Hotel Transaction Tennessee

American Hotel Income Properties Acquires 104-Room Rail Crew Hotel in Nashville, Tennessee

The Nashville Property features a multi-year, rail crew lodging contract with a large national U.S. railway and is being acquired for an aggregate purchase price of approximately US$8.7 million, including US$950,000 for planned capital expenditures and excluding closing and post-acquisition adjustments.

American Hotel Income Properties

American Hotel Income Properties REIT LP (TSX: HOT.UN) (OTCQX: AHOTF) announced today the acquisition of a 104-room hotel located in Nashville, Tennessee. The Nashville Property features a multi-year, rail crew lodging contract with a large national U.S. railway and is being acquired for an aggregate purchase price of approximately US$8.7 million, including US$950,000 for planned capital expenditures and excluding closing and post-acquisition adjustments. The Nashville Property is being purchased at a capitalization rate of approximately 10% after all management fees, FF&E reserve contributions, and renovation costs.

ACQUISITION HIGHLIGHTS

  • The Nashville Property is being purchased for approximately US$84,000 per guestroom, which is below management's estimate of replacement cost, and the acquisition is expected to be immediately accretive to AFFO per unit.
  • Planned renovations include immediate conversion of the property to the industry-leading Oak Tree Inn rail crew hotel standards, which includes the incorporation of "Dark and Quiet" guestrooms, common area upgrades, and new property and yield management systems.
  • The multi-year rail crew lodging contract is with an existing railway customer and will guarantee 58 guestrooms per night.
  • Nashville is the state capital of Tennessee and has a metropolitan population of 1.8 million. According to STR, Inc., Nashville is one of the strongest RevPAR growth markets in the United States with an August 2016 Trailing Twelve Months RevPAR growth rate of 9.2%. Nashville has a number of strong demand generators, including being a major music recording and production centre, numerous health care companies, universities, large automotive companies including Nissan and Bridgestone, as well as other Fortune 500 companies.
  • The acquisition will be funded with cash from the July 2016 bought deal offering. AHIP intends to obtain mortgage financing within 30 days of the completion date.
  • This transaction is expected to be completed in early December 2016, subject to customary closing conditions and documentation.

Mr. Ian McAuley, President of AHIP, commented, "This strategic acquisition of a rail crew hotel, uniquely located within a strong, high-demand commercial and leisure market, allows us to both strengthen our relationship with one of our key railway customers and also maximize transient and commercial lodging business." Mr. Rob O'Neill, Chief Executive Officer of AHIP, continued, "The continued growth of our contractual relationships with major railway companies is consistent with AHIP's strategy of providing long-term sustainable returns to our unitholders."

Upon completion of the Nashville acquisition, along with the previously announced acquisition of six select-service, branded hotels in Florida, AHIP's portfolio will consist of 91 hotels totaling 8,686 guest rooms, with 46 rail crew hotels totaling 3,893 guest rooms and 45 branded hotels totaling 4,263 guest rooms.

The Property 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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