NORFOLK, NE -- 05/05/08 --
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.
About Supertel Hospitality, Inc.
As of May 5, 2008, Supertel Hospitality, Inc. (NASDAQ: SPPR) owns 125
hotels comprised of 10,886 rooms in 24 states. The company's hotel
portfolio includes Super 8, Comfort Inn/Comfort Suites, Hampton Inn,
Holiday Inn Express, Supertel Inn, Days Inn, Ramada Limited, Guest House
Inn, Sleep Inn, Savannah Suites and Masters Inn. This diversity enables the
company to participate in the best practices of each of these respected
hospitality partners. The company specializes in limited-service hotels,
which do not normally offer food and beverage service. For more information
or to make a hotel reservation, visit www.supertelinc.com.
Certain matters within this press release are discussed using
forward-looking language as specified in the Private Securities Litigation
Reform Act of 1995, and, as such, may involve known and unknown risks,
uncertainties and other factors that may cause the actual results or
performance to differ from those projected in the forward-looking
statement. These risks are discussed in the company's filings with the
Securities and Exchange Commission.
SELECTED FINANCIAL DATA:
The following table sets forth the company's balance sheet as of March 31,
2008 and December 31, 2007. The company owned 125 hotels at March 31, 2008
and owned 115 hotels at December 31, 2007, (in thousands, except share
data).
As of
March 31, December 31,
2008 2007
----------- -----------
(unaudited)
ASSETS
Investments in hotel properties $ 401,789 $ 376,240
Less accumulated depreciation 78,823 75,295
----------- -----------
322,966 300,945
Cash and cash equivalents 1,845 1,166
Accounts receivable 2,466 2,242
Prepaid expenses and other assets 4,334 4,725
Deferred financing costs, net 1,921 1,947
----------- -----------
$ 333,532 $ 311,025
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable, accrued expenses and other
liabilities $ 14,519 $ 12,401
Long-term debt 221,173 196,840
----------- -----------
235,692 209,241
----------- -----------
Minority interest in consolidated partnerships,
redemption value $8,481 and $9,544 9,953 10,178
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 40,000,000
shares authorized; 924,489 and 932,026 shares
outstanding, liquidation preference of $9,245
and $9,320 9 9
Common stock, $.01 par value, 100,000,000 shares
authorized; 20,709,466 and 20,696,126 shares
outstanding. 207 207
Additional paid-in capital 112,792 112,792
Distributions in excess of retained earnings (25,121) (21,402)
----------- -----------
87,887 91,606
----------- -----------
COMMITMENTS AND CONTINGENCIES
$ 333,532 $ 311,025
=========== ===========
The following table sets forth the Company's unaudited results of
operations for the three months ended March 31, 2008 and 2007,
respectively, (in thousands, except per share data).
Three Months Ended
March 31,
Unaudited
------------------------
2008 2007
----------- -----------
REVENUES
Room rentals and other hotel services $ 27,975 $ 19,348
----------- -----------
EXPENSES
Hotel and property operations 21,418 14,676
Depreciation and amortization 3,579 2,584
General and administrative 955 924
----------- -----------
25,952 18,184
----------- -----------
EARNINGS BEFORE NET GAIN
ON DISPOSITIONS OF
ASSETS, OTHER INCOME, INTEREST EXPENSE,
MINORITY INTEREST AND INCOME TAXES 2,023 1,164
Net gain on dispositions of assets 2 -
Other income 31 35
Interest expense (3,660) (2,099)
Minority interest 13 (43)
----------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (1,591) (943)
Income tax benefit 698 550
----------- -----------
NET LOSS (893) (393)
Preferred stock dividend (186) (290)
NET LOSS AVAILABLE ----------- -----------
TO COMMON SHAREHOLDERS $ (1,079) $ (683)
=========== ===========
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS
EPS Basic $ (0.05) $ (0.03)
=========== ===========
EPS Diluted $ (0.05) $ (0.03)
=========== ===========
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Unaudited - In thousands, except per share data:
Three months
ended March 31,
2008 2007
----------- -----------
Weighted average shares outstanding for:
calculation of earnings per share - basic 20,701 19,646
=========== ===========
calculation of earnings per share - diluted 20,701 19,646
=========== ===========
Weighted average shares outstanding for:
calculation of FFO per share - basic 20,701 19,646
=========== ===========
calculation of FFO per share - diluted 22,347 19,664
=========== ===========
Reconciliation of weighted average number of
shares for EPS diluted to FFO per share diluted:
EPS diluted shares 20,701 19,646
Common stock issuable upon exercise or conversion
of:
Options 1 18
Series A Preferred Stock 1,645 -
----------- -----------
FFO per share diluted shares 22,347 19,664
=========== ===========
Reconciliation of net loss to FFO
Net loss available to common shareholders $ (1,079) $ (683)
Depreciation and amortization 3,579 2,584
Net gain on disposition of assets (2) -
----------- -----------
FFO available to common shareholders $ 2,498 $ 1,901
=========== ===========
FFO per share - basic $ 0.12 $ 0.10
=========== ===========
FFO per share - diluted $ 0.12 $ 0.10
=========== ===========
FFO is a non-GAAP financial measure. We consider FFO to be a market
accepted measure of an equity REIT's operating performance, which is
necessary, along with net earnings (loss), for an understanding of our
operating results. FFO, as defined under the National Association of Real
Estate Investment Trusts (NAREIT) standards, consists of net income
computed in accordance with accounting principles generally accepted in the
United States of America ("GAAP"), excluding gains (or losses) from sales
of real estate assets, plus depreciation and amortization of real estate
assets. We believe our method of calculating FFO complies with the NAREIT
definition. FFO does not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt
service obligations, or other commitments and uncertainties. FFO should
not be considered as an alternative to net income (loss) (computed in
accordance with GAAP) as an indicator of our liquidity, nor is it
indicative of funds available to fund our cash needs, including our ability
to pay dividends or make distributions. All REITs do not calculate FFO in
the same manner; therefore, our calculation may not be the same as the
calculation of FFO for similar REITs.
We use FFO as a performance measure to facilitate a periodic
evaluation of our operating results relative to those of our peers, who,
like us, are typically members of NAREIT. We consider FFO a useful
additional measure
of performance for an equity REIT because it facilitates an understanding
of the operating performance of our properties without giving effect to
real estate depreciation and amortization, which assume that the value of
real estate assets diminishes predictably over time. Since real estate
values have historically risen or fallen with market conditions, we believe
that FFO provides a meaningful indication of our performance.
Unaudited-in thousands
Three months ended
2008 2007
----------- -----------
RECONCILIATION OF NET LOSS TO EBITDA
Net loss available to common shareholders $ (1,079) $ (683)
Interest 3,660 2,099
Income tax benefit (698) (550)
Depreciation and amortization 3,579 2,584
Minority interest (13) 43
Preferred stock dividend 186 290
----------- -----------
EBITDA (1) $ 5,635 $ 3,783
=========== ===========
EBITDA is a non-GAAP financial measure. With respect to EBITDA, we believe
that excluding the effect of non-operating expenses and non-cash charges,
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 amortization, 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 accrues directly to common shareholders.
EBITDA doesn't represent cash generated from operating activities
determined by GAAP and should not be considered as an alternative to net
income, cash flow from operations or any other operating performance
measure prescribed by GAAP. EBITDA is not a measure of our liquidity, nor
is EBITDA indicative of funds available to fund our cash needs, including
our ability to make cash distributions. Neither measurement reflects cash
expenditures for long-term assets and other items that have been and will
be incurred. EBITDA may include funds that may not be available for
management's discretionary use due to functional requirements to conserve
funds for capital expenditures, property acquisitions, and other
commitments and uncertainties. To compensate for this, management
considers the impact of these excluded items to the extent they are
material to operating decisions or the evaluation of our operating
performance.
The following table sets forth the operations of the Company's hotel
properties for the three months ended March 31, 2008 and 2007,
respectively. The Company owned 125 hotels at March 31, 2008. This
presentation includes non-GAAP financial measures. The Company believes
that the presentation of hotel property operating results (POI) is helpful
to investors, and represents a more useful description of its core
operations, as it better communicates the comparability of its hotels'
operating results.
Unaudited-In thousands, except statistical data: Three months
ended March 31,
2008 2007
--------- ---------
Same Store:
Revenue per available room (RevPAR):
Midscale w/o F&B $ 38.99 $ 40.69
Economy $ 26.26 $ 25.03
Extended Stay $ 17.53 $ 16.53
--------- ---------
Total $ 28.95 $ 28.70
========= =========
Average daily room rate (ADR):
Midscale w/o F&B $ 69.36 $ 70.07
Economy $ 47.57 $ 47.27
Extended Stay $ 25.00 $ 26.55
--------- ---------
Total $ 49.96 $ 51.15
========= =========
Occupancy percentage:
Midscale w/o F&B 56.2% 58.1%
Economy 55.2% 53.0%
Extended Stay 70.1% 62.3%
--------- ---------
Total 58.0% 56.1%
========= =========
Unaudited-In thousands, except statistical data:
Three months
ended March 31,
2008 2007
--------- ---------
Total Hotels:
Revenue per available room (RevPAR): $ 27.40 $ 28.83
Average daily room rate (ADR): $ 47.95 $ 50.80
Occupancy percentage: 57.1% 56.7%
Revenue from room rentals and other hotel services
consists of:
Room rental revenue $ 27,137 $ 18,736
Telephone revenue 99 111
Other hotel service revenues 739 501
--------- ---------
Total revenue from room rentals and other hotel
services $ 27,975 $ 19,348
========= =========
Room rentals and other hotel services
Same Store locations $ 18,378 $ 18,064
Acquisitions 9,597 1,284
--------- ---------
Total room rental and other hotel services $ 27,975 $ 19,348
========= =========
Hotel and property operations expense
Same Store locations $ 14,039 $ 13,845
Acquisitions 7,379 831
--------- ---------
Total hotel and property operations expense $ 21,418 $ 14,676
========= =========
Property Operating Income ("POI")
Same Store locations $ 4,339 $ 4,219
Acquisitions 2,218 453
--------- ---------
Total property operating income $ 6,557 $ 4,672
========= =========
POI as a percentage of revenue from room rentals
and other hotel services
Same Store locations 23.6% 23.4%
Acquisitions 23.1% 35.3%
--------- ---------
Total POI as a percentage of revenue 23.4% 24.1%
========= =========
* Same Store reflects 88 hotels owned as of January 1, 2007 for YTD 2008
and 2007. Hotel acquisitions which were excluded from same store
calculations for the three months ended March 31, 2008 and 2007 were 37
hotels acquired during 2007 and 2008. The excluded properties were not
owned by the Company throughout each of the periods presented and therefore
are excluded from the same store calculations.
Unaudited-In thousands, except statistical data:
Three months
ended March 31,
2008 2007
--------- ---------
RECONCILIATION OF NET LOSS TO POI
Net loss $ (893) $ (393)
Depreciation and amortization 3,579 2,584
Net gain on disposition of assets (2) -
Other income (31) (35)
Interest expense 3,660 2,099
Minority interest (13) 43
General and administrative expense 955 924
Income tax benefit (698) (550)
--------- ---------
POI $ 6,557 $ 4,672
========= =========
Contact:
Donavon A. Heimes
Supertel Hospitality
Chief financial officer
402.371.2520
Email Contact
Jerry Daly, Carol McCune
Daly Gray
(Media Contact)
703.435.6293
Email Contact
