This decrease reflects the continued weakness in the travel and hospitality industry and of the economy in general. The sale of the Scottsdale, AZ property in the first quarter of fiscal year 2004 also contributed to the reduction in revenue.
The Trust reported revenue of $5.8 million for the three months ended July 31, 2003, a decrease of 13.5% from $6.7 million for the prior year period.
The Trust's total net loss attributable to Shares of Beneficial Interest for the six months ended July 31, 2003 was $857,000, or $(0.42) per diluted share, compared to a loss of $112,000, or $(0.05) per diluted share, during the first six months of the prior fiscal year. During the six months ended July 31, 2003, the Trust recorded a loss on impairment relating to the Buena Park, CA property of $329,000, of which $169,000 was attributable to Shares of Beneficial Interest.
The Trust's total net loss attributable to Shares of Beneficial Interest for the three months ended July 31, 2003 was $1.0 million, or $(0.50) per diluted share, compared to a loss of $731,000, or $(0.34) per diluted share, during the same three month period in the prior fiscal year.
The Trust had Recurring Funds From Operations (FFO) of $230,000 for the six months ended July 31, 2003. Recurring FFO decreased $417,000 from $647,000 in the prior year period.
FFO is a widely used financial measure of a REIT's performance that excludes most non-cash charges, including depreciation of real estate and gains and losses on disposal of assets. FFO is an alternative non-GAAP financial measure of a company's cash flow and its ability to pay dividends. See reconciliation below.
Six Months Ended Six Months Ended
July 31, 2003 July 31, 2002
(amounts in thousands)
Net loss attributable to Shares
of Beneficial Interest $(857) $(112)
Depreciation of hotel properties 1,755 1,509
Loss on disposal of assets 51 43
Loss on impairment of hotel property 329 --
Minority interest share of
depreciation and loss on disposals (1,048) (793)
Funds from operations $230 $647
Several factors can impact the Trust's FFO, including, but not limited to, changes in occupancy rates, property acquisitions and dispositions, and overall economic conditions.
A purchase agreement was entered into on July 16, 2003 among RRF Limited Partnership (the "Partnership") and CVTI LLC ("CVTI"), an unaffiliated third party, for the purchase by CVTI of the Buena Park, California property for $6,900,000, which sales price was later reduced to $6,500,000 pursuant to an Addendum to the Purchase and Sale Agreement. Of the sales price, $6,300,000 is payable in cash at closing with the Partnership financing the remaining $200,000 at 7% interest per year. As of July 31, 2003, the book value of the Buena Park property was $6,500,000. The property was previously appraised at $7,125,000 in February 2001 by an independent appraiser in connection with a mortgage loan on the property. The outstanding principal balance of that mortgage loan is approximately $3,098,000 and will be paid in full with the sale proceeds. If all contingencies of the agreement are met, the sale will close prior to October 18, 2003. The Trust expects to receive net cash proceeds of approximately $3.2 million upon closing.
On August 21, 2003, the Trust sold its Flagstaff, Arizona property to Flagstaff/Grand Canyon Resort LLC, an affiliate of James Wirth, for its appraised value of $2,775,000. The purchase price was satisfied with cash. The Trust used the proceeds to pay off its $1.5 million line of credit and to reduce its notes payable to an affiliate of Wirth by $1,275,000. In connection with the sale, the Trust recorded a gain of $377,000.
Positioned for the Future
The Trust has been impacted by the general economic slowdown and, specifically, the difficulties in the travel and hospitality industries. The Trust has taken steps, including tight cost controls and the disposition of underperforming assets, which it believes has mitigated the impact of these factors and has positioned the Trust to benefit from a recovery in the travel industry. Although the Trust expects a modest pickup in the economy over the balance of the current year and in the coming year, it continues to take aggressive steps to cut costs and increase sales.
Your Suite Choice(R)-Value Concept
InnSuites Hospitality Trust is a mid-market studio and two-room suite hospitality real estate investment trust with 9 moderate service and full service hotels containing 1,419 hotel suites located in Arizona, New Mexico and Southern California.
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