Hotel Portfolio Transaction

American Hotel Income Properties REIT Buys Six Select-Service Hotels in Florida for US$61.0 Million

Holiday Inn Express & Suites Ft Myers - Exterior
American Hotel Income Properties REIT Buys Six Select-Service Hotels in Florida for US$61.0 Million

American Hotel Income Properties

American Hotel Income Properties REIT LP (TSX: HOT.UN) (OTCQX: AHOTF) announced today that it has agreed to acquire through its subsidiaries, a portfolio of six branded, select-service hotels located in Tampa, Orlando, Sarasota, and Fort Myers, Florida for an aggregate purchase price of US$61.0 million, excluding closing and post-acquisition adjustments. The purchase price does not include approximately US$10.6 million for the completion of brand-mandated property improvement plans.

The Acquisition Properties are being purchased at a weighted-average capitalization rate of approximately 8.5% on trailing twelve months net operating income (after inclusion of all hotel management fees, franchise fees, a 4.0% FF&E reserve contribution, and the PIPs).

ACQUISITION HIGHLIGHTS

  • The Acquisition Properties consist of six hotels containing 559 total guestrooms that are being acquired below management's estimate of replacement cost.
  • The select-service, branded hotel portfolio has an average age of approximately 13 years and includes the following Florida hotels: a 111-room Holiday Inn Express & Suites located in Fort Myers; a 101-room Holiday Inn Express & Suites located in Sarasota; a 100-room Staybridge Suites hotel located in Tampa; an 86-room Wingate by Wyndham hotel located in Tampa; an 81-room Courtyard by Marriott hotel located in Tampa; and, an 80-room Fairfield Inn & Suites located in Orlando.
  • Tampa, Florida has a metro population of approximately 2.9 million, and is the second largest metro area in Florida. Its economy includes a diversified and growing mix of tourism, several Fortune 500 companies, and the University of South Florida, which is the fourth largest university in the state. Tampa is accessible via Interstate 275, Interstate 4, and Interstate 75.
  • Orlando, Florida has a metro population of approximately 2.4 million, and is the third largest metro area in Florida after Miami and Tampa. Orlando is the "Theme Park Capital" of the world with a number of theme parks including Walt Disney World Resort, Universal Orlando Resort, and SeaWorld Orlando. Other demand generators in the Orlando area include numerous aviation, aerospace, technology and film-related companies. It is also home to the University of Central Florida, which has a total enrollment of approximately 60,000 and is one of the largest universities in the United States. Orlando is easily accessible via Interstate 4 and the Florida Turnpike.
  • Fort Myers, Florida is located in southwest Florida and accessible via Interstate 75. The Cape Coral-Fort Myers area has a population base of almost 680,000. The area is a major tourist destination and is also home to spring training facilities for multiple major league baseball teams.
  • Sarasota, Florida is located along the I-75 corridor on Florida's west coast and has a metro population of approximately 379,000. The area is also the winter home to several major league baseball teams and is the gateway to miles of beaches, including Lido Beach and Siesta Key.
  • The investment is expected to be immediately accretive to adjusted funds from operations ("AFFO") per unit.
  • AHIP will fund the purchase price, including the PIPs, using a combination of cash on hand from the July 2016 offering and a new $37.0 million commercial mortgage backed securities ("CMBS") loan. The new mortgage will be secured by five hotel properties, will have a 10-year term, and is expected to have a fixed interest rate of less than 4.50%. The lender has also agreed to provide an FF&E reserve waiver for two years.
  • This transaction is expected to close on or before November 30, 2016, subject to customary closing conditions and documentation.

Ian McAuley, AHIP's president, commented, "This strategic acquisition expands and diversifies both our brand affiliation and geographic presence within the high-performing Florida market, while creating synergies and cost-saving opportunities with our existing Florida hotels." Rob O'Neill, AHIP's Chief Executive Officer, commented, "We are pleased to be acquiring these high-quality, stabilized assets located in larger secondary markets with strong demand generators near major U.S. highways." Mr. O'Neill continued, "The continued availability of long-term, fixed-rate debt allows us to deliver stable returns to our unitholders."

Upon completion of this acquisition, and the previously-announced acquisitions of two Embassy Suites hotels located in Texas and Arizona, as well as the four Marriott-branded, select-service hotels located in Florida and Tennessee, AHIP's portfolio will consist of 92 hotels totaling 8,581 guest rooms with 47 branded hotels totaling 4,792 guest rooms and 45 rail hotels totaling 3,789 guest rooms.

The Acquisition Properties will be managed for AHIP by its exclusive hotel manager, Tower Rock Hotels & Resorts Inc., a wholly owned subsidiary of O'Neill Hotels & Resorts Ltd.



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