VANCOUVER, Aug. 24, 2015 /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 five strategic railway
lodging facilities (the "Railway Portfolio") for an aggregate purchase price of US$44,775,000, excluding closing
and post-acquisition adjustments.
ACQUISITION HIGHLIGHTS
-
The Railway Portfolio consists of five hotels containing 586 total guest
rooms that are being acquired for approximately US$76,500 per guest
room, which is below management's estimate of replacement cost.
-
The five railway lodging facilities include a 160-room hotel in Belen,
New Mexico; a 156-room hotel in Gillette, Wyoming; a 118-room hotel in
Ravenna, Nebraska; a 96-room hotel in Guernsey, Wyoming; and a 56-room
hotel in Edgemont, South Dakota.
-
The Railway Portfolio is secured by long term lodging contracts with one
of the U.S.'s top three railway companies, which guarantee in excess of
80% of the available guestrooms for terms averaging nine years. AHIP
presently owns three Oak Tree Inn hotels that are contracted with this
railway company.
-
The investment is expected to be immediately accretive to adjusted funds
from operations ("AFFO") per unit, and at a trailing capitalization rate consistent with other
rail hotel acquisitions.
-
AHIP will fund the purchase of the Railway Portfolio with cash on hand
from the proceeds of the bought deal that was completed on August 11,
2015, and additional debt financing. AHIP's term financing on the
Railway Portfolio will be US$20 million of the aggregate purchase price
with a 10-year term and fixed interest rates of approximately 4.00% for
the first 5 years.
-
This transaction is expected to close within the coming weeks upon
finalization of the formal debt agreements. Upon completion of the
Railway Portfolio acquisition, AHIP's portfolio will consist of 78
hotels totaling 6,798 guest rooms with 43 rail hotels totaling 3,467
guest rooms and 35 branded hotels totaling 3,331 guest rooms.
Rob O'Neill, AHIP's Chief Executive Officer, commented, "This
transaction will enable AHIP to unlock the embedded value of the five
hotel properties through value add programs and management
efficiencies. The properties are secured by railway contracts that we
expect will create significant incremental value for AHIP and its
unitholders. I have been working on this strategic investment for more
than two years. There are few strategic hotel operators focused on U.S.
railway lodging and we are very pleased to be acquiring all of the
lodging properties owned by a competitor that has been accommodating
railway crews since 1973. Upon completion of this transaction, AHIP
will have more than doubled its locations with a key railway client and
will be its sole dedicated crew lodging provider, building on our Oak
Tree Inn's tradition of providing "dark and quiet" room stays for
railway companies and their employees."
Mr. O'Neill added, "Negotiations are also underway with this railway
client for two additional, previously announced property conversions,
totaling 250 guestrooms in Mississippi and Kansas. Upon the expected
completion of these transactions, these seven rail initiatives are
expected to provide further scale and stability to our rail portfolio
through diversification of railway clients and longer term contracts."
The Railway Portfolio will be managed for AHIP by its exclusive hotel
manager, TR Lodging Enterprises Inc., a wholly owned subsidiary of
Tower Rock Hotels & Resorts Ltd. ("Tower Rock"). Tower Rock is a wholly owned subsidiary of O'Neill Hotels and
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",
"believe", "budget", "could", "estimate", "expect", "going-in",
"intend", "may", "opportunities", "plan", "potential", "predict",
"project", "should" "will", "would" 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, references to the following: the acquisition of the Railway
Portfolio and the expected completion timing therefor; post-acquisition
adjustments to the purchase price for the Railway Portfolio; the manner
in which AHIP will fund the acquisition of the Railway Portfolio;
management's expectation that the acquisition of the Railway Portfolio
will be immediately accretive to AFFO per unit; the assignment of the
railway lodging contracts for the Railway Portfolio; the terms of the
railway lodging contracts for the Railway Portfolio; management's
expectation that the railway lodging contracts will create significant
incremental value for AHIP and its unitholders; the ability of AHIP to
unlock the embedded value of the Railway Portfolio; the terms of the
new debt financing for the Railway Portfolio; references to property
conversions in Mississippi and Kansas; the total number of hotels and
rooms owned by AHIP after giving effect to the acquisition of the
Railway Portfolio; and references to the management of the Railway
Portfolio by TR Lodging Enterprises Inc., a wholly owned subsidiary of
AHIP's exclusive hotel manager, Tower Rock Hotels & Resorts Inc.
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, the ability to secure debt financing, the
ability to successfully integrate the Railway Portfolio and
expectations and assumptions related to capitalization rates, fees and
reserves and replacement costs for the Railway Portfolio, as
applicable. 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 27, 2015 and under "Risks and
Uncertainties" in AHIP's Management's Discussion and Analysis dated
August 12, 2015, both of which are available on SEDAR at www.sedar.com.
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 is engaged primarily in the
railroad employee accommodation, transportation-oriented, and
select-service lodging sectors. AHIP's properties are mostly located in
secondary and tertiary markets in the United States in close proximity
to railroads, airports, highway interchanges, and other demand
generators. AHIP currently owns 73 hotels including 38 hotels serving
the U.S. rail industry pursuant to long-term railway contracts and 35
hotels affiliated with leading national and international hotel brands.
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 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 NEWS RELEASE.
SOURCE American Hotel Income Properties REIT LP
