VANCOUVER, Jan. 23, 2015 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN;OTCQX: AHOTF) announced today the commencement of a new railway growth strategy involving the construction of additional guestrooms at existing, high occupancy Oak Tree Inn railway hotels. The first opportunity involves a commitment with SunOne Developments Inc. ("SunOne") to construct a 24-room expansion at the existing 109-room Oak Tree Inn and Penny's Diner located in Dexter, Missouri. The existing property is currently operating at over 100% occupancy and is secured by a long-term railway contract. The expansion will be financed and developed in accordance with the existing Master Development Agreement with SunOne. AHIP will acquire the additional guestrooms for a total purchase price of US$2.7 million, which is 95% of the as-stabilized appraised value, as determined by a nationally recognized appraisal company and reflects a double-digit year one capitalization rate and expected return on equity. Management anticipates that this expansion will be immediately accretive to unitholders. Construction will begin immediately with completion targeted for late-2015.
Mr. Rob O'Neill, Chief Executive Officer of AHIP commented, "This development strategy provides AHIP with the opportunity to capture organic growth at existing, high-occupancy railway hotels that have adjacent available land. A long-term railway contract currently secures all existing guestrooms and hotel occupancy exceeds 100%. The proposed expansion is expected to increase revenues from more transient and railway guests. We have grown the Oak Tree Inn railway portfolio by acquiring new-build properties, by buying and converting existing hotels to the Oak Tree Inn standard, and we now have an opportunity to unlock additional value from existing, high-occupancy locations. Management has currently identified five additional existing Oak Tree Inn locations that may be suitable candidates for this type of expansion. The current strength of the U.S. Dollar further supports taking advantage of these types of highly accretive, organic development initiatives."
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 branded 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.
Certain statements contained in this news release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "expect", "will", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Forward-looking statements in this news release include, without limitation, completion of the proposed expansion, the future performance of the Dexter property, expansion of other Oak Tree Inn hotels, and the value of the U.S. Dollar.
Forward-looking information is based on a number of key expectations and assumptions made by AHIP, including, without limitation: a reasonably stable North American economy and stock market. Although the forward-looking information 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 reflects current expectations of AHIP's management regarding future events and operating performance as of the date of this news 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. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, without limitation, those factors that can be found under "Risk Factors" in AHIP's Annual Information Form dated March 26, 2014.
The forward-looking statements contained herein represent AHIP's expectations as of the date of this news release, and are subject to change after this date. AHIP assumes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE ACCURACY OF THIS RELEASE.
SOURCE American Hotel Income Properties REIT LP