Temple REIT reports 2010 second quarter results

WINNIPEG, Aug. 19 /CNW/ - Temple Real Estate Investment Trust ("Temple REIT") (TSX Venture: TR.UN) today reported its financial results for the quarter ended June 30, 2010. The following comments in regard to the financial position and operating results of TREIT should be read in conjunction with the Management Discussion & Analysis and the financial statements for the quarter ended June 30, 2010, which may be obtained from the TREIT website at www.treit.ca or the SEDAR website at www.sedar.com.

During the second quarter of 2010, Temple REIT experienced an improvement in its quarter-to-quarter operating results for the first time since the beginning of 2009. In comparison to the first quarter of 2010, operating income increased by $0.29 million during the second quarter of 2010, while the net loss decreased by $0.22 million.

The improvement in operating income is mainly due to an increase in operating income for the Fort McMurray hotel portfolio and the Best Western Wayside Inn, partially offset by a decrease in operating income for the Capri Centre. Cash flow from operating activities, excluding changes in non-cash operating items, also increased by $0.29 million during the second quarter of 2010, compared to the first quarter of 2010.

Temple REIT has a high concentration of properties in Fort McMurray and throughout 2009 hotel market conditions in Fort McMurray declined, following the slowdown of development activity in the oil sands industry. The gradual decline in market conditions is reflected in the overall room revenue results for the Fort McMurray hotel portfolio, with the "revenue per available room" ("RevPar") decreasing from $114.74 per room in the first quarter of 2009 to $108.13, $99.58 and $84.70 per room during the second, third and fourth quarter of the year, respectively.

Although hotel market conditions in Fort McMurray are beginning to show signs of a recovery, the general state of the hotel market was considerably weaker during the second quarter of 2010, compared to the second quarter of 2009. Accordingly, and as anticipated, there is a substantial unfavourable variance between the operating results for the second quarter of 2010, compared to the second quarter of 2009. During the second quarter of 2010, Temple REIT incurred a net loss of $0.76 million, compared to net income of $0.83 million during the second quarter of 2009. Operating income decreased by $1.34 million during the second quarter of 2010, compared to the second quarter of 2009.

In addition to the cash generated from operating activities, Temple REIT obtained $5 million of additional mortgage loan financing during the second quarter of 2010. After considering cash outflows in regard to mortgage principal payments, distributions, property improvements and other transactions, the cash balance of Temple REIT increased by approximately $2.7 million during the second quarter of 2010, compared to the cash balance at March 31, 2010. As of June 30, 2010, the cash balance is approximately $8.7 million.

FINANCIAL AND OPERATING STATISTICS

    
                          Three Months Ended           Six Months Ended
                                June 30                     June 30
                     ---------------------------  ---------------------------
                           2010          2009          2010          2009
                     -------------  ------------  ------------  -------------
    DISTRIBUTIONS                                   `
      Amount - total  $ 1,282,535   $ 1,282,535   $ 2,565,070   $  3,844,939
             - per
                unit  $      0.10   $      0.10   $      0.20   $       0.30
    BALANCE SHEET
      Total Assets    $266,136,192  $258,084,378  $266,136,192  $258,084,378
      Total
       Long-Term Debt
       and Convertible
       Debentures     $201,915,547  $186,021,034  $201,915,547  $186,021,034

    KEY PERFORMANCE
     INDICATORS
    Operations:
      Occupancy                55%           54%           53%           54%
      ADR                  $155.18       $175.52       $169.91       $180.35
      RevPar                $86.05        $94.80        $92.31        $96.69
      Operating profit
       margin                  33%           39%           33%           39%
    Operating results:
      Total revenue   $ 15,754,121  $ 16,780,369  $ 30,735,138  $ 34,048,791
      Operating
       income         $  5,159,067  $  6,501,010  $ 10,031,415  $ 13,279,438
      Net income
       (loss)         $   (762,054) $    828,023  $ (1,748,305) $  1,666,398
    Cash flows:
      Distributable
       income         $    815,469  $  2,470,033  $  1,365,600  $  5,075,612
      Funds from
       operations     $    885,968  $  2,706,903  $  1,380,903  $  5,558,141
    Financing:
      Weighted average
       interest rate
       of long-term
       debt                  6.45%         6.34%         6.45%         6.34%

    PER UNIT AMOUNTS    Basic and     Basic and     Basic and     Basic and
                         Diluted       Diluted       Diluted       Diluted
      Net income (loss)     $(0.06)        $0.06        $(0.14)        $0.13
      Distributable
       income                $0.06         $0.19         $0.11         $0.40
      Funds from
       operations            $0.07         $0.21         $0.11         $0.43
    

2010 COMPARED TO 2009

Analysis of Net Income (Loss)

    
    -------------------------------------------------------------------------
                                               Three Months Ended
                                                     June 30
                                    -----------------------------------------
                                                                 Increase/
                                        2010          2009       (Decrease)
                                    ------------  ------------  -------------
    Hotel revenue
      Room                          $  9,732,697  $ 10,333,821  $   (601,124)
      Other                            5,497,137     5,668,100      (170,963)
                                    ------------  ------------  -------------
      Total hotel revenue             15,229,834    16,001,921      (772,087)
    Interest and other income            524,287       778,448      (254,161)
                                    ------------  ------------  -------------
      Total revenue                   15,754,121    16,780,369    (1,026,248)
    Hotel operating costs             10,595,054    10,279,359       315,695
                                    ------------  ------------  -------------
    Operating income                   5,159,067     6,501,010    (1,341,943)
    Finance expense                    4,001,516     3,541,697       459,819
    Trust expense                        219,383       225,491        (6,108)
    Amortization                       1,745,028     1,595,755       149,273
                                    ------------  ------------  -------------
                                        (806,860)    1,138,067    (1,944,927)

    Change in marketable securities     (117,225)       26,175      (143,400)
    Income taxes recovery (expense)      162,031      (336,219)      498,250
                                    ------------  ------------  -------------
    Net income (loss)               $   (762,054) $    828,023  $ (1,590,077)
                                    ------------  ------------  -------------
                                    ------------  ------------  -------------


                                                Six Months Ended
                                                     June 30
                                    -----------------------------------------
                                                                 Increase/
                                        2010          2009       (Decrease)
                                    ------------  ------------  -------------
    Hotel revenue
      Room                          $ 18,763,981  $ 20,916,888  $ (2,152,907)
      Other                           10,956,183    11,637,128      (680,945)
                                    ------------  ------------  -------------
      Total hotel revenue             29,720,164    32,554,016    (2,833,852)
    Interest and other income          1,014,974     1,494,775      (479,801)
                                    ------------  ------------  -------------
      Total revenue                   30,735,138    34,048,791    (3,313,653)
    Hotel operating costs             20,703,723    20,769,353       (65,630)
                                    ------------  ------------  -------------
    Operating income                  10,031,415    13,279,438    (3,248,023)
    Finance expense                    8,074,809     7,221,897       852,912
    Trust expense                        583,390       424,300       159,090
    Amortization                       3,489,626     3,190,293       299,333
                                    ------------  ------------  -------------
                                      (2,116,410)    2,442,948    (4,559,358)

    Change in marketable securities      (22,650)      (90,750)       68,100
    Income taxes recovery (expense       390,755      (685,800)    1,076,555
                                    ------------  ------------  -------------
    Net income (loss)               $ (1,748,305)  $ 1,666,398  $ (3,414,703)
                                    ------------  ------------  -------------
                                    ------------  ------------  -------------
    

Comparison of Second Quarter Results

In comparison to the second quarter of 2009, income, before taxes and the change in value of marketable securities, decreased by $1.94 million during the second quarter of 2010. The decrease in income mainly reflects a decrease in operating income from hotel operations of $1.34 million and an increase in financing expense of $0.46 million. Amortization expense also increased by $0.15 million.

The decrease in operating income mainly reflects a decline in hotel occupancy levels and a corresponding decline in room revenue and other hotel revenue.

The increase in financing expense mainly reflects incremental financing charges related to the $15 million, 8.75% convertible debenture offering in November 2009.

After providing for taxes and the change in value of marketable securities, Temple REIT completed the second quarter of 2010 with a loss of $0.76 million, representing a decrease of $1.59 million compared to the second quarter of 2009.

Room Revenue Statistics

    
    -------------------------------------------------------------------------
                                      Six Months Ended June 30
                        ----------------------------------------------------
                                   2010                       2009
                        -------------------------  -------------------------
                          Occ      ADR    RevPar     Occ      ADR    RevPar
                        -------  -------  -------  -------  -------  -------
    Fort McMurray           52%  $199.45  $115.15      53%  $208.83  $111.44
    Temple Gardens          76%  $160.19  $122.06      76%  $158.42  $120.88
    Chateau Nova            50%  $140.37  $ 70.42      50%  $148.66  $ 73.79
    Best Western Wayside
     Inn                    47%  $124.40  $ 58.86      48%  $127.83  $ 60.80
    Capri Centre            46%  $122.70  $ 56.28      42%  $136.42  $ 57.53
                        -------  -------  -------  -------  -------  -------
      Overall Portfolio     53%  $157.00  $ 83.75      54%  $180.35  $ 96.69
                        -------  -------  -------  -------  -------  -------
    

Comparison of Six-Month Results

In comparison to the first six months of 2009, income, before taxes and the change in value of marketable securities, decreased by $4.56 million during the first six months of 2010. The decrease in income is mainly due to the same factors which contributed to the decrease in income during the second quarter of 2010, namely a decrease in operating income from hotel operations of $3.25 million and an increase in financing expense of $0.85 million. Trust expense and amortization expense also increased by $0.16 million and $0.30 million, respectively.

After providing for taxes and the change in value of marketable securities, Temple REIT completed the first six months of 2010 with a loss of $1.75 million, representing a decrease of $3.41 million compared to the income in the first six months of 2009.

Room Revenue Statistics

    
    -------------------------------------------------------------------------
                                     Three Months Ended June 30
                        ----------------------------------------------------
                                   2010                       2009
                        -------------------------  -------------------------
                          Occ      ADR    RevPar     Occ      ADR    RevPar
                        -------  -------  -------  -------  -------  -------
    Fort McMurray           53%  $169.98  $ 90.69      54%  $199.29  $108.13
    Temple Gardens          76%  $160.22  $121.45      79%  $157.65  $125.12
    Chateau Nova            54%  $137.32  $ 73.83      49%  $151.31  $ 74.24
    Best Western Wayside
     Inn                    53%  $123.20  $ 65.30      46%  $126.79  $ 58.62
    Capri Centre            50%  $121.54  $ 60.40      40%  $135.95  $ 54.56
                        -------  -------  -------  -------  -------  -------

    Overall portfolio       55%  $155.18  $ 86.05      54%  $175.52  $ 94.80
                        -------  -------  -------  -------  -------  -------
    

COMPARISON TO PRIOR QUARTER

Analysis of Net Income - Q2 2010 vs. Q1 2010

    
    -------------------------------------------------------------------------
                                        Three Months Ended
                                    --------------------------     Increase
                                       Q2 2010       Q1 2010      (Decrease)
                                    ------------  ------------  -------------
    Hotel revenue
      Room                          $  9,732,697  $  9,031,285  $    701,412
      Other                            5,497,137     5,459,045        38,092
                                    ------------  ------------  -------------
      Total hotel revenue             15,229,834    14,490,330       739,504
    Interest and other income            524,287       490,687        33,600
                                    ------------  ------------  -------------
      Total revenue                   15,754,121    14,981,017       773,104
    Hotel operating expenses          10,595,054    10,108,669       486,385
                                    ------------  ------------  -------------
    Operating income                   5,159,067     4,872,348       286,719
    Finance expense                    4,001,516     4,073,293       (71,777)
    Trust expense                        219,383       364,007      (144,624)
    Amortization                       1,745,028     1,744,598           430
                                    ------------  ------------  -------------
                                        (806,860)   (1,309,550)      502,690
    Increase (decrease) in value
     of marketable securities           (117,225)       94,575       211,800
    Income taxes recovery                162,031       228,724        66,693
                                    ------------  ------------  -------------
    Net income (loss)               $   (762,054) $   (986,251) $    224,197
                                    ------------  ------------  -------------
                                    ------------  ------------  -------------
    

Loss, before taxes and the change in value of marketable equity securities, decreased by $0.50 million during the second quarter of 2010, compared to the first quarter of 2010. The decrease in the loss mainly reflects an increase in operating income and a decrease in finance and trust expenses.

During the second quarter of 2010, operating income increased by $0.29 million or 6%. The increase in operating income mainly reflects an increase in hotel revenue of $0.74 million, partially offset by a increase in hotel operating expenses of $0.49 million.

The increase in hotel revenue is mainly due to an increase in room revenue for the Fort McMurray hotels and an increase in both room revenue and other hotel revenue at the Best Western Wayside Inn and the Capri Centre. The increase in room revenue is the result of an improvement in occupancy levels and a corresponding improvement in RevPar. As disclosed in the following chart, the RevPar of the Fort McMurray hotels, the Best Western Wayside Inn and the Capri Centre increased by 3%, 25% and 16% respectively during the second quarter of 2010, compared to the first quarter of 2010. Overall, RevPar was $86.05 per room during the second quarter of 2010, compared to $81.46 per room during the first quarter of 2010.

Room Revenue Statistics

    
    -------------------------------------------------------------------------
                                     Three Months Ended June 30
                        ----------------------------------------------------
                                 Q2 2010                    Q1 2010
                        -------------------------  -------------------------
                          Occ      ADR    RevPar     Occ      ADR    RevPar
                        -------  -------  -------  -------  -------  -------
    Fort McMurray           53%  $169.98  $ 90.69      51%  $172.55  $ 87.77
    Temple Gardens          76%  $160.22  $121.45      77%  $160.15  $122.67
    Chateau Nova            54%  $137.32  $ 73.83      47%  $143.89  $ 67.01
    Best Western Wayside
     Inn                    53%  $123.20  $ 65.30      42%  $125.92  $ 52.42
    Capri Centre            50%  $121.54  $ 60.40      42%  $124.07  $ 52.15
                        -------  -------  -------  -------  -------  -------

    Overall portfolio       55%  $155.18  $ 86.05      51%  $158.97  $ 81.46
                        -------  -------  -------  -------  -------  -------
                        -------  -------  -------  -------  -------  -------
    

The increase in hotel operating expenses is mainly attributable to the Capri Centre. After accounting for revenue and operating expense increases/decreases the operating income of the Fort McMurray hotel portfolio and the Best Western Wayside Inn increased by $0.32 million and $0.17 million respectively, while the operating income at the Capri Centre decreased by $0.25 million.

Trust expense decreased by $0.14 million compared to the first quarter of 2010, while finance expense decreased by $0.07 million.

The decrease in trust expense mainly reflects a decrease in unit based compensation expense as the majority of the year-to-date unit based compensation expense was incurred during the first quarter of 2010 in regard to the issuance of additional options under the Unit Option Plan. The "professional and legal fees" component of trust expense also decreased during the second quarter of 2010, as professional and legal fees were comparatively high during the first quarter of 2010 as the first quarter of the year encompasses fees related to the November 2009 convertible debenture offering.

OUTLOOK

In contrast to the ongoing decline in quarterly operating results during 2009, the operating results for 2010 are displaying a stabilized trend. Management continues to anticipate gradually improving results for the hotel portfolio. By 2011, Temple REIT will complete improvements at Capri Centre with the objective of improving market share and ensuring longer-term value enhancement for Temple REIT's largest property.

    
    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 Hotels Inc.

For further information: 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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