Mr. Keith Levit reports
LAKEVIEW HOTEL INVESTMENT CORP ANNOUNCES 2ND QUARTER RESULTS
Lakeview Hotel Investment Corp. (LHIC) is releasing its financial results for the quarter ended June 30, 2014. The following comments in regard to the financial results should be read in conjunction with the June 30, 2014, financial statements, and management discussion and analysis, which are available on SEDAR.
Lakeview Hotel Investment continued to produce very solid operating results in the second quarter of 2014. Comparing operating results from the second quarter of 2013, funds from operations (FFO) more than doubled from $518,663 to $1,138,525, as did adjusted funds from operations (AFFO), which increased from $337,014 to $949,961. Distributable income (DI) for the quarter increased from $456,076 to $1,008,491. The outlook for the third quarter of 2014 remains positive, with revenues anticipated to be ahead of the revenues achieved on a comparable hotel bases in the third quarter of 2013. Overall expectations are that the second half of 2014 will be flat to better than the second half of 2013.
Based on the very important metrics of FFO, AFFO and DI, Lakeview Hotel Investment has almost fully recovered from the bottom of the market in 2009, when the economy was in recession, and when drilling activity in Alberta and British Columbia collapsed. Results are now comparable with those experienced in the peak of the market in 2006 and 2007.
From the time of the collapse of the market, the company has been struggling with financing issues. Since 2009, the financial statements of Lakeview Hotel Investment have classified almost all debt as current liabilities and have included going concern notes questioning Lakeview's ability to meet its obligations as they came due.
On Aug. 25, 2014, Lakeview Hotel Investment completed a financing on 13 of its hotels in Alberta and British Columbia. The $48-million facility was provided by a syndicate of lenders led by Alberta Treasury Branches, and included Business Development Bank of Canada (BDC) and Roynat Capital. The financing was for a five-year term and at an interest rate of 6.08 per cent. Management is of the opinion that the financing will allow these loans to be reclassified as long-term debt and removes the requirement for the going concern classification. With financial stability in place, management will once again be able to focus its efforts on growing the business of Lakeview Hotel Investment, instead of dealing with financing matters.
COMPARISON OF THE OPERATING RESULTS
Three months ended June 30, Six months ended June 30,
2014 2013 2014 2013
Hospitality revenue
Room $ 7,479,519 $ 8,400,742 $ 15,525,937 $ 16,786,404
Food and beverage 1,121,776 1,116,057 2,283,859 2,237,448
Other 456,640 428,547 936,802 868,199
Total revenue 9,057,935 9,945,346 18,746,598 19,892,051
Expenses (8,844,295) (10,323,119) (18,003,662) (20,585,139)
Gain on sale of income properties 336,223 6,158,120 1,007,514 6,158,120
Net income (loss) 549,863 5,780,347 1,750,450 5,465,032
Basic and diluted income (loss) before income tax per share $ 0.028 $ 0.296 $ 0.090 $ 0.279
Reconciliation to funds from operations
Add (deduct)
Amortization of income properties 763,664 975,674 1,520,106 2,005,031
Amortization of franchise fees and licences 1,192 1,192 2,384 2,384
Gain on sale of income properties (336,223) (6,158,120) (1,007,514) (6,158,120)
Distributions from Lakeview Flag Licensing
General Partnership 259,700 90,650 401,800 219,030
Distributions from Lakeview Flag Management
General Partnership 161,250 89,250 338,750 196,250
Income from Lakeview Flag Licensing General Partnership (157,971) (144,976) (328,486) (288,411)
Income from Lakeview Flag Management General Partnership (102,950) (115,354) (212,602) (229,084)
Funds from operations 1,138,525 518,663 2,464,888 1,212,112
Basic and diluted funds from operations per share $ 0.058 $ 0.027 $ 0.126 $ 0.062
Contributions to reserve account (188,564) (181,649) (351,577) (370,117)
Adjusted funds from operations 949,961 337,014 2,113,311 841,995
Basic and diluted adjusted funds from operations per share $ 0.049 $ 0.017 $ 0.108 $ 0.043
Reconciliation to distributable income
Accretion of debentures 36,116 75,572 72,559 151,562
Accretion of mortgages payable 21,846 20,962 45,829 44,176
Loss on derecognition of income properties 568 22,528 1,887 25,780
Distributable income 1,008,491 456,076 2,233,586 1,063,513
Basic and diluted distributable income per share $ 0.052 $ 0.023 $ 0.114 $ 0.054
Distributions - - - -