Supertel Hospitality Reports 2010 Second Quarter Results

Revenues from continuing operations for the 2010 second quarter increased 3.1 percent to $24.7 million, compared to the same year-ago period. Net loss attributable to common shareholders for the 2010 second quarter was $(4.0) million, or $(0.18) per diluted share, compared to net income attributable to common shareholders of $0.9 million, or $0.04 per diluted share, in the 2009 same quarter, a decline of $4.9 million. The decrease was primarily the result of $4.5 million of impairment.

Funds from operations (FFO), which includes the impairment expense, for the 2010 second quarter was $(1.5) million, or $(0.07) per diluted share. The $4.5 million impairment in the quarter resulted from declining markets and expectations related to recoverability of carrying values on specific hotels -- one hotel in continuing operations and 12 of 18 hotels held for sale (HFS) classified in discontinued operations.

Funds from operations (FFO) without impairment, a non-cash item, were $3.1 million, or $0.14 per diluted share, in the 2010 second quarter, compared to $3.5 million, or $0.16 per diluted share, in the same 2009 period.

Earnings before interest, taxes, depreciation and amortization, noncontrolling interest and preferred stock dividends (Adjusted EBITDA) decreased to $2.4 million compared to $8.2 million for the second quarter of 2009.

Second Quarter Highlights

Revenue per available room (RevPAR) rose 3.2 percent, led by a 9.8 percent increase in occupancy
Completed the sale of a Masters Inn in Cave City, Ky.
Completed the sale of a Super 8 in Kingdom City, Mo.
Signed sales contracts on five additional held for sale hotels, for a total of six contracts signed at June 30
Raised a total of $1.0 million through a sale of common stock and warrants
Raised $420,000 using a standby equity distribution agreement

"On balance, our second quarter results demonstrated how the nation's economic recovery began to positively impact our operating performance at the top line," said Kelly A. Walters, Supertel's president and CEO. "The 3.2 percent increase in our quarterly RevPAR represents the first time since first quarter 2008 that we have experienced a gain in this key metric. The favorable RevPAR performance was driven by a solid 9.8 percent gain in our occupancy from continuing operations to 68.2 percent, which is 7.5 percentage points above the industry average, according to Smith Travel Research. As is typical in most hospitality recovery cycles, average daily rate (ADR) is the lagging metric, as we posted a 6.0 percent decline for the quarter to $48.35. We are working aggressively with our operators and currently expect modest room rate improvement in the third quarter."

He added that the company continues to make progress with its plan to remake Supertel and its portfolio. "During the past three months, we completed two dispositions and signed sales contracts on five additional properties that we recently classified as held for sale assets. Our financial and operating performance was in line with our budget, and the execution of the business plan is being carried out as it was designed. The primary obstacle to more rapid execution of this phase of our plan currently, and for the foreseeable future, is the availability of credit for buyers of our properties. The tight credit conditions have frustrated our timeline, but we are confident that market conditions will improve as lenders reenter the hospitality sector.

"Supertel's capital access has shown improvement as we have issued a measured amount of equity to strengthen the balance sheet, and our banks have demonstrated a willingness to extend maturities on loans while we work through our corporate repositioning."

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