AHIP Board approves commitment with SunOne Developments Inc. to construct a 56-room Oak Tree Inn hotel and Penny's Diner located in Santa Teresa, New Mexico, secured by a long-term contract
VANCOUVER, July 9, 2013 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP") (Toronto Stock Exchange: HOT.UN) announced today the commitment with SunOne Developments Inc. ("SunOne") to construct a 56-room Oak Tree Inn hotel and Penny's Diner located in Santa Teresa, New Mexico, secured by a long-term railway contract. The Oak Tree Inn hotel and 24-hour Penny's Diner (the "property") will be financed and developed in accordance with the Master Development Agreement between SunOne and AHIP. AHIP has agreed to provide mezzanine financing of US$1.1 million to SunOne, and upon completion AHIP has agreed to a total purchase price of US$5.1 million, which is equal to 95% of the as-stabilized appraised value, as determined by a nationally recognized appraisal company. With a first-year budgeted net operating income projected by the manager, TR Lodging Enterprises, the forecasted capitalization rate is 12.4% and the forecast return on equity is 18%. Management anticipates that the Santa Teresa investment will be highly accretive to unit holders and is satisfied that all AHIP investment criteria have been met.
The property will be constructed on a 2.28 acre site in the Santa Teresa Business Centre, adjacent to the Doña Ana County Airport and approximately three miles from the railway crew change office. The property is expected to open by May 1st, 2014. A contract has been executed to guarantee all 56 rooms for a 10 year period. The railway client is constructing a US$400 million intermodal and refueling terminal in Santa Teresa, which is scheduled to open in early 2014. Commercial lodging demand from a variety of sources is expected to supplement railway demand and enable the subject property to operate in excess of 100% occupancy. The property is being constructed such that an additional 20 guestrooms may be added to the property in the future.
The property will be managed by TR Lodging Enterprises Inc. and is expected to open concurrently with the completion of the Santa Teresa railway terminal. Following the opening of the Santa Teresa property, AHIP's portfolio of dedicated railway facilities will be comprised of 33 hotels with a total count of 2,621 guestrooms, and 24 24-hour diners.
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", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would" and similar terms and phrases and includes, but is not limited to, the amount of the expected monthly cash distributions and annual yield for the Units and the timing to pay the first cash distribution to unitholders, 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, a reasonably stable North American economy and stock market. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risk Factors" in AHIP`s Management's Discussion and Analysis dated March 28, 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 Partnership 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.
SOURCE American Hotel Income Properties REIT LP