Supertel Hospitality Reports 2008 First Quarter, Substantial Increases in Revenues, FFO, EBITDA and POI
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Supertel Hospitality Reports 2008 First Quarter, Substantial Increases in Revenues, FFO, EBITDA and POI
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Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2008-05-07
Fixes Rate on $64.6 Million of Floating Rate Debt at 5.9 Percent
Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust (REIT) which owns 125 hotels in 24 states, today announced its results for the first quarter ended March 31, 2008. In addition, the company announced that it had converted $64.6 million of variable rate debt to an average fixed rate of 5.9 percent for the remaining term of 8.8 years. The average amortization on this debt is 18.7 years.
First quarter 2008 revenues rose 44.6 percent to $28 million, compared to the like period in 2007. Reflecting a seasonal occupancy pattern, the company had a net loss available to common shareholders in the 2008 first quarter of $(1.1) million, or $(0.05) per fully diluted share, compared to a loss of $(0.7) million, or $(0.03) per diluted share, in the prior year same quarter.
Funds from operations (FFO) improved 31.4 percent to $2.5 million. FFO per share increased 20 percent to $0.12 per diluted share, compared to year ago of $0.10 per diluted share.
Earnings before interest, taxes, depreciation and amortization (EBITDA) advanced 49.0 percent to $5.6 million.
First Quarter Highlights
-- Acquired 10 hotels for approximately $22.0 million.
-- Attained 6.0 percent increase in revenue per available room (RevPAR)
for the company's same store extended stay hotels.
-- Achieved 0.9 percent increase in same store RevPAR, led by 4.9 percent
RevPAR increase in the company's same store economy hotels.
-- Made progress in labor scheduling and other cost containment
initiatives, partially offset by higher energy costs and weather-related
issues.
"On balance, we had a good first quarter," said Paul J. Schulte, Supertel's chairman, president and CEO. "In our 88 same store hotel portfolio, we had strong RevPAR growth in our extended stay and economy segment hotels, up 6.0 percent and 4.9 percent, respectively, which was offset somewhat by a 4.2 percent decline in the midscale without food and beverage segment. The same store total portfolio occupancy was up 3.4 percent, while average room rate was off 2.3 percent.
"We faced three challenges during the first quarter. The first was weather-related, which impacted many of our Midwest properties, especially our recently acquired Kentucky hotels, where storm activity was unusually high.
"Our second challenge was the timing of Easter and the fact that there were five full weekends in March this year," he noted. "Corporate travelers typically do not travel during Easter week, which is only minimally offset by leisure guests visiting family for the holiday.
The extra weekend, typically the slowest part of the week for our portfolio, also impacted our properties. Fortunately both of these challenges are seasonal, which should not impact us in the second quarter."
Schulte noted that the company's Southeastern hotels are being impacted somewhat by the slowdown in the economy, especially the housing industry. "Our properties are attractive values to workers in the construction trade, which has slowed in recent months, especially in Florida and Georgia, where we have 22 hotels. Our operators are expanding their marketing efforts in those regions to offset the slowdown from that guest segment."
"We saw good progress in cost control in a number of areas," he added. "However, rising energy costs, which impact many hotel areas, continue to increase rapidly."
Schulte noted that the company continued to monitor closely, the balance between rate and occupancy. "Our same store extended-stay occupancy, which we believe is now beginning to see the benefit from the oversight of a dedicated extended-stay director specialist, was up 12.5 percent, which was partially offset by a 5.8 percent decrease in room rate. Our operators have an aggressive rate management program in place and are constantly responding to market conditions to optimize rate and occupancy, with positive success in the first quarter."
The company's 52 same store economy properties enjoyed a 4.2 percent increase in occupancy and a 0.6 percent improvement in room rate. "Economy properties account for approximately 60 percent of our portfolio," Schulte said. "The strong 4.9 percent same store RevPAR growth was particularly gratifying when compared to the overall industry segment's 1.4 percent decline, according to Smith Travel Research.
"Our 29 same store midscale without food and beverage properties had a more difficult first quarter, with RevPAR down by 4.2 percent due to several factors, including severe weather in the East North Central region, overall softening of occupancy in the East Coast markets, and new competition in several Mid-Atlantic and South Atlantic markets. Our operators are actively pursuing additional customer segments, especially government and private contract sectors, as replacement business."
Schulte added, "Our past experience with new competition, especially in larger markets, is that the new property impact gradually diminishes as new rooms are absorbed and normal pricing replaces special pre-opening rates at the new hotel. During this period, we market more aggressively and keep our properties well maintained to recapture our fair share of business as quickly as possible."
Hotel and property operations expenses for the 2008 first quarter rose 45.9 percent to $21.4 million, primarily due to acquisitions. Interest expense increased $1.6 million, primarily as a result of debt incurred for recent hotel acquisitions. First quarter 2008 depreciation and amortization expense rose $1.0 million over the same period a year earlier, also primarily related to hotel acquisitions.
Property operating income (POI), defined as revenue from room rentals and other hotel services less hotel and property operations expenses, improved 40.3 percent to $6.6 million, led largely by new hotel acquisitions. The company believes property operating income (POI) is a useful measure of its hotels' operating efficiencies.
General and administrative expense for the 2008 first quarter was essentially flat at $1.0 million, compared to the like period a year earlier.
Acquisitions
The company acquired 10 hotels with 736 rooms for approximately $22.0 million in January 2008. The properties include two Days Inns in Sioux Falls, South Dakota; a Super 8 in Green Bay, Wisconsin; and seven hotels in Kentucky, consisting of two Comfort Inns, a Comfort Suites, two Days Inns, a Sleep Inn and a Quality Inn.
Schulte said the company continues to carefully monitor the hotel acquisition market. "We see about the same level of deal flow but are beginning to see cap rates improve slightly, which we believe will continue, especially if the lending environment remains difficult. We believe this will create some attractive opportunities, but we will be prudent in our acquisitions."
Balance Sheet
Effective May 1, 2008 the company consummated the conversion of $64.6 million of variable rate debt to an average fixed-rate of 5.9 percent. "This will give us significant rate stability for the next seven to eight years," said Donavon A. Heimes, chief financial officer. "About 68 percent of our $221.2 million debt is now fixed, at favorable long-term rates.
Dividends
Supertel paid a first quarter dividend of $0.12 3/4 per share on April 30, 2008 to common shareholders of record on March 31, 2008. The payment is a 13.3 percent increase from the $0.11 1/4 dividend paid for the same period a year earlier. "The board will continue to evaluate its dividend payout on a quarterly basis," Schulte said.
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