InnVest REIT Reports Third Quarter Results
Solid Progress Against Strategic Plan and 2014 Mortgages Refinanced
(firmenpresse) - TORONTO, ONTARIO -- (Marketwired) -- 11/08/13 -- InnVest Real Estate Investment Trust ("InnVest") (TSX: INN.UN), today announced financial results for the three and nine months ended September 30, 2013.
"We continue to make progress against our strategic plan to improve our portfolio quality and strengthen our balance sheet. We have been active on our capital investment program including significant renovations underway at two important full-service hotels during the quarter as well as the ongoing revitalization program for our Comfort Inn portfolio. In addition, we have generated over $93 million in gross sale proceeds at attractive capitalization rates, representing more than 50% of our stated two-year divestiture objective," said Anthony Messina, InnVest's President and Chief Executive Officer. "Excluding renovation activity during the quarter, our portfolio realized improvements across all profitability measures. Looking ahead, fundamentals for our portfolio remain positive, driven by an improving industry outlook, upside from capital investments and our ability to accretively redeploy capital from asset sales to higher return alternatives."
Third Quarter Highlights
InnVest's Condensed Interim Consolidated Financial Statements and Management's Discussion and Analysis for the three and nine months ended September 30, 2013 and 2012 are available on InnVest's website at .
SELECTED FINANCIAL INFORMATION
The operating statistics relating to gross room revenues for the three and nine months ended September 30, 2013 and 2012 are on a same-hotel basis and exclude hotels sold and one hotel which was closed for a portion of the periods presented.
OPERATIONS REVIEW
Three months ended September 30, 2013
Third quarter hotel revenues decreased $11.7 million as compared to the prior period. Hotel sales contributed $10.5 million of the decline. Same-hotel RevPAR was relatively flat to the prior period with growth across the portfolio offset by displacement caused by renovation activity. Excluding hotels impacted by renovations during the quarter, RevPAR growth would have exceeded 2%.
Hotel property expenses during the three months ended September 30, 2013 decreased $9.4 million or 7.6%. Excluding asset sales, expense growth was limited to 0.4%, benefitting from operational enhancements implemented in the first quarter. Notwithstanding limited growth in operating expenses, Hotel GOP declined $2.3 million or 4.6% reflecting the impact of flat same-hotel RevPAR achieved. Same-hotel Hotel GOP margins declined 1.0% to 29.3%.
Mortgage interest expense declined $1.9 million owing to the year-to-date repayment of $61.7 million of mortgage debt following asset sales, as well as regular principal repayments. Interest expense related to InnVest's convertible debentures reflect the issuance of $115.0 million of Series G 5.75% Debentures on February 27, 2013 and the early redemption of its $75.0 million 6.0% Series B Debentures on April 1, 2013.
Third quarter results include gain on sales and the reversal of previous impairment totaling $1.6 million along with $0.8 million of lease income related to the oversight of one hotel following its sale.
The third quarter generated FFO of $31.5 million ($0.270 per unit diluted) and distributable income of $26.5 million ($0.226 per unit diluted) up $0.6 million and $1.2 million, respectively, from the prior periods. The year-over-year improvements reflect interest expense reductions achieved following asset sales which offset lower Hotel GOP generated.
Nine months ended September 30, 2013
For the nine months ended September 30, 2013 hotel revenues decreased $17.2 million, or 3.7% owing to $16.2 million of reduced contribution from asset divestitures. Same-hotel RevPAR over this period was relatively unchanged. Year-to-date RevPAR reflects the impact of renovation activity during the third quarter as well as the closure of InnVest's two full-service hotels in downtown Calgary due to the floods in late June (estimated $2.0 million hotel revenue loss in Q2). InnVest expects to recover lost earnings at its two Calgary hotels through a business interruption claim. No insurance proceeds related to these claims have been recognized to-date in 2013.
InnVest generated Hotel GOP of $104.0 million, down $4.0 million or 3.7% as compared to the prior period. First quarter results included a restructuring charge of $1.3 million which is expected to be fully recovered through expense savings by the end of the year. For the nine months ended September 30, 2013, Same-hotel Hotel GOP margins decreased 1.0% to 23.8%.
For the nine months ended September 30, 2013, InnVest generated FFO of $51.4 million ($0.499 per unit diluted) and distributable income of $38.0 million ($0.377 per unit diluted), down $0.6 million and up $0.6 million from the prior periods, respectively.
PORTFOLIO REPOSITIONING PROGRAM
To date in 2013, InnVest has completed the sale of six non-core assets for gross proceeds of $93.1 million (net proceeds of approximately $18.1 million) and has entered into separate agreements to sell six additional non-core properties for gross proceeds of $33.5 million. Eleven additional hotels are actively being marketed.
CAPITAL INVESTMENT PROGRAM
Capital expenditures during the nine months ended September 30, 2013 totalled $41.2 million compared to the notional FF&E Reserve of $18.6 million. At September 30, 2013, InnVest has additional committed capital of $18.2 million.
Capital investments undertaken in 2013 reflect the rollout of InnVest's Comfort Inn revitalization program as well as the start of renovations at select full-service hotels including the Delta Winnipeg (lobby, meeting space and guestrooms) and the Sheraton Suites Calgary Eau Claire (lobby, meeting space and guestrooms). Currently, 24 Comfort Inn hotels have been substantially renovated. By the end of 2013, InnVest expects to have completed 30 Comfort Inn renovations.
BALANCE SHEET
In early October 2013, InnVest announced the refinancing of $251.8 million of 2014 mortgage debt maturities. Incremental proceeds achieved will be used to partially repay remaining 2014 mortgage maturities. Proforma these refinancing transactions, InnVest will have a weighted average mortgage interest rate of approximately 5.4% and a weighted average term of 4.5 years.
On February 27, 2013, InnVest issued $115.0 million of Series G - 5.75% convertible debentures with proceeds primarily used to redeem InnVest's $75.0 million Series B - 6.0% convertible debentures on April 1, 2013. Incremental proceeds will be used to fund InnVest's capital investment program.
As at September 30, 2013, InnVest had $29.1 million of cash (including restricted cash) and $36.6 million of capacity on its undrawn credit facility. InnVest's leverage at September 30, 2013 including convertible debentures was 64.0% (43.0% excluding convertible debentures), compared to 64.5% at December 31, 2012.
INCOME TAX DEFERRAL
For 2013, InnVest estimates that the non-taxable portion of the distributions made to unitholders during the year will approximate 30% (2012 - 40%). This estimate may change materially based on InnVest's asset disposition activity during the fourth quarter.
OUTLOOK
The hospitality industry is highly correlated to the economy and as such, uncertain global and domestic economic conditions continue to impact the Canadian lodging industry. InnVest's broad, diversified portfolio remains a key advantage in the current environment.
While industry growth has been more modest than expected, Canadian lodging industry fundamentals remain favourable, with improving demand expectations through the coming year and a low supply outlook.
Through the end of 2014, InnVest expects to divest of low-yielding assets and reinvest proceeds generated to undertake an extensive capital program to enhance its product offering at a number of select hotels. These targeted investments are expected to improve the portfolio's competitive positioning and operating performance through increased occupancies and rates.
InnVest's strategy to reduce debt, reposition its portfolio and invest in core assets is expected to enhance the stability and growth of the portfolio's long-term cash flows.
QUARTERLY CONFERENCE CALL
Management will host a conference call on Friday November 8, 2013 at 11:00 a.m. Eastern time to discuss the performance of InnVest. Investors are invited to access the call by dialing 416-340-8018 or 1-866-223-7781. You will be required to identify yourself and the organization on whose behalf you are participating. A recording of this call will be made available November 8th, beginning at 1:00 pm through to November 22nd, 2013. To access the recording please call 905-694-9451 or 1-800-408-3053 and use the reservation number 4079005#.
FORWARD LOOKING STATEMENTS
Statements contained in this press release that are not historical facts are forward-looking statements which involve risk and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are real estate investment risks, hotel industry risks, competition and the status of InnVest REIT as a REIT for Canadian federal income tax purposes in any year. These and other factors are discussed in InnVest REIT's annual information form for the year ended December 31, 2012, which is available at . InnVest REIT disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable securities law.
INNVEST PROFILE
InnVest Real Estate Investment Trust is an unincorporated open-ended real estate investment trust which owns a portfolio of 131 hotels across Canada representing over 16,500 guest rooms operated under internationally recognized brands. InnVest also holds a 50% interest in Choice Hotels Canada Inc., one of the largest franchisors of hotels in Canada.
InnVest's units and convertible debentures trade on the Toronto Stock Exchange (the "TSX") under the symbols INN.UN, INN.DB.C, INN.DB.D, INN.DB.E, INN.DB.F and INN.DB.G.
Contacts:
InnVest Real Estate Investment
Chantal Nappert
Vice President, Finance and Investor Relations
(905) 624-7806
(905) 206-7114 (FAX)
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Datum: 08.11.2013 - 13:09 Uhr
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News-ID 314414
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