WILLIAMSBURG, Va., Nov. 8 /PRNewswire-FirstCall/ -- MHI Hospitality
Corporation (Amex: MDH), a lodging real estate investment trust focused on the
ownership of midscale and upscale full-service hotels, today reported results
for the quarter ended September 30, 2005.
Andrew M. Sims, president and CEO of MHI Hospitality Corporation,
commented, "We continue to be encouraged regarding the opportunity for growth
in our portfolio, despite the impact that renovations of our Laurel property
had on the quarterly operating performance. The Laurel property has been
successfully rebranded as a Holiday Inn and we are already seeing benefits
from the conversion to their national reservation system. During the
quarter, we also completed our acquisition of the Jacksonville Hilton, which
we believe will be a solid contributor to the portfolio, and announced the
execution of an agreement to purchase an interest in a planned condominium
hotel property in Hollywood, Florida."
Consolidated Financial Results
For the third quarter, the company reported consolidated total revenue of
$14.6 million and consolidated net income of $0.6 million, or $0.09 per share.
Funds from operations, or FFO, defined as net income excluding extraordinary
items, depreciation and minority interest, was $2.1 million or $0.19 per share
for the quarter. FFO was impacted by the number of rooms out of service during
the quarter due to an accelerated renovation program at the Holiday Inn Laurel
West (formerly, the Best Western Maryland Inn) to mitigate the original
construction delays resulting from high demand for materials from vendors to
the industry.
For the nine month period ended September 30, 2005, the company reported
consolidated total revenue of $41.3 million and consolidated net income of
$2.0 million, or $0.29 per share. FFO for the period was $6.2 million or
$0.59 per share.
FFO is a non-GAAP financial measure within the meaning of the rules of the
Securities and Exchange Commission. Management believes FFO is a key measure
of a REIT's performance and should be considered along with, but not as an
alternative to, net income and cash flow as a measure of our operating
performance. A reconciliation of this non-GAAP financial measure is included
in the accompanying financial tables.
Hotel Operating Performance
For the quarter ended September 30, 2005, the company's seven hotels
generated $14.6 million of total revenue and $3.0 million of hotel operating
profit, defined as total revenue less total hotel operating expenses.
Included in the following table are the key hotel operating statistics for
our seven hotel properties for the three months ended September 30, 2005 and
for the comparable period in 2004. The statistics for the three months ended
September 30, 2005 reflect the results for six hotels for a full quarter and
the Hilton Jacksonville Riverfront Hotel since the date of acquisition. The
statistics for the three months ended September 30, 2004 reflect the results
for a full quarter for seven hotels. All but one of the hotel properties, the
Holiday Inn Laurel West, was under the management of MHI Hotels Services.
Quarter Ended Quarter Ended
Sept. 30, 2005Sept. 30, 2004 Variance
______________ ______________ _______
Occupancy % 66.8% 73.9% (9.7) %
Average Daily Rate ("ADR") $ 101.25 $91.41 10.8 %
Revenue per Available Room
("RevPAR") $67.62 $67.59 -
For the nine months ended September 30, 2005, the company's hotels
generated $41.3 million of total revenue and $9.1 million of hotel operating
profit.
Included in the following table are the key hotel operating statistics for
the seven hotel properties for the nine months ended September 30, 2005 and
for the comparable period in 2004. The statistics for the nine months ended
September 30, 2005 reflect the results for six hotels for nine months and the
Hilton Jacksonville Riverfront Hotel since the date of acquisition. The
statistics for the nine months ended September 30, 2004 reflect the results
for nine months for seven hotels.
Period Ended Period Ended
Sept. 30, 2005Sept. 30, 2004 Variance
______________ ______________ _______
Occupancy % 69.6% 72.5% (2.9)%
Average Daily Rate ("ADR") $ 100.35 $90.92 10.4 %
Revenue per Available Room
("RevPAR") $69.86 $65.91 6.0 %
Balance Sheet and Liquidity As of September 30, 2005, the company had approximately $4.9 million in
cash and cash equivalents, approximately $4.6 million of which is restricted
for capital improvements and certain other expenses. The company has drawn
$2.0 million of its $23.0 million secured revolving line of credit. The
company intends to use the line of credit to acquire or renovate properties,
and for working capital.
The company declared a quarterly dividend of $0.17 per share of common
stock payable to shareholders of record on the close of business Thursday,
December 15, 2005. The dividend will be paid on Wednesday, January 11, 2006.
Portfolio Update
At September 30, 2005, total assets were $117.5 million, including
$104.3 million of net investment in hotel properties; total debt was
$44.9 million, and unit holders' equity was $22.2 million representing
3,907,605 units outstanding.
On July 22, 2005, the company acquired its seventh hotel, the 292-room
Hilton Jacksonville Riverfront in Jacksonville, Florida for an aggregate price
of $22.0 million. The purchase price was funded in part by an $18.0 loan from
an affiliate of the seller, BIT Holdings, Seventeen, Inc., with the remainder
paid in cash utilizing proceeds from the company's initial public offering.
An affiliate of the management company contributed furniture, fixtures and
equipment used in the operation of the Hotel and assigned its leasehold
interest and other rights relating to the property to the purchaser in
exchange for 90,569 units in our operating partnership, MHI Hospitality, L.P.,
valued at approximately $913,000. The hotel will continue to be managed by
MHI Hotels Services LLC.
As previously announced, the company has entered into a purchase and sale
contract with MCZ/Centrum Florida VI Owner, L.L.C. (the "Developer"), to
purchase an interest in a condominium hotel property in Hollywood, Florida,
which formerly operated as the Ambassador Resort. The developer will renovate
the hotel and complete a condominium conversion, after which the company,
through an affiliate, will purchase the commercial spaces of the condominium.
The company will retain the services of MHI Hotels Services LLC to operate the
property, and will seek to obtain a franchise with a well-known national
lodging brand.
The Philadelphia, Williamsburg and Laurel properties are in the final
stages of renovations, and will be completed on time and on budget. The
Williamsburg hotel is being marketed for sale by Jones Lang LaSalle. The
completed Laurel renovation incorporates a Holiday Inn re-branding and the
opening of an Outback Steakhouse.
Outlook and Market Trends
The company reaffirms its previous guidance and anticipates that RevPAR
growth for 2005 will be in the range of 5.0 percent to 6.0 percent when
compared to the accounting predecessor, and 6.0 to 9.0 percent when compared
to our initial hotels in 2004. The company also anticipates that for the full
year 2005, FFO per share will be in the range of $0.80 to $0.86. This
guidance is based upon the assumption of a continuation of the recovery in the
lodging industry.
Reconciliation Table
(In millions, except for per share data) Low Range High Range
Net income available to common shareholders $2.0 $2.4
Depreciation and amortization 3.4 3.4
Minority interests adjustments 3.1 3.3
Funds from Operations (FFO) $8.5 $9.1
FFO per Share (fully converted) $.80 $.86
Earnings Call The company will conduct its quarterly conference call for investors and
other interested parties at 10:30 AM EST on Tuesday, November 8, 2005. The
conference call will be accessible by telephone and through the Internet.
Interested individuals are invited to listen to the call by telephone at
800-819-9193. To participate in the webcast, log on to
http://www.mhihospitality.com or http://www.earnings.com 15 minutes before the
call to download the necessary software.
About MHI Hospitality Corporation
MHI Hospitality Corporation is a self-advised lodging REIT focused on the
acquisition, redevelopment and management of midscale and upscale full service
hotels in the mid-Atlantic and southeastern United States. Currently, the
company's portfolio consists of seven properties for a total of 1,675 rooms,
the majority of which operate under the Hilton and Holiday Inn brands. The
company has been added to the Russell Microcap(TM) Index, which is comprised
of the smallest 1,000 securities in the small-cap Russell 2000(TM) Index along
with the next 1,000 companies, based on a ranking of all U.S. equities by
market capitalization. More information on the company may be found on its
website at http://www.mhihospitality.com.
Forward-Looking Statements
This presentation 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. General economic conditions, including the
timing and magnitude of the recovery in the hospitality industry, future acts
of terrorism, risks associated with the hotel and hospitality business, the
availability of capital, the ability of the company to acquire additional
hotel properties, the timely completion of planned hotel renovations, and
other factors, may affect the company's future results, performance and
achievements. These risks and uncertainties are described in greater detail
in the company's current and periodic filings 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 we believe our
current expectations to be based upon reasonable assumptions, we can give no
assurance that our expectations will be attained or that actual results will
not differ materially.
MHI HOSPITALITY CORPORATION
CONSOLIDATED BALANCE SHEETS
MHI HospitalitySeptember 30, MHI Hospitality
2005 December 31,
(unaudited) 2004
ASSETS Investment in hotel properties, net $104,293,198$78,418,173
Cash and cash equivalents 209,532 8,314,353
Restricted cash 4,644,559 637,627
Accounts receivable 2,024,006 1,161,159
Accounts receivable-affiliate 285,185 400,216
Prepaid expenses, inventory and other assets 2,609,213 1,602,633
Shell Island lease purchase, net 3,191,176 3,500,000
Deferred financing costs, net 194,501 198,083
TOTAL ASSETS $117,451,370 $94,232,244
LIABILITIES
Line of credit $2,000,000 $-
Mortgage loans 42,897,598 25,753,188
Note payable related party - 2,000,000
Accounts payable and accrued expenses 4,348,454
5,177,184
Dividends and distributions payable 1,803,973 -
Advance deposits 408,731 336,302
Due to affiliate - 100,000
TOTAL LIABILITIES 51,458,756 33,366,674
Minority Interest in Operating Partnership 22,178,238 21,118,257
Commitments and contingencies (see Note 9)
OWNERS' EQUITY
Preferred stock, par value $0.01,
1,000,000 shares authorized, 0 shares
issued and outstanding - -
Common stock, par value $0.01,
49,000,000 shares authorized, 6,704,000
shares and 6,004,000 shares issued and
outstanding at June 30, 2005 and
December 31, 2004 67,040 60,040
Additional paid in capital 47,760,347 42,221,495
Accumulated deficit (4,013,011) (2,534,222)
TOTAL OWNERS' EQUITY 43,814,376 39,747,313
TOTAL LIABILITIES AND OWNERS' EQUITY $117,451,370$94,232,244
MHI HOSPITALITY CORPORATION AND PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(unaudited)
MHI The MHI The
Hospitality Predecessor Hospitality Predecessor
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
Revenue Rooms department $9,992,439 $4,633,373 $27,787,533 $13,370,476
Food and beverage
department 3,854,810 1,753,497 11,654,497 5,849,616
Other operating
departments 710,409 262,539 1,841,464 706,085
Total revenue 14,557,658 6,649,409 41,283,494 19,926,177
EXPENSES
Hotel operating
expenses
Rooms department 2,867,253 1,187,221 7,750,127 3,313,711
Food and beverage
department 2,918,404 1,357,578 8,303,727 4,284,888
Other operating
departments 231,354 126,745 579,060 347,126
Indirect 5,531,525 2,585,637 15,593,294 7,460,136
Total hotel
operating
expenses 11,548,536 5,257,181 32,226,208 15,405,861
Depreciation and
amortization 1,117,226 566,905 3,069,133 1,589,531
Corporate general
and administrative 428,051 - 1,393,216 -
Total operating
expenses 13,093,813 5,824,086 36,688,557 16,995,392
OPERATING INCOME 1,463,845 825,323 4,594,937 2,930,785
Other income (expense)
Interest expense (834,470) (565,029) (1,870,080) (1,708,856)
Interest income 18,837 427 120,493 857
Other income - net - 4,496 - (3,501)
Income before minority
interest in operating
partnership and
income taxes 648,212 265,217 2,845,350 1,219,285
Minority Interest in
predecessor company - (18,674) - (357,632)
Minority interest in
operating
partnership (345,222) - (1,129,040) -
Benefit from
income tax 295,052 - 239,337 -
Net income $595,042 $246,543 $ 1,955,647 $861,653
Income per share $0.09 $ - $0.29 $ -
Weighted average number
of shares
outstanding 6,704,000 - 6,655,282 -
MHI HOSPITALITY CORPORATION AND PREDECESSOR
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (FFO)
(unaudited)
MHI The MHI The
Hospitality Predecessor Hospitality Predecessor
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
Net income $595,042 $246,543 $1,955,647 $861,653
Add minority
interest 345,222 18,674 1,129,040 357,632
Add depreciation
and amortization 1,117,226 566,905 3,069,133 1,589,531
FFO $2,057,490 $832,122 $6,153,820 $2,808,816
Weighted average
shares
outstanding 6,704,000 6,655,282
Weighted average
units outstanding 3,886,932 3,840,591
Weighted average
shares and units 10,590,932 10,495,873
FFO per share
and unit $0.19 $0.59
Funds from Operations, FFO, is used by industry analysts and investors 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 minority 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. Thus, NAREIT created FFO as a supplemental measure of
REIT operating performance that excludes historical cost depreciation, among
other items, from GAAP net income. Management believes that the use of FFO,
combined with the required GAAP presentations, has improved the understanding
of the operating results of REITs among the investing public and made
comparisons of REIT operating results more meaningful. Management 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.
SOURCE MHI Hospitality Corporation
-0- 11/08/2005
/CONTACT: Bill Zaiser, Chief Financial Officer of MHI Hospitality
Corporation, +1-301-220-5400, or Georganne Palffy, General Information at
Financial Relations Board, +1-312-640-6768 /
/Web site: http://www.mhihospitality.com /
(MDH)
CO: MHI Hospitality Corporation
ST: Virginia
IN: RLT FIN
SU: ERN CCA ERP
EA
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