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HALIFAX, Nov. 13, 2008 (Canada NewsWire via COMTEX News Network) -- /NOT FOR DISTRIBUTION ON U.S. WIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES/
Holloway Lodging Real Estate Investment Trust (TSX: HLR.UN, HLR.DB and HLR.DB.A) ("Holloway" or the "REIT") today announced its unaudited financial results for the three and nine months ended September 30, 2008. All amounts are in Canadian dollars unless otherwise indicated. This press release should be read in conjunction with the REIT's unaudited interim consolidated financial statements and management's discussion and analysis, copies of which are available on the REIT's website at www.hlreit.com and on the SEDAR website at www.sedar.com.
Highlights - Third Quarter
The following summarizes the key highlights that occurred during the three months ended September 30, 2008:
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- Hotel revenues increased by 3.6% to $25.7 million from $24.9 million
for the three months ended September 30, 2008 and 2007, respectively.
- Distributable income was $0.13 per unit.
- Hotel gross profit margin was 71%.
- The same hotel portfolio achieved a RevPAR growth of 0.9% based on
increased occupancy for the three months ended September 30, 2008.
Monthly Distributions
Starting with the distribution which is payable to unitholders on December
15, 2008, Holloway will be reducing its monthly cash distributions to $0.0175
per unit or $0.21 on an annualized basis.
"The ongoing challenges in the financial and capital markets have reduced
Holloway's unit price to the extent that it does not reflect the underlying
value of our assets. The distribution reduction is a prudent response to these
challenging times and will allow Holloway to preserve capital and further
strengthen its balance sheet", commented Glenn Squires, Chief Executive
Officer. Holloway's Board of Trustees believes that the distribution reduction
will still provide unitholders with a very attractive distribution yield that
is conservative and sustainable on a go-forward basis. In addition, the
reduction will afford Holloway the ability to retain capital that can be
redeployed into the business to fund organic growth or capitalize on
acquisition opportunities as they may arise in these market conditions.
Mr. Squires added that "while the decision to reduce the distributions to
a more conservative level was a difficult one, both management and the Board
of Trustees felt it prudent to lower the distribution to a level that would
allow Holloway to satisfy all of its obligations, including the REIT's 2009
principal repayment of $5,500,000 on its first mortgage debt through funds
generated from operations. While many other Canadian REIT's do not allow for
principal repayment when determining the level of distributions and
calculating payout ratios, the current economic environment coupled with the
possibility that both the credit and equity markets may not be favourable for
Holloway over the near to medium term were the primary factors which
contributed to the depth of the reduction."
"Looking forward, we continue to be optimistic about Holloway's future. We
have an attractive portfolio of relatively young and well managed hotels, no
debt maturities until 2010, a cash balance of $8 million as of September 30,
2008, and undrawn credit facilities of approximately $10 millon. The reduction
in our distribution level will provide Holloway's unitholders with an
annualized distribution yield of 21% based on the market closing price of
$1.00 on November 13, 2008. It should be noted we expect our distributions to
be 100% return of capital for 2008 and 2009. We believe that Holloway is well
positioned to enhance unitholder value over the long term."
Unitholder Rights Plan
Holloway's Board of Trustees has adopted a Unitholder Rights Plan. The
purpose of the rights plan is to provide the Board sufficient time to develop
and implement alternatives intended to maximize value for all unitholders in
the event of an unsolicited bid for Holloway and to enhance Holloway's ability
to prevent any unfair acquisition tactics. The Board's actions are not related
to any specific acquisition proposal. Holloway is unaware of any take-over bid
activity underway at this time. The rights plan is also not intended to, and
would not, hinder full and fair offers for Holloway that are made to all
unitholders; in particular, the rights plan contains a standard "permitted
bid" exclusion that makes it inapplicable to a take-over bid made to all
unitholders that is open for acceptance for at least 60 days and otherwise
complies with customary "permitted bid" requirements.
The adoption of the rights plan is subject to acceptance by the TSX.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2008 and 2007
The following table provides a summary of the operating results for the
three and nine months ended September 30, 2008 and 2007.
Three Three Nine Nine
months months months months
(in 000's except number ended ended ended ended
of units and per unit September September September September
results) 30, 2008 30, 2007 30, 2008 30, 2007
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Hotel revenues $ 25,748 $ 24,858 $ 72,125 $ 47,493
Hotel expenses 22,443 21,200 65,541 42,032
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Income from hotel
operations 3,305 3,658 6,584 5,461
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Net trust expenses 1,782 1,448 5,627 3,244
Future income tax expense 742 933 984 551
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Net income (loss) for
the period - basic and
diluted $ 781 $ 1,277 ($ 27) $ 1,666
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Reconciliation to
distributable income
Add/(deduct):
Depreciation and
amortization $ 3,351 $ 3,043 $ 9,913 $ 5,293
Future income tax expense 742 933 984 551
Accretion on mortgages
and convertible
debentures 542 562 1,601 881
Unit-based compensation 120 91 462 286
Unrealized foreign
exchange loss 200 - 329 -
FF&E reserve (772) (746) (2,164) (1,425)
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Distributable income -
basic and diluted $ 4,964 $ 5,160 $ 11,098 $ 7,252
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Weighted average basic
units outstanding 39,130,370 39,046,143 39,130,628 25,101,068
Weighted average diluted
units outstanding 39,130,370 39,236,224 39,130,628 25,252,585
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Basic income (loss)
per unit $ 0.02 $ 0.03 ($ 0.00) $ 0.07
Diluted income (loss)
per unit $ 0.02 $ 0.03 ($ 0.00) $ 0.07
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Basic distributable
income per unit $ 0.13 $ 0.13 $ 0.28 $ 0.29
Diluted distributable
income per unit $ 0.13 $ 0.13 $ 0.28 $ 0.29
Distributions declared $ 0.135 $ 0.135 $ 0.405 $ 0.36
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THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
Results of Operations
The results of operations for the three months ended September 30, 2008 include the operation of twenty-two hotels for the full quarter. For the comparative three months of 2007, the REIT owned 20 hotels for the full quarter and acquired the Holiday Inn Express in Kamloops, BC on September 12, 2007.
Hotel Operations
The hotel properties generated revenue of approximately $25.7 million for the three months ended September 30, 2008 compared to $24.9 million for the three months ended September 30, 2007. Hotel EBITDA has increased to $9.7 million from $9.6 million.
There were two new hotels in the portfolio for the full quarter compared with the prior year. The Holiday Inn Express Kamloops was acquired September 12, 2007 and the Holiday Inn Express Myrtle Beach was acquired November 2, 2007. Two restaurants which were in the prior year results are no longer in operation. One operation was closed and the other was converted to a tenancy. Both situations are net positive to Holloway's operating results.
Corporate Operations
Net trust expenses were $1.8 million for the three months ended September 30, 2008 and $1.4 million for the three months ended September 30, 2007. During the three months ended September 30, 2008, the REIT generated interest income of $0.7 million from loans receivable and the investment of cash balances, compared to $0.9 million during the third quarter of 2007. In 2007, the REIT had not deployed some of the cash from the equity and debentures issuances in June and July, 2007 thus resulting in higher interest income on invested cash balances.
General and administrative expenses have decreased approximately $70,000 for the three months ended September 30, 2008 compared to the three months ended September 30, 2007. The expenses for the third quarter of 2007 include a one-time fee of $150,000 for graduating to the TSX and higher legal expenses pertaining thereto. Salaries and wages are higher in this quarter compared to 2007 as our President and Chief Operating Officer Michael Jackson was hired on September 15, 2007.
The REIT incurred $32,000 in due diligence expenses related to abandoned property acquisitions during the three months ended September 30, 2008, whereas in 2007 the recovery of $126,000 expenses related to the Holiday Inn Express in Myrtle Beach that had been written off in a previous quarter.
The total debenture interest expense and the non-cash accretion of the discount on the debentures and deferred financing fees is consistent for the third quarters in 2007 and 2008 as the debentures outstanding of $72.1 million has not changed.
Distributable Income
The REIT generated $5.0 million in distributable income ($0.13 basic and diluted per unit) for the three months ended September 30, 2008 compared to $5.2 million ($0.13 basic and diluted per unit) for the same period in 2007. Distributions of $0.045 per unit per month were declared and totalled $5.3 million for the three months ended September 30, 2008. Distributable income will fluctuate due to the seasonality in the hospitality industry and the timing of acquisitions.
The REIT's third quarter distributions slightly exceeded the distributable income. Excess, undeployed cash was used to fund the distribution shortfall.
Holloway Lodging Real Estate Investment Trust
Holloway is a real estate investment trust listed on the Toronto Stock Exchange. Our goal is to be one of the top-performing lodging REITs and to grow sustainable distributions to our unitholders. We will continuously seek to improve our operating results by focusing on dominating the market segments in which we operate and maximizing product quality through a prudent capital reinvestment program.
This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the future financial position, property acquisition strategies and opportunities, business strategy, financial results and plans and objectives of the REIT. Particularly, statements regarding the REIT's future operating results, property acquisition strategies and opportunities and economic performance 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 the REIT 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 28, 2008 which is available at www.sedar.com. The REIT does not intend to update or revise any such forward-looking information should its assumptions and estimates change.
%SEDAR: 00023845E
SOURCE: Holloway Lodging Real Estate Investment Trust
Mr. Glenn Squires, Chief Executive Officer of the REIT; Mr. Michael Jackson,
President and Chief Operating Officer of the REIT; Ms. Tracy Sherren, Chief Financial
Officer of the REIT, (902) 404-3499
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