Highlights:—Consolidated Revenue totaled $7.6 million, a decrease of 7.6% from the prior year period of $8.3 million.—Net income was $147,000, a decrease of 76% from the prior year period reflecting a difficult travel environment and the Iraq war, which disrupted Arizona`s high-season travel.—Recurring FFO for the first quarter was $599,000 compared to $992,000 in the prior year period.—The Trust sold its Scottsdale, AZ property, which had been a source of losses in each of the prior four fiscal years.—The Trust has entered into an agreement to sell its San Diego, CA property for $9.6 million, which exceeds its carrying and appraised value and is expected to result in a capital gain of $4.7 million.
InnSuites Hospitality Trust reported revenue of $7.6 million for the three months ended April 30, 2003, a decrease of 7.6% from $8.3 million for the prior year period. This decrease reflects the challenging economic environment and the continued weakness in the travel and hospitality industry.
The Trust`s total net income attributable to Shares of Beneficial Interest for the quarter ended April 30, 2003 was $147,000, or $0.07 per basic share and a loss of $(0.01) per diluted share, compared to income of $618,000, or $0.29 per basic share and $0.06 per diluted share, during the first three months of the prior fiscal year.
The Trust had Recurring Funds From Operations (FFO) of $599,000 for the three months ended April 30, 2003. Recurring FFO decreased $393,000 from $992,000 in the prior year period.
FFO is a widely used financial measure of a REIT`s performance that excludes most non-cash charges, including depreciation of real estate and gains and losses on disposal of assets. FFO is an alternative non-GAAP financial measure of a company`s cash flow and its ability to pay dividends.
Several factors can impact the Trust`s FFO, including, but not limited to, changes in occupancy rates, property acquisitions and dispositions, and overall economic conditions.
On March 21, 2003, the Trust sold the Scottsdale InnSuites hotel at its carrying and appraised value of $3.1 million to an affiliate of James Wirth, President of the Trust. During fiscal year 2003, the Scottsdale hotel accounted for $632,000 of the loss attributable to Shares of Beneficial Interest, or $(0.31) per basic share, including a $590,000 loss on impairment.
A purchase agreement was entered into on February 25, 2003 with Lennar Homes of California, Inc., an unaffiliated third party, for the purchase by Lennar Homes of the Trust`s San Diego, California property for $9.6 million. As of April 30, 2003, the book value of the San Diego property was approximately $4.9 million. The property was previously appraised at a value of $7,275,000 in January 2001 by an independent appraiser. The outstanding principal balance of the mortgage on the San Diego property is approximately $4.9 million and will be paid in full with the sale proceeds. The Trust expects the sale of the San Diego property to close in February 2004 during the first quarter of fiscal year 2005 and expects the net cash proceeds and the net profit from the sale to be approximately $4.7 million. On June 10, 2003, the Trust entered into an agreement, which contains substantial buyer contingencies, to sell its Buena Park, CA property for $8.6 million.
Over the past two years, the travel and hospitality industries have been challenged by the uncertain economy and world events. The Trust has responded to these events with aggressive cost-cutting measures which, when combined with sales initiatives, have helped the Trust to somewhat mitigate the economic impact of these events. Although the Trust does expect a modest pickup in the economy and in travel in the balance of the current year and in the coming year, nevertheless, the Trust is taking additional steps to cut costs and improve stability.
InnSuites Hospitality Trust is a mid-market studio and two-room suite hospitality real estate hotel investment trust with 10 moderate service and full service hotels containing 1,555 hotel suites located in Arizona, New Mexico and Southern California. For reservations, call 1-888-INNSUITES, or visit http://www.innsuites.com/ . For investor information, visit >http://www.innsuitestrust.com/.