American Hotel Income Properties Results

American Hotel Income Properties REIT LP Reports Second Quarter 2016 Financial Results

Strongest Quarter in AHIP's History With Revenues Increasing by +30.5%, Net Income Increasing by +46.4% and Diluted FFO per Unit Increasing by +11.1%; All Amounts Expressed in U.S. Dollars Unless Otherwise Indicated

American Hotel Income Properties

American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) reported today its financial results for the three and six months ended June 30, 2016.

SECOND QUARTER 2016 FINANCIAL HIGHLIGHTS

  • Funds from operations ("FFO") was up +37.9% to $10.5 million (2015 - $7.6 million) and adjusted funds from operations ("AFFO") was up +38.4% to $9.3 million (2015 - $6.7 million) from the increase in the number of hotels in the portfolio, coupled with strong operating performance from effective yield management and cost controls.
  • For the current quarter, Diluted FFO per Unit was up +11.1% to $0.30 (2015 - $0.27) and Diluted AFFO per Unit was up +12.5% to $0.27 (2015 - $0.24).
  • Same-store revenue per available room ("RevPAR") for the Branded Hotels was up +4.4%. In particular, the Virginia Region was up by +16.1%, the North Carolina Region was up by +12.4%, and the Florida Region was up by +7.3%. According to STR, RevPAR for the U.S. hotel industry increased by +3.5%.
  • Total revenues for the quarter increased by +30.5% to $44.5 million compared to $34.1 million for the same quarter last year.
  • Total portfolio same-store net operating income ("NOI") grew by +3.5% with Rail Hotel NOI growth of +2.7% (YTD +4.4%) reflecting stability from the contractual revenues and lower expenses. Branded Hotel same-property NOI increased by +4.0% (YTD +7.0%) led by revenue growth of +4.4% from newly renovated properties.
  • EBITDA for the quarter was up +36.0% to $15.1 million compared to $11.1 million in the same period last year and EBITDA margin improved by 140 basis points to 34.0% (2015 - 32.6%).
  • Net income for the quarter was up +46.4% to $3.5 million (2015 - $2.4 million) and diluted net income per unit was up +25% to $0.10 (2015 - $0.08).
  • The payout ratio for the quarter improved to 61.0% (2015 - 83.7%).
  • AHIP's debt-to-gross book value at June 30, 2016 was 49.4% (June 30, 2015 - 49.6%) and interest coverage ratio for the current quarter improved to 4.3x (2015 - 4.0x).
  • AHIP's weighted average stated interest rate at June 30, 2016 improved to 4.56% (June 30, 2015 - 4.65%) and the weighted average loan term to maturity at June 30, 2016 increased to 7.7 years (June 30, 2015 - 7.5 years).
  • Starting this quarter, AHIP paid monthly distributions of US$0.054 per Unit, which is equivalent to US$0.648 per Unit on an annualized basis. The change in distribution currency was adopted to align distribution payments to AHIP's cash flows, which are all generated in U.S. dollars, and to eliminate costly hedging strategies.
  • During the quarter, AHIP acquired two-24 room expansions at two high occupancy Oak Tree Inn hotels located in Hearne, Texas and Hermiston, Oregon. Another 24-room expansion at the high occupancy Oak Tree Inn hotel located in North Platte, Nebraska is scheduled to be completed in September 2016.
  • As at June 30, 2016, AHIP had a cash balance of $8.2 million, a restricted cash balance of $15.7 million and an unutilized revolving line of credit of $10.0 million.

Rob O'Neill, CEO of AHIP, commented, "I am pleased to announce strong operating results from our well diversified portfolio of Rail and Branded Hotels. Our Virginia, North Carolina, and Florida Branded Hotels performed very well with impressive RevPAR growth coupled with effective efforts by our hotel manager at optimizing operating results. Capital markets continue to support our growth strategy as evidenced with our recently completed bought deal offering, the net proceeds from which we expect to fully deploy in the coming months with the proposed acquisition of additional accretive hotel properties below replacement cost, while continuing to deliver a stable and reliable income stream to our unitholders. The combination of accretive portfolio growth, industry leading RevPAR increases, strong same-property operating performance has generated strong quarter over quarter operating results." Mr. O'Neill continued, "Given ongoing volatility in the currency markets, we are pleased to provide our unitholders with consistent U.S. dollar distributions and exposure to U.S. dollar denominated hotel assets".

SUBSEQUENT EVENTS

  • On July 26, 2016, AHIP completed a Cdn$103.5 million bought deal offering ("July 2016 Offering") involving the issuance of 10,000,400 Units, including the full exercise of the over-allotment option. AHIP intends to use the net proceeds primarily to fund potential acquisitions of both Branded and Rail Hotels to further strengthen AHIP's well diversified portfolio.
  • On July 13, 2016, AHIP announced the acquisition of two, high-quality Embassy Suites by Hilton hotels located in Dallas, Texas and Tempe, Arizona, consisting of 529 total guestrooms for an aggregate purchase price of approximately $57.6 million, excluding an estimated $5.7 million in brand mandated property improvement plans and post-closing adjustments. The transaction is expected to close in early September 2016. The transaction is expected to be financed with mortgage debt of $32.5 million, the issuance of $17.4 million in Units, and cash from the July 2016 Offering. In addition, to assist the vendor of the Tempe Embassy Suites hotel with expiring debt, on August 5, 2016, AHIP advanced a $10.2 million interest-only loan ("Bridge Loan") with an interest rate of 8.0% and a term of 60 days with an option to extend the term for a further 90 days. The Bridge Loan will be repaid upon the completion of the Embassy Suites transaction.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

AHIP's current property portfolio is comprised of 80 hotels located in 27 U.S. states, representing 7,095 available guestrooms. The Rail Hotel segment, serving the U.S. freight railway industry, consists of 45 hotels comprising 3,765 guestrooms and 27 Penny's Diner restaurants. The Branded Hotel segment consists of 35 hotels comprising 3,330 guestrooms and is affiliated with leading hotel brands including Marriott, Hilton and IHG.

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 rail crew accommodation, transportation, and branded, select service 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.



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