American Hotel Income Properties REIT LP Announces US$30.5 Million Branded Hotel Portfolio Acquisition

VANCOUVER, June 26, 2014 /CNW/ - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN; OTCQX: AHOTF) announced today that it has agreed to acquire through its subsidiaries a portfolio of four branded hotel properties (the "Acquisition Properties") located in North Carolina and Georgia for an aggregate purchase price of approximately US$30.5 million before customary closing and post-acquisition adjustments. The purchase price does not include a US$1.5 million restricted cash reserve to be established by AHIP for the completion of brand mandated property improvement plans ("PIPs").

The Acquisition Properties will be purchased at a weighted-average capitalization rate of 8.2% on pro-forma 2014 net operating income (after inclusion of all hotel management fees, administration fees, brand franchise fees and a 4% FF&E reserve contribution).

Acquisition Highlights:

• The Acquisition Properties contain 387 total guest rooms and are being acquired for approximately US$82,700 per guest room inclusive of the cost of the PIPs, which is below management's estimate of replacement cost.
• The four select-service hotel properties are located in North Carolina and Georgia, and consist of two Fairfield Inn & Suites hotels, one SpringHill Suites hotel (brands controlled by Marriott International Inc.), and one Hampton Inn hotel (a brand controlled by Hilton Worldwide Inc.).
• The Acquisition Properties are located in Asheboro, North Carolina; Pinehurst, North Carolina; and Kingsland, Georgia, near transportation hubs and other major demand generators such as military bases, manufacturing facilities, medical centres, and golf and leisure attractions.
• The investment is expected to be immediately accretive to adjusted funds from operations ("AFFO") per unit.
• The total acquisition price including the cost of the PIPs is significantly below the total as-stabilized appraised value of US$34.5 million, which was determined by a third party appraiser.
• AHIP expects to fund the purchase price of the Acquisition Properties, including the PIPs, using a combination of cash from AHIP's bought deal offering of units that closed on June 4, 2014, the assumption of existing CMBS loans of approximately US$13.4 million on the SpringHill Suites and Hampton Inn properties, and new CMBS debt on the two Fairfield Inn & Suites properties. The two assumed loans have principal balances of approximately US$7.7 million and US$5.7 million, bear interest at 5.28% and 5.69%, and are scheduled to mature on February 1, 2024 and August 1, 2018, respectively. The new US$6.0 million CMBS mortgage will be for a 10 year term with a fixed interest rate of 4.72%.
• The transaction is expected to close imminently.

Robert O'Neill, AHIP's Chief Executive Officer, commented, "This investment is consistent with our stated growth strategy targeting acquisitions of transportation-oriented and select-service hotels, located in secondary markets in the United States close to railroads, airports, highway interchanges, other transportation hubs, and major demand generators. The Asheboro and Kingsland properties are located near Interstate highway exits. Pinehurst is adjacent to Fort Bragg, the U.S. Army's largest installation. Pinehurst is also the quintessential American golf resort destination, and earlier this month the Men's and Women's U.S. Open Championships were held at the famed Pinehurst No. 2 course. Locking in 10-year, 4.72% fixed interest rate CMBS financing on the two Fairfield Inn & Suites properties also highlights a key aspect of our conservative approach to leverage, aimed at providing highly stable returns to AHIP's unitholders."

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.

Forward-Looking Information

Certain statements contained in this news release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Forward-looking statements in this news release include, without limitation, the following: references to the purchase and closing costs of the Acquisition Properties; local lodging demand generators; the completion and estimated costs of PIPs; the near term growth of the Acquisition Properties and US hotel industry overall; the availability of accretive acquisition opportunities; the degree to which the Acquisition Properties are accretive; the anticipated closing date of the Acquisition Properties transaction; and future availability of low cost CMBS financing.

Forward-looking information is based on a number of key expectations and assumptions made by AHIP, including, without limitation: a reasonably stable North American economy and stock market and the ability to successfully integrate the Acquisition Portfolio. Although the forward-looking information contained in this news release is based on what 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 AHIP's 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. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, without limitation, those factors that can be found under "Risk Factors" in AHIP's Annual Information Form dated March 26, 2014 and AHIP's Short form Prospectus dated May 29, 2014.

The forward-looking statements contained herein represent AHIP's expectations as of the date of this news release, and are subject to change after this date. AHIP assumes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as 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 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 US; (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 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

For further information:

Andrew Greig, Investor Relations
American Hotel Income Properties REIT LP
Suite 1660 - 401 West Georgia Street
Vancouver, B.C. V6B 5A1
Tel: [phone]
Email: [email protected]