TEMPLE REIT Reports 2010 OPERATING RESULTS

WINNIPEG, April 27 /CNW/ - Temple Real Estate Investment Trust ("Temple REIT") (TSX Venture: TR.UN) today reported its financial results for the year ended December 31, 2010.  The following comments in regard to the financial position and operating results of Temple REIT should be read in conjunction with the Management Discussion & Analysis and the financial statements for the year ended December 31, 2010, which may be obtained from the TREIT website at www.treit.ca or the SEDAR website at www.sedar.com.

Annual Results

During 2010, Temple REIT incurred a net loss of $2.31 million, representing a $3.21 million decrease compared to the 2009 net income of $0.90.  The variance between the 2010 and 2009 year end results is mainly due to the combined effects of a decrease in operating income of $3.18 million, an increase financing expense of $0.74 million and an increase in amortization expense of $0.42 million.

Cash from operating activities, before changes in non-cash operating items, decreased by $3.35 million during 2010, mainly due to the above noted decrease in operating income of $3.18 million.

The Fort McMurray hotel portfolio accounted for approximately 55% of the decrease in operating income during 2010, as the hotel portfolio of Temple REIT is concentrated in the northern Alberta city. Six of the ten hotel properties of Temple REIT are located in Fort McMurray.  Recessionary influences impacted the operating income of the hotel portfolio during the past two years.

Operating Income

Year      Fort McMurray      All Properties
2010     $10,498,605      $21,401,349
2009       $12,244,411      $24,580,776
2008      $20,721,032      $28,637,201

The reduction in operating income for the Fort McMurray hotel portfolio in 2010, compared to 2009, reflects the ongoing decline in quarterly operating income, which began in early 2009 as hotel market conditions in Fort McMurray weakened throughout the year, while, in 2010 operating income was at a low point at the beginning of the year and then began to gradually improve.  The operating income in 2008 indicates the potential of the Fort McMurray hotel portfolio when market conditions are strong.

2010 Fourth Quarter Results

After reaching a low point in the first quarter of 2010, there was a marked improvement in operating results during the second and third quarter of the year.  Although a further improvement in total revenues was achieved during the fourth quarter of 2010, operating income was lower due to the seasonal reduction in room demand throughout the hotel portfolio, with the exception of the Capri Centre.  A summary of the 2010 and 2009 quarterly operating income and net income (loss) is provided in the following chart:

2010         Q4     Q3     Q2     Q1
                             
Operating income         $ 5,399,103      $ 5,970,831      $ 5,159,067      $ 4,872,348 
Per unit - Basic and diluted         $ 0.42      $ 0.46      $ 0.40      $ 0.38 
                             
Net income (loss)         $ (505,519)      $ (51,292)      $ (762,054)      $ (986,251) 
Per unit - Basic and diluted         $ (0.04)      $ 0.00      $ (0.06)      $ (0.08) 
                             

2009         Q4     Q3     Q2     Q1
                             
Operating income         $ 5,448,887      $ 5,852,451      $ 6,501,010      $ 6,778,428 
Per unit - Basic and diluted         $ 0.42      $ 0.46      $ 0.51      $ 0.53 
                             
Net income (loss)         $ (581,909)      $ (180,211)      $ 828,023      $ 838,375 
Per unit - Basic and diluted         $ (0.05)      $ (0.01)      $ 0.06      $ 0.07 
                             

FINANCIAL AND OPERATING STATISTICS

            Year Ended December 31
            2010     2009     2008
DISTRIBUTIONS                        
  Amount - total           $ 5,132,561     $ 6,410,009     $ 12,931,226
  - per unit           $ 0.40      $ 0.50      $ 1.10
                         
BALANCE SHEET                        
  Total Assets           $ 260,481,436      $ 269,813,482      $ 260,478,528
  Total Long-Term Debt and Convertible Debentures           $ 199,029,880      $ 199,189,940      $ 187,941,446 
                           
KEY PERFORMANCE INDICATORS                        
Operations:                        
  Occupancy           56%     53%     74%
  ADR           $153.92     $173.74     $183.78
  RevPar           $85.55     $91.94     $135.18
  Operating profit margin           33%     37%     51%
                         
Operating results:                        
  Total revenue           $ 63,901,993     $ 65,811,591     $ 56,481,296
  Operating income           $ 21,401,349     $ 24,580,776     $ 28,637,201
  Net income (loss)           $ (2,305,116)     $ 904,278     $ 8,708,263
                         
Cash flows:                        
  Distributable income           $ 4,191,544     $ 7,476,083     $ 14,558,662
  Funds from operations           $ 4,312,549     $ 8,187,133     $ 15,115,604
                           
Financing:                        
  Weighted average interest rate of long-term debt           6.55%     6.51%     6.34%

PER UNIT AMOUNTS                     Basic and
Diluted
          Basic and
Diluted
          Basic and
Diluted
                                               
      Net income (loss)                     $(0.18)           $0.07           $0.76
      Distributable income                     $0.33           $0.58           $1.27
      Funds from operations                     $0.34           $0.64           $1.31

2010 COMPARED TO 2009

Analysis of Net Income (Loss)
  Year Ended December 31 
      Increase/
     2010 2009 (Decrease)
Hotel revenue      
      Room $ 38,803,869 $ 40,493,644 $ (1,689,775)
      Other       23,143,446       22,640,830       502,616
      Total hotel revenue       61,947,315       63,134,474       (1,187,159)
Interest and other income       1,954,678       2,677,117       (722,439)
       
      Total revenue       63,901,993       65,811,591       (1,909,598)
Hotel operating costs       42,500,644       41,230,815       1,269,829
       
Operating income       21,401,349       24,580,776       (3,179,427)
       
Finance expense       16,259,269       15,521,431       737,838
Trust expense       770,047       709,711       60,336
Amortization       6,981,053       6,558,811       422,242
        (2,609,020)       1,790,823       (4,399,843)
Change in marketable securities       (52,950)       (288,375)       235,425
Income taxes expense (recovery)       (356,854)       598,170       (955,024)
       
Net income (loss) $ (2,305,116) $ 904,278 $ (3,209,394)

Comparison of Year-Over-Year Results

In comparison to 2009, income before taxes and the change in value of marketable securities, decreased by $4.40 million during 2010.  As noted in the above table, the decrease is mainly due to a decrease in operating income, an increase in financing expense and an increase in amortization expense.  After providing for taxes and the change in value of marketable securities, Temple REIT completed 2010 with a loss of $2.31 million, compared to net income of $0.90 million in 2009, representing a decrease of $3.21 million.

Room Revenue Statistics
  Year Ended December 31
  2010 2009
  Occ ADR RevPar Occ ADR RevPar
Fort McMurray 53% $ 167.10 $ 88.43 51% $ 200.12 $ 101.79
Temple Gardens 77% $ 160.83 $ 124.17   79% $ 157.22 $ 124.64  
Chateau Nova 53% $ 135.39 $ 71.69 52% $ 146.01 $ 75.60
Best Western Wayside Inn    59% $ 126.66 $ 74.32 51% $ 127.01 $ 64.77
Capri Centre 47% $ 123.18 $ 57.60 40% $ 134.15 $ 53.48
      Overall Portfolio 56%    $ 153.92   $ 85.55 53%    $ 173.74   $ 91.94

As disclosed in the above table, RevPar for the Fort McMurray portfolio decreased by $13.36 during 2010, mainly due to a decrease in ADR.  RevPar for the Best Western Wayside Inn and the Capri Centre increased by $9.55 and $4.12, respectively during 2010, compared to 2009.  The increase in RevPar at the Best Western Wayside Inn is mainly due to an increase in the occupancy level while the increase in RevPar at the Capri Centre reflects an increase in occupancy level, partially offset by a decrease in ADR.

COMPARISON TO PRIOR QUARTER

Analysis of Net Income - Q4 2010 vs. Q3 2010
  Three Months Ended Increase
  Q4 2010 Q3 2010 (Decrease)
Hotel revenue      
      Room $ 9,444,728    $ 10,595,157    $ (1,150,429)   
      Other 6,892,646 5,294,620 1,598,026
      Total hotel revenue 16,337,374 15,889,777 447,597
Interest and other income 428,414 511,290 (82,876)
      Total revenue 16,765,788 16,401,067 364,721
Hotel operating expenses 11,366,685 10,430,236 936,449
Operating income 5,399,103 5,970,831 (571,728)
Finance expense 4,119,846 4,064,614 55,232
Trust expense 137,705 48,952 88,753
Amortization 1,746,085 1,745,342 743
  (604,533) 111,923 (716,456)
Increase (decrease) in value of marketable securities    18,300 (48,600) (66,900)
Income taxes expense (recovery) (80,714) 114,615 195,329
Net loss $ (505,519) $ (51,292) $ (454,227)

As disclosed in the following table, with the exception of the Capri Centre, occupancy levels declined throughout the hotel portfolio during the fourth quarter of 2010.  The most notable change in occupancy level occurred at Temple Gardens Mineral Spa, Chateau Nova and the Best Western Wayside Inn, mainly due to the seasonal reduction in demand, which is typically associated with the hotels in the last quarter of the year.  After considering the overall decrease in occupancy levels and the overall decrease in the ADR, RevPar was $81.85 during the fourth quarter of 2010, compared to $92.83 during the third quarter of 2010.

Room Revenue Statistics
  Three Months Ended
  Q4 2010 Q3 2010
  Occ ADR RevPar Occ ADR RevPar
Fort McMurray 52% $ 157.95 $ 81.76 56% $ 167.86 $ 93.50
Temple Gardens 73% $ 161.15 $ 116.89   84%    $ 161.72   $ 135.68  
Chateau Nova 47%    $ 135.43   $ 63.92 64% $ 127.59 $ 82.00
Best Western Wayside Inn    61% $ 126.60 $ 83.43 74% $ 129.60 $ 96.12
Capri Centre 50% $ 127.40 $ 63.61 45% $ 119.53 $ 54.23
Overall portfolio 55% $ 149.00 $ 81.85 61% $ 152.97 $ 92.83

OUTLOOK

Mortgage Financing

Subsequent to December 31, 2010, the $32.4 million first mortgage loan on the Clearwater Suites Hotel was paid down by $9 million and the remaining balance of $23.1 million, which matured on March 31, 2011, was renewed to December 31, 2011.  The renewed mortgage loan is repayable at any time without penalty and management anticipates that it will obtain an increased first mortgage loan with another lender during 2011.

Other mortgage maturities during the balance of 2011 include:

  • Two first mortgage loans registered against the Temple Gardens Mineral Spa Resort in the amounts of $4.9 million and $6.1 million, which mature on May 1, 2011 and October 1, 2011, respectively; and

  • A $5.5 million first mortgage loan registered against Chateau Nova, which matures on November 30, 2011.

Management anticipates that all three maturing mortgage loans will be renewed in the normal course of business.

Sheraton Hotel and Convention Centre - Red Deer

Temple REIT is undertaking extensive guest room improvements and building upgrades to the Capri Centre in Red Deer, Alberta, at a total cost of $9.8 million, with $8.6 million to be expended in 2011.  The upgrade/improvement program is being undertaken as part of the process to re-brand the Capri Centre under the "Sheraton" hotel banner. The "eco-friendly" improvements will involve new guest room designs, which were created by the in-house design team for Sheraton.  The new room designs are based on extensive in-room behaviour research, which indicated a desire, by guests for a greater level of "stylish functionality".  According to the design team for Sheraton, the new rooms will be "highly functional, globally relevant and designed to reflect the distinct personality of the Sheraton brand hotels." The new rooms at the Capri Centre will serve as the prototype for the new Sheraton room design in the Canadian market.  The upgrade/improvement program is expected to be completed in 2011 at which time the Capri Centre will be renamed the "Sheraton Hotel and Convention Centre" and be the prime hotel property in central Alberta.

Outlook

Temple REIT's hotel properties are located in markets where demand is directly related to the natural resource industry.  In 2010, operating income and operating cash flow was well below 2008 levels and potential levels.  The Fort McMurray hotel portfolio, the Capri Centre in Red Deer and the Best Western Wayside Inn in Lloydminster have recently achieved a marked improvement in occupancy levels and room revenue.  Given the future projection for resource investment in Western Canada, management is confident that operating results will continue to improve during 2011 and 2012.

ABOUT TREIT

TREIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbols TR.UN (trust units), TR.DB.A, TR.DB.B and TR.DB.S (convertible debentures).  The objective of TREIT is to provide Unitholders with stable cash distributions from investment in a geographically diversified Canadian portfolio of hotel properties and related assets.  For further information on TREIT, please visit our website at www.treit.ca.

This press release contains certain statements that could be considered as forward-looking information.  The forward-looking information is subject to certain risks and uncertainties, which could result in actual results differing materially from the forward-looking statements.

The TSX Venture Exchange has not reviewed or approved the contents of this press release and does not accept responsibility for the adequacy or accuracy of this press release. 

SOURCE Temple REIT

For further information:

Arni Thorsteinson, Chief Executive Officer, or Gino Romagnoli, Investor Relations

Tel: (204) 475-9090, Fax: (204) 452-5505, Email: info@treit.ca

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