WILLIAMSBURG, Va., Aug. 7 /PRNewswire-FirstCall/ -- MHI Hospitality
Corporation (NASDAQ:MDH) ("the Company"), a self-advised lodging
real estate investment trust (REIT), today reported its
consolidated results for the second quarter ended June 30, 2009.
HIGHLIGHTS: -- Funds from Operations ("FFO") of approximately $0.23
per share for second quarter -- Same-store operating margins
improved 4 percentage points over second quarter 2008 -- Same-store
hotel operating expenses decreased approximately $2.2 million or
16.6% over second quarter 2008 as a result of the Company's expense
control and cost-cutting initiatives -- Operating margins increased
12.8% over second quarter 2008 -- Total revenue increased 0.4 %
over second quarter 2008 -- Total assets of approximately $220.5
million at June 30, 2009, versus approximately $194.1 million at
end of second quarter 2008 Andrew M. Sims, President and CEO of MHI
Hospitality Corporation, commented, "Since our inception as a
public company nearly five years ago and throughout this
extraordinarily difficult business environment, we have
consistently executed on our business model. Today, we have in
place a well-located platform of hotel assets that is also
substantially repositioned, with substantially all construction
risk eliminated." Added Sims, "We remain committed over the near
term to three key objectives. First, we are expediting the ramp-up
and marketing of this significantly improved asset base. Second, at
both the property and corporate levels, we continue to put in place
operating efficiencies as well as stringent expense controls that
have produced improved operating margins. And third, we are
actively seeking viable sources of capital in order to strengthen
the balance sheet. We believe we have turned the corner in terms of
operating metrics and, looking ahead, we expect to see improvements
in those metrics for the balance of the year." Operating Results
The Company reported consolidated total revenue of approximately
$20.5 million for the three-month period ended June 30, 2009, an
increase of 0.4% over the three-month period ended June 30, 2008.
For the second quarter, the Company also reported consolidated net
income of approximately $0.1 million, or $0.02 per share, as
compared to consolidated net income of approximately $1.3 million,
or $0.19 per share, for the comparable 2008 period. The Company
reported net operating income for the same period of approximately
$3.0 million, approximately the same amount of net operating income
for the second quarter of 2008. During the second quarter, FFO was
approximately $2.4 million, or $0.23 per share, compared to
approximately $3.9 million, or $0.37 per share, for the second
quarter of 2008. During the quarter, the Company reported an
unrealized gain on the value of its interest rate swap of
approximately $0.3 million as compared to an unrealized gain on the
value of its interest rate swap of approximately $0.7 million for
the second quarter of 2008. The interest rate swap is required by
the Company's lenders on its revolving credit facility. During the
quarter ended June 30, 2008, the Company recognized a gain of $0.75
million related to the purchase of a portion of the mortgage loan
on the Crowne Plaza Hollywood Beach Resort by the joint venture
that owns the property. The Company owns a 25.0% indirect interest
in the joint venture. It should be noted that the unrealized gain
on the value of the Company's interest rate swap as well as the
gain related to the Hollywood financing transaction contributed
approximately $0.03 per share to FFO for the second quarter 2009 as
compared to contributing approximately $0.14 per share to FFO for
the second quarter 2008. FFO is a non-GAAP financial measure within
the meaning of the rules of the Securities and Exchange Commission.
The Company defines FFO as net income excluding extraordinary
items, depreciation and minority interest. Management believes FFO
is a key measure of a REIT's performance and should be considered
along with, but not as an alternative to, net income and cash flow
as a measure of the Company's operating performance. A
reconciliation of this non-GAAP financial measure is included in
the accompanying financial tables. Portfolio Operating Performance
The following tables illustrate the key operating metrics for the
three months and six months ended June 30, 2009 and 2008 for the
properties owned during each respective reporting period
("consolidated" properties) as well as the six properties in the
portfolio that were not under development and under the Company's
control during all of 2008 and the six months ended June 30, 2009
("same-store" properties). Accordingly, the same store data does
not reflect the performance of the Sheraton Louisville Riverside,
which opened in May 2008, the Crowne Plaza Tampa Westshore, which
opened in March 2009, or the Crowne Plaza Hampton Marina, which was
acquired in April 2008. Neither table includes 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 (All hotels) Quarter Ended Quarter
Ended June 30, 2009 June 30, 2008 Variance -------------
------------- ------------- Occupancy % 66.8% 68.6% -2.5% Average
Daily Rate ("ADR") $110.47 $124.65 -11.4% Revenue per Available
Room ("RevPAR") $73.82 $85.47 -13.6% Same Store (6 Hotels) Quarter
Ended Quarter Ended June 30, 2009 June 30, 2008 Variance
------------- ------------- ------------- Occupancy % 73.0% 73.9%
-1.2% Average Daily Rate ("ADR") $112.39 $125.24 -10.3% Revenue per
Available Room ("RevPAR") $82.02 $92.51 -11.3% For the quarter
ended June 30, 2009, the Company's properties realized a 13.6%
decrease in RevPAR versus the same period in 2008. The RevPAR
decrease was the result of a 2.5% decrease in occupancy and an
11.4% decrease in ADR. For the quarter ended June 30, 2009, the
same-store portfolio realized an 11.3% decrease in RevPAR versus
the same period in 2008. The RevPAR decrease was the result of a
1.2% decrease in occupancy compounded by a 10.3% decrease in ADR.
Consolidated (All Hotels) Six Months Six Months Ended Ended June
30, 2009 June 30, 2008 Variance ------------- -------------
------------- Occupancy % 60.7% 66.8% -9.1% Average Daily Rate
("ADR") $110.26 $122.03 -9.6% Revenue per Available Room ("RevPAR")
$66.96 $81.51 -17.8% Same Store (6 Hotels) Six Months Six Months
Ended Ended June 30, 2009 June 30, 2008 Variance -------------
------------- ------------- Occupancy % 66.4% 69.3% -4.2% ADR
$111.77 $122.23 -8.6% RevPAR $74.17 $84.71 -12.4% For the six
months ended June 30, 2009, the Company's properties realized a
17.8% decrease in RevPAR versus the same period in 2008. The RevPAR
decrease was the result of a 9.1% decrease in occupancy and a 9.6%
decrease in ADR. For the first six months of 2009, this same-store
portfolio generated an 8.6% decrease in ADR from the comparable
period in 2008. Portfolio Update As of June 30, 2009, total assets
were approximately $220.5 million, including approximately $191.0
million of net investment in hotel properties plus approximately
$10.0 million for the Company's joint venture investment in the
Crowne Plaza Hollywood Beach Resort. -- With the opening of the
Crowne Plaza Tampa Westshore in the first quarter, all currently
planned portfolio renovations have been completed. -- Ramp-up
efforts with a strong focus on sales and marketing are on pace at
approximately 50% of the Company's assets, including the Crowne
Plaza Tampa Westshore, the Sheraton Louisville Riverside, the
Crowne Plaza Hampton Marina and the Hilton Savannah DeSoto. -- The
Hilton Wilmington Riverside, following its 2007-2008 renovation,
regained its market position and realized RevPAR equivalent to
161.5% of the average RevPAR realized by peer properties in the
Wilmington, North Carolina market, according to data provided by
Smith Travel Research. -- The Company is executing a relaunch with
the Holiday Inn franchise at its Raleigh, North Carolina asset,
which it expects to complete by year-end 2009. Balance
Sheet/Liquidity At June 30, 2009, the Company had approximately
$7.5 million of available cash and cash equivalents, of which
approximately $0.9 million is reserved for capital improvements and
certain other expenses. The Company has approximately $79.5 million
outstanding on its $80.0 million revolving line of credit, which
had been deployed primarily to fund the acquisition and renovation
of the Sheraton Louisville Riverside Hotel, the Company's equity
contribution to its joint venture with The Carlyle Group for the
purchase of the Crowne Plaza Hollywood Beach Resort, as well as the
acquisitions of the Tampa, Florida and Hampton, Virginia hotel
properties. The Company has no debt maturing before May 2011. On
May 18, 2009, the Company entered into a fourth amendment to its
credit agreement modifying the minimum tangible net worth covenant
and waiving compliance with respect to such covenant for the
quarter ended March 31, 2009. As of June 30, 2009, the Company was
in compliance with all credit agreement covenants. Dividend On June
30, 2009, the Company paid a quarterly dividend of $0.01 per share
of common stock to stockholders of record on the close of business
Friday, June 19, 2009. As previously announced, the most recent
amendment to the credit agreement entered into in May 2009 permits
the Company to pay in any given fiscal year a dividend in an amount
minimally necessary to maintain the Company's REIT status, provided
that no dividend may be paid during the first three quarters of
such fiscal year. The Company anticipates the amount of such a
dividend will remain at 90% of taxable income. Notwithstanding
these limitations, the Company was permitted to pay the previously
announced dividend on June 30, 2009. If certain liquidity
thresholds and other conditions are met the Company may be able to
declare and pay additional cash dividends in any fiscal year. Any
future changes to the Company's current dividend policy will need
to be in compliance with restrictions on the payment of cash
dividends as set forth in the referenced amendment to the credit
agreement. Outlook and Market Trends The Company has decided to
suspend the practice of providing guidance regarding projected
financial performance for the near term due to ongoing
unpredictable macro-economic conditions and their potential impact
on the Company's markets and customer base. With a substantially
repositioned portfolio now in place, management remains confident
in the underlying strength of its business and expects to compete
effectively over the longer term. Earnings Call/Webcast The Company
will conduct its second quarter conference call for investors and
other interested parties at 10:00 a.m. Eastern Time (ET) on Friday,
August 7, 2009. The conference call will be accessible by telephone
and through the Internet. Interested individuals are invited to
listen to the call by telephone at 800-860-2442. To participate on
the webcast, log on to http://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 two hours after completion of the live call
on August 7, 2009 through September 7, 2009. To access the
rebroadcast, dial 877-344-7529 and enter passcode number 432296. A
replay of the call also will be available on the Internet at
http://www.mhihospitality.com/ until September 30, 2009. About MHI
Hospitality Corporation MHI Hospitality Corporation is a
self-advised lodging REIT focused on the acquisition, redevelopment
and management of mid-scale, upscale and upper-upscale full-service
hotels in the Mid-Atlantic, Midwest and Southeastern United States.
Currently, the Company's portfolio consists of nine properties
comprising 2,110 rooms, all of which operate under the Hilton,
InterContinental Hotels Group or Starwood Hotels and Resorts
brands. In addition, the Company has a 25% interest in the Crowne
Plaza Hollywood Beach Resort and a leasehold interest in the common
area of Shell Island Resort, a resort condominium property. MHI
Hospitality Corporation was organized in 2004 and is headquartered
in Williamsburg, Virginia. For more information please visit
http://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
the current economic downturn, that will 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 availability and terms of financing and capital and the
general volatility of the securities markets, specifically, the
impact of the current 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; management and performance of the Company's
hotels; 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; and legislative/regulatory changes, including changes
to laws governing taxation of real estate investment trusts. 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 our
expectations will be attained or that actual results will not
differ materially. Financial Tables Follow. . . MHI HOSPITALITY
CORPORATION CONSOLIDATED BALANCE SHEETS June 30, 2009 December 31,
2008 (unaudited) (audited) ------------ ------------ ASSETS
Investment in hotel properties, net $190,972,760 $154,295,611
Properties under development - 33,101,773 Investment in joint
venture 10,028,357 10,253,732 Cash and cash equivalents 6,599,482
1,719,147 Restricted cash 866,337 2,573,444 Accounts receivable
2,691,703 1,352,203 Accounts receivable-affiliate 59,133 53,795
Prepaid expenses, inventory and other assets 5,767,192 4,603,118
Notes receivable, net 100,000 100,000 Shell Island lease purchase,
net 1,647,059 1,852,941 Deferred financing costs, net 1,726,778
1,312,670 ------------ ------------ TOTAL ASSETS $220,458,801
$211,218,434 ============ ============ LIABILITIES Line of credit
$79,487,858 $73,187,858 Mortgage loans 72,935,572 72,256,168 Loans
payable 4,665,748 - Accounts payable and accrued liabilities
9,823,914 11,451,976 Advance deposits 647,807 546,236 ------------
------------ TOTAL LIABILITIES 167,560,899 157,442,238 ------------
------------ Commitments and contingencies EQUITY MHI Hospitality
Corporation stockholders' equity Preferred stock , par value $0.01,
1,000,000 shares authorized, 0 shares issued and outstanding - -
Common stock, par value $0.01; 49,000,000 shares authorized;
6,964,263 shares and 6,939,613 shares issued and outstanding at
June 30, 2009 and December 31, 2008, respectively 69,643 69,396
Additional paid in capital 48,664,039 48,586,775 Distributions in
excess of retained earnings (12,963,038) (12,341,122) ------------
------------ Total MHI Hospitality Corporation stockholders' equity
35,770,644 36,315,049 ------------ ------------ Noncontrolling
interest 17,127,258 17,461,147 ------------ ------------ TOTAL
EQUITY 52,897,902 53,776,196 ------------ ------------ TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $220,458,801 $211,218,434
============ ============ MHI HOSPITALITY CORPORATION CONSOLIDATED
STATEMENTS OF OPERATIONS Three Three Six Six months months months
months ended ended ended ended June 30, June 30, June 30, June 30,
2009 2008 2009 2008 ----------- ----------- ----------- -----------
REVENUE Rooms department $14,173,691 $13,882,421 $24,622,781
$24,624,523 Food and beverage department 5,156,464 5,464,637
9,063,282 9,278,695 Other operating departments 1,202,364 1,107,870
2,345,646 2,069,172 ----------- ----------- ----------- -----------
Total revenue 20,532,519 20,454,928 36,031,709 35,972,390 EXPENSES
Hotel operating expenses Rooms department 3,665,264 3,610,400
6,732,438 6,746,290 Food and beverage department 3,313,253
3,748,067 6,032,642 6,742,574 Other operating departments 195,452
229,716 374,337 424,019 Indirect 7,454,902 7,635,084 14,386,976
13,894,225 ----------- ----------- ----------- ----------- Total
hotel operating expenses 14,628,871 15,223,267 27,526,393
27,807,108 Depreciation and amortization 2,085,460 1,589,683
3,996,058 2,980,606 Corporate general and administrative 853,807
709,894 1,753,104 1,672,262 ----------- ----------- -----------
----------- Total operating expenses 17,568,138 17,522,844
33,275,555 32,459,976 ----------- ----------- -----------
----------- NET OPERATING INCOME 2,964,381 2,932,084 2,756,154
3,512,414 Other income (expense) Interest expense (2,583,849)
(1,719,758) (4,584,707) (2,877,179) Interest income 14,342 18,808
27,828 34,822 Equity in earnings of joint venture (123,141) 525,298
(12,024) 594,810 Loan impairment charge - (200,000) - (200,000)
Unrealized gain (loss) on hedging activities 300,673 737,335
537,257 (29,273) Gain (Loss) on disposal of assets 8,870 (125,450)
8,870 (116,972) ----------- ----------- ----------- ----------- Net
income (loss) before taxes 581,276 2,168,317 (1,266,622) 918,622
Income tax benefit (provision) (371,423) (98,496) 524,855 407,059
----------- ----------- ----------- ----------- Net income (loss)
209,853 2,069,821 (741,767) 1,325,681 Adjust: Net (income) loss
attributable to the noncontrolling interest (73,412) (724,992)
259,137 (464,269) ----------- ----------- ----------- -----------
Net income (loss) attributable to the Company $136,441 $1,344,829
$(482,630) $861,412 =========== =========== =========== ===========
Net income (loss) per share attributable to the Company Basic $0.02
$0.19 $(0.07) $0.12 Diluted $0.02 $0.19 $(0.07) $0.12 Weighted
average number of shares outstanding Basic 6,964,263 6,939,613
6,961,106 6,934,829 Diluted 6,990,263 6,975,613 6,987,106 6,971,829
MHI HOSPITALITY CORPORATION RECONCILIATION OF NET INCOME TO FUNDS
FROM OPERATIONS (FFO) (unaudited) Three Three Six Six months months
months months ended ended ended ended June 30, June 30, June 30,
June 30, 2009 2008 2009 2008 ----------- ----------- -----------
----------- Net income (loss) $136,441 $1,344,829 $(482,630)
$861,412 Adjust noncontrolling interest 73,412 724,992 (259,137)
464,269 Add depreciation and amortization 2,085,460 1,589,683
3,996,058 2,980,606 Add equity in depreciation and amortization of
joint venture 135,702 137,044 271,879 272,812 Adjust gain (loss) on
disposal of assets (8,870) 125,450 (8,870) 116,972 -----------
----------- ----------- ----------- FFO $2,422,145 $3,921,998
$3,517,300 $4,696,071 =========== =========== ===========
=========== Weighted average shares outstanding 6,964,263 6,939,613
6,961,106 6,934,829 Weighted average units outstanding 3,737,607
3,737,607 3,737,607 3,737,607 ----------- ----------- -----------
----------- Weighted average shares and units 10,701,870 10,671,220
10,698,713 10,672,436 =========== =========== ===========
=========== FFO per share and unit $0.23 $0.37 $0.33 $0.44
=========== =========== =========== =========== 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. Thus, NAREIT created FFO as a supplemental
measure of REIT operating performance that excludes historical cost
depreciation, among other items, from GAAP net income. Management
believes that the use of FFO, combined with the required GAAP
presentations, has improved the understanding of the operating
results of REITs among the investing public and made comparisons of
REIT operating results more meaningful. Management 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. DATASOURCE: MHI
Hospitality Corporation CONTACT: Bill Zaiser, Chief Financial
Officer of MHI Hospitality Corporation, +1-301-220-5405; or Vicki
Baker of Financial Relations Board, General Information,
+1-703-796-1798, for MHI Hospitality Corporation Web Site:
http://www.mhihospitality.com/
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