Holloway Lodging REIT reports strong third quarter results and 17% increase in distribution

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HALIFAX, Nov. 13, 2012 /CNW/ - Holloway Lodging Real Estate Investment Trust (TSX: HLR.UN) ("Holloway") today announced financial results for the three months ended September 30, 2012. All amounts are in Canadian dollars unless otherwise indicated. Readers should refer to Holloway's unaudited interim consolidated condensed financial statements as at September 30, 2012 and its management discussion and analysis which are available on Holloway's website at www.hlreit.com and on SEDAR at www.sedar.com.

Key Events - Q3, 2012

  • Holloway recorded increased same-store revenue, operating income per available room, operating income margin, funds from operations and distributable income for the three months ended September 30, 2012 compared to the three months ended September 30, 2011:
                 
(In millions where indicated except
percentages and per room
measures)
  2012   2011   $ INCREASE   % CHANGE
                 
Hotel revenues - same store   $15.6 M   $15.2 M   $0.4M   2.5%
Revenue per available room - same store   $93.57   $90.52   $3.05   3.4%
Hotel operating income per available room before depreciation   $38.73   $35.42   $3.31   9.3%
Hotel operating income margin   38.1%   34.4%   -   3.7 ppt
Funds from operations   $3.3 M   $2.4 M   $0.9 M   37.5%
Distributable income   $3.3 M   $2.1 M   $1.2 M   57.1%
  • The REIT repaid $3.9 million of debt in the third quarter, including:
    • Repayment at maturity of the $2.5 million mortgage secured by the Super 8® hotel in Windsor, NS. The REIT now has two hotels unencumbered by mortgages.
    • Penalty-free prepayment of $0.4 million of the mortgage secured by the Super 8® hotel in Truro, NS.
  • The REIT sold its minority interest in the Super 8® hotel in Amherst, NS for $0.2 million.
  • The REIT returned $0.9 million to unitholders in the third quarter, consisting of:
    • Repurchase of 89,300 units under its normal course issuer bid at an average cost of $3.56 per unit,
    • Declaration and payment of a distribution of $0.03 per unit

Distribution Increase

In August 2012, the Board of Trustees reinstated Holloway's distribution at a quarterly rate of $0.03 per unit, representing an annual distribution of $0.12 per unit, due to the material improvement in Holloway's business and capital structure. On November 13, 2012, the Board of Trustees decided to increase Holloway's quarterly distribution by 17% to $0.035 per unit, representing an annual distribution of $0.14 per unit. The increased quarterly distribution will be payable on December 17, 2012 to unitholders of record on November 30, 2012. The Board of Trustees will consider the merits of further increasing the distribution in coming quarters.

Michael Rapps, Chairman of Holloway, stated: "Holloway's results reflect improved business conditions, positive operating performance at our hotels and a material improvement in our capital structure. We believe that our increased distribution remains conservative, sustainable and leaves considerable cash flow for Holloway to invest in its hotels, repay additional mortgage debt, repurchase units and selectively acquire hotels that are accretive to us."

Outlook

Holloway continues to be cautiously optimistic about the performance of its hotels in the coming quarters. While we do not expect material improvement at our three Atlantic Canadian hotels, we are seeing continued positive developments at our Western Canadian hotels as well as our sole US hotel. A number of large-scale infrastructure projects have been proposed and/or are underway in Northern Alberta and British Columbia that are expected to benefit several of Holloway's hotels.

In recent quarters, significant progress has been achieved in reducing Holloway's total debt, which now consists of mortgages on 15 of its 17 hotels. Holloway will look to further reduce its mortgage debt and its annual interest expense as opportunities arise.

Holloway will continue to focus on operational efficiencies through operating cost reductions and by completing capital upgrades at its hotels. Holloway also expects to increase revenue through strategic capital investments and potentially through development of owned excess land. To this effect, Holloway has commenced the expansion of its Super 8® hotel in Fort St. John, BC, which is expected to result in eight new guest rooms. Holloway will also commence in the next several weeks the upgrade of its Super 8® hotel in Yellowknife, NWT which will result in the renovation of all 66 guestrooms and enable us to increase occupancy and rate. Holloway will also seek to selectively acquire additional hotels to the extent such acquisitions are accretive to Holloway's cash flow and net asset value.

Operating Results

The following table provides a summary of the operating results for the three and nine months ended September 30, 2012 and 2011.

 
  Three months ended   Nine months ended
(in $000's except number of units and per unit results) Sept. 30,
2012
  Sept. 30,
2011
  Sept. 30,
2012
  Sept. 30,
2011
Hotel revenues 15,563   21,162   45,819   59,650
Hotel expenses 9,631   13,887   30,168   42,229
Hotel operating income before depreciation 5,932   7,275   15,651   17,421
Other expenses 4,704   8,642   9,032   24,972
Provision for income taxes -   -   -   -
Income (loss) for the periods 1,228   (1,367)   6,619   (7,551)
Weighted average basic units outstanding 18,812,681   983,350   17,397,509   983,350
Weighted average diluted units outstanding 18,812,681   983,350   17,397,509   983,350
Basic income (loss) per unit* 0.06   (1.39)   0.38   (7.68)
Diluted income (loss) per unit* 0.06   (1.39)   0.38   (7.68)
Reconciliation to funds from operations (FFO)              
Add / (deduct):              
Depreciation and amortization on real property 1,908   2,310   5,783   7,349
Provision for (recovery of) deferred income taxes -   -   -   -
(Gain) loss on disposal of hotel properties 64   1,452   (5,593)   1,950
Loss on disposal of minority interest investment in hotel properties 101   -   101   -
Funds from operations - basic and diluted 3,301   2,395   6,910   1,748
Basic FFO per unit* 0.18   2.44   0.40   1.78
Diluted FFO per unit* 0.18   2.44   0.40   1.78
Reconciliation to distributable income              
Add/(deduct):              
Depreciation and amortization - trust and other assets 18   45   105   138
Accretion of mortgages, loan due to a related party, convertible debentures and deferred financing fees 44   799   698   2,603
Fair value adjustment on Class B LP units and derivative liability (8)   (73)   26   (104)
Gain on repurchase of convertible debentures -   (507)   -   (507)
Unit-based compensation 385   62   400   62
FF&E reserve (467)   (635)   (1,375)   (1,789)
Distributable income - basic and diluted 3,273   2,086   6,764   2,151
Basic distributable income per unit* 0.17   2.12   0.39   2.19
Diluted distributable income per unit* 0.17   2.12   0.39   2.19
Reconciliation of cash generated from operating activities to distributable income              
Net cash generated from operating activities 3,811   254   4,219   2,767
Changes in items of working capital (71)   2,467   3,920   1,173
FF&E reserve (467)   (635)   (1,375)   (1,789)
Distributable income 3,273   2,086   6,764   2,151
*Periods prior to Q1 2012 are not directly comparable due to the conversion of 2012 convertible debentures.


Holloway Lodging Real Estate Investment Trust

Holloway is a real estate investment trust focused on owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets. Holloway currently owns 17 hotels with 1,665 rooms. Holloway's trust units trade on the Toronto Stock Exchange under the symbol HLR.UN.

This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to Holloway's future outlook and anticipated events or results and may include statements regarding the future financial position, property acquisition or disposal strategies and opportunities, business strategy, financial results and plans and objectives of Holloway. Particularly, statements regarding Holloway's future distribution policy, the potential acquisition of hotels and the expected results of approved infrastructure projects are forward-looking statements. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward looking-information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what Holloway currently expects and there can be no assurance that such statements will prove to be accurate.  Some of these risks and uncertainties are described under "Risk Factors" in Holloway's Annual Information Form ("AIF"), dated March 14, 2012 which is available at www.sedar.com. Holloway does not intend to update or revise any such forward-looking information should its assumptions and estimates change.

SOURCE HOLLOWAY LODGING REAL ESTATE INVESTMENT TRUST




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