Holloway Lodging Real Estate Investment Trust reports third quarter 2009
results

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

HALIFAX, Nov. 9 /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 nine months ended September 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 third quarter, Holloway continued
to focus on operating fundamentals and managing its costs. The following
summarizes the key results for the three months ended September 30, 2009:

    - Hotel revenues decreased to $19.8 million from $24.5 million for the
      three months ended September 30, 2009 and 2008, respectively;

    - Hotel operating expenses decreased to $13.6 million from $15.4 million
      for the three months ended September 30, 2009 and 2008, respectively;

    - Hotel operating income decreased to $6.2 million from $9.1 million for
      the three months ended September 30, 2009 and 2008, respectively;

    - Distributable income was $0.04 per unit for the three months
      September 30, 2009 compared to $0.13 per unit for the three months
      ended September 30, 2008;

    - Holloway achieved a 5% RevPAR premium compared to the PKF year-to-date
      survey results to August 31, 2009; and

    - Entered into a binding agreement for the sale of the Wingate by Wyndham
      Calgary to an arm's length purchaser for $16.5 million, representing a
      gain on sale of approximately $1.4 million. The sale closed on
      October 5, 2009.

    Operating Results

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

    -------------------------------------------------------------------------
                                  Three       Three        Nine        Nine
                                 months      months      months      months
    (in $000's except number      ended       ended       ended       ended
     of units and per unit    September   September   September   September
     results)                  30, 2009    30, 2008    30, 2009    30, 2008
    -------------------------------------------------------------------------
    Hotel revenues               19,800      24,509      56,046      68,842
    Hotel expenses               13,588      15,382      40,165      44,994
    -------------------------------------------------------------------------
    Hotel operating income        6,212       9,127      15,881      23,848
    -------------------------------------------------------------------------
    Other expenses                7,842       7,918      28,663      23,700
    Provision for (recovery
     of) future income taxes       (412)        641      (2,643)        773
    -------------------------------------------------------------------------
    Net income (loss) from
     continuing operations
     for the period - basic
     and diluted                 (1,218)        568     (10,139)       (625)
    Income from discontinued
     operations                      79         213         234         448
    -------------------------------------------------------------------------
    Net income (loss) and
     comprehensive loss for
     the period                  (1,139)        781      (9,905)       (177)
    -------------------------------------------------------------------------
    Weighted average
     basic units
     outstanding             39,135,216  39,130,370  39,135,216  39,130,628
    Weighted average
     diluted units
     outstanding             39,135,216  39,130,370  39,135,216  39,130,628
    Basic income (loss)
     per unit                     (0.03)       0.02       (0.25)       0.00
    Diluted income (loss)
     per unit                     (0.03)       0.02       (0.25)       0.00
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reconciliation to funds
    -----------------------
     from operations (FFO)
     ---------------------
    Add/(deduct):
    Depreciation and
     amortization on real
     property                     3,231       3,295       9,854       9,730
    Provision for impairment
     of mezzanine loans and
     advances                         -           -       4,700           -
    Provision for (recovery
     of) future income taxes,
     continuing operations         (412)        641      (2,643)        773
    Provision for future
     income taxes,
     discontinued operations         43         101         165         211
    -------------------------------------------------------------------------
    Funds from operations -
     basic and diluted            1,723       4,818       2,171      10,537
    -------------------------------------------------------------------------
    Basic FFO per unit             0.04        0.12        0.06        0.27
    Diluted FFO per unit           0.04        0.12        0.06        0.27
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reconciliation to
    -----------------
     distributable income
     --------------------
    Add/(deduct):
    Depreciation and
     amortization - trust
     and other assets                52          56         192         183
    Accretion of mortgages,
     convertible debentures
     and deferred financing
     fees                           647         542       1,859       1,601
    Unit-based compensation          15         120          49         462
    Unrealized foreign
     exchange loss (gain)          (407)        200        (651)        329
    FF&E reserve                   (607)       (772)     (1,755)     (2,164)
    -------------------------------------------------------------------------
    Distributable income -
     basic and diluted            1,423       4,964       1,865      10,948
    -------------------------------------------------------------------------
    Basic distributable
     income per unit               0.04        0.13        0.05        0.28
    Diluted distributable
     income per unit               0.04        0.13        0.05        0.28
    Distributions declared            -       0.135       0.105       0.405
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reconciliation of cash
    ----------------------
     flow from operating
     -------------------
     activities to
     -------------
     distributable income
     --------------------
    Cash flow from
     operating activities         2,103       7,843       3,215      13,624
    Changes in non-cash
     working capital
     balances                       (73)     (2,107)        405        (512)
    FF&E reserve                   (607)       (772)     (1,755)     (2,164)
    -------------------------------------------------------------------------
    Distributable income          1,423       4,964       1,865      10,948
    -------------------------------------------------------------------------


    Hotel Revenues

    -------------------------------------------------------------------------
                   Three Months Ended         Three Months Ended
                   September 30, 2009         September 30, 2008
                 Occu-                      Occu-                    RevPAR
    Region      pancy      ADR   RevPAR    pancy      ADR   RevPAR   Change
    -------------------------------------------------------------------------

    Atlantic
     Canada
     ($Cdn)     85.25% $128.40  $109.46    86.61% $135.32  $117.20     (6.6%)

    Western
     Canada
     ($Cdn)     56.53% $135.38   $76.53    69.06% $144.30   $99.65    (23.2%)

    United
     States
     ($US)      65.19%  $92.12   $60.05    66.47% $103.02   $68.48    (12.3%)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted
     Average
     Total
     ($Cdn)     61.95% $131.87   $81.69    71.98% $140.76  $101.32    (19.4%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Atlantic Canada RevPAR has decreased 6.6% for the three months ended September 30, 2009 compared to the three months ended September 30, 2008.

In Moncton, the number of rooms available in the competitive set has increased over the prior year and the market continues to absorb this new supply. In Truro, there were an additional 1,600 room nights available in the market in the third quarter of 2009 versus the prior year due to a new market entrant and this supply growth had an effect on occupancy in this relatively small market.

In downtown Halifax, the occupancy among the competitive set was fairly constant year over year and was achieved due to rate discounting among market participants. There was a shift in occupancy toward downtown Halifax at the expense of the suburban Halifax market due to the discounting of rates in the city-centre. This demand shift also compressed room rates in the suburban market, as did the new supply entering this market. Three of the four REIT hotels in the Atlantic region ranked first in market share among their respective competitive sets in the third quarter.

The Western Canada RevPAR decreased 23.2%. As in prior quarters within the Western region there was a sharp decrease in demand in markets heavily reliant on energy exploration and production. This combined with significant room supply increases and associated rate concessions resulted in a substantial drop in RevPAR.

The largest occupancy declines were in Calgary, Slave Lake, Fort McMurray, Fort St. John, Drayton Valley and Whitecourt. The weakening in gas and oil well maintenance activity has a major effect on each of our Alberta and British Columbia markets as demand is largely reliant on this sector. In Calgary, there was less activity than usual surrounding the Stampede events, as well as less city-wide programs such as conferences due to the current economic conditions. In Fort McMurray, there has been much lower demand in the market generally as major oil sands capital projects have been postponed or scaled back.

The increase in available room supply has been a dominant factor in Grande Prairie, Slave Lake, Drayton Valley and Fort St. John. The magnitude of the increase in available rooms has been substantial in each of these markets, with Slave Lake being the highest at 40% compared to the prior year. In these markets, several hotel developments which were conceived in more robust economic times are now completed and in operation. Despite the challenges, as outlined, many of the REIT's hotels in the Western region ranked first in market share among their respective competitive sets in the third quarter and posted solid growth in market share year over year.

The RevPAR for the Holiday Inn Express in Myrtle Beach, South Carolina decreased 12.3%, primarily due to the drop in average rate as a result of lower leisure demand and the move toward discounted third party internet bookings as clientele are progressively more price conscious due to the prevailing economic conditions in the United States.

Lower food and beverage revenue in Grande Prairie and Calgary accounted for the majority of the decline in other revenue. There were lower ancillary revenues at several hotels due to lower occupancy levels as well as a decline in parking revenue in Calgary.

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 $1.6 million when comparing the three months ended September 30, 2009 to the same period in 2008. Substantial savings were achieved as a result of lower wage costs due to the lower occupancy and from cost cutting initiatives including the consolidation of positions and scheduling efficiencies. The balance of the savings were achieved from reductions in operating expenses such as guest consumables as well as from diligent cost management in maintenance, administrative and marketing departments. Utility costs were also lower as a function of the lower occupancy.

Property taxes and insurance expenses have remained flat for the three months ended September 30, 2009 and 2008, respectively.

Management fees are based on the hotel revenues which have declined from the prior year.

Other Income and Expenses

Interest on mortgages and other debt and accretion of deferred financing fees has increased $0.05 million for the three months ended September 30, 2009 compared to the three months ended September 30, 2008. The write-off of the remaining balance of deferred financing fees related to a line of credit that has been replaced with a line from another financial institution and interest on the promissory notes issued in December 2008 were the primary reasons for the slight increase.

The total debenture interest expense and the non-cash accretion of the discount on the debentures has increased $0.09 million to $1.9 million for the third quarter of 2009 compared to $1.8 million for the third quarter of 2008 as the non-cash accretion on the convertible debentures has increased. The accretion increases over the term to the maturity dates of the debentures.

Corporate administrative expenses were $0.5 million for the three months ended September 30, 2009 and $0.7 million for the three months ended September 30, 2008. Of the decrease of $0.2 million, $0.1 million is a result of the decrease in unit-based compensation. In addition, the REIT has implemented various cost-control measures which have resulted in lower salaries, legal and other expenses.

During the three months ended September 30, 2009 and 2008, the REIT generated interest income of $0.2 million and $0.7 million respectively from loans receivable and the investment of cash balances. The REIT is recording an allowance against the interest income from the mezzanine loans where collectability is uncertain.

The unrealized foreign exchange gain/loss represents the conversion of the US-denominated mortgage on the Holiday Inn Express in Myrtle Beach into Canadian dollars.

Depreciation and amortization has increased marginally for the three months ended September 30, 2009 compared to the third quarter of 2008. The increase in depreciation represents depreciation on capital additions made to the properties.

The income from discontinued operations represents the income from the Wingate by Wyndham hotel in Calgary, AB. On August 5, 2009, the REIT entered into a binding agreement for the sale of this hotel to an arm's length purchaser for $16.5 million, representing a gain on sale of approximately $1.4 million. After repayment of the mortgage and closing costs on the property, net cash proceeds were approximately $8.7 million. The income from discontinued operations of $0.1 million for the three months ended September 30, 2009 represents the income for the month of July as the operations after July 31, 2009 accrued to the purchaser. The income from discontinued operations of $0.2 million for the three months ended September 30, 2008 represents the operations of the hotel for the full quarter.

Distributable Income

The REIT generated $1.4 million in distributable income ($0.04 basic and diluted distributable income per unit) for the three months ended September 30, 2009 compared to $5.0 million ($0.13 basic and diluted distributable income 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 and disposals. No distributions for the quarter were declared as distributions were suspended on July 21, 2009. The June distributions to unitholders were paid on July 15, 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

SOURCE Holloway Lodging Real Estate Investment Trust

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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