2014

American Hotel Income Properties REIT LP announces Q1 2014 financial results

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

VANCOUVER, May 9, 2014 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN; OTCQX: AHOTF) today announced the release of its financial results for the three months ended March 31, 2014.

AHIP's current property portfolio is comprised of 43 hotels located in 20 states, representing 3,572 available guest rooms. Including its IPO in February 2013, AHIP has raised Cdn$140 million of equity and has acquired $228 million of hotel investment properties and has commitments to acquire an additional $15 million of contracted rail hotel opportunities by year end.

Q1 2014 FINANCIAL HIGHLIGHTS

  • Total revenues were $17.2 million for the three months ended March 31, 2014 boosted by new Oak Tree Inn properties, the acquisition of four Pittsburgh hotels in November 2013 and four Virginia hotels in March 2014.
  • Net operating Income ("NOI") was $5.4 million for the three months ended March 31, 2014.
  • Funds from operations ("FFO") and adjusted funds from operations ("AFFO") were $2.0 million and $1.9 million ($0.14 and $0.13 per Unit, respectively) for the three months ended March 31, 2014.
  • Total distributions of Cdn$0.225 per limited partnership unit ("Unit") were declared during the three months March 31, 2014, representing Cdn$0.90 per Unit on an annualized basis.
  • AHIP's cash balance was $20.7 million, including restricted cash of $12.4 million, as at March 31, 2014.
  • Debt to gross book value was 52.6% as at March 31, 2014, in line with AHIP's targeted debt to gross book value ratio of between 50-55%.
  • AHIP's pro forma payout and leverage ratios remain conservative, after giving effect to the completion of the previously announced development projects, the Jefferson City renovation project, the Pittsburgh Portfolio acquisition and the Virginia Portfolio acquisition (see below), at approximately 79.5% on projected 2014 AFFO and a projected debt to gross book value of approximately 51.2%.
  • The Oak Tree Inn hotels, Pittsburgh and Virginia Portfolios achieved a combined 5.3% year-over-year increase in revenues (from the same period in 2013) with occupancy, average daily rate ("ADR"), revenue per available room ("RevPAR") all higher during the quarter ended March 31, 2014:
    • Total Oak Tree Inn revenue increased by 5.4%,
    • Pittsburgh Portfolio revenue increased by 4.3%, and
    • Virginia Portfolio revenue increased by 9.5%

It should be noted that AHIP purchased the Virginia Portfolio on March 12, 2014 and its year-over-year increase is a comparison of partial quarters. The Pittsburgh Portfolio was purchased on November 21, 2013.

  • The U.S. hotel industry reported increased in 3 key performance metrics for the first quarter 2014 in year-over-year measurements with occupancy up 2.9%; ADR rose 3.8% and RevPAR was up 6.8%, according to data from STR released on April 25, 2014.

RECENT EVENTS

  • On March 12, 2014, AHIP completed the acquisition of four hotel properties located in Virginia (the "Virginia Portfolio") for an aggregate purchase price of approximately $37.2 million excluding closing adjustments and the funding of a $6.0 million restricted cash reserve for brand mandated property improvement plans. The Virginia Portfolio comprises an aggregate of 403 guest rooms and consists of three hotels under the "Hampton Inn" flag, (a Hilton brand) and one hotel under the "Fairfield Inn & Suites" flag (a Marriott brand). The properties are located in Harrisonburg, Emporia and South Hill, Virginia, near transportation hubs and other major demand generators such as James Madison University, manufacturing facilities, distribution centers, and medical centers. The Virginia Portfolio was partially financed by CMBS mortgage debt of $24.5 million with an interest rate fixed for ten years at 4.97%.  The loan is interest only for the first four years and then amortized over a 30 year period.
  • On February 4, 2014 AHIP announced the grand re-opening of a 77-room fully renovated Oak Tree Inn hotel located in Jefferson City, Missouri. This hotel was acquired on September 12, 2013, and on November 21, 2013, AHIP announced the signing of a long-term contract for railway crew accommodation at the hotel.
  • On May 1, 2014, AHIP acquired a brand new 56-room Oak Tree Inn hotel and Penny's Diner in Santa Teresa, New Mexico, for a total purchase price of $5.1 million. $1.0 million of the purchase price was paid through the issuance of 101,247 newly-issued HOT.UN units at a five-day weighted average issue price of Cdn$10.825, with the remainder of the purchase price a combination of mortgage financing and available cash. The Oak Tree Inn hotel is secured by a long-term railway contract for 100% occupancy.

Mr. Robert O'Neill, Chief Executive Officer, commented, "We are pleased with our Q1 2014 revenues and results, which are in line with our expectations and reflect the seasonally weakest quarter for revenue and EBITDA for our portfolio. The cold weather conditions experienced across most of North America during the past few months did impact our operating results, most notably as our energy expenses came in higher than expected. Our results also reflect our excess cash holdings, which were fully deployed on March 12, 2014 with the acquisition of our Virginia Portfolio."

 "Coming into 2014, our focus has been to deploy our available cash for acquisitions and to intensify our efforts to identify, negotiate and close accretive acquisitions" said Mr. O'Neill. To date in 2014, we have acquired our second portfolio acquisition of non-rail, branded hotels (the Virginia Portfolio) and our first development property at Santa Teresa, New Mexico, from our development partner SunOne Developments Inc. ("SunOne"). In addition, we have enhanced our senior management team to lead the company through this exciting period with the transition of our founding CFO, Robert Hibberd, to the position of Executive Vice President to focus on acquisitions and capital markets, and the addition of our new CFO, Azim Lalani."

"Our resources are now firmly in place to achieve our key objectives. We continue to actively evaluate a significant pipeline of accretive external acquisitions of high quality, branded hotels. Furthermore, our railway hotel development pipeline is scheduled to deliver three more new Oak Tree Inn hotels in 2014, an increase of 185 rooms. Each of these three hotels have signed long-term contracts for railway crew accommodation with national rail companies which guarantee greater than 78.4% of their available room nights. Upon completion of these previously announced development projects, AHIP will own a total of 46 hotels in 20 states comprising 3,757 guest rooms. This represents a 50.0% increase in AHIP's total guest rooms in just over 12 months. Following completion of development projects currently underway, 57% of AHIP's total rooms will be covered under minimum occupancy guarantees from railway operators."

Mr. O'Neill continued, "The U.S. hotel market continues to demonstrate solid industry fundamentals. AHIP is well positioned to expand its portfolio through organic growth, accretive acquisitions of branded focused-service hotels, further development of hotels with occupancy guarantees under long term contracts with railway operators, and secure long term financing at low fixed interest rates. As AHIP earns substantially all of its revenues in U.S. dollars, the recent strength of the U.S. dollar has had a positive impact on cash flows to support our Canadian dollar distributions."

CONFERENCE CALL

Robert O'Neill, CEO, Robert Hibberd, Executive Vice President and Azim Lalani, CFO, of AHIP will host a conference call at 3:00 p.m. (Eastern time) or 12:00 p.m. (Pacific time), on Friday May 9, 2014, to review the financial results and corporate developments for the three month period ended March 31, 2014.

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 American Hotel Income Properties conference call.

Dial in numbers

Toll free dial in number (from Canada and USA)................................... 1-888-390-0546

International or Local Toronto............................................................. 1-416-764-8688

Conference Call Replay

If you cannot participate on May 9, 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 120 minutes after the meeting end time, and the replay will be available until May 16, 2014.

Please enter the Replay ID# 564311, followed by the # key.

Replay Dial in number (Toll Free from Canada or the USA).................. 1-888-390-0541

International or Local Toronto ........................................................... 1-416-764-8677

NON-IFRS MEASURES

Certain non-IFRS financial measures are included in this news release, which include NOI, FFO, AFFO 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 and AFFO as supplemental measures of performance and debt to gross book value as a supplemental measure of financial condition.

Debt to gross book value, NOI, FFO and AFFO 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, FFO, AFFO, 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 dated May 9, 2014, 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 press 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 is identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "subject to", "will", "would", and similar terms and phrases, including references to assumptions.

Forward-looking information contained in this press release is based on certain key expectations and assumptions made by AHIP, including, without limitation, expectations and assumptions respecting the amount of the expected monthly cash distributions and annual yield for the Units and the timing to pay such cash distributions to unitholders, and actual costs to complete hotel property improvement plans. Although the forward-looking information contained in this press release is based upon what the 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 management regarding future events and operating performance as of the date of this press 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. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, and a description of these factors can be found under "Risk Factors" in AHIP's annual information form dated March 26, 2014, which is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.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 press 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 the railway 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 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 interim financial statements for the three months ended March 31, 2014, AHIP's Management's Discussion and Analysis dated May 9, 2014, and other public filings are 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



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