SOURCE: American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP

November 01, 2016 06:00 ET

American Hotel Income Properties REIT LP Announces the Acquisition of a 104-Room Rail Crew Hotel in Nashville, Tennessee

VANCOUVER, BC--(Marketwired - November 01, 2016) - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) announced today the acquisition of a 104-room hotel located in Nashville, Tennessee (the "Nashville Property"). The Nashville Property features a multi-year, rail crew lodging contract with a large national U.S. railway and is being acquired for an aggregate purchase price of approximately US$8.7 million, including US$950,000 for planned capital expenditures and excluding closing and post-acquisition adjustments. The Nashville Property is being purchased at a capitalization rate of approximately 10% after all management fees, FF&E reserve contributions, and renovation costs.

ACQUISITION HIGHLIGHTS

  • The Nashville Property is being purchased for approximately US$84,000 per guestroom, which is below management's estimate of replacement cost, and the acquisition is expected to be immediately accretive to AFFO per unit.
  • Planned renovations include immediate conversion of the property to the industry-leading Oak Tree Inn rail crew hotel standards, which includes the incorporation of "Dark and Quiet" guestrooms, common area upgrades, and new property and yield management systems.
  • The multi-year rail crew lodging contract is with an existing railway customer and will guarantee 58 guestrooms per night.
  • Nashville is the state capital of Tennessee and has a metropolitan population of 1.8 million. According to STR, Inc., Nashville is one of the strongest RevPAR growth markets in the United States with an August 2016 Trailing Twelve Months RevPAR growth rate of 9.2%. Nashville has a number of strong demand generators, including being a major music recording and production centre, numerous health care companies, universities, large automotive companies including Nissan and Bridgestone, as well as other Fortune 500 companies.
  • The acquisition will be funded with cash from the July 2016 bought deal offering. AHIP intends to obtain mortgage financing within 30 days of the completion date.
  • This transaction is expected to be completed in early December 2016, subject to customary closing conditions and documentation.

Mr. Ian McAuley, President of AHIP, commented, "This strategic acquisition of a rail crew hotel, uniquely located within a strong, high-demand commercial and leisure market, allows us to both strengthen our relationship with one of our key railway customers and also maximize transient and commercial lodging business." Mr. Rob O'Neill, Chief Executive Officer of AHIP, continued, "The continued growth of our contractual relationships with major railway companies is consistent with AHIP's strategy of providing long-term sustainable returns to our unitholders."

Upon completion of the Nashville acquisition, along with the previously announced acquisition of six select-service, branded hotels in Florida, AHIP's portfolio will consist of 91 hotels totaling 8,686 guest rooms, with 46 rail crew hotels totaling 3,893 guest rooms and 45 branded hotels totaling 4,263 guest rooms.

The Property will be managed for AHIP by its exclusive hotel manager Tower Rock Hotels & Resorts Inc., a wholly-owned subsidiary of O'Neill Hotels & Resorts Ltd.

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, references to: the acquisition of the Nashville Property and the expected completion timing therefor; the cost and scope of the planned capital expenditures for the Nashville Property; the manner in which AHIP will fund the acquisition of the Nashville Property; post-acquisition adjustments to the purchase price for the Nashville Property; management's expectation that the acquisition of the Nashville Property will be immediately accretive to AFFO per unit; the terms of the rail crew lodging contract for the Nashville Property; AHIP's intention to refinance the purchase price with new mortgage financing; the future performance of any Oak Tree Inn hotels; the total number of hotels and rooms owned by AHIP after giving effect to the acquisition of the Nashville Property and the six select-service, branded hotels in Florida; and the management of the Nashville Property by Tower Rock Hotels & Resorts Inc.

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; management's estimate of the replacement cost of the Nashville Property; the ability to secure mortgage financing on the Nashville Property; the condition of the Nashville Property; the timing and scope of renovation work required to convert the Nashville Property to Oak Tree Inn standards and the ability to successfully complete such work; the ability to successfully integrate the Nashville Property; the long-term strategic benefit of the Nashville Property; the accuracy of third party reports with respect to lodging industry data for the Nashville area and expectations and assumptions related to capitalization rates, fees and reserves, as applicable. 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 lodging, transportation-oriented, and select-service lodging sectors. AHIP's properties 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'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

  • FOR FURTHER INFORMATION, PLEASE CONTACT:
    Andrew Greig, Investor Relations
    American Hotel Income Properties REIT LP
    Suite 1660 - 401 West Georgia Street
    Vancouver, B.C. V6B 5A1
    Phone: 604-630-3134
    Email: agreig@ahipreit.com