Holloway Lodging Real Estate Investment Trust reports second quarter 2009 results



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

    HALIFAX, Aug. 10 /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 and six months ended June 30,
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 recession is continuing to negatively impact the hospitality industry
as demand and room rates decline. During the second quarter, Holloway
continued to focus on operating fundamentals and managing its costs. The
following summarizes the key results for the three months ended June 30, 2009:

    
    - Hotel revenues decreased to $18.9 million from $23.7 million for the
      three months ended June 30, 2009 and 2008, respectively;

    - Hotel operating expenses decreased to $13.6 million from $15.6 million
      for the three months ended June 30, 2009 and 2008, respectively;

    - Hotel operating income decreased to $5.4 million from $8.0 million for
      the three months ended June 30, 2009 and 2008, respectively;

    - Distributable income was $0.01 per unit for the three months ended
      June 30, 2009 compared to $0.08 per unit for the three months ended
      June 30, 2008;

    - Holloway achieved a 13% RevPAR premium compared to the PKF year-to-date
      survey results to May, 2009;

    - Recognized a $4.7 million non-cash provision for impairment on the
      mezzanine loans to The Yorkland Hotel in Toronto; and

    - Distributions were subsequently suspended - on July 21, 2009, the REIT
      suspended distributions to unitholders effective immediately in order
      to conserve cash and strengthen its balance sheet.

    RESULTS OF OPERATIONS

    The following table provides a summary of the operating results for the
three and six months ended June 30, 2009 and 2008.

                                  Three       Three         Six         Six
                                 months      months      months      months
    (in $000's except number      ended       ended       ended       ended
     of units and per unit      June 30,    June 30,    June 30,    June 30,
     results)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    Hotel revenues               18,917      23,669      38,245      46,377
    Hotel expenses               13,562      15,637      27,791      30,822
    -------------------------------------------------------------------------
    Hotel operating income        5,355       8,032      10,454      15,555
    -------------------------------------------------------------------------
    Other expenses               12,690       8,007      21,329      16,271
    Provision for (recovery of)
     future income taxes         (1,049)        203      (2,109)        242
    -------------------------------------------------------------------------
    Net loss for the period
     - basic and diluted         (6,286)       (178)     (8,766)       (958)
    -------------------------------------------------------------------------
    Weighted average basic
     units outstanding       39,135,216  39,108,768  39,135,216  39,130,759
    Weighted average
     diluted units
     outstanding             39,135,216  39,108,768  39,135,216  39,130,759
    Basic loss per unit           (0.16)      (0.01)      (0.22)      (0.02)
    Diluted loss per unit         (0.16)      (0.01)      (0.22)      (0.02)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reconciliation to funds
    -----------------------
     from operations (FFO)
     ---------------------
    Add/(deduct):
    Depreciation and
     amortization on
     real property                3,319       3,237       6,623       6,435
    Provision for impairment
     of mezzanine loans and
     advances                     4,700           -       4,700           -
    Provision for (recovery of)
     future income taxes         (1,049)        203      (2,109)        242
    -------------------------------------------------------------------------
    Funds from operations
     - basic and diluted            684       3,262         448       5,719
    -------------------------------------------------------------------------
    Basic FFO per unit             0.02        0.08        0.01        0.15
    Diluted FFO per unit           0.02        0.08        0.01        0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reconciliation to
    -----------------
     distributable income
     --------------------
    Add/(deduct):
    Depreciation and
     amortization - trust and
     other assets                    55          63         140         127
    Accretion of mortgages,
     convertible debentures and
     deferred financing fees        614         538       1,212       1,058
    Unit-based compensation          15         118          33         342
    Unrealized foreign exchange
     loss (gain)                   (437)        (31)       (243)        128
    FF&E reserve                   (568)       (710)     (1,147)     (1,391)
    -------------------------------------------------------------------------
    Distributable income
     - basic and diluted            363       3,240         443       5,983
    -------------------------------------------------------------------------
    Basic distributable
     income per unit               0.01        0.08        0.01        0.15
    Diluted distributable
     income per unit               0.01        0.08        0.01        0.15
    Distributions declared       0.0525       0.135       0.105        0.27
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reconciliation of cash flow
    ---------------------------
     from operating activities
     -------------------------
     to distributable income
     -----------------------
    Cash flow from operating
     activities                   1,340       4,296       1,107       5,780
    Changes in non-cash
     working capital balances      (409)       (346)        483       1,594
    FF&E reserve                   (568)       (710)     (1,147)     (1,391)
    -------------------------------------------------------------------------
    Distributable income            363       3,240         443       5,983
    -------------------------------------------------------------------------

    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 June 30, 2009
and 2008.

    -------------------------------------------------------------------------
                  Three Months Ended         Three Months Ended
                     June 30, 2009              June 30, 2008
                   Oc-                        Oc-                    RevPAR
    Region    cupancy      ADR   RevPAR  cupancy      ADR   RevPAR   Change
    -------------------------------------------------------------------------
    Atlantic
     Canada
     ($Cdn)     70.37% $120.39   $84.72    76.51% $125.25   $95.83    (11.6%)

    Western
     Canada
     ($Cdn)     51.84% $139.58   $72.36    63.05% $147.78   $93.18    (22.3%)

    United
     States
     ($US)      68.37%  $86.00   $58.80    71.62% $101.33   $72.57    (19.0%)
    -------------------------------------------------------------------------
    

    The Atlantic Canada RevPAR has decreased by 11.6% for the three months
ended June 30, 2009 compared to the three months ended June 30, 2008. In
Moncton, the number of available rooms in the competitive set has increased
25% over the prior year. In Truro, there are 30% more rooms available in the
second quarter of 2009 versus the prior year. In the second quarter of 2008,
Halifax hosted the World Hockey Championships which increased business levels
significantly for a large part of May 2008, but no city-wide event of
comparable scale occurred in the second quarter of this year. These factors
were exacerbated by reduced market demand caused by the current general
economic conditions. All four of the REIT's hotels in the Atlantic region
ranked first in market share among their respective competitive sets in the
second quarter and three of the four hotels posted solid growth in market
share.
    The Western Canada RevPAR decreased by 22.3%. Within the Western region,
the combination of sharply lower demand, room supply increases in many markets
and the resulting downward pressure on rates produced substantial decline in
RevPAR for the quarter. The largest occupancy declines were in downtown
Calgary, Slave Lake, Fort McMurray, Fort St. John and Yellowknife. The decline
in exploration and mining as well as gas and oilwell maintenance activity has
a major affect on each our Alberta and British Columbia markets as demand is
largely reliant on the gas and oil business. The increase in available room
supply has been a major factor in Grande Prairie, Slave Lake, Drayton Valley
and Fort St. John. In Slave Lake, the increase in room supply is the highest
of any of the markets at 40%. Many of the REIT's hotels in the Western region
ranked first in market share among their respective competitive sets in the
second quarter and posted solid growth in market share.
    The RevPAR for the Holiday Inn Express in Myrtle Beach, South Carolina
decreased by 19.0%, 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 in the United States. Despite this, the hotel achieved
growth in market share and is well ahead of fair market share.

    Hotel Expenses

    Operating expenses include wages, supplies, and overhead expenses such as
repairs and maintenance, sales and marketing, and administrative expenses
related to the operations of the hotel. These expenses have decreased $1.8
million when comparing the three months ended June 30, 2009 to the same period
in 2008. Savings were achieved across all departments as wages were controlled
as a result of lower business levels. Across the portfolio, positions were
consolidated and hours curtailed as operations warranted. All departmental
expense categories achieved savings as efficiencies were identified. Various
rooms' department expenses which are a function of occupancy, food and
beverage cost of goods sold, sales expenses, administrative costs, as well as
maintenance and utilities were all lower due to declining business levels and
cost saving initiatives.
    Property taxes and insurance expenses have decreased $0.2 million from
$1.3 million to $1.1 million for the three months ended June 30, 2009 and
2008, respectively. There were several reassessments in Alberta which resulted
in lower property tax expenses. Insurance expenses have remained flat when
compared to the same period last year.
    Management fees are based on the hotel revenues which have declined from
the prior year.

    Other Income and Expenses

    Other income and expenses have increased from $8.0 million for the three
months ended June 30, 2008 to $12.7 million, which includes the $4.7 million
non-cash provision for impairment on a mezzanine loan receivable for the three
months ended June 30, 2009. Interest income decreased by $0.5 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 remained flat when comparing to the three months ended June 30, 2008.
This is due to a decrease in mortgage interest expense as principal balances
are paid down.
    During the three months ended June 30, 2009 and 2008, the REIT generated
interest income of $0.2 million and $0.7 million respectively from loans
receivable. The decline in interest income is a result of one of the mezzanine
loans being repaid in February, 2009 and recording an allowance on the
interest on the mezzanine loan to The Yorkland Hotel which is in default.
    Corporate administrative expenses were $0.5 million for the three months
ended June 30, 2009 and $0.8 million for the three months ended June 30, 2008.
This decrease is due primarily to decreases in unit-based compensation,
salaries and wages, professional fees and expenses related to the annual
meeting.
    The total debenture interest expense and the non-cash accretion of the
discount in the debentures and deferred financing fees has increased $0.1
million to $1.9 million for the second quarter of 2009 as the non-cash
accretion has increased.
    Depreciation and amortization has increased by $0.1 million to $3.4
million from $3.3 million for the three months ended June 30, 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.
    The REIT recognized a $4.7 million non-cash provision for impairment on
the mezzanine loans to The Yorkland Hotel in Toronto. On August 6, 2009, a
court-appointed receiver for the property was named with a mandate to sell the
property and maximize the return to the debt-holders. The loans have been
written down to the estimated fair vale of the REIT's underlying security.

    Distributable Income

    The REIT generated $0.4 million in distributable income ($0.01 basic and
diluted per unit) for the three months ended June 30, 2009 compared to $3.2
million ($0.08 basic and diluted per unit) for the same period in 2008.
Distributable income will fluctuate due to the seasonality in the hospitality
industry and the timing of acquisitions. A distribution of $0.0175 per unit
per month was declared for April to June, 2009. Distributions declared
totalled $2.1 million for the three months ended June 30, 2009. The REIT's
second quarter distributions exceeded the distributable income. Excess,
un-deployed cash was used to fund the distribution shortfall. The REIT
suspended distributions to unitholders on July 21, 2009.

    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. 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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