SOURCE: American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP

October 11, 2016 06:00 ET

American Hotel Income Properties REIT LP Announces Accretive Changes to Its Master Hotel Management Agreement

VANCOUVER, BC--(Marketwired - October 11, 2016) - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) announced today a reduction in its base hotel management fees from 3.5% to 3.0% of gross revenue for all 80 hotels in its portfolio. The fee reduction was negotiated by AHIP to increase cash flow and improve AFFO, and was part of an amendment to certain terms of AHIP's Master Hotel Management Agreement with its exclusive hotel manager, Tower Rock Hotels & Resorts, Inc. ("Tower Rock"), which is effective from and after July 1, 2016 (the "Amendment").

The terms of the Amendment were unanimously approved by the independent directors of AHIP's General Partner.

HIGHLIGHTS OF THE AMENDMENT:

As a result of the Amendment effective July 1, 2016:

  • Base management fees have been reduced from 3.5% to 3.0% of gross revenue from AHIP's existing portfolio and for all future hotels acquired by AHIP.

  • The annual administration fee of US$25,000 per hotel has been waived for any hotels with more than 100 rooms acquired after July 1, 2016.

  • If the Master Hotel Management Agreement is terminated following a change of control of AHIP, the termination fees will step down over time from 5.0 times to 4.0 times aggregate trailing twelve months fees paid to Tower Rock. Prior to the Amendment, the termination fees were based on the net present value of the management fees in the remaining term of the Master Hotel Management Agreement, and ranged from 30 months to five years.

  • The exclusivity period for Tower Rock as AHIP's hotel manager has also been extended for a further five-year term, until February 20, 2023.

AHIP's President, Ian McAuley, commented: "We believe these changes provide significant benefits to AHIP. The reduction in base fees by 50 basis points, in particular, immediately improves both AHIP's cash flow and AFFO and also broadens our ability to bid competitively on portfolio acquisitions that satisfy AHIP's capitalization rate objectives. The other changes in the Amendment provide increased stability for AHIP's hotel management structure. We have an excellent relationship with Tower Rock and we look forward to continuing to work together in the future."

The Amendment has been filed on SEDAR at www.sedar.com.

FORWARD-LOOKING INFORMATION

Certain statements contained in this news release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Forward-looking statements in this news release include, without limitation, the following: references to the expected impacts of the Amendment on AHIP, including, without limitation, on AHIP's cash flows and AFFO; AHIP's ability to bid on portfolio acquisitions; and AHIP's relationship with Tower Rock.

Forward-looking information is based on a number of key expectations and assumptions made by AHIP, including, without limitation: a reasonably stable North American economy and stock market; the continued strength of the U.S. lodging industry; there are no material exchange rate fluctuations between the Canadian Dollar and U.S. Dollar; the ability to secure new debt financing; the ability to successfully bid on and integrate any acquisition properties; and expectations and assumptions related to capitalization rates for acquisition properties. Although the forward-looking information contained in this news release is based on what AHIP's management believes to be reasonable assumptions, AHIP cannot assure investors that actual results will be consistent with such information.

Forward-looking information reflects current expectations of AHIP's management regarding future events and operating performance as of the date of this news release. Such information involves significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, without limitation, those factors that can be found under "Risk Factors" in AHIP's Annual Information Form dated March 17, 2016 and under "Risks and Uncertainties" in AHIP's Management's Discussion and Analysis dated August 9, 2016, both of which are available on SEDAR at www.sedar.com.

The forward-looking statements contained herein represent AHIP's expectations as of the date of this news release, and are subject to change after this date. AHIP assumes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

AHIP is a limited partnership formed under the Limited Partnerships Act (Ontario) to invest in hotel real estate properties located substantially in the United States and is engaged primarily in the rail crew accommodation, transportation-oriented, and select-service lodging sectors. AHIP's hotels are mostly located in secondary and tertiary markets in the United States in close proximity to railroads, airports, highway interchanges, and other demand generators. AHIP currently owns 80 hotels including 45 hotels serving the U.S. rail industry pursuant to long-term rail crew contracts and 35 hotels affiliated with leading national and international hotel brands. AHIP's long-term objectives are to: (i) generate stable and growing cash distributions from hotel properties substantially in the U.S.; (ii) enhance the value of its assets and maximize the long-term value of the hotel properties through active management; and (iii) expand its asset base and increase its AFFO per unit through an accretive acquisition program, participation in strategic development opportunities and improvements to its properties through targeted value-added capital expenditure programs.

ADDITIONAL INFORMATION

Additional information relating to AHIP, including its other public filings, is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE ACCURACY OF THIS NEWS RELEASE.

Contact Information

  • Azim Lalani
    Chief Financial Officer
    American Hotel Income Properties REIT LP
    Suite 1660 - 401 West Georgia Street
    Vancouver, B.C. V6B 5A1
    Phone: 604-633-2878
    Email: alalani@ahipreit.com