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Humphrey Hospitality Trust, Inc. Reports First Quarter 2003 Results |
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COLUMBIA, Md. May 12, 2003 Humphrey Hospitality Trust, Inc. (NASDAQ:HUMP), a self-advised real estate investment trust, today announced its results for the first quarter ended March 31, 2003. |
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Earnings per share ("EPS") represented a loss of $2.7 million, or $.22 per basic and diluted share, for the first quarter of 2003, compared to a loss of $1.9 million, or $.17 per basic and diluted share, for the same quarter last year.
Funds from operations ("FFO") were $107,000, or $.01 per basic and diluted share for the quarter ended March 31, 2003, as compared to $611,000, or $.05 per basic and diluted share, reported for the same quarter in 2002.
The comparable, same-store average daily rate ("ADR") for the quarter ended March 31, 2003 improved by $1.02 (2.1%), to $48.82, while same-store occupancy fell 240 basis points, to 52.4%. Comparable, same-store revenue per available room ("RevPAR") for the first quarter 2003 was $25.59, down 2.3% relative to the same quarter 2002.
The reduction in first quarter 2003 earnings and FFO was driven substantially by the 2.3% decline in same-store RevPAR (approximately $301,000, or $.03 per basic and diluted share), as well as increases in certain same-store hotel operating costs.
While the Company's sale of 10 hotels during 2002 contributed to lower hotel profit contribution ($315,000), a marked reduction in interest expense during the 2003 first quarter more than compensated for the sale of these hotel properties.
The interest savings were attributed to the accelerated pay-off of long-term debt ($370,000), and a 50 basis point reduction in weighted average interest rates, to 6.91%, during the 2003 first quarter ($117,000).
Increased same-store operating expenses were noted in the cost categories of hotel labor ($141,000 or 3%), due principally to the expiration of a company-wide wage freeze in the third quarter of 2002; insurance ($126,000 or 43%), due to escalating premiums, loss retention limits, and deductibles; and utilities ($89,000 or 11%), resulting from the higher utilization of natural gas and electricity over an extended period of severe weather during the 2003 first quarter.
"Our third-party management company has successfully increased ADR without adversely compromising demand during the 2003 first quarter. While a reduction in occupancy had occurred during this period, we believe it was substantially due to a sharp fall-off in demand during periods of severe inclement weather in February 2003. The non-recurring nature of demand generators in certain markets has also contributed to reductions in comparable occupancy. We are very pleased that same-store RevPAR has been held to a 2.3% decline in an industry where substantially higher declines in RevPAR have become the norm", stated Randy Whittemore, the Company's President and CEO.
The net loss reported for the 2003 first quarter includes an impairment charge of $940,000 ($.08 per basic and diluted share) related to losses expected on the planned sale of the Company's Super 8 hotels in Plano, TX and Allentown, PA.
An impairment charge was also recorded in the 2002 first quarter ($588,000 or $.05 per basic and diluted share) related to losses expected on the sale of the Company's Bedford, TX Super 8 hotel (subsequently sold in May 2002).
Hotel dispositions subsequently completed at the start of the Company's 2003 second quarter (Bullhead City, AZ - April 2003, and College Station, TX - May 2003) have resulted in gains on sale before any built-in gain taxes ("Gain on Sale") of $1.0 million, fully offsetting the impairment charges reported during the first quarter 2003.
Additional Gain on Sale (approximately $851,000) is expected from the pending disposition of the Company's Grapevine, TX Super 8 hotel.
"We believe our strategy of culling non-core assets from our portfolio of hotels has been highly successful to date, and we plan to continue to execute on this strategy over the coming months. After consideration of the pending Grapevine hotel sale, our Company expects to realize a cumulative Gain on Sale of $640,000, from the sale of 15 hotels, since first announcing its disposition strategy in late 2001. Cash proceeds generated from closed and pending sales are expected to represent a cumulative $28.4 million reduction in long-term debt, and more importantly, our financial capacity to sustain business operations during any prolonged downturn in the lodging industry has improved substantially" said Mr. Whittemore.
The Company recently redeemed approximately 78,000 (21%) of the preferred operating partnership units (the "Preferred Units") it issued in the acquisition of five hotels in late 2000.
While the Company borrowed $780,000 to fund the repurchase of the Preferred Units, at an interest rate of 5.75%, the interest payable on this new debt is well below the 11% preferred dividend otherwise payable to the Preferred Unit holders. As a result, the redemption of the Preferred Units will serve to increase taxable income allocable to common stock shareholders of the Company.
As many as 102,000 (27%) additional Preferred Units are to be redeemed in June 2003, and the Company has agreed to redeemed substantially all of the remaining Preferred Units at any time, at the option of the Preferred Unit holders.
"We are guardedly optimistic that with the end of the Iraq war, and an improving U.S. economy, we are close to turning the corner for improved hotel operating conditions. However, as a result of continued volatility in lodging demand at this time, we will further defer any announcement regarding dividends until a more certain conclusion can be made about our earnings potential for the year 2003" concluded Mr. Whittemore.
Humphrey Hospitality Trust, Inc. specializes in limited-service lodging. The Company owns 79 hotels in 18 mid-western and eastern states.
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