SOURCE: American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP

October 25, 2016 06:00 ET

American Hotel Income Properties REIT LP Announces Acquisition of Six Branded, Select-Service Hotels in Florida for US$61.0 Million

VANCOUVER, BC --(Marketwired - October 25, 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 six branded, select-service hotels (the "Acquisition Properties") located in Tampa, Orlando, Sarasota, and Fort Myers, Florida for an aggregate purchase price of US$61.0 million, excluding closing and post-acquisition adjustments. The purchase price does not include approximately US$10.6 million for the completion of brand-mandated property improvement plans (the "PIPs").

The Acquisition Properties are being purchased at a weighted-average capitalization rate of approximately 8.5% on trailing twelve months net operating income (after inclusion of all hotel management fees, franchise fees, a 4.0% FF&E reserve contribution, and the PIPs).

ACQUISITION HIGHLIGHTS

  • The Acquisition Properties consist of six hotels containing 559 total guestrooms that are being acquired below management's estimate of replacement cost.

  • The select-service, branded hotel portfolio has an average age of approximately 13 years and includes the following Florida hotels: a 111-room Holiday Inn Express & Suites located in Fort Myers; a 101-room Holiday Inn Express & Suites located in Sarasota; a 100-room Staybridge Suites hotel located in Tampa; an 86-room Wingate by Wyndham hotel located in Tampa; an 81-room Courtyard by Marriott hotel located in Tampa; and, an 80-room Fairfield Inn & Suites located in Orlando.

  • Tampa, Florida has a metro population of approximately 2.9 million, and is the second largest metro area in Florida. Its economy includes a diversified and growing mix of tourism, several Fortune 500 companies, and the University of South Florida, which is the fourth largest university in the state. Tampa is accessible via Interstate 275, Interstate 4, and Interstate 75.

  • Orlando, Florida has a metro population of approximately 2.4 million, and is the third largest metro area in Florida after Miami and Tampa. Orlando is the "Theme Park Capital" of the world with a number of theme parks including Walt Disney World Resort, Universal Orlando Resort, and SeaWorld Orlando. Other demand generators in the Orlando area include numerous aviation, aerospace, technology and film-related companies. It is also home to the University of Central Florida, which has a total enrollment of approximately 60,000 and is one of the largest universities in the United States. Orlando is easily accessible via Interstate 4 and the Florida Turnpike.

  • Fort Myers, Florida is located in southwest Florida and accessible via Interstate 75. The Cape Coral-Fort Myers area has a population base of almost 680,000. The area is a major tourist destination and is also home to spring training facilities for multiple major league baseball teams.

  • Sarasota, Florida is located along the I-75 corridor on Florida's west coast and has a metro population of approximately 379,000. The area is also the winter home to several major league baseball teams and is the gateway to miles of beaches, including Lido Beach and Siesta Key.

  • 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 and a new $37.0 million commercial mortgage backed securities ("CMBS") loan. The new mortgage will be secured by five hotel properties, will have a 10-year term, and is expected to have a fixed interest rate of less than 4.50%. The lender has also agreed to provide an FF&E reserve waiver for two years.

  • This transaction is expected to close on or before November 30, 2016, subject to customary closing conditions and documentation.

Ian McAuley, AHIP's president, commented, "This strategic acquisition expands and diversifies both our brand affiliation and geographic presence within the high-performing Florida market, while creating synergies and cost-saving opportunities with our existing Florida hotels." Rob O'Neill, AHIP's Chief Executive Officer, commented, "We are pleased to be acquiring these high-quality, stabilized assets located in larger secondary markets with strong demand generators near major U.S. highways." Mr. O'Neill continued, "The continued availability of long-term, fixed-rate debt allows us to deliver stable returns to our unitholders."

Upon completion of this acquisition, and the previously-announced acquisitions of two Embassy Suites hotels located in Texas and Arizona, as well as the four Marriott-branded, select-service hotels located in Florida and Tennessee, AHIP's portfolio will consist of 92 hotels totaling 8,581 guest rooms with 47 branded hotels totaling 4,792 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, references to the following: the acquisition of the Acquisition Properties, including purchase prices and closing costs therefor; the funding of the acquisition of the Acquisition Properties; the weighted-average capitalization rate for the acquisition; management's expectation that the acquisition of the Acquisition Properties will be immediately accretive to AFFO per unit; the expected completion timing for the acquisition; the estimated costs of the PIPs; the amount and terms of the CMBS financing for the Acquisition Properties, including the estimated interest rate; the availability of future financing; the integration of the Acquisition Properties; the composition of AHIP's portfolio of branded hotels in Florida; the synergies and potential cost savings at AHIP's hotels in Florida; and the total number of hotels and guest rooms owned by AHIP after giving effect to the acquisition of the Acquisition Properties, as well as the Embassy Suites hotels in Texas and Arizona and the four hotels to be acquired in Florida and Tennessee.

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