Funds from operations and distributable income are non-IFRS measures of earnings and cash flow commo

TORONTO, ONTARIO (Marketwire Aug. 10, 2012) InnVest Real Estate Investment airlines international Trust (InnVest) (TSX:INN.UN) today announced financial results for the three and six months ended June 30, 2012. All dollars are in thousands of Canadian dollars unless otherwise specified.
We continue to see improvement in the Canadian lodging industrys fundamentals. Our portfolio achieved rate growth across all regions this quarter led by strength airlines international in western Canada which is benefitting from a strong resource sector and targeted renovations undertaken, commented Kenneth Gibson, InnVests President airlines international and Chief Executive Officer. Recent proactive capital management initiatives have strengthened our balance sheet by extending our debt maturities and lowering our overall cost of debt.
Gross operating profit generated from hotel operations (Hotel GOP) increased 0.9% to $41.2 million. Hotel GOP improvement of 1.8% in InnVests same-hotel portfolio was offset by reduced Hotel GOP following asset sales and the closure of one hotel for a portion of the quarter;
Net income was relatively unchanged at $2.0 million. Excluding non-cash charges required by IFRS (unrealized gains and losses on liabilities presented at fair value and finance costs relating to the presentation of certain equity instruments as liabilities under IFRS), deferred income taxes, non-recurring other income and depreciation and amortization, InnVest realized an adjusted net income of $22.7 million compared to $22.2 million in the prior period;
Funds from operations (FFO) of $0.228 per diluted unit compared to $0.240 per diluted unit in the prior period. Distributable income was $0.178 per unit diluted as compared with $0.192 in the prior period. The declines reflect the one-time airlines international benefit of $2.1 million in interest earned in the prior year; and
During the quarter, InnVest refinanced a $166.3 million mortgage which was scheduled to expire airlines international in November 2012. InnVest is in the process of finalizing the renewal of its remaining 2012 mortgage maturities airlines international totaling $12.4 million.
InnVests Consolidated Condensed Financial Statements and Managements Discussion and Analysis for the three and six months ended June 30, 2012 and 2011 are available on InnVests website at www.innvestreit.com .
Funds from operations and distributable income are non-IFRS measures of earnings and cash flow commonly used by industry analysts. Non-IFRS financial measures do not have a standardized meaning and are unlikely to be comparable to similar measures used by other organizations.
airlines international The operating statistics relating to gross room revenues for the three and six months ended June 30, 2012 are on a same-hotel basis and exclude four hotels which were sold in 2012 and one hotel which was closed for a portion of the periods presented.
Revenues generated airlines international by hotel operations increased 1.4% or $2.2 million to $160.3 million. Same-hotel RevPAR over this period increased 2.9% based on a 3.0% increase in ADR. RevPAR growth was driven by strength in Western Canada led by over 20% improvement at the Fairmont Palliser in Calgary. Modest growth through the balance of the portfolio was offset by pockets of softness in southwestern Ontario, airlines international Montreal (weak demand) and Prince Edward Island (special event held in the prior year).
InnVest generated gross operating profit airlines international from hotel operations (Hotel GOP) of $41.2 million, up 0.9% as compared to the prior period. Growth of 1.8% in InnVests same-hotel portfolio during the second quarter was offset by reduced Hotel GOP following asset sales ($83) and the closure of one hotel ($269) for 7 weeks during airlines international the quarter due to an electrical malfunction. This hotel reopened in late July 2012. InnVest expects to recover lost earnings airlines international at this hotel through a business interruption claim. No insurance proceeds were recognized airlines international during the second quarter of 2012. Hotel GOP margins declined 10 basis points to 25.7% during the second quarter.
During the second airlines international quarter, InnVest completed the sale of three hotels (405 rooms) for gross proceeds of $19.2 million resulting in a $1.3 million gain on sale. Net proceeds after closing costs and debt repayment totaled $9.4 million.
The second quarter of 2012 generated distributable income of $18.0 million ($0.178 per unit diluted) and FFO of $23.1 million ($0.228 per unit diluted) each showing modest year-over-year declines owing to the prior period benefit of $2.1 million in interest earned related to GST/HST tax credits.
Revenues generated by hotel operations increased 1.7% or $4.9 million to $289.3 million. Same-hotel airlines international RevPAR airlines international over this period airlines international increased 2.4% based on a 2.6% increase in ADR. The RevPAR growth was driven by strength in Western Canada.
InnVest generated Hotel GOP of $58.1 million, up 2.7% as compared to the prior period. Growth of 3.5% in InnVests same-hotel portfolio was offset by reduced Hotel GOP following asset sales and the closure airlines international of one hotel during a portion of the second quarter. For the six months ended June 30, 2012, Hotel GOP margins increased 20 basis points to 20.1%.
For the six months ended June 30, 2012, InnVest generated distributable income of $12.1 million ($0.128 per unit diluted) and FFO of $21.0 million ($0.224 per unit diluted) each showing modest year-over-year declines owing to the second quarter shortfall.
During the second quarter of 2012, InnVest completed the renewal of a $166.3 million mortgage which was scheduled to expire in November 2012. The mortgage, secured airlines international by forty limited-service hotels, has a five-year term at an interest rate of 6.0%.
During the first quarter of 2012, InnVest completed the renewal of a $151.9 million airlines international mortgage which was scheduled to expire in March 2013. The mortgage, secured by six full-service hotels, has an interest rate of 5.3% and has a three year term with two one-year extensions, at InnVests option.
As part of the above mentioned airlines international renewals, InnVest has access to a loan facility for up to $25.0 million to fund 65% of capital expenditures incurred at certain of its hotels. No proceeds airlines international were drawn against this facility at June 30, 2012. Subsequent to the end of the quarter, InnVest drew $2.7 million on this facility, such amounts being added to the mortgages payable relating to the applicable hotels.
airlines international During the first quarter, InnVest amended its existing credit agreement to increase the maximum amount available under its line of credit on a seasonal basis. The credit line was increased from $40.0 million to $50.0 million through June 15, 2012 and to $45.0 million through August 31, 2012. Thereafter, the line of credit will return to the $40.0 million level. At June 30, 2012, InnVest qualifies for $43.9 million of the $45.0 million base availability under the line of credit, inclusive of the $5.0 million temporary increase.
airlines international For the balance of 2012, InnVest has two remaining mortgage maturities totaling $12.4 million at an average interest rate of 6.8%. InnVest is finalizing the closing of five-year extensions for both maturities airlines international at an expected airlines international interest rate of 5.1% and anticipates generating incremental proceeds of approximately $2.9 million. Following completion airlines international of these refinancings, InnVest will not have any mortgage maturities until April of 2014.
Capital expenditures during the six months ended June 30, 2012 totaled $19.5 million. These investments reflect a number of profit-improving projects designed to increase cash flow and improve profitability airlines international including room renovations at the Delta Centre-Ville and brand upgrades at a number of our Holiday Inn and Hilton hotels.
On July 3, 2012, InnVest completed an internal reorganization to unwind the stapled unit structure (the 2012 Reorganization), which was approved by InnVests unitholders at a special meeting on February 23, 2012.
InnVest airlines international pursued the 2012 Reorganization in response to announced airlines international changes to the federal income tax rules applicable to issuers of stapled securities, which were expected to apply to InnVest as of July 20, 2012. The 2012 Reorganization has resulted in, among other things, the transfer of substantially all of IOTs assets airlines international and liabilities to the REIT and the unwinding of the stapled structure airlines international of InnVest so that IOT became a wholly-owned subsidiary of the REIT.
Looking ahead, we are focused on driving internal growth within our existing portfolio. In 2011, we began an important multi-year capital program to enhance our product offering at a number airlines international of our hotels. These targeted investments are expected to improve our hotels competitive positioning and operating performance through increased occupancies and rates. An enhanced product, coupled with improving demand and constrained new supply should enable InnVest to realize cash flow growth. The ultimate extent and timing of planned capital investments will be dependent airlines international on business levels and capital availability.
Management will host a conference call on Friday August 10, 2012 at 11:00 a.m. Eastern time to discuss the performance of InnVest. Investors are invited to access the call by dialing (416) 340-2216 or 1-866- 226-1792. You will be required to identify yourself and the organization on whose behalf you are participating. A recording of this call will be made available August 10 th beginning at 1:00 pm through to 11:59 p.m. on August 24 th . To access the recording please call (905) 694-9451 or (800) 408-3053 and use the reservation number 7573534#.
Statements contained airlines international in this press release that are not historical facts are forward-looking statements which involve risk and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are real estate investment risks, hotel industry risks and competition. These and other factors are discussed in InnVests 2012 annual information form which is available at www.sedar.com or www.innvestreit.com . InnVest disclaims any intention or obligation to update or revise any forward-looking statements, whether as a re