For Immediate Release
 
Contact:
 
Ms. Krista Arkfeld
Jerry Daly
Director of Corporate Communications
Daly Gray
karkfeld@supertelinc.com
jerry@dalygray.com


Supertel Hospitality Reports 2011 Fourth Quarter, Full-Year Results
 
NORFOLK, NE., March 30, 2012 – Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust (REIT) which currently owns 98 hotels in 23 states, today announced its results for the fourth quarter and year ended December 31, 2011.
 
2011 Fourth Quarter and Full-Year Highlights
 
·  
Funds from operations (FFO), adjusted EBITDA and earnings declined, reflecting a year of transition of management leading to a new equity investment.
 
·  
Increased revenues from same store continuing operations 1.6 percent to $17.5 million in the fourth quarter and 0.7 percent for the full year.
 
·  
Sold one hotel in the 2011 fourth quarter, bringing the full year’s divestment transactions to six hotels, generating gross proceeds of $11.8 million.
 
·  
Reduced mortgage debt five percent to $165.8 million by year-end.
 
·  
Improved the continuing operations portfolio’s 2011 fourth quarter Revenue per Available Room (RevPAR) by 1.9 percent and 0.9 percent for the full year.
 
·  
Improved the continuing operations midscale portfolio’s 2011 fourth quarter RevPAR by 5.9 percent and 1.0 percent for the full year. The midscale and upper-midscale segments play heavily into our future growth plans.
 
·  
Transitioned our continuing operations hotel portfolio from one management company to three proven regional operators.
 
·  
Relocated the company’s corporate office to a more economical, leased office space.
 
·  
Sourced $30 million in new equity capital through an investment by an IRSA Inversiones y Representaciones Sociedad Anónima (NYSE: IRS) affiliate that closed in February 2012.
 
Fourth Quarter Operating & Financial Results
 
Revenues from continuing operations for the 2011 fourth quarter rose $0.3 million, or 1.6 percent, to $17.5 million, compared to the same year-ago period, due primarily to the economic recovery.  The company had a net loss attributable to common shareholders of $(8.6) million, $(0.37) per diluted share for the 2011 fourth quarter, compared to $(4.2) million, or $(0.18) per diluted share, for the same 2010 period. The portfolio of 76 continuing operations hotels in the 2011 fourth quarter posted a 1.9 percent improvement in RevPAR, compared with the same period a year earlier, led by a 5.3 percent increase in average daily rate (ADR) partially offset by a 3.2 percent decrease in occupancy.
 
Funds from operations (FFO) was $0.2 million, or $0.01 per diluted share, for the 2011 fourth quarter, compared to $0.4 million, or $0.02 per diluted share, in the same 2010 period.
 
Earnings before interest, taxes, depreciation and amortization, non-controlling interest and preferred stock dividends (Adjusted EBITDA) decreased to $(3.6) million, down $5.1 million from the 2010 fourth quarter.
 
“We have addressed multiple complex issues as we recreate the company,” said Kelly Walters, Supertel’s president and chief executive officer. “We have made significant progress and are confident that we are on the right path to improved shareholder returns.  Metaphorically, we are out of the emergency room and in recovery.  We’re not yet at 100 percent of where we intend to be, but are well on the way.”
 
 
Fourth Quarter 2011 vs Fourth Quarter 2010
 
                                     
 
RevPar ($)
 
Occupancy (%)
 
ADR ($)
 
 
Variance
 
2011
 
2010
 
Variance
 
2011
 
2010
 
Variance
 
2011
 
2010
 
                                     
                                     
Industry - Total US Market
7.9%
 
56.65
 
52.52
 
3.9%
 
55.5
 
53.4
 
3.9%
 
102.15
 
98.29
 
Supertel - Continuing Operations Portfolio
1.9%
 
29.04
 
28.51
 
-3.2%
 
57.8
 
59.7
 
5.3%
 
50.29
 
47.74
 
                                     
Chain Scale
                                   
                                     
Industry - Midscale
4.1%
 
34.76
 
33.40
 
3.4%
 
48.7
 
47.1
 
0.5%
 
71.33
 
70.95
 
Supertel - Midscale
5.9%
 
36.54
 
34.50
 
-0.2%
 
54.1
 
54.2
 
6.0%
 
67.49
 
63.64
 
                                     
Industry - Economy
6.2%
 
24.16
 
22.75
 
2.7%
 
49.2
 
47.9
 
3.4%
 
49.09
 
47.48
 
Supertel - Economy
-0.2%
 
28.25
 
28.31
 
-2.9%
 
56.7
 
58.4
 
2.7%
 
49.81
 
48.49
 
                                     
Industry - Extended Stay
N/A
 
N/A
 
N/A
 
N/A
 
N/A
 
N/A
 
N/A
 
N/A
 
N/A
 
Supertel - Extended Stay
-5.2%
 
   16.20
 
   17.08
 
-8.9%
 
67.9%
 
74.5%
 
4.1%
 
    23.87
 
    22.92
 
                                     
Industry Source: STR Monthly Review
                           

 
Midscale Hotels
 
Fourth quarter RevPAR for the company’s 29 midscale continuing operations hotels increased 5.9 percent to $36.54. Occupancy declined 0.2 percent to 54.1 percent, while ADR rose six percent to $67.49.
 
Economy Hotels
 
RevPAR in the 2011 fourth quarter for the company’s 40 economy hotels in continuing operations was essentially flat, a 0.2 percent decrease, to $28.25.  Occupancy declined 2.9 percent to 56.7 percent, and ADR rose 2.7 percent to $49.81.
 
Extended-Stay Hotels
 
The company’s seven extended-stay hotels in continuing operations reported a 5.2 percent decrease in RevPAR to $16.20, as a result of an 8.9 percent decline in occupancy to 67.9 percent, partially offset by a 4.1 percent increase in ADR to $23.87.
 
“Operationally, Supertel was a company in transition for most of 2011, as we shifted our entire portfolio to three, strong, new management companies from one central operator,” Walters commented.  “On balance, the transition occurred as expected.  The change in operators was mildly disruptive to the peak summer season.  This disruption played a major role in our results lagging behind the percentage increases in occupancy and RevPAR enjoyed by the industry during 2011.  We anticipated this disruption, but are confident it was the right move strategically.  Even with the transition, our midscale and economy properties continued to exceed their respective segments in occupancy and RevPAR.  Entering 2012, we now have all the operating pieces in place and functioning smoothly to rebuild and restore the company to a position of strength.”
 
Walters noted that the company aggressively increased room rate in the year.  “The increase impacted our occupancy,” Walters said.  “We will continue to emphasize rate over occupancy, but will constantly tinker with the formula to optimize RevPAR and margins.”
 
Property operating income (POI), an important operating measurement, is the revenue from room rentals and other hotel services less hotel and property operating expenses.  For the 2011 fourth quarter, POI from continuing operations increased $0.1 million, or 1.9 percent, compared to the similar year-ago period.
 
 
Three months
Twelve months
POI as a percentage of revenue from room rentals
ended December 31,
ended December 31,
and other hotel services:
2011
2010
2011
2010
Continuing operations
21.4%
21.3%
23.5%
24.3%
Discontinued operations
2.8%
7.5%
11.7%
13.3%

 
“The discontinued operations portfolio continues to weigh on our overall operating results,” Walters noted. “We continue to execute our plan of disposing of non-strategic, more mature assets.   We would prefer to accelerate the speed of dispositions, but given the difficult financing environment, we are moving as rapidly as prudently possible.  We have sold 25 properties since we initiated the plan in 2008. We will continue to dispose of underperforming properties and recycle the capital into newer, larger and well positioned brands, including Marriott and Hilton, that we believe, at this stage of our growth cycle, will have greater income durability and higher returns under the REIT investment model.”
 
The company had a net loss of $(8.3) million for the 2011 fourth quarter, compared to a net loss of $(3.8) million for the same 2010 period.  The 2011 fourth quarter loss includes a total non-cash impairment charge of $6.5 million, comprised of a  $2.4 million non-cash impairment charge against assets classified as continuing operations (76 hotels at December 31, 2011), and $4.1 million of non-cash impairment charges recorded against assets classified as discontinued operations (24 hotels at December 31, 2011).  This compares to $2.5 million of impairment charges recorded in the like 2010 period against assets classified as discontinued operations.  All income and expenses related to sold hotels are classified as discontinued operations.
 
After recognition of non-controlling interest and dividends for preferred stock shareholders, net loss attributable to common shareholders was $(8.6) million, or $(0.37) per diluted share, for the 2011 fourth quarter, compared with a net loss attributable to common shareholders of $(4.2) million, or $(0.18) per diluted share, for the like 2010 period.
 
Full-Year Financial Results
 
Revenues from continuing operations for full-year 2011 increased 0.7 percent to $75.8 million.
 
The portfolio of 76 continuing operations hotels in 2011, compared with the same period a year earlier, reported a 0.9 percent rise in RevPAR as a result of a 3.8 percent increase in average daily rate (ADR) partially offset by a 2.9 percent decrease in occupancy.
 
For full-year 2011, the company recorded $14.3 million of impairment charges, including $5.8 million against discontinued operations hotels and $8.5 million against continuing operations properties.
 
Net loss attributable to common shareholders for 2011 was $(18.9) million, compared with a 2010 net loss attributable to common shareholders of $(12.1) million.  FFO for the full year 2011 was $3.9 million, or $0.17 per diluted share, compared to $6.6 million, or $0.29 per diluted share, for the full year 2010.
 
Earnings before interest, taxes, depreciation and amortization, non-controlling interest and preferred stock dividends (Adjusted EBITDA) was $3.0 million for the full year 2011.
 
Disposition Program
 
During 2011 the company sold six hotels for approximately $11.8 million, resulting in a gain on sale of approximately $0.4 million.  Proceeds were used primarily to strengthen the balance sheet by reducing debt.  The sold properties included:
 
Ø Masters Inn
Atlanta (Tucker), GA
107 rooms
Ø Super 8
Wichita North, KS
59 rooms
Ø Tara Inn
Jonesboro, GA
127 rooms
Ø Masters Inn
Charleston, SC
119 rooms
Ø Masters Inn
Marietta, GA
87 rooms
Ø Masters Inn
Doraville, GA
88 rooms

Capital Reinvestment
 
During 2011, the company invested $5.0 million to upgrade its properties and maintain brand standards.   “We expect to invest $7 million in improvements for our continuing operations hotels in 2012,” he said.   “Our goal is to maintain our properties in good, competitive condition, both to attract guests and to attract higher selling prices if they are reclassified as held for sale.”
 
Balance Sheet
 
The company continued to improve its balance sheet strength and flexibility in 2011 through mortgage debt reduction, loan-term extensions, covenant modifications and obtaining new equity and debt.
 
As of December 31, 2011, Supertel had $131.3 million in outstanding debt on its continuing operations hotels with an average term of 3.5 years and weighted average annual interest rate of 6.37 percent.
 
“We have strengthened our balance sheet to the point where we are in a much better negotiating position and able to place debt with a longer time horizon,” he said.  “An added plus is that interest rates remain historically low.  We have a $29.4 million loan coming due in late 2012 on 32 hotels, which we believe hold considerably more equity value.  We are in the process of working with multiple mortgage bankers to procure replacement debt with more flexible terms which would allow us to monetize these assets more cost efficiently.”
 
Subsequent Events
 
At a special meeting held on January 31, 2012, company shareholders approved a $30 million investment in the company by Real Estate Strategies L.P., an investment vehicle indirectly controlled by IRSA Inversiones y Representaciones Sociedad Anónima, an Argentina-based, publicly traded company.
 
Of the $30 million in new equity, $20 million will be used for future hotel acquisitions. The remaining funds will be used primarily to pay down existing mortgage debt, to cover transaction-related expenses and for general corporate purposes.
 
Dividends
 
The company did not declare a common stock dividend in 2011 or for the 2011 fourth quarter.  Preferred dividends continued uninterrupted.  The board of directors will continue to monitor the dividend policy on a quarterly basis.
 
Outlook 2012
 
“Supertel now is in a position to implement the next phase of its revitalization plan, which involves acquiring hotels that lay the foundation for transforming the company into a more stable, institutional grade REIT over the next few years,” Walters said. “The recent infusion of equity by Real Estate Strategies will be deployed in an accretive and prudent manner.  We believe that Supertel now is well positioned for the current stage of the economic recovery.  We have the right management companies in place to execute our growth strategy.
 
“Our turn-around is not complete, but we believe we are poised on the threshold of a new era of growth and improved returns for our shareholders,” Walters noted.  “The economy in many of our current markets remains sluggish and is likely to continue to lag behind the economy as a whole.  Nonetheless, we believe our continuing operations hotels are in a better position with our new operators to make meaningful improvements in RevPAR in 2012.
 
“We have the strongest balance sheet and the greatest flexibility to control our destiny than at any time in the past four years,” he added.  “Over time, our goal is to build a new portfolio of higher quality assets that have greater upside potential and much better defensive characteristics against future downturn in the economy.
 
“Hotel industry results continue to improve and forecasters called for steady, positive growth over the next few years.  New supply remains at very low levels, which will play a major role in our ability to improve occupancy and room rate in the months ahead,” he said.   “We have executed our new business plan in extraordinary economic times and we now are stronger and more confident than at any time since the beginning of the recession.  We look forward to making continued positive strides in 2012.”
 

About Supertel Hospitality, Inc.
 
As of March 30, 2012, Supertel Hospitality, Inc. (NASDAQ: SPPR) owned 98 hotels comprising 8,622 rooms in 23 states.  The company focuses primarily on the limited-service hotel segment, which does not offer food and beverage service.  The company’s hotel portfolio includes Baymont Inn, Comfort Inn/Comfort Suites, Days Inn, Guest House Inn, Hampton Inn, Holiday Inn Express, Key West Inns, Masters Inn, Quality Inn, Ramada Limited, Savannah Suites, Sleep Inn, Super 8 and Supertel Inn.  For more information or to make a hotel reservation, visit www.supertelinc.com.
 
Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These risks are discussed in the company’s filings with the Securities and Exchange Commission.
 

 
 

The following information was filed by Condor Hospitality Trust, Inc. (CDOR) on Friday, March 30, 2012 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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