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AHIP's weighted average stated interest rate at September 30, 2016 improved to 4.56% (September 30, 2015 - 4.65%) and the weighted average loan term to maturity at September 30, 2016 was 7.5 years (September 30, 2015 - 7.6 years).
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As at September 30, 2016, AHIP had unrestricted cash balances of $65.8 million, a restricted cash balance of $13.7 million and an unutilized revolving line of credit of $10.0 million.
THIRD QUARTER DEVELOPMENTS
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Effective July 1, 2016, AHIP amended certain terms of the original master hotel management agreement with its exclusive hotel manager Tower Rock Hotels & Resorts Inc. The amendment included, among other things, a reduction of the base management fee from 3.5% to 3.0% of gross revenue for AHIP's existing portfolio and for all future hotels acquired by AHIP, and a waiver of the annual administration fee of $25,000 per hotel for any hotels with more than 100 guestrooms acquired after July 1, 2016.
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On July 13, 2016, AHIP announced it had agreed to acquire two Embassy Suites by Hilton hotels with a total of 529 guestrooms located in Dallas, Texas and Tempe, Arizona (the "Embassy Suites Portfolio") for an aggregate purchase price of approximately $57.6 million before brand mandated property improvement plans ("PIPs") and customary closing and post-acquisition adjustments. In conjunction with this proposed transaction, on August 5, 2016, AHIP advanced a $10.2 million, interest-only bridge loan ("Bridge Loan") to the vendor of the Embassy Suites Tempe Hotel ("Tempe Hotel"). The Bridge Loan has an interest rate of 8.0%, is secured by the Tempe Hotel and matures on January 5, 2017.
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On July 26, 2016, AHIP completed a public offering of 10,000,400 Units, on a bought deal basis, at a price of Cdn$10.35 per Unit, for total gross proceeds of Cdn$103.5 million (the "July 2016 Offering"). Included in the closing were 1,304,400 Units (Cdn$13.5 million) from the full exercise of the over-allotment option.
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On August 31, 2016, AHIP announced the promotion of Mr. Ian McAuley to the newly created position of President effective September 1, 2016.
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On September 1, 2016, AHIP completed the acquisition of a 24-room expansion at the existing, high-occupancy Oak Tree Inn hotel in North Platte, Nebraska for a total purchase price of $2.1 million.
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On September 30, 2016, AHIP announced it had agreed to acquire a four-hotel, Marriott-branded portfolio with a total of 374 guestrooms located in Florida and Tennessee (the "Florida/Tennessee Portfolio") for an aggregate purchase price of approximately $47.0 million before PIPs and customary closing and post-acquisition adjustments. The transaction was completed on October 27, 2016.
Ian McAuley, President of AHIP, commented, "Our stable third quarter results highlight the balance and diversity of our Branded and Rail portfolios which we have assembled over the past three years. The solid same-property double-digit RevPAR growth and resulting NOI of our Virginia, North Carolina, and Florida Branded Hotels provided a buffer to offset the temporary situational weakness currently experienced by five of our Pittsburgh and Oklahoma hotels. The quarterly and annual NOI contributions from our Branded portfolio provide significant support and balance to the long-term sustainability of distributions while the railroad industry continues to experience a temporary period of lower carload volumes. Our railway customers have reported an easing in carload volume declines and we expect to see more rail crews staying at our Oak Tree Inns in the coming quarters. The combination of continued accretive acquisitions, steady same-property operating performance and a conservative balance sheet provides AHIP with a strong foundation for future growth."
SUBSEQUENT EVENTS
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On October 25, 2016, AHIP announced it had agreed to acquire a six-property, branded hotel portfolio with a total of 559 total guestrooms in Florida (the "Florida 6 Portfolio") for an aggregate purchase price of approximately $61.0 million before PIPs and customary closing and post-acquisition adjustments. The transaction is expected to be completed on or before November 30, 2016.
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On October 25, 2016, the completion date for the previously announced acquisition of the Embassy Suites Portfolio was amended to the later of January 4, 2017 and five business days following agreement of new franchise agreements and the arrangement of financing satisfactory to AHIP.
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On October 28, 2016, AHIP announced the completion of the previously announced acquisition of the Florida/Tennessee Portfolio. On November 4, 2016, AHIP obtained a $27.5 million commercial mortgage-backed security loan secured against the Florida/Tennessee Portfolio with a 10 year term and a fixed interest rate of 4.43%.
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On November 1, 2016, AHIP announced it had agreed to acquire a 104-room rail crew hotel located in Nashville, Tennessee for an aggregate purchase price of approximately $7.8 million excluding capital expenditures and closing and post-acquisition adjustments. The transaction is expected to be completed in early December 2016.
Rob O'Neill, CEO of AHIP, commented, "The capital markets continue to support our growth strategy as evidenced by our recently completed Cdn$103.5 million bought deal offering. Although the net proceeds created a temporary per Unit dilution of four cents during the quarter, we expect to fully invest those funds by year end with accretive hotel acquisitions." Mr. O'Neill continued, "Given ongoing volatility in the currency markets, we are pleased to provide our unitholders with long-term, sustainable, and consistent U.S. dollar distributions with investments in U.S. hotel assets."
Q3 2016 FINANCIAL RESULTS CONFERENCE CALL
Management will host a conference call at 4:00 p.m. (Eastern), 1:00 p.m. (Pacific) on Wednesday, November 9, 2016 to review the financial results and corporate results for the three and nine months ended September 30, 2016.
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.
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| Dial in numbers: | | North America Toll free: | | 1-877-291-4570 |
| | | International or local Toronto: | | 1-647-788-4919 |
CONFERENCE CALL REPLAY
If you cannot participate on Wednesday, November 9, 2016, 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 replay two hours after the call end time, and the replay will be available until Wednesday, November 16, 2016. An audio recording of this conference call will also be available at www.ahipreit.com under the "Investor Info/Presentations & Calls" tab.
Please enter replay PIN number 2106923 followed by the # key.
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| Replay dial in numbers: | | North America Toll free: | | 1-800-585-8367 |
| | | International or local Toronto: | | 1-416-621-4642 |
NON-IFRS MEASURES
Certain non-IFRS financial measures are included in this news release, which include NOI, EBITDA, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, interest coverage ratio, 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, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, and payout ratio as supplemental measures of performance and interest coverage ratio and debt-to-gross book value as a supplemental measure of financial condition.
Debt-to-gross book value, NOI, EBITDA, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, interest coverage ratio, payout ratio and debt-to-gross book value 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, EBITDA, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, interest coverage ratio, payout ratio, debt-to-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 November 7, 2016, 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 news 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 generally can be 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. Some of the specific forward-looking statements in this news release include, but are not limited to, statements with respect to: management's expectations with respect to AHIP's future performance; the expectation that AHIP will see more rail crews staying at its Oak Tree Inns in the coming quarters; the expectation that AHIP will fully deploy the net proceeds of the July 2016 Offering by year end 2016 to fund the acquisition of additional hotel properties; the terms of, and expected timing of completion for, the acquisitions of each of the Embassy Suites Portfolio, the rail hotel in Nashville, Tennessee and the Florida 6 Portfolio; and AHIP's long-term objectives.
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; the continued strength of the U.S. lodging industry; AHIP will be able to successfully integrate properties acquired into its portfolio; the currently proposed acquisitions of the Embassy Suites Portfolio, the Florida 6 Portfolio and the rail hotel in Nashville, Tennessee will be completed on the terms currently contemplated; capital markets will provide AHIP with readily available access to equity and/or debt financing on terms acceptable to AHIP; and the value of the U.S. dollar. 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 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; future growth potential; Unit prices; liquidity; tax risk; tax laws currently in effect remaining unchanged; ability to access capital markets; competition for real property investments; environmental matters; the value of the U.S. dollar; and changes in legislation or regulations. 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 MD&A and in its annual information form for the year ended December 31, 2015, copies of which are 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 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.
ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP
AHIP's current property portfolio is comprised of 84 hotels located in 28 U.S. states, representing 7,493 available guestrooms. The Rail Hotel segment, serving the U.S. freight railway industry, consists of 45 hotels comprising 3,789 guestrooms and 27 Penny's Diner restaurants. The Branded Hotel segment consists of 39 hotels comprising 3,704 guestrooms and is affiliated with leading hotel brands including Marriott, Hilton and IHG.
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 rail crew accommodation, transportation, and branded, select service 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 financial statements for the three and nine months ended September 30, 2016, AHIP's MD&A dated November 7, 2016, and other public filings are available on SEDAR at www.sedar.com.
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE ACCURACY OF THIS NEWS RELEASE.
