TD TARGET AT 6, SEE NOTEIn our view, the most important takeaway from Q4/21 was the continued recovery in RevPAR, which came in just 10% below Q4/19 levels and directly in line with our forecast. Despite the impact Omicron had on December travel demand, this was ahead of Q3/21 where RevPAR was 13% below the same period in 2019. It also compared favourably to the U.S. peers, which reported Q4/21 RevPAR ~20% below 2019 levels (Exhibit 5). January 2022 RevPAR fell to 81% of January 2019 due to Omicron, before rebounding nicely in February (including a modest uptick in corporate travel), which was just 9% below the comparable 2019 period. This is also supported by a broader recovery in STR's U.S. Hotel RevPAR Index, which recovered nicely in the last two weeks of February (Exhibit 6). Operating expenses were above our expectations, which was due to staffing shortages caused by Omicron and the utilization of contract labour (15%-20% premium). We expect a similar trend in January 2022, but anticipate staffing costs will normalize over the balance of Q1/22. One area we remain cautious on is the impact of rising commodity prices on utility costs. We believe higher staffing costs and utilities could offset most of the savings expected to be recognized from the relaxed brand standards in H1/22, which were expected to generate between 100-200bps of margin expansion, all else equal. That said, the ability for hotels to change rates daily should mitigate some of the cost inflation. Forecast. Our AFFO/unit estimates decline largely on a higher unit count due to dilution from the recently issued converts. Our $5.40 NAV/unit estimate is +4%. TD Investment Conclusion Our investment thesis remains intact, particularly with increasing visibility on the return of corporate and group travel (link). The REIT reached 90% of 2019 RevPAR levels without a major contribution from that segment (pre-pandemic represented ~65% of demand). As corporate/group travel begins to pick up, we expect AHIP's RevPAR to surpass 2019 levels. With increased confidence in the timing of the recovery, as well as its relative valuation vs. it peers, we are maintaining our BUY rating. 4.5 4.5 4 4 3.5 3.5 3 3 2.5 2.5 2 2 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 HOT.UN-T: Price Company Profile AHIP REIT owns a portfolio of 77 Premium Branded select-service hotels aggregating ~8,700 rooms across 22 states. AHIP is currently the only Canada-listed lodging REIT with an exposure to the U.S. lodging industry. Real Estate American Hotel Income Properties REIT (HOT.UN-T, HOT.U-T) US$3.48 | $4.37 RevPAR Forecast to Exceed 2019 Levels in Q3/22 Lorne Kalmar, CPA, CA Jonathan Kelcher, CFA Recommendation: BUY Risk: HIGH 12-Month Target Price: US$4.75 12-Month Distribution (Est): $0.18 12-Month Total Return: 41.7% Market Data (US$) Current Price US$3.48 52-Week Range $2.51 - $3.99 Mkt Cap (f.d.) ($mm) $310.8 Mkt Cap (basic) ($mm) $273.2 EV ($mm) $1,004.5 Current Distribution per Unit $0.18 Current Distribution Yield 5.2% Avg. Daily Trading Vol. 111,027 Financial Data (US$) Fiscal Y-E December Units O/S (f.d.) (mm) 89.3 Units O/S (basic)(mm) 78.5 Float Units (mm) 74.6 Net Debt/Total Cap 204.2% Net Debt/EBITDA 7.5x NAVPU $5.40 Estimates (US$) Year 2020A 2021A 2022E 2023E EBITDA ($mm) 31.9 70.5 89.7 102.1 DPU 0.18 0.00 0.15 0.18 FFO/Unit (0.12) 0.50 0.56 0.70 FFO/Unit (old) – 0.53 0.60 0.74 AFFO/Unit (0.19) 0.22 0.46 0.59 AFFO/Unit (old) – 0.25 0.49 0.62 FFO/Unit Quarterly Estimates (US$) Year 2020A 2021A 2022E 2023E Q1 0.06 (0.03) 0.10 0.16 Q2 (0.12) 0.14 0.19 0.22 Q3 0.00 0.32 0.19 0.21 Q4 (0.07) 0.07 0.13 0.15 Valuations Year 2020A 2021A 2022E 2023E EV/EBITDA 31.5x 14.2x 11.2x 9.8x