AHIP Board approves commitment to purchase a new 25-room Oak Tree Inn and Penny's Diner located in Brunswick, Maryland, secured by a long-term contract
VANCOUVER, Aug. 23, 2013 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP") (Toronto Stock Exchange: HOT.UN) announced today that its Board of Directors have approved the commitment with SunOne Developments Inc. ("SunOne") to purchase a new 25-room Oak Tree Inn and Penny's Diner located in Brunswick, Maryland, secured by a long-term railway contract. The Oak Tree Inn and 24-hour Penny's Diner (collectively, the "Brunswick Facilities") will be financed and developed in accordance with the Master Development Agreement already in place between SunOne and AHIP. AHIP has agreed to provide mezzanine financing of US$0.4 million to SunOne, and upon completion, AHIP has agreed to a total purchase price of US$2.7 million. This price is equal to 95% of the as-stabilized appraised value, as determined by a nationally recognized appraisal company. Based upon a first-year budgeted net operating income projected by the appraiser, the going-in capitalization rate is 10.7% and the expected return on equity is 12.5%. Management anticipates that its investment in the Brunswick Facilities will be accretive to unitholders and is satisfied that all AHIP investment criteria have been met.
The Brunswick Facilities will be constructed on a 2.14 acre site, approximately 1.3 miles from the railway crew change office, and they are expected to open for business by June 30, 2014. A contract has been executed for a 10-year period with a major US railway, which has invested more than US$69 million in its Maryland network during 2012. Commercial lodging demand from a variety of sources is expected to supplement railway demand and would thereby enable this Oak Tree Inn to operate in excess of 90% occupancy.
Rob O'Neill, Chief Executive Officer, commented "We are pleased to work with our railway client to provide a uniquely sized Oak Tree Inn, along with a 24-hour Penny's Diner, that was economic for our client and accretive for our Unitholders."
The Brunswick Facilities are one of the four properties previously referred to by Mr. O'Neill in AHIP's August 8, 2013 news release. There is an anticipated purchase price of approximately US$14.7 for the three remaining properties currently under preliminary agreement as additions to AHIP's portfolio.
AHIP`s portfolio is currently comprised of 32 fully operational hotel properties, including 2,564 guest rooms and 23 diners. AHIP's commitment to purchase the new 25-room Oak Tree Inn and Penny's Diner at Brunswick, Maryland is in addition to the previously announced approval for AHIP's commitment to purchase the 56-room Oak Tree Inn and Penny's Diner scheduled to open by May 1, 2014 at Santa Teresa, New Mexico. Along with AHIP's existing properties, both of these new properties will be managed by TR Lodging Enterprises Inc.
This news release contains forward-looking information within the meaning of applicable securities legislation, which reflects AHIP's current expectations regarding future events. Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "budget", "could", "estimate", "expect", "going-in", "intend", "may", "plan", "predict", "project", "will", "would" and similar terms and phrases, and includes, but is not limited to, the closing of the acquisition of the Brunswick Facilities, the accretive nature of AHIP's investment in the Brunswick Facilities, the expected occupancy level for the Brunswick Oak Tree Inn and the anticipated purchase price for three remaining properties under preliminary agreement. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond AHIP's control, that could cause actual results and events to differ materially from those that are disclosed in, or implied by, such forward-looking information. Such assumptions include, but are not limited to, construction of the Brunswick Facilities not experiencing any material delays, and a reasonably stable North American economy and stock market. Such risks and uncertainties include, but are not limited to, budgeted net operating income, going-in capitalization rate and expected return on equity being materially different than projected as well as the factors discussed under "Risk Factors" in AHIP`s Management's Discussion and Analysis dated August 8, 2013. The forward-looking information contained herein is made as of the date of this news release and, except as expressly required by applicable law, AHIP assumes no obligation to publicly update or revise such information.
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 the railroad employee accommodation, transportation and contract-focused lodging sectors. AHIP's long-term objectives are to: (i) generate stable and growing cash distributions from hotel properties substantially in the US; (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 Adjusted Funds From Operations ("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.
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
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