News for the Hospitality Executive |
NORFOLK, NE--(Aug 10, 2012) -
Supertel Hospitality, Inc. (NASDAQ: SPPR),
a real estate investment trust (REIT) which currently owns 94 hotels in
23
states, today announced its results for the second quarter ended June
30, 2012. Second Quarter 2012 Highlights
Second Quarter Operating and Financial
Results Revenues from continuing operations for the
2012 second quarter rose $1.1 million, or 5.5 percent, to $21.6
million,
compared to the same year-ago period. The improved performance
primarily was
due to the increased average daily rate (ADR) of the same store
portfolio, in
addition to the acquisition of the Hilton Garden Inn. The company reported net income attributable
to common shareholders of $1.6 million, or $0.07 per diluted share for
the 2012
second quarter, compared to a net loss of $(4.5) million or $(0.20) per
diluted
share for the same 2011 period. The second quarter increase of $6.1
million is
primarily attributable to a $4.4 million increase in gains related to
dispositions of hotels, a $0.9 million unrealized gain from the
reduction in
fair market value of the derivative liabilities, and a $0.7 million
decrease in
total non cash impairment losses; the total non cash impairment losses
for the
three months ended June 30, 2012 were $4.1 million versus $4.8 million
for the
like prior period. Funds from operations (FFO) in the 2012
second quarter was $3.1 million, compared to $2.6 million in the same
2011
period. Adjusted funds from operations (AFFO), which is FFO adjusted to
include
gain or exclude losses on derivatives and exclude acquisition expense,
in the
2012 second quarter was $2.4 million, compared to $2.6 million in the
same 2011
period. Earnings before interest, taxes, depreciation
and amortization, (EBITDA) increased to $6.7 million, compared to $1.0
million
for the second quarter of 2011. Adjusted EBITDA, which is EBITDA before
non-controlling interest, net gain on disposition of assets,
impairment,
preferred stock dividends, unrealized gain/loss on derivatives and
acquisition
expense, increased to $6.2 million, or 6.5 percent compared to $5.8
million for
the second quarter of 2011. In the 2012 second quarter, the 74-hotel same
store portfolio reported an increase in revenue per available room
(RevPAR) of
3.9 percent led by a 3.1 percent improvement in ADR and a 0.7 percent
increase
in occupancy, compared to the 2011 second quarter. "The significantly improved results in
the 2012 second quarter reflect the full ramp-up of our management
companies,
the continued improvement in our portfolio make-up and the benefits of
the
infusion of $30 million in new equity in the 2012 first quarter," said
Kelly A. Walters, Supertel president and CEO.
Upscale Hotels The operating results for the Hilton Garden
Inn, which was purchased on May 25, 2012, are not reflected in the 74
same
store hotel operating results. The hotel generated RevPAR of $93.04,
driven by
$126.05 ADR and 73.8 percent occupancy during the period of May 25,
2012,
through June 30, 2012. Upper Midscale Hotels Second quarter RevPAR for the company's 21
continuing operations, upper midscale hotels rose 4.9 percent to
$51.95, led by
a 2.5 percent improvement in ADR to $72.99 and a 2.4 percent increase
in
occupancy. 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 sharply, 21.3 percent, to $36.68.
Occupancy
increased 18.9 percent with an ADR increase of 2.0 percent to $64.83.
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 1.4 percent increase in RevPAR to $33.54 in
the 2012
second quarter as a result of a 2.0 percent rise in ADR to $50.47,
partially
offset by a 0.6 percent decrease in occupancy. 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 2.0 percent increase in RevPAR to
$17.72, led
by a 4.0 percent increase in ADR to $24.71, partially offset by a 1.9
percent
decline in occupancy. Hotels in this segment include the Savannah
Suites brand. "While we are not yet satisfied with our
performance in the midscale segment, overall, our hotels continue to
achieve
above average occupancy compared to the industry, which provides
opportunities
to increase ADR," Walters noted. "We have instructed our operators to
evaluate raising room rates as aggressively as possible, while
carefully
monitoring market conditions and adjusting accordingly. We believe
there is
still room for ADR improvement, without materially impacting
occupancy." "Our operators have done a noteworthy
job in controlling costs, which is reflected in our 4.6 percent
increase for
the quarter in property operating income of the total portfolio," he
added. "Year-to-date through the second quarter, revenues rose at twice
the rate of incremental labor costs; and management fees remained
essentially
flat on higher revenues when compared with last year. We attribute the
bulk of
these improvements to our 2011 decision to move to regional operators
from one
centralized management company. "What makes these results all the more
gratifying is that many of our markets are in smaller population
centers,"
he noted. "While they did not suffer as much in the downturn, many of
these markets continue to lag behind in the rebound. Although our
results were
not as strong as the industry as a whole in the 2012 second quarter, we
believe
they showed good growth given the local economies in which they
operate." Interest expense from continuing operations
decreased slightly to $2.1 million for the quarter. In addition, the
company
temporarily paid its credit line down to zero by applying the unused
portion of
its recent equity infusion. A portion of the credit line is expected to
be
invested in hotel acquisitions by year end. Depreciation and
amortization
expense from continuing operations declined $0.1 million from the 2011
second
quarter to $2.2 million. Property operating income (POI) from
continuing operations for the 2012 second quarter rose $0.7 million, or
13.3
percent, compared to the same period a year earlier. The increase was
led by
higher same store room revenue, and improved expense management by our
new
operators, and $0.1 million of POI from the new Hilton Garden Inn in
Solomons,
Maryland. 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 Second Quarter 2012 versus Second Quarter
2011). Year-to-Date Operating and Financial Results Revenues from continuing operations for the
six months ended June 30, 2012 rose $1.5 million or 4.2 percent, to
$38.2
million, compared to $36.7 million for the same year-ago period. Net loss attributable to common shareholders
was $(3.0) million, or $(0.13) per diluted share for the six months
ended June
30, 2012, compared to a net loss of $(8.5) million, or $(0.37) per
diluted
share for the same 2011 period. RevPAR for the 74 same store hotels was
$31.82, a 2.9 percent increase compared to the same period in 2011. FFO for the six months ended June 30, 2012 was
$1.6 million, compared to $1.6 million for the same 2011 period. The
company's
Adjusted FFO for six months ended June 30, 2012 was $2.1 million, which
is an
increase of $0.5 million over the $1.6 million reported at June 30,
2011. Earnings before interest, taxes, depreciation
and amortization, impairment, non controlling interest, net gain on
disposition
of assets, preferred stock dividends, unrealized gain/loss on
derivatives and
acquisition expense (Adjusted EBITDA) increased to $8.5 million,
compared to
$7.2 million for the prior year. Acquisition Activity On May 25, the company purchased, in an all
cash transaction, the 100-room Hilton Garden Inn in Solomons Island,
Maryland
for $11.5 million, excluding closing costs and fees. The purchase was
funded
with proceeds from the company's first quarter preferred equity capital
raise.
The company currently is negotiating a mortgage loan for the property,
which it
expects to complete by year-end. "While we've only owned the property for
two months, we already are seeing a positive impact on our overall
portfolio," Walters said. "The hotel has performed to our
expectations and continues to hold a substantial market share RevPAR
premium
over its competitive set. This hotel has multiple, year-round demand
generators,
and we are quite positive about this acquisition." Walters noted, "The company is pursuing
several other acquisitions with a similar profile: premium-branded,
select-service hotels in healthy secondary markets with identifiable
and
durable sources of business." Disposition Program During the 2012 second quarter, the company
sold four hotels: a 49-room Super 8 hotel located in El Dorado, Kansas,
for
$1.6 million, an 87-room Super 8 in Sedalia, Missouri for $1.8 million;
a
119-room Super 8 in Wichita, Kansas for $4.1 million; and a 127-room
Masters
Inn in Tampa, Florida for $2.05 million. Proceeds were used to reduce
associated mortgage debt by $7.8 million. "We continue to average selling a
non-core hotel approximately every six to eight weeks," Walters noted.
"Financing has eased somewhat, but still takes time for the buyers to
obtain. Most of our transactions remain single sales, but we are
exploring
opportunities for targeted portfolio sales." Property Renovations The company invested $1.6 million in property
improvements in the 2012 second quarter. "Based on our experience with
renovations at similar hotels, while it causes a temporary displacement
in
revenues, we typically see improved bottom line results through steady
RevPAR
growth and improved market share," Walters said. Balance Sheet "Our balance sheet is stronger now than
at any point in the last few years," said Connie Scarpello, chief
financial officer. "We have reduced our debt by $32.2 million, or 18.9
percent, in the past 12 months. We will continue to reduce our debt
leverage
ratios, with a long-term goal of approximately 50 percent debt-to-total
enterprise value over time." Outstanding debt on hotels in continuing
operations totaled $117.6 million, and has an average term to maturity
of 3.2
years and a weighted average annual interest rate of 6.4 percent. "We are in negotiations to finance $28.6
million debt mortgage that matures this year," Scarpello said. "We
also expect to place a prudent amount of debt on our recently acquired
Hilton
Garden Inn to free up funds to acquire additional hotels." "The terms of the preferred capital
raise require the company to invest $20 million of equity in hotels
meeting the
firm's investment criteria, $11.7 million, including acquisition
expenses, of
which was used to purchase the Hilton Garden Inn in Solomons, Maryland,
initially for cash. The remaining $8.3 million was used to pay down the
Great
Western revolver until other core acquisitions are ready to close which
will
then involve drawing down on our credit lines as well as using the
proceeds
from the financing of the Hilton Garden Inn. 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 second quarter,
the company closed on the sale of its 57-room Super 8 hotel in
Watertown, South
Dakota for $1.55 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 second 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 are making steady process in
implementing our business plan," Walters said. "We have made
meaningful strides in improving operations, are improving our portfolio
make up
by selling off non-strategic assets while launching an acquisition
program. The
weak economic recovery in many markets where we own hotels keeps us
cautious,
but our dependency on tertiary markets is decreasing steadily as we
sell
non-core properties. On balance, with proper execution of our business
plan, we
believe Supertel has a promising future." 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 94
hotels
comprising 8,283 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.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FFO and AFFO 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. AFFO is FFO adjusted to
include gain
or exclude losses on derivative liabilities, which is a non-cash charge
against
income and which does not represent results from our core operations.
AFFO also
adds back acquisition costs. 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. Diluted FFO per share and diluted Adjusted
FFO per share are computed after adjusting the numerator and
denominator of the
basic computation for the effects of any dilutive potential common
shares
outstanding during the period. Up to 30,000,000 shares of common stock
may be
issued upon conversion of the Series C convertible preferred stock, and
adjustments are made for these shares in the computation of diluted FFO
per
share and diluted Adjusted FFO per share. The Company's outstanding
warrants to
purchase common stock and stock options would be antidilutive and are
not
included in the dilution computation. 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 to be useful additional measures
of
performance for an equity REIT because it facilitates 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. (Unaudited-In thousands, except per share
data)
EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are financial
measures that are not calculated in accordance with accounting
principles
generally accepted in the United States of America ("GAAP"). We
calculate EBITDA and 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 EBITDA and Adjusted EBITDA also do not
represent
an amount that accrues directly to common shareholders. In calculating
Adjusted
EBITDA, we add back noncontrolling interest, net (gain) loss on
disposition of
assets, preferred stock dividends and acquisition expenses which are
cash
charges. We also add back impairment and unrealized gain or loss on
derivatives, which are non-cash charges. EBITDA and Adjusted EBITDA do not represent
cash generated from operating activities determined by GAAP and should
not be
considered as alternatives to net income, cash flow from operations or
any
other operating performance measure prescribed by GAAP. EBITDA and
Adjusted
EBITDA are not measures of our liquidity, nor are they indicative of
funds
available to fund our cash needs, including our ability to make cash
distributions. Neither do the measurements reflect cash expenditures
for
long-term assets and other items that have been and will be incurred.
EBITDA
and 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. (Unaudited-In thousands, except statistical
data) *Same store reflects 74 hotels.
Note: During the reporting periods above, no
properties were moved from the same store portfolio and reclassified as
held
for sale and no properties which were included in discontinued
operations (held
for sale) were reclassified as held for use. |
Contact: Ms. Krista Arkfeld Director of Corporate Communications [email protected] |