Holloway Lodging Real Estate Investment Trust reports 2012 first quarter results and 50% reduction in total debt
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HALIFAX, May 10, 2012 /CNW/ - Halifax, Nova Scotia - Holloway Lodging Real Estate Investment Trust (TSX: HLR.UN) ("Holloway" or the "REIT") today announced its financial results for the three months ended March 31, 2012. All amounts are in Canadian dollars unless otherwise indicated. Readers should refer to Holloway's unaudited interim consolidated condensed financial statements as at March 31, 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 - Q1, 2012
- Results showed significant improvement for the first quarter of 2012 compared to the first quarter of 2011 as follows:
(In millions where indicated except
percentages and per room
|Hotel revenues - same store||$14.9 M||$13.4 M||$1.5 M||11.2%|
|Revenue per available room - same store||$84.73||$75.94||$8.79||11.6%|
|Hotel operating income before depreciation||$5.6 M||$4.7 M||$0.9 M||19.1%|
|Hotel operating income margin||33.4%||24.9%||-||8.5ppt|
|Funds from operations||$2.1 M||($0.7 M)||2.8 M||400%|
|Distributable income||$2.2 M||($0.4 M)||2.6 M||650%|
- On January 12, 2012, the REIT sold the leasehold interest on the 5 Calgary Downtown Suites Hotel in Calgary, AB, for $22.6 million. After repayment of the mortgage and closing costs, the net cash proceeds were $6.9 million. The gain on sale was $0.5 million.
- On January 23, 2012, the REIT redeemed the remaining $46.7 million principal amount of the 6.5% debentures by issuing units to the debentureholders.
- On February 1, 2012, the REIT sold the Radisson® Hotel and Suites in Fort McMurray, AB, for $25.1 million, including a vendor take-back loan receivable of $3.0 million. After repayment of the mortgage and closing costs, the net cash proceeds were $11.1 million. The gain on sale was $4.1 million.
- During the first quarter, the REIT fully repaid its $14.8 million loan due to a related party and repaid $2.3 million on its line of credit.
- On February 28, 2012, Felix Seiler was appointed Chief Operating Officer and Jane Rafuse was appointed Chief Financial Officer of the REIT.
- On March 28, 2012, the REIT consolidated, on a 40 to 1 basis, its outstanding trust and special voting units in accordance with the terms of its Declaration of Trust. After consolidation, the REIT has 18,839,260 trust units and 1,150 special voting units outstanding.
Subsequent to March 31, 2012, the REIT further improved its balance sheet as follows:
- On April 2, 2012, the REIT received a $3.05 million cash repayment of the vendor take-back loan receivable, including accrued interest, related to the sale of the Radisson® Hotel and Suites in Fort McMurray, AB.
- On April 12, 2012, the REIT refinanced a maturing mortgage on the Holiday Inn Express® in Moncton, NB, at a rate of 5.99% for a 5 year term. The REIT used this refinancing as an opportunity to reduce its debt further by paying down $0.4 million of principal.
- On May 1, 2012, the REIT received a $0.5 million cash payment from the release of a holdback related to the sale of the 5 Calgary Downtown Suites Hotel in Calgary, AB.
As at the date of this press release, the REIT has repaid all amounts outstanding under its $5.0 million line of credit and has terminated its $0.5 million line of credit. The REIT's only debt consists of mortgages on 17 of its 18 hotels and certain nominal capital leases. As a result of the significant debt reduction actions taken over the last year and substantially improved hotel operating results, the REIT has:
- Reduced its total debt by $114 million or 50%;
- Improved its debt service coverage ratio from 0.87x to 1.16x; and
- Reduced its debt to gross book value ratio by 22 percentage points to 35.2%.
On May 8, 2012, Holloway announced that it had entered into a letter of intent with a third party regarding the potential acquisition of all of Holloway's trust units. The initial receipt of the letter of intent underscores how far Holloway has come in recent months in strengthening its balance sheet and creating a sustainable cash flow generating business as well as the positive fundamentals currently benefitting our hotels in Western Canada.
The REIT 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. The performance of the Western Canadian hotels fluctuates based on oil and gas exploration and development and infrastructure projects in the surrounding areas. There are several infrastructure and pipeline projects underway or anticipated in Alberta and British Columbia which are expected to provide ongoing demand for several of the REIT's hotels.
In recent quarters, the REIT's priority was to improve its balance sheet and create a capital structure that is better suited to the cyclical nature of the hotel industry. Significant progress has been achieved in reducing our total debt and now that the REIT's debt consists principally of mortgages on its hotels, the REIT will look to further reduce its debt as mortgages mature or opportunistically. In the coming quarters, the REIT will continue to focus on operational improvements and executing select capital projects at its hotels.
The REIT expects improved cash flow in coming quarters compared to the prior year periods due to improved hotel results and substantially lower interest expense. The REIT's board of trustees will assess the merits of reinstating its distribution in the second half of 2012.
The following table provides a summary of the operating results for the three months ended March 31, 2012 and 2011.
|Three months ended|
|(in $000's except number of units and per unit results)||March 31, 2012||March 31, 2011|
|Hotel operating income before depreciation||5,587||4,673|
|Hotel depreciation and amortization||1,984||2,566|
|Provision for (recovery of) deferred income taxes||-||-|
|Income (loss) for the periods||4,721||(3,240)|
|Weighted average basic units outstanding||14,523,884||978,380|
|Weighted average diluted units outstanding||14,523,884||978,380|
|Basic income (loss) per unit||0.33||(3.31)|
|Diluted income (loss) per unit||0.33||(3.31)|
|Reconciliation to funds from operations (FFO)|
|Depreciation and amortization on real property||1,943||2,521|
|Gain on disposal of hotel properties||(4,597)||-|
|Funds from operations - basic and diluted||2,067||(719)|
|Basic FFO per unit||0.14||(0.73)|
|Diluted FFO per unit||0.14||(0.73)|
Reconciliation to distributable income
|Depreciation and amortization - trust and other assets||42||46|
|Accretion on convertible debentures, loan due to a related party, mortgages and deferred financing fees||602||842|
|Fair value adjustment of Class B LP units and derivative liability||13||(32)|
|Distributable income - basic and diluted||2,230||(427)|
|Basic distributable income per unit||0.15||(0.44)|
|Diluted distributable income per unit||0.15||(0.44)|
|Reconciliation of cash generated from operating activities to distributable income|
|Net cash generated from operating activities||(1,399)||179|
|Changes in items of working capital||4,131||58|
|Write off of deferred financing fee||-||(100)|
Q1 Operating Results
The following table provides the REIT's hotel operating margins for its portfolio for the three months ended March 31, 2012 and 2011.
|Three months ended|
|(in $000's except percentages, # of rooms available and HOI per available room)||March 31, 2012||March 31, 2011||Variance|
|Hotel departmental and operating expenses excluding depreciation and amortization||9,943||12,460||(2,517)|
|Hotel gross margin||6,782||6,322||460|
|Hotel overhead expenses||1,195||1,649||(454)|
|Hotel operating income before depreciation (HOI)||5,587||4,673||914|
|Hotel operating income margin||33.4%||24.9%||8.5 ppt|
|Number of rooms available||180,254||214,740||(34,486)|
|HOI per available room||$31.00||$21.76||$9.24|
This table includes the operations of the 18 hotels for the first quarter of 2012 and the prior year.
|Three months ended|
|March 31, 2012||March 31, 2011||RevPAR|
|Atlantic Canada ($Cdn)||51.63%||$106.61||$55.04||48.51%||$109.96||$53.34||3.2%|
|Western Canada ($Cdn)||75.13%||$125.96||$94.63||74.19%||$113.59||$84.27||12.3%|
|United States ($US)||50.49%||$70.82||$35.76||41.67%||$70.07||$29.20||22.5%|
|Weighted Average Total ($Cdn)||69.93%||$121.17||$84.73||68.12%||$111.48||$75.94||11.6%|
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 18 hotels with 1,747 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 the REIT'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 the REIT. Particularly, statements regarding the REIT's future distribution policies and the potential acquisition of all of the trust units of Holloway by a third party 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 14, 2012 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.
For further information:
Felix Seiler, Chief Operating Officer of the REIT, or Jane Rafuse, Chief Financial Officer of the REIT at (902) 404-3499