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American Hotel Income Properties REIT LP announces 2013 fiscal year and Q4 financial results

VANCOUVER, March 17, 2014 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN; OTCQX: AHOTF) today announced the release of its financial results for the three months and fiscal year ended December 31, 2013.

AHIP's current property portfolio is comprised of 42 hotels located in 20 states, representing 3,516 available guest rooms. Including its IPO in February 2013 AHIP has raised $141 million of equity and has acquired $223 million of properties and has commitments to acquire additional $23 million of contracted rail hotel opportunities.

FISCAL YEAR AND Q4 2013, FINANCIAL HIGHLIGHTS

(All amounts expressed in U.S. dollars unless otherwise indicated. Certain operating results of AHIP presented for the twelve month period ended December 31, 2013 reflect only the operational results for the 314-day period from the acquisition of Lodging Enterprises, LLC on February 20, 2013, and the 41-day period from the acquisition of the Pittsburgh Portfolio on November 21, 2013 to December 31, 2013.)

  • Total revenues were $14.5 million and $48.1 million for the three months and fiscal year ended December 31, 2013, respectively.

  • Full year revenue for the Oak Tree Inn railway hotels increased by 5.1% over 2012, and was 2.8% below the prorated IPO Forecast.

  • Net operating Income ("NOI") was $4.4 million and $16.0 million for the three months and fiscal year ended December 31, 2013, respectively.

  • Funds from operations ("FFO") were $1.3 million and $7.4 million ($0.099 and $0.736 per Unit) for the three months and fiscal year ended December 31, 2013, respectively.

  • Adjusted funds from operations ("AFFO") were $1.7 million and $7.2 million ($0.129 and $0.720 per Unit) for the three months and fiscal year ended December 31, 2013, respectively. AFFO is reflective of a normalized FF&E reserve amount, but when actual FF&E reserve contributions made are considered, the restated AFFO was $7.8 million ($0.772 per Unit) for the fiscal year ended December 31, 2013.

  • AFFO payout ratio of 114.9% (107.3% restated) reflected AHIP's significant undeployed excess cash position throughout the year.

  • Total distributions of Cdn$0.225 per limited partnership unit ("Unit") and Cdn$0.771 per Unit were declared during the three months and fiscal year ended December 31, 2013, respectively, both representing Cdn$0.90 per Unit on an annualized basis.

  • AHIP's cash balance was $29.5 million, excluding restricted cash of $6.0 million, as at December 31, 2013.

  • Debt to gross book value was 46.6% as at December 31, 2013, calculated as principal amount of debt outstanding ($112.3 million) divided by the sum of total assets ($236.5 million) plus accumulated depreciation and amortization ($6.3 million) less the deferred income tax liability ($1.8 million).

  • AHIP's pro forma payout and leverage ratios remain conservative, after giving effect to the completion of the previously announced development projects, the Jefferson City renovation project, the Pittsburgh Portfolio acquisition and the Virginia Portfolio acquisition (see below), at approximately 79.5% on projected 2014 AFFO and a projected debt to gross book value of approximately 51.2%.

RECENT EVENTS

  • AHIP announced the following commitments with SunOne Developments Inc. ("SunOne"), each secured by a 10-year railway contract for 60% to 100% of the rooms:
    • On July 9, 2013, a 56-room Oak Tree Inn hotel and Penny's Diner located in Santa Teresa, New Mexico. The property is expected to open for business by July 2014.

    • On August 23, 2013, a 25-room Oak Tree Inn hotel and Penny's Diner located in Brunswick, Maryland. The property is expected to open for business by September 2014.

    • On November 7, 2013, a 110-room Oak Tree Inn hotel located in Wellington, Kansas. The property is expected to open for business by September 2014.

    • Also on November 7, 2013, a 50-room Oak Tree Inn hotel and Penny's Diner located in Glendive, Montana. The property is expected to open in November 2014.

    • AHIP has agreed to finance up to 15% of the construction costs as mezzanine financing, at an annual interest rate of 10%. Upon completion the financing advanced and accrued interest will be applied to the purchase price of the respective properties.

  • On September 12, 2013, AHIP acquired a 77-room hotel in Jefferson City, Missouri. On November 21, 2013, AHIP announced the signing of a long-term contract for a majority of the rooms. Renovations to improve the pre-existing hotel to Oak Tree Inn quality standards were completed according to plan and the hotel was opened for railway business on February 4, 2014.

  • On October 31, 2013, AHIP closed a bought deal offering of 3,967,500 subscription receipts ("Subscription Receipts"), inclusive of 517,500 Subscriptions Receipts issued pursuant to the exercise in full of the over-allotment option, at a price of Cdn$10.15 per Subscription Receipt for gross proceeds to AHIP of approximately Cdn$40.3 million (the "Offering"). AHIP filed the related final prospectus (the "Prospectus") on October 24, 2013, and the Subscription Receipts were listed on the TSX under the symbol HOT.R.

  • On November 21, 2013, AHIP announced the closing of its previously announced acquisition of four hotel properties located in metropolitan Pittsburgh, Pennsylvania (the "Pittsburgh Portfolio") for a total purchase price of approximately US$57.3 million, excluding post-acquisition adjustments and a total of $6.0 million funded into restricted cash reserves for capital expenditures per brand mandated property improvement plans (the "PIPs"). The Pittsburgh Portfolio comprises an aggregate of 471 guest rooms and consists of three hotels under the 'Hampton Inn' flag (a Hilton brand), and one hotel under the 'Residence Inn' flag (a Marriott brand). The Pittsburgh Portfolio was partially financed by CMBS mortgage debt of $38.0 million with an interest rate fixed for ten years at 5.02%.

  • On March 12, 2014, AHIP announced the closing of its previously announced acquisition of four hotel properties located in Virginia (the "Virginia Portfolio") for an aggregate purchase price of approximately US$37.2 million, including US$1.48 million for defeasance of existing debt and US$0.1 million for additional land, and before customary closing and post-acquisition adjustments, and the funding of a $6.0 million restricted cash reserve for PIPs. The Virginia Portfolio comprises an aggregate of 403 guest rooms and consists of three hotels under the 'Hampton Inn' flag, and one hotel under the 'Fairfield Inn & Suites' flag (a Marriott brand). The properties are located in Harrisonburg, Emporia and South Hill, Virginia, near transportation hubs and other major demand generators such as James Madison University, manufacturing facilities, distribution centers, and medical centers. The Virginia Portfolio was partially financed by CMBS mortgage debt of $24.5 million with an interest rate fixed for ten years at 4.97%.

The Virginia Portfolio and Pittsburgh Portfolio hotels are included within AHIP's "Other Branded" hotels operating segment, and are characterized as high quality extended-stay and focused-service hotels that cater primarily to corporate-transient travelers.

"2013 was a tremendously successful first year for AHIP" said Mr. Rob O'Neill, Chief Executive Officer. "In addition to completing our $100 million IPO and the initial portfolio acquisition of 32 rail hotels (including the 'Oak Tree Inn' and 'Penny's Diner' brands) in February, we announced our first development commitments with our development partner SunOne, our first 'Dark and Quiet' renovation project in Jefferson City, Missouri, and our first acquisition of non-rail hotels (the "Pittsburgh Portfolio")."

"We are pleased that the capital markets acknowledged these accomplishments, as AHIP was the top performing REIT IPO on the TSX in 2013, on a total return basis."

Mr. O'Neill continued, "The U.S. hotel market continues to demonstrate solid industry fundamentals. Strong RevPAR growth, reduced levels of new construction, significant opportunities to purchase high quality hotels in secondary markets, and lenders returning to the hotel sector with long-term financing at low interest rates, have all combined to draw the attention of investors to the hotel industry. This strengthening in fundamentals is further supported by several recently announced high profile hotel IPO's and private equity transactions. AHIP is well positioned to participate in this historic opportunity to continue to expand our portfolio through organic growth, accretive acquisitions of branded focused-service hotels, further development of hotels with minimum occupancy guarantees under long term contracts with railroad operators, and secure long term financing at low fixed interest rates. In addition, as AHIP earns substantially all of its revenues in U.S. dollars, the recent strength of the U.S. dollar has had a positive impact on available cash based on our Canadian dollar distributions."

"With respect to our growth initiatives, AHIP continues to actively evaluate a significant pipeline of accretive external acquisitions. Furthermore, our development pipeline is scheduled to deliver four new hotels in 2014, an increase of 241 rooms, and all four hotels have been tied to long term rail contracts with national rail companies guaranteeing greater than 83% of their available room nights. Upon completion of the previously announced development projects, the Jefferson City renovation project, the Pittsburgh Portfolio acquisition and the Virginia Portfolio acquisition, AHIP will own a total of 42 hotels in 20 states comprising 3,757 guest rooms. This represents a 37% increase in AHIP's total guest rooms in just over 12 months. 37 hotels comprising 2,378 rooms have long-term lodging contracts with our railway customers. Following the completion of the acquisitions closed subsequent to year end and the completion of development projects currently underway, 58% of AHIP's total rooms, or 77% of the rooms in AHIP's hotels with long-term lodging contracts, will be covered under minimum occupancy guarantees from railroad operators."

"We are pleased with our 2013 results overall. Full year 2013 revenue in our Oak Tree Inn railway hotels increased by 5.1% over 2012, with same store room revenue up by an estimated 1.3%, however overall revenue in our Oak Tree Inn  hotels compared to our prorated IPO forecast was down by 2.8%. This shortfall in revenue to the prorated IPO forecast was due primarily to the late opening of two hotels and rail traffic not increasing as we had forecast at six of our 32 IPO hotels."

"Alongside our aggressive acquisition strategy, several key initiatives are underway including reducing transaction costs by bringing costs relating to external acquisition and diligence professionals in-house, standardizing processes for offers and legal agreements, requiring third party venders to tender services, and negotiating national contracts for service providers that are in a position to handle AHIP's growing overall business."

CONFERENCE CALL

Rob O'Neill, CEO, Robert Hibberd, CFO and Dan Miller, CIO, will host a conference call at 5:00pm EDT (2:00pm PDT), on March 17, 2014, to review the financial results and corporate developments for the three months and fiscal year ended December 31, 2013.

To participate in this conference call, please dial one of the following numbers approximately 10 minutes prior to the commencement of the call, and ask to join the AHIP conference call.

Dial in numbers:      Toll Free.........................................1-888-390-0546
      International or Local Toronto........1-416-764-8688


CONFERENCE CALL REPLAY

If you cannot participate on March 17, 2014, a replay of the conference call will be available two hours after the call's end time by dialing one of the numbers listed below. The replay will be available until March 24, 2014.

Please enter the replay PIN number 636255 followed by the # key.

Replay numbers:      Toll Free.........................................1-888-390-0541
      International or Local Toronto........1-416-764-8677


An audio recording of this conference call will also be available at www.ahipreit.com under the "Presentations and Calls" tab.

MARCH CASH DISTRIBUTION

AHIP also announced the cash distribution of Cdn$0.075 per Unit AHIP for the period of March 1, 2014, to March 31, 2014, which is equivalent to Cdn$0.90 per Unit on an annualized basis. The distribution will be paid on April 15, 2014, to unitholders of record at the close of business on March 31, 2014. There are currently 14,437,800 Units issued and outstanding.

AHIP's policy is to pay cash distributions on or about the 15th day of each month to the unitholders of record on the last business day of the preceding month.

NON-IFRS MEASURES

Certain non-IFRS financial measures are included in this news release, which include NOI, FFO, AFFO and debt to gross book value. These terms are not measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. Real estate investment trusts often refer to NOI, FFO and AFFO as supplemental measures of performance and debt to gross book value as a supplemental measure of financial condition.

Debt to gross book value, NOI, FFO and AFFO should not be construed as alternatives to measurements determined in accordance with IFRS as indicators of AHIP's performance or financial condition. AHIP's method of calculating NOI, FFO, AFFO, debt and gross book value may differ from other issuers' methods and accordingly may not be comparable to measures used by other issuers. For further information, please refer to AHIP's Management's Discussion and Analysis dated March 17, 2014, which is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

FORWARD-LOOKING INFORMATION

Certain statements in this press release may constitute "forward-looking" information that involves known and unknown risks, uncertainties and other factors, and it 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. Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "subject to", "will", "would", and similar terms and phrases, including references to assumptions.

Forward-looking information contained in this press release is based on certain key expectations and assumptions made by AHIP, including, without limitation, expectations and assumptions respecting the amount of the expected monthly cash distributions and annual yield for the Units and the timing to pay such cash distributions to unitholders, and actual costs to complete PIPs. Although the forward-looking information contained in this press release is based upon what the 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 management regarding future events and operating performance as of the date of this press 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. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, and a description of these factors can be found under "Risk Factors" in AHIP's short form prospectus dated October 24, 2013, and Management's Discussion and Analysis dated March 17, 2014, which are available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information reflects management's current beliefs and is based on information currently available to AHIP. The forward-looking information is made as of the date of this press 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.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

AHIP is a limited partnership formed under the Limited Partnership Act (Ontario) to invest in hotel real estate properties located substantially in the United States and engaged primarily in the railroad employee accommodation, transportation, and contract-focused 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.

Additional information relating to AHIP, including AHIP's interim financial statements for the three months and fiscal year ended December 31, 2013, AHIP's Management's Discussion and Analysis dated March 17, 2014, and other public filings are available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

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

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