Royal Host Real Estate Investment Trust

Royal Host Real Estate Investment Trust

November 11, 2008 19:01 ET

Royal Host REIT Announces Third Quarter Results and Special Distribution

CALGARY, ALBERTA--(Marketwire - Nov. 11, 2008) - Royal Host Real Estate Investment Trust ("Royal Host" or the "Trust") (TSX:RYL.UN) (TSX:RYL.DB.A) (TSX:RYL.DB.B) (TSX:RYL.DB.C) (TSX:RYL.DB.D) today announced record results for the three and nine months ended September 30, 2008.

Royal Host generated record net income of $76.4 million, or $3.54 per unit, in the third quarter, largely attributable to the gain realized on the sale of the Grand Okanagan Lakefront Resort and Conference Centre as the Trust continued to be opportunistic in its pursuit of initiatives to increase Unitholder value.

During the quarter, Royal Host actively repurchased its trust units, bringing year-to-date repurchases to $40.9 million and retired $7.4 million of convertible debentures. In addition to being immediately accretive, Management believes that repurchases at a discount to the Trust's underlying net asset value are in the best interests of Unitholders. The Trust also continued to focus on the long-term value of its hotels through reinvestment of $1.8 million during the quarter, totalling $8.7 million to date in 2008.

Royal Host increased its portfolio of income-producing marketable securities by $49.8 million in the third quarter. Subsequent to September 30, the Trust disclosed that it had accumulated approximately 13.3% of the trust units of the largest hospitality REIT in Canada. The resulting portfolio provides diversified cash flow, which represents a higher yield than that which was historically generated from hotel assets sold in 2008.

"The initiatives undertaken by the Trust throughout 2008 have reinforced a platform that ensures the Trust's ability to deliver Unitholder value, regardless of economic climate," commented Patrick Lambie, Executive Vice President. "The liquidity inherent on our balance sheet, along with a conservative payout ratio provides the capacity to meet all future obligations and continue to take advantage of opportunities," he added.

The following table highlights the Trust's financial results for the three
and nine months ended September 30, 2008.

Three months ended Nine months ended
September 30 September 30
($000's, except as Change Change
otherwise noted) 2008 2007 (%) 2008 2007 (%)
Hospitality Revenue 27,542 29,740 (7.4) 79,331 81,756 (3.0)
Hospitality Expenses 19,534 19,572 (0.2) 58,065 58,306 (0.4)
------------------- ------------------
Hospitality Gross
Margin 8,008 10,168 (21.2) 21,266 23,450 (9.3)
------------------- ------------------
Hospitality Gross
Margin % 29.1% 34.2% 26.8% 28.7%
------------------- ------------------
Investment Income 3,118 1,142 173.0 7,435 5,089 46.1
------------------- ------------------
Royal Private
Residence Club (130) - (130) -
------------------- ------------------
Other Expenses 9,750 8,434 15.6 24,415 26,874 (9.2)
------------------- ------------------
Income From Continuing
Operations 1,246 2,876 (56.7) 4,156 1,665 149.6
Income From
Discontinued Operations 75,112 4,648 1,516.0 102,287 13,017 685.8
------------------- ------------------
Net Income 76,358 7,524 914.9 106,443 14,682 625.0
------------------- ------------------
------------------- ------------------
Basic Per Unit Net
Earnings ($)

From Continuing
Operations 0.06 0.11 (45.5) 0.18 0.07 157.1
From Discontinued
Operations 3.48 0.18 1,833.3 4.38 0.51 758.8
------------------- ------------------
3.54 0.29 1,120.7 4.56 0.58 686.2
------------------- ------------------
------------------- ------------------
Distributable Income 5,659 10,073 (43.8) 15,023 17,585 (14.6)
------------------- ------------------
------------------- ------------------
Distributions Declared
on Trust Units 3,559 4,378 (18.7) 11,245 12,880 (12.7)
------------------- ------------------
------------------- ------------------
Basic Per Unit
Income ($) 0.26 0.39 (33.3) 0.64 0.69 (7.2)
------------------- ------------------
------------------- ------------------
Per Unit Distributions
Declared ($) 0.165 0.165 - 0.495 0.495 -
------------------- ------------------
------------------- ------------------

Results from hospitality operations in the third quarter reflect the reduced demand in certain markets as a result of economic uncertainty, as well as continued upward pressure on labour and other operating costs. Management has dedicated additional resources to mitigate the effect of these challenges on its core business.

After considering the strength of the Trust's financial performance to date in 2008, including gains realized from the sale of hotel properties in 2008, and after consideration of the sustainability of the Trust's regular monthly distributions, the Trustees of Royal Host intend to declare a special distribution for the 2008 fiscal year, with record and payment dates in December 2008. The amount of the special distribution will be guided by the estimate of taxable income for the 2008 fiscal year with potential adjustments. Current estimates of the undistributed taxable income for the 2008 fiscal year indicate a minimum special distribution of approximately $28 million. The final amount of the special distribution will vary based on, among other considerations, actual earnings in the fourth quarter of 2008. It is anticipated that the special distribution will be declared, and the details of the distribution will be announced, in early December 2008.

Management of Royal Host will host an investor conference call on Wednesday, November 12, 2008 at 11:00 a.m. Eastern Time. The call may be accessed by dialing 1-416-640-3404 or 1-866-322-1159 and providing confirmation code 1184412. A recording of this call will be available shortly after the call until November 22, 2008. To access this recording please dial 1-647-436-0148 or 1-888-203-1112 and provide the playback password 1184412. Alternatively, a recording of the audio webcast will also be available on the Trust's website after November 15, 2008.

Royal Host is a uniquely diversified hospitality trust that delivers Unitholder value through hotel ownership, investment, management and franchising. Royal Host's portfolio of Canadian hotels operates under a variety of recognizable brands as well as a number of unbranded properties. The Trust's hotel portfolio is further enhanced by a stable franchising business, a successful hotel management operation, and a sizable portfolio of publicly-traded securities from within the hospitality and service sectors.

Royal Host trust units and convertible debentures are traded on the Toronto Stock Exchange under the trading symbols "RYL.UN", "RYL.DB.A", "RYL.DB.B", "RYL.DB.C" and "RYL.DB.D", respectively.

The above statements in regard to the financial results should be read in conjunction with Royal Host's unaudited consolidated financial statements for the three and nine months ended September 30, 2008 and its management's discussion and analysis, which are available on Royal Host's website at as well as the SEDAR website at

This press release contains certain forward-looking statements relating, but not limited to, Royal Host's operations, anticipated financial performance, business prospects, and strategies. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by such forward-looking statements. Such factors include, but are not limited to economic, competitive, and lodging industry conditions. Royal Host disclaims any responsibility to update any such forward-looking statements except as required by law.

Contact Information

  • Royal Host Real Estate Investment Trust
    A. Brad Cann, CA
    Executive Vice President and Chief Financial Officer
    (403) 259-9800
    (403) 259-8580 (FAX)