WILLIAMSBURG, Va., May 6 /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 first quarter ended March 31, 2009.
HIGHLIGHTS: -- Funds from Operations ("FFO") increased 41.4 percent
to approximately $0.10 per share over the first quarter 2008 --
Total revenue decreased 0.1 percent over first quarter of 2008 --
Total assets of approximately $220.9 million at March 31, 2009,
versus approximately $170.4 million at the end of the first quarter
2008 -- Renovations completed at the Tampa, Florida and Hampton,
Virginia properties, which concludes near-term portfolio asset
improvement plans Andrew M. Sims, President and CEO of MHI
Hospitality Corporation, commented, "Within an operating
environment that remains challenging, we are focused on achieving
an accelerated ramp-up at our newly repositioned hotels while
maintaining market share at our core properties. I am pleased to
report that during the quarter our 16-month repositioning of the
Crowne Plaza Tampa Westshore and the 10-month renovation of the
Crowne Plaza Hampton Marina were both completed. This effectively
concludes our near term asset improvement plans. During the
quarter, we also took measures to further enhance liquidity and
strengthen the balance sheet." Added Sims, "We expect and are
prepared for a difficult business environment near term. However,
in looking at the larger picture, with a portfolio of completely
modernized hotels now in place, we believe the Company is
positioned to perform soundly over the long term." Operating
Results The Company reported consolidated total revenue of
approximately $15.5 million for the three-month period ended March
31, 2009, a decrease of $0.1 million or 0.1 percent over the
three-month period ended March 31, 2008. For the first quarter, the
Company also reported a consolidated net loss of approximately $0.6
million, or $0.09 per share, as compared to a consolidated net loss
of approximately $0.5 million, or $0.07 per share, for the
comparable 2008 period. The Company reported a net operating loss
for the same period of approximately $0.2 million, as compared to
net operating income of approximately $0.6 million for the first
quarter of 2008. During the first quarter, FFO was approximately
$1.1 million, or $0.10 per share, compared to approximately $0.8
million, or $0.07 per share, for the first quarter of 2008,
representing an increase of 41.4 percent. During the quarter, the
Company reported an unrealized gain on the value of its interest
rate swap of approximately $0.2 million as compared to an
unrealized loss on the value of its interest rate swap of
approximately $0.8 million for the first quarter of 2008. The
interest rate swap is required by the Company's lenders on its
revolving credit facility. 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
"Same-store" key operating statistics for six of the Company's
properties for the quarters ended March 31, 2009 and 2008 are
presented in the following table. These statistics do not include
the Sheraton Louisville Riverside, which opened in May 2008, the
Crowne Plaza Hollywood Beach Resort, which was acquired through a
joint venture in August 2007 and opened in September 2007, the
Crowne Plaza Tampa Westshore, which opened in March 2009, or the
Crowne Plaza Hampton Marina, which was acquired in April 2008.
Quarter Ended Quarter Ended March 31, 2009 March 31, 2008 Variance
-------------- --------------- -------- Occupancy % 59.7% 64.7%
-7.8% Average Daily Rate ("ADR") $111.01 $118.80 -6.6% Revenue per
Available Room ("RevPAR") $66.24 $76.90 -13.9% For the quarter
ended March 31, 2009, the same-store portfolio realized a 13.9
percent decrease in RevPAR versus the same period in 2008. The
RevPAR decrease was the result of a 7.8 percent decrease in
occupancy compounded by a 6.6 percent decrease in ADR. For the same
three-month period, the Company's six hotels included in continuing
operations generated approximately $9.2 million of total room
revenue in 2009 versus approximately $10.7 million in 2008.
Portfolio Update As of March 31, 2009, total assets were
approximately $220.9 million, including approximately $191.4
million of net investment in hotel properties plus approximately
$10.3 million for the Company's joint venture investment in the
Crowne Plaza Hollywood Beach Resort. The Company also reported the
following portfolio developments: -- At the Company's newest asset
in Hampton, Virginia, the Company completed an upbranding to the
Crowne Plaza flag in the fourth quarter of 2008 and completed
extensive renovations of the new Crowne Plaza Hampton Marina in
February 2009. As of March 31, 2009, the Company incurred costs
totaling approximately $4.5 million toward this renovation. -- At
the Crowne Plaza Tampa Westshore, the 16-month deep turn renovation
was completed and the hotel opened to the public in March 2009. The
reconfigured 222-room hotel features a new 10,000 square foot
ballroom and pre-function structure, 6,500 square foot semi-free
standing restaurant tenant space, an outdoor pool and approximately
250 surface parking spaces. As of March 31, 2009, the Company
incurred costs totaling approximately $23.5 million toward this
renovation. With the repositioning of the Tampa asset, as well as
the Savannah and Hampton properties, which were announced earlier
this year, the Company has successfully completed the near-term
improvement plans to its portfolio. In addition, all repositioned
properties have been relicensed for ten or more years with the
Company's franchise partners: Crowne Plaza, Hilton and Starwood.
Balance Sheet/Liquidity At March 31, 2009, the Company had
approximately $6.4 million of available cash and cash equivalents,
approximately $0.8 million of which is reserved for capital
improvements and certain other expenses. The Company has
approximately $78.8 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. In order to enhance liquidity, on
February 9, 2009, the indirect subsidiary of the Company, which is
a member of the joint venture entity that owns the Hollywood asset,
borrowed $4.75 million from an affiliate of The Carlyle Group, the
other member of the joint venture. The interest rate and maturity
date of the loan are tied to a note that is secured by a mortgage
on the Hollywood property. As background, in 2008 the joint venture
that owns the Hollywood property purchased a portion of the
mortgage originally placed on the property from the initial lender.
The amount of the loan from Carlyle is equal to the amount the
Company contributed to the joint venture to enable that joint
venture to purchase its interest in the mortgage loan. The Company
expects that the mortgage will be refinanced in an amount equal to
the original first mortgage loan and the proceeds of such
refinancing will allow it to repay the Carlyle loan. On February
19, 2009, the Company entered into a third amendment to its May 8,
2006 credit agreement with Branch Banking & Trust Company
("BB&T"), as administrative agent and lender, to address
certain financial covenants including the Company's total leverage
ratio. As previously announced, in addition to waiving potential
technical financial covenant defaults for 2008, the amendment
establishes a new valuation category and methodology for those
Company assets under renovation. The amendment also increases the
Company's interest rate spread for its variable LIBOR-based
interest rate by 1.125 percent, establishing a new spread range
from 2.75 percent to 3.25 percent based on the Company's total
leverage ratio. The amendment also adds a new one hundred basis
point spread for any prime rate loans under the facility and eases
the Company's total leverage ratio test by increasing the Company's
total maximum permitted leverage from 55 percent to 62.5 percent of
the total value of the Company's assets. Finally, the amendment
establishes new limitations on cash distributions that the Company
may pay to stockholders to a level necessary to maintain the
Company's REIT qualification until such time as the Company meets
certain liquidity and other tests, mandates that the Company
include the Company's hotel property in Laurel, Maryland in the
credit agreement's borrowing base, and provides for fixed
valuations of certain of the Company's hotel properties through
April 2010. Dividend As previously announced, the Company declared
a quarterly dividend of $0.01 per share of common stock payable to
stockholders of record on the close of business Friday, June 19,
2009. The dividend will be paid on Tuesday, June 30, 2009. As
previously announced, the Company currently intends to maintain its
annual dividend distribution level at 90 percent of taxable income,
consistent with maintaining its REIT status. 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 guidance for the
near term due to ongoing unpredictable macro-economic conditions
and their potential impact on the Company's markets and customer
base. Management remains confident in the underlying strength of
its business and, with a substantially repositioned portfolio in
place, expects to compete effectively over the longer term.
Earnings Call/Webcast The Company will conduct its first quarter
conference call for investors and other interested parties at 10:00
a.m. Eastern Time (ET) on Wednesday, May 6, 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 May 6, 2009 through June
6, 2009. To access the rebroadcast, dial 877-344-7529 and enter
passcode number 429875. A replay of the call also will be available
on the Internet at http://www.mhihospitality.com/ until June 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 and
Starwood Hotels and Resorts brands. In addition, the Company has a
25 percent 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 listed on the Russell Microcap(TM) Index.
The Company 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 March 31, December 31, 2009
2008 (unaudited) (audited) ASSETS Investment in hotel properties,
net $191,392,173 $154,295,611 Properties under development -
33,101,773 Investment in joint venture 10,284,809 10,253,732 Cash
and cash equivalents 5,572,994 1,719,147 Restricted cash 807,218
2,573,444 Accounts receivable 3,044,956 1,352,203 Accounts
receivable-affiliate 18,794 53,795 Prepaid expenses, inventory and
other assets 6,087,463 4,603,118 Notes receivable 100,000 100,000
Shell Island lease purchase, net 1,750,000 1,852,941 Deferred
financing costs, net 1,862,022 1,312,670 TOTAL ASSETS $220,920,429
$211,218,434 LIABILITIES Line of credit $78,787,858 $73,187,858
Mortgage loans 73,000,000 72,256,168 Loans payable 4,732,403 -
Accounts payable and accrued liabilities 10,824,978 11,451,976
Advance deposits 808,622 546,236 TOTAL LIABILITIES 168,153,861
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
March 31, 2009 and 69,643 69,396 December 31, 2008, respectively
Additional paid in capital 48,635,539 48,586,775 Distributions in
excess of retained earnings (13,029,836) (12,341,122) Total MHI
Hospitality Corporation stockholders' equity 35,675,346 36,315,049
Noncontrolling interest 17,091,222 17,461,147 TOTAL EQUITY
52,766,568 53,776,196 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$220,920,429 $211,218,434 MHI HOSPITALITY CORPORATION CONSOLIDATED
STATEMENTS OF OPERATIONS Three months ended Three months ended
March 31, March 31, 2009 2008 Revenue Rooms department $10,449,089
$10,742,102 Food and beverage department 3,906,818 3,814,058 Other
operating departments 1,143,282 961,301 Total revenue 15,499,189
15,517,461 EXPENSES Hotel operating expenses Rooms department
3,067,173 3,135,890 Food and beverage department 2,719,389
2,994,507 Other operating departments 178,885 194,302 Indirect
6,932,074 6,259,143 Total hotel operating expenses 12,897,521
12,583,842 Depreciation and amortization 1,910,598 1,390,923
Corporate general and administrative 899,297 962,368 Total
operating expenses 15,707,416 14,937,133 NET OPERATING INCOME
(LOSS) (208,227) 580,328 Other income (expense) Interest expense
(2,000,858) (1,157,421) Interest income 13,486 16,015 Equity in
earnings of joint venture 111,117 69,512 Unrealized gain (loss) on
hedging activities 236,584 (766,607) Gain on disposal of assets -
8,478 Net loss before taxes (1,847,898) (1,249,695) Income tax
benefit 896,278 505,554 Net loss (951,620) (744,141) Add: Net loss
attributable to the noncontrolling interest 332,549 260,724 Net
loss attributable to the Company $(619,071) $(483,417) Net loss per
share attributable to the Company Basic $(0.09) $(0.07) Diluted
$(0.09) $(0.07) Weighted average number of shares outstanding Basic
6,957,915 6,930,045 Diluted 6,983,915 6,968,045 MHI HOSPITALITY
CORPORATION RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
(FFO) (unaudited) Three months ended Three months ended March 31,
March 31, 2009 2008 Net loss $(619,071) $(483,417) Less
noncontrolling interest (332,549) (260,724) Add depreciation and
amortization 1,910,598 1,390,923 Add equity in depreciation and
amortization of joint venture 136,177 135,768 Less gain on disposal
of assets - (8,478) FFO $1,095,155 $774,072 Weighted average shares
outstanding 6,957,915 6,930,045 Weighted average units outstanding
3,737,607 3,737,607 Weighted average shares and units 10,695,522
10,667,652 FFO per share and unit $0.10 $0.07 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 General
Information, Vicki Baker of Financial Relations Board,
+1-703-796-1798, for MHI Hospitality Corporation Web Site:
http://www.mhihospitality.com/
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