MHI Hospitality Corporation (NASDAQ: MDH) (“MHI” or the
“Company”), a self-managed and self-administered lodging real
estate investment trust (“REIT”), today reported consolidated
results for the fourth quarter and the year ended December 31,
2011. The Company’s results include the following*:
Three months ended Year ended
December 31, 2011 December 31, 2010
December 31, 2011 December 31, 2010 ($ in
thousands except per share data) Total Revenue $ 19,492 $
18,820 $ 81,173 $ 77,382 Net loss attributable to the Company
(2,556 ) (854 ) (4,844 ) (2,383 ) EBITDA 2,127
3,789
15,081
16,477 Adjusted EBITDA 3,648
3,602
17,052
15,646 Hotel EBITDA 4,049
4,000
18,708
17,640 FFO (890 )
1,190
2,924
5,972 Adjusted FFO 625
849
5,578
5,315 Net loss per diluted share attributable to the Company
$ (0.26 )
$ (0.09 )
$ (0.50 )
$ (0.25 ) FFO per diluted share and unit (0.07 )
0.09
0.23
0.46 Adjusted FFO per diluted share and unit 0.05
0.07
0.43
0.41 (*) Earnings before interest, taxes, depreciation and
amortization (“EBITDA”), adjusted EBITDA, hotel EBITDA, funds from
operations (“FFO”), adjusted FFO, FFO per share and adjusted FFO
per share are non-GAAP financial measures. See further discussion
of these non-GAAP measures, including definitions related thereto,
and reconciliations to net income (loss) later in this press
release.
HIGHLIGHTS:
- Common Dividends. Consistent
with the Company’s announcement in July 2011 that it has reinstated
payment of quarterly dividends on its common stock, the Company
declared another quarterly dividend (distribution) of $0.02 per
common share (and unit), payable on April 11, 2012 to stockholders
(and unitholders) of record as of March 15, 2012.
- RevPAR. Room revenue per
available room (“RevPAR”) for the Company’s wholly-owned properties
increased 5.3 percent over the fourth quarter 2010 to $66.75 driven
by a 5.1 percent increase in average daily rate (“ADR”). For the
year 2011, RevPAR increased 5.8 percent over 2010 to $72.94.
- Hotel EBITDA. The Company
generated hotel EBITDA of approximately $4.0 million during the
fourth quarter 2011, bringing its annual total hotel EBITDA to
$18.7 million, an increase of approximately $1.1 million over
2010.
- Adjusted EBITDA. The Company
generated adjusted EBITDA of approximately $3.6 million during the
fourth quarter 2011, bringing its total annual adjusted EBITDA to
approximately $17.1 million, an increase of approximately $1.5
million over 2010.
- Adjusted FFO. The Company
generated adjusted FFO of approximately $0.6 million during the
fourth quarter 2011 and approximately $5.6 million for the year
2011, an increase of approximately $0.3 million over adjusted FFO
for 2010.
- Capital Expenditures. In 2011,
the Company invested approximately $6.0 million of capital
throughout its portfolio, including approximately $3.0 million at
its property in Raleigh, North Carolina, which became the
Doubletree by Hilton Brownstone-University during the fourth
quarter 2011.
Andrew M. Sims, Chairman and CEO of MHI Hospitality Corporation,
commented, “2011 was a significant year for the Company. Early in
the year, we completed a preferred transaction that permitted an
extension of all debt maturities, thus allowing us to transact a
series of single asset property financings that we expect to
ultimately lead to a pay off of our syndicated credit facility. The
balance sheet restructuring allowed us to increase our liquidity,
reinstate our common dividend and be in a position to begin the
process of growing our portfolio.”
Financing Transactions
- On October 17, 2011, the Company
obtained a 5-year, $8.0 million mortgage with Premier Bank, Inc. on
the Doubletree by Hilton Brownstone-University hotel property. The
mortgage bears interest at a rate of 5.25% per annum for the first
five years and may be extended for an additional five years, at the
Company’s option if certain conditions precedent have been
satisfied, during which it will bear interest at a rate of 3.00%
per annum plus the then-current 5-year U.S. Treasury bill rate of
interest. Proceeds of the mortgage were used to pay down a related
portion of the Company’s indebtedness under its credit
facility.
- On December 15, 2011, the Company
obtained a 5-year, $12.2 million mortgage with Goldman Sachs
Commercial Mortgage Capital, L.P. on the Sheraton Louisville
Riverside hotel property. The mortgage bears interest at a rate of
6.2415% per annum. Proceeds of the mortgage were used to pay down a
related portion of the Company’s indebtedness under its credit
facility.
- On December 21, 2011, the Company
entered into an amendment to its $10.0 million bridge loan
agreement with Essex Equity High Income Joint Investment Vehicle,
LLC to extend the lender’s loan commitment by 17 months through May
31, 2013.
- On December 21, 2011, the Company also
amended the terms of the outstanding warrant issued by the Company
in favor of two affiliates of the lender of the bridge loan, Essex
Illiquid, LLC and Richmond Hill Capital Partners, LP. Pursuant to
the warrant amendment, the exercise price per share of common stock
covered by the warrant will be adjusted from time to time in the
event of cash dividends upon common stock by deducting from such
exercise price the per-share amount of such cash dividends. Such
adjustment does not take into account quarterly dividends declared
prior to January 1, 2012.
Balance Sheet/Liquidity
At December 31, 2011, the Company had approximately $7.1 million
of available cash and cash equivalents, of which approximately $2.7
million was reserved for real estate taxes, insurance, capital
improvements and certain other expenses or otherwise restricted.
The Company had approximately $154.3 million in outstanding debt at
a weighted average interest rate of approximately 6.73%. The
Company also had $5.0 million of availability on its bridge loan
agreement at December 31, 2011.
2012 Outlook
Set forth below is guidance for 2012, which is predicated on
continued strengthening of the economy and expected improvements in
hotel lodging industry fundamentals. These projections are based on
estimates of occupancy and average daily rates that are consistent
with calendar year 2012 forecasts by Smith Travel Research for the
market segments in which the Company operates.
The table below reflects the Company’s projection, within a
range, of various financial measures for 2012:
Low Range High Range Y/E Dec 31, 2012 Y/E Dec
31, 2012 ($ in thousands except per share data) Total Revenue $
83,000 $ 88,000 Net loss (5,430 ) (1,880 ) EBITDA 16,975
20,700 Adjusted EBITDA 18,025 20,600 Hotel EBITDA 20,360 22,485
FFO 3,945 7,620 Adjusted FFO 5,845 8,620 Net loss per
diluted share attributable to the Company $ (0.42 ) $ (0.15 ) FFO
per diluted share and unit 0.31 0.59 Adjusted FFO per diluted share
and unit 0.45 0.67
Earnings Call/Webcast
The Company will conduct its fourth quarter 2011 conference call
for investors and other interested parties at 10:00 a.m. Eastern
Time on Tuesday, February 21, 2012. The conference call will be
accessible by telephone and through the Internet. Interested
individuals are invited to listen to the call by telephone at
877-317-6789 (United States) or 866-605-3852 (Canada) or +1
412-317-6789 (International). To participate on the webcast, log on
to www.mhihospitality.com at least 15 minutes before the call to
download the necessary software. For those unable to listen to the
call live, a taped rebroadcast will be available beginning one hour
after completion of the live call on February 21, 2012 through
December 31, 2012. To access the rebroadcast, dial 877-344-7529 and
enter conference number 10008869. A replay of the call also will be
available on the Internet at www.mhihospitality.com until December
31, 2012.
About MHI Hospitality Corporation
MHI Hospitality Corporation is a self-managed and
self-administered lodging REIT focused on the acquisition,
renovation, upbranding and repositioning of upscale to upper
upscale full-service hotels in the Mid-Atlantic and Southern United
States. Currently, the Company’s portfolio consists of investments
in ten hotel properties, nine of which are wholly-owned and
comprise 2,113 rooms. All of the Company’s wholly-owned properties
operate under the Hilton Worldwide, InterContinental Hotels Group
and Starwood Hotels and Resorts brands. The Company has a 25.0
percent interest in the Crowne Plaza Hollywood Beach Resort. MHI
Hospitality Corporation was organized in 2004 and is headquartered
in Williamsburg, Virginia. For more information please visit
www.mhihospitality.com.
Forward-Looking Statements
This news release includes “forward-looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934
and Section 27A of the Securities Act of 1933. Although the Company
believes that the expectations and assumptions reflected in the
forward-looking statements are reasonable, these statements are not
guarantees of future performance and involve certain risks,
uncertainties and assumptions which are difficult to predict and
many of which are beyond the Company’s control. Therefore, actual
outcomes and results may differ materially from what is expressed,
forecasted or implied in such forward-looking statements. Factors
which could have a material adverse effect on the Company’s future
results, performance and achievements, include, but are not limited
to: national and local economic and business conditions, including
the recent economic downturn, that will affect occupancy rates at
the Company’s hotels and the demand for hotel products and
services; risks associated with the hotel industry, including
competition, increases in wages, energy costs and other operating
costs; the magnitude, sustainability and timing of the economic
recovery in the hospitality industry and in the markets in which
the Company operates; the availability and terms of financing and
capital and the general volatility of the securities markets,
specifically, the impact of the recent credit crisis which has
severely constrained the availability of debt financing; risks
associated with the level of the Company’s indebtedness and its
ability to meet covenants in its debt agreements; management and
performance of the Company’s hotels; risks associated with the
conflicts of interest of the Company’s officers and directors;
risks associated with redevelopment and repositioning projects,
including delays and cost overruns; supply and demand for hotel
rooms in the Company’s current and proposed market areas; the
Company’s ability to acquire additional properties and the risk
that potential acquisitions may not perform in accordance with
expectations; the Company’s ability to successfully expand into new
markets; legislative/regulatory changes, including changes to laws
governing taxation of REITs; the Company’s ability to maintain its
qualification as a REIT; and the Company’s ability to maintain
adequate insurance coverage. These risks and uncertainties are
described in greater detail under “Risk Factors” in the Company’s
Annual Report on Form 10-K and subsequent reports filed with the
Securities and Exchange Commission. The Company undertakes no
obligation and does not intend to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. Although the Company believes its
current expectations to be based upon reasonable assumptions, it
can give no assurance that its expectations will be attained or
that actual results will not differ materially.
MHI HOSPITALITY CORPORATION CONSOLIDATED
BALANCE SHEETS December 31, 2011 December 31,
2010 (unaudited) (audited) ASSETS
Investment in hotel properties, net
$
181,469,432
$ 183,898,660 Investment in joint venture 8,966,795 9,464,389 Cash
and cash equivalents 4,409,959 2,992,888 Restricted cash 2,690,391
2,205,721 Accounts receivable 1,702,616 1,868,380 Accounts
receivable-affiliate 24,880 17,375 Prepaid expenses, inventory and
other assets 1,877,456 2,335,783 Notes receivable, net 100,000
100,000 Shell Island lease purchase, net 720,588 1,080,882 Deferred
income taxes 4,061,749 4,746,938 Deferred financing costs, net
3,275,580 872,415
TOTAL
ASSETS $ 209,299,446 $
209,583,431 LIABILITIES Line of credit
$ 25,537,290 $ 75,197,858 Mortgage debt 94,157,825 72,192,253 Loans
payable 9,275,220 4,493,970 Series A Cumulative Redeemable
Preferred Stock, par value $0.01, 27,650 shares authorized, 25,354
and 0 shares issued and outstanding at December 31, 2011 and
December 31, 2010, respectively 25,353,698 — Accounts payable and
accrued liabilities 7,437,246 6,335,145 Advance deposits 453,077
555,902 Dividends and distributions payable 258,772 — Warrant
derivative liability 2,943,075 —
TOTAL LIABILITIES 165,416,203
158,775,128 Commitments and contingencies
EQUITY MHI Hospitality Corporation stockholders’ equity
Preferred stock, par value $0.01; 972,350
shares authorized, 0 shares issued and outstanding at December 31,
2011 and December 31, 2010, respectively
— — Common stock, par value $0.01; 49,000,000 shares authorized;
9,953,786 shares and 9,541,286 shares issued and outstanding at
December 31, 2011 and December 31, 2010, respectively 99,538 95,413
Additional paid in capital 56,911,039 55,682,976 Distributions in
excess of retained earnings (22,074,739 ) (16,837,182
) Total MHI Hospitality Corporation stockholders’ equity 34,935,838
38,941,207 Noncontrolling interest 8,947,405
11,867,096
TOTAL EQUITY 43,883,243
50,808,303
TOTAL LIABILITIES AND EQUITY
$ 209,299,446 $ 209,583,431
MHI HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ended December 31,
Year ended December
31,
2011 2010 2011 2010
REVENUE Rooms department $ 12,964,006 $ 12,305,892 $
56,187,231 $ 53,090,084 Food and beverage department 5,491,370
5,510,269 20,482,457 19,905,509 Other operating departments
1,036,651 1,003,340 4,502,816
4,386,751
Total revenue
19,492,027 18,819,501 81,172,504
77,382,344 EXPENSES Hotel operating expenses
Rooms department 3,793,650 3,594,877 15,841,985 15,090,190 Food and
beverage department 3,514,984 3,491,471 13,617,847 13,248,212 Other
operating departments 117,388 156,789 537,969 697,037 Indirect
7,842,129 7,415,299 31,784,191
30,026,159
Total hotel operating
expenses 15,268,151 14,658,436 61,781,992
59,061,598 Depreciation and amortization 2,241,952
2,125,424 8,702,880 8,506,802 Corporate general and administrative
871,382 702,044 4,025,794
3,389,764
Total operating expenses
18,381,485 17,485,904
74,510,666 70,958,164
NET OPERATING INCOME 1,110,542
1,333,597 6,661,838 6,424,180 Other
income (expense) Interest expense (2,768,983 ) (2,645,167 )
(10,821,815 ) (10,030,517 ) Interest income 2,989 6,527 14,808
22,305 Equity in earnings (loss) of joint venture 100,989 11,842
(60,094 ) 16,931 Unrealized gain (loss) on warrant derivative
(1,575,075 ) — (1,309,075 ) — Unrealized gain on hedging activities
— 69,659 72,649 700,488 Gain (loss) on disposal of assets
(130,460 ) (87,175 ) (128,099 ) (171,304 )
Net loss before taxes (3,259,998 )
(1,310,717 ) (5,569,788 )
(3,037,917 ) Income tax benefit (provision)
(140,372 ) 151,958 (905,455 ) (214,344
)
Net loss (3,400,370 )
(1,158,759 ) (6,475,243 )
(3,252,261 ) Add: Net loss attributable to the
noncontrolling interest 844,849 304,762
1,630,797 869,317
Net loss
attributable to the Company $ (2,555,521 )
$ (853,997 ) $ (4,844,446
) $ (2,382,944 ) Net loss per
share attributable to the Company Basic $ (0.26 ) $ (0.09 ) $ (0.50
) $ (0.25 ) Diluted $ (0.26 ) $ (0.09 ) $ (0.50 ) $ (0.25 )
Weighted average number of shares outstanding Basic 9,824,743
9,541,286 9,676,846 9,447,275 Diluted 9,813,508 9,557,286 9,806,512
9,463,275
MHI HOSPITALITY CORPORATION
KEY OPERATING METRICS
(unaudited)
The following tables illustrate the key operating metrics
for the three months and years ended December 31, 2011 and 2010,
respectively, for the Company’s wholly-owned properties during each
respective reporting period (“consolidated” properties). The table
excludes performance data for the Crowne Plaza Hollywood Beach
Resort, which was acquired through a joint venture in August 2007
and in which the Company has a 25.0% indirect interest.
Consolidated Properties
Three Months Ended December 31,
2011 2010
Variance
Occupancy 60.1 % 60.0 % 0.2 % ADR $ 111.14 $ 105.72 5.1 % RevPAR $
66.75 $ 63.39 5.3 %
Consolidated Properties
Year Ended December 31,
2011 2010
Variance
Occupancy 66.2 % 66.0 % 0.2 % ADR $ 110.24 $ 104.42 5.6 % RevPAR $
72.94 $ 68.93 5.8 %
MHI HOSPITALITY
CORPORATION RECONCILIATION OF NET INCOME (LOSS) TO
FFO, Adjusted FFO, EBITDA, Adjusted EBITDA and Hotel EBITDA
(unaudited) Three months ended December 31,
Year ended December
31,
2011 2010 2011 2010
Net loss attributable to the Company $ (2,555,521 ) $
(853,997 ) $ (4,844,446 ) $ (2,382,944 ) Noncontrolling interest
(844,849 ) (304,762 ) (1,630,797 ) (869,317 ) Depreciation and
amortization 2,241,952 2,125,424 8,702,880 8,506,802 Equity in
depreciation and amortization of joint venture 137,653 136,395
567,803 546,055 Loss on disposal of assets 130,460
87,175 128,099 171,304
FFO (890,305 ) 1,190,235 2,923,539 5,971,900 Unrealized
(gain)/loss on hedging activities(1) (53,790 ) (187,366 ) 77,152
(830,614 ) Unrealized loss on warrant derivative 1,575,075 —
1,309,075
— (Increase) decrease in deferred income taxes (6,292 ) (153,884 )
685,189 174,035 Aborted offering costs — —
582,850 — Adjusted FFO $
624,688 $ 848,985 $ 5,577,805 $ 5,315,321
Weighted average shares outstanding 9,824,743
9,541,286 9,676,846 9,447,275 Weighted average units outstanding
3,114,758 3,356,493 3,257,479
3,446,169 Weighted average shares and
units 12,939,501 12,897,779
12,934,325 12,893,444 FFO per share and
unit $ (0.07 ) $ 0.09 $ 0.23 $ 0.46
Adjusted FFO per share and unit $ 0.05 $ 0.07 $ 0.43
$ 0.41
Three months ended December
31, Year ended December 31, 2011 2010
2011 2010 Net loss attributable to the
Company $ (2,555,521 ) $ (853,997 ) $ (4,844,446 ) $ (2,382,944 )
Noncontrolling interest (844,849 ) (304,762 ) (1,630,797 ) (869,317
) Interest expense 2,768,983 2,645,167 10,821,815 10,030,517
Interest income (2,989 ) (6,527 ) (14,808 ) (22,305 ) Income tax
provision (benefit) 140,372 (151,958 ) 905,455 214,344 Depreciation
and amortization 2,241,952 2,125,424 8,702,880 8,506,802 Equity in
interest expense and depreciation and amortization of joint venture
248,452 248,632 1,012,874 828,466 Loss on disposal of assets
130,460 87,175 128,099
171,304 EBITDA 2,126,860 3,789,154 15,081,072
16,476,867 Unrealized (gain)/loss on hedging activities(1) (53,790
) (187,366 ) 79,265 (830,614 ) Unrealized loss on warrant
derivative 1,575,075 — 1,309,075
— Aborted offering costs — —
582,850 — Adjusted EBITDA 3,648,145
3,601,788 17,052,262 15,646,253 Corporate general and
administrative(2) 871,372 702,044 3,442,944 3,389,764 Equity in
EBITDA of joint venture (295,652 ) (142,767 ) (1,104,694 ) (715,271
) Net lease rental income (113,250 ) (109,250 ) (447,000 ) (443,000
) Other fee income (61,922 ) (51,644 )
(235,493 ) (238,198 ) Hotel EBITDA $ 4,048,693
$ 4,000,171 $ 18,708,019 $ 17,639,548
(1) Includes equity in unrealized (gain)/loss on
hedging activities of joint venture. (2) Excludes aborted offering
costs.
Non-GAAP Financial Measures
The Company considers the non-GAAP measures of FFO (including
FFO per share), EBITDA and hotel EBITDA to be key supplemental
measures of the Company’s performance and should be considered
along with, not alternatives to, net income (loss) as a measure of
the Company’s performance. These measures do not represent cash
generated from operating activities determined by GAAP or amounts
available for the Company’s discretionary use and should not be
considered alternative measures of net income, cash flows from
operations or any other operating performance measure prescribed by
GAAP.
FFO
Industry analysts and investors use Funds from Operations, FFO,
as a supplemental operating performance measure of an equity REIT.
FFO is calculated in accordance with the definition that was
adopted by the Board of Governors of the National Association of
Real Estate Investment Trusts (“NAREIT”). FFO, as defined by
NAREIT, represents net income or loss determined in accordance with
GAAP, excluding extraordinary items as defined under GAAP and gains
or losses from sales of previously depreciated operating real
estate assets, plus certain non-cash items such as real estate
asset depreciation and amortization, and after adjustment for any
noncontrolling interest from unconsolidated partnerships and joint
ventures. Historical cost accounting for real estate assets in
accordance with GAAP implicitly assumes that the value of real
estate assets diminishes predictably over time. Since real estate
values instead have historically risen or fallen with market
conditions, many investors and analysts have considered the
presentation of operating results for real estate companies that
use historical cost accounting to be insufficient by itself.
The Company considers FFO to be a useful measure of adjusted net
income (loss) for reviewing comparative operating and financial
performance because we believe FFO is most directly comparable to
net income (loss), which remains the primary measure of
performance, because by excluding gains or losses related to sales
of previously depreciated operating real estate assets and
excluding real estate asset depreciation and amortization, FFO
assists in comparing the operating performance of a company’s real
estate between periods or as compared to different companies.
Although FFO is intended to be a REIT industry standard, other
companies may not calculate FFO in the same manner as we do, and
investors should not assume that FFO as reported by us is
comparable to FFO as reported by other REITs.
EBITDA
The Company believes that excluding the effect of non-operating
expenses and non-cash charges, and the portion of those items
related to unconsolidated entities, all of which are also based on
historical cost accounting and may be of limited significance in
evaluating current performance, can help eliminate the accounting
effects of depreciation and financing decisions and facilitate
comparisons of core operating profitability between periods and
between REITs, even though EBITDA also does not represent an amount
that accrued directly to shareholders.
Hotel EBITDA
The Company believes that excluding the effect of
corporate-level expenses and non-cash items, and the portion of
these items that relate to unconsolidated entities, provides a more
complete understanding of the operating results over which
individual hotels and operators have direct control. We believe
property-level results provide investors with supplemental
information on the on-going operational performance of our hotels
and the effectiveness of third-party management companies operating
our business on a property-level basis. The Company previously
reported Hotel EBITDA as Adjusted Operating Income.
Adjusted FFO and Adjusted
EBITDA
The Company presents adjusted FFO, including adjusted FFO per
share and unit, and adjusted EBITDA, which adjusts for certain
additional items including any unrealized gain (loss) on its
hedging instruments or warrant derivative, impairment losses,
losses on early extinguishment of debt, aborted offering costs,
costs associated with the departure of executive officers and
acquisition transaction costs. The Company excludes these items as
it believes it allows for meaningful comparisons between periods
and among other REITs and is more indicative of the on-going
performance of its business and assets. The Company’s calculation
of adjusted FFO and adjusted EBITDA may be different from similar
measures calculated by other REITs.
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