures prior to maturity, by issuing trust units to holders of Debenturesrather than paying cash;

  • Combinations of the above options.

Operating Results

The results of operations for the three months ended September 30, 2011 represent the operations of twenty hotels for the full quarter and one hotel for part of the quarter.  For the third quarter of the prior year, the REIT owned twenty-two hotels.  The Radisson Suite hotel in Halifax, NS was sold on June 30,2011 and the Holiday Inn Express in Halifax, NS was sold on August 15, 2011.

  Three months ended
(in $000's except number of units and per unit results) September 30,
2011
September 30,
2010
Hotel revenues 21,162 21,173
Hotel expenses 13,887 14,486
Hotel depreciation and amortization 2,354 2,551
Hotel operating income 4,921 4,136
Other expenses 6,288 5,417
Loss for the periods (1,367) (1,281)
Weighted average basic units outstanding 39,321,026 39,135,216
Weighted average diluted units outstanding 39,321,026 39,135,216
Basic income (loss) per unit (0.03) (0.03)
Diluted income (loss) per unit (0.03) (0.03)
Reconciliation to funds from operations (FFO)
Add/(deduct):
   
Depreciation and amortization on real property 2,310 2,506
Provision for impairment of minority interest investments in hotel properties - 423
(Gain) or loss on disposal of assets 1,452 (72)
Funds from operations - basic and diluted 2,395 1,576
Basic FFO per unit 0.06 0.04
Diluted FFO per unit 0.06 0.04
Reconciliation to distributable income
Add/(deduct):
   
Depreciation and amortization - trust and other assets 45 47
Accretion of mortgages, convertible debentures, other long-term debt and deferred financing fees 799 820
Fair value adjustment on Class B LP units and derivative liabilities (73) (54)
Gain on repurchase of convertible debentures (507) -
Unit-based compensation 62 -
FF&E reserve (635) (635)
Distributable income - basic and diluted 2,086 1,754
Basic distributable income per unit 0.05 0.04
Diluted distributable income per unit 0.05 0.04
Reconciliation of cash generated from operating activities to distributable income    
Net cash generated from operating activities 254 789
Changes in items of working capital 2,467 1,600
FF&E reserve (635) (635)
Distributable income 2,086 1,754

  Three months ended  
(in $000's except percentages) September 30,
2011
September 30,
2010
Variance
Hotel revenues 21,162 21,173 (11)
Hotel operating expenses excluding depreciation 12,396 12,789 393
Hotel gross margin 8,766 8,384 382
Percentage 41.4% 39.6% 1.8%
Hotel overhead expenses (1) 1,491 1,697 206
Hotel operating income before depreciation (HOI) 7,275 6,687 588
Hotel operating income margin 34.4% 31.6% 2.8%

(1) Hotel overhead expenses include property taxes, insurance and management fees.

On a same store basis for the 20 hotels owned for the entire quarter.

  Three months ended  
  September 30, 2011 September 30, 2010 RevPAR
Region Occ. ADR RevPAR Occ. ADR RevPAR Change
               
Atlantic Canada ($Cdn) 74.78% $120.11 $89.82 82.13% $118.23 $97.10 (7.5%)
               
Western Canada ($Cdn) 75.25% $124.20 $93.46 65.60% $123.53 $81.04 15.3%
               
United States ($US) 71.81% $99.23 $71.25 68.43% $99.81 $68.30 4.3%
               
Weighted Average Total ($Cdn) 75.01% $122.33 $91.76 67.77% $121.71 $82.48 11.3%

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 20 hotels with 2,183 rooms.  Holloway's units and convertible debentures trade on the Toronto Stock Exchange under the symbols HLR.UN and HLR.DB.A, respectively.

This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the future financial position, property acquisition strategies and opportunities, business strategy, financial results and plans and objectives of the REIT as well as strategies to address the maturity of the REIT's 6.5% convertible debentures which mature on June 30, 2012, including the repayment or non-repayment of such convertible debentures. Particularly, statements regarding the REIT's future operating results, property acquisition strategies and opportunities and economic performance 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 the REIT 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 24, 2011 which is available at www.sedar.com.  The REIT does not intend to update or revise any such forward-looking information should its assumptions and estimates change. 

 

SOURCE HOLLOWAY LODGING REAL ESTATE INVESTMENT TRUST

For further information:

Mr. Glenn Squires, Chief Executive Officer or Mr. Michael Rapps, Chairman and Interim Chief Financial Officer of the REIT at (902) 404-3499.

Profil de l'entreprise

HOLLOWAY LODGING REAL ESTATE INVESTMENT TRUST

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