The dream of a Winnipeg real estate operator to build a country-wide hotel chain is on its death bed.
The dream started in 2006 when Arnie Thorstensein’s Temple Real Estate Investment Trust (REIT) bought Temple Gardens Mineral Spa from the local shareholders who built the hotel.
The Temple REIT prospered, paying attractive dividends monthly and expanding from Temple Gardens Mineral Spa to Alberta and other provinces.
On the path to owning more than 5,000 hotel rooms, the Temple REIT acquired too many high-yielding, high-priced hotels in the booming Fort McMurray oil centre.
At one point, the Fort McMurray properties amounted to nearly 50 per cent of hotel rooms.
That was awesome for revenues and profits until the bloom came off the Fort Mac boom. Occupancy and profits fell dramatically, not only in Fort Mac but in other Alberta hotel properties.
Profits from several Saskatchewan hotels, including Temple Gardens, and some eastern Canada hotel properties were insufficient to make up for lost income in Alberta.
The Temple REIT reached the point where unit holders had little equity interest left after debt. Certainly there was no profit.
The writing was on the wall before the oil price crash in 2014. The REIT restructured into a public company called Temple Hotels in 2013. The process raised $147.5 million in share sales from 2013 to 2015.
Those share sales saved the company from going into receivership. Sales of some hotels helped the situation.
In 2016, Morguard Trust Canada, by now a major shareholder that had financed the restructuring, named its own CEO, pushing Thorstensein out of the picture.
Since then Temple Hotels has repaid $77.8 million debentures or mortgages, sold one hotel for $9.7 million and borrowed $35 million from Morguard.
Fort Mac remains a drag on the company’s 3,785 hotel rooms, with just under one-quarter of rooms. Other Alberta hotels, also under-performing, account for one in five rooms.
As of September 30, company loss was $5.6 million, down from $8.6 million the same time in 2017.
Shareholder equity is $48.6 million up from a negative $26.7 million out of $442 million value in properties.
Room occupancy is still dropping at 59 per cent from 63 per cent. Fort Mac occupancy, once in the 80 per cent range, is now 42 per cent.
In the midst of this financial mess Morguard Trust, already owner of 72.6 per cent of shares, offered $2.10 per share for the remainder, representing an 18 per cent premium to the market price.
It is now a matter of months until Temple Hotels becomes a private company under the Morguard umbrella.
Ron Walter can be reached at [email protected]
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
