SOURCE: American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP

September 30, 2016 06:00 ET

American Hotel Income Properties REIT LP Announces Acquisition of Four Branded, Select-Service Hotels in Florida and Tennessee for US$47.0 Million

VANCOUVER, BC--(Marketwired - September 30, 2016) - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) announced today that it has agreed to acquire through its subsidiaries, a portfolio of four Marriott-branded, select-service hotels (the "Acquisition Properties") located in Jacksonville and Lake City, Florida, and Chattanooga, Tennessee for an aggregate purchase price of US$47.0 million, excluding closing and post-acquisition adjustments. The purchase price does not include US$2.8 million for the completion of brand-mandated property improvement plans ("PIPs").

The Acquisition Properties are being purchased at a weighted-average capitalization rate of approximately 9.0% on trailing twelve months net operating income (after inclusion of all hotel management fees, franchise fees, a 4.0% FF&E reserve contribution, and PIPs).

ACQUISITION HIGHLIGHTS

  • The Acquisition Properties consist of four hotels containing 374 total guest rooms that are being acquired below management's estimate of replacement cost.
  • The four select-service, Marriott-branded hotel portfolio has an average age of 6.5 years and includes the following hotels: a 109-room Residence Inn; two 89-room Fairfield Inn & Suites; and, an 87-room TownePlace Suites.
  • Chattanooga, Tennessee is the fourth-largest city in Tennessee with a population of approximately 177,000 and a metro population of approximately 548,000. The city is located adjacent to the Georgia border close to three major interstates namely, I-24, I-75 and I-59. Its economy includes a diversified and growing mix of manufacturing and service industries, including the Volkswagen Group's North American manufacturing headquarters.
  • Jacksonville, Florida has a population of approximately 850,000 with a metro population of approximately 1,600,000, and is the fourth largest metropolitan area within the state of Florida after Miami, Tampa and Orlando. Jacksonville is a leading transportation and distribution hub with access to three major interstates and highways, three railways including CSX, Norfolk Southern and Florida East Coast and a deepwater port with three marine terminals.
  • Lake City, Florida is referred to as the "Gateway to Florida" given its location on I-75 and I-10, the two major interstate highways which carry a large percentage of Florida's tourist and commercial traffic. Lake City has metro population of approximately 68,000.
  • The investment is expected to be immediately accretive to adjusted funds from operations ("AFFO") per unit.
  • AHIP will fund the purchase price, including the PIPs, using a combination of cash on hand from the July 2016 offering ("Offering") and a new commercial mortgage backed securities ("CMBS") loan. The new mortgage will be for a 10-year term and is expected to have a fixed interest rate of under 4.50%.
  • This transaction is expected to close in late October or early November 2016, subject to customary closing conditions and documentation.

Ian McAuley, AHIP's President, commented, "When I toured this younger Marriott-branded portfolio, I was impressed with the high quality hotel and real estate product, as well as the diversity and strength of the Florida and Tennessee markets' demand generators and limited new supply." Rob O'Neill, AHIP's Chief Executive Officer, commented, "This acquisition is consistent with AHIP's strategy of owning high quality, branded, select-service hotels in strong secondary markets. This portfolio will integrate nicely with our existing portfolio of Florida and Georgia hotels and increases our percentage of Marriott-branded hotel rooms to over 40% of our Branded portfolio." Mr. O'Neill continued, "The availability of long-term, low-cost, fixed-rate debt highlights a key aspect of our conservative approach to leverage, aimed at providing highly stable returns and delivering value to unitholders."

Upon completion of this acquisition and the previously-announced acquisition of two Embassy Suites by Hilton hotels in Dallas, Texas and Tempe, Arizona, AHIP's portfolio will consist of 86 hotels totaling 8,022 guest rooms with 41 branded hotels totaling 4,233 guest rooms and 45 rail hotels totaling 3,789 guest rooms.

The Acquisition Properties 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, the following: references to the acquisition of the Acquisition Properties, including purchase prices and closing costs therefor; the weighted-average capitalization rate for the acquisition; the completion timing for the acquisition; the estimated costs of PIPs for the Acquisition Properties; the accretive nature of the acquisition; the amount and terms of the CMBS financing for the Acquisition Properties, including the estimated interest rate; the availability of future financing; the deployment of all funds raised from the Offering; the integration of the Acquisition Properties; and the total number of hotels and guest rooms owned by AHIP after giving effect to the acquisition of the Acquisition Properties.

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; the ability to secure new debt financing; the ability to successfully integrate the Acquisition Properties; and expectations and assumptions related to capitalization rates, fees and reserves and replacement costs for the Acquisition Properties, 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 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

  • 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