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
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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)
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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
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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
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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
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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
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Three Months Ended June 30
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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
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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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