American Hotel Income Properties REIT LP announces Q3 2013 results and announces its commitment with SunOne Developments Inc. to construct two new hotels located in Wellington, Kansas and Glendive, Montana, each secured by ten-year railway contracts

VANCOUVER, Nov. 7, 2013 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP") (Toronto Stock Exchange: HOT.UN; OTCQX: AHOTF) today announced the release of its financial results for the three and nine months ended September 30, 2013.

2013 Q3 financial highlights and recent events

(All amounts expressed in U.S. dollars unless otherwise indicated. Certain operating results of AHIP presented for the nine month period ended September 30, 2013 reflect only the operational results for the 222-day period from the acquisition of Lodging Enterprises, LLC on February 20, 2013 to September 30, 2013.)

  • AHIP's current property portfolio was comprised of 33 hotels located in 19 states as at September 30, 2013, representing 2,641 available guest rooms under management of AHIP's external hotel manager, which experienced an 84.7% and 83.4% occupancy rate for the three and nine months ended September 30, 2013 respectively.
  • Revenues at AHIP's Lodging Enterprises hotels are estimated to have increased by approximately 7.4% and 6.5% for the three month and 222-day periods ended September 30, 2013, respectively.
  • In addition to continued growth in the rail portfolio, AHIP has under letter of intent and is actively pursuing high quality, select service hotel portfolios totaling more than $100 million in its non-rail acquisition pipeline.
  • Cash balance was $20,958,211, excluding restricted cash of $51,237 and a cash deposit of $1,650,000 relating to the Acquisition Properties (see below) as at September 30, 2013.
  • Total revenues were $14,342,715 and $33,557,014 for the three and nine months ended September 30, 2013, respectively, all of which was attributable to the operating results of Lodging Enterprises, LLC subsequent to the acquisition date of February 20, 2013.
  • Funds from operations ("FFO") were $2,745,793 ($0.264 per Unit) for the three months ended September 30, 2013.
  • Adjusted funds from operations ("AFFO") were $2,508,542 ($0.241 per Unit) for the three months ended September 30, 2013.
  • Net operating Income ("NOI") was $4,886,447 for the three months ended September 30, 2013.
  • Distributions of $2,254,828 and $5,525,796 were declared during the three and nine months ended September 30, 2013 respectively (both representing Cdn$0.90 per Unit on an annualized basis), of which $751,611 was included in accounts payable and accrued liabilities at September 30, 2013 and paid on October 15, 2013.
  • AFFO payout ratio was 89.9% (calculated as distributions declared divided by AFFO) for the three months ended September 30, 2013 which includes approximately $15,000,000 of unutilized cash available for acquisitions.
  • Debt to gross book value was 41.6% (calculated as principal debt outstanding ($69,784,601) divided by the sum of total assets ($165,118,468) plus depreciation ($3,261,359) and amortization of intangible assets ($1,084,828) less the deferred income tax liability ($1,879,962) as at September 30, 2013.
  • On July 9, 2013, AHIP announced a commitment with SunOne Developments Inc. ("SunOne") to construct a 56-room Oak Tree Inn hotel and Penny's Diner (collectively "Santa Teresa") located in Santa Teresa, New Mexico, secured by a 10-year railway contract for all 56 rooms. The property is expected to open for business by July, 2014.
  • On August 23, 2013, AHIP announced a commitment with SunOne to construct a 25-room Oak Tree Inn hotel and Penny's Diner (collectively "Brunswick") located in Brunswick, Maryland, secured by a 10-year railway contract for 15 rooms. The property is expected to open for business by September 2014.
  • On September 20, 2013, a distribution of Cdn$0.075 per Unit was declared for the month of September 2013 (Cdn$0.90 per Unit on an annualized basis), for payment on October 15, 2013.
  • On October 10, 2013 AHIP announced that it has agreed to acquire four hotel properties located in metropolitan Pittsburgh, Pennsylvania (the "Acquisition Properties") for an aggregate purchase price of approximately $57.3 million, excluding post-acquisition adjustments and approximately $6.0 million of brand mandated property improvement plans ("PIPs"). The Acquisition Properties comprise an aggregate of 471 guest rooms and consists of three hotels under the 'Hampton Inn' flag (a Hilton brand), and one hotel under the 'Residence Inn' flag (a Marriott brand). The completion of the acquisition is expected to occur on or about November 21, 2013.
  • On October 10, 2013 AHIP announced it had entered into an agreement with a syndicate of underwriters (the "Underwriters"), to sell, on a bought deal basis up to 3,967,500 subscription receipts ("Subscription Receipts"), inclusive of 517,500 Subscriptions Receipts issued pursuant to the exercise in full of the over-allotment option, at a price of Cdn$10.15 per Subscription Receipt for gross proceeds to AHIP of approximately Cdn$40.3 million (the "Offering"). AHIP filed the related final prospectus (the "Prospectus") on October 24, 2013.
  • On October 31, 2013 AHIP announced the completion of the Offering, including the full exercise of the over-allotment option. The Subscription Receipts are listed on the TSX under the symbol HOT.R. Additional information relating to the Subscription Receipts is included in the Prospectus.
  • On November 4, 2013, AHIP entered a forward interest rate lock agreement with a major international bank (the "Lender") to lock the interest rate at 5.02% on the four proposed loans relating to the Acquisition Properties for an aggregate gross loan amount of $38 million. The terms of the Rate Lock for a 30 day period, with a 30 day extension option. The loans remain subject to final approval by the Lender.

Two new Railway Contracts signed today

AHIP announced today the commitment with SunOne Developments Inc. ("SunOne") to construct a 110-room Oak Tree Inn hotel located in Wellington, Kansas, and a 50-room Oak Tree Inn hotel and Penny's Diner located in Glendive, Montana.  The two Oak Tree Inn hotels and 24-hour Penny's Diner 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$1.57 million to SunOne for the developments, and upon completion AHIP has agreed to a total purchase price of US$12.35 million, which is equal to 95% of the as-stabilized appraised value, as determined by a nationally recognized appraisal company. Both hotels are secured by long-term railway contracts that guarantee greater than 80% of the 160 total guestrooms for 10 years.  Management anticipates that the two investments will be highly accretive to unit holders and is satisfied that all AHIP investment criteria have been met.

  • The Wellington property will be constructed on a 2.00 acre site and is expected to open by September 1, 2014.  Wellington is located in southern Kansas, approximately 23 miles north of the Kansas/Oklahoma border and 35 miles south of Wichita along I-35.
  • The Glendive property will be constructed on a 2.00 acre site and is expected to open by November 1, 2014.  Glendive is located in eastern Montana, approximately 35 miles west of the Montana/North Dakota border.  The properties will be managed by TR Lodging Enterprises Inc.
  • AHIP's portfolio of dedicated railway facilities is currently comprised of 32 operating hotels with a total count of 2,564 guestrooms, and 23 24-hour diners. This excludes the 77 room hotel property in Jefferson City, Missouri and the four Oak Tree Inn hotel construction projects (Santa Teresa, NM; Brunswick, MD; Wellington, KS; and Glendive, MT) featuring 241 rooms and three new 24-hour diners that are under development in accordance with development agreements between AHIP and SunOne Developments Inc.

"Following our February 20, 2013 IPO and the smooth transition of the management of our hotel assets to AHIP's external hotel manager, we have experienced three successive quarters of stable operating results, with overall revenues from properties purchased at the IPO in line with our expectations and an improvement over the last year under the previous owners' management" said Mr. Rob O'Neill, Chief Executive Officer. "In addition to providing for the growth of our initial portfolio through an accretive acquisition program and participation in strategic development opportunities, we have continued to sharpen our focus on deploying AHIP's excess cash on an accretive basis through the acquisition of additional high quality economy and select service hotel assets in the U.S. The two ten-year contracts signed today further expand AHIP's rail portfolio and strengthen the relationship with one of our key railway partners, BNSF. These contracts are in addition to the previously announced 56 room $5.1 million property at Santa Teresa, New Mexico and the 25 room $2.8 million property at Brunswick, Maryland developments with two of our other key railway partners."

In reference to the four non-rail Pittsburgh Acquisition Properties, Mr. O'Neill said, "As the first significant acquisition since AHIP's February 2013 IPO, we believe that this transaction highlights management's ability to source accretive acquisitions which should contribute meaningfully to cash flow and increasing our AFFO. With an increasing volume of transactions coming onto the market, AHIP has under letter of intent and is actively pursuing high quality, select service hotel portfolios totaling more than $100 million in its non-rail acquisition pipeline."

Mr. O'Neill concluded, "With the continuing strengthening of average daily rates and occupancies to historic levels in the U.S. hotel Industry, AHIP's properties are well-positioned to benefit from this trend. Through accretive acquisitions and the expansion of our existing rail portfolio, we intend to capitalize on the growth in the U.S. hotel industry and simultaneously utilize the substantial availability of low interest CMBS financing, as with the Acquisition Properties, to provide high returns to our stakeholders."

Conference Call

Rob O'Neill, CEO, Robert Hibberd, CFO and Dan Miller, CIO, of AHIP, will host a conference call at 8:00am (Eastern time) or 5:00am (Pacific time), on Friday November 8, 2013, to review the financial results and corporate developments for the three and nine month period ended September 30, 2013.

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:      Toll Free ......................................................1-888-390-0546
      International or Local Toronto......................1-416-764-8688

Conference Call Replay

If you cannot participate on November 8, 2013, 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 November 15, 2013.

Please enter the replay PIN number 880859 followed by the # key.

Replay Dial-In:       Toll Free ......................................................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 debt to gross book value, funds from operations ("FFO"), adjusted funds from operations ("AFFO") and net operating income ("NOI"). 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 FFO, AFFO and NOI as supplemental measures of performance and debt to gross book value as a supplemental measure of financial condition.

Debt to gross book value, FFO, AFFO and NOI 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 debt, gross book value, FFO, AFFO and NOI 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 November 7, 2013 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 a reasonably stable North American economy and stock market. 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 final prospectus dated February 12, 2013 and Management's Discussion and Analysis dated November 7, 2013, which are 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 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 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 relating to AHIP, including AHIP's interim financial statements for the three and nine months ended September 30, 2013, AHIP's Management's Discussion and Analysis dated November 7, 2013, and other public filings are available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

SOURCE American Hotel Income Properties REIT LP



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