American Hotel Income Properties REIT LP (“
AHIP”,
or the “
Company”) (TSX: HOT.UN, TSX: HOT.U, TSX:
HOT.DB. V), today announced its financial results for the three and
nine months ended September 30, 2024.
All amounts presented in this news release are
in United States dollars (“U.S. dollars”) unless
otherwise indicated.
2024 THIRD QUARTER
HIGHLIGHTS
- AHIP is taking
decisive steps to improve its balance sheet and address near term
debt maturities through strategic dispositions of non-core hotels
and planned refinancings.
- Same property
RevPAR (1) was $98 for the third quarter of 2024, an increase of
2.1% compared to the same period of 2023 with increases in both ADR
(1) and occupancy (1).
- Same property NOI
was $19.0 million for the third quarter of 2024, an increase of
0.5% compared to the same period of 2023.
- Same property NOI
margin was 30.2% for the third quarter of 2024, a decrease of 50
bps compared to the same period of 2023.
- Diluted FFO per
unit (1) and normalized diluted FFO per unit (1) were $0.06 and
$0.07, respectively, for the third quarter of 2024, compared to
$0.17 and $0.11 for the same period of 2023.
- Completed
dispositions of five hotel properties for total gross proceeds of
$54.7 million in the current quarter, with a blended Cap Rate (1)
of 7.3% on 2023 annual hotel EBITDA (1), after adjusting for an
industry standard 4% FF&E reserve.
- Since September 30,
2024, the dispositions of four hotel properties for total gross
proceeds of $40.8 million were completed, and the dispositions of
five additional hotel properties for total gross proceeds of $52.8
million are expected to be completed in the fourth quarter of 2024.
These dispositions represent a blended Cap Rate of 6.9%, and 6.4%,
respectively, both on 2023 annual hotel EBITDA, after adjusting for
an industry standard 4% FF&E reserve.
- The dispositions
completed in the current quarter resulted in total debt repayment
of $49.5 million. Including dispositions completed since September
30, 2024, and expected to be completed in the fourth quarter of
2024, total estimated debt repayment is $78.0 million which
includes estimated repayments of $35.4 million to the term loans
governed by the Sixth Amendment (defined below), which will satisfy
the primary remaining condition to extend the maturity of the
revolving credit facility and term loans.
- Debt to gross book
value (1) was 50.1% as at September 30, 2024, a decrease of 180 bps
compared to 51.9% as at December 31, 2023.
- Debt to TTM EBITDA
(1) was 9.1x as at September 30, 2024, a decrease of 1.0x compared
to 10.1x as at September 30, 2023.
- AHIP had $36.5
million in available liquidity as at September 30, 2024,
compared to $27.8 million as at December 31, 2023. The available
liquidity of $36.5 million was comprised of an unrestricted cash
balance of $25.8 million and borrowing availability of $10.7
million under the revolving credit facility.
“AHIP’s portfolio of premium branded select
service hotel properties continued to demonstrate strong demand
metrics in Q3 2024.” said Jonathan Korol, CEO. “Same property
ADR, occupancy and RevPAR all achieved growth in the current
quarter. Cost inflation is decelerating across many cost
categories, and we are making progress on operating margins with
wage increase moderating and less reliance on overtime and contract
labor.”
Mr. Korol added: “In 2024, AHIP made significant
progress on our plan to reduce debt and high-grade the portfolio
through asset sales and loan refinancings. AHIP has completed the
dispositions of eleven hotel properties and has five additional
hotel properties under contract for sale for total gross proceeds
of $165.2 million. These dispositions are expected to result in an
improvement to the portfolio with a pro forma increase in RevPAR,
NOI margin and EBITDA per hotel. AHIP also signed a non-binding
term sheet with a major US Bank to refinance certain borrowing base
hotel properties under our senior credit facility, which will
significantly reduce the balance of our term loans and revolving
credit facility in the fourth quarter of 2024.
Once completed, these steps will strengthen our
liquidity and balance sheet and resolve all of our 2024 debt
maturities. With the US economy remaining strong, we are positioned
to benefit if the industry operating environment improves in 2025.
We will continue to monitor macroeconomic conditions and operating
performance, while considering further strategic opportunities to
deliver value to unitholders over the long term.”
2024 THIRD QUARTER REVIEW
FINANCIAL AND OPERATIONAL
HIGHLIGHTS
For the three months ended September 30, 2024,
ADR, occupancy, and RevPAR were consistent with the same period in
2023. The improved RevPAR for the extended stay and select service
properties was offset by lower RevPAR for the Embassy Suites
properties.
NOI and normalized NOI were $19.5 million and
$19.9 million for the three months ended September 30, 2024,
decreases of 12.6% and 12.7%, respectively, compared to NOI of
$22.3 million and normalized NOI of $22.8 million for the same
period in 2023. The decrease in NOI and normalized NOI was
primarily due to the disposition of the seven hotel properties
completed during the nine months ended September 30, 2024.
NOI margin was 29.6% in the current quarter, a
decrease of 60 bps compared to the same period in 2023. The
decrease in NOI margin was due to higher operating expenses as a
result of higher salaries and repair and maintenance expenses in
the current quarter. Although certain operating expenses are
expected to remain a challenge in 2024, the year-over-year NOI
margin decline has improved from 270 bps in the first quarter of
2024 to 60 bps in the current quarter.
AHIP completed its property insurance renewal
effective June 1, 2024, with a decrease in premiums compared to the
prior period ended May 31, 2024. On an annualized basis, the
decrease from the prior period is approximately $1.6 million, which
will be recognized in earnings over a twelve-month period.
Diluted FFO per unit and normalized diluted FFO
per unit were $0.06 and $0.07 for the third quarter of 2024,
respectively, compared to diluted FFO per unit of $0.17 and
normalized diluted FFO per unit of $0.11 for the same period in
2023. The decrease in normalized diluted FFO per unit was mainly
due to lower NOI and higher financing costs, partially offset by
lower corporate and administrative expenses in the current
quarter.
SAME PROPERTY KPIs
The following table summarizes key performance
indicators (“KPIs”) for the portfolio for the five
most recent quarters with a comparison to the same period in the
prior year.
|
KPIs |
Q3 2024 |
Q2 2024 |
Q1 2024 |
Q4 2023 |
Q3 2023 |
|
ADR |
$135 |
$137 |
$134 |
$128 |
$134 |
|
Change compared to same period in prior year - %
increase/(decrease) |
0.7% |
1.7% |
(1.0%) |
- |
3.3% |
|
Occupancy |
72.7% |
75.6% |
67.4% |
67.2% |
71.9% |
|
Change compared to same period in prior year - bps
increase/(decrease) |
80 |
86 |
54 |
(114) |
(208) |
|
RevPAR |
$98 |
$104 |
$90 |
$86 |
$96 |
|
Change compared to same period in prior year - %
increase/(decrease) |
2.1% |
2.8% |
(0.2%) |
(1.7%) |
0.4% |
|
NOI (thousands of dollars) |
$18,983 |
$20,618 |
$15,805 |
$14,272 |
$18,882 |
|
Change compared to same period in prior year - %
increase/(decrease) |
0.5% |
(2.4%) |
(4.3%) |
(20.2%) |
(6.0%) |
|
NOI Margin |
30.2% |
32.5% |
28.1% |
25.6% |
30.7% |
|
Change compared to same period in prior year - bps
increase/(decrease) |
(50) |
(164) |
(213) |
(651) |
(256) |
Same property ADR in the current quarter is
$135, an increase of 0.7% compared to the same period of 2023. Same
property occupancy increased by 80 bps to 72.7% in the current
quarter compared to the same period of 2023. The increase in ADR
and occupancy is primarily attributable to higher demand for
extended stay and select service properties.
Same property NOI margin decreased by 50 bps to
30.2% compared to the same period of 2023. The decrease in the same
property NOI margin was due to higher operating expenses as a
result of higher salaries and repair and maintenance expenses in
the current quarter. Although certain operating expenses are
expected to remain a challenge in 2024, the year-over-year same
property NOI margin decline has improved for four consecutive
quarters since the fourth quarter of 2023.
LEVERAGE AND LIQUIDITY
|
KPIs |
Q3 2024 |
Q2 2024 |
Q1 2024 |
Q4 2023 |
Q3 2023 |
|
Debt-to-GBV |
50.1% |
52.0% |
52.2% |
51.9% |
51.1% |
|
Debt-to-TTM EBITDA |
9.1x |
9.7x |
10.5x |
10.6x |
10.1x |
Debt to gross book value as at September 30,
2024 was 50.1%, a decrease of 180 bps compared to December 31,
2023. Debt to TTM EBITDA as at September 30, 2024 was 9.1x, a
decrease of 1.0x compared to September 30, 2023. The improvement in
debt to gross book value and debt to TTM EBITDA was due to the use
of net proceeds from the completed dispositions to pay down CMBS
mortgage debt and the term loans governed by the Sixth
Amendment.
As at September 30, 2024, AHIP had $36.5 million
in available liquidity, compared to $27.8 million as at December
31, 2023. The available liquidity of $36.5 million was comprised of
an unrestricted cash balance of $25.8 million and borrowing
availability of $10.7 million under the revolving credit facility.
AHIP had an additional restricted cash balance of $35.4 million as
at September 30, 2024.
CAPITAL RECYCLING
2024 Hotel Dispositions
Summary
|
Hotel |
Location |
Gross Proceeds (millions of dollars) |
Keys |
Gross proceeds per key |
Cap Rateon 2023annual
hotel EBITDA |
Closing Date
(Actual/Expected) |
|
Completed Dispositions: |
|
Hampton Inn Harrisonburg University |
Harrisonburg, Virginia |
$8.6 |
159 |
$54,000 |
7.9% |
Q1 2024 |
|
Residence Inn Cranberry |
Cranberry, Pennsylvania |
$8.3 |
96 |
$86,000 |
9.3% |
Q1 2024 |
|
Total completed in Q1 2024 |
$16.9 |
255 |
$66,000 |
8.6% |
|
|
Holiday Inn Amarillo West Medical Center |
Amarillo, Texas |
$8.3 |
151 |
$55,000 |
3.6% |
Q3 2024 |
|
Fairfield Inn & Suites Amarillo Airport |
Amarillo, Texas |
$9.3 |
79 |
$118,000 |
8.1% |
Q3 2024 |
|
Residence Inn Egg Harbor Township |
Egg Harbor, New Jersey |
$11.1 |
101 |
$110,000 |
4.4% |
Q3 2024 |
|
Residence Inn Ocala |
Ocala, Florida |
$11.1 |
87 |
$128,000 |
10.1% |
Q3 2024 |
|
Courtyard Ocala |
Ocala, Florida |
$14.9 |
169 |
$88,000 |
8.8% |
Q3 2024 |
|
Total completed in Q3 2024 |
$54.7 |
587 |
$93,000 |
7.3% |
|
|
Courtyard Statesville Mooresville Lake Norman |
Statesville, North Carolina |
$13.0 |
94 |
$138,000 |
7.6% |
Q4 2024 |
|
Hampton Inn Statesville |
Statesville, North Carolina |
$12.2 |
80 |
$153,000 |
8.0% |
Q4 2024 |
|
Fairfield Inn & Suites Melbourne West |
Melbourne, Florida |
$6.6 |
83 |
$80,000 |
7.7% |
Q4 2024 |
|
Home2 Suites Houston Willowbrook |
Houston, Texas |
$9.0 |
108 |
$84,000 |
3.7% |
Q4 2024 |
|
Total completed in Q4 2024 |
$40.8 |
365 |
$112,000 |
6.9% |
|
|
Total completed in 2024 |
$112.4 |
1,207 |
$93,000 |
7.3% |
|
|
Dispositions Under Contract: |
|
Fairfield Inn & Suites Kingsland |
Kingsland, Georgia |
$5.2 |
82 |
$63,000 |
7.3% |
Q4 2024 |
|
Embassy Suites DFW Airport South |
Dallas, Texas |
$27.0 |
305 |
$89,000 |
8.3% |
Q4 2024 |
|
Hampton Inn & Suites Corpus Christi |
Corpus Christi, Texas |
$10.3 |
101 |
$101,000 |
5.7% |
Q4 2024 |
|
Fairfield Inn & Suites Ocala |
Ocala, Florida |
$7.7 |
96 |
$80,000 |
4.8% |
Q4 2024 |
|
Sleep Inn & Suites Amarillo |
Amarillo, Texas |
$2.6 |
63 |
$41,000 |
-7.5% |
Q4 2024 |
|
Total under contract |
$52.8 |
647 |
$82,000 |
6.4% |
|
|
Total completed and under contract |
$165.2 |
1,854 |
$89,000 |
7.0% |
|
As of the date of the news release, AHIP has
completed the dispositions of eleven properties for total gross
proceeds of $112.4 million during the current financial year. In
addition, AHIP has five hotel properties under purchase and sales
agreements for total gross proceeds of $52.8 million. AHIP intends
to use the net proceeds from these dispositions to repay certain
CMBS mortgage loans and reduce the balance of the term loans
governed by the Sixth Amendment.
After adjusting for an industry standard 4%
FF&E reserve, the combined sales price for the 16 properties
either sold in 2024 or currently under contract for sale represents
a blended Cap Rate of 7.0% on 2023 annual hotel EBITDA. AHIP’s
current enterprise value reflects an implied Cap Rate of 8.7% on
2023 annual hotel EBITDA for the portfolio of 58 hotel properties,
excluding the five hotel properties in respect of which AHIP is in
managed foreclosure as of September 30, 2024, based on the
U.S. dollar closing price of US$0.44 per unit on the TSX on
November 5, 2024.
AHIP intends to continue to execute its strategy
to divest assets to reduce debt and is currently marketing a
selected number of additional properties which are expected to
demonstrate value above the current unit trading price.
INITIATIVES TO STRENGTHEN FINANCIAL
POSITION AND PRESERVE UNITHOLDER VALUE
The Board of Directors (the
“Board”), together with management, have
implemented a plan to strengthen AHIP’s financial position and to
preserve unitholder value. Initiatives, and progress made to date,
are outlined below.
PLAN TO ADDRESS LOAN
MATURITIES
AHIP has made significant progress with its plan
to address the Company’s upcoming debt maturities. These efforts
continue to improve leverage metrics.
To address the Q2 2024 commercial
mortgage-backed securities (“CMBS”) loan
maturities of $22.3 million, AHIP completed the disposition of one
hotel property and refinanced the balance of the loan in March
2024, specifically:
- AHIP completed the
disposition of a hotel property in Harrisonburg, Virginia for gross
proceeds of $8.6 million. The net proceeds were used to partially
satisfy the non-recourse mortgage debt; and
- AHIP completed the
CMBS refinancing for the remaining three assets secured against
this loan with gross proceeds of $17.5 million prior to initial
capital reserves contribution of approximately $5.0 million. The
term of this new CMBS loan is five years at a fixed annual interest
rate of 7.8%.
To address upcoming CMBS loan maturities, AHIP
completed the dispositions of seven hotel properties since the
beginning of the third quarter for total gross proceeds of $75.4
million, specifically:
- In August 2024,
AHIP completed the dispositions of two hotel properties in
Amarillo, Texas for gross proceeds of $9.3 million and $8.3
million, respectively. The CMBS mortgage loan of $16.0 million was
fully repaid in the third quarter of 2024.
- In September 2024,
AHIP completed the dispositions of two hotel properties in Ocala,
Florida for gross proceeds of $11.1 million and $14.9 million,
respectively. The CMBS mortgage loan of $19.0 million was fully
repaid in the third quarter of 2024.
- In October and
November 2024, AHIP completed the dispositions of two hotel
properties in Statesville, North Carolina, and one hotel property
in Melbourne, Florida for gross proceeds of $13.0 million, $12.2
million and $6.6 million, respectively. The CMBS mortgage loan of
$24.9 million was fully repaid in the fourth quarter of 2024.
- In addition, 50% of
the net proceeds remaining after the CMBS mortgage loan repayment
from the dispositions of these seven hotel properties, which was
$8.0 million, was used to pay down outstanding amounts under the
term loans governed by the Sixth Amendment in the third and fourth
quarters of 2024.
The Sixth Amendment dated November 7, 2023 (the
“Sixth Amendment”), which governs AHIP’s revolving
credit facility (the “RCF” or “revolving
credit facility”) and certain term loans, includes a
borrower option to extend the maturity of the RCF and term loans to
June 2025, subject to three primary conditions: (i) reduction of
the aggregate maximum facility size to $148.2 million from and
after December 3, 2024; (ii) obtaining updated appraisals for the
borrowing base properties in order to determine the value of such
properties for purposes of setting the maximum borrowing
availability under the Sixth Amendment, which is set based on a
maximum loan to value ratio of 67.5%; and (iii) compliance with the
terms of the Sixth Amendment at the time of the extension which
includes among other things compliance with financial covenants
including payout ratio and fixed charge coverage ratio.
- During the current
quarter, AHIP completed the disposition of one hotel property in
Egg Harbor, New Jersey for gross proceeds of $11.1 million. The net
proceeds of $10.3 million were used to repay the term loans
governed by the Sixth Amendment in the same period.
- In November 2024,
AHIP completed the disposition of one hotel property in Houston,
Texas for gross proceeds of $9.0 million. The net proceeds of $8.2
million were used to repay the term loans governed by the Sixth
Amendment in the same period.
- AHIP made total
repayments of $11.0 million during the current quarter, and
additional repayments of $15.5 million since September 30, 2024,
which reduced the balance of RCF and term loans pursuant to the
Sixth Amendment to $156.0 million as of the date of the news
release.
To further reduce the aggregate facility size
before December 3, 2024:
- As of the date of
the news release, AHIP has five hotel properties under purchase and
sales agreements for total gross proceeds of $52.8 million with
expected closing dates prior to December 3, 2024. The completion of
these dispositions is expected to reduce the aggregate facility
balance by approximately $23.4 million, which represents the
required repayment amount under the terms of the Sixth
Amendment.
- AHIP has also
signed a non-binding term sheet with a major US Bank to refinance
in the CMBS market certain borrowing base properties currently
secured under the Sixth Amendment. Management is currently
targeting to close this refinancing by the end of November 2024,
subject to the completion of definitive legal documentation and
other customary closing conditions. This refinancing, if completed,
is expected to reduce the aggregate facility balance outstanding
under the Sixth Amendment by approximately $60.0 million.
- Accordingly, AHIP
expects to achieve the required paydown with either the asset sales
or the refinancing prior to December 3, 2024. With both achieved,
the aggregate facility balance under the Sixth Amendment would be
reduced to approximately $72.6 million.
SELECTED INFORMATION
|
|
Three months ended September 30 |
Nine months ended September 30 |
|
(thousands of dollars, except per Unit
amounts) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
| Revenue |
65,728 |
|
73,743 |
|
205,831 |
|
214,684 |
|
| Income from operating
activities |
12,603 |
|
13,322 |
|
39,791 |
|
40,659 |
|
| Income (loss) and
comprehensive income (loss) |
374 |
|
(1,345 |
) |
(9,326 |
) |
7,713 |
|
| NOI (2) |
19,475 |
|
22,270 |
|
61,355 |
|
66,875 |
|
| NOI margin (2) |
29.6 |
% |
30.2 |
% |
29.8 |
% |
31.2 |
% |
| |
|
|
|
|
| Hotel EBITDA (1) |
18,045 |
|
20,054 |
|
56,848 |
|
60,102 |
|
| Hotel EBITDA margin (1) |
27.5 |
% |
27.2 |
% |
27.6 |
% |
28.0 |
% |
| EBITDA (1) |
16,479 |
|
17,517 |
|
50,120 |
|
52,374 |
|
| EBITDA margin (1) |
25.1 |
% |
23.8 |
% |
24.4 |
% |
24.4 |
% |
| |
|
|
|
|
| Cashflow from operating
activities |
6,007 |
|
7,668 |
|
16,694 |
|
33,165 |
|
| Distributions declared per
unit - basic and diluted |
- |
|
0.045 |
|
- |
|
0.14 |
|
| Distributions declared to
unitholders - basic |
- |
|
3,550 |
|
- |
|
10,643 |
|
| Distributions declared to
unitholders - diluted |
- |
|
4,044 |
|
- |
|
12,103 |
|
| Dividends declared to Series C
holders |
1,150 |
|
1,022 |
|
3,387 |
|
3,033 |
|
| |
|
|
|
|
| FFO diluted (1) |
4,605 |
|
15,578 |
|
16,825 |
|
42,032 |
|
| FFO per unit - diluted
(1) |
0.06 |
|
0.17 |
|
0.21 |
|
0.47 |
|
| Normalized FFO per unit -
diluted (1) |
0.07 |
|
0.11 |
|
0.19 |
|
0.33 |
|
| |
|
|
|
|
| AFFO diluted (1) |
1,048 |
|
12,776 |
|
8,437 |
|
33,371 |
|
| AFFO
per unit - diluted (1) |
0.01 |
|
0.14 |
|
0.10 |
|
0.37 |
|
| (1) See “Non-IFRS
and Other Financial Measures” |
| (2) NOI and NOI
margin included the IFRIC 21 property taxes adjustment. |
SELECTED INFORMATION
|
(thousands of dollars) |
September 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
| Total assets |
872,406 |
|
954,887 |
|
| Total liabilities |
651,801 |
|
721,937 |
|
| Total non-current
liabilities |
363,415 |
|
529,178 |
|
| Term loans and revolving
credit facility |
534,705 |
|
599,873 |
|
| |
|
|
| Debt to gross book value
(1) |
50.1 |
% |
51.9 |
% |
| Debt to EBITDA (times)
(1) |
9.1 |
|
10.6 |
|
| Interest coverage ratio
(times) (1) |
1.7 |
|
1.9 |
|
| |
|
|
| Term loans and revolving
credit facility: |
|
|
| Weighted average interest
rate |
5.76 |
% |
4.95 |
% |
| Weighted average term to
maturity (years) |
1.6 |
|
2.2 |
|
| |
|
|
| Number of rooms |
7,075 |
|
7,917 |
|
| Number of properties |
63 |
|
70 |
|
| Number
of restaurants |
14 |
|
14 |
|
| (1) See
“Non-IFRS and Other Financial Measures” |
2024 THIRD QUARTER OPERATING
RESULTS
|
|
Three months ended September 30 |
Nine months ended September 30 |
|
(thousands of dollars) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
| ADR (1) |
133 |
|
133 |
|
133 |
|
133 |
|
| Occupancy (1) |
71.5 |
% |
71.5 |
% |
69.5 |
% |
69.5 |
% |
| RevPAR
(1) |
95 |
|
95 |
|
92 |
|
92 |
|
|
|
|
|
|
|
|
Revenue |
65,728 |
|
73,743 |
|
205,831 |
|
214,684 |
|
| |
|
|
|
|
| Operating expenses |
35,057 |
|
38,980 |
|
109,328 |
|
113,238 |
|
| Energy |
2,977 |
|
3,272 |
|
8,672 |
|
9,515 |
|
| Property maintenance |
3,805 |
|
3,956 |
|
12,002 |
|
11,248 |
|
|
Property taxes, insurance and ground lease |
4,414 |
|
5,265 |
|
14,474 |
|
13,808 |
|
| Total expenses |
46,253 |
|
51,473 |
|
144,476 |
|
147,809 |
|
|
|
|
|
|
|
| NOI (2) |
19,475 |
|
22,270 |
|
61,355 |
|
66,875 |
|
| NOI
margin % (2) |
29.6 |
% |
30.2 |
% |
29.8 |
% |
31.2 |
% |
| |
|
|
|
|
|
Depreciation and amortization |
6,872 |
|
8,948 |
|
21,564 |
|
26,216 |
|
|
Income from operating activities |
12,603 |
|
13,322 |
|
39,791 |
|
40,659 |
|
|
|
|
|
|
|
| Other expenses |
12,820 |
|
15,043 |
|
50,479 |
|
34,231 |
|
| Current income tax
expense |
11 |
|
32 |
|
47 |
|
563 |
|
|
Deferred income tax expense (recovery) |
(602 |
) |
(408 |
) |
(1,409 |
) |
(1,848 |
) |
| |
|
|
|
|
| Income
(loss) and comprehensive income (loss) |
374 |
|
(1,345 |
) |
(9,326 |
) |
7,713 |
|
|
(1) See “Non-IFRS and Other Financial Measures” |
|
(2) NOI and NOI margin included the IFRIC 21 property taxes
adjustment. |
FINANCIAL INFORMATION
This news release should be read in conjunction
with AHIP’s unaudited condensed consolidated interim financial
statements, and management’s discussion and analysis for the three
and nine months ended September 30, 2024 and 2023, that are
available on AHIP’s website at www.ahipreit.com, and under AHIP’s
profile on SEDAR+ at www.sedarplus.com.
Q3 2024 CONFERENCE CALL
Management will host a webcast and conference
call at 10:00 a.m. Pacific time on Thursday, November 7, 2024, to
discuss the financial and operational results for the three and
nine months ended September 30, 2024 and 2023.
To participate in the conference call,
participants should register online via AHIP’s website. A dial-in
and unique PIN will be provided to join the call. Participants are
requested to register a minimum of 15 minutes before the start of
the call. An audio webcast of the conference call may be accessed
on AHIP’s website at www.ahipreit.com.
ABOUT AMERICAN HOTEL INCOME PROPERTIES
REIT LP
American Hotel Income Properties REIT LP (TSX:
HOT.UN, TSX: HOT.U, TSX: HOT.DB.V), or AHIP, is a limited
partnership formed to invest in hotel real estate properties across
the United States. AHIP’s portfolio of premium branded,
select-service hotels are located in secondary metropolitan markets
that benefit from diverse and stable demand. AHIP hotels operate
under brands affiliated with Marriott, Hilton, IHG and Choice
Hotels through license agreements. AHIP’s long-term objectives are
to build on its proven track record of successful investment,
deliver monthly U.S. dollar denominated distributions to
unitholders, and generate value through the continued growth of
itsdiversified hotel portfolio. More information is available at
www.ahipreit.com.
NON-IFRS AND OTHER FINANCIAL
MEASURES
Management believes the following non-IFRS
financial measures, non-IFRS ratios, capital management measures
and supplementary financial measures are relevant measures to
monitor and evaluate AHIP’s financial and operating performance.
These measures and ratios do not have any standardized meaning
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other issuers. These measures and
ratios are included to provide investors and management additional
information and alternative methods for assessing AHIP’s financial
and operating results and should not be considered in isolation or
as a substitute for performance measures prepared in accordance
with IFRS.
NON-IFRS FINANCIAL
MEASURES:
FFO: FFO measures operating
performance and is calculated in accordance with Real Property
Association of Canada’s (“REALPAC”) definition.
FFO – basic is calculated by adjusting loss and comprehensive
income (loss) for depreciation and amortization, gain or loss on
disposal of property, IFRIC 21 property taxes, fair value gain or
loss, impairment of property, deferred income tax, and other
applicable items. FFO – diluted is calculated as FFO – basic plus
the interest, accretion, and amortization on convertible debentures
if convertible debentures are dilutive. The most comparable IFRS
measure to FFO is income (loss) and comprehensive income (loss),
for which a reconciliation is provided in this news release.
AFFO: AFFO is defined as a
recurring economic earnings measure and calculated in accordance
with REALPAC’s definition. AFFO – basic is calculated as FFO –
basic less maintenance capital expenditures. AFFO – diluted is
calculated as FFO – diluted less maintenance capital expenditures.
The most comparable IFRS measure to AFFO is income (loss) and
comprehensive income (loss), for which a reconciliation is provided
in this news release.
Normalized FFO: calculated as
FFO adjusting for non-recurring items. For the three months ended
September 30, 2024, normalized FFO is calculated as FFO
excluding the non-recurring property damage insurance proceeds
adjustment of $1.1 million recorded in the same period. For the
nine months ended September 30, 2024, normalized FFO is
calculated as FFO excluding the non-recurring property damage
insurance proceeds of $1.6 million recorded in the same period. For
the three and nine months ended September 30, 2023,
normalized FFO is calculated as FFO excluding the non-recurring
insurance proceeds of $5.4 million and $12.9 million, respectively,
for property damage related to the weather-related damage at
several hotel properties in late December 2022. The most comparable
IFRS measure to normalized FFO is income (loss) and comprehensive
income (loss), for which a reconciliation is provided in this news
release.
Normalized NOI: calculated as
NOI adjusting for non-recurring items. For the three and nine
months ended September 30, 2024, normalized NOI included the
non-recurring insurance proceeds of $0.4 million and $0.5 million,
respectively, for business interruption claims. For the three and
nine months ended September 30, 2023, normalized NOI
included the non-recurring insurance proceeds of $0.5 million and
$3.4 million, respectively, for business interruption claims
related to the weather-related damage at several hotel properties
in late December 2022. The most comparable IFRS measure to
normalized NOI is NOI, for which a reconciliation is provided in
this news release.
Hotel EBITDA: calculated by
adjusting NOI for hotel management fees. The most comparable IFRS
measure to hotel EBITDA is NOI, for which a reconciliation is
provided in this news release.
EBITDA: calculated by adjusting
NOI for hotel management fees and general administrative expenses.
The sum of hotel management fees and general administrative
expenses is equal to corporate and administrative expenses in the
Financial Statements. The most comparable IFRS measure to EBITDA is
NOI, for which a reconciliation is provided in this news
release.
Debt: calculated as the sum of
term loans and revolving credit facility, the face value of
convertible debentures, unamortized portion of debt financing
costs, lease liabilities and unamortized portion of mark-to-market
adjustments. The most comparable IFRS measure to debt is total
liabilities, for which a reconciliation is provided in this news
release.
Gross book value: calculated as
the sum of total assets, accumulated depreciation and impairment on
property, buildings and equipment, and accumulated amortization on
intangible assets. The most comparable IFRS measure to gross book
value is total assets, for which a reconciliation is provided in
this news release.
Interest expense: calculated by
adjusting finance costs for gain/loss on debt settlement,
amortization of debt financing costs, accretion of debenture
liability, amortization of debenture costs, dividends on series B
preferred shares and amortization of mark-to-market adjustments,
accretion of management fee because interest expense excludes
certain non-cash accounting items and dividends on preferred
shares. The most comparable IFRS measure to interest expense is
finance costs, for which a reconciliation is provided in this news
release.
Enterprise value: is a
supplementary financial measure and is calculated as the sum of (i)
total debt obligations as reflected on the September 30, 2024
balance sheet, less the term loans of the five hotel properties in
respect of which AHIP is in managed foreclosure as of
September 30, 2024, (ii) AHIP’s market capitalization (which
is calculated as the U.S. dollar closing price of the units on the
TSX as of November 5, 2024, multiplied by the total number of units
issued and outstanding), and (iii) face value of series C preferred
shares, less (iv) the amount of cash and cash equivalents reflected
on the September 30, 2024 balance sheet.
NON-IFRS RATIOS:
FFO per unit – basic/diluted:
calculated as FFO – basic/diluted divided by weighted average
number of units outstanding - basic/diluted respectively for the
reporting periods.
Normalized FFO per unit –
basic/diluted: calculated as normalized FFO –
basic/diluted divided by weighted average number of units
outstanding - basic/diluted respectively for the reporting
periods.
AFFO per unit – basic/diluted:
calculated as AFFO – basic/diluted divided by weighted average
number of units outstanding - basic/diluted respectively for the
reporting periods.
Hotel EBITDA margin: calculated
as hotel EBITDA divided by total revenue.
EBITDA margin: calculated as
EBITDA divided by total revenue.
Capitalization rate (“Cap
Rate”): calculated as 2023 annual hotel EBITDA, after
adjusting for an industry standard 4% furniture, fixtures, and
equipment (“FF&E”) reserve, divided by the
actual and expected gross proceeds of the asset dispositions.
Implied capitalization rate (“implied
Cap Rate”): calculated as 2023 annual hotel EBITDA, after
adjusting for an industry standard 4% FF&E reserve, for the
portfolio of 58 hotel properties by excluding the five hotel
properties in respect of which AHIP is in managed foreclosure as of
September 30, 2024, divided by the enterprise value as at
November 5, 2024.
CAPITAL MANAGEMENT
MEASURES:
Debt to gross book value:
calculated as debt divided by gross book value. Debt to gross book
value is a primary measure of capital management and leverage.
Debt to TTM EBITDA: calculated
as debt divided by the trailing twelve months (“TTM”) of EBITDA.
Debt to EBITDA measures the amount of income generated and
available to pay down debt before covering interest, taxes,
depreciation, and amortization expenses. In Q3 2024, the debt to
TTM EBITDA calculation excluded five hotels in respect of which
AHIP is in managed foreclosure as of September 30, 2024.
Interest coverage ratio:
calculated as TTM EBITDA divided by interest expense for the
trailing twelve months. The interest coverage ratio is a measure of
AHIP’s ability to service the interest requirements of its
outstanding debt. In Q3 2024, the interest coverage ratio
calculation excluded five hotels in respect of which AHIP is in
managed foreclosure as of September 30, 2024.
SUPPLEMENTARY FINANCIAL
MEASURES:
Occupancy is a major driver of room revenue as
well as food and beverage revenues. Fluctuations in occupancy are
normally accompanied by fluctuations in most categories of variable
hotel operating expenses, including housekeeping and other labor
costs. Higher ADR increases room revenue with limited impact on
hotel operating expenses. Increase in RevPAR attributable to
increase in occupancy may reduce EBITDA and EBITDA margins, while
increase in RevPAR attributable to increase in ADR typically result
in increases in EBITDA and EBITDA margins.
Occupancy: calculated as the
total number of hotel rooms sold divided by the total number of
rooms available for the reporting periods. Occupancy is a metric
commonly used in the hotel industry to measure the utilization of
hotels’ available capacity.
Average daily rate (“ADR”):
calculated as total room revenue divided by total number of rooms
sold for the reporting periods. ADR is a metric commonly used in
the hotel industry to indicate the average revenue earned per
occupied room in a given time period.
Revenue per available room
(“RevPAR”): calculated as occupancy multiplied by ADR for
the reporting periods.
Same property occupancy, ADR, RevPAR,
revenue, expense, NOI and NOI margin: measured for
properties owned by AHIP for both the current reporting periods and
the same periods in 2023. In Q3 2024, Q4 2023 and Q3 2023, the same
property ADR, occupancy, RevPAR and NOI margin calculations
excluded the five hotel properties in respect of which AHIP is in
managed foreclosure as of September 30, 2024. In Q2 2024 and
Q1 2024, the same property ADR, occupancy, RevPAR and NOI margin
calculations excluded the same five hotel properties mentioned in
the immediately preceding sentence, as well as the Residence Inn
Neptune and Courtyard Wall in New Jersey as these two hotels had
limited availability in Q2 2023 and Q1 2023 comparative periods,
due to remediation and rebuilding after the weather-related damage
in late December 2022.
NON-IFRS RECONCILIATION
INCOME (LOSS) AND COMPREHENSIVE INCOME
(LOSS) TO FFO
|
|
Three months ended September 30 |
Nine months ended September 30 |
|
(thousands of dollars, except per unit
amounts) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
| Income (loss) and
comprehensive income (loss) |
374 |
|
(1,345 |
) |
(9,326 |
) |
7,713 |
|
| Adjustments: |
|
|
|
|
| Income attributable to
non-controlling interest |
(1,150 |
) |
(1,022 |
) |
(3,387 |
) |
(3,033 |
) |
| Depreciation and
amortization |
6,872 |
|
8,948 |
|
21,564 |
|
26,216 |
|
| Impairment of cash-generating
units |
2,229 |
|
4,737 |
|
11,402 |
|
4,737 |
|
| (Recovery) write-off of
property, building and equipment |
(2,032 |
) |
3,766 |
|
188 |
|
7,934 |
|
| Gain on sale of
properties |
(1,105 |
) |
(540 |
) |
(1,347 |
) |
(2,941 |
) |
| IFRIC 21 property taxes
adjustment |
15 |
|
308 |
|
(481 |
) |
(272 |
) |
| Change in fair value of
warrants |
4 |
|
(1,239 |
) |
(134 |
) |
(2,958 |
) |
| Change in fair value of
interest rate swap contracts |
- |
|
1,263 |
|
- |
|
3,188 |
|
| Gain on convertible debt
conversion |
- |
|
- |
|
(245 |
) |
- |
|
|
Deferred income tax expense (recovery) |
(602 |
) |
(408 |
) |
(1,409 |
) |
(1,848 |
) |
|
|
|
|
|
|
| FFO basic (1) |
4,605 |
|
14,468 |
|
16,825 |
|
38,736 |
|
| Interest, accretion and
amortization on convertible debentures |
- |
|
1,110 |
|
- |
|
3,296 |
|
|
FFO diluted (1) |
4,605 |
|
15,578 |
|
16,825 |
|
42,032 |
|
| |
|
|
|
|
| FFO per unit – basic (1) |
0.06 |
|
0.18 |
|
0.21 |
|
0.49 |
|
| FFO per
unit – diluted (1) |
0.06 |
|
0.17 |
|
0.21 |
|
0.47 |
|
| |
|
|
|
|
| Non-recurring
items: |
|
|
|
|
| Other
expenses (income) |
1,098 |
|
(5,421 |
) |
(1,591 |
) |
(12,889 |
) |
|
|
|
|
|
|
| Measurements excluding
non-recurring items: |
|
|
|
|
| Normalized FFO diluted
(1) |
5,703 |
|
10,157 |
|
15,234 |
|
29,143 |
|
|
Normalized FFO per unit – diluted (1) |
0.07 |
|
0.11 |
|
0.19 |
|
0.33 |
|
|
|
|
|
|
|
| Weighted average number of
units outstanding: |
|
|
|
|
| Basic (000’s) |
79,234 |
|
78,877 |
|
79,155 |
|
78,837 |
|
| Diluted
(000’s) (2) |
81,562 |
|
89,864 |
|
80,979 |
|
89,612 |
|
|
(1) See “Non-IFRS and Other Financial Measures”(2) The calculation
of FFO diluted, FFO per unit – diluted, normalized FFO diluted,
normalized FFO per unit – diluted, weighted average number of units
outstanding – diluted for the three and nine months ended September
30, 2024, excluded the convertible debentures because they were
anti-dilutive. The calculation of FFO diluted, FFO per unit –
diluted, normalized FFO diluted, normalized FFO per unit – diluted,
weighted average number of units outstanding – diluted for the
three and nine months ended September 30, 2023, included the
convertible debentures because they were dilutive. |
RECONCILIATION OF FFO TO
AFFO
|
|
Three months ended September 30 |
Nine months ended September 30 |
|
(thousands of dollars, except per Unit
amounts) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
| FFO basic (1) |
4,605 |
|
14,468 |
|
16,825 |
|
38,736 |
|
| FFO diluted (1) |
4,605 |
|
15,578 |
|
16,825 |
|
42,032 |
|
|
Maintenance capital expenditures |
(3,557 |
) |
(2,802 |
) |
(8,388 |
) |
(8,661 |
) |
|
|
|
|
|
|
| AFFO basic (1) |
1,048 |
|
11,666 |
|
8,437 |
|
30,075 |
|
| AFFO diluted (1) |
1,048 |
|
12,776 |
|
8,437 |
|
33,371 |
|
| AFFO per unit - basic (1) |
0.01 |
|
0.15 |
|
0.11 |
|
0.38 |
|
| AFFO
per unit - diluted (1) |
0.01 |
|
0.14 |
|
0.10 |
|
0.37 |
|
|
|
|
|
|
|
| Measurements excluding
non-recurring items: |
|
|
|
|
| AFFO diluted (1) |
2,146 |
|
7,355 |
|
6,846 |
|
20,482 |
|
| AFFO
per unit - diluted (1) |
0.03 |
|
0.08 |
|
0.08 |
|
0.23 |
|
|
(1) See “Non-IFRS and Other Financial Measures” |
|
|
|
|
DEBT TO GROSS BOOK VALUE
|
(thousands of dollars) |
September 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
| Debt |
624,626 |
|
688,585 |
|
| Gross
Book Value |
1,247,511 |
|
1,326,070 |
|
|
Debt to Gross Book Value |
50.1 |
% |
51.9 |
% |
|
|
|
|
|
(thousands of dollars) |
September 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
| Term loans and revolving
credit facility |
571,749 |
|
633,298 |
|
| 2026 debentures (at face
value) |
49,730 |
|
50,000 |
|
| Unamortized portion of debt
financing costs |
2,277 |
|
4,065 |
|
| Lease liabilities |
870 |
|
1,239 |
|
|
Unamortized portion of mark-to-market adjustments |
- |
|
(17 |
) |
|
Debt |
624,626 |
|
688,585 |
|
|
|
|
|
|
(thousands of dollars) |
September 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
| Total assets |
872,406 |
|
954,887 |
|
| Accumulated depreciation and
impairment on property, buildings and equipment |
369,274 |
|
365,970 |
|
|
Accumulated amortization on intangible assets |
5,831 |
|
5,213 |
|
|
Gross Book Value |
1,247,511 |
|
1,326,070 |
|
DEBT TO TTM EBITDA
|
(thousands of dollars) |
September 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
|
|
| Debt (2) |
564,406 |
|
688,585 |
|
| EBITDA (trailing twelve
months) (2) |
61,979 |
|
64,732 |
|
|
Debt to TTM EBITDA (times)
(2) |
9.1x |
|
10.6x |
|
|
2) The calculation of Debt to TTM EBITDA for the trailing
twelve months ended September 30, 2024 excluded the five hotels in
respect of which AHIP is in managed foreclosure as of September 30,
2024. |
INTEREST COVERAGE RATIO
|
(thousands of dollars) |
September 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
|
|
| EBITDA (trailing twelve
months) (2) |
61,979 |
|
64,732 |
|
| Interest expense (trailing
twelve months) (2) |
36,978 |
|
33,725 |
|
|
Interest Coverage Ratio (times)
(2) |
1.7x |
|
1.9x |
|
|
2) The calculation of Interest Coverage Ratio for the trailing
twelve months ended September 30, 2024 excluded the five hotels in
respect of which AHIP is in managed foreclosure as of September 30,
2024. |
The reconciliation of NOI to hotel EBITDA and EBITDA is shown
below:
|
|
|
|
Three months ended September 30 |
Nine months ended September 30 |
|
(thousands of dollars) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
| NOI |
19,475 |
|
22,270 |
|
61,355 |
|
66,875 |
|
|
Management fees |
(1,430 |
) |
(2,216 |
) |
(4,507 |
) |
(6,773 |
) |
|
Hotel EBITDA |
18,045 |
|
20,054 |
|
56,848 |
|
60,102 |
|
| |
|
|
|
|
| General
administrative expenses |
(1,566 |
) |
(2,538 |
) |
(6,728 |
) |
(7,729 |
) |
|
EBITDA |
16,479 |
|
17,517 |
|
50,120 |
|
52,374 |
|
The reconciliation of NOI to normalized NOI is
shown below:
|
|
Three months ended September 30 |
Nine months endedSeptember 30 |
|
(thousands of dollars) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
| NOI |
19,475 |
|
22,270 |
|
61,355 |
|
66,875 |
|
| Business interruption
insurance proceeds |
409 |
|
516 |
|
501 |
|
3,446 |
|
|
Normalized NOI |
19,884 |
|
22,786 |
|
61,856 |
|
70,321 |
|
The reconciliation of finance costs to interest
expense is shown below:
|
|
Three months ended September 30 |
Nine months ended September 30 |
|
(thousands of dollars) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
| Finance costs |
10,386 |
|
8,335 |
|
31,948 |
|
26,260 |
|
| Amortization of debt financing
costs |
(658 |
) |
(536 |
) |
(1,983 |
) |
(1,387 |
) |
| Accretion of debenture
liability |
(273 |
) |
(254 |
) |
(796 |
) |
(737 |
) |
| Amortization of debenture
costs |
(120 |
) |
(105 |
) |
(353 |
) |
(305 |
) |
| Gain on debt settlement |
- |
|
1,155 |
|
- |
|
1,155 |
|
| Dividends on Series B
preferred shares |
- |
|
(4 |
) |
- |
|
(12 |
) |
| Debt
defeasance and other costs |
(296 |
) |
5 |
|
(307 |
) |
(14 |
) |
|
Interest Expense |
9,039 |
|
8,596 |
|
28,509 |
|
24,960 |
|
For information on the most directly comparable
IFRS measures, composition of the measures, a description of how
AHIP uses these measures, and an explanation of how these measures
provide useful information to investors, please refer to AHIP’s
management discussion and analysis for the three and nine months
ended September 30, 2024 and 2023, available on AHIP’s website at
www.ahipreit.com, and under AHIP’s profile on SEDAR+ at
www.sedarplus.com.
FORWARD-LOOKING INFORMATION
Certain statements in this news release may
constitute “forward-looking information” and “financial outlook”
within the meaning of applicable securities laws. Forward-looking
information and financial outlook generally can be identified by
words such as “anticipate”, “believe”, “continue”, “expect”,
“estimates”, “intend”, “may”, “outlook”, “objective”, “plans”,
“should”, “will” and similar expressions suggesting future outcomes
or events. Forward-looking information and financial outlook
include, but are not limited to, statements made or implied
relating to the objectives of AHIP, AHIP’s strategies to achieve
those objectives and AHIP’s beliefs, plans, estimates, projections
and intentions and similar statements concerning anticipated future
events, results, circumstances, performance, or expectations that
are not historical facts. Forward-looking information and financial
outlook in this news release includes, but is not limited to,
statements with respect to: AHIP management’s expectation as to the
impacts on AHIP’s business of the seasonal nature of the lodging
industry, inflation (including on labor and materials costs),
competition, overall economic cycles, weather conditions; AHIP’s
expectations with respect to the timing and amount of insurance
proceeds for weather and fire-related damage and lost income in
respect of certain hotel properties; AHIP’s leverage and liquidity
strategies and goals; AHIP’s expectations with respect to the
performance of its hotel portfolio, including specific segments
thereof; AHIP’s expectations with respect to inflation, labor
supply, labor costs, interest rates, supply chain and other market
financial and macroeconomic conditions in 2024 and beyond and the
expected impacts thereof on AHIP’s financial position and
performance, including on ADR, occupancy, RevPAR, NOI and NOI
margins; AHIP’s expectation that operating costs will remain a
challenge in 2024; AHIP’s strategic initiatives and the intended
outcomes thereof, including improved liquidity, addressing
near-term debt maturities and providing AHIP with financial
stability and protecting long-term value for unitholders; AHIP’s
expectations with respect to the macroeconomic and operating
environment, including certain specific expectations for the fourth
quarter of 2024 and for the 2025 fiscal year; AHIP continuing to
execute its strategy to divest assets and reduce debt; AHIP’s
planned property dispositions, including the expected terms and
timing thereof and the financial impact thereof on AHIP (including
the estimated amount and uses of the proceeds from such
dispositions) and AHIP’s expectation that the sale of such
properties will demonstrate value above the current unit trading
price and result in an improvement to the portfolio with a pro
forma increase in RevPAR, NOI margin and EBITDA per hotel; AHIP’s
intended strategies for near-term debt maturities, including
planned sales of assets and loan refinancing and the expected
impacts thereof on AHIP’s financial performance and position; AHIP
targeting the completion of the refinancing of certain borrowing
base properties on or about the end of November 2024, subject to
the completion of definitive legal documentation and other
customary closing conditions and the expected reduction to the
credit facilities governed by the Sixth Amendment as a result
thereof; AHIP’s expectation that it will satisfy the conditions for
the extension of the maturity date for the credit facilities
governed by the Sixth Amendment, including its obligation to reduce
the facility size by December 3, 2024; AHIP’s expectation that it
will be able to refinance the remaining RCF balance due to the
strong loan to value ratio of the assets securing the revolving
credit facility, six prior amendments, and progress made on asset
sales and refinancing activities; AHIP’s belief that it is
positioned to benefit if the industry operating and macroeconomic
environment improves in 2025;and AHIP’s stated long-term
objectives.
Although the forward-looking information and
financial outlook contained in this news release are 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 is based on a number
of key expectations and assumptions made by AHIP, including,
without limitation: inflation, labor shortages, and supply chain
disruptions will negatively impact the U.S. economy, U.S. hotel
industry and AHIP’s business; AHIP will continue to have sufficient
funds to meet its financial obligations; AHIP will be able generate
sufficient funds to meet any paydown obligations under the
loan-to-value covenants set forth in the Sixth Amendment; AHIP’s
strategies with respect to completion of capital projects,
liquidity, addressing near-term debt maturities, and divestiture of
assets will be successful and achieve their intended effects; AHIP
will satisfy the conditions to extend the maturity of the term
loans and RCF governed by the Sixth Amendment; AHIP will complete
its currently planned divestitures and loan refinancings on the
terms currently contemplated and in accordance with the timing
currently contemplated; AHIP will receive insurance proceeds in an
amount consistent with AHIP’s estimates in respect of its weather
and fire-damaged properties; AHIP will continue to have good
relationships with its hotel brand partners; AHIP will be
successful in opposing the Claim and will resolve the matters set
out in the Default Notice in a manner that is acceptable to AHIP;
capital markets will provide AHIP with readily available access to
equity and/or debt financing on terms acceptable to AHIP, including
the ability to refinance maturing debt as it becomes due on terms
acceptable to AHIP; AHIP will be successful in reducing the size of
the RCF and term loans and in carrying out its planned strategies
for refinancing or extending the RCF and term loans; the Federal
Reserve will reduce interest rates in the fourth quarter of 2024
and in 2025; AHIP’s future level of indebtedness and its future
growth potential will remain consistent with AHIP’s current
expectations; the useful lives and replacement cost of AHIP’s
assets being consistent with management’s estimates thereof; AHIP
will be able to successfully integrate properties acquired into its
portfolio, if any; the U.S. REIT will continue to qualify as a real
estate investment trust for U.S. federal income tax purposes; the
impact of the current economic climate and the current global
financial conditions on AHIP’s operations, including AHIP’s
financing capability and asset value, will remain consistent with
AHIP’s current expectations; there will be no material changes to
tax laws, government and environmental regulations adversely
affecting AHIP’s operations, financing capability, structure or
distributions; conditions in the international and, in particular,
the U.S. hotel and lodging industry, including competition for
acquisitions, will be consistent with the current economic climate;
and AHIP will achieve its long term objectives.
Forward-looking information and financial
outlook involve significant risks and uncertainties and should not
be read as guarantees of future performance or results as actual
results may differ materially from those expressed or implied in
such forward-looking information and financial outlook, accordingly
undue reliance should not be placed on such forward-looking
information or financial outlook. Those risks and uncertainties
include, among other things, risks related to: AHIP may not achieve
its expected performance levels in 2024 and 2025; AHIP’s brand
partners may impose revised service standards and capital
requirements which are adverse to AHIP; PIP renovations may not
commence or complete in accordance with currently expected timing
and may suffer from increased material costs; AHIP’s strategic
initiatives with respect to liquidity, addressing upcoming debt
maturities and providing AHIP with financial stability may not be
successful and may not achieve their intended outcomes; AHIP’s
strategies for divesting assets to reduce debt may not be
successful; AHIP may not complete its currently planned divestures
and loan refinancings on the terms currently contemplated or in
accordance with the timing currently contemplated, or at all; AHIP
may not enter into definitive legal documentation with respect to
the loan refinancing for certain of the borrowing base properties
contemplated by the non-binding term sheet signed with a major US
Bank in accordance with the timing or on the terms currently
contemplated or at all, and may not complete such refinancing;
AHIP’s planned dispositions, once completed, may not demonstrate
value above the current unit trading price; AHIP may not be
successful in reducing its leverage; there is no guarantee that
monthly distributions will be reinstated, and if reinstated, as to
the timing thereof or what the amount of the monthly distribution
will be; AHIP may not be able to refinance debt obligations as they
become due or may do so on terms less favorable to AHIP than under
AHIP’s existing loan agreements; AHIP may not be successful in
reducing the size of the RCF and term loans and in carrying out its
planned strategies for refinancing or extending the RCF and term
loans on terms acceptable to AHIP or at all; AHIP may not complete
the refinancing of certain borrowing base properties in November
2024 on the terms currently contemplated, or at all; AHIP has not
replaced its interest rate swaps, which is expected to create
continued increased interest expense; refinanced loans are expected
to be refinanced at significantly higher interest rates; the
Federal Reserve may not reduce interest rates in accordance with
the timing or the quantum anticipated by management, or at all; the
outcome of the Claim, the Default Notice and the dispute resolution
procedures under the HMAs cannot be predicted, and may be
determined in a manner unfavorable to AHIP, which may have a
substantial negative impact on AHIP’s financial position and
results of operations; AHIP may incur significant costs in relation
to the Claim, regardless of its merit, the Default Notice and the
dispute resolution procedures under the HMAs and may be ordered to
pay damages and costs in any such proceedings; the outcome of the
Claim may be subject to appeal; if Aimbridge is removed, the
financial terms of the engagement of any replacement hotel manager
cannot be determined at this time and could less advantageous to
AHIP than the terms of the HMAs, and AHIP may suffer some
operational disruption in the course of any replacement of
Aimbridge; general economic conditions and consumer confidence; the
growth in the U.S. hotel and lodging industry; prices for the Units
and debentures; liquidity; tax risks; ability to access debt and
capital markets; financing risks; changes in interest rates; the
financial condition of, and AHIP’s relationships with, its external
hotel manager and franchisors; real property risks, including
environmental risks; the degree and nature of competition; ability
to acquire accretive hotel investments; ability to integrate new
hotels; environmental matters; and changes in legislation.
Additional information about risks and uncertainties is contained
in this new release, in AHIP’s most recently filed AIF and most
recently filed MD&A, a copies of each of which are available on
SEDAR+ at www.sedarplus.com.
To the extent any forward-looking information
constitutes a “financial outlook” within the meaning of applicable
securities laws, such information is being provided to investors to
assist in their understanding of: estimated proceeds from the
planned disposition of certain hotel properties and the expected
use thereof and impact thereon on AHIP’s outstanding term loans and
RCF; and management’s expectations for certain aspects of AHIP’s
financial performance for the remainder of 2024 and for 2025.
The forward-looking information and financial
outlook contained herein is expressly qualified in its entirety by
this cautionary statement. Forward-looking information and
financial outlook reflect management's current beliefs and are
based on information currently available to AHIP. The
forward-looking information and financial outlook are 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.
For additional information, please
contact:
Investor Relationsir@ahipreit.com
(1) Non-IFRS and other financial measures. See
“NON-IFRS AND OTHER FINANCIAL MEASURES” section of this news
release.