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 first quarter ended March 31, 2012. The Company’s
results include the following*:
Three Months ended
March 31, 2012 March 31, 2011 ($ in thousands except
per share data) Total Revenue $ 20,025 $ 18,536 Net loss
attributable to the Company
(2,294
)
(989 ) EBITDA 2,836 3,658 Adjusted EBITDA 4,014 3,585 Hotel
EBITDA 4,448 3,856 FFO
(663
)
917 Adjusted FFO 1,206 829 Net loss per diluted share
attributable to the Company
$
(0.23
)
$
(0.10
)
FFO per diluted share and unit
(0.05
)
0.07 Adjusted FFO per diluted share and unit 0.09 0.06
(*) 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 July 11, 2012 to stockholders
(and unitholders) of record as of June 15, 2012.
- RevPAR. Room revenue per
available room (“RevPAR”) for the Company’s wholly-owned properties
increased 6.7 percent over the first quarter 2011 to $72.52 driven
by a 4.8 percent increase in occupancy.
- Hotel EBITDA. The Company
generated hotel EBITDA of approximately $4.4 million during the
first quarter 2012, an increase of 15.3% or approximately $0.5
million over the first quarter 2011.
- Adjusted EBITDA. The Company
generated adjusted EBITDA of approximately $4.0 million during the
first quarter 2012, an increase of 12.0% or approximately $0.4
million over the first quarter 2011.
- Adjusted FFO. The Company
generated adjusted FFO of approximately $1.2 million during the
first quarter 2012, an increase of 45.4% or approximately $0.4
million over the first quarter 2011.
Andrew M. Sims, Chairman and Chief Executive Officer of MHI
Hospitality Corporation, commented, “The first quarter of 2012 was
one of our most successful reporting periods in the past several
years. First and foremost, we retired the syndicated line of
credit, the constraints of which had become burdensome during the
recent downturn. Our hotels exceeded expectations in the first
quarter, performing at a very high level. We continued to
strengthen our balance sheet by adding liquidity, extending our
debt maturities and releasing our Tampa, Florida asset from any
encumbrances.”
Financing Transactions
- On March 5, 2012, the Company obtained
a $30.0 million mortgage with TD Bank, N.A. on the Hilton
Philadelphia Airport hotel property. The mortgage bears interest at
a rate of 30-day LIBOR plus additional interest of 3.0% per annum
and provides for payments of principal and interest on a monthly
basis under a 25-year amortization schedule. The mortgage’s
maturity date is August 30, 2014, with an extension option until
March 1, 2017, contingent upon the extension or acceptable
replacement of the hotel’s Hilton Worldwide license agreement.
Proceeds of the mortgage were used to extinguish the Company’s
indebtedness under the then-existing syndicated credit facility,
prepay a portion of the Company’s indebtedness under the bridge
loan financing with Essex Equity High Income Joint Investment
Vehicle, LLC and for working capital. With this transaction, the
Company extinguished its syndicated credit facility and released
its Crowne Plaza Tampa Westshore hotel property therefrom, which is
now unencumbered.
Balance Sheet/Liquidity
At March 31, 2012, the Company had approximately $8.1 million of
available cash and cash equivalents, of which approximately $2.1
million was reserved for real estate taxes, insurance, capital
improvements and certain other expenses or otherwise restricted.
The Company had approximately $155.0 million in outstanding debt at
a weighted average interest rate of approximately 6.57%. The
Company also had $5.0 million of availability on its bridge loan
agreement at March 31, 2012.
2012 Outlook
The Company reiterates its previous guidance for 2012 which is
predicated on continued strengthening of the economy and expected
improvements in hotel lodging industry fundamentals. These
projections are based on estimates of occupancy and average daily
rates that are consistent with calendar year 2012 forecasts by
Smith Travel Research for the market segments in which the Company
operates.
The table below reflects the Company’s projection, within a
range, of various financial measures for 2012:
Low Range High
Range Y/E Dec 31, 2012 Y/E Dec 31, 2012 ($ 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 first quarter 2012 conference call
for investors and other interested parties at 10:00 a.m. Eastern
Time on Tuesday, May 1, 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 May 1, 2012 through March 31,
2013. To access the rebroadcast, dial 877-344-7529 and enter
conference number 10012344. A replay of the call also will be
available on the Internet at www.mhihospitality.com until March 31,
2013.
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
recessionary economic conditions existing over the last several
years, that 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 and, if necessary, to refinance or seek an extension of
the maturity of such indebtedness; 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 March 31, 2012
December 31, 2011 (unaudited) (audited)
ASSETS Investment in hotel properties, net
$
180,389,194
$ 181,469,432 Investment in joint venture 9,232,589 8,966,795 Cash
and cash equivalents 6,000,615 4,409,959 Restricted cash 2,133,776
2,690,391 Accounts receivable, net 3,305,814 1,702,616 Accounts
receivable-affiliate 9,984 24,880 Prepaid expenses, inventory and
other assets 2,324,583 1,877,456 Notes receivable, net 100,000
100,000 Shell Island sublease, net 660,539 720,588 Deferred income
taxes 3,889,701 4,061,749 Deferred financing costs, net
3,113,878 3,275,580
TOTAL ASSETS
$
211,160,673
$ 209,299,446 LIABILITIES
Line of credit $ — $ 25,537,290 Mortgage debt 123,758,079
94,157,825 Loans payable 5,775,220 9,275,220 Series A Cumulative
Redeemable Preferred Stock, par value $0.01, 27,650 shares
authorized, 25,480 and 25,354 shares issued and outstanding at
March 31, 2012 and December 31, 2011, respectively 25,480,118
25,353,698 Accounts payable and accrued liabilities 9,921,828
7,437,246 Advance deposits 1,105,297 453,077 Dividends and
distributions payable 259,692 258,772 Warrant derivative liability
4,106,833 2,943,075
TOTAL
LIABILITIES 170,407,067 165,416,203
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 March 31,
2012 and December 31, 2011, respectively
— — Common stock, par value $0.01; 49,000,000 shares authorized;
9,999,786 shares and 9,953,786 shares issued and outstanding at
March 31, 2012 and December 31, 2011, respectively 99,998 99,538
Additional paid in capital 57,020,979 56,911,039 Distributions in
excess of retained earnings (24,569,090 ) (22,074,739
) Total MHI Hospitality Corporation stockholders’ equity 32,551,887
34,935,838 Noncontrolling interest 8,201,719
8,947,405
TOTAL EQUITY 40,753,606
43,883,243
TOTAL LIABILITIES AND EQUITY
$ 211,160,673 $ 209,299,446
MHI HOSPITALITY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Quarter ended
Quarter ended March 31, 2012 March 31, 2011
REVENUE Rooms department $ 13,943,706 $ 12,904,433 Food and
beverage department 4,994,465 4,567,658 Other operating departments
1,086,975 1,063,481
Total
revenue 20,025,146
18,535,572 EXPENSES Hotel operating
expenses Rooms department 3,950,486 3,692,907 Food and beverage
department 3,397,386 3,126,428 Other operating departments 123,493
120,993 Indirect 7,936,089 7,565,885
Total hotel operating expenses 15,407,454
14,506,213 Depreciation and amortization 2,179,963
2,123,477 Corporate general and administrative 1,131,587
957,093
Total operating expenses
18,719,004 17,586,783
NET OPERATING INCOME 1,306,142
948,789 Other income (expense) Interest expense
(3,288,630 ) (2,585,427 ) Interest income 4,683 2,936 Equity income
in joint venture 265,794 289,437 Unrealized gain on hedging
activities — 50,037 Unrealized loss on warrant derivative
(1,163,758 ) — Gain on disposal of assets —
6,200
Net loss before taxes (2,875,769
) (1,288,028 ) Income tax provision
(104,575 ) (48,441 )
Net loss (2,980,344 )
(1,336,469 ) Add: Net loss attributable to the noncontrolling
interest 685,989 347,151
Net
loss attributable to the Company $ (2,294,355
) $ (989,318 ) Basic $
(0.23 ) $ (0.10 ) Diluted $ (0.23 ) $ (0.10 ) Weighted average
number of shares outstanding Basic 9,983,105 9,560,564 Diluted
10,188,737 9,560,564
MHI HOSPITALITY CORPORATION
KEY OPERATING METRICS
(unaudited)
The following table illustrates the key operating metrics
for the three months ended March 31, 2012 and 2011, 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 March 31,
2012 2011
Variance Occupancy 66.1 % 63.1 % 4.8 % Average Daily Rate
(“ADR”) $ 109.71 $ 107.72 1.8 % RevPAR $ 72.52 $ 67.95 6.7 %
MHI HOSPITALITY CORPORATION RECONCILIATION OF NET
INCOME (LOSS) TO FFO, Adjusted FFO, EBITDA, Adjusted EBITDA
and Hotel EBITDA (unaudited)
Three months ended March 31, 2012
2011 Net loss attributable to the Company $
(2,294,355 ) $ (989,318 ) Noncontrolling interest (685,989 )
(347,151 ) Depreciation and amortization 2,179,963 2,123,477 Equity
in depreciation and amortization of joint venture 137,815 136,628
Loss on disposal of assets — (6,200 )
FFO (662,566 ) 917,436 Unrealized (gain)/loss on hedging
activities(1) 14,681 (73,776 ) Unrealized loss on warrant
derivative 1,163,758 — (Increase) decrease in deferred income taxes
218,274 (14,884 ) Loss on early extinguishment of debt
471,396 — Adjusted FFO $ 1,205,543
$ 828,776 Weighted average shares outstanding
9,983,105 9,560,564 Weighted average units outstanding
2,984,839 3,353,439 Weighted average
shares and units 12,967,944 12,914,003
FFO per share and unit $ (0.05 ) $ 0.07
Adjusted FFO per share and unit $ 0.09 $ 0.06
Three months ended March 31, 2012 2011
Net loss attributable to the Company $ (2,294,355 ) $
(989,318 ) Noncontrolling interest (685,989 ) (347,151 ) Interest
expense 3,288,630 2,585,427 Interest income (4,683 ) (2,936 )
Income tax provision 104,575 48,441 Depreciation and amortization
2,179,963 2,123,477 Equity in interest expense and depreciation and
amortization of joint venture 247,515 246,591 Loss on disposal of
assets — (6,200 ) EBITDA 2,835,656
3,658,331 Unrealized (gain)/loss on hedging activities(1) 14,681
(73,776 ) Unrealized loss on warrant derivative 1,163,758
— Adjusted EBITDA 4,014,095 3,584,555
Corporate general and administrative 1,131,587 957,093 Equity in
Adjusted EBITDA of joint venture (527,990 ) (512,288 ) Net lease
rental income (87,500 ) (101,250 ) Other fee income (82,616
) (72,089 ) Hotel EBITDA $ 4,447,576 $
3,856,021
(1) Includes equity in unrealized (gain)/loss on hedging
activities of joint venture.
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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