American Hotel Income Properties REIT LP Announces Cdn$40.4 Million Bought Deal Equity Financing


VANCOUVER, May 15, 2014 /CNW/ - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN; OTCQX: AHOTF) announced today that it has entered into an agreement with a syndicate of underwriters co-led by Canaccord Genuity Corp. and National Bank Financial Inc. (collectively, the "Underwriters"), to sell, on a bought deal basis, 3,900,000 limited partnership units (each, a "Unit") of AHIP at a price of Cdn$10.35 per Unit for gross proceeds to AHIP of approximately Cdn$40.4 million (the "Offering").

AHIP has granted to the Underwriters an over-allotment option to purchase up to an additional 585,000 Units, representing 15% of the size of the Offering. The over-allotment option may be exercised in whole or in part at any time for a period of up to 30 days following closing of the Offering, to cover over-allotments.

The closing of the Offering is expected to occur on or about June 4, 2014. The Offering is subject to customary regulatory approvals, including the Toronto Stock Exchange ("TSX"). The Units will be offered in each of the provinces and territories of Canada pursuant to National Instrument 44-101 - Short Form Prospectus Distributions.

AHIP intends to use the net proceeds from the Offering to: (i) acquire from SunOne Developments Inc. ("SunOne"), upon completion of construction, three previously announced hotel developments located in  Brunswick, Maryland; Wellington, Kansas; and Glendive, Montana (the "New Oak Tree Inns") which are scheduled to open between September and December 2014; (ii) partially fund the acquisition of two additional railway lodging facilities which require renovations to meet Oak Tree Inn quality standards (the "Additional Railway Hotels"); (iii) partially fund the potential acquisition of two high-quality nationally-branded hotel portfolios (the "Other Branded Hotel Portfolios"); and (iv) fund working capital and general corporate purposes.

New Oak Tree Inns

  • The New Oak Tree Inns are secured by 10-year railway contracts that guarantee occupancy of approximately 78.4% of the 185 total guest rooms. These contracts have already been executed and all properties are currently under construction.
  • The New Oak Tree Inns will be purchased at a weighted average capitalization rate on stabilized income in excess of 11.0% (after consideration of all hotel management fees and a reserve for furniture, fixtures and equipment), or approximately US$82,000 per guest room. The aggregate purchase price for the New Oak Tree Inns is expected to be approximately US$15.1 million. The following table provides further information on each of the New Oak Tree Inns:



Purchase Price




Brunswick Oak Tree Inn



Sept. 2014

Wellington Oak Tree Inn



Nov. 2014

Glendive Oak Tree Inn



Dec. 2014





Additional Railway Hotels

  • The Additional Railway Hotels include two existing hotel acquisitions expected to be completed prior to August 31, 2014 that will be renovated to meet Oak Tree Inn's quality standards. Employees of two major U.S. railway operators are expected to occupy the hotels for corporate training purposes and for regular railway operations.  These Additional Railway Hotels, if purchased, will be secured by long-term lodging facility railway contracts with guaranteed occupancy rates. The terms of the contracts, and the acquisition of the properties, are presently under negotiation.

Other Branded Hotel Portfolios

  • AHIP has entered into a conditional Purchase and Sale Agreement ("PSA") and a non-binding letter of intent ("LOI") for two branded hotel portfolios in the Southeastern and Midwestern United States, respectively. Together, these Other Branded Hotel Portfolios total approximately 810 guest rooms and operate with leading hotel franchisors, including Hilton and Marriott. The aggregate purchase price for the Other Branded Hotel Portfolios is approximately US$63.0 million or approximately US$78,000 per room. They are targeted to be purchased at a weighted average capitalization rate of approximately 8.5% (after taking into account all hotel management fees and a reserve for furniture, fixtures and equipment, and after accounting for brand-mandated property improvement plans expected to cost an additional approximately US$1.5 million). Each of the PSA and LOI are preliminary and subject to various conditions, including satisfactory completion of due diligence by AHIP and negotiation of formal legal documents.
  • The Other Branded Hotel Portfolios are priced below management's estimates of replacement cost and are expected to be immediately accretive to Adjusted Funds From Operations ("AFFO") per Unit.
  • AHIP continues to actively review a number of other potential portfolio acquisition opportunities of branded hotels.  For branded hotel acquisitions, AHIP is targeting portfolio capitalization rates of 8.0% to 9.0% (after taking into account all hotel management fees and a reserve for furniture, fixtures and equipment, and after accounting for brand-mandated property improvement plans).

AHIP's pro forma leverage and payout ratios are expected to remain conservative and within management's target range after giving effect to the potential acquisitions.  After the contemplated transactions, AHIP's railway portfolio will be comprised of 40 properties containing 3,042 rooms and its branded hotel portfolio will be comprised of 16 properties containing 1,684 rooms.  Approximately 51.4% of AHIP's pro forma  rooms are expected to be covered under long term occupancy guarantees with railroad operators, with the balance of the portfolio benefitting from the continued recovery in the U.S. economy and sustained improvements in U.S. hotel fundamentals.

Rob O'Neill, AHIP's CEO commented, "AHIP is achieving its stated growth strategy, both in our railway lodging and branded hotel segments. Working with SunOne has been beneficial to AHIP and we are extremely pleased with the new-build Oak Tree Inn hotels and Penny's Diner restaurants that SunOne is delivering to AHIP in 2014. I strongly believe that this is an opportune time to acquire transportation-oriented, select-service and extended stay hotels in the United States in close proximity to railroads, airports, highway interchanges and other transportation hubs and demand generators. The new branded hotel portfolios that we are considering are consistent with our recently acquired Pittsburgh and Virginia portfolios, both in terms of quality and yield. In addition, AHIP continues to benefit from the improving United States economy and strengthening U.S. dollar."

This news release shall not constitute an offer to sell or a solicitation of any offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and such securities may not be offered or sold within the United States absent registration under the U.S. Securities Act or an applicable exemption from the registration requirements thereunder.


This news release contains forward-looking information within the meaning of applicable securities legislation, which reflects AHIP's current expectations regarding future events. Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "budget", "could", "estimate", "expect", "going-in", "intend", "may", "plan", "predict", "project", "will", "would" and similar terms and phrases, including references to assumptions. Such information includes, but is not limited to: statements with respect to the closing of the Offering or the over-allotment option and the use of proceeds therefrom, including the potential acquisition, renovation, opening and operation, as applicable, of the New Oak Tree Inns, the Additional Railway Hotels and/or the Other Branded Hotel Portfolios; the cost of brand-mandated property improvement plans; AHIP's leverage and payout ratios after giving effect to any such acquisitions; and the accretive nature of such acquisitions. Actual events or results may differ materially.

Forward-looking information contained in this news release is based on certain key expectations and assumptions made by AHIP, including, without limitation: the acquisition, renovation, opening and successful integration, as applicable, of the New Oak Tree Inns, the Additional Railway Hotels and/or the Other Branded Hotel Portfolios; capitalization rates; fees and reserves; targeted opening dates; locations; appraised values; replacement costs; pro forma leverage; and payout ratios. Although the forward-looking information contained in this news release is based upon what AHIP's management believes to be reasonable assumptions, AHIP cannot assure investors that actual events or 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 news 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 Annual Information Form dated March 26, 2014 and under "Risks and Uncertainties" in AHIP's Management's Discussion and Analysis dated May 9, 2014, both of which are available on SEDAR at

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information is made as of the date of this news 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.

The potential acquisitions described in this news release are indicative only, as these potential transactions are being evaluated and negotiated with the applicable sellers.  In addition, each acquisition, if it proceeds, would subject to conditions, including satisfactory completion of AHIP's due diligence and negotiation of formal legal documents. For example, AHIP cautions that there can be no assurance that any transaction will result from the conditional PSA and non-binding LOI described herein, or what the terms of such a transaction, if any, may be. AHIP undertakes no obligation to update investors on the status of any potential acquisitions described in this news release unless and until its acquisition due diligence is complete and the Board of Directors has approved the transaction, in each case.


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 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 its other public filings, is available on SEDAR at and on AHIP's website at


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: 604-630-3134, Email:


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