Provides Update on Sale of DoubleTree Portfolio, and Convertible Notes
NexPoint Hospitality Trust, (TSX-V: NHT.U) announced the release of NHT's financial results for the three and nine months ended September 30, 2022. All amounts are expressed in U.S. dollars.
The table below presents net income from continuing operations, Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO").
| For the Three Months Ended | For the Nine Months Ended | ||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||
| Net income | $ (0.9) | $ 0.1 | $ (1.7) | $ 7.8 | |||
| FFO2 | 0.4 | (0.4) | 5.4 | (11.5) | |||
| AFFO2 | (0.1) | (2.9) | 5.3 | (11.9) | |||
The table below presents Occupancy, ADR and RevPAR.
| For the Three Months Ended | For the Nine Months Ended | ||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||
| Occupancy | 69.3 % | 68.8 % | 67.6 % | 62.5 % | |||
| ADR | $ 155.41 | $ 144.66 | $ 158.78 | $ 119.34 | |||
| RevPAR | $ 108.64 | $ 100.62 | $ 108.70 | $ 76.26 | |||
DoubleTree Portfolio
On March 8, 2022, the Company began the marketing process to sell its DoubleTree Portfolio. As of September 30, 2022, the Company has sold the Beaverton property and Vancouver property for a combined purchase price of US$29 million. The Company has executed purchase and sale agreements on the Tigard property and Bend property for a combined purchase price of US$53 million and expects these transactions to close in the fourth quarter of 2022. The Company will use the proceeds from the sale to pay down the outstanding debt on the DoubleTree Portfolio.
The Company has opted to no longer sell the Olympia property at this time.
NHT Capitalization Updates
NHT previously announced that a subsidiary of NHT had, between July 1, 2022, and September 30, 2022, issued convertible notes (the "Notes") in the aggregate principal amount of US$8.5 million (the "Liquidity Transactions") to affiliates of NHT's external advisor.
The Notes bear interest at varying rates and are repayable in membership interests ("Membership Interests") of NHT's operating subsidiary, NHT Operating Partnership, LLC (the "OP"), which are redeemable for trust units of NHT ("Trust Units") at the option of NHT in its sole discretion. The approval of the TSX Venture Exchange will be required prior to any conversion of the Membership Interests into Trust Units. NHT used the proceeds of the Liquidity Transactions for general working capital purposes. Management believes the Liquidity Transactions will further strengthen NHT's balance sheet and liquidity profile to better position itself as the hospitality industry continues to rebound from the impact of the COVID-19 pandemic. The fair market value of each Note does not exceed and did not exceed at the time of issuance of such Note 25% of NHT's market capitalization.
Each of the Liquidity Transactions constituted a related party transaction as defined in Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Liquidity Transactions were completed in reliance on (i) an available exemption from the formal valuation requirement of MI 61-101 provided in paragraph (a) of Section 5.5 of MI 61-101 and (ii) an available exemption from the minority shareholder requirement of MI 61-101 provided in paragraph (a) of Section 5.7(1) of MI 61-101.
Non-IFRS Financial Measures
FFO and AFFO are key measures of performance commonly used by real estate operating companies and real estate investment trusts. They are not measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. FFO and AFFO may not be comparable to similar measures presented by other issuers in the real estate or lodging industries. For complete definitions of these measures, as well as an explanation of their composition and how the measures provide useful information to investors, please refer to the section titled "Non-IFRS Financial Measures" in NHT's MD&A for the three months and nine months ended September 30, 2022, which section is hereby incorporated herein by reference.
The following is a reconciliation of our net income to FFO and AFFO for the three months and nine months ended September 30, 2022 and September 30, 2021:
| For the Three Months Ended | For the Nine Months Ended | ||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||
| $ | $ | $ | $ | ||||
| Net income (loss) from continuing operations | (900) | (93) | (1,699) | 7,773 | |||
| Depreciation of property and equipment | 3,106 | 2,606 | 8,980 | 7,699 | |||
| Depreciation of right-of-use asset | 84 | 79 | 251 | 237 | |||
| Amortization of advanced bookings from acquisitions | 268 | — | 486 | — | |||
| Fair value adjustment to interest rate swaps | — | (190) | — | (4,803) | |||
| Acquisition costs | 134 | — | 498 | — | |||
| Change in value of interest rate caps | (826) | — | (1,397) | — | |||
| Deferred income tax recovery | (581) | (115) | (960) | (187) | |||
| Fair value adjustment of Class B Units | (311) | 236 | (818) | (18) | |||
| Impairment (recovery)/loss | (570) | (3,090) | 20 | (22,183) | |||
| Funds from Operations | (404) | (381) | 5,361 | (11,482 | |||
| FFO per unit - basic | (0.01) | (0.01 | 0.18 | (0.29) | |||
| Income taxes | (434) | (1,759) | 117 | (283) | |||
| FF&E reserve | (684) | (990) | (2,041 | (1,304) | |||
| Amortization of deferred financing costs | 337 | 208 | 932 | 645 | |||
| Stock Compensation | 311 | — | 900 | 543 | |||
| Adjusted Funds from Operations | (66) | (2,922) | 5,269 | (11,881) | |||
| AFFO per unit - basic | – | (0.10) | 0.18 | (0.40) | |||
| Weighted average units outstanding - basic | 29,352,055 | 29,352,055 | 29,352,055 | 29,352,055 | |||
About NHTNexPoint Hospitality Trust is a publicly traded real estate investment trust, with its Units listed on the TSX Venture Exchange under the ticker NHT.U. and NHT is focused on acquiring, owning and operating well-located hospitality properties in the United States that offer a high current yield and in many cases are underperforming assets with the potential to increase in value through investments in capital improvements, a market-based recovery, brand repositioning, revenue enhancements, operational improvements, expense inefficiencies, and exploiting excess land or underutilized space. NHT owns 11 branded properties sponsored by Marriott, Hilton, Hyatt, and Intercontinental Hotels Group, located across the U.S. NHT is externally advised by NexPoint Real Estate Advisors VI, L.P.