(All numbers are in U.S. dollars unless otherwise indicated)
VANCOUVER, Dec. 3, 2019 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP", the "Company") (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.U) is pleased to announce that it has closed the previously announced acquisition of 12 Premium Branded hotels (the "Acquisition") for $191.0 million, effective today. In addition, AHIP has secured a five-year $105.0 million interest-only term loan to partially finance the Acquisition and has entered into a swap rate agreement to fix the interest rate on the term loan to a maximum of 3.52% for four years. AHIP has also secured a $60.0 million variable rate revolving credit facility with an initial term of four years to replace its current revolving credit facility with the same lender.
The 12 Premium Branded hotels were acquired for approximately $158,800 per key, which is below AHIP's estimate of replacement cost. These properties were all built in the last five years, have been well maintained, and require no major property improvements. As all of these properties were already being managed by Aimbridge Hospitality – AHIP's exclusive hotel manager, it should ensure for a seamless transition into AHIP's portfolio with continuity of hotel systems and staff.
"We're very pleased with how quickly this acquisition was completed, as it has allowed us to redeploy the proceeds from the sale of the 45 Economy Lodging properties in less than a week. Now that these two strategic initiatives have been accomplished, we look forward to focusing on driving growth from our higher-quality portfolio of 79 Premium Branded select-service hotels," said John O'Neill, CEO.
Mr. O'Neill continued: "This acquisition further diversifies our geographic markets across the U.S. and expands our portfolio of suites-focused and extended-stay hotels, which generally benefit from higher margins. As well, the favourable debt terms we've secured to partially finance this acquisition will provide AHIP with meaningful cost savings and improve our cash flow. For example, we estimate this new term loan will generate more than $6 million in improved cash flow in 2020 compared to the debt previously secured for the 45 Economy Lodging properties we sold."
Reference should be made to the terms of a Credit Agreement respecting the new term loan and revolving credit facility, a copy of which will be filed under the Company's profile on SEDAR at www.sedar.com.
ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP
American Hotel Income Properties REIT LP (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.U), or AHIP, is a limited partnership formed to invest in hotel real estate properties located in the United States. AHIP is engaged in growing its portfolio of 79 premium branded, select-service hotels in larger secondary markets that have diverse and stable demand. AHIP hotels operate under brands affiliated with Marriott, Hilton, IHG, Wyndham and Choice Hotels through license agreements. The Company's long-term objectives are to build on its proven track record of successful investment, deliver reliable and consistent U.S. dollar denominated distributions to unitholders, and generate value through the continued growth of its diversified hotel portfolio. More information is available at www.ahipreit.com.
Certain statements in this news release may constitute "forward-looking information" (also known as forward- looking statements) or "financial outlook" within the meaning of applicable securities laws. Forward-looking information and financial outlook involve known and unknown risks, uncertainties and other factors, which 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 and financial outlook. Forward-looking information and financial outlook generally can be identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "feel", "intend", "may", "plan", "predict", "project", "subject to", "will", "would", and similar terms and phrases, including references to assumptions. Some of the specific forward-looking information and financial outlook in this news release includes, but is not limited to, statements with respect to: the Acquisition; the cost of the Acquisition; management's view that the new debt financing will result in meaningful cost savings and improved cash flow; the expected strategic impacts of the Acquisition and of continuing to pursue premium branded hotel properties; there no major capital renovations required for the Acquisition properties; the pricing of the Acquisition relative to replacement cost; management's view that since all of the Acquisition hotels are already managed by Aimbridge Hospitality, there should be a seamless transition into AHIP's portfolio; management's view that AHIP's portfolio of suites-focused and extended-stay hotels generally benefit from higher margins; and management's intention to focus on driving growth from AHIP's portfolio of 79 Premium Branded select-service hotels.
Forward-looking information and financial outlook are based on a number of key expectations and assumptions made by AHIP, including, without limitation: AHIP will realize the intended benefits of the Acquisition; AHIP will achieve its strategic objectives; AHIP will be able to successfully integrate and seamlessly transition the Acquisition properties into its portfolio; assumptions and expectations related to capitalization rates; a reasonably stable North American economy and stock market; the continued strength of the U.S. lodging industry; capital markets will provide AHIP with readily available access to equity and/or debt financing on terms acceptable to AHIP; and the value of the U.S. dollar. Although the forward-looking information and financial outlook 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 and financial outlook are provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking information and financial outlook involve significant risks and uncertainties and should not be read as guarantees of future performance or results as actual results may differ materially from those expressed or implied in such statements. Those risks and uncertainties include, among other things, risks related to: AHIP may not realize the intended benefits of the Acquisition including as a result of the failure to successfully integrate and seamlessly transition the Acquisition properties into its portfolio; AHIP may not be successful in achieving its intended strategic outcomes of the Acquisition; market financing terms are subject to change; and distributions are not guaranteed and may be reduced or suspended at any time at the discretion of AHIP's board of directors. Additional information about risks and uncertainties is contained in AHIP's Management's Discussion and Analysis dated November 7, 2019 and annual information form for the year ended December 31, 2018, copies of which are available on SEDAR at www.sedar.com.
To the extent any forward-looking information in this news release constitute a "financial outlook" within the meaning of applicable securities laws, such information is being provided to assist investors in understanding the potential strategic and financial impact of the Acquisition on AHIP.
The forward-looking information and financial outlook contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information and financial outlook reflect management's current beliefs and are based on information currently available to AHIP. The forward-looking information is made as of the date of this news 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.
SOURCE American Hotel Income Properties REIT LP