Lodgian Reports 2009 Q3 Results
ATLANTA, Nov. 5 -- Lodgian, Inc. (NYSE Alternext US: LGN) has reported results for the 2009 third quarter ended September 30, 2009.
The "35 continuing operations hotels" comprise those Lodgian properties that were not held for sale as of September 30, 2009. Lists of properties, both continuing operations and held for sale, are attached to this press release.
Third Quarter 2009 Results
Third quarter 2009 total revenue for continuing operations declined 17.6 percent to $50.6 million, compared to the same period in 2008. Loss from continuing operations was $(39.8) million in the 2009 third quarter, compared to a loss of $(2.3) million in the 2008 third quarter. The 2009 third quarter loss was driven primarily by a $34.2 million impairment charge largely related to seven hotels which are expected to be returned to their lenders. Six of these hotels are expected to be returned to the lender after unsuccessful negotiations to extend and modify the Merrill Lynch Fixed Rate Pool 3 loan agreement.
Net loss attributable to common shares was $(36.2) million, or $(1.70) per diluted share in the 2009 third quarter, compared to a net loss of $(6.2) million, or $(0.29) per diluted share in the 2008 third quarter. The 2009 third quarter net loss includes total impairment charges of $35.4 million in both continuing operations and discontinued operations, including the $34.2 million impairment charge previously mentioned.
EBITDA from continuing operations declined from $10.4 million in the 2008 third quarter to $(27.1) million, including impairment charges. Adjusted EBITDA for the same group of properties, which excludes the effect of impairment charges, decreased 39.5 percent, from $11.7 million in the 2008 third quarter to $7.1 million in the 2009 third quarter. Adjusted EBITDA margins for the continuing operations hotels decreased by 510 basis points to 14.0 percent during the 2009 third quarter compared to the 2008 third quarter due to a significant decline in revenues, despite on-going cost reduction efforts.
Management Comments
"Our results, and the hotel industry as a whole, continue to be impacted by the effects of the global economic slowdown," said Dan Ellis, Lodgian president and chief executive officer. "Every hotel is competing hard for every piece of business. We have been successful in both finding new business and attracting previous accounts back to our hotels. Nonetheless, it remains a fiercely competitive environment. We gave up a little market share in the third quarter, but our continuing operations portfolio still retains a slight edge over its competitive set in revenue per available room (RevPAR), with our RevPAR Index at 100.6.
"We continue our strategic review of the portfolio, evaluating each of our hotels in terms of debt coverage, equity and long-term strategic value, with the goal of further strengthening the company," he said.
Asset Disposition Program and Balance Sheet Update
As of November 1, 2009, one property remained classified as held for sale. Subsequent to the close of the 2009 third quarter, the company sold the Ramada Plaza in Troy, Mich. for gross proceeds of $3.0 million. The company provided seller financing in the amount of $1.75 million, and net proceeds were used for general corporate purposes.
During the 2009 third quarter, the company surrendered control of the Holiday Inn in Phoenix, Ariz. to a court-appointed receiver. As a result, all assets and liabilities were excluded from the company's consolidated balance sheet as of September 30, 2009. The company does not believe the limited recourse provisions of the loan secured by the Holiday Inn will be triggered by this transaction.
As of September 30, 2009, 33 hotels were encumbered as collateral for various mortgage debt facilities totaling approximately $310.5 million. A summary of mortgage debt facilities is included in the supplemental information attached to this release.
The company recently reported that, in conjunction with the development of a strategic plan, it has stopped servicing the debt secured by the Crowne Plaza in Worcester, Mass., and intends to convey the hotel to the lender in full satisfaction of the debt, which had a principal balance of $16.3 million as of September 30, 2009. On a trailing twelve month basis, the cash flow from the hotel was insufficient to service the debt on the property. The company is now in default on this loan, and the lender has accelerated repayment of the loan. The company intends to cooperate with the lender in transferring this hotel to the lender's control.
As previously disclosed, the Merrill Lynch Fixed Rate Pool 3 securitized mortgage debt, with a principal balance of $45.5 million, matured on October 1, 2009 and is now in default. The company had been in discussions with the special servicer regarding extension and modification of the loan; however, no agreement has been reached at this time. The company is now in discussions with the special servicer regarding returning the six hotels to the lender in full satisfaction of the debt. This mortgage indebtedness is non-recourse to the company except in certain limited circumstances, which the company believes do not apply in this case, and is not cross-collateralized with any of the company's other indebtedness.
Lodgian currently owns and manages a portfolio of 36 hotels with 6,749 rooms located in 21 states. Of the company's 36-hotel portfolio, 17 are InterContinental Hotels Group brands (Crowne Plaza, Holiday Inn, and Holiday Inn Express), 12 are Marriott brands (Marriott, Courtyard by Marriott, SpringHill Suites by Marriott, Residence Inn by Marriott and Fairfield Inn by Marriott), two are Hilton brands, and four are affiliated with other nationally recognized franchisors including Starwood, Wyndham and Carlson. One hotel is an independent, unbranded property, which is currently closed and held for sale. For more information about Lodgian, visit the company's website: www.lodgian.com.