Temple REIT reports 2009 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, 2009. The following comments in regard to the financial position and operating results of TREIT should be read in conjunction with the December 31, 2009 Management Discussion & Analysis and the financial statements for the year ended December 31, 2009, which may be obtained from the TREIT website at www.treit.ca or the SEDAR website at www.sedar.com.
A full year of operations from the Capri Centre and six additional months of operations from the Best Western Wayside Inn and Suites represented a substantial source of incremental operating income for Temple REIT during 2009 compared to 2008. The incremental income from the Capri Centre and Best Western hotels was more than offset, however, by a decline in combined operating income from the other eight hotel properties and, in particular, from the six hotels in Fort McMurray. The hotel portfolio in Fort McMurray experienced a significant decline in occupancy levels during 2009, due to the slowdown of new development activity in the oil sands industry.
After accounting for the decrease in operating income from the Fort McMurray hotel portfolio and other variables, including an increase in financing expense and amortization charges, the net income of Temple REIT decreased by $7.8 million in 2009, compared to 2008. Cash provided by operating activities also decreased by $6.2 million in 2009, compared to 2008, largely due to the decrease in operating income and an increase in non-cash financing expenses. As a result of the decrease in cash flow, the distributions of Temple REIT were reduced from monthly distributions of $0.10 per unit in January and February 2009 to quarterly distributions of $0.10 per unit for the second, third and fourth quarter of 2009.
Distributable income amounted to $7.48 million ($0.58 per unit), representing an 85.7% payout ratio, while funds from operation amounted to $8.19 million ($0.64 per unit), representing a 78.3% payout ratio.
Notwithstanding the decline in income, a number of positive events occurred during 2009, which had a favourable impact on the overall financial results. The Capri Centre, which was acquired at the end of 2008, contributed $5.6 million of operating income during 2009. In August 2009, the 68-room expansion of the Merit Hotel was completed at a total cost of $19.8 million. Although the Merit Hotel experienced a reduction in operating income during 2009 as a result of a decrease in the overall occupancy level of the hotel, the 68-room expansion has enhanced the longer term earning potential of the hotel.
Also during 2009, Temple REIT completed a $15 million public offering of 8.75% convertible debentures, collected on a loan receivable of $7.07 million, including accrued interest of approximately $1.07 million, and obtained $3 million of new funding from the upward refinancing of the first mortgage loan debt of the Temple Gardens hotel. The additional capital was primarily used to pay down higher cost debt and to improve the cash position. Debt repayments in 2009 included the retirement of the $10 million second mortgage loan on Clearwater Suites and the repayment of $7.0 million of the 12% mortgage loan on the Merit Hotel expansion. As of December 31, 2009, the cash balance of Temple REIT was $7.4 million, compared to $2.8 million, as of December 31, 2008.
During the very challenging economic environment which existed during 2009, Temple REIT generated $11.5 million of cash flow from operating activities, paid down $17.2 million of higher cost debt from capital raised through the operating, investing and financing activities, increased its year-end cash position by $4.6 million, compared to 2008, and continued to pay distributions to its Unitholders, albeit at the reduced amount of $0.10 per unit per quarter. The ability of Temple REIT to improve its earnings position in 2010 is largely dependent on the rate of an improvement in hotel market conditions in Fort McMurray
FINANCIAL AND OPERATING STATISTICS
Year Ended December 31
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2009 2008 2007
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DISTRIBUTIONS
Amount- total $6,410,009 $12,931,226 $5,348,041
- per unit $0.50 $1.10 $0.64
BALANCE SHEET
Total Assets $269,813,482 $260,478,528 $184,615,851
Total Long-Term Debt and
Convertible Debentures $199,189,940 $187,941,446 $131,212,484
KEY PERFORMANCE INDICATORS
Operations:
Occupancy 52.91% 73.55% 76.87%
ADR $173.74 $183.78 $172.14
RevPar $91.94 $135.18 $132.32
Operating profit margin 37.35% 50.70% 49.47%
Operating results:
Total revenue $65,811,591 $56,481,296 $34,406,559
Operating income $24,580,776 $28,637,201 $17,018,646
Net income $904,278 $8,708,263 $3,267,422
Cash flows:
Distributable income $7,476,083 $14,558,662 $6,160,804
Funds from operations $8,187,133 $15,115,604 $6,583,385
Financing:
Weighted average interest
rate of long-term debt 6.51% 6.34% 6.45%
PER UNIT AMOUNTS Basic Diluted Basic Diluted Basic Diluted
Net income $0.07 $0.07 $0.76 $0.75 $0.41 $0.40
Distributable income $0.58 $0.58 $1.27 $0.97 $0.77 $0.76
Funds from operations $0.64 $0.64 $1.31 $1.01 $0.82 $0.81
2009 COMPARED TO 2008
Analysis of Net Income
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Year Ended December 31
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Increase/
2009 2008 (Decrease)
------------- ------------- -------------
(restated)
Hotel revenue
Room $ 40,493,644 $ 45,409,497 $ (4,915,853)
Other 22,640,830 8,300,285 14,340,545
------------- ------------- -------------
Total hotel revenue 63,134,474 53,709,782 9,424,692
Interest and other income 2,677,117 2,771,514 (94,397)
------------- ------------- -------------
Total revenue 65,811,591 56,481,296 9,330,295
Hotel operating costs 41,230,815 27,844,095 13,386,720
------------- ------------- -------------
Operating income 24,580,776 28,637,201 (4,056,425)
Finance expense 15,521,431 12,281,232 3,240,199
Trust expense 709,711 733,478 (23,767)
Amortization 6,558,811 5,077,624 1,481,187
------------- ------------- -------------
1,790,823 10,544,867 (8,754,044)
Change in marketable securities (288,375) (881,797) 593,422
Income taxes 598,170 954,807 (356,637)
------------- ------------- -------------
Net income $ 904,278 $ 8,708,263 $ (7,803,985)
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In comparison to 2008, income, before taxes and the change in value of marketable securities, decreased by $8.75 million during 2009. The decrease in income mainly reflects a decrease in operating income from hotel operations of $4.06 million, an increase in financing expense of $3.24 million and an increase in amortization expense of $1.48 million. The decrease in operating income mainly reflects a decline in operating income from the hotel portfolio in Fort McMurray, partially offset by incremental operating income from the Capri Centre and, to a much lesser extent, from the Best Western Wayside Inn.
As disclosed in the following chart, Revenue per Available Room ("RevPar") for the Fort McMurray hotel portfolio decreased to $101.79 per room during 2009, compared to $154.70 per room during 2008. The decrease in RevPar mainly reflects a decrease in the average occupancy level.
Room Revenue Statistics
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Year Ended December 31
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2009 2008
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Occ ADR RevPar Occ ADR RevPar
-------- -------- -------- -------- -------- --------
Fort McMurray 51% $200.12 $101.79 75% $205.18 $154.70
Temple Gardens,
Chateau Nova and
Best Western
Wayside Inn 61% $145.57 $88.34 70% $145.64 $102.64
-------- -------- -------- -------- -------- --------
Subtotal 55% $177.36 $96.74 74% $183.78 $135.18
-------- -------- -------- -------- -------- --------
Capri Centre 40% $134.15 $53.48 N/A N/A N/A
-------- -------- -------- -------- -------- --------
Overall portfolio 53% $173.74 $91.94 74% $183.78 $135.18
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
The increase in financing expense and amortization mainly reflects incremental financing and amortization charges related to the acquisition of the Capri Centre on December 30, 2008 and, to a lesser extent, the acquisition of the Best Western Wayside Inn on June 1, 2008 and the completion of the Merit Hotel expansion, effective August 1, 2009.
After providing for taxes and the change in value of marketable securities, Temple REIT completed 2009 with income of $904,278, representing a decrease of $7.8 million compared 2008.
COMPARISON TO PRECEDING QUARTER
Analysis of Net Income (Loss) - Q4 2009 vs. Q3 2009
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Increase
Three Months Ended (Decrease)
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Q4 Q3 Amount
------------- ------------- -------------
Hotel revenue
Room $ 9,399,757 $ 10,176,999 $ (777,242)
Other 6,161,698 4,842,004 1,319,694
------------- ------------- -------------
Total hotel revenue 15,561,455 15,019,003 542,452
Interest and other income 562,267 620,075 (57,808)
------------- ------------- -------------
Total revenue 16,123,722 15,639,078 484,644
Hotel operating expenses 10,674,835 9,786,627 888,208
------------- ------------- -------------
Operating income 5,448,887 5,852,451 (403,564)
Finance expense 4,207,372 4,092,162 115,210
Trust expense 220,109 65,302 154,807
Amortization 1,728,857 1,639,661 89,196
------------- ------------- -------------
(707,451) 55,326 (762,777)
Change in marketable securities (1,350) (196,275) 194,925
Income taxes (126,892) 39,262 (166,154)
------------- ------------- -------------
Net income (loss) $ (581,909) $ (180,211) $ (401,698)
------------- ------------- -------------
------------- ------------- -------------
Loss, before taxes and the change in value of marketable equity securities, increased by $763,000 during the fourth quarter of 2009, compared to the third quarter of 2009. The increase mainly reflects a decrease in operating income and, to a lesser extent, an increase in financing, trust and amortization expenses.
During the fourth quarter of 2009, operating income decreased by $403,500 or 7%. As disclosed in the chart, "other" hotel revenue increased by $1.32 million, which offset the $888,000 increase in hotel operating costs. The increase in "other" hotel revenue and the increase in hotel operating expenses are mainly attributable to the operations of the Capri Centre. The decrease in "room" hotel revenue of $777,000 is mainly due to a decrease in hotel revenue from the Fort McMurray hotel portfolio.
As disclosed in the following chart, the RevPar of the hotel portfolio was $81.42 per room during the fourth quarter of 2009, compared to $92.95 per room during the third quarter of 2009. The decrease in RevPar reflects a 15% decrease in RevPar for the Fort McMurray portfolio and a 9% decrease in RevPar at the other hotels.
Room Revenue Statistics
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Three Months Ended
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Q4 Q3
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Occ ADR RevPar Occ ADR RevPar
-------- -------- -------- -------- -------- --------
Fort McMurray 46% $184.36 $84.70 51% $196.07 $99.58
Temple Gardens,
Chateau Nova and
Best Western
Wayside Inn 58% $145.54 $84.72 69% $142.78 $98.31
-------- -------- -------- -------- -------- --------
Subtotal 51% $167.60 $84.71 57% $172.73 $99.10
-------- -------- -------- -------- -------- --------
Capri Centre 41% $133.64 $55.15 34% $129.10 $43.72
-------- -------- -------- -------- -------- --------
Overall portfolio 50% $164.45 $81.42 55% $169.73 $92.95
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
In comparison to the third quarter of 2009, financing expense increased by $115,000 or 3% during the fourth quarter of 2009. The increase mainly reflects the incremental interest charges related to the 8.75% senior secured convertible debenture debt in November 2009, partially offset by a reduction in interest charges associated with lump-sum debt repayments during the last four months of 2009. Lump-sum debt repayments during the last four months of 2009 include the repayment of the $10 million second mortgage loan on Clearwater Suites and the repayment of $7 million of principal on the 12% mortgage loan for the Merit Hotel. The fourth quarter increase in trust expense of $154,807 mainly reflects an increase in professional fees, administrative costs, and trustee's fees.
OUTLOOK
The operations for 2010 are largely dependent on economic growth in Fort McMurray, which is expected to improve during 2010.
Temple REIT does not meet the prescribed conditions relating to the nature of its revenue and property to be considered a Qualifying REIT. Accordingly, under legislation that became law on June 22, 2007 (the "SIFT Rules"), Temple REIT became a specified investment Flow-through trust (a "SIFT"). Under the SIFT Rules Temple REIT will be subject to tax on distributions commencing in 2011, except for distributions paid as returns of capital which will not be subject to the tax. In 2009, 100% of the distributions were characterized as returns of capital. Management believes that it is likely that a high return of capital component will continue into the foreseeable future. As a result, any impact of the SIFT Rules on Temple REIT will be significantly mitigated due to the large proportion of distributions which are expected to be a return of capital. Accordingly, Temple REIT has concluded to remain as a SIFT, subject to further review of its status before the end of 2012.
ABOUT TREIT
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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.
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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