-- Increased its dividends by $0.0025 per share in the second quarter and
raised the dividend $0.01 per share for the 2007 third quarter.
-- Acquired four hotels located in Virginia and Louisiana from Waterloo
Hospitality, Inc. for approximately $30.9 million.
-- Purchased the Tara Inn and Suites, located in Jonesboro, Ga., for
approximately $6 million.
-- Obtained 15 Masters Inn hotels for approximately $42.7 million.
-- Following the close of the second quarter, acquired a Days Inn hotel
located in Bossier City, La. and a Days Inn in Fredericksburg, Va. from
Budget Motels, Inc. for $6.9 million of limited partnership interests in
the company's operating partnership.
Second Quarter Operating Results
Supertel's portfolio consists of limited-service hotels, including
mid-scale without food and beverage, economy and economy extended-stay
hotels. For the second quarter 2007 compared to the same period a year
ago, the company's mid-scale hotels' RevPAR increased 2 percent, driven by
a 5.1 percent increase in average daily rate (ADR). The company's economy
hotels' RevPAR rose 3.3 percent, primarily due to a 4.7 percent increase in
occupancy. The company did not own extended-stay hotels in the same period
a year ago and therefore comparisons are not available. Since the economy
extended-stay hotels have a significantly lower ADR than the mid-scale and
economy hotels, the overall impact of the newly added economy extended-stay
hotels on the company's portfolio was a 9.7 percent reduction in ADR and an
8.7 percent decline in the portfolio's RevPAR.
"The first two quarters of 2006 were very favorable, making for tougher
than normal comparisons for same-store hotels in the first half of 2007,"
Schulte said. "However, we are seeing steady improvement in the third
quarter and are returning to more normal patterns."
During the 2007 second quarter, hotel and property operations expenses
increased $7.1 million, of which $6.5 million can be attributed to hotels
acquired after April 1, 2006. Same store operating expenses rose $0.6
million, primarily due to advertising, business promotion, repairs and room
supplies, including linen upgrades.
Interest expense rose $1.5 million, due primarily to increased debt in
conjunction with hotel acquisitions. The depreciation and amortization
expense increased $0.9 million in the 2007 second quarter due primarily to
hotel acquisitions.
The company believes property operating income, which is revenue from room
rentals and other hotel services less hotel and property operations
expenses, is a useful measure of the company's operating efficiency of its
hotel properties. Property operating income increased by $3.6 million, or
54.0 percent for the 2007 second quarter, compared to the same year-ago
period, due primarily to hotel acquisitions. General and administration
expense for the 2007 second quarter rose $0.2 million, compared to the same
period last year, primarily as a result of increases in salaries and
professional fees, associated principally with the company's acquisition
activities.
Hotel Acquisitions
During the quarter, the company acquired 20 hotels, a 21.5 percent increase
in the size of the portfolio, for a total purchase price of $79.6 million.
The hotels were purchased using advances from its revolving lines of credit
and new first mortgage obligations.
On July 31, the company acquired two Days Inn hotels that it had leased and
managed since April 4, 2007. The properties, located in Bossier City, La.
and Fredericksburg, Va., were purchased from Budget Motels, Inc. for $6.9
million limited partnership interests in the company's operating
partnership.
"We have an active pipeline and continue to review a substantial number of
acquisition candidates, both portfolios and individual properties," Schulte
noted. "Concurrently, we expect to periodically prune our portfolio of
properties that no longer fit our long-term growth strategy. We are the
only publicly traded REIT to concentrate on hotels in the mid-market and
economy limited-service and economy extended-stay sectors. As a result, we
do not experience the same pricing pressures as some other hotel REITs and
typically acquire hotels at more attractive cap rates," he said. "Our
acquisition strategy remains to buy properties that can generate strong
cash flow and benefit from our scale, distribution and asset management."
"Our portfolio is in very good physical condition," he said. "We continue
to invest in our properties and have spent $4.4 million in renovations and
upgrades during the first half of 2007."
Balance Sheet Information
In the 2007 second quarter, shareholders approved an increase in the number
of shares of common stock available for issuance to 100 million shares and
an increase in the number of preferred stock shares to 40 million.
Dividend Increases
The board of directors declared a $0.12 1/2 dividend for the 2007 third
quarter, payable October 31, 2007 to shareholders of record September 28,
2007, a $0.01 increase over the second quarter dividend. Based on the
closing price of the common shares at the close of business on August 10,
2007, the annualized dividend represents a yield of approximately 6.3
percent.
"This increase will result in a 35 percent compounded annual growth rate of
our dividend since the first quarter of 2003," Schulte said. "This
increase also reflects the confidence that the board has in our recent
acquisitions and our outlook for the industry and our specific markets. We
will continue to evaluate our dividend policy on a quarterly basis."
About Supertel Hospitality, Inc.
As of August 10, 2007, Supertel Hospitality, Inc. (
As of
June 30, Dec. 31,
2007 2006
--------- ---------
(unaudited)
ASSETS
Investments in hotel properties $ 369,299 $ 254,241
Less accumulated depreciation 68,926 63,509
--------- ---------
300,373 190,732
Cash and cash equivalents 3,040 5,436
Accounts receivable 2,905 1,332
Prepaid expenses and other assets 4,521 3,116
Deferred financing costs, net 1,979 1,532
--------- ---------
$ 312,818 $ 202,148
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable, accrued expenses and other
liabilities $ 15,106 $ 8,905
Debt 199,136 94,878
--------- ---------
214,242 103,783
--------- ---------
Minority interest in consolidated partnerships 3,478 3,528
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 40,000,000 and
10,000,000 shares authorized; 1,096,218 and
1,515,258 shares outstanding, liquidation
preference of $10,962 11 15
Preferred stock warrants 53 53
Common stock, $.01 par value, 100,000,000 and
25,000,000 shares authorized; 20,361,531 and
19,074,903 shares outstanding 203 191
Additional paid-in capital 112,679 109,319
Distributions in excess of retained earnings (17,848) (14,741)
--------- ---------
95,098 94,837
--------- ---------
$ 312,818 $ 202,148
========= =========
The following table sets forth the company's unaudited results of
operations for the three and six months ended June 30, 2007 and 2006,
respectively.
Unaudited - In thousands, except per share data:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
REVENUES
Room rentals and other hotel
services $ 30,820 $ 20,118 $ 50,167 $ 35,808
-------- -------- -------- --------
EXPENSES
Hotel and property operations 20,582 13,470 35,258 25,166
Depreciation and amortization 3,018 2,077 5,602 4,133
General and administrative 927 708 1,850 1,387
-------- -------- -------- --------
24,527 16,255 42,710 30,686
-------- -------- -------- --------
EARNINGS BEFORE LOSS ON
DISPOSITIONS OF ASSETS, OTHER
INCOME, INTEREST EXPENSE,
MINORITY INTEREST AND INCOME TAX
BENEFIT (EXPENSE) 6,293 3,863 7,457 5,122
Net loss on dispositions of assets - (1) - (5)
Other income 42 31 77 61
Interest expense (3,392) (1,867) (5,491) (3,623)
Minority interest (99) (103) (142) (151)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,844 1,923 1,901 1,404
Income tax benefit (expense) (438) (317) 112 7
-------- -------- -------- --------
NET INCOME 2,406 1,606 2,013 1,411
Preferred stock dividend (248) (305) (538) (609)
NET INCOME AVAILABLE -------- -------- -------- --------
TO COMMON SHAREHOLDERS $ 2,158 $ 1,301 $ 1,475 $ 802
======== ======== ======== ========
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS
EPS Basic $ 0.11 $ 0.11 $ 0.07 $ 0.07
======== ======== ======== ========
EPS Diluted $ 0.11 $ 0.11 $ 0.07 $ 0.07
======== ======== ======== ========
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Unaudited - In thousands, except per share data:
Three Months Six Months
ended June 30, ended June 30,
2007 2006 2007 2006
------- ------- ------- -------
Weighted average shares outstanding - Basic 20,083 12,064 19,866 12,064
======= ======= ======= =======
Weighted average shares outstanding -
Diluted 20,105 12,064 19,888 12,064
======= ======= ======= =======
Weighted average number of shares
outstanding for:
calculation of FFO per share - basic 20,083 12,064 19,866 12,064
======= ======= ======= =======
calculation of FFO per share - diluted 22,356 14,757 22,335 14,757
======= ======= ======= =======
Reconciliation of net income to FFO
Net income available to common shareholders $ 2,158 $ 1,301 $ 1,475 $ 802
Depreciation and amortization 3,018 2,077 5,602 4,133
Net loss on disposition of assets - 1 - 5
------- ------- ------- -------
FFO available to common shareholders $ 5,176 $ 3,379 $ 7,077 $ 4,940
======= ======= ======= =======
FFO per share - basic $ 0.26 $ 0.28 $ 0.36 $ 0.41
======= ======= ======= =======
FFO per share - diluted $ 0.24 $ 0.25 $ 0.34 $ 0.38
======= ======= ======= =======
FFO is a non-GAAP financial measure. The company considers FFO to be a
market accepted measure of an equity REIT's operating performance, which is
necessary, along with net earnings (loss), for an understanding of the
company's operating results. FFO, as defined under the National
Association of Real Estate Investment Trusts (NAREIT) standards, consists
of net income computed in accordance with accounting principles generally
accepted in the United States of America ("GAAP"), excluding gains (or
losses) from sales of real estate assets, plus depreciation and
amortization of real estate assets. The company believes its method of
calculating FFO complies with the NAREIT definition. FFO does not
represent amounts available for management's discretionary use because of
needed capital replacement or expansion, debt service obligations, or other
commitments and uncertainties. FFO should not be considered as an
alternative to net income (loss) (computed in accordance with GAAP) as an
indicator of the company's liquidity, nor is it indicative of funds
available to fund the company's cash needs, including its ability to pay
dividends or make distributions. All REITs do not calculate FFO in the
same manner; therefore, the company's calculation may not be the same as
the calculation of FFO for similar REITs.
The company uses FFO as a performance measure to facilitate a periodic
evaluation of its operating results relative to those of its peers, who
like Supertel Hospitality, Inc., are typically members of NAREIT. The
company considers FFO a useful additional measure of performance for an
equity REIT because it facilitates an understanding of the operating
performance of its properties without giving effect to real estate
depreciation and amortization, which assume that the value of real estate
assets diminishes predictably over time. Since real estate values have
historically risen or fallen with market conditions, the company believes
that FFO provides a meaningful indication of its performance.
Unaudited - In thousands:
Three Months Six Months
ended June 30, ended June 30,
2007 2006 2007 2006
--------- --------- -------- --------
RECONCILIATION OF NET INCOME TO
EBITDA
Net income available to common
shareholders $ 2,158 $ 1,301 $ 1,475 $ 802
Interest 3,392 1,867 5,491 3,623
Income tax expense (benefit) 438 317 (112) (7)
Depreciation and amortization 3,018 2,077 5,602 4,133
Minority interest 99 103 142 151
Preferred stock dividend 248 305 538 609
--------- --------- -------- --------
EBITDA $ 9,353 $ 5,970 $ 13,136 $ 9,311
========= ========= ======== ========
EBITDA is a non-GAAP financial measure. With respect to EBITDA, the company
believes that excluding the effect of non-operating expenses and non-cash
charges, all of which are also based on historical cost accounting and may
be of limited significance in evaluating current performance, can help
eliminate the accounting effects of depreciation and amortization, and
financing decisions and facilitate comparisons of core operating
profitability between periods and between REITs, even though EBITDA also
does not represent an amount that accrues directly to common shareholders.
EBITDA doesn't represent cash generated from operating activities
determined by GAAP and should not be considered as an alternative to net
income, cash flow from operations or any other operating performance
measure prescribed by GAAP. EBITDA is not a measure of the company's
liquidity, nor is EBITDA indicative of funds available to fund the
company's cash needs, including its ability to make cash distributions.
Neither measurement reflects cash expenditures for long-term assets and
other items that have been and will be incurred. EBITDA may include funds
that may not be available for management's discretionary use due to
functional requirements to conserve funds for capital expenditures,
property acquisitions, and other commitments and uncertainties. To
compensate for this, management considers the impact of these excluded
items to the extent they are material to operating decisions or the
evaluation of the company's operating performance.
The following table sets forth the continuing operations of the company's
hotel properties for the three and six months ended June 30, 2007 and 2006,
respectively. The comparisons below include the company's 115 and 79
hotels for June 30, 2007 and 2006. This presentation includes non-GAAP
financial measures. The company believes that the presentation of hotel
property operating income (POI) is helpful to investors, and represents a
more useful description of its core operations, as it better communicates
the comparability of its hotels' results. "Same Store locations" reflect
76 hotels owned as of January 1, 2006, used for YTD 2007 and 2006; 77
hotels owned as of April 1, 2006 used for the three months ended 2007 and
2006. The company refers to its entire hotel portfolio as limited service
hotels which can be further described as mid-scale without food and
beverage, economy and economy extended stay.
Unaudited-In thousands, except
statistical data:
Three Months ended Six Months ended
June 30, June 30,
2007 2006 2007 2006
--------- --------- -------- --------
Average daily room rate (ADR):
Midscale w/o F&B $ 75.14 $ 71.48 $ 72.69 $ 69.13
Economy $ 47.24 $ 47.86 $ 47.23 $ 47.39
Economy Extended Stay $ 26.92 $ - $ 26.76 $ -
--------- --------- -------- --------
Total $ 52.00 $ 57.60 $ 51.53 $ 56.44
========= ========= ======== ========
Revenue per available room
(RevPAR):
Midscale w/o F&B $ 52.88 $ 51.86 $ 46.75 $ 47.18
Economy $ 32.32 $ 31.28 $ 29.65 $ 28.10
Economy Extended Stay $ 18.35 $ - $ 17.49 $ -
--------- --------- -------- --------
Total $ 35.82 $ 39.25 $ 32.77 $ 35.40
========= ========= ======== ========
Occupancy percentage:
Midscale w/o F&B 70.4% 72.6% 64.3% 68.3%
Economy 68.4% 65.4% 62.8% 59.3%
Economy Extended Stay 68.2% - 65.4% -
--------- --------- -------- --------
Total 68.9% 68.2% 63.6% 62.7%
========= ========= ======== ========
Revenue from room rentals and
other hotel services consists of:
Room rental revenue $ 29,991 $ 19,602 $ 48,726 $ 34,871
Telephone revenue 135 45 246 78
Other hotel service revenues 694 471 1,195 859
--------- --------- -------- --------
Total revenue from room rentals
and other hotel services $ 30,820 $ 20,118 $ 50,167 $ 35,808
========= ========= ======== ========
Room rentals and other hotel services
Midscale w/o F&B $ 10,267 $ 10,056 $ 18,212 $ 18,052
Economy 10,006 9,777 17,482 17,212
--------- --------- -------- --------
Same Store locations 20,273 19,833 35,694 35,264
--------- --------- -------- --------
Midscale w/o F&B 1,614 284 2,043 284
Economy 6,790 1 8,555 260
Economy Extended Stay 2,143 - 3,875 -
--------- --------- -------- --------
Acquisitions 10,547 285 14,473 544
--------- --------- -------- --------
Total room rental and other hotel
services $ 30,820 $ 20,118 $ 50,167 $ 35,808
========= ========= ======== ========
Hotel and property operations expense
Midscale w/o F&B $ 6,640 $ 6,369 $ 12,405 $ 12,102
Economy 7,153 6,858 13,256 12,627
--------- --------- -------- --------
Same Store locations 13,793 13,227 25,661 24,729
--------- --------- -------- --------
Midscale w/o F&B 1,015 206 1,453 207
Economy 4,407 37 5,593 230
Economy Extended Stay 1,367 - 2,551 -
--------- --------- -------- --------
Acquisitions 6,789 243 9,597 437
--------- --------- -------- --------
Total hotel and property
operations expense $ 20,582 $ 13,470 $ 35,258 $ 25,166
========= ========= ======== ========
Property Operating Income ("POI")
Midscale w/o F&B $ 3,627 $ 3,687 $ 5,807 $ 5,950
Economy 2,853 2,919 4,226 4,585
--------- --------- -------- --------
Same Store locations 6,480 6,606 10,033 10,535
--------- --------- -------- --------
Midscale w/o F&B 599 78 590 77
Economy 2,383 (36) 2,962 30
Economy Extended Stay 776 - 1,324 -
--------- --------- -------- --------
Acquisitions 3,758 42 4,876 107
--------- --------- -------- --------
Total property operating income $ 10,238 $ 6,648 $ 14,909 $ 10,642
========= ========= ======== ========
Unaudited-In thousands, except
Percentages:
Three Months ended Six Months ended
June 30, June 30,
2007 2006 2007 2006
--------- --------- -------- --------
POI as a percentage of revenue from
room rentals and other hotel services
Midscale w/o F&B 35.3% 36.7% 31.9% 33.0%
Economy 28.5% 29.9% 24.2% 26.6%
--------- --------- -------- --------
Same Store locations 32.0% 33.3% 28.1% 29.9%
========= ========= ======== ========
Midscale w/o F&B 37.1% 27.5% 28.9% 27.1%
Economy 35.1% - 34.6% 11.5%
Economy Extended Stay 36.2% - 34.2% -
--------- --------- -------- --------
Acquisitions 35.6% 14.7% 33.7% 19.7%
--------- --------- -------- --------
Total POI as a percentage of
revenue 33.2% 33.0% 29.7% 29.7%
========= ========= ======== ========
RECONCILIATION OF NET INCOME TO POI
Net income $ 2,406 $ 1,606 $ 2,013 $ 1,411
Depreciation and amortization 3,018 2,077 5,602 4,133
Loss on disposition of assets - 1 - 5
Other Income (42) (31) (77) (61)
Interest expense 3,392 1,867 5,491 3,623
Minority interest 99 103 142 151
General and administrative expense 927 708 1,850 1,387
Income tax expense (benefit) 438 317 (112) (7)
--------- --------- -------- --------
POI $ 10,238 $ 6,648 $ 14,909 $ 10,642
========= ========= ======== ========
Contact Information: Contact: Donavon A. Heimes Supertel Hospitality Chief financial officer 402.371.2520 Jerry Daly, Carol McCune Daly Gray (Media contact) 703.435.6293