Holloway Lodging Real Estate Investment Trust reports first quarter 2009 results



    /NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
    DISSEMINATION IN THE UNITED STATES/

    HALIFAX, May 7 /CNW/ - Holloway Lodging Real Estate Investment Trust
(TSX: HLR.UN, HLR.DB and HLR.DB.A) ("Holloway" or the "REIT") today announced
its unaudited financial results for the three months ended March 31, 2009. All
amounts are in Canadian dollars unless otherwise indicated. This press release
should be read in conjunction with the REIT's unaudited interim consolidated
financial statements and management's discussion and analysis, copies of which
are available at www.hlreit.com and www.sedar.com.

    Key Results

    The following summarizes the key results for the three months ended March
31, 2009, the first full quarter of operations during our current economic
recession:

    
    - Hotel revenues decreased to $19.3 million from $22.7 million for the
      three months ended March 31, 2009 and 2008, respectively;
    - Hotel operating income decreased to $5.1 million from $7.5 million for
      the three months ended March 31, 2009 and 2008, respectively;
    - Distributable income was $0.00 per unit for the three months ended
      March 31, 2009 compared to $0.07 per unit for the three months ended
      March 31, 2008;
    - Holloway achieved a 20% RevPAR premium compared to the PKF year-to-date
      survey results to February, 2009; and
    - $3.0 million mezzanine loan repaid - on February 5, 2009, the mezzanine
      loan receivable from RegWin Hotel Ltd of $3.0 million was repaid in
      full.

    "The overall economy and tight credit have had a negative impact on the
hotel industry as a whole and as a result, has also negatively impacted
Holloway's results for the first quarter. We will continue to focus on
operating fundamentals, moving market share, and strengthening our balance
sheet and liquidity," said Glenn Squires, CEO of Holloway Lodging REIT.

    RESULTS OF OPERATIONS

    The following table provides a summary of the operating results for the
three months ended March 31, 2009 and 2008.

    (in $000's except number of                   Three months  Three months
     units and per unit results)                         ended         ended
                                                      March 31,     March 31,
                                                          2009          2008

    -------------------------------------------------------------------------
    Hotel revenues                                      19,328        22,708
    Hotel expenses                                      14,229        15,204
    -------------------------------------------------------------------------
    Hotel operating income                               5,099         7,504
    -------------------------------------------------------------------------
    Other (income) expenses                              8,639         8,246
    Provision for (recovery of) future income
     taxes                                              (1,060)           39
    -------------------------------------------------------------------------
    Net income (loss) for the period - basic and
     diluted                                            (2,480)         (781)

    -------------------------------------------------------------------------
    Weighted average basic units outstanding        39,135,216    39,152,750
    Weighted average diluted units outstanding      39,135,216    39,152,750
    Basic income (loss) per unit                         (0.06)        (0.02)
    Diluted income (loss) per unit                       (0.06)        (0.02)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reconciliation to funds from operations (FFO)
    ---------------------------------------------
    Add/(deduct):
    Depreciation and amortization on real property       3,304         3,198
    Provision for (recovery of) future income
     taxes                                              (1,060)           39
    -------------------------------------------------------------------------
    Funds from operations - basic and diluted             (236)        2,456
    -------------------------------------------------------------------------
    Basic FFO per unit                                   (0.01)         0.06
    Diluted FFO per unit                                 (0.01)         0.06
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reconciliation to distributable income
    --------------------------------------
    Add/(deduct):
    Depreciation and amortization - trust and
     other assets                                           86            63
    Accretion of mortgages, convertible debentures
     and deferred financing fees                           598           521
    Unit-based compensation                                 18           224
    Unrealized foreign exchange loss                       193           142
    FF&E reserve                                          (580)         (681)
    -------------------------------------------------------------------------
    Distributable income - basic and diluted                79         2,725
    -------------------------------------------------------------------------
    Basic distributable income per unit                   0.00          0.07
    Diluted distributable income per unit                 0.00          0.07
    Distributions declared                              0.0525         0.135
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    OPERATIONS REVIEW

    Hotel Revenues

    The following table provides information on occupancy, ADR and RevPAR for
the twenty-two wholly-owned hotels for the three months ended March 31, 2009
and 2008.

    -------------------------------------------------------------------------
                         3 Months Ended            3 Months Ended
                         March 31, 2009            March 31, 2008
                    Occu-                     Occu-                   RevPAR
    Region         pancy       ADR  RevPAR   pancy       ADR  RevPAR  Change
    -------------------------------------------------------------------------

    Atlantic
     Canada
     ($Cdn)        55.96%  $114.21  $63.92   60.97%  $114.70  $69.93    -8.6%

    Western
     Canada
     ($Cdn)        56.77%  $142.20  $80.72   65.57%  $147.44  $96.68   -16.5%

    United
     States ($US)  45.03%   $71.88  $32.37   49.52%   $82.30  $40.75   -20.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The Atlantic Canada RevPAR has decreased by 8.6% for the three months
ended March 31, 2009 compared to the three months ended March 31, 2008 due to
reduced occupancy at each of the four properties in the Atlantic region.
Demand decreased in each of the competitive sets in the region due to the
general economic environment. Despite this, the Holiday Inn Express in Moncton
and the Super 8 in Truro achieved increases in their market share compared to
the prior year.
    Western Canada RevPAR decreased by 16.5%. Within the Western region, the
combination of sharply lower demand in many markets coupled with downward
pressure on rates resulted in a substantial decline in RevPAR for the quarter.
The largest occupancy declines in Alberta were in Fort McMurray, Drayton
Valley, Slave Lake, High Level and Whitecourt, due to substantial reduction in
oil and gas activity and decreased demand from oil crews and associated
service companies. In Fort McMurray, the postponement and scaling back of
various oil sands activities has had a substantial impact on business levels.
In Grande Prairie, the average rate decline has been the predominant
contributor causing the decline in RevPAR as lower demand from oil and gas
crews translates into downward rate pressure as those companies which are
active in the market are constraining expenses and requiring rate concessions
to secure the business. Changes to the business mix such that the weekend
leisure segment has increased versus the corporate segment also results in
additional compression on rates, due to the rate sensitivity of the leisure
segment in this operating environment. Exacerbating the situation is the fact
that markets such as Grande Prairie, Drayton Valley and Slave Lake, have all
had significant increases in room supply within the last year.
    Occupancy in Yellowknife, NT, was down due to the reduction in business
from the mining sector. In the British Columbia markets of Fort St. John and
Fort Nelson, both occupancy and rate declines were experienced due to the
reduction in business from the oil and gas as well as the forestry sectors.
    The Super 8 in Drayton Valley experienced an increase in market share as
did the Super 8 in Grande Prairie and the Wingate by Wyndham in Calgary.
Market share at the Super 8 Fort St John and Super 8 Slave Lake each exceed
150% of fair share.
    The decline in RevPAR for the Holiday Inn Express in Myrtle Beach, our
U.S. property, is primarily due to the drop in average rate due to lower
leisure business levels and less group activity on account of the general
economic conditions.

    Hotel Expenses

    Hotel operating expenses include wages, supplies, and overhead expenses
such as repairs and maintenance, sales and marketing, and administrative
expenses. Expenses have decreased $1.1 million from $13.5 million to $12.4
million when comparing to the same period in 2008. With the decline in
revenues, the hotels are working on managing and controlling expenses.
Variable expenses showing declines include rooms' department wages, food and
beverage cost of goods sold, as well as maintenance and utilities.
Administration expenses were down due to the comparative period having a
one-time expense related to the closure and lease out of a food and beverage
operation and lower expenses for wages and travel under the current management
contract for 10 hotels in Northern Alberta and British Columbia.
    Property taxes and insurance expenses have increased $0.2 million from
$1.1 million to $1.3 million for the three months ended March 31, 2009 and
2008, respectively. Property taxes have increased in northern Alberta, British
Columbia, and Myrtle Beach. Insurance expenses have remained consistent for
the first quarter in the 2009 compared to the first quarter of 2008.
    Management fees are based on hotel revenues which have declined from the
prior year. In addition, the management fees for January, 2008 for 10 hotels
in Alberta and British Columbia were subject to a higher fee under the
previous management contract which was terminated at the end of January, 2008.

    Other Income and Expenses

    Other income and expenses have increased from $8.2 million for the three
months ended March 31, 2008 to $8.6 million for the three months ended March
31, 2009. Interest income decreased by $0.4 million, depreciation and
amortization increased by $0.1 million and corporate and administrative
expenses decreased by $0.3 million.
    Interest on mortgages and other debt and accretion of deferred financing
fees has increased marginally when comparing to the three months ended March
31, 2008. This is due to a decrease in mortgage interest expense as principal
balances are paid down, offset by an increase in interest expense incurred on
the promissory notes issued in December, 2008.
    During the three months ended March 31, 2009 and 2008, the REIT generated
interest income of $0.3 million and $0.7 million respectively from loans
receivable and the investment of cash balances.
    Corporate administrative expenses were $0.6 million for the three months
ended March 31, 2009 and $0.9 million for the three months ended March 31,
2008. This decrease is due primarily to decreases in unit-based compensation,
salaries and wages and legal expenses.
    Debenture interest expense, the non-cash accretion of the discount on the
debentures and deferred financing fees are consistent at $1.8 million for the
first quarters of 2009 and 2008 as the principal amount of $72.1 million has
not changed.
    Depreciation and amortization has increased by $0.1 million to $3.4
million from $3.3 million for the three months ended March 31, 2009 and 2008,
respectively. The REIT owns the same number of hotels and the increase in
depreciation represents depreciation on capital additions made to the
properties during the prior year.

    Distributable Income

    The REIT generated $0.1 million in distributable income ($0.00 basic and
diluted per unit) for the three months ended March 31, 2009 compared to $2.7
million ($0.07 basic and diluted per unit) for the same period in 2008. The
decline in revenues has been a major contributor to the decrease in
distributable income. Distributable income will also fluctuate due to the
seasonality in the hospitality industry. Distributions of $0.0175 per unit per
month were declared for January to March, 2009 and totalled $2.1 million. The
REIT's first quarter distributions exceeded distributable income. Excess,
un-deployed cash was used to fund the distribution shortfall.

    Holloway Lodging Real Estate Investment Trust

    Holloway is a real estate investment trust listed on the Toronto Stock
Exchange. Our goal is to be one of the top-performing lodging REITs and to
provide sustainable distributions to our unitholders. We will continuously
seek to improve our operating results by focusing on dominating the market
segments in which we operate and maximizing product quality through a prudent
capital reinvestment program.

    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. 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 30, 2009 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.
    
    %SEDAR: 00023845E




For further information:

For further information: Mr. Glenn Squires, Chief Executive Officer of
the REIT, (902) 404-3499; Mr. Michael Jackson, President and Chief Operating
Officer of the REIT, (902) 404-3499; Ms. Tracy Sherren, Chief Financial
Officer of the REIT, (902) 404-3499

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Holloway Lodging Real Estate Investment Trust

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