|By Marketwired .||
|May 9, 2014 08:00 AM EDT||
TORONTO, ONTARIO -- (Marketwired) -- 05/09/14 -- InnVest Real Estate Investment Trust ("InnVest") (TSX: INN.UN) today announced financial results for the three months ended March 31, 2014.
"We have announced a number of exciting changes for InnVest in the last few months including expanding our capital partners, initiating a process to build a dedicated management team and amending existing agreements to enhance flexibility and alignment," said Edward Pitoniak, InnVest's Managing Director and Trustee. "These efforts demonstrate our commitment to growing unitholder value and positioning InnVest as the leading growth platform in Canada's hospitality industry."
First Quarter Highlights
-- Revenue per available room ("RevPAR") on a same-hotel basis improved 0.5% driven by rate gains and stable occupancies. Excluding hotels under renovation during the quarter or recovering from renovations recently undertaken, RevPAR growth would have exceeded 3.5%; -- Same-hotel revenues improved 1.2% over the prior year. Overall revenues declined $9.4 million reflecting asset sales. Notwithstanding the revenue decline, gross operating profit ("GOP") improved 1.7% to $13.5 million and margins increased 110 basis points; -- Realized an improved net loss of $34.9 million compared to a loss of $41.7 million in the prior period, benefitting from lower non-cash charges. InnVest typically incurs a loss in the first quarter given the seasonality of the portfolio; -- Funds from operations ("FFO") and adjusted funds from operations ("AFFO") improved 12.5% and 11.8% respectively; -- Sold four non-core assets for aggregate gross proceeds of $14.3 million and have commitments to sell six additional hotels for aggregate gross proceeds of $23.9 million; -- Refinanced one mortgage for $68.0 million with incremental proceeds available to repay mortgage maturities in April 2014; -- Subsequent to the end of the quarter, InnVest entered into subordinated loan agreements with KingSett Capital ("KingSett") for $50.0 million including InnVest's option to draw an additional $50.0 million. Subsequently, InnVest called its $70.0 million Series C convertible debentures for early redemption on June 3, 2014; and -- Management also announced its intention to internalize InnVest's asset management function and completed amendments to its hotel management agreement with Westmont.
"The accretive nature of our divestiture program continues to positively contribute to our operating performance. Our active capital investment program is expected to further improve long term cash flow and profitability metrics across the portfolio," said Anthony Messina, InnVest's President and Chief Executive Officer.
The first quarter is historically InnVest's lowest earnings period. Given the seasonality of the portfolio, the first quarter is not reflective of anticipated results for the annual period. Revenues are typically higher in the second and third quarters due to business and leisure travel trends as compared to the first and fourth quarters.
InnVest's Condensed Interim Consolidated Financial Statements and Management's Discussion and Analysis for the three months ended March 31, 2014 and 2013 are available on InnVest's website at www.innvestreit.com.
SELECTED FINANCIAL INFORMATION
The operating statistics relating to gross room revenues for the three months ended March 31, 2014 and 2013 are on a same-hotel basis (124 hotels) and exclude hotels sold since the start of the periods presented.
Occupancy ADR RevPAR % Variance $ Variance $ Variance to 2013 to 2013 to 2013 ----------------------------------------------------------- Ontario 56.5% 1.8 pts $ 105.51 (1.0%) $ 59.60 2.3% Quebec 53.8% (1.1 pts) $ 109.89 2.8% $ 59.15 0.7% Atlantic 45.3% (0.7 pts) $ 108.43 0.8% $ 49.13 (0.6%) Western 59.5% (2.8 pts) $ 158.97 3.1% $ 94.60 (1.5%) ----------------------------------------------------------- Total 54.7% - $ 117.88 0.7% $ 64.42 0.5% -------------------------------- Three Months Three Months Ended Ended March 31, 2014 March 31, 2013 ($000s except per unit amounts) (unaudited) (unaudited) Revenue Hotel properties $ 114,235 $ 123,018 Other real estate properties 196 804 -------------------------------- $ 114,431 $ 123,822 Gross operating profit (1) Hotel properties $ 13,607 $ 13,061 Other real estate properties (113) 202 -------------------------------- $ 13,494 $ 13,263 Net loss and comprehensive loss $ (34,871) $ (41,666) Reconciliation to funds from operations (FFO) Add / (deduct) Depreciation and amortization 20,226 20,712 Deferred income tax recovery - (282) Unrealized changes in the fair value of financial liabilities 8,071 17,228 Distributions included in corporate and administrative expense 36 36 Gain on sale of assets, net (1,056) (1,259) Reversal of previous impairment (575) - Proxy defense and settlement costs 3,594 - -------------------------------- Funds from operations (2) $ (4,575) $ (5,231) -------------------------------- Reconciliation to adjusted funds from operations (AFFO) Add / (deduct) Non-cash portion of mortgage interest expense 566 524 Non-cash portion of convertible debentures interest and accretion 1,148 1,238 FF&E reserve (4,762) (5,175) -------------------------------- AFFO (2) $ (7,623) $ (8,644) -------------------------------- Per unit data - Diluted Net loss and comprehensive loss $ (0.372) $ (0.445) FFO $ (0.049) $ (0.056) AFFO $ (0.081) $ (0.092) Distributions declared $ 0.0999 $ 0.0999 -------------------------------- (1) Gross operating income ("GOP") is defined as revenues less hotel and other real estate properties expenses. (2) Funds from operations and adjusted funds from operations are non-IFRS financial measures of earnings and cash flow commonly used by industry analysts. Non-IFRS financial measures do not have a standardized meaning and are unlikely to be comparable to similar financial measures used by other organizations.
Three months ended March 31, 2014
Excluding hotels impacted by renovations during the quarter, same-hotel RevPAR growth would have exceeded 3.5% with growth across all regions. Same-hotel RevPAR grew 0.5% during the three months ended March 31, 2014.
Hotel divestitures completed since 2013 contributed to the hotel revenue decline of $8.8 million, or 7.1%. Other real estate revenues also declined $0.6 million owing to an office complex sale in May 2013.
Notwithstanding the revenue declines, overall GOP improved 1.7% to $13.5 million, contributing to GOP margins improvement of 110 basis points and highlighting the low yielding nature of assets sold. Utility expenses were up $1.6 million as compared to the prior year, as a result of unusually cold temperatures and higher utility rates during the quarter.
As part of a proxy contest settlement reached in March 2014, InnVest incurred $3.6 million in non-recurring costs, including the reimbursement of customary transaction costs incurred by the parties involved. These costs contributed to the higher corporate and administrative expenses during the first quarter of 2014.
For the three months ended March 31, 2014, InnVest generated an FFO loss of $4.6 million ($0.049 per unit diluted) and an AFFO loss of $7.6 million ($0.081 per unit diluted), improving 12.5% and 11.8%, respectively.
In early 2013, InnVest announced a comprehensive two-year strategic plan based on four key initiatives. This 2013 strategic plan is being reviewed as a consequence of certain changes to InnVest's Board of Trustees (the "Board") following the proxy contest settlement (the "Settlement").
In conjunction with this review, the Board has appointed an interim Managing Director and commenced a search for a permanent full-time Chief Executive Officer to be employed by InnVest and the Chief Financial Officer role will become fully dedicated to the affairs of the REIT during the year.
Following the Settlement, InnVest has completed changes to certain agreements with Westmont Hospitality Canada Limited ("Westmont") as follows:
-- Asset management of InnVest will be internalized effective November 30, 2014 at no cost to InnVest. As a result, InnVest will no longer pay asset management fees to Westmont effective December 1, 2014; -- Amendment and extension of the hotel management agreement on the following terms: -- The term of the agreement was extended until April 21, 2024; -- Westmont no longer has the exclusive right to manage InnVest's acquired hotels. Westmont was released from its non-compete arrangements; -- InnVest has the ability to terminate Westmont's appointment to manage any or all hotels for any reason on 60 days' prior written notice with respect to any or all of the hotels managed by Westmont, subject to a termination payment; -- Effective April 1, 2014, Westmont's base management fee has been reduced to 2.95% from 3.375% and a new incentive fee structure has been adopted that will allow Westmont to earn up to 3.80% of the gross revenue of managed hotels per year.
PORTFOLIO REPOSITIONING PROGRAM
During the first quarter of 2014, four non-core assets were sold for gross proceeds of $14.3 million (net proceeds of $7.4 million). Six hotels are currently under purchase and sale agreements for aggregate gross proceeds of approximately $23.9 million. Since the start of 2013, management has completed or committed transactions of $151.2 million, representing over 80% of its divestiture objectives through the end of 2014.
CAPITAL INVESTMENT PROGRAM
InnVest expects to invest approximately $70 million across its portfolio in 2014, $18.5 million of which was invested in the first quarter of 2014.
Investments underway during the first quarter of 2014 included completing guestroom upgrades at the Delta Prince Edward and Fairmont Palliser, as well as the continuation of phased renovations at the Sheraton Suites Eau Claire.
Through the end of the first quarter of 2014, 35 Comfort Inn hotels have been renovated as part of InnVest's brand revitalization program. Approximately 75% of InnVest's core Comfort Inn portfolio is expected to be renovated by the end of the second quarter, with the balance expected to be renovated following the busier summer travel season.
Additional planned investments in 2014 include the completion of guestroom upgrades at the Delta Winnipeg and the repositioning of one unbranded hotel.
At March 31, 2014, InnVest has total liquidity of $92.6 million (including cash, restricted cash and availability under InnVest's operating line of credit and capital expenditure loan facility). This amount does not include the $50.0 million subordinated term loan (funded in April 2014), nor InnVest's option to draw an additional $50.0 million subordinated facility, from KingSett.
In January 2014, InnVest completed the refinancing of the Sheraton Eau Claire, Calgary for $68.0 million at a fixed interest rate of 5.33% for a 10-year term. Incremental proceeds of $36.4 million were available to help partially repay a $45.4 million mortgage maturity in April 2014.
In March 2014, KingSett was introduced as a strategic capital partner of InnVest, providing InnVest with incremental capital sources to support debt and growth initiatives. Furthermore, KingSett may purchase assets from InnVest at fair market value, subject to the Board's approval.
On April 24, 2014, InnVest entered into and closed a four-year credit agreement with KingSett for a $50.0 million subordinated term loan facility. KingSett has also provided InnVest with an option to draw an additional $50.0 million subordinated non-revolving stand-by liquidity facility. The loans are supported by a general security agreement. Annual interest payments are expected to include cash payments of 5.75% and InnVest Units equivalent to 3% for the $50 million subordinated loan facility (3.75% for the $50 million subordinated liquidity facility, if drawn).
Proceeds from this financing will be used for the early redemption of InnVest's $70.0 million 5.85% Series C Debentures on June 3, 2014. Following this redemption, InnVest will not have any significant debt maturities until July 2015.
Asset sales over the past year have contributed to overall mortgage debt repayment and interest savings. Proforma transactions announced or completed following the end of the quarter, InnVest's leverage would have approximated 65.5% at March 31, 2014 (47.7% excluding convertible debentures).
The hospitality industry is highly correlated to the economy and as such, uncertain global and domestic economic conditions continue to impact the Canadian lodging industry. InnVest's broad, diversified portfolio remains a key advantage in the current environment. Fundamentals for the Canadian lodging industry remain favourable, with improving demand expectations through the balance of the year and a low supply outlook.
Through the end of 2014, InnVest expects to continue its portfolio repositioning strategy of divesting of low-yielding assets and reinvesting proceeds generated to undertake an extensive capital program to enhance its product offering at a number of select hotels. While impacting near-term operating results caused by displacement, these targeted investments are expected to improve the portfolio's competitive positioning and operating performance through increased occupancies and average daily rates over the longer term.
InnVest is committed to enhancing unitholder alignment and growing unitholder value. InnVest's strategy to reduce debt (including reducing InnVest's reliance on dilutive securities), reposition its portfolio and invest in core assets is expected to enhance the stability and growth of the portfolio's long-term cash flows and valuation.
QUARTERLY CONFERENCE CALL
Management will host a conference call on Friday May 9, 2014 at 11:00 a.m. Eastern time to discuss the performance of InnVest. Investors are invited to access the call by dialing 416-340-2219 or 1-866-225-0198. You will be required to identify yourself and the organization on whose behalf you are participating. A recording of this call will be made available May 9, 2014 beginning at 1:00 pm through to May 22, 2014. To access the recording please call 905-694-9451 or 1-800-408-3053 and use the reservation number 4381103#.
Statements contained in this press release that are not historical facts are forward-looking statements. These forward-looking statements are based on current expectations and involve risks and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are InnVest's capital requirements and available sources of funds, changes to InnVest's business strategy (including InnVest's ability to divest of assets, its intent to internalize asset management and return expectations on capital investments completed); real estate investment risks, hotel industry risks, competition and the status of InnVest as a REIT for Canadian federal income tax purposes in any year. These and other factors are discussed in InnVest's annual information form for the year ended December 31, 2013, which is available at www.sedar.com. InnVest disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable securities law.
InnVest Real Estate Investment Trust is an unincorporated open-ended real estate investment trust which owns a portfolio of 124 hotels across Canada representing approximately 15,500 guest rooms operated under internationally recognized brands. InnVest also holds a 50% interest in Choice Hotels Canada Inc., one of the largest franchisors of hotels in Canada.
InnVest's units and convertible debentures trade on the Toronto Stock Exchange (the "TSX") under the symbols INN.UN, INN.DB.C, INN.DB.D, INN.DB.E, INN.DB.F and INN.DB.G.
InnVest Real Estate Investment Trust
Vice President, Finance and Investor Relations
(905) 206-7114 (FAX)
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
Apr. 25, 2017 06:30 AM EDT
SYS-CON Events announced today that Hitachi, the leading provider the Internet of Things and Digital Transformation, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Hitachi Data Systems, a wholly owned subsidiary of Hitachi, Ltd., offers an integrated portfolio of services and solutions that enable digital transformation through enhanced data management, governance, mobility and analytics. We help globa...
Apr. 25, 2017 06:15 AM EDT Reads: 763
In his session at 20th Cloud Expo, Scott Davis, CTO of Embotics, will discuss how automation can provide the dynamic management required to cost-effectively deliver microservices and container solutions at scale. He will discuss how flexible automation is the key to effectively bridging and seamlessly coordinating both IT and developer needs for component orchestration across disparate clouds – an increasingly important requirement at today’s multi-cloud enterprise.
Apr. 25, 2017 06:00 AM EDT Reads: 4,256
Developers want to create better apps faster. Static clouds are giving way to scalable systems, with dynamic resource allocation and application monitoring. You won't hear that chant from users on any picket line, but helping developers to create better apps faster is the mission of Lee Atchison, principal cloud architect and advocate at New Relic Inc., based in San Francisco. His singular job is to understand and drive the industry in the areas of cloud architecture, microservices, scalability ...
Apr. 25, 2017 05:00 AM EDT Reads: 3,346
SYS-CON Events announced today that CollabNet, a global leader in enterprise software development, release automation and DevOps solutions, will be a Bronze Sponsor of SYS-CON's 20th International Cloud Expo®, taking place from June 6-8, 2017, at the Javits Center in New York City, NY. CollabNet offers a broad range of solutions with the mission of helping modern organizations deliver quality software at speed. The company’s latest innovation, the DevOps Lifecycle Manager (DLM), supports Value S...
Apr. 25, 2017 05:00 AM EDT Reads: 152
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...
Apr. 25, 2017 05:00 AM EDT Reads: 804
SYS-CON Events announced today that Super Micro Computer, Inc., a global leader in compute, storage and networking technologies, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Supermicro (NASDAQ: SMCI), the leading innovator in high-performance, high-efficiency server technology, is a premier provider of advanced server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/...
Apr. 25, 2017 04:30 AM EDT Reads: 1,985
Join IBM November 2 at 19th Cloud Expo at the Santa Clara Convention Center in Santa Clara, CA, and learn how to go beyond multi-speed it to bring agility to traditional enterprise applications. Technology innovation is the driving force behind modern business and enterprises must respond by increasing the speed and efficiency of software delivery. The challenge is that existing enterprise applications are expensive to develop and difficult to modernize. This often results in what Gartner calls ...
Apr. 25, 2017 04:30 AM EDT Reads: 2,989
Amazon has gradually rolled out parts of its IoT offerings in the last year, but these are just the tip of the iceberg. In addition to optimizing their back-end AWS offerings, Amazon is laying the ground work to be a major force in IoT – especially in the connected home and office. Amazon is extending its reach by building on its dominant Cloud IoT platform, its Dash Button strategy, recently announced Replenishment Services, the Echo/Alexa voice recognition control platform, the 6-7 strategic...
Apr. 25, 2017 04:15 AM EDT Reads: 4,991
All organizations that did not originate this moment have a pre-existing culture as well as legacy technology and processes that can be more or less amenable to DevOps implementation. That organizational culture is influenced by the personalities and management styles of Executive Management, the wider culture in which the organization is situated, and the personalities of key team members at all levels of the organization. This culture and entrenched interests usually throw a wrench in the work...
Apr. 25, 2017 04:15 AM EDT Reads: 165
With billions of sensors deployed worldwide, the amount of machine-generated data will soon exceed what our networks can handle. But consumers and businesses will expect seamless experiences and real-time responsiveness. What does this mean for IoT devices and the infrastructure that supports them? More of the data will need to be handled at - or closer to - the devices themselves.
Apr. 25, 2017 03:45 AM EDT Reads: 191
New competitors, disruptive technologies, and growing expectations are pushing every business to both adopt and deliver new digital services. This ‘Digital Transformation’ demands rapid delivery and continuous iteration of new competitive services via multiple channels, which in turn demands new service delivery techniques – including DevOps. In this power panel at @DevOpsSummit 20th Cloud Expo, moderated by DevOps Conference Co-Chair Andi Mann, panelists will examine how DevOps helps to meet th...
Apr. 25, 2017 03:45 AM EDT Reads: 949
@GonzalezCarmen has been ranked the Number One Influencer and @ThingsExpo has been named the Number One Brand in the “M2M 2016: Top 100 Influencers and Brands” by Analytic. Onalytica analyzed tweets over the last 6 months mentioning the keywords M2M OR “Machine to Machine.” They then identified the top 100 most influential brands and individuals leading the discussion on Twitter.
Apr. 25, 2017 03:45 AM EDT Reads: 800
Building a cross-cloud operational model can be a daunting task. Per-cloud silos are not the answer, but neither is a fully generic abstraction plane that strips out capabilities unique to a particular provider. In his session at 20th Cloud Expo, Chris Wolf, VP & Chief Technology Officer, Global Field & Industry at VMware, will discuss how successful organizations approach cloud operations and management, with insights into where operations should be centralized and when it’s best to decentraliz...
Apr. 25, 2017 03:30 AM EDT Reads: 181
Judith Hurwitz is president and CEO of Hurwitz & Associates, a Needham, Mass., research and consulting firm focused on emerging technology, including big data, cognitive computing and governance. She is co-author of the book Cognitive Computing and Big Data Analytics, published in 2015. Her Cloud Expo session, "What Is the Business Imperative for Cognitive Computing?" is scheduled for Wednesday, June 8, at 8:40 a.m. In it, she puts cognitive computing into perspective with its value to the busin...
Apr. 25, 2017 03:30 AM EDT Reads: 3,562