TEMPLE REAL ESTATE INVESTMENT TRUST Press Release

Transcription

1 TEMPLE REAL ESTATE INVESTMENT TRUST Press Release TEMPLE REIT REPORTS 76% INCREASE IN OPERATING INCOME DURING Q Winnipeg, Manitoba, November 14, 2012 Temple Real Estate Investment Trust ( Temple REIT ) (TSX: TR.UN) today reported its financial results for the quarter ended September 30, The following comments in regard to the financial position and operating results of Temple REIT should be read in conjunction with Management s Discussion & Analysis and the financial statements for the quarter ended September 30, 2012, which may be obtained from the Temple REIT website at or the SEDAR website at Monetary data in the tables of this press release, unless otherwise indicated, are in thousands of Canadian dollars, except for per unit, average daily rate ( ADR ), and revenue per available room ( RevPAR ) amounts. OPERATING RESULTS Three Months Ended September 30 Nine Months Ended September Total Revenue $25,254 $16,930 $69,984 $52,300 Operating income $9,916 $5,629 $26,575 $18,201 Net income (loss) before change in fair value of financial instruments and income tax expense (recovery) $(984) $948 $301 $3,035 Net income (loss) $(2,163) $2,485 $2,133 $2,322 Cash flow from operating activities $6,574 $5,161 $7,515 $9,929 Distributable income $3,331 $2,182 $9,672 $6,922 Funds from operations $1,582 $2,627 $7,166 $8,347 Distributions $3,208 $1,892 $8,780 $5,544 DI payout ratio 96.3% 86.7% 90.8% 80.1% FFO payout ratio 202.8% 72.0% 122.5% 66.4% Occupancy 72% 69% 71% 69% ADR $ $ $ $ RevPar $ $ $ $ OPERATING INCOME Temple REIT increased hotel operating income by $4.29 million, or 76%, to $9.92 million in Q3-2012, compared to $5.63 million in Q The increase is comprised of a $1.61 million increase from the "same property" hotel portfolio and incremental income of $2.68 million from the five new hotels which were acquired between December 1, 2011 and September 30,

2 NET INCOME Temple REIT completed Q with a net loss of $2.16 million, compared to net income of $2.49 million during Q3-2011, representing a decrease of $4.65 million. Excluding income taxes and the expense related to the change in fair value of financial instruments, net income decreased by $1.93 million during Q3-2012, compared to the Q The decrease is comprised of a $4.62 million increase in interest expense, a $0.95 million increase in amortization and depreciation and a $0.66 million increase in trust expense, largely offset by the above noted increase in operating income of $4.29 million. IFRS accounting requirements have negatively impacted Q results, including a $1.9 million change in the fair value of debentures which resulted in a charge to income in the same amount; and the IFRS requirement that transaction costs be charged to interest expense as incurred resulted in a further $2.4 million charge against income. In the absence of the two IFRS related charges noted above, TREIT would have recorded income of $2.2 million in Q The increase in interest expense mainly reflects $2.44 million of non-recurring transaction costs related to the issuance of the Series E convertible debentures in August 2012, as well as incremental interest on new mortgage loan and convertible debenture debt. CASH FLOW Excluding working capital adjustments, cash from operating activities increased by $1.44 million during Q3-2012, compared to Q3-2011, mainly due to an increase in the cash component of operating income, partially offset by an increase in interest paid. Including working capital adjustments, cash from operating activities increased by $1.41 million. The variance between the increase in cash flow from operating activities and the decrease in net income mainly reflects the extent to which non-cash expenses have affected income, including depreciation and amortization charges of $2.73 million and a $1.62 million expense related to the change in fair value of financial instruments. Transaction costs related to the issuance of the Series E convertible debentures are also not included in the determination of operating cash flow. DISTRIBUTABLE INCOME During Q3-2012, distributable income increased by $1.15 million or 53%, compared to Q For the nine month period ended September 30, 2012, distributable income increased by $2.75 million compared to the nine month period ended September 30, Distributions represented 91% of distributable income during the nine month period ended September 30, 2012, compared to 80% during the nine month period ended September 30, The payout ratio will decline in the ensuing quarters as low yielding cash resources are invested in the acquisition of additional hotel properties. HOTEL PORTFOLIO As previously reported, Temple REIT acquired the 160 room Hilton Garden Inn in Edmonton, Alberta on August 1, On November 1, 2012, Temple REIT acquired the Saskatoon Inn & Conference Centre for $37.15 million. The Saskatoon Inn consists of 250 guestrooms and over 28,000 square feet of meeting and banquet space. The acquisition was funded by a first mortgage loan of $27.75 million, with the balance in cash. Since December 1, 2011, Temple REIT has acquired 6 new hotels in locations throughout western Canada, at a total combined purchase price of approximately $141 million. The new acquisitions include two additional hotels in Fort McMurray, Alberta, and hotels in each of Edmonton, Regina, Saskatoon and New Westminster. Temple REIT has also entered into an agreement to acquire a new 225-room hotel in Calgary (the "Acclaim Hotel Calgary Airport") upon completion of a 102-guest room expansion which is expected to be completed in October

3 In comparison to the property portfolio at September 30, 2011, the expanded portfolio of Temple REIT, including the Saskatoon Inn & Conference Centre, represents an increase of 854 guest rooms and an increase in annualized operating income potential in the estimated amount of $8 million. CAPITAL RESOURCES During Q3-2012, Temple REIT raised $46 million of additional funds from the Series E convertible debenture offering for use in the acquisition of additional hotel properties. Temple REIT completed Q with a $30 million short-term guaranteed investment certificate and an unrestricted cash balance of approximately $24.4 million for a total cash balance of 54.4 million. Temple REIT generated $6.9 million from the upward refinancing of the first mortgage loan of the Days Inn, Lloydminster during Q During the course of 2012, the total net proceeds from the upward refinancing of mortgage loan debt have amounted to approximately $26.5 million and have served as a source of funds for capital expenditure programs, acquisitions and working capital. In October 2012, the upward refinancing of the Vantage Inn in Fort McMurray resulted in net proceeds of approximately $3.6 million. FINANCIAL AND OPERATING STATISTICS BALANCE SHEET Sept. 30, 2012 Dec. 31, 2011 Total Assets $ 458,417 $ 282,553 Total Debt $ 355,677 $ 205,401 Three Months Ended September 30 Nine Months Ended September DISTRIBUTIONS ` Amount - total $ 3,208 $ 1,892 $ 8,780 $ 5,544 - per unit $ $ $ $ KEY PERFORMANCE INDICATORS Operations: Occupancy 72% 69% 71% 69% ADR $ $ $ $ RevPar $ $ $ $ Operating profit margin 39% 33% 38% 35% Operating results: Total revenue $ 25,254 $ 16,930 $ 69,984 $ 52,300 Operating income $ 9,916 $ 5,629 $ 26,575 $ 18,201 Net income (loss) $ (2,163) $ 2,485 $ 2,133 $ 2,332 Cash flows: Cash flow from operating activities $ 6,574 $ 5,161 $ 7,515 $ 9,929 Distributable income $ 3,331 $ 2,182 $ 9,672 $ 6,922 Funds from operations $ 1,582 $ 2,627 $ 7,166 $ 8,347 Financing: Weighted average interest rate of debt 6.01% 6.41% 6.01% 6.41% Weighted average interest mortgages 5.26% 6.01% 5.26% 6.01% PER UNIT AMOUNTS Basic Basic Basic Basic Net income (loss) $(0.08) $0.13 $0.09 $0.13 Cash from operating activities $0.26 $0.27 $0.31 $0.56 Distributable income $0.13 $0.12 $0.40 $0.39 Funds from operations $0.06 $0.14 $0.30 $0.47 3

4 Q COMPARED TO Q Analysis of Net Income (Loss) Three Months Ended Nine Months Ended September 30 September (Decrease) (Decrease) Revenue Room revenue $ 18,954 $ 11,279 $ 7,675 $ 49,838 $ 33,631 $ 16,207 Other hotel revenue 6,300 5, ,146 18,669 1,477 Total revenue 25,254 16,930 8,324 69,984 52,300 17,684 Hotel operating costs 15,338 11,301 4,037 43,409 34,099 9,310 Operating income 9,916 5,629 4,287 26,575 18,201 8,374 Interest expense, net 7,399 2,784 4,615 17,618 9,217 8,401 Trust expense , Depreciation and amortization 2,726 1, ,209 5,310 1,899 (984) 948 (1,932) 301 3,035 (2,734) Change in fair value of financial instruments: gain (loss) (1,621) 2,041 (3,662) 2, ,952 Income taxes recovery (expense) 442 (504) 946 (177) (770) 593 Net income (loss) $ (2,163) $ 2,485 $ (4,648) $ 2,133 $ 2,322 $ (189) Income before the change in fair value of financial instruments and income taxes decreased by $1.93 million during Q compared to Q The decrease reflects an increase in interest expense (net), trust expense and depreciation and amortization of $4.62 million, $0.66 million and $0.95 million, respectively, largely offset by an increase in operating income of $4.29 million. After providing for the change in fair value of financial instruments and income taxes, Temple REIT completed Q with a net loss of $2.16 million, compared to net income of $2.49 million during Q3-2011, representing a decrease in income of $4.65 million. For the first nine months of 2012, income before the change in fair value of financial instruments and income taxes decreased by $2.73 million, compared to the first nine months of The decrease reflects an increase in interest expense (net), trust expense and depreciation and amortization of $8.40 million, $0.81 million and $1.90 million, respectively, partially offset by an increase in operating income of $8.37 million. After providing for the change in fair value of financial instruments and income taxes, Temple REIT completed the first nine months of 2012 with a net income of $2.13 million, compared to a net income of $2.32 million during the first six months of 2011, representing an increase in income of $0.19 million. 4

5 Revenue Analysis of Total Hotel Revenues Three Months Ended Sept. 30 Nine Months Ended Sept (Decrease) (Decrease) Total - Same Properties Room revenue $ 13,079 $ 11,279 $ 1,800 $ 38,751 $ 33,631 $ 5,120 Other hotel revenue 5,571 5,651 (80) 18,920 18, Total Hotel Revenue $ 18,650 $ 16,930 $ 1,720 57,671 52,300 5,371 Total - Newly Acquired Properties Room revenue $ 5,875 $ N/A $ 5,875 $ 11,087 $ N/A $ 11,087 Other hotel revenue 729 N/A 729 1,226 N/A 1,226 Total Hotel Revenue $ 6,604 $ N/A $ 6,604 $ 12,313 $ N/A $ 12,313 Total Room revenue $ 18,954 $ 11,279 $ 7,675 $ 49,838 $ 33,631 $ 16,207 Other hotel revenue 6,300 5, ,146 18,669 1,477 Total hotel revenue $ 25,254 $ 16,930 8,324 $ 69,984 $ 52,300 $ 17,684 Room Revenue Total room revenue increased by $7,675 or 68% during Q3-2012, compared to Q3-2011, comprised of an increase of $1.80 million or 16% in "same property" revenue and incremental revenue of $5.88 million from new hotel acquisitions. With the exception of the Days Inn, Lloydminster and a minor decrease at the Clearwater Hotel, the room revenue for all of the hotels in the "same property" portfolio increased during Q compared to Q The Sheraton Red Deer was the largest contributor to the increase in room revenue, achieving an increase in room revenue of $617 or 86%. The Fort McMurray hotel portfolio achieved an increase in room revenue of 15%. The increase in room revenue for Sheraton Red Deer is largely attributable to the fact that a number of guest rooms were temporarily removed from operations in Q due to the completion of hotel renovations. As disclosed in the following chart, RevPar for the same property portfolio was $ in Q3-2012, compared to $ in Q RevPar for the Sheraton Red Deer increased by $25.89 during the Q3-2012, compared to Q3-2011, due to an increase in ADR and an improvement in occupancy level. All of the other hotels with the exception of Days Inn Lloydminster also experienced an improvement in RevPar. During the first nine months of 2012, room revenue increased by $16.21 million or 48%, compared to the first nine months of 2011, comprised of an increase of $5.12 million or 15% in "same property" revenue and incremental revenue of $11.09 million from new hotel acquisitions. 5

6 Room Revenue Statistics Three Months Ended September Occ ADR RevPar Occ ADR RevPar Total - Same Properties 70% $ $ % $ $ Newly Acquired Properties 77% $ $ N/A N/A N/A Overall Portfolio 72% $ $ % $ $ Room Revenue Statistics Nine Months Ended September Occ ADR RevPar Occ ADR RevPar Total - Same Properties 70% $ $ % $ $ Newly Acquired Properties 74% $ $ N/A N/A N/A Overall Portfolio 71% $ $ % $ $ HOTEL OPERATING COSTS Hotel operating costs increased by $4.04 million during Q3-2012, compared to Q3-2011, comprised of an increase of $0.12 million or 1% for the "same property" portfolio and $3.92 million attributable to new hotel acquisitions. During the first nine months of 2012, hotel operating costs increased by $9.31 million, compared to the first nine months of 2011, comprised of an increase of $1.75 million or 5% for the "same property" portfolio and $7.56 million which is attributable to new hotel acquisitions. The Sheraton Red Deer and the Fort McMurray hotel portfolio accounted for 61% and 40% of the total increase in "same property" operating costs, respectively. In general terms, the increase in operating costs for the Fort McMurray hotel portfolio reflects an increase in variable costs related to the increase in room revenue of the hotel portfolio, including an increase in labour costs. The increase in operating costs at the Sheraton Red Deer is mainly due to increased labour, marketing and royalty costs following the completion of the hotel renovations in December 2011 and the commencement of operations under the "Sheraton" hotel banner. Hotel operating costs for new hotel acquisitions for the nine months ended September 30, 2012, include $0.33 million of non-recurring costs related directly to the acquisition of the new hotels, compared to $nil for the first nine months of Operating Income and Profit Margin Operating Income Amount. Operating Profit Margin Three Months Nine Months Three Months Nine Months Q Q Q Q Q A Q Q Total - Same Properties $ 7,233 $ 5,629 $ 21,825 $ 18,201 39% 33% 38% 35% Total - Newly Acquired Properties $ 2,683 $ N/A $ 4,750 $ N/A 41% N/A 39% N/A Total portfolio $ 9,916 $ 5,629 $ 26,575 $ 18,201 39% 33% 38% 35% 6

7 Operating income increased by $4.29 million or 76% during Q3-2012, compared to Q3-2011, comprised of an increase of $1.60 million or 29% for the "same property" portfolio and $2.68 million attributable to new hotel acquisitions. The increase in "same property" operating income is mainly attributable to an increase in operating income for Fort McMurray same property portfolio, Sheraton Red Deer and Temple Gardens. All of the other "same property" hotels also experienced an increase in operating income, with the exception of the Days Inn Lloydminster. For the first nine months of 2012, operating income increased by $8.37 million or 46% compared to the first nine months of 2011, comprised of an increase of $3.62 million or 20% for the "same property" portfolio and $4.75 million attributable to new hotel acquisitions. The increase in "same property" operating income is mainly attributable to an increase in operating income for the Fort McMurray "same property" portfolio, Temple Gardens and Sheraton Red Deer. The overall profit margin of the entire hotel portfolio increased from 33% during Q3-2011, to 39% during Q For the nine months ended September 30, 2012, the overall profit margin increased to 38%, compared to 35% for the nine months ended September 30, COMPARISON TO PRIOR QUARTER Analysis of Net Income (Loss) - Q vs. Q Q Q (Decrease) Revenue Room $ 18,954 $ 16,091 $ 2,863 Other 6,300 7,098 (798) Total revenue 25,254 23,189 2,065 Hotel operating costs 15,338 14, Operating income 9,916 8,764 1,152 Interest expense, net 7,399 4,393 3,006 Trust expense Depreciation and amortization 2,726 2, (984) 1,476 (2,460) Change in fair value of financial instruments: gain (loss) (1,621) 3,283 (4,904) Income taxes recovery (expense) 442 (782) 1,224 Net income $ (2,163) $ 3,977 $ (6,140) Income before the change in fair value of financial instruments and income taxes decreased by $2.46 million during Q3-2012, compared to Q The decrease in income mainly reflects a $3.01 million increase in interest expense (net) partially offset by an increase of $1.15 million or 13% in operating income. The increase in interest expense reflects an increase in convertible debenture transaction costs of $2.44 million as well as an increase in mortgage loan and convertible debenture interest. The increase in operating income is comprised of a decrease of $89 in "same property" operating income and $1.24 million of operating income which is attributable to new hotels. The decrease in "same property" operating income reflects quarterly variations in operating income throughout the same property hotel portfolio. After reflecting income tax expense, and the loss associated with the change in fair value financial instruments, net income decreased by $6.14 million during Q compared to Q The variance in the fair value loss of $1.62 million during Q3-2012, compared to the fair value gain of $3.28 million during Q2-2012, served to decrease income for Q by $4.90 million compared to Q The variance in fair value reflects variations in the net change in the quarter-ended trading price of the "fair-valued" financial instruments. 7

8 Room Revenue Statistics Q Q Occ ADR RevPar Occ ADR RevPar Total - Same Properties 70% $ $ % $ $ Total - Newly Acquired Properties 77% $ $ % $ $ Overall Portfolio 72% $ $ % $ $ Overall, occupancy increased from 70% in Q to 72% in Q and ADR increased from $ to $ during the same period, resulting in an overall RevPar increase of $7.97 or 7.3% from $ in Q to $ in Q Occupancy for the Fort McMurray hotel portfolio stayed constant from Q2 to Q3 and the average daily room rate increased by 4%, resulting in an increase in RevPar of $5.99 to $ The occupancy level for the other hotels in the same property portfolio increased from 64% in Q2 to 66% in Q3 and the ADR decreased by 1%, resulting in a $1.85 increase in RevPar to $ RevPar for the five new hotels was $ for Q compared to $ for Q CONVERSION FROM A TRUST TO A CORPORATION At a Special Meeting of the Unitholders which is scheduled for November 19, 2012, Unitholders will consider a special resolution to authorize Temple REIT to proceed with its plan to convert the REIT from a trust to a corporation. The conversion to a corporation will result in an ownership structure for Temple REIT which is more comparable to the majority of public companies operating in Canada. As such, the new ownership structure is expected to maintain access to capital, attract new investors and provide a more liquid market for the trading of shares and debentures. The tax and legal structure of the corporation will also be simplified which should result in a reduction in administrative costs The board of trustees believes that the proposed conversion is in the best interests of the Temple REIT and unanimously recommends that the Unitholders vote in favour of the special resolution at the upcoming meeting. As soon as practicable after the conversion to a corporation, Temple REIT plans to implement a dividend reinvestment plan. ("DRIP"). OUTLOOK During the next year Temple REIT expects to complete several additional hotel acquisitions with a focus on hotels which provide an opportunity for accretive gains and with a view to further enhancing the geographic diversification of the overall hotel portfolio. ABOUT TREIT Temple REIT is a real estate investment trust, which is listed on the Toronto Stock Exchange under the symbols TR.UN (trust units), TR.DB.B, TR.DB.C, TR.DB.D, TR.DB.E and TR.DB.S (convertible debentures). The objective of Temple REIT 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 Temple REIT, please visit our website at FOR FURTHER INFORMATION PLEASE CONTACT: Arni Thorsteinson, Chief Executive Officer, or Gino Romagnoli, Investor Relations Tel: (204) , Fax: (204) , info@treit.ca 8

9 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 Toronto Stock 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. 9