Holloway Lodging Corporation reports Q1 2016 results and declares quarterly dividend

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HALIFAX, May 12, 2016 /CNW/ - Holloway Lodging Corporation (TSX: HLC HLC.DB HLC.DB.A) ("Holloway") today announced financial results for the three months ended March 31, 2016. All amounts are in Canadian dollars unless otherwise indicated. Readers should refer to Holloway's unaudited interim consolidated condensed financial statements as at March 31, 2016 and its management discussion and analysis which are available on Holloway's website at http://www.hlcorp.ca and on SEDAR at www.sedar.com.

First Quarter Overview and Outlook

Hotel Performance

Revenue declined 23% and NOI declined 55% in the first quarter of 2016 compared to the prior year. The following table shows the source of these declines.

Approximately 12% of the NOI decline came from properties or businesses that were owned in the prior year's quarter but were not owned in this year's quarter. Another 9% of the operating income decline came from properties located in Ontario and Atlantic Canada (excluding expenses associated with the opening of the Travelodge® in Sydney, NS). The principal source of Holloway's poor first quarter results is our properties in Western Canada, which accounted for 77% of our year-over-year NOI decline. The bright spot during the first quarter was our properties located in Northern Canada, which generated higher revenues and NOI than in the prior year's quarter. We expect these positive results to continue due to, among other things, the lower Canadian dollar which should result in increased tourism in this region, a continued focus on productivity improvements, the benefits of energy reduction initiatives put in place in prior quarters and the recent rebranding of our Yellowknife Inn.

During the first quarter, Holloway branded its 152-room Holloway Inn & Suites in Grande Prairie, AB and its 129-room Yellowknife Inn located in Yellowknife, NT as Quality Inn & Suites®. 

Balance Sheet and Capital Allocation

Holloway's financial position remains strong. We currently have $238.8 million of debt. Of this amount, $89.2 million or 37% is in the form of convertible debentures with no financial covenants and $126.4 million or 53% of debt matures in 2018 or beyond.

During the quarter, Holloway undertook several financing transactions that took advantage of the current low interest rate environment and strengthened the company's financial position. Holloway renegotiated its revolving credit facility increasing total availability under the facility from $25.0 million to $45.0 million. Holloway entered into mortgages for three previously unencumbered hotels located in Nova Scotia and New Brunswick. The mortgages have an aggregate principal amount of $8.9 million, a five-year term and a fixed rate of interest of 4.25%. Holloway also refinanced the mortgage on an Ontario hotel with a new lender, resulting in proceeds of $1.1 million and reducing the interest rate from 6.50% to 4.25%.

Holloway repurchased $25 thousand of our 6.25% convertible debentures at an average cost of $86.21 per $100 of face value and $11 thousand of our 7.50% convertible debentures at an average cost of $94.04 per $100 of face value. Holloway also repurchased 140,700 shares or 0.7% of our outstanding shares at an average cost of $4.58 per share. While Holloway's financial and share price performance has been less than desirable recently, we believe this to be a transitory phenomenon and that repurchasing our shares at these depressed levels will yield considerable benefits in coming years.

Outlook

Subsequent to the end of the quarter, Holloway acquired the Westmark® Whitehorse Hotel and Conference Center in Whitehorse, YT and opened the Travelodge® hotel in Sydney, NS following extensive renovations. These hotels are expected to produce approximately $2.0 million of NOI on a full-year basis and will help offset the NOI declines being realized in Western Canada. The ramp up of the DoubleTree® in London, ON and Holiday Inn® in Ottawa, ON will also help to offset the NOI declines being realized in Western Canada.

We expect conditions in Western Canada to remain challenging throughout the remainder of this year. We believe results in our three other regions will improve throughout the remainder of this year as a result of higher revenues (due to recent acquisitions and renovations, the effects of the lower Canadian dollar, etc.) and lower costs.

Dividend Declaration

On May 12, 2016, the Board of Directors declared a quarterly dividend of $0.035 per share, representing an annual dividend of $0.14 per share. The dividend is payable on June 15, 2016 to shareholders of record on May 31, 2016. 

ABOUT HOLLOWAY LODGING CORPORATION

Holloway is a real estate corporation focused on acquiring, owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets. Holloway owns 36 hotels with 4,153 rooms. Holloway's shares and debentures trade on the TSX under the symbols HLC, HLC.DB and HLC.DB.A.

This press release contains forward-looking information within the meaning of applicable securities laws.  Forward-looking information may relate to Holloway's future outlook and anticipated events or results and may include statements regarding Holloway's future financial position, business strategy, financial results, plans and objectives. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts.  Forward-looking information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what Holloway currently expects and there can be no assurance that such statements will prove to be accurate.  Some of these risks and uncertainties are described under "Risk Factors" in Holloway's annual information form for the year ended December 31, 2015 which is available on Holloway's profile on the SEDAR website at www.sedar.com.  Holloway does not intend to update or revise any such forward-looking information should its assumptions and estimates change.

SOURCE Holloway Lodging Corporation