Temple REIT reports record 2008 third quarter results
Thu Nov 27, 5:00 PMWINNIPEG, Nov. 27 /CNW/ - Temple Real Estate Investment Trust ("TREIT") (TSX Venture: TR-UN.V) reports its financial results for the quarter ended September 30, 2008. The following comments in regard to the financial position and operating results of TREIT should be read in conjunction with the 2008 Third Quarter Report and the financial statements for the quarter ended September 30, 2008, which may be obtained from the TREIT website at www.treit.ca or the SEDAR website at www.sedar.com.
2008 THIRD QUARTER HIGHLIGHTS
Property Portfolio
- Property portfolio at September 30, 2008 consisting of nine hotels,
comprised of 955 rooms/suites, with an appraised value of
$237.5 Million.
- Invested approximately $730,000 in property improvements during the
third quarter of 2008, including a $500,000 payment in regard to the
expansion of the Merit Hotel in Fort McMurray.
Financial
Third quarter of 2008 compared to second quarter of 2008:
- Revenue per available room (RevPar) decreased from $142.76 to
$136.54, mainly the result of a decrease in the average occupancy
level from 78.4% to 73.8%, offset by an increase in the average daily
room rate (ADR) from $182.03 to $185.07. The decrease in occupancy is
mainly due to the normal decline in room demand in Fort McMurray
during the summer holiday period.
- Operating income increased by approximately $138,000 or 1.8% to
$7.8 Million
- Operating profit margin of 51.3%, compared to 53.8% in the second
quarter
- Net income increased by approximately $174,000 or 6.2% to $2.98
Million
- Distributable income increased by approximately $283,000 or 7.1% to
$4.25 Million or $0.34 per unit, representing a payout ratio of 88.4%
for the quarter
- Funds from operations (FFO) increased by approximately $364,000 or 9%
to $4.43 Million or $0.36 per unit, representing a payout ratio of
84.8% for the quarter
Capital Structure
- Weighted average interest rate on the aggregate mortgage loan balance
of 6.43% at September 30, 2008 compared to 6.42% at June 30, 2008 and
6.45% at December 31, 2007
- Mortgage loan debt to appraised property value ratio of 59% at
September 30, 2008, based on appraisals completed in 2006 for
Clearwater, 2008 for Best Western Wayside and 2007 for the remainder
of the properties
Ongoing Investment Activities
- The $40 Million acquisition of the Capri Centre in Red Deer, AB is
expected to close on December 31, 2008. The purchase price will be
funded by a $24 Million first mortgage and a $5 Million vendor take-
back mortgage, both bearing interest at 6% and with 5-year terms to
maturity, and the balance in cash. TREIT intends to undertake $8
Million of capital expenditures and license the hotel with the
Sheraton brand name in 2009.
- Before completion of the capital expenditure program, Capri Centre is
projected to generate 209 annual distributable income and FFO in
excess of $3.5 Million or $0.27 per unit.
Financial and Operating Statistics
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Three Months Ended
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September 30 June 30 September 30
2008 2008 2007
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DISTRIBUTIONS
Amount - total $3,758,437 $2,956,159 $1,423,975
- per unit $0.30 $0.26 $0.16
BALANCE SHEET
Total assets $236,932,294 $224,952,320 $182,231,410
Total long term debt and
convertible debentures $160,613,346 $152,983,544 $130,844,908
KEY PERFORMANCE INDICATORS
Operations:
Occupancy 73.78% 78.43% 75.73%
ADR $185.07 $182.03 $175.87
RevPar $136.54 $142.76 $131.59
Operating profit margin 51.27% 53.79% 53.66%
Operating results:
Total revenue $15,217,465 $14,246,410 $10,885,385
Operating income $7,801,585 $7,663,286 $5,840,247
Net income $2,978,257 $2,804,198 $543,818
Cash flows:
Distributable income $4,250,825 $3,968,198 $1,550,858
Funds from operations $4,429,554 $4,065,315 $1,685,500
Financing:
Weighted average interest
rate of long-term debt 6.43% 6.42% 6.43%
Per Unit Amounts Basic Diluted Basic Diluted Basic Diluted
----- ------- ----- ------- ----- -------
Net income $0.24 $0.22 $0.25 $0.24 $0.06 $0.06
Distributable income $0.34 $0.26 $0.36 $0.26 $0.17 $0.17
FFO $0.36 $0.28 $0.37 $0.26 $0.19 $0.19
TREIT completed the third quarter of 2008 with another favourable performance, achieving additional growth in net income and cash from operating activities, compared to the second quarter of 2008, as well as maintaining a favourable distribution payout ratio. As disclosed in the above chart, the third quarter results also reflect the continuation of favourable occupancy levels and average daily room rates (ADR) for the entire portfolio of hotel properties and an operating profit margin, which continues to be above the industry average.
TREIT's hotel portfolio is concentrated in Fort McMurray, Alberta, which has been achieving favourable RevPar and attaining a favourable operating profit margin. Over time, as the TREIT becomes more geographically diversified and expands into additional locations, it is anticipated that there will be some dilution in the RevPar of the entire hotel portfolio. On June 1, 2008, TREIT acquired the 130-room Best Western Wayside Inn and Suites in Lloydminster, Alberta. The decrease in the RevPar in the third quarter of 2008, as disclosed in the preceding chart, is partially due to the comparatively lower room rates at the Best Western hotel. The decrease also reflects the normal decline in occupancy levels and room rates which occurs during the months of July and August for the Fort McMurray portfolio, as a result of a reduction in demand from the business sector during the summer holiday period. For July and August 2008, RevPar of the Fort McMurray portfolio was $119.64, however, in September 2008, RevPar returned to a higher level, increasing to $146.26. Notwithstanding the reduction in RevPar, the operating profit margin of the six Fort McMurray properties remained at a favourable 61% during the third quarter of 2008.
The modest decline in net income, on a per unit basis, mainly reflects the extent to which the convertible debentures were converted into trust units during the second and third quarter of 2008. The average number of trust units outstanding during the third quarter of 2008 increased by 1,263,397 units, or 11.4%, compared to the second quarter of 2008, with debenture conversions accounting for 97% of the increase.
During the third quarter of 2008, TREIT further diversified its hotel portfolio by contracting to acquire the Capri Centre, the largest hotel complex in Red Deer, Alberta. The Capri Centre contains 218 guestrooms and contains a 53,110 square foot conference centre, three restaurants, three lounges, an outdoor heated pool, indoor whirlpool and exercise room, a leased gift shop, clothing store and hair salon and a free-standing liquor store operated by the hotel. The acquisition of the Capri Centre is scheduled to close on December 31, 2008. The purchase price of $40 Million will be funded by a $24 Million first mortgage loan and a $5 Million vendor take-back mortgage, both bearing interest at 6% and with 5-year terms to maturity, and the balance of $11.0 Million in cash. Before completion of the capital expenditure program, Capri Centre is projected to generate 2009 annual distributable income and FFO in excess of $3.5 Million or $0.27 per unit.
COMPARISON TO PREVIOUS QUARTER
Analysis of Net Income - Q3 2008 vs. Q2
2008
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Three Months Ended
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September 30 June 30
2008 2008 Change
-------------- ------------- -------------
Hotel revenue
Room $ 12,115,366 $ 11,755,872 $ 359,494
Other 2,446,958 1,776,407 670,551
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Total hotel revenue 14,562,324 13,532,279 1,030,045
Interest and other income 655,141 714,131 (58,990)
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Total revenue 15,217,465 14,246,410 971,055
Operating expenses 7,415,880 6,583,124 832,756
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Operating income 7,801,585 7,663,286 138,299
Finance expense 3,105,913 3,217,974 (112,061)
Trust expense 143,414 233,011 (89,597)
Amortization 1,337,719 1,244,433 93,286
Provision for taxes 236,282 163,670 72,612
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Net income $ 2,978,257 $ 2,804,198 $ 174,059
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TREIT completed the third quarter of 2008 with net income of $2,978,257, compared to net income of $2,804,198 in the second quarter of 2008, representing an increase of $174,059. The increase in net income mainly reflects an increase in operating income and a decrease in finance and trust expenses, partially offset by an increase in amortization and provision for taxes. The increase in operating income mainly reflects the inclusion of the operating results of the Best Western Wayside Inn & Suites for the entire third quarter, compared to one month in the second quarter.
During 2009, TREIT will be undertaking an $8 Million capital expenditure program at the Capri Centre property, consisting primarily of the refurbishment of the rooms. In conjunction with the hotel improvements, TREIT also expects to license the Capri Centre with the Sheraton brand name in 2009. It is anticipated that the room refurbishments and other hotel upgrades, combined with the change to the Sheraton brand name, will result in an improvement in RevPar and, in turn, an increase in the amount of operating income derived from the property.
TREIT is also undertaking $1.5 Million of capital improvements at the Best Western Wayside Inn & Suites and a $19 Million, 68-room expansion at the Merit Hotel in Fort McMurray. The $4.5 Million equity component of the hotel expansion in Fort McMurray will be financed with convertible debenture debt, while the balance of the capital improvement and expansion program will be funded from existing capital and eventually, by the upward refinancing of the mortgage loan debt of the hotel portfolio.
As noted above, TREIT has a concentration of properties in Fort McMurray. Although declining oil prices have resulted in a reduction in economic growth projections for Fort McMurray, the oil sands industry remains very active as a result of the enormity of the existing developments in the area. Accordingly, provided that global recessionary influences do not impact the Fort McMurray economy to a greater degree than is currently anticipated, Temple REIT is expected to sustain its current level of profitability for the fourth quarter of 2008, while undertaking measures to enhance the longer-term value of the hotel portfolio.
TREIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbol TR.UN. 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. There are currently 12,812,019 trust units outstanding. 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.
ContactsArni Thorsteinson
Chief Executive Officer
or Gino Romagnoli
Investor Relations
Tel: (204) 475-9090
Fax: (204) 452-5505
Email: info@treit.ca
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