News for the Hospitality Executive |
NORFOLK, NE--(May 15, 2012) -
Supertel Hospitality, Inc. (NASDAQ: SPPR),
a real estate investment trust (REIT) which owns 97 hotels in 23
states, today
announced its results for the first quarter ended March 31, 2012. First Quarter 2012 Highlights
First Quarter Operating and Financial Results
Revenues from continuing operations for the
2012 first quarter rose $0.4 million, or 2.5 percent, to $16.7 million,
compared to the same year-ago period. The improved performance
primarily was
due to the improved results of the company's 21 upper midscale
properties. The company reported a net loss of $(4.0)
million for the 2012 first quarter, compared to a net loss of $(3.7)
million
for the same 2011 period. The 2012 first quarter loss includes a $1.2
million
increase in the fair value of derivative liabilities as well as an
impairment
charge of $1.8 million on properties which are held for sale. The 2011
first
quarter loss includes a onetime termination cost of $0.6 million and a
net
impairment charge of $0.3 million on properties held for sale. All
income and
expenses related to sold and held for sale hotels are classified as
discontinued operations. Funds from operations (FFO) in the 2012 first
quarter was $(1.5) million, or $(0.07) per diluted share, compared to
$(1.0)
million, or $(0.04) per diluted share, in the same 2011 period. The
company's
Adjusted FFO for three months ended March 31, 2012 was $(0.3) million,
which is
an increase of $0.7 million over the $(1.0) million reported at March
31, 2011. Earnings before interest, taxes, depreciation
and amortization, non controlling interest and preferred stock
dividends
(Adjusted EBITDA) decreased to $0.2 million, compared to $0.9 million
for the
first quarter of 2011. "The 2012 first quarter began to bear
the fruits of our new strategic direction, both financially and
operationally," said Kelly A. Walters, Supertel president and CEO.
"From an operations standpoint, a 14.9% increase in our most critical
metric,
total POI, validated last year's decision to revamp our hotel
management
structure by replacing a long-standing centralized management company
with more
focused, regional operators. From a financial standpoint, the
shareholder
approval of the sale of the Series C preferred stock, gave us a
strategic
infusion of $30 million in new equity with $20 million specifically
designated
to be used for acquiring hotels conforming to the business plan.
Further, we
saw a 10.2% increase in the RevPAR figures of our upper midscale
properties,
which supports our strategy of expanding our holdings in that segment."
The full portfolio of 74 hotels in continuing
operations in the 2012 first quarter reported a RevPAR increase of 1.8
percent
led by a 3.7 percent improvement in ADR partially offset by a 1.9
percent
decline in occupancy, compared to the 2011 first quarter.
Prior to the 2012 first quarter, the company
had classified its upper midscale and midscale hotels collectively as
midscale
hotels. Supertel updated its chain-scale brand categories for midscale
hotels
to correspond with the 2012 Smith Travel Research (STR) classifications
of
midscale and upper midscale hotels. "Reclassifying our 21 upper
midscale
hotels allows us to better clarify RevPAR growth in the segment that
over time
will dominate our portfolio," Walters said. Upper Midscale Hotels First quarter RevPAR for the company's 21
continuing operations upper midscale hotels rose 10.2 percent to
$40.11, aided
by an 8.8 percent increase in occupancy and a 1.2 percent increase in
ADR to
$66.16. Upper midscale hotel brands currently in the company's
portfolio include
Comfort Inns, Comfort Suites, Hampton Inn and Holiday Inn Express. Midscale Hotels RevPAR for the company's six continuing
operations midscale hotels rose 0.4 percent to $27.86. Occupancy
declined 0.9
percent with an offsetting ADR increase of 1.2 percent to $60.01.
Supertel's
midscale brands include Quality Inn, Sleep Inn, Baymont Inn and Ramada
Limited. Economy Hotels The company's 40 continuing operations
economy hotels reported a 2.9 percent decrease in RevPAR to $25.44 in
the 2012
first quarter, caused by a 5.2 percent decrease in occupancy, partially
offset
by a 2.4 percent rise in ADR to $47.73. Supertel's branded properties
in this
segment include Days Inn, Super 8, Key West Inns and Guesthouse Inn. Extended Stay Hotels The company's seven continuing operations
extended-stay hotels reported a 2.7 percent decrease in RevPAR to
$17.54,
reflecting a 6.3 percent decline in occupancy and a 3.9 percent
increase in ADR
to $24.40. Hotels in this segment include the Savannah Suites brand. "Three factors influenced our 2012 first
quarter results:
While we always want to expand our top-line
growth, STR data indicates that we are exceeding our fair share of
occupancy,
but we currently are not attaining our fair share of ADR," Walters
said.
"As a result, we continue to fine tune our bottom line strategy on a
property-by-property basis which we expect will continue to impact our
relative
performance over the short term. Our goal is to win the bottom-line
game,
without forfeiting top-line growth. "Our management companies have kept
operation expenses from continuing operations' hotels under control in
the 2012
first quarter and were essentially flat, over the like 2011 period,"
Walters noted. Interest expense from continuing operations
decreased to $2.1 million for the quarter, primarily due to the paydown
of the
Great Western Bank revolver with funds provided by the sale of the
preferred
stock, but also due to a prepayment penalty incurred during the first
quarter
of 2011. Depreciation and amortization expense from continuing
operations
declined $0.1 million from the 2011 first quarter to $2.1 million. For the 2012 first quarter, property
operating income (POI) from continuing operations rose $0.4 million, or
12.9
percent, compared to the year-ago period. The increase resulted from a
combination of higher revenue and improved cost management, especially
in the
areas of utilities and repairs and maintenance. POI is calculated as
revenue
from room rentals and other hotel services less hotel and property
operations
expenses. See attached chart (Property Operating Income Percent First
Quarter
2012 versus First Quarter 2011). General and administration expense from
continuing operations for the 2012 first quarter was unchanged. "We believe our new operators now are
fully familiar with our properties, and we expect to see steady
improvements in
the quarters ahead, as the economy continues to recover," Walters said. Acquisition Activity On March 27, the company entered into an
agreement to acquire the 100-room Hilton Garden Inn in Solomons Island,
Maryland for $11.5 million, excluding closing costs and fees.
Completion of the
proposed acquisition is subject to customary closing conditions and is
expected
to occur in the 2012 second quarter. The hotel will be managed by
Cherry Cove
Hospitality Management, LLC, the current operator. "The purchase of the Hilton Garden Inn
is significant on many levels because not only does it mark our
re-entry into
the acquisition market, but it represents the type of asset we target
as part
of our updated strategy which we believe will usher in a new era of
growth for
Supertel," said Walters. "This hotel is located in the greater
Washington, D.C. market and has multiple demand generators, including
the Naval
Air Station Patuxent River and Calvert Cliffs Nuclear Power Plant." Disposition Program During the first quarter, the company sold an
83-room Super 8 hotel located in Fayetteville, Arkansas, for $1.56
million and
a 63-room Super 8 in Muscatine, Iowa for $1.3 million. Proceeds were
used to
reduce related mortgage debt. "We are divesting of hotels that no
longer
meet our new strategic vision," Walters said. "Over time we intend to
significantly reduce the age of our portfolio and refine the mix,
moving from a
heavy concentration in the economy segment to a portfolio with a much
greater
focus on premium-branded, select-service hotels." Property Renovations During the 2012 first quarter, the company
invested $1.6 million to upgrade its properties and maintain brand
standards.
Imbedded in the quarter's capital expenditure figures is approximately
$0.5
million of renovations to three upper midscale Choice Hotels located in
Indiana, including South Bend, Fort Wayne, and Warsaw. The renovations
caused
some displacement in revenues but the hotels are now better positioned
for the
high demand period. Balance Sheet "We continue to strengthen and add
flexibility to our balance sheet through reconfiguring our portfolio
and
raising new equity," said Connie Scarpello, chief financial officer.
"We have reduced our total debt in the past 12 months by 16.5 percent
to
$146.5 million." Outstanding debt on hotels in continuing operations
totaled $120.6 million, and has an average term to maturity of 3.4
years and a
weighted average annual interest rate of 6.4 percent. In two separate transactions in February,
2012, the company completed the sale of the previously announced
3,000,000
shares of Series C convertible preferred stock and warrants to purchase
30,000,000 shares of common stock at an exercise price of $1.20 per
common
share. On February 3, 2012, the company paid off its $5.0 million
balance on a
revolving credit facility with Elkhorn Valley Bank with a portion of
the net
proceeds from the sale of the Series C convertible preferred stock. On February 16, 2012, the company paid off a
$2.1 million note payable to Fredericksburg North Investors, LLC, with
a
portion of the net proceeds from the sale of the Series C convertible
preferred
stock. In addition, the company used a portion of proceeds to pay down
the
$12.5 million Great Western Bank revolver. On February 21, 2012, the
company
entered into an amendment with Great Western Bank to extend the
maturity date
of all loans to June 30, 2013. On March 1, 2012 the company amended its
credit
facility with First National Bank of Omaha to extend the maturity date
to May
1, 2012. The debt was paid in full April 20, 2012. "The terms of the preferred capital
raise require the company to invest $20 million of equity in hotels
meeting the
firm's investment criteria, which will involve both the use of our set
aside
cash and the $12.5 million revolving facility with Great Western Bank.
By year
end, the company has plans to invest as much as $40 million in equity
and debt
as we begin to rebuild our portfolio," Walters said. "We continue to
focus on balance sheet improvements through additional de-levering
measures." Subsequent Events Following the close of the first quarter, the
company closed on the sale of its 49-room Super 8 hotel in El Dorado,
Kansas
for $1.625 million. The associated mortgage debt was fully retired with
excess
proceeds applied to general corporate purposes. Dividends The company did not declare a common stock
dividend for the 2012 first quarter. Preferred dividends continued
uninterrupted. The company will monitor requirements to maintain its
REIT
status and will routinely evaluate the dividend policy. The company
intends to
continue to meet its dividend requirements to retain its REIT status. Outlook "We believe that the 2012 first quarter
marks a critical, positive shift in the company's future direction and
sets it
on a restorative and transformational path by putting into motion the
financial
and human capital required to restructure and adapt the hotel portfolio
to
contemporary market expectations," Walters said. "This will be a
multi-year process, but we are confident in our direction." About Supertel Hospitality, Inc. Supertel Hospitality, Inc. (NASDAQ: SPPR)
is a self-administered real estate investment trust that specializes in
the
ownership of select-service hotels. The company currently owns 97
hotels
comprising 8,573 rooms in 23 states. Supertel's hotels are franchised
by a
number of the industry's most well-regarded brand families, including
Hilton,
IHG, Choice and Wyndham. For more information or to make a hotel
reservation,
visit www.supertelinc.com.
Forward Looking Statement Certain matters within this press release are
discussed using forward-looking language as specified in the Private
Securities
Litigation Reform Act of 1995, and, as such, may involve known and
unknown
risks, uncertainties and other factors that may cause the actual
results or
performance to differ from those projected in the forward-looking
statement.
These risks are discussed in the Company's filings with the Securities
and
Exchange Commission. SELECTED FINANCIAL DATA: The following table sets forth the Company's
balance sheet as of March 31, 2012 and December 31, 2011. The Company
owned 98
hotels (including 24 hotels in discontinued operations) at March 31,
2012, and
105 hotels as of December 31, 2011 respectively.
The following table sets forth the Company's
results of operations for the three months ended March 31, 2012 and
2011,
respectively. (in thousands, except per share data)
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FFO and Adjusted FFO ("AFFO") are
non-GAAP financial measures. We consider FFO and AFFO to be market
accepted
measures of an equity REIT's operating performance, which are
necessary, along
with net earnings (loss), for an understanding of our operating
results. FFO,
as defined under the National Association of Real Estate Investment
Trusts
(NAREIT) standards, consists of net income computed in accordance with
GAAP,
excluding gains (or losses) from sales of real estate assets, plus
depreciation
and amortization of real estate assets. We believe our method of
calculating
FFO complies with the NAREIT definition. Adjusted FFO excludes the
unrealized
loss on derivative liabilities, which is a non-cash charge against
income and
which does not represent results from our core operations. FFO and AFFO
do not
represent amounts available for management's discretionary use because
of
needed capital replacement or expansion, debt service obligations, or
other
commitments and uncertainties. FFO and AFFO should not be considered as
alternatives to net income (loss) (computed in accordance with GAAP) as
an
indicator of our liquidity, nor are they indicative of funds available
to fund
our cash needs, including our ability to pay dividends or make
distributions.
All REITs do not calculate FFO and AFFO in the same manner; therefore,
our
calculation may not be the same as the calculation of FFO and AFFO for
similar
REITs. We use FFO and AFFO as performance measures
to facilitate a periodic evaluation of our operating results relative
to those
of our peers. We consider FFO and AFFO useful additional measures of
performance for an equity REIT because they facilitate an understanding
of the
operating performance of our properties without giving effect to real
estate
depreciation and amortization, which assume that the value of real
estate
assets diminishes predictably over time. Since real estate values have
historically risen or fallen with market conditions, we believe that
FFO and
AFFO provide a meaningful indication of our performance.
Adjusted EBITDA is a financial measure that
is not calculated in accordance with accounting principles generally
accepted
in the United States of America ("GAAP"). We calculate Adjusted
EBITDA by adding back to net earnings (loss) available to common
shareholders
certain non-operating expenses and non-cash charges which are based on
historical cost accounting and we believe may be of limited
significance in
evaluating current performance. We believe these adjustments can help
eliminate
the accounting effects of depreciation and amortization and financing
decisions
and facilitate comparisons of core operating profitability between
periods,
even though Adjusted EBITDA also does not represent an amount that
accrues
directly to common shareholders. In calculating Adjusted EBITDA, we
also add
back preferred stock dividends and noncontrolling interests, which are
cash
charges. Adjusted EBITDA doesn't represent cash
generated from operating activities determined by GAAP and should not
be
considered as an alternative to net income, cash flow from operations
or any
other operating performance measure prescribed by GAAP. Adjusted EBITDA
is not
a measure of our liquidity, nor is Adjusted EBITDA indicative of funds
available to fund our cash needs, including our ability to make cash
distributions. Neither does the measurement reflect cash expenditures
for
long-term assets and other items that have been and will be incurred.
Adjusted
EBITDA may include funds that may not be available for management's
discretionary use due to functional requirements to conserve funds for
capital
expenditures, property acquisitions, and other commitments and
uncertainties.
To compensate for this, management considers the impact of these
excluded items
to the extent they are material to operating decisions or the
evaluation of our
operating performance. Adjusted EBITDA, as presented, may not be
comparable to
similarly titled measures of other companies. The following table sets forth the operations
of the Company's hotel properties in continuing operations for the
three months
ended March 31, 2012 and 2011, respectively.
This presentation includes non-GAAP financial
measures. The Company believes that the presentation of hotel property
operating income (POI) is helpful to investors, and represents a useful
description of its operations, as it communicates the comparability of
its
hotels' operating results.
Same Store reflects 74 hotels in continuing
operations for the three months and year to date ended March 31, 2012
and 2011. The following unaudited table presents our
RevPAR, ADR and Occupancy, by region, for the three months ended March
31, 2012
and 2011, respectively. The comparisons of same store operations are
for 74
hotels in continuing operations as of January 1, 2011.
|
Contact: Ms. Krista Arkfeld Director of Corporate Communications [email protected] |