SOURCE: American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP

May 10, 2017 22:12 ET

American Hotel Income Properties REIT LP's Growth Fuels Strong First Quarter Results With Total Revenues Increasing by 54% and AFFO by 61%

VANCOUVER, BC--(Marketwired - May 10, 2017) -

(All amounts expressed in U.S. dollars unless otherwise indicated)

American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) announced today its financial results for the three months ended March 31, 2017. The following comments should be read in conjunction with AHIP's unaudited condensed consolidated interim financial statements and management's discussion and analysis ("MD&A") for the three months ended March 31, 2017 which are available on AHIP's website at www.ahipreit.com and on SEDAR at www.sedar.com.

Q1 2017 EXECUTIVE SUMMARY

During the first quarter, AHIP continued its disciplined investment strategy to offer investors U.S. dollar denominated distributions through the acquisition of premium branded, select-service hotels in larger secondary U.S. markets with diverse and stable demand from corporate and transient travelers as well as long standing contractual railway customers.

In Q1 2017, funds from operations ("FFO") increased by 61.0% to $11.6 million, while adjusted funds from operations ("AFFO") rose 60.7% to $9.8 million as a result of the addition of new hotels to AHIP's portfolio. Total revenues for the quarter increased by 53.8% to $61.7 million, EBITDA rose 57.9% to $16.9 million and EBITDA margin was up by 70 basis points to 27.3%.

"AHIP's first quarter results were strong and reflected our disciplined and focused investment strategy. During this quarter, AHIP acquired five premium select-service, Embassy Suites by Hilton hotels totaling 1,311 guestrooms in larger secondary U.S. markets in Texas, Arizona and Ohio," said Rob O'Neill, AHIP's CEO. Mr. O'Neill continued, "These acquisitions totaling over $180 million reflect our pragmatic acquisition strategy to diversify the portfolio geographically with strong, demand focused hotels that deliver higher margins with lower volatility and partnering with some of the world's preeminent and trusted hotel brand families."

FINANCIAL HIGHLIGHTS

  • Total revenues for the quarter increased by 53.8% to $61.7 million compared to $40.1 million for the same quarter last year as a result of the acquisition of new hotels between reporting periods.
  • Net income for the quarter rose to $2.4 million compared to a loss of $1.5 million in the prior year. Diluted net income per Unit was $0.04 compared to a diluted net loss per Unit of $0.04 in the prior year.
  • For the quarter, FFO was up 61.0% to $11.6 million (2016 - $7.2 million) and AFFO was up 60.7% to $9.8 million (2016 - $6.1 million) as a result of the 16 new hotels added over the last two quarters.
  • For the quarter, Diluted FFO per Unit was $0.20 (2016 - $0.21) and Diluted AFFO per Unit was $0.17 (2016 - $0.18) with results being affected by the temporary dilution caused by the unutilized cash from the December 2016 Offering.
  • Same-property revenue per available room ("RevPAR") for Branded Hotels was up 2.1% led by Florida, Central, North Carolina and Texas properties with significant RevPAR increases of between 3.9% and 7.6%. This was offset by weakness in the Oklahoma and Pittsburgh properties which saw RevPAR declines of 1.1% and 8.8%, respectively. According to STR, Inc., first quarter 2017 RevPAR for the U.S. hotel industry increased by 3.4%.
  • Total portfolio same-property revenues for the quarter were $39.0 million (2016 - $39.8 million) with Branded Hotel same-property revenue growth of 1.5% offset by declines in Rail Hotel same-property revenues as a result of recent contract negotiations which lowered minimum contractual occupancy guarantees in exchange for higher average rates. Total portfolio same-property NOI was $13.0 million (2016 - $14.2 million).
  • EBITDA for the quarter was up 57.9% to $16.9 million compared to $10.7 million in the same period last year and EBITDA margin improved by 70 basis points to 27.3% (2016 - 26.6%).
  • The AFFO payout ratio during the quarter was 96.6% (2016 - 93.5%) reflecting the issuance of Units from the December 2016 Offering, the net proceeds of which were partially invested during the quarter.
  • AHIP's interest coverage ratio for the first quarter was 3.0x (2016 - 3.1x).
  • AHIP paid monthly distributions of $0.054 per Unit during the first quarter, which is equivalent to $0.648 per Unit on an annualized basis.
  • As at March 31, 2017, AHIP had an unrestricted cash balance of $20.7 million, restricted cash balance of $33.8 million and an unutilized revolving line of credit of $10.0 million.
  • AHIP's debt-to-gross book value as at March 31, 2017 was 48.4% compared to 44.0% as at December 31, 2016.

FIRST QUARTER DEVELOPMENTS

  • On January 6, 2017, AHIP completed the acquisition of the 529-room select-service Embassy Suites by Hilton portfolio in Dallas and Tempe for an aggregate purchase price of approximately $57.6 million before closing adjustments and property improvement plans ("PIPs"). The acquisition was funded using a combination of cash from AHIP's bought deal offerings completed in July 2016 and December 2016, the assumption of an existing $19.0 million mortgage on the Dallas property, a new $13.5 million mortgage on the Tempe property, and the issuance of approximately $17.4 million (or 2,242,761) in new Units from treasury.
  • On January 19, 2017, AHIP completed the acquisition of the 782-room select-service Embassy Suites by Hilton portfolio located in proximity to Columbus, Cleveland and Cincinnati, Ohio for an aggregate purchase price of approximately $124.0 million including the expected cost of capital work on acquisition and PIPs. The acquisition was funded by cash on hand from AHIP's December 2016 bought deal offering of units and a new $65.0 million mortgage.
  • On March 15, 2017, AHIP completed the sale of the 77-room Country Inn & Suites by Carlson hotel in Norman, Oklahoma, a non-core branded hotel, for gross proceeds of $4.5 million.

Ian McAuley, President of AHIP, commented, "We are building on our successful track record of delivering reliable and consistent U.S. dollar denominated cash flows to unitholders while growing our diversified hotel portfolio. The growth in EBITDA, FFO and AFFO during the first quarter continues to support and reflect our ongoing growth strategy."

Q1 2017 FINANCIAL RESULTS CONFERENCE CALL

Management will host a conference call at 4:00 p.m. (Eastern), 1:00 p.m. (Pacific) on Thursday, May 11, 2017 to review the financial results and corporate results for the three months ended March 31, 2017.

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 Thursday, May 11, 2017, 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 Thursday, May 25, 2017. 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 8586729 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 interest coverage ratio and debt-to-gross book value as supplemental measures of financial condition.

Debt-to-gross book value, NOI, EBITDA, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, interest coverage ratio 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 and debt-to-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 MD&A dated May 9, 2017, 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: the sustainability and nature of AHIP's distributions; management's acquisition strategies for the growth of AHIP; management's expectations with respect to AHIP's future performance; 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; AHIP will be able to successfully integrate properties acquired into its portfolio; capital markets will provide AHIP with readily available access to equity and/or debt financing on terms acceptable to AHIP; the accuracy of third party reports with respect to lodging industry data; 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 annual information form for the year ended December 31, 2016, 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 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 growing a portfolio of premium branded, select-service hotels in larger secondary markets with diverse and stable demand generators as well as long standing contractual railway customers.

AHIP's long-term objectives are to build on its proven track record of successful investment, deliver reliable and consistent U.S. dollar denominated distributions to unitholders and add value through ongoing growth of its diversified hotel portfolio.

ADDITIONAL INFORMATION

Additional information relating to AHIP, including AHIP's unaudited condensed consolidated interim financial statements for the three months ended March 31, 2017, AHIP's MD&A dated May 9, 2017, 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