SOURCE: American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP

December 16, 2016 06:00 ET

American Hotel Income Properties REIT LP Announces the Acquisition of a Strategic Portfolio of Three Embassy Suites by Hilton Branded Hotels With a Total of 782 Guestrooms

VANCOUVER, BC--(Marketwired - December 16, 2016) - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF)

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) announced today that it has agreed to acquire through its subsidiaries the previously announced strategic portfolio of three Embassy Suites by Hilton branded hotels totaling 782 guestrooms located in proximity to Columbus, Cleveland and Cincinnati, Ohio (the "Midwestern 3 Embassy Suites Portfolio") for approximately US$124.0 million, including the expected cost of capital work on acquisition and the brand-mandated property improvement plans (the "PIPs").

The Midwestern 3 Embassy Suites Portfolio is being acquired at a weighted-average capitalization rate of approximately 8.0% on trailing twelve months net operating income (after inclusion of all hotel management fees, brand franchise fees, a 4.0% furniture, fixtures and equipment ("FF&E") reserve and the PIPs).

ACQUISITION HIGHLIGHTS

  • The three hotels are being acquired for approximately US$159,000 per guestroom, inclusive of the cost of the PIPs, which is below management's estimate of replacement cost. Embassy Suites by Hilton is an industry leading all-suite, select-service product that offers free cooked-to-order breakfasts and a complimentary evening reception.
  • AHIP expects to fund the purchase price, including the PIPs, using a combination of a portion of the net proceeds from AHIP's recently announced bought deal offering of units (the "Offering") and a new US$65.0 million commercial mortgage backed securities ("CMBS") loan (the "Mortgage").
  • The Mortgage is expected to have a 10-year term, with interest-only payments for the first three years and then amortized over a 30-year period for the remaining seven years. The Mortgage is expected to have a fixed interest rate of approximately 4.70% for the entire term. In addition, the lender has agreed to provide an FF&E reserve waiver for the first two years.
  • The 284-room Embassy Suites Columbus Dublin is located in Dublin, Ohio approximately 15 miles north of downtown Columbus at the convergence of Interstate 270 and State Route 161. The hotel is ideally situated near a number of corporate and regional headquarters including Nationwide Insurance and Ohio State University, which is the third largest university campus in the United States. Columbus is the capital and largest city in the state of Ohio with an estimated population of approximately 850,000 people. The Columbus metro area has a population of approximately 2.1 million people.
  • The 271-room Embassy Suites Cleveland Rockside is located in Independence, Ohio approximately 10 miles south of downtown Cleveland and 12 miles east of Cleveland Hopkins Airport at the convergence of Interstate 480 and Interstate 77. The hotel is proximate to a number of demand generators including three major sporting venues that are home to MLB, NBA, and NFL teams. Cleveland is a health care hub with more than 60 hospitals including the world renowned Cleveland Clinic. It is the second largest city in the state of Ohio with an estimated population of approximately 400,000 people and the metro area has a population of approximately 2.1 million people.
  • The 227-room Embassy Suites Cincinnati Rivercenter is located on the banks of the Ohio River overlooking downtown Cincinnati in Covington, Kentucky. The hotel is situated on land leased from the city of Covington, with the next renewal of the lease due in 2040. The hotel is proximate to a number of demand generators including the Northern Kentucky Convention Center and the Duke Energy Convention Center as well as major sporting venues that are home to NFL and MLB teams. Cincinnati is home to nine Fortune 500 companies including The Kroger Co., Proctor and Gamble, and Macy's. It has an estimated population of approximately 300,000 people and the metro area has a population of approximately 2.2 million people.
  • This transaction is expected to close in late January 2017, subject to customary closing conditions and documentation and is expected to be immediately accretive to adjusted funds from operations ("AFFO") per unit.
  • Upon the completion of this acquisition and the previously announced acquisition of the Embassy Suites by Hilton hotels located in Dallas, Texas and Tempe, Arizona, AHIP's portfolio will consist of 96 hotels totaling 9,467 guestrooms, with 50 branded hotels totaling 5,574 guestrooms and 46 rail crew hotels totaling 3,893 guestrooms.
  • The hotels will be managed by AHIP's exclusive hotel manager, Tower Rock Hotels & Resorts Inc., a wholly owned subsidiary of O'Neill Hotels and Resorts Ltd.

Ian McAuley, President of AHIP, commented, "This strategic investment builds upon our previously-announced acquisitions of larger, select service hotels located in larger markets. These specific hotels are well located with great visibility and perform very well within their respective markets. When I toured these properties, I was impressed with their overall institutional quality." Rob O'Neill, AHIP's CEO continued, "AHIP's ability to use conservatively financed, long-term, low-cost, fixed-rate debt with a significant interest-only period highlights a key aspect of our strategy of providing consistent and stable returns to our unitholders."

This news release shall not constitute an offer to sell or a solicitation of any offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and such securities may not be offered or sold within the United States absent registration under the U.S. Securities Act or an applicable exemption from the registration requirements thereunder.

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 Midwestern 3 Embassy Suites Portfolio; the acquisition cost of the Midwestern 3 Embassy Suites Portfolio, including the cost of the capital work upon acquisition and the PIPs; closing and post-acquisition adjustments to the purchase price of the Midwestern 3 Embassy Suites Portfolio; management's expectation that the acquisition of the Midwestern 3 Embassy Suites Portfolio will be immediately accretive to AFFO per unit; AHIP's intention to use a portion of the net proceeds of the Offering and the new Mortgage to finance the acquisition of the Midwestern 3 Embassy Suites Portfolio; the amount and expected terms of the new Mortgage; the term of the ground lease in Covington; the capitalization rates associated with the acquisition of the Midwestern 3 Embassy Suites Portfolio; the expected strategic impacts of the acquisition of the Midwestern 3 Embassy Suites Portfolio; pricing of the Midwestern 3 Embassy Suites Portfolio relative to replacement cost; the expected date of the completion of the acquisition of the Midwestern 3 Embassy Suites Portfolio; the total number of hotels and rooms owned by AHIP after giving effect to the acquisition of the Midwestern 3 Embassy Suites Portfolio and AHIP's other previously announced acquisitions; and the management of the Midwestern 3 Embassy Suites Portfolio 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, the ability to secure Mortgage financing on the Midwestern 3 Embassy Suites Portfolio on the terms currently contemplated, the ability to successfully complete the Offering, the ability to get consent to assignment of the ground lease in Covington, the timing and scope of the PIPs and the ability to successfully complete such renovation work, the ability to successfully integrate the Midwestern 3 Embassy Suites Portfolio into AHIP's existing portfolio of branded hotels, the accuracy of third party reports with respect to data about the Cincinnati, Cleveland and Columbus metropolitan areas, the value of the U.S. Dollar and assumptions and expectations related to capitalization rates, fees and reserves, replacement costs and targeted completion dates. 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 November 7, 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'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