WINNIPEG, Aug. 13, 2013 /CNW/ - Temple Hotels Inc. ("Temple") (TSX: TPH) today reported its financial results for the quarter ended June 30, 2013. The following comments in regard to the financial position and operating results of Temple should be read in conjunction with Management's Discussion & Analysis and the financial statements for the quarter ended June 30, 2013, which may be obtained from the Temple website at www.templehotels.ca or the SEDAR website at www.sedar.com.
Monetary data in the tables of this press release, unless otherwise indicated, are in thousands of Canadian dollars, except for per share, average daily rate ("ADR"), and revenue per available room ("RevPAR") amounts.
HIGHLIGHTS
- Hotel operating income increased by $5.29 million (59%) in Q2-2013, compared to Q2-2012, comprised of a $0.63 million (8%) increase for same properties and $4.66 million increase attributable to new acquisitions. For the six months ended June 30, 2013, hotel operating income increased by $8.67 million (51%), compared to the six months ended June 30, 2012, comprised of $1.08 million (7%) increase for same properties and $7.59 million increase attributable to new acquisitions.
- Same property occupancy increased to 72% in Q2-2013 from 69% in Q2-2012.
- Same property ADR increased to $166.66 in Q2-2013 from $158.22 in Q2-2012.
- Same property RevPar increased by 8.8% from $109.92 to $119.62.
- The weighted average interest rate of mortgage debt declined from 5.64% at June 30, 2012 to 5.14% at June 30, 2013. The weighted average interest rate for total debt declined from 6.63% to 5.61% during the same period.
- FFO increased by $2.60 million or 69% compared to Q2-2012 and by $4.28 million or 77.2% compared to six months ended June 30, 2012.
- AFFO increased by $2.26 million or 79.3% compared to Q2-2012 and by $3.0 million or 51.4% compared to six months ended June 30, 2012.
- Dividends declared for Q2-2013 and six months ended June 30, 2012 represented a payout ratio of 63% and 78% of FFO, respectively, and 78% and 86% of AFFO, respectively.
Asset and Revenue Growth
During Q2-2013 total revenue increased by $17 million or 73% compared to Q2-2012, with $15.5 million of the increase stemming from new hotel acquisitions. Revenue results for Q2-2013 reflect the significant acquisition activity which has been undertaken by Temple over the past 18 months. In total, Temple has added ten hotels to its property portfolio since January 1, 2012, including the acquisition of five hotels during the first six months of 2013. The most recent hotel acquisition of the 90-room Holiday Inn Express in Sherwood Park, Alberta, was completed on June 20, 2013.
As of June 30, 2013, Temple's portfolio consisted of 21 wholly-owned properties with a total of 2,926 rooms and a 50% equity investment in two additional properties with a total of 299 rooms. Including only the 21 wholly-owned properties, the total number of rooms has increased by 112% compared to the room total on January 1, 2012. The portfolio of new properties comprises 53% of the total rooms. The majority of the hotels in the portfolio of new properties are located outside of Alberta, in markets that have lower ADR, RevPar and operating margin metrics in comparison to the same property portfolio, which has a high weighting of rooms in Fort McMurray. The average acquisition cost per room for the portfolio of new properties is approximately 27% lower than the average acquisition cost per room for the same property portfolio.
During the first six months of 2013, several of the newly acquired properties do not reflect stabilized earnings levels due to the timing of the acquisitions and/or the impact of hotel renovations. In particular, the Radisson Hotel & Suites in Fort McMurray experienced a temporary reduction in the number of available rooms during Q1-2013 due to $3 million of scheduled hotel renovations and upgrades. In Q2-2013, following the completion of the room upgrades, room revenue at the Radisson Hotel & Suites increased by 112% compared to Q1-2013.
Financial and Operating Results
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||
2013 | 2012 | 2013 | 2012 | |||||||
Total revenue | $40,016 | $23,189 | $72,195 | $44,731 | ||||||
Operating income | $14,216 | $8,924 | $25,555 | $16,886 | ||||||
Net income | $770 | $3,977 | $906 | $4,296 | ||||||
Occupancy | 72% | 70% | 70% | 70% | ||||||
ADR | $158.99 | $156.11 | $158.07 | $155.17 | ||||||
RevPar | $113.89 | $108.83 | $110.48 | $108.98 | ||||||
Dividends/distributions | $3,980 | $2,998 | $7,637 | $5,572 | ||||||
Funds from operations (FFO) | $6,358 | $3,763 | $9,823 | $5,544 | ||||||
Adjusted funds from operations (AFFO) | $5,118 | $2,855 | $8,845 | $5,842 | ||||||
Per share/unit | ||||||||||
Dividends/distributions | $0.135 | $0.12 | $0.27 | $0.24 | ||||||
FFO | $0.22 | $0.15 | $0.35 | $0.24 | ||||||
AFFO | $0.17 | $0.11 | $0.31 | $0.25 | ||||||
Payout ratio | ||||||||||
FFO | 63% | 79% | 78% | 101% | ||||||
AFFO | 78% | 90% | 86% | 95% |
Financing Activities
The upward refinancing of certain mortgage loans during Q2-2013 resulted in gross incremental loan proceeds of $18.1 million while the gross proceeds from a private placement of shares provided $7.8 million of additional capital.
The 8.5% Series B convertible debentures in the amount of $19.86 million were repaid in full on the April 30, 2013 maturity date. The repayment of the Series B debentures partially offsets the addition of the $38 million 7% Series F convertible debentures issued in the first quarter, in terms of the total debenture debt level of the Company.
Investing Activities
During Q2-2013, Temple acquired one additional property, being the Holiday Inn Express in Sherwood Park, for $15.15 million of which $4.65 million was funded in cash and $10.5 million by mortgage debt. In addition, capital expenditures for hotel renovations and upgrades were completed at various properties in the total amount of $4.58 million. Capital expenditure programs, at various stages of completion, include the multi-year hotel renovation program at the Saskatoon Inn; guest room, lobby and meeting room refurbishments at the Hilton Garden Inn - Edmonton; and additional hotel upgrades at the Sheraton Red Deer.
Also during Q2-2013, Temple realized total proceeds of $13.83 million from the sale of marketable equity securities and received $4.18 million from its 50% equity investment in two hotel properties.
Outlook
Temple's eight hotels in Fort McMurray are experiencing record rates of occupancy this summer due to the expanding level of economic activity in the oilsands industry and are expected to provide substantial earnings growth during the second half of this year.
The acquisition of the 225 room expanded Acclaim Hotel - Calgary Airport North is expected to be completed on November 1, 2013. Due to much higher than originally projected room revenue this property will make a meaningful contribution to our future earnings. Temple has $45 million of liquid resources available to fund multiple hotel acquisitions during the fourth quarter. Temple will also remain focused on achieving earnings growth from its existing hotel portfolio, including hotels acquired in 2013, through operational efficiencies and accretive capital improvements.
Q2-2013 COMPARED TO Q2-2012
Analysis of Net income | |||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30 | June 30 | ||||||||||||||||||||||||||||
Increase/ | Increase/ | ||||||||||||||||||||||||||||
2013 | 2012 | (Decrease) | 2013 | 2012 | (Decrease) | ||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||
Room revenue | $ | 28,722 | $ | 16,091 | $ | 12,631 | $ | 51,369 | $ | 30,884 | $ | 20,485 | |||||||||||||||||
Other hotel revenue | 11,294 | 7,098 | 4,196 | 20,826 | 13,847 | 6,979 | |||||||||||||||||||||||
Total revenue | 40,016 | 23,189 | 16,827 | 72,195 | 44,731 | 27,464 | |||||||||||||||||||||||
Hotel operating costs | 25,800 | 14,265 | 11,535 | 46,640 | 27,845 | 18,795 | |||||||||||||||||||||||
Operating income | 14,216 | 8,924 | 5,292 | 25,555 | 16,886 | 8,669 | |||||||||||||||||||||||
Interest expense, net | 7,267 | 4,393 | 2,874 | 13,715 | 10,219 | 3,496 | |||||||||||||||||||||||
General and administrative expenses | 660 | 649 | 11 | 2,107 | 898 | 1,209 | |||||||||||||||||||||||
Depreciation and amortization | 4,147 | 2,406 | 1,741 | 7,672 | 4,484 | 3,188 | |||||||||||||||||||||||
2,142 | 1,476 | 666 | 2,061 | 1,285 | 776 | ||||||||||||||||||||||||
Equity income on investment in hotel properties |
178 | - | 178 | 302 | - | 302 | |||||||||||||||||||||||
Change in fair value of financial instruments: gain (loss) |
(1,021) | 3,283 | (4,304) | (1,200) | 3,630 | (4,830) | |||||||||||||||||||||||
Income taxes (expense) recovery | (529) | (782) | 253 | (257) | (619) | 362 | |||||||||||||||||||||||
Net income | $ | 770 | $ | 3,977 | $ | (3,207) | $ | 906 | $ | 4,296 | $ | (3,390) | |||||||||||||||||
Per Share Results: | |||||||||||||||||||||||||||||
Basic | $ | 0.03 | $ | 0.16 | $ | 0.03 | $ | 0.19 | |||||||||||||||||||||
Diluted | $ | 0.03 | $ | 0.12 | $ | 0.03 | $ | 0.13 |
Overall Results
Income, before equity income, change in fair value of financial instruments and income taxes, increased by $0.66 million during Q2-2013 compared to Q2-2012. The increase reflects an increase in operating income of $5.29 million, largely offset by an increase in interest expense (net) and depreciation and amortization of $2.87 million and $1.74 million, respectively. Including equity income, change in fair value of financial instruments and income taxes, Temple completed Q2-2013 with net income of $0.77 million, compared to net income of $3.98 during Q2-2012, representing a total decrease in net income of $3.21 million.
Income, before equity income, change in fair value of financial instruments and income taxes, increased by $0.78 million during the first six months of 2013 compared to the first six months of 2012. The increase reflects an increase in operating income of $8.67 million, largely offset by an increase in interest expense (net) general and administrative expenses and depreciation and amortization of $3.50 million, $1.21 million and $3.19 million, respectively. Including equity income, change in fair value of financial instruments and income taxes, Temple completed the first six months of 2013 with net income of $0.91 million, compared to net income of $4.30 million during the first six months of 2012, representing a decrease in income of $3.40 million.
On a per share basis, net income decreased to $0.03 per share from $0.16 per share during Q2-2013 compared Q2-2012. For the first six months of 2013, net income on a per share basis was $0.03 per share, compared to $0.19 per share for the first six months of 2012. As of June 30, 2013, the weighted average number of shares increased by 53% since June 30, 2012 and by 75% since January 1, 2012.
Revenue
Analysis of Total Hotel Revenues | |||||||||||||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||||||||||||
Increase/ | Increase/ | ||||||||||||||||||||||||||||
2013 | 2012 | (Decrease) | 2013 | 2012 | (Decrease) | ||||||||||||||||||||||||
Same Properties | |||||||||||||||||||||||||||||
Room revenue | $ | 15,142 | $ | 13,829 | $ | 1,313 | $ | 29,419 | $ | 27,636 | $ | 1,783 | |||||||||||||||||
Other hotel revenue | 6,853 | 6,898 | (45) | 13,526 | 13,589 | (63) | |||||||||||||||||||||||
Total Hotel Revenue | $ | 21,995 | $ | 20,727 | $ | 1,268 | 42,945 | 41,225 | 1,720 | ||||||||||||||||||||
Newly Acquired Properties | |||||||||||||||||||||||||||||
Room revenue | $ | 13,580 | $2,262 | $ | 11,318 | $ | 21,950 | $ | 3,248 | $ | 18,702 | ||||||||||||||||||
Other hotel revenue | 4,441 | 200 | 4,241 | 7,300 | 258 | 7,042 | |||||||||||||||||||||||
Total Hotel Revenue | $ | 18,021 | $ | 2,462 | $ | 15,559 | $ | 29,250 | $ | 3,506 | $ | 25,744 | |||||||||||||||||
Total | |||||||||||||||||||||||||||||
Room revenue | $ | 28,722 | $ | 16,091 | $ | 12,631 | $ | 51,369 | $ | 30,884 | $ | 20,485 | |||||||||||||||||
Other hotel revenue | 11,294 | 7,098 | 4,196 | 20,826 | 13,847 | 6,979 | |||||||||||||||||||||||
Total hotel revenue | $ | 40,016 | $ | 23,189 | 16,827 | $ | 72,195 | $ | 44,731 | $ | 27,464 |
During Q2-2013, total room revenue increased by $12.63 million or 78%, compared to Q2-2012, comprised of an increase of $1.31 million or 9% in "same property" revenue and incremental revenue of $11.32 million from new hotel acquisitions. The increase in room revenue for the "same property" portfolio is comprised of an increase in room revenue of $1.06 million or 15% for the Fort McMurray same property portfolio, and an increase in room revenue of $0.26 million for the "Other" hotels in the same property portfolio.
As disclosed in the following chart, RevPar for the same property portfolio was $119.62 during Q2-2013, compared to $109.92 during Q2-2012. Revenue for the Fort McMurray "same property" portfolio continued to improve during Q2-2013, with the portfolio achieving RevPar of $142.81, an increase of 13.6% compared to $125.66 during Q2-2012.
During the first six months of 2013, room revenue increased by $20.48 million or 66%, compared to the first six months of 2012, comprised of an increase of $1.78 million or 6% in "same property" revenue and incremental revenue of $18.70 million from new hotel acquisitions.
Room Revenue Statistics | |||||||||||||||||||||||
Three Months Ended June 30 | |||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||
Occ | ADR | RevPar | Occ | ADR | RevPar | ||||||||||||||||||
Same Properties | |||||||||||||||||||||||
Fort McMurray | 77% | $185.47 | $142.81 | 72% | $175.74 | $125.66 | |||||||||||||||||
Other | 67% | $144.90 | $96.43 | 67% | $139.64 | $94.18 | |||||||||||||||||
Total - Same Properties | 72% | $166.66 | $119.62 | 69% | $158.22 | $109.92 | |||||||||||||||||
Newly Acquired Properties | 72% | $151.28 | $108.15 | 71% | $149.21 | $105.20 | |||||||||||||||||
Overall Portfolio | 72% | $158.99 | $113.89 | 70% | $156.11 | $108.83 | |||||||||||||||||
Six Months Ended June 30 | |||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||
Occ | ADR | RevPar | Occ | ADR | RevPar | ||||||||||||||||||
Same Properties | |||||||||||||||||||||||
Fort McMurray | 77% | $184.59 | $142.43 | 74% | $172.56 | $127.34 | |||||||||||||||||
Other | 66% | $145.78 | $96.43 | 66% | $139.97 | $93.02 | |||||||||||||||||
Total - Same Properties | 72% | $166.68 | $119.43 | 70% | $157.11 | $100.18 | |||||||||||||||||
Newly Acquired Properties | 68% | $149.01 | $101.53 | 71% | 148.72 | 104.99 | |||||||||||||||||
Overall Portfolio | 70% | $158.07 | $110.48 | 70% | $155.17 | $108.98 | |||||||||||||||||
Operating Income and Profit Margin | ||||||||||||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||||||||||
Operating Income Amount | Operating Profit Margin | |||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
Q2 | Q2 | Q2 | Q2 | Q2 | Q2 | Q2 | Q2 | |||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||
Same Properties | ||||||||||||||||||||||||||||||||||
Fort McMurray | $ | 5,019 | $ | 4,197 | $ | 10,044 | $ | 8,681 | 57% | 54% | 58% | 55% | ||||||||||||||||||||||
Other | 3,474 | 3,666 | 6,468 | 6,753 | 26% | 28% | 25% | 27% | ||||||||||||||||||||||||||
Total Same Properties | $ | 8,493 | $ | 7,863 | $ | 16,512 | $ | 15,434 | 39% | 38% | 38% | 37% | ||||||||||||||||||||||
Newly Acquired Properties | $ | 5,723 | $ | 1,061 | $ | 9,043 | $ | 1,452 | 32% | 43% | 31% | 41% | ||||||||||||||||||||||
Total portfolio | $ | 14,216 | $ | 8,924 | $ | 25,555 | $ | 16,886 | 36% | 38% | 35% | 38% |
Total operating income increased by $5.29 million or 59% during Q2-2013, compared to Q2-2012, comprised of an increase of $0.63 million or 8% for the "same property" portfolio and $4.66 million which is attributable to new hotel acquisitions. The increase in "same property" operating income reflects an increase in operating income for the Fort McMurray "same property" portfolio, partially offset by a decrease in operating income for the other same property portfolio.
For the first six months of 2013, operating income increased by $8.67 million or 51%, compared to the first six months of 2012, comprised of an increase of $1.08 million or 7% for the "same property" portfolio and $7.59 million which is attributable to new hotel acquisitions.
As disclosed in the preceding chart, the overall profit margin of the entire hotel portfolio decreased from 38% during Q2-2012, to 36% during Q2-2013. For the six months ended June 30, 2013, the overall profit margin was 35%, compared to 38% for the six months ended June 30, 2012. The decline in overall profit margin is mainly attributable to a decrease in the proportionate contribution from hotels in Fort McMurray as the hotels in Fort McMurray have a substantially higher profit margin. As disclosed in the chart, the Fort McMurray profit margin increased from 54% in Q2-2012 to 57% in Q2-2013 and from 55% for the six months ended June 30, 2012 to 58% for the six months ended June 30, 2013.
COMPARISON TO PRIOR QUARTER
Analysis of Net Income - Q2-2013 vs Q1-2013 | |||||||||||||||||||
Increase/ | |||||||||||||||||||
Q2-2013 | Q1-2013 | (Decrease) | |||||||||||||||||
Revenue | |||||||||||||||||||
Room | $ | 28,722 | $ | 22,647 | $ | 6,075 | |||||||||||||
Other | 11,294 | 9,532 | 1,762 | ||||||||||||||||
Total revenue | 40,016 | 32,179 | 7,837 | ||||||||||||||||
Hotel operating costs | 25,800 | 20,840 | 4,960 | ||||||||||||||||
Operating income | 14,216 | 11,339 | 2,877 | ||||||||||||||||
Interest expense, net | 7,267 | 6,448 | 819 | ||||||||||||||||
General and administrative expenses | 660 | 1,447 | (787) | ||||||||||||||||
Depreciation and amortization | 4,147 | 3,525 | 622 | ||||||||||||||||
2,142 | (81) | 2,223 | |||||||||||||||||
Equity income (loss) on investment in hotel properties | 178 | 124 | 54 | ||||||||||||||||
Change in fair value of financial instruments: gain (loss) | (1,021) | (179) | (842) | ||||||||||||||||
Income taxes recovery (expense) | (529) | 272 | (801) | ||||||||||||||||
Net income | $ | 770 | $ | 136 | $ | 634 |
Income, before equity income, change in fair value of financial instruments and income taxes, increased by $2.22 million during Q2- 2013, compared to Q1-2013. The increase in income mainly reflects an increase in operating income and a decrease in general and administrative expenses, partially offset by an increase in interest expense (net) and depreciation and amortization.
Operating income increased by $2.88 million or 25% in Q2-2013, comprised of an increase of $0.47 million in "same property" operating income and $2.41 million of operating income which is attributable to new hotels. The increase in "same property" operating income reflects quarterly variations in operating income throughout the same property hotel portfolio.
General and administrative expenses decreased by $787 in Q2-2013 which is mainly attributable to the comparatively high level of general and administrative expenses in Q1-2013 due to the land transfer taxes incurred on new hotel acquisitions.
"Interest expense, net" increased by $819 in Q2-2013 compared to the first quarter of 2013 and mainly reflects an increase in mortgage loan interest as a result of hotel acquisitions completed during Q1-2013 and the upward refinancing of mortgage loan debt, as well as an increase in convertible debenture interest as a result of the Series F convertible debenture offering in February 2013. The increase in convertible debenture interest from the Series F debentures was partially offset by a reduction in interest expense in regard to the retirement of the Series B debentures on April 30, 2013.
Including equity income; the loss associated with the change in fair value of financial instruments and income taxes, total net income increased by $0.63 million during Q2-2013 compared to Q1-2013.
ABOUT TEMPLE
Temple is a real estate investment company listed on the Toronto Stock Exchange under the symbols TPH (common shares), TPH.DB.C, TPH.DB.D, TPH.DB.E and TPH.DB.F (convertible debentures). The objective of Temple is to provide shareholders with stable dividends from investment in a diversified portfolio of hotel properties and related assets. For further information on Temple, please visit our website at www.templehotels.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 Toronto Stock 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:
Arni Thorsteinson, Chief Executive Officer, or Gino Romagnoli, Investor Relations
Tel: (204) 475-9090, Fax: (204) 452-5505, Email: [email protected]
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