SOURCE: American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP

January 20, 2017 06:00 ET

American Hotel Income Properties REIT LP Completes Strategic Acquisition of Three Midwestern Embassy Suites by Hilton Hotels for US$124 Million

VANCOUVER, BC--(Marketwired - January 20, 2017) - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) announced today the completion of its previously announced strategic acquisition of three Embassy Suites by Hilton hotels (the "Acquisition Properties") located in proximity to Columbus, Cleveland and Cincinnati, Ohio for an aggregate purchase price of approximately US$124 million, including the expected cost of capital work on acquisition and brand-mandated property improvement plans (the "PIPs").

The Acquisition Properties comprise 782 total guestrooms, and were acquired for approximately US$159,000 per guestroom, which is below management's estimate of replacement cost. The aggregate purchase price represents 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). The portfolio includes the following hotels:

  • the 284-room Embassy Suites by Hilton Columbus Dublin hotel located in proximity to Ohio State University;
  • the 271-room Embassy Suites by Hilton Cleveland Rockside hotel located next to numerous healthcare and professional sports demand generators; and
  • the 227-room Embassy Suites by Hilton Cincinnati Rivercenter hotel, which is located in Covington, Kentucky, on the banks of the Ohio River overlooking downtown Cincinnati and near a number of Fortune 500 companies and professional sports demand generators.

AHIP funded the purchase price and the PIPs with cash on hand from its December 2016 bought deal unit offering and a new US$65.0 million commercial mortgage backed securities loan (the "Mortgage"). The Mortgage has a 10-year term, and has a fixed interest rate of 4.72%. The Mortgage is interest-only for the first three years and will then be amortized over a 30-year term. The lender has provided an FF&E reserve waiver for the first two years.

Ian McAuley, President of AHIP, stated, "During the first three weeks of 2017, we have acquired five market-leading Embassy Suites by Hilton hotels with more than 1,300 guestrooms, for an aggregate investment of approximately US$187.3 million, or approximately US$143,000 per guestroom. That price per guestroom is well below our estimated replacement cost for hotels of this calibre within major metropolitan markets. AHIP's ability to acquire high quality, upscale hotels at favourable per room prices supports our strategic objective of further diversifying the portfolio with larger institutional-grade properties, and augments the overall stability provided by our guaranteed rail crew lodging contracts."

Rob O'Neill, CEO of AHIP commented, "As we continue to prudently grow AHIP's asset base with larger, well-maintained select-service hotels located within higher barrier-to-entry metropolitan markets, we also continue to build a defensive balance sheet that includes moderate leverage and long term, fixed rate debt. This conservative approach, coupled with a modest payout ratio, continues to allow AHIP to provide consistent and stable returns to our unitholders."

With the completion of this acquisition, AHIP's portfolio now consists 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 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 expected cost of capital work on acquisition and the estimated costs of PIPs for the Acquisition Properties; the expected strategic impacts of the acquisition of the Acquisition Properties; and the management of the Acquisition Properties by AHIP's exclusive hotel manager, 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 timing and scope of the expected capital work and the PIPs and the ability to successfully complete such renovation work; the ability to successfully integrate the Acquisition Properties into AHIP's existing portfolio of branded hotels; 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 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 in select-service, transportation-oriented, and rail crew contract lodging sectors. 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