Intelligence

Skyline announces improved operational results and record net income for 2021

Skyline Investments Inc., the Canadian company that specializes in hotel real estate investments in the U.S. and Canada, has published its results for the year ended December 31, 2021. The Company currently owns 16 income-producing assets with 2,749 hotel rooms and 85,238 square feet of commercial space.

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SUMMARY OF FINANCIAL RESULTS

C$000’s202120202019
NOI1 from Hotels & Resorts33,08111,35942,214
NOI from Hotels & Resorts Margin26%12%22%
Same Asset NOI222,2603,40233,240
Same Asset NOI Margin25%6%24%
Adjusted EBITDA124,5017,88440,849
Adjusted EBITDA Margin18%6%17%
Net Income29,578(18,637)(1,359)
FFO112,312(3,761)18,331
Shareholders’ Equity266,249226,044252,374

Q4& 2021 Highlights

  • 2021 revenue from hotels and resorts increased by 41 per cent to $129.3 million compared to $91.5 million in 2020, due to continued improvement in demand and relaxation in operating restrictions related to COVID-19;
  • 2021 Adjusted EBITDA1 improved by 211% to $24.5 million compared to $7.9 million in 2020, demonstrating a continuing significant recovery;
  • 2021 net income was $29.6 million compared to a net loss of $18.6 million in 2020 due to the sale of the Company’s Canadian resort assets along with improved operating results;
  • 2021 Funds from Operations (“FFO”)1 grew by $16.1 million to $12.3 million, or $0.74 per share, compared to 2020 FFO of negative $3.8 million or negative $0.23 per share;
  • Skyline’s shareholders’ equity grew by 5.5 per cent relative to December 31, 2019, despite two years of the COVID-19 crisis;
  • Same Property NOI1 for 2021 was $22.3 million compared to $3.4 million in 2020. The increase was primarily driven by improved occupancy at our US hotels;
  • On December 6, 2021, Skyline completed the sale of the resort assets and surrounding development lands at Deerhurst Resort (“Deerhurst”) and Horseshoe Resort (“Horseshoe”) as well as the remaining development lands at Blue Mountain Resort (“Blue Mountain”) (collectively, the Assets”) for $210 million with Freed Corp. (“Freed”) (the Freed Transaction”), which is approximately $30 million in excess of Skyline’s IFRS book value as at June 30, 2021, prior to the Freed Transaction;
  • On December 5, 2021, the Company announced that it entered into two agreements for the conditional sale of 90 per cent its interest in the Renaissance hotel and 100% of its interest in the Hyatt hotel (collectively, the Cleveland Properties”) to an unrelated third-party in the amount of USD $95.2 million. The transaction, if completed, is expected to close during the second quarter of 2022;
  • On December 12, 2021, the Company announced that it had signed a 5‑year term sheet with a large US insurance company to refinance the mortgage on its Courtyard by Marriott hotel portfolio; and
  • Midroog rating agency reconfirmed the Company’s debt rating at Baa1, and upgraded their outlook for the Company from negative to stable;
  • The Company’s focus going forward will be on acquiring select-service hotels, which will provide more stable and predictable earnings and cash flow growth.

1 A non-IFRS measure. For definitions, reconciliations and the basis of presentation of Skyline’s non-IFRS measures, refer to the Non-IFRS Measures section in this news release.
2 A supplementary financial measure. Refer to the Non-IFRS Measures section of this news release.

Blake Lyon, Skyline’s CEO commented: Skyline’s strong results during 2021 show the continued rebound from the lows of the COVID-19 pandemic during 2020. Our revenues continue to significantly improve, driven by improving occupancy at our US hotels. At the same time, we are continuing to maintain strict safety and cost control at all of our properties. During Q4, we completed the largest corporate transaction in our 20-year history, with the sale of Deerhurst, Horseshoe, and the remaining lands at Blue Mountain for $210 million. The transaction value was approximately $30 million in excess of our IFRS book value prior to the sale, which demonstrates our continued commitment to creating value for our shareholders. The proceeds from the transaction have provided Skyline with significant liquidity and allowed us to repay a significant amount of corporate debt. We ended the year with over $60 million in cash and a net asset value that was 47 per cent in excess of our traded market value. Skyline has less debt and substantially more cash now than before the pandemic started and is looking to acquire more select-service hotels, where its focus will be going forward.”

INCOME STATEMENT HIGHLIGHTS

All amounts in millions of Canadian dollars unless otherwise stated

  • Total revenue for 2021was $136.8, compared to $129.4 in 2020 (Q42021 revenue was $33.6 compared to $22.5 in Q42020). Revenue from hotels and resorts increased by 41 per cent to $129.3 due to increased demand and the relaxation of operating restrictions related to COVID-19. Revenue from the sale of residential real estate was $7.5, compared to $37.9 during 2020. During Q12020, the Company completed the sale of phases 2 and 3 of the Second Nature development project located near Blue Mountain. Upon final closing of the transaction, the Company recorded revenue of $28.9, received net cash proceeds of $5.4, and repaid construction debt in the amount of $2.4. As part of the transaction, the Company gave the purchaser a 3‑year vendor take back loan in the amount of $23.7. On August 12, 2021, Skyline received early repayment of the VTB related to phase 3 of Second Nature in the amount of $16.3.
  • Same asset NOI for 2021was $22.3, an increase of 554 per cent compared to $3.4 in 2020, driven by a strong rebound in the US markets due to relaxation in COVID-19 restrictions.
  • Adjusted EBITDA for 2021was $24.5, an increase of 211 per cent compared to $7.9 in 2020 (Q42021 Adjusted EBITDA was $1.6 compared to $1.1 in Q42020). The increase is attributable to the strong recovery in hotel demand.
  • Net financial expense for 2021 totalled $17.5, compared to $17.4 in 2020. Interest expense was $1.4 lower relative to 2020 due to a lower average debt balance and lower interest rates on the Company’s variable interest rate debt. The decline in interest expense was offset by a $1.7 fee related to the early repayment of Bond A, which was repaid in full on December 232021.
  • FFO for 2021 was $12.3 compared to negative $3.8 in 2020 (Q42021 FFO was $4.1 compared to negative $0.3 in Q42020). The improvement was due to the strong recovery in hotel demand, as discussed above, which positively impacted earnings.
  • Net income for 2021was $29.6, compared to a net loss of $18.6 in 2020 (Q42021 net income was $1.1 compared to net loss of $2.9 in Q42020). Excluding minority interests, the Company had net income of $22.9 in 2021, compared to net loss of $18.0 in 2020. This is the highest net income in a fiscal year that the company has ever achieved in its 20+ year history.
  • Total comprehensive income for 2021 was $48.0 compared to total comprehensive loss of $20.5 in 2020.

BALANCE SHEET HIGHLIGHTS

  • Total assets as at December 31, 2021 were $579.7 compared to $637.9 as at December 31, 2020. The decrease was primarily driven by the sale of investment properties, PP&E and real estate inventory related to the Freed Transaction, offset by increases in cash and VTBs, also as a result of the Freed Transaction.
  • Cash and cash equivalents were $61.5 as at December 31, 2021 compared to $22.4 as at December 31, 2020. The increase was driven by net proceeds received from the Freed Transaction, coupled with positive operating cash flows at the Company’s hotels and resorts.
  • Net debt as at December 31, 2021 totalled $162.1, a decrease of $121.6, or 43 per cent compared to net debt of $283.7 as at December 31, 2020. The decrease was primarily driven by the repayment of Bond A and other debt, coupled with the net proceeds received from the Freed Transaction. On December 12, 2021, the Company announced that it had signed a 5‑year term sheet with a large US insurance company to refinance the mortgage on its Courtyard by Marriott hotel portfolio. The Company expects to finalize this agreement in the first quarter of 2022.
  • Total equity attributable to shareholders was $266.2 ($297.1 including non-controlling interest), representing 46 per cent of total assets. Equity per share attributable to shareholders was 38.83 NIS ($15.90), compared to the closing share price of 26.34 NIS ($10.78), a discount of $32 per cent.

A breakdown of the change in IFRS fair value described above is summarized in the table below:

C$000’sYTD Fair
Value Change
Tax ImpactNet Change –
OCI
Net Change –
Net Income
Property, Plant & Equipment
Courtyard by Marriott hotels14,244(3,552)10,692-
Renaissance2,617(437)2,180-
Hyatt Arcade2,409(855)1,554-
Bear Valley110(31)79-
Deerhurst3366,9687,304-
Horseshoe(4,305)1,141(3,164)-
Total – PP&E15,4113,23418,645-
Investment Properties30,976(37)-30,939
Total Change46,3873,19718,64530,939