SKYLINE Announces Financial Results for the Year Ended December 31, 2023

TORONTO, ON / ACCESSWIRE / March 28, 2024 / Skyline Investments Inc. (the "Company" or "Skyline") (TASE:SKLN), a Canadian company that specializes in hotel real estate investments in the United States and Canada, published its results for the year ended December 31, 2023.

SUMMARY OF FINANCIAL RESULTS

Q4 and 2023 Highlights

• 2023 same asset revenue has decreased by 9.58% to $103.29 million compared to $114.23 million in 2022, overall decrease was primarily driven by the decline in US full-service hotels from the effect of extensive renovations at the Renaissance hotel where Skyline has reduced available rooms. This was partially offset by the increase in ADR, RevPAR, and occupancy at the Hyatt hotel. Select service hotels declined over prior year, driven by lower occupancy due to the ongoing renovations at four of its Courtyard hotels. Total revenue from hotels and resorts was $121.3 million compared to $132.1 million in 2022;
• 2023 same asset NOI ¹ decreased to $14.5 million compared to $25.03 million in 2022. The decrease over prior year is primarily driven by the effect of the extensive renovations at the Renaissance hotel where Skyline has reduced available rooms. In December 2023, only 102 rooms out of 491 were available; this also significantly impacted the same asset NOI margin, which declined from 22% in the prior year to 14% in 2023.
• 2023 Adjusted EBITDA ² was $5.0 million compared to $19.7 million in 2022.
• 2023 Funds from Operations ("FFO") ¹ was negative $7.3 million (or negative $0.44) per share, compared to a positive 2022 FFO of $9.3 million (or positive $0.56) per share.
• The book value per share of the shareholder equity is 38.54 NIS ($14.07), per share, which is 42% above the closing price of its shares at December 31, 2023.

Blake Lyon, Skyline's Chief Executive Officer commented "The Renaissance hotel renovation, along with two other Courtyard hotel renovations, have materially affected our financial results in the short-term. Same asset revenue has decreased compared to 2022, due to the impact of hotel renovations, partially offset by travel activity that continues to rebound and Skyline continues to focus on efficiency initiatives. We reinvested some of the proceeds received during Q4 2021 from the sale of our Canadian resorts, in the acquisition of the Courtyard Ithaca, on July 11, 2022 and also in the significant renovation of the Renaissance and our Courtyard Dayton hotels. In Q4 2023, we sold Bear Valley ski resort, and the Company's interest in RCLP. We continue to carefully manage our business in this environment of global volatility and rapid rise in interest rates."

INCOME STATEMENT HIGHLIGHTS

All amounts in millions of Canadian dollars unless otherwise stated

• Total revenue for 2023 was $121.3, compared to $133.7 in 202­­2. Revenue from hotels and resorts decreased by 8.2% to $121.3 driven by the decrease in occupancy rate due to the impact of a significant renovation of the Renaissance hotel and four of the Courtyard hotels. Same asset revenue decreased by 9.58% relative to 2022.
• Same asset NOI for 2023 was $14.5, compared to $25.03 in 2022. The decrease over prior year is mainly due to hotel renovations.
• Adjusted EBITDA for 2023 was $5.0, compared to $19.7 in 2022.
• Net financial expense for 2023 totalled $33.6, compared to $13.6 in 2022, driven primarily by higher interest rates and more loans compared to prior year, and a provision for credit losses for the forgiven portion of Freed VTBs of $11.0 and a provision for credit losses against the Port McNicoll VTB of $1.5. This was partially offset by the foreign exchange revaluation of bonds - the non-cash foreign exchange impact of the Company's bonds was a gain of $0.9, compared to a loss of ($2.9) in 2022.
• FFO for 2023 was ($7.3) compared to $9.3 in 2022. There is a decrease in FFO due to the hotel renovations, as discussed above, which negatively impacted earnings.
• Net income (loss) for 2023 was ($48.3), compared to ($2.03) in 2022. Excluding minority interests, the Company had net income (loss) of ($40.3) in 2023, compared to net income (loss) of ($1.55) in 2022.
• Total comprehensive income (loss) for 2023 was ($59.6) compared to total comprehensive income of $15.12 in 2022.

BALANCE SHEET HIGHLIGHTS

• Total assets as at December 31, 2023 were $640.90 compared to $609.35 as at December 31, 2023. The increase was primarily driven by increase in cash and cash equivalents mainly from the $41.2 cash received from Freed for the full payment of bridge loan and partial payment of the VTB loans in Q4 2023, increase in restricted cash due to collateral deposits held in trust related to the Company's US properties, and additions to PP&E as a result of renovations at the Renaissance, partially offset by the fair value adjustments as a result of selling the Company's holdings in RCLP as part of the Freed transaction in Q4 2023, and credit losses booked under IFRS 9 against Freed VTB loans for the principal forgiveness and Port McNicoll VTB loan.
• Cash and cash equivalents were $57.1 as at December 31, 2023 compared to $19.5 as at December 31, 2022. The increase was driven mainly from the $41.2 cash received from Freed for the full payment of bridge loan and partial payment of the VTB loans in Q4 2023, bond series expansion, TIF funding received for the renovation of the Renaissance Hotel, and the funds received from the $6m mortgage loan agreement, partially offset by capital expenditures, and payments on debt and taxes.
• Net debt as at December 31, 2023 totalled $253.7, an increase of $32.7 (or 14.8%) compared to net debt of $221 as at December 31, 2022. The increase was primarily driven by higher debt balances due to the bond series expansion, TIF obligation recognized from the funding received for the renovation of the Renaissance hotel, the one-year mortgage loan agreement entered during Q3 2023 and refinancing and increasing the loan in connection with Hyatt Hotel renovation.
• Total equity attributable to shareholders was $235.0 ($266.7 including non-controlling interest), representing 41.61% of total assets. Equity per share attributable to shareholders was 38.54 NIS ($14.07), compared to the closing share price on December 31, 2023 of 22.20 NIS ($8.10), a discount of 42.39%.

About Skyline

Skyline is a Canadian company that specializes in hospitality real estate investments in the United States and Canada. The Company currently owns 16 income-producing assets with 2,804 hotel rooms and 85,238 square feet of commercial space.

The Company is traded on the Tel Aviv Stock Exchange (ticker: SKLN) and is a reporting issuer in Canada.

For more information:
Blake D. Lyon
Chief Executive Officer
[email protected]
1 (519) 535-8651

Oded Ben Chorin
KM Investor Relations
+972-3-5167620
[email protected]

Additional Information :

Non-IFRS Measures

The Company's consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). However, the following measures: NOI, FFO, FFO per share and Adjusted EBITDA are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS, and should not be compared to or construed as alternatives to profit/loss, cash flow from operating activities or other measures of financial performance determined in accordance with IFRS. NOI, FFO, FFO per share and Adjusted EBITDA as computed by the Company, may differ from similar measures as reported by other companies in similar or different industries. However, these non-IFRS measures are recognized supplemental measures of performance for real estate issuers widely used by the real estate industry, particularly by those publicly traded entities that own and operate income-producing properties, and the Company believes they provide useful supplemental information to both management and readers in measuring the financial performance of the Company. Skyline also uses certain supplementary financial measures as key performance indicators. Supplementary financial measures are financial measures that are intended to be disclosed on a periodic basis to depict the historical or expected future financial performance, financial position, or cash flow, that are not disclosed directly in the financial statements and are not non-IFRS measures. Same Asset NOI is a financial measure that is calculated using the same methodology as NOI, but only including NOI from properties owned for 2 full years prior to December 31, 2023.

Further details on non-IFRS measures and Supplementary Financial Measures are set out in the Company's Management's Discussion and Analysis for the period ended December 31, 2023 and available on the Company's profile on SEDAR+ at www.sedarplus.com or MAGNA at www.magna.isa.gov.il and are incorporated by reference in this news release.

The reconciliations for each non-IFRS measure included in this news release are outlined as follows:

NOI

Skyline defines NOI as property revenues less property operating expenses. Management believes that NOI is a useful key indicator of performance on an unlevered basis as it represents a measure over which Management of property operations has control. NOI is also a key input used by management in determining the value of the Properties. NOI is used by industry analysts, investors and Management to measure operating performance of Canadian companies. NOI represents revenue from cash generating properties less property operating expenses excluding depreciation as presented in the consolidated statements of income and comprehensive income prepared in accordance with IFRS.

Given the seasonality of its hospitality operations, NOI for a fiscal year (or trailing four quarters) is considered by Management as a more accurate measure of the Company's performance.

Skyline calculates NOI as operating income before depreciation, valuation adjustments and other income, adjusted for:

1. Segmented results from Development Segment
2. Selling and Marketing expenses
3. Administrative and General expenses

Alternatively, the same result is arrived at by adding segmented results (per note 12 in the consolidated financial statements) of the Company's hotels and resorts. The following table sets out a reconciliation of NOI from hotels and resorts to operating income before depreciation, valuation adjustments and other income:

FFO

FFO is a non-IFRS financial measure of operating performance widely used by the real estate industry, particularly by those publicly traded entities that own and operate income-producing properties. FFO is not an alternative to net income determined in accordance with IFRS. Skyline calculates the financial measure in accordance with the Real Property Association of Canada White Paper issued in January 2022, except for (i) changes in the fair value of financial instruments which are economically effective hedges but do not qualify for hedge accounting, (ii) non-controlling interest, and (iii) operational revenue and expenses from right-of-use assets. The use of FFO, combined with the data required under IFRS, has been included for the purpose of improving the understanding of the operating results of Skyline.

Management believes that FFO provides an operating performance measure that, when compared period-over- period, reflects the impact on operations of trends in occupancy, room rates, operating costs and realty taxes and interest costs, and provides a perspective of the Company's financial performance that is not immediately apparent from net income determined in accordance with IFRS. FFO excludes from net income items that do not arise from operating activities, such as fair value adjustments, purchase transaction costs, and deferred income taxes, if any. FFO, however, still includes non-cash revenues related to accounting for straight-line rent and makes no deduction for recurring capital expenditures necessary to sustain the Company's existing earnings stream. It should be emphasized that the method of calculation of this indicator by the Company may differ from the method of calculation applied by other companies. The following table sets out a reconciliation of FFO to net income:

Adjusted EBITDA

The Company's operations include income producing assets and revenue from the sale of developed real estate. As such, Management believes Adjusted EBITDA (as defined below) is a useful supplemental measure of its operating performance for investors and debt holders.

EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, and Amortization. The Company calculates Adjusted EBITDA as follows:

• Income from hotels and resorts;
• Sale of residential real estate;

Less:

• Operating expenses from hotels and resorts;
• Cost of sales of residential real estate;
• Selling and marketing expenses;
• Administration and general expenses

Adjusted EBITDA does not include fair value gains, gains on sale or other expenses, and is presented in the Company's consolidated statement of profit and loss for year ended December 31, 2023 as operating income before depreciation, valuation adjustments and other income.

Forward-Looking Statements

This release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the Company. In some cases, forward-looking statements can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside our control that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements as well as other risks detailed in our public filings with the Canadian and Israeli Securities Administrators. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, we undertake no obligation to update any forward-looking or other statements herein whether as a result of new information, future events or otherwise.

SOURCE: Skyline Investments Inc.