WILLIAMSBURG, Va., Aug. 10 /PRNewswire-FirstCall/ -- MHI
Hospitality Corporation (Nasdaq: MDH) (the "Company"), a
self-managed and self-administered lodging real estate investment
trust ("REIT"), today reported its consolidated results for the
second quarter ended June 30,
2010.
HIGHLIGHTS:
- Funds from Operations ("FFO") increased 8.8% or approximately
$0.2 million over second quarter 2009
to approximately $2.6 million, and
increased 8.3% or approximately $0.3
million over the six months ended June 30, 2009 to approximately $3.8 million;
- Net operating income ("NOI") increased 8.2% or approximately
$0.2 million over second quarter 2009
to approximately $3.2 million, and
increased 29.5% or approximately $0.8
million over the six months ended June 30, 2009 to approximately $3.6 million;
- Occupancy increased to 72.2% in the second quarter, an increase
of 8.1% over the same period for the prior year, and increased to
67.5%, or an increase of 11.1% in the six months ended June 30, 2010 over the six months ended
June 30, 2009;
- Total room revenue increased approximately $0.8 million or 5.5% over second quarter 2009 to
approximately $15.0 million, and
increased approximately $2.4 million
or 9.8% over the six months ended June 30,
2009 to approximately $27.0
million;
- Net income before taxes increased 59.5% or approximately
$0.3 million over the second quarter
2009 to approximately $0.9 million,
whereas the net loss before taxes for the six months ended
June 30, 2010 narrowed 71.6% or
approximately $0.9 million to
approximately $0.4 million; and
- Adjusted operating income increased approximately $0.3 million or 4.9% over second quarter 2009 to
approximately $6.0 million, and
increased approximately $1.3 million
or 16.4% over the six months ended June 30,
2009 to approximately $9.4
million.
Andrew M. Sims, President and CEO
of MHI Hospitality Corporation, commented, "This is the fourth
consecutive quarterly period in which Funds from Operations and
occupancy have grown as compared to the same quarter in the prior
year. We believe this building record of strong performance
demonstrates demand for our competitive hotel platform."
Added Mr. Sims, "We also strengthened our financial position in
the second quarter. Actions included negotiating an option to
extend the term of our credit agreement to 2012 and an extension of
our mortgage on the Jacksonville property. We are encouraged
by improvements taking place within the lodging environment and
remain committed to driving share within our markets."
Operating Results
The Company reported consolidated total revenue of approximately
$21.5 million for the three-month
period ended June 30, 2010, an
increase of 4.8% over the three-month period ended June 30, 2009. For the second quarter, the
Company also reported consolidated net income of approximately
$0.3 million, or $0.03 per share, as compared to consolidated net
income of approximately $0.01
million, or $0.02 per share,
for the comparable 2009 period. The Company reported net
operating income of approximately $3.2
million for the three-month period ended June 30, 2010, an increase of approximately
$0.2 million or 8.2% over the
comparable 2009 period. During the second quarter, FFO was
approximately $2.6 million, or
$0.20 per share, compared to
approximately $2.4 million, or
$0.23 per share, for the second
quarter of 2009. FFO for the six months ended June 30, 2010 increased 8.3%, or approximately
$0.3 million, to approximately
$3.8 million, or $0.30 per share, compared to approximately
$3.5 million, or $0.33 per share, for the comparable 2009
period.
Adjusted operating income and FFO are non-GAAP financial
measures within the meaning of the rules of the Securities and
Exchange Commission. The Company defines adjusted operating
income as net operating income excluding depreciation and
amortization, corporate general and administrative expenses, lease
revenue and related expenses as well as other fee income not
related to the Company's wholly-owned hotel properties. 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.
Reconciliation of these non-GAAP financial measures 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, 2010 and 2009 for the Company's wholly-owned properties
during each respective reporting period ("consolidated" properties)
as well as the eight wholly-owned properties in the portfolio that
were not under development and under the Company's control during
all of 2009 and the six months ended June
30, 2010 ("same-store" properties). Accordingly, the
same-store data does not reflect the Crowne Plaza Tampa Westshore,
which opened in March 2009. The
tables also exclude 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
June 30, 2010
|
Quarter Ended
June 30, 2009
|
Variance
|
|
Occupancy
|
72.2%
|
66.8%
|
8.1%
|
|
Average Daily Rate
("ADR")
|
$ 107.86
|
$ 110.47
|
-2.4%
|
|
Revenue per Available Room
("RevPAR")
|
$ 77.88
|
$ 73.82
|
5.5%
|
|
|
|
|
|
|
|
For the quarter ended June 30,
2010, the Company's consolidated properties realized a 5.5%
increase in RevPAR versus the same period in 2009. The RevPAR
increase was the result of an 8.1% increase in occupancy and a 2.4%
decrease in ADR.
|
|
Consolidated (All
Hotels)
|
Six Months
Ended
June 30, 2010
|
Six Months Ended
June 30, 2009
|
Variance
|
|
Occupancy
|
67.5%
|
60.7%
|
11.1%
|
|
ADR
|
$ 104.99
|
$ 110.26
|
-4.8%
|
|
RevPAR
|
$ 70.82
|
$ 66.96
|
5.8%
|
|
|
|
|
|
|
|
|
|
Same-Store (8
Hotels)
|
Six Months Ended
June 30, 2010
|
Six Months Ended
June 30, 2009
|
Variance
|
|
Occupancy
|
67.7%
|
62.9%
|
7.7%
|
|
ADR
|
$ 106.59
|
$ 111.28
|
-4.2%
|
|
RevPAR
|
$ 72.18
|
$ 69.99
|
3.1%
|
|
|
|
|
|
|
|
For the six months ended June 30,
2010, the Company's consolidated properties realized a 5.8%
increase in RevPAR versus the same period in 2009. The RevPAR
increase was the result of an 11.1% increase in occupancy offset by
a 4.8% decrease in ADR. For the first six months of 2010, the
same-store portfolio generated a 3.1% increase in RevPAR from the
comparable period in 2009.
Portfolio Update
As of June 30, 2010, total assets
were approximately $213.9 million,
including approximately $185.5
million of net investment in hotel properties plus
approximately $9.8 million for the
Company's joint venture investment in the Crowne Plaza Hollywood
Beach Resort.
Balance Sheet/Liquidity
At June 30, 2010, the Company had
approximately $6.5 million of
available cash and cash equivalents, of which approximately
$1.6 million was reserved for real
estate taxes, insurance, capital improvements and certain other
expenses. The Company has approximately $75.2 million outstanding on its line of credit,
which had been deployed primarily to fund the acquisitions and
renovations of the Sheraton Louisville Riverside Hotel and the
Crowne Plaza Tampa Westshore, 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 acquisition of
the Hampton, Virginia hotel
property.
On June 7, 2010, the Company
announced that it had entered into a fifth amendment to its credit
agreement. As of June 30, 2010,
the Company was in compliance with all credit agreement
covenants.
On July 7, 2010, the Company
announced that during the second quarter it had exercised its
option to extend the scheduled maturity date of the $18.0 million mortgage on the Crowne Plaza
Jacksonville Riverfront Hotel. The new maturity date is
July 22, 2011.
The Company has no debt maturing before May 2011.
Dividend
As previously announced, the fifth amendment to the credit
agreement entered into in June 2010
permits the Company to pay in any given fiscal year a dividend in
an amount minimally necessary in order to maintain its status as a
REIT provided that no default or event of default exists at the
time of, or after giving effect to, the distribution and the
Company does not incur indebtedness to make the distribution.
The Company anticipates the amount of such a dividend will
remain at 90% of taxable income excluding net capital gains, which
does not necessarily equal net income as calculated in accordance
with GAAP. The credit agreement also provides that the
Company may make additional dividend distributions so long as no
event of default exists at the time, or after giving effect to,
such additional distributions if the Company maintains a minimum
liquidity position of $10 million and
satisfies a debt yield ratio of EBITDA to total liabilities of at
least 10% before and after giving effect to such distribution,
provided the aggregate amount of such distributions in a given year
cannot exceed 90% of FFO for the prior 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
Set forth below is our guidance for 2010, which is predicated on
continued strengthening of the economy and expected improvements in
hotel lodging industry fundamentals. These projections are
based on occupancy and rate estimates that are consistent with
calendar year 2010 trend forecasts by Smith Travel Research for the
market segments in which the Company operates. The FFO forecast
reflects management's expectation that recently renovated and
opened properties, including the Hilton Savannah DeSoto and the
Crowne Plaza Tampa Westshore, will continue to experience increased
demand and improved operations and that there will be continued,
albeit slowed, expansion in the lodging industry through 2010.
The table below reconciles projected 2010 net income to
projected FFO and provides projected key operating metrics and
supplemental information:
|
|
|
Low Range
|
|
High Range
|
|
|
Y/E Dec 31, 2010
|
|
Y/E Dec 31, 2010
|
|
Net loss
|
$
(1,216,000)
|
|
$
(630,000)
|
|
Noncontrolling
interest
|
(444,000)
|
|
(230,000)
|
|
Depreciation and
amortization
|
8,510,000
|
|
8,510,000
|
|
Equity in
depreciation and amortization of joint venture
|
550,000
|
|
550,000
|
|
|
|
|
|
|
FFO
|
$
7,400,000
|
|
$
8,200,000
|
|
|
|
|
|
|
Weighted average shares and
units
|
12,897,408
|
|
12,897,408
|
|
|
|
|
|
|
FFO per share and
unit
|
$
0.57
|
|
$
0.64
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Call/Webcast
The Company will conduct its second quarter 2010 conference call
for investors and other interested parties at 10:00 a.m. Eastern Time (ET) on Tuesday, August 10, 2010. The conference
call will be accessible by telephone and through the Internet.
Interested individuals are invited to listen to the call by
telephone at 877-317-6789 (United
States) or 8666053852 (Canada). To participate on the webcast,
log on to 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 one hour after completion of the live call on
August 10, 2010 through September 30, 2010 at 5:00
p.m. ET. To access the rebroadcast, dial 877-344-7529
and enter passcode number 442740. A replay of the call also
will be available on the Internet at www.mhihospitality.com until
September 30, 2010.
About MHI Hospitality Corporation
MHI Hospitality Corporation is a self-managed and
self-administered lodging REIT focused on the acquisition,
renovation, upbranding and repositioning of upscale to upper
upscale full-service hotels in the Mid-Atlantic and Southern United States. Currently, the
Company's portfolio consists of investments in ten hotel
properties, nine of which are wholly-owned and comprise 2,110
rooms. All of the Company's wholly-owned properties operate
under the Hilton, InterContinental Hotels Group and Starwood Hotels
and Resorts brands. The Company has a 25.0% interest in the
Crowne Plaza Hollywood Beach Resort. The Company also has 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 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 magnitude,
sustainability and timing of an anticipated recovery in the
hospitality industry and in the markets in which the Company
operates; 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 and, if necessary, to refinance or seek an
extension of the maturity of such indebtedness; management and
performance of the Company's hotels; risks associated with the
conflicts of interest of the Company's officers and directors;
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; the Company's ability to successfully expand into new
markets; legislative/regulatory changes, including changes to laws
governing taxation of real estate investment trusts; the Company's
ability to maintain its qualification as a REIT; and the Company's
ability to maintain adequate insurance coverage. 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
its expectations will be attained or that actual results will not
differ materially.
Financial Tables Follow...
MHI HOSPITALITY
CORPORATION
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
June 30,
2010
|
|
December 31,
2009
|
|
|
|
|
(unaudited)
|
|
(audited)
|
|
ASSETS
|
|
|
|
|
|
Investment in hotel properties,
net
|
|
$
185,461,695
|
|
$
188,587,507
|
|
Investment in joint
venture
|
|
9,770,855
|
|
9,685,844
|
|
Cash and cash
equivalents
|
|
4,948,114
|
|
3,490,487
|
|
Restricted cash
|
|
1,586,561
|
|
701,730
|
|
Accounts
receivable
|
|
2,527,255
|
|
1,625,161
|
|
Accounts
receivable-affiliate
|
|
45,354
|
|
32,444
|
|
Prepaid expenses, inventory and
other assets
|
|
2,247,091
|
|
2,046,082
|
|
Notes receivable,
net
|
|
100,000
|
|
100,000
|
|
Shell Island lease purchase,
net
|
|
1,261,029
|
|
1,441,176
|
|
Deferred income
taxes
|
|
4,598,312
|
|
4,920,973
|
|
Deferred financing costs,
net
|
|
1,377,432
|
|
1,328,351
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
213,923,698
|
|
$
213,959,755
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Line of credit
|
|
$
75,197,858
|
|
$
75,522,858
|
|
Mortgage loans
|
|
72,534,720
|
|
72,738,250
|
|
Loans payable
|
|
4,561,005
|
|
4,613,163
|
|
Accounts payable and accrued
liabilities
|
|
7,586,461
|
|
6,696,605
|
|
Advance deposits
|
|
727,112
|
|
547,653
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
$
160,607,156
|
|
$
160,118,529
|
|
|
|
|
|
|
|
|
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; 9,541,286
shares and 9,096,943 shares issued and outstanding at June 30,
2010
|
|
|
|
|
|
|
|
and December 31, 2009,
respectively
|
|
$ 95,413
|
|
$ 90,969
|
|
|
Additional paid in
capital
|
|
55,625,975
|
|
52,543,562
|
|
|
Distributions in excess of
retained earnings
|
|
(14,978,513)
|
|
(14,454,238)
|
|
|
|
Total MHI Hospitality
Corporation stockholders' equity
|
|
40,742,875
|
|
38,180,293
|
|
|
Noncontrolling
interest
|
|
12,573,667
|
|
15,660,933
|
|
TOTAL EQUITY
|
|
53,316,542
|
|
53,841,226
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
EQUITY
|
|
$
213,923,698
|
|
$
213,959,755
|
|
|
|
|
|
|
|
|
|
|
MHI HOSPITALITY
CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
|
|
Three months
ended
|
|
Three months
ended
|
|
Six months
ended
|
|
Six months
ended
|
|
|
|
|
June 30,
2010
|
|
June 30,
2009
|
|
June 30,
2010
|
|
June 30,
2009
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
Rooms department
|
$
14,953,693
|
|
$
14,173,691
|
|
$
27,048,091
|
|
$
24,622,781
|
|
|
Food and beverage
department
|
5,430,191
|
|
5,156,464
|
|
9,737,983
|
|
9,063,282
|
|
|
Other operating
departments
|
1,125,638
|
|
1,202,364
|
|
2,239,039
|
|
2,345,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
21,509,522
|
|
20,532,519
|
|
39,025,113
|
|
36,031,709
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Hotel operating
expenses
|
|
|
|
|
|
|
|
|
|
Rooms department
|
3,929,587
|
|
3,665,264
|
|
7,522,967
|
|
6,732,438
|
|
|
Food and beverage
department
|
3,509,070
|
|
3,313,253
|
|
6,529,437
|
|
6,032,642
|
|
|
Other operating
departments
|
170,906
|
|
195,452
|
|
343,838
|
|
374,337
|
|
|
Indirect
|
7,662,968
|
|
7,454,902
|
|
14,839,936
|
|
14,386,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total hotel operating
expenses
|
15,272,531
|
|
14,628,871
|
|
29,236,178
|
|
27,526,393
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
2,126,133
|
|
2,085,460
|
|
4,257,617
|
|
3,996,058
|
|
Corporate general and
administrative
|
904,206
|
|
853,807
|
|
1,961,810
|
|
1,753,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
18,302,870
|
|
17,568,138
|
|
35,455,605
|
|
33,275,555
|
|
|
|
|
|
|
|
|
|
|
|
|
NET OPERATING
INCOME
|
3,206,652
|
|
2,964,381
|
|
3,569,508
|
|
2,756,154
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(2,466,124)
|
|
(2,583,849)
|
|
(4,777,074)
|
|
(4,584,707)
|
|
|
Interest income
|
5,275
|
|
14,342
|
|
10,936
|
|
27,828
|
|
|
Equity in earnings of joint
venture
|
(82,208)
|
|
(123,141)
|
|
189,326
|
|
(12,024)
|
|
|
Unrealized gain on hedging
activities
|
263,448
|
|
300,673
|
|
647,394
|
|
537,257
|
|
|
Gain on disposal of
assets
|
—
|
|
8,870
|
|
—
|
|
8,870
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
taxes
|
927,043
|
|
581,276
|
|
(359,910)
|
|
(1,266,622)
|
|
Income tax benefit
(provision)
|
(555,318)
|
|
(371,423)
|
|
(362,400)
|
|
524,855
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
371,725
|
|
209,853
|
|
(722,310)
|
|
(741,767)
|
|
Adjust: Net (income) loss
attributable to the noncontrolling interest
|
(116,158)
|
|
(73,412)
|
|
198,035
|
|
259,137
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to the
Company
|
$
255,567
|
|
$
136,441
|
|
$
(524,275)
|
|
$
(482,630)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
attributable to the Company
|
|
|
|
|
|
|
|
Basic
|
$ 0.03
|
|
$ 0.02
|
|
$ (0.06)
|
|
$ (0.07)
|
|
|
Diluted
|
$ 0.03
|
|
$ 0.02
|
|
$ (0.06)
|
|
$ (0.07)
|
|
Weighted average number of
shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
9,525,824
|
|
6,964,263
|
|
9,351,705
|
|
6,961,106
|
|
|
Diluted
|
9,541,824
|
|
6,990,263
|
|
9,367,705
|
|
6,987,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MHI
HOSPITALITY
CORPORATION
RECONCILIATION OF NET INCOME TO
FUNDS FROM OPERATIONS (FFO)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Three months
ended
|
|
Six months
ended
|
|
Six months
ended
|
|
|
|
|
June 30,
2010
|
|
June 30,
2009
|
|
June 30,
2010
|
|
June 30,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to the Company
|
|
$ 255,567
|
|
$ 136,441
|
|
$ (524,275)
|
|
$ (482,630)
|
|
|
Adjust noncontrolling
interest
|
116,158
|
|
73,412
|
|
(198,035)
|
|
(259,137)
|
|
|
Add depreciation and
amortization
|
2,126,133
|
|
2,085,460
|
|
4,257,617
|
|
3,996,058
|
|
|
Add equity in depreciation and
amortization of joint venture
|
136,654
|
|
135,702
|
|
272,965
|
|
271,879
|
|
|
Adjust gain (loss) on disposal
of assets
|
—
|
|
(8,870)
|
|
—
|
|
(8,870)
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO
|
|
$ 2,634,512
|
|
$ 2,422,145
|
|
$ 3,808,272
|
|
$ 3,517,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding
|
9,525,824
|
|
6,964,263
|
|
9,351,705
|
|
6,961,106
|
|
Weighted average units
outstanding
|
3,369,439
|
|
3,737,607
|
|
3,532,166
|
|
3,737,607
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares and
units
|
12,895,263
|
|
10,701,870
|
|
12,883,871
|
|
10,698,713
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per share and
unit
|
|
$ 0.20
|
|
$ 0.23
|
|
$ 0.30
|
|
$ 0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Management
believes 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.
MHI HOSPITALITY
CORPORATION
RECONCILIATION OF NET
OPERATING INCOME
TO
ADJUSTED OPERATING INCOME
(unaudited)
|
|
|
|
|
Three months
ended
|
|
Three months
ended
|
|
Six months
ended
|
|
Six months
ended
|
|
|
|
|
June 30,
2010
|
|
June 30,
2009
|
|
June 30,
2010
|
|
June 30,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
income
|
|
$ 3,206,652
|
|
$ 2,964,381
|
|
$ 3,569,508
|
|
$ 2,756,154
|
|
|
Add corporate general and
administrative
|
904,206
|
|
853,807
|
|
1,961,810
|
|
1,753,104
|
|
|
Add depreciation and
amortization
|
2,126,133
|
|
2,085,460
|
|
4,257,617
|
|
3,996,058
|
|
|
Subtract net lease rental
income
|
(121,250)
|
|
(104,534)
|
|
(222,500)
|
|
(222,500)
|
|
|
Subtract other fee
income
|
(73,549)
|
|
(41,215)
|
|
(147,503)
|
|
(191,136)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income
|
|
$ 6,042,192
|
|
$ 5,757,899
|
|
$ 9,418,932
|
|
$ 8,091,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We provide adjusted operating income as supplemental information
for investors. We eliminate corporate-level costs and
expenses to arrive at property-level results because we believe
property-level results provide investors with supplemental
information into the ongoing operating performance of our hotels.
We eliminate depreciation and amortization because, even
though depreciation and amortization are property-level expenses,
these non-cash expenses, which are based on historical cost
accounting for real estate assets, implicitly assume that the value
of real estate assets diminishes predictably over time. As
noted earlier, because real estate values have historically risen
or fallen with market conditions, many industry investors have
considered presentation of operating results for real estate
companies that use historical cost accounting to be insufficient by
themselves.
As a result of the elimination of corporate-level costs and
expenses, depreciation and amortization, net lease income as well
as other fee income not related to our wholly-owned hotel
properties, the adjusted operating income we present should not be
used to evaluate our performance as a whole. Management
compensates for these limitations by separately considering the
impact of these excluded items to the extent they are material to
operating decisions or assessments or our operating performance.
Our consolidated statements of operations include such
amounts, all of which should be considered by investors when
evaluating our performance.
We also believe that providing adjusted operating income
provides investors and management with useful information for
evaluating the period-to-period performance of our hotels and
facilitates comparisons with other hotels REITs and hotel
owners.
SOURCE MHI Hospitality Corporation
Copyright . 10 PR Newswire