SOURCE: American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP

August 09, 2016 22:50 ET

American Hotel Income Properties REIT LP Reports Strong Second Quarter 2016 Financial Results

Strongest Quarter in AHIP's History With Revenues Increasing by +30.5%, Net Income Increasing by +46.4% and Diluted FFO per Unit Increasing by +11.1%; All Amounts Expressed in U.S. Dollars Unless Otherwise Indicated

VANCOUVER, BC--(Marketwired - August 09, 2016) - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) reported today its financial results for the three and six months ended June 30, 2016.

SECOND QUARTER 2016 FINANCIAL HIGHLIGHTS

  • Funds from operations ("FFO") was up +37.9% to $10.5 million (2015 - $7.6 million) and adjusted funds from operations ("AFFO") was up +38.4% to $9.3 million (2015 - $6.7 million) from the increase in the number of hotels in the portfolio, coupled with strong operating performance from effective yield management and cost controls.
  • For the current quarter, Diluted FFO per Unit was up +11.1% to $0.30 (2015 - $0.27) and Diluted AFFO per Unit was up +12.5% to $0.27 (2015 - $0.24).
  • Same-store revenue per available room ("RevPAR") for the Branded Hotels was up +4.4%. In particular, the Virginia Region was up by +16.1%, the North Carolina Region was up by +12.4%, and the Florida Region was up by +7.3%. According to STR, RevPAR for the U.S. hotel industry increased by +3.5%.
  • Total revenues for the quarter increased by +30.5% to $44.5 million compared to $34.1 million for the same quarter last year.
  • Total portfolio same-store net operating income ("NOI") grew by +3.5% with Rail Hotel NOI growth of +2.7% (YTD +4.4%) reflecting stability from the contractual revenues and lower expenses. Branded Hotel same-property NOI increased by +4.0% (YTD +7.0%) led by revenue growth of +4.4% from newly renovated properties.
  • EBITDA for the quarter was up +36.0% to $15.1 million compared to $11.1 million in the same period last year and EBITDA margin improved by 140 basis points to 34.0% (2015 - 32.6%).
  • Net income for the quarter was up +46.4% to $3.5 million (2015 - $2.4 million) and diluted net income per unit was up +25% to $0.10 (2015 - $0.08).
  • The payout ratio for the quarter improved to 61.0% (2015 - 83.7%).
  • AHIP's debt-to-gross book value at June 30, 2016 was 49.4% (June 30, 2015 - 49.6%) and interest coverage ratio for the current quarter improved to 4.3x (2015 - 4.0x).
  • AHIP's weighted average stated interest rate at June 30, 2016 improved to 4.56% (June 30, 2015 - 4.65%) and the weighted average loan term to maturity at June 30, 2016 increased to 7.7 years (June 30, 2015 - 7.5 years).
  • Starting this quarter, AHIP paid monthly distributions of US$0.054 per Unit, which is equivalent to US$0.648 per Unit on an annualized basis. The change in distribution currency was adopted to align distribution payments to AHIP's cash flows, which are all generated in U.S. dollars, and to eliminate costly hedging strategies.
  • During the quarter, AHIP acquired two-24 room expansions at two high occupancy Oak Tree Inn hotels located in Hearne, Texas and Hermiston, Oregon. Another 24-room expansion at the high occupancy Oak Tree Inn hotel located in North Platte, Nebraska is scheduled to be completed in September 2016.
  • As at June 30, 2016, AHIP had a cash balance of $8.2 million, a restricted cash balance of $15.7 million and an unutilized revolving line of credit of $10.0 million.

Rob O'Neill, CEO of AHIP, commented, "I am pleased to announce strong operating results from our well diversified portfolio of Rail and Branded Hotels. Our Virginia, North Carolina, and Florida Branded Hotels performed very well with impressive RevPAR growth coupled with effective efforts by our hotel manager at optimizing operating results. Capital markets continue to support our growth strategy as evidenced with our recently completed bought deal offering, the net proceeds from which we expect to fully deploy in the coming months with the proposed acquisition of additional accretive hotel properties below replacement cost, while continuing to deliver a stable and reliable income stream to our unitholders. The combination of accretive portfolio growth, industry leading RevPAR increases, strong same-property operating performance has generated strong quarter over quarter operating results." Mr. O'Neill continued, "Given ongoing volatility in the currency markets, we are pleased to provide our unitholders with consistent U.S. dollar distributions and exposure to U.S. dollar denominated hotel assets".

SUBSEQUENT EVENTS

  • On July 26, 2016, AHIP completed a Cdn$103.5 million bought deal offering ("July 2016 Offering") involving the issuance of 10,000,400 Units, including the full exercise of the over-allotment option. AHIP intends to use the net proceeds primarily to fund potential acquisitions of both Branded and Rail Hotels to further strengthen AHIP's well diversified portfolio.
  • On July 13, 2016, AHIP announced the acquisition of two, high-quality Embassy Suites by Hilton hotels located in Dallas, Texas and Tempe, Arizona, consisting of 529 total guestrooms for an aggregate purchase price of approximately $57.6 million, excluding an estimated $5.7 million in brand mandated property improvement plans and post-closing adjustments. The transaction is expected to close in early September 2016. The transaction is expected to be financed with mortgage debt of $32.5 million, the issuance of $17.4 million in Units, and cash from the July 2016 Offering. In addition, to assist the vendor of the Tempe Embassy Suites hotel with expiring debt, on August 5, 2016, AHIP advanced a $10.2 million interest-only loan ("Bridge Loan") with an interest rate of 8.0% and a term of 60 days with an option to extend the term for a further 90 days. The Bridge Loan will be repaid upon the completion of the Embassy Suites transaction.

Q2 2016 FINANCIAL RESULTS CONFERENCE CALL

Management will host a conference call at 4:00 p.m. (Eastern), 1:00 p.m. (Pacific) on Wednesday, August 10, 2016 to review the financial results and corporate results for the three and six months ended June 30, 2016.

To participate in this conference call, please dial one of the following numbers approximately 10 minutes prior to the commencement of the call, and ask to join the AHIP conference call.

Dial in numbers:  North America Toll free:  1-877-291-4570
   International or local Toronto:  1-647-788-4919

CONFERENCE CALL REPLAY

If you cannot participate on Wednesday, August 10, 2016, a replay of the conference call will be available by dialing one of the following replay numbers. You will be able to dial in and listen to the conference call replay two hours after the call end time, and the replay will be available until Wednesday, August 17, 2016. An audio recording of this conference call will also be available at www.ahipreit.com under the "Investor Info/Presentations & Calls" tab.

Please enter replay PIN number 51882804 followed by the # key.

Replay dial in numbers:  North America Toll free:  1-800-585-8367
   International or local Toronto:  1-416-621-4642

NON-IFRS MEASURES

Certain non-IFRS financial measures are included in this news release, which include NOI, EBITDA, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, interest coverage ratio, payout ratio and debt-to-gross book value. These terms are not measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. Real estate investment trusts often refer to NOI, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, and payout ratio as supplemental measures of performance and debt-to-gross book value as a supplemental measure of financial condition.

Debt-to-gross book value, NOI, EBITDA, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, and payout ratio should not be construed as alternatives to measurements determined in accordance with IFRS as indicators of AHIP's performance or financial condition. AHIP's method of calculating NOI, EBITDA, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, interest coverage ratio, payout ratio, debt and gross book value may differ from other issuers' methods and accordingly may not be comparable to measures used by other issuers. For further information, please refer to AHIP's Management's Discussion and Analysis ("MD&A") dated August 9, 2016, which is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

FORWARD-LOOKING INFORMATION

Certain statements in this news release may constitute "forward-looking" information that involves known and unknown risks, uncertainties and other factors, and it may cause actual results, performance or achievements or industry results, to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking information. Forward-looking information generally can be identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "feel", "intend", "may", "plan", "predict", "project", "subject to", "will", "would", and similar terms and phrases, including references to assumptions. Some of the specific forward-looking statements in this news release include, but are not limited to, statements with respect to: AHIP's future performance; the expectation to fully deploy the funds raised by AHIP from the July 2016 Offering in the coming months primarily to fund potential acquisitions of both Branded and Rail Hotels including the Embassy Suites by Hilton hotels; the expansion of the Oak Tree Inn hotel in Nebraska and the expected completion timing therefor; and AHIP's long-term objectives.

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 completion of the expansion of the Oak Tree Inn hotel in Nebraska, and the value of the U.S. dollar. 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 statements are provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results. Those risks and uncertainties include, among other things, risks related to: general economic conditions; future growth potential; Unit prices; liquidity; tax risk; tax laws currently in effect remaining unchanged; ability to access capital markets; competition for real property investments; environmental matters; the value of the U.S. dollar; and changes in legislation or regulations. Management believes that the expectations reflected in forward-looking statements are based upon reasonable assumptions and information currently available; however, management can give no assurance that actual results will be consistent with these forward-looking statements. Additional information about risks and uncertainties is contained in AHIP's MD&A and in its annual information form for the year ended December 31, 2015, copies of which are available on SEDAR at www.sedar.com.

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information reflects management's current beliefs and is based on information currently available to AHIP. The forward-looking information is made as of the date of this news release and AHIP assumes no obligation to update or revise such information to reflect new events or circumstances, except as may be required by applicable law.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

AHIP's current property portfolio is comprised of 80 hotels located in 27 U.S. states, representing 7,095 available guestrooms. The Rail Hotel segment, serving the U.S. freight railway industry, consists of 45 hotels comprising 3,765 guestrooms and 27 Penny's Diner restaurants. The Branded Hotel segment consists of 35 hotels comprising 3,330 guestrooms and is affiliated with leading hotel brands including Marriott, Hilton and IHG.

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 engaged primarily in the rail crew accommodation, transportation, and branded, select service 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 AHIP's financial statements for the three and six months ended June 30, 2016, AHIP's MD&A dated August 9, 2016, and other public filings are available on SEDAR at www.sedar.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: 604-633-2857
    Email: agreig@ahipreit.com