VANCOUVER, June 1, 2015 /PRNewswire/ - 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 nine branded, select-service hotel
properties (the "Acquisition Properties") located in
Illinois, Iowa, Kansas,
Missouri and Oklahoma for an aggregate purchase price of
US$53.5 million, excluding closing
and post-acquisition adjustments. In addition, the
Acquisition Properties will require brand-mandated property
improvement plans ("PIPs") of US$3.5
million to be completed over the next 30 months.
The Acquisition Properties are being purchased at a
weighted-average capitalization rate of approximately 9.0% on
trailing twelve months net operating income (after inclusion of all
hotel management fees, brand franchise fees, a 4.0% FF&E
reserve contribution and PIPs).
Acquisition Highlights:
- The Acquisition Properties consist of nine hotels containing
632 total guest rooms and are being acquired for approximately
US$90,000 per guest room inclusive of
the cost of the PIPs, which is below management's estimate of
replacement cost. The average age of the portfolio is
approximately five years.
- The nine select-service hotels consist of seven Holiday Inn
Express (an IHG brand) properties (a 69-room hotel in Bethany, Oklahoma; a 62-room hotel in
Chickasha, Oklahoma; an 87-room
hotel in Dubuque, Iowa; a 68-room
hotel in Emporia, Kansas; a
69-room hotel in Jacksonville,
Illinois; a 69-room hotel in Mattoon, Illinois; and a 68-room hotel in
Nevada, Missouri), one Hampton Inn (a Hilton brand) (a
63-room hotel located in Chickasha,
Oklahoma) and one Country Inn and Suites (a Carlson brand)
property (a 77-room hotel in Norman,
Oklahoma).
- The properties are situated along major U.S. Interstate
Highways near transportation hubs and other major demand
generators.
- 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 and a new US$32.0 million commercial mortgage backed
securities ("CMBS") loan. The new mortgage will be for a
10-year term, interest-only for the first seven years and then
amortized over a 30-year period for the remaining three years. The
mortgage is expected to have a fixed interest rate of approximately
4.10% for the entire term. In addition, the lender has agreed to
provide an FF&E reserve waiver for the first two years.
- This transaction is expected to close by the end of
June 2015, subject to customary
closing conditions and documentation.
Rob O'Neill, AHIP's Chief
Executive Officer, commented, "This investment is consistent with
our stated growth strategy targeting acquisitions of
transportation-oriented and branded, select-service hotels located
in secondary markets in the U.S. that are proximate to significant
demand generators such as universities, colleges, manufacturing and
distribution centres, agriculture, medical, and other demand
generators. This acquisition diversifies our portfolio into new
U.S. markets coupled with the introduction of the Holiday Inn
Express brand to the AHIP portfolio. It is one of the fastest
growing brands in the industry, opening an average of two hotels a
week." Mr. O'Neill continued, "The availability of long-term,
low-cost, fixed-rate CMBS debt with a significant interest-only
period highlights a key aspect of our conservative approach to
leverage, aimed at providing highly stable returns to AHIP's
unitholders. Upon the completion of this acquisition, AHIP's
portfolio will consist of 70 hotels totaling 5,860 guest rooms with
32 branded hotels totaling 2,979 guest rooms and 38 rail hotels
totaling 2,881 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, the following: references
to the acquisition of the Acquisition Properties, including
purchase prices and closing costs therefor; the completion timing
for the Acquisition Properties; the estimated costs of PIPs for the
Acquisition Properties; the degree to which the Acquisition
Properties are expected to be accretive; the amount and terms of
the CMBS financing for the Acquisition Properties and the
availability of future CMBS financing.
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 CMBS 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 27, 2015 and under "Risks and
Uncertainties" in AHIP's Management's Discussion and Analysis dated
May 13, 2015, 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 railroad employee accommodation,
transportation-oriented, and select-service lodging sectors. AHIP's
properties 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 owns hotels serving the U.S. rail industry
pursuant to long-term railway contracts and 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.
SOURCE American Hotel Income Properties REIT LP