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.
Contacts:
Scott Kucinski, 757-229-5648
Director
- Investor Relations
