American Hotel Income Properties REIT LP announces Q2 2014 financial results

"Portfolio and profit growth remain on track"

All amounts expressed in U.S. dollars unless otherwise indicated.

VANCOUVER, Aug. 14, 2014 /CNW/ - 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 six months ended June 30, 2014.

AHIP's current property portfolio is comprised of 47 hotels located in 22 states, representing 3,958 available guest rooms.  Since its IPO in February 2013, AHIP has increased its asset base to over $300 million.

Q2 2014 FINANCIAL HIGHLIGHTS

  • Funds from operations ("FFO") and adjusted funds from operations ("AFFO") were $4.4 million and $4.1 million, respectively, in the current quarter compared to $2.6 million and $2.4 million, respectively, for the same period last year, an increase of 69.2% and 70.8%, respectively
  • For the current quarter, FFO per unit – As Reported was $0.28 and Core FFO per unit (which adjusts for the dilutive impact of the June 2014 unit offering) was $0.31, compared to FFO per unit of $0.25 in the prior period
  • For the current quarter, AFFO per unit – As Reported was $0.26 and Core AFFO per unit (which adjusts for the dilutive impact of the June 2014 unit offering) was $0.28, compared to AFFO per unit of $0.23 in the prior period
  • Operating results were boosted by the acquisition of four Pittsburgh hotels in November 2013 (471 rooms), four Virginia hotels in March 2014 (403 rooms) and new Oak Tree Inn properties opened in New Mexico in May 2014 (56 rooms) and Missouri in February 2014 (77 rooms)
  • Occupancy was 84.9% for the current quarter compared to 83.6% for the prior period.  Average daily rates ("ADR") for the quarter were up 25.7% to $71.10 compared to $56.55 in 2013.  This resulted in RevPAR gains of 27.7% to $60.36 compared to $47.27 for the same period last year
  • Total revenues for the quarter increased to $22.5 million compared to $13.6 million for the prior period reflecting gains of 65.4%
  • Net operating income ("NOI") for the quarter was up 66.7% to $8.0 million compared $4.8 million in the same period last year
  • For the current quarter, the AFFO payout ratio was 81.4% compared to 96.6% in the prior period
  • Total distributions of Cdn$0.225 per unit were declared during the three months ended June 30, 2014, representing Cdn$0.90 per unit on an annualized basis
  • As at June 30, 2014, AHIP had a cash balance of $35.7 million, excluding restricted cash of $12.5 million for brand mandated property improvement plans and funds held in escrow of $15.7 million for the Southeastern Portfolio acquisition that was completed in early July 2014
  • Debt to gross book value was 45.2% as at June 30, 2014, below AHIP's targeted debt to gross book value ratio of between 50-55%

Fundamentals have remained strong in the U.S. lodging through the first half of 2014.  According to STR, second quarter performance in the U.S. was very strong, propelling key lodging metrics to their high watermarks with June 2014 hotel occupancy of 71.7%, which was higher than the previous high watermark of 71.1% set in June 2007.   As of June 2014, the U.S. 12 month moving average demand growth was 3.2% while supply growth remained muted at 0.8%, resulting in the 12 month moving average ADR growing by 3.9% to $112 and RevPAR growth of 6.4% to $71.  AHIP continues to expect strong performance in the U.S. lodging industry for the balance of the year.

Overall, U.S. rail traffic continued at decade high levels as intermodal transport continues to outpace all other categories.  The strong performance has resulted in railway companies increasing short term requirements and guarantees at selected hotels.  For the Oak Tree Inn Hotels portfolio, the number of railway rooms currently guaranteed is approximately 75%.

Hotel transactions continue at strong levels in the U.S., fueled by debt availability for hotel transactions, particularly lower leverage deals in the 50-55% loan-to-value range.  AHIP was successful in recently placing a 10 year fixed rate CMBS mortgage at 4.72% with the first three years as interest only as part of the recent Southeastern Portfolio transaction that was completed in early July 2014.  AHIP continues to review its existing debt maturities in an effort to extend the term and reduce refinancing risk during the current low interest rate environment.

RECENT EVENTS

  • On May 1, 2014, SunOne Developments Inc. ("SunOne") delivered to AHIP a new-build 56 room Oak Tree Inn Hotel and Penny's Diner in Santa Teresa, New Mexico secured by a long term railway contract.  Partial consideration included the issuance of 101,247 AHIP units further increasing the alignment between SunOne and AHIP
  • On June 4, 2014 AHIP completed the issuance of 4.9 million units (including the partial exercise of the over-allotment option) for total gross proceeds of Cdn$50.7 million. Partial cash proceeds were used to fund the acquisition of the Southeastern Portfolio
  • In July 2014, AHIP completed the acquisition of the Southeastern Portfolio consisting of four hotels totaling 387 rooms located in North Carolina and Georgia for $30.5 million (or approximately $79,000 per room) before closing adjustments and brand mandated property improvement plans of $1.5 million.  Three of the hotels were acquired on July 3, 2014 and the fourth hotel was acquired on July 11, 2014.  The hotels include three Marriott-branded hotels (a 107-room SpringHill Suites, an 87-room Fairfield Inn and Suites and an 82-room Fairfield Inn and Suites) and one Hilton branded property (a 111-room Hampton Inn).  The properties are on average 10 years old and were acquired at a cost significantly less than management's estimate of replacement value
  • Negotiations have concluded with the renewal of two railway contracts and management continues to pursue several new rail hotel projects and conversions

AHIP's pipeline of potential hotel acquisitions remains strong and management continues to review multiple select service portfolios that meet our acquisition criteria at prices well below replacement cost.  Furthermore, SunOne's railway hotel development pipeline is scheduled to deliver three new Oak Tree Inn Hotels (totaling 185 rooms) in late 2014, all secured by long-term railway contracts with national rail companies which will guarantee approximately 78.4% of their available room nights.  Upon completion of these previously announced development projects, AHIP will own a total of 50 hotels in 24 states comprising 4,143 guest rooms. This represents a 65% increase in AHIP's total guest rooms in just over 12 months and a 15% increase in AHIP's Railway Portfolio over the same period.

Robert O'Neill, CEO of AHIP, commented "Portfolio and profit growth remain on track. AHIP is performing strongly after its first 16 months of operations since its IPO in February 2013.  Strong cyclical revenue during the second quarter was supported by solid railroad traffic growth at the Oak Tree Inn Hotels and exceptional year over year growth in the Branded Hotel portfolios.  We feel well positioned to take advantage of the typically seasonally strong third quarter and the remainder of 2014.  The U.S. dollar also continues to strengthen which also supports our FFO.  The U.S. hotel industry continues to demonstrate strong fundamentals and the outlook is exceptionally positive.  Furthermore, capital and debt markets remain receptive to AHIP, which should enable further accretive growth."

Q2 2014 FINANCIAL RESULTS CONFERENCE CALL

Robert O'Neill, CEO, Azim Lalani, CFO and Robert Hibberd, Executive Vice President of AHIP will host a conference call at 4:00 p.m. (Eastern time)/1:00 p.m. (Pacific time) on Friday August 15, 2014, to review the financial results and corporate developments for the three month and six month periods ended June 30, 2014.

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 American Hotel Income Properties conference call.

Dial in numbers

Toll free dial in number (from Canada and U.S.)                        

1-888-390-0546

International or Local Toronto                                                   

1-416-764-8688

Conference Call Replay

If you cannot participate on August 15, a replay of the conference call will be available by dialing one of the following replay numbers. You will be able to dial in and listen to the conference call 120 minutes after the meeting end time, and the replay will be available until August 22, 2014.

Please enter the Replay ID# 453060 followed by the # key.

Replay toll free dial in number (from Canada and U.S.)              

1-888-390-0541

International or Local Toronto                                                   

1-416-764-8677

NON-IFRS MEASURES

Certain non-IFRS financial measures are included in this news release, which include ADR, RevPAR, NOI, FFO, FFO per unit, Core FFO per unit, AFFO, AFFO per unit, Core AFFO per unit, payout ratio 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, FFO per unit, AFFO, AFFO per unit, payout ratio 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, FFO per unit, AFFO, AFFO per unit, payout ratio 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, FFO per unit, AFFO, AFFO per unit, payout ratio, 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 ("MD&A") dated August 14, 2014, which is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

Management believes that the computation of FFO per unit – As Reported and AFFO per unit – As Reported includes certain items that are not indicative of the results provided by AHIP's operating portfolio and affect the comparability of AHIP's period-over-period performance.  These items include the dilutive impact of the June 4, 2014 unit offering.  Therefore, in addition to FFO per unit – As Reported and AFFO per unit – As Reported, management uses Core FFO per unit and Core AFFO per unit to exclude such items.  Management believes that Core FFO per unit and Core AFFO per unit are useful supplemental measures, however, these may not be comparable to the adjusted or modified FFOs per unit or AFFOs per unit of other REITs.

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", "feel", "intend", "may", "plan", "predict", "project", "subject to", "will", "would", and similar terms and phrases, including references to assumptions.

Forward-looking statements are provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes.  Forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results. Those risks and uncertainties include, among other things, risks related to: general economic conditions; unit prices; liquidity; tax risk; ability to access capital markets; competition for real property investments; environmental matters and changes in legislation. Management believes that the expectations reflected in forward-looking statements are based upon reasonable assumptions and information currently available; however, management can give no assurance that actual results will be consistent with these forward-looking statements.  Additional information about risks and uncertainties is contained in AHIP's annual information form for the year ended December 31, 2013 available on SEDAR at www.sedar.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 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 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

Additional information relating to AHIP, including AHIP's interim financial statements for the three months and six months ended June 30, 2014, AHIP's MD&A dated August 14, 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 NEWS RELEASE.

SOURCE American Hotel Income Properties REIT LP

For further information: Andrew Greig, Investor Relations, American Hotel Income Properties REIT LP, Suite 1660 - 401 West Georgia Street, Vancouver, BC V6B 5A1, Phone: 604-633-2857, Email: agreig@ahipreit.com