American Hotel Income Properties REIT LP Reports First Quarter 2019 Results

• Total Portfolio Average Daily Rate ("ADR") grew 1.9% from comparable quarter
• Premium Branded ADR grew 1.4%, Economy Lodging ADR grew 4.3% from comparable quarter
• NOI Margin improved 1.6% compared to Q1 2018
• Q1 2019 FFO of $11.4 million or $0.15 per diluted unit
• Strengthened leadership team with appointment of new Chief Operating Officer

(All numbers are in U.S. dollars unless otherwise indicated)

VANCOUVER, May 8, 2019 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP", or the "Company") (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.U), which has 112 select-service hotels located across the United States, announced today its financial results for the three months ended March 31, 2019. 

"Our first quarter results demonstrate the hotels we renovated in 2018 are now commanding higher guestroom rates, generating substantially more food and beverage revenues, and driving higher margins," said John O'Neill, CEO.  "The six hotels that were renovated by the end of January collectively saw first quarter ADR grow 3% and revenue grow nearly 7% compared to the same period of 2018. The strong contribution from these newly updated hotels was partially offset by the impacts of ongoing renovations during the quarter, which compressed occupancy rates for our portfolio."

"We're pleased overall with how our business performed despite the negative effects from group booking cancelations related to the U.S. government shutdown, and one-time expenses associated with management changes during the period. Normalizing for these two factors, FFO per diluted unit would have been approximately 1.5 cents higher."

Mr. O'Neill continued: "The strengthening U.S. dollar has increased the value of our U.S. dollar cash distributions by more than 4% in the past year for Canadian investors.  This, combined with our estimate that only 60% of our distributions will be taxable as U.S. sourced income in 2019, should continue to enhance the total return for our Canadian unitholders as we unlock value through hotel renovations, capital recycling and asset management in the year ahead."

THREE MONTHS ENDED MARCH 31, 2019 FINANCIAL HIGHLIGHTS

• Total revenues for the quarter decreased 0.7% to $80.5 million (Q1 2018 – $81.1 million) primarily due to displacement from renovations at five hotels during the quarter, as well as lower revenues at hotels affected by the U.S. government shutdown during January 2019.
  
  
• Total portfolio average daily rate ("ADR") increased 1.9% from the same quarter last year to $97.32 as a result of stronger demand coupled with higher guaranteed rail revenues. Occupancy declined 1.5% from Q1 2018, to 72.4% due mostly to renovation displacement and cancellations related to the U.S. government shutdown. Revenue per available room ("RevPAR") increased 0.3% from the same quarter last year to $70.46.
  
  
• ADR for Premium Branded hotels increased 1.4%, with higher transient and group demand in Kentucky (post renovation), Arizona (group demand) and North Carolina (transient demand). This was offset by a 3.4% decline in occupancy related to the U.S. government shutdown, which affected hotels in Florida, New Jersey and Oklahoma, and hotels undergoing renovations, as well as new supply in Virginia. As a result, RevPAR for Premium Branded Hotels declined 2.0% to $84.86 (Q1 2018 – $86.61). The STR RevPAR index, which compares the performance of AHIP owned hotels to their competitive set in each region, indicated AHIP's Premium Branded hotels generally outperformed their identified direct competition with AHIP having an average index rating of 129.0 during the quarter – with 100.0 representing a 'fair share' of the market.
  
  
• Five larger properties were under renovation for portions of the quarter: the Embassy Suites Columbus, the Staybridge Suites Tampa, the Residence Inn White Marsh Baltimore, the Residence Inn Chattanooga and the Fairfield Inn Jacksonville. RevPAR at these properties saw an average decline of 5.8% due to lower occupancy as rooms were taken out of inventory for renovations.
  
  
• RevPAR for Economy Lodging Hotels increased 6.7% to $41.56 (Q1 2018 – $38.96), due primarily to a 4.3% increase in ADR to $60.67 (Q1 2018 – $58.15) as a result of increased rail crew revenue guarantees coupled with higher Wyndham-generated occupancies.
  
  
• The net loss for the seasonally weaker first quarter was $0.5 million, compared to net income of $1.4 million in Q1 2018. The change in net income from Q1 2018 was due to a $0.7 million unrealized fair value loss on interest rate swap contracts during the current quarter compared to a $1.4 million unrealized fair value gain last year. Diluted net loss per Unit for the quarter was $0.01 compared to a diluted net income per Unit of $0.02 in the same quarter of last year.
  
  
• Funds from operations ("FFO") increased 0.4% to $11.4 million, and adjusted funds from operations ("AFFO") increased 0.5% to $9.9 million.
  
  
• Q1 2019 Diluted FFO per Unit was $0.15 (Q1 2018 – $0.15) and Diluted AFFO per Unit was $0.13 (Q1 2018 – $0.13).

Same Property Operating Metrics:

• AHIP has modified its definition of same property operating metrics to align with its publicly traded U.S. hotel REIT peers. The Company's same property definition includes properties owned and operated for the entire year in both reporting periods. As such, properties acquired and sold during the comparable reporting period are not included in same property metrics.
  
  
• For the current and comparable periods presented, AHIP had no changes to its Premium Branded portfolio, and as a result, no same property metrics were presented for the first quarter of 2019.
  
  
• In AHIP's Economy Lodging portfolio, three hotels totaling 185 guestrooms were sold during 2018 that had no meaningful impact on total NOI. Same property RevPAR increased by 3.5% to $41.56 (Q1 2018 - $40.15) as a result of fewer occupied rail crew rooms and increased guaranteed revenues. Economy Lodging same property NOI grew 2.4% from the same period last year, to $4.8 million.

Capital Metrics:

• As at March 31, 2019, AHIP's debt had a weighted average remaining term of 6.2 years (Q1 2018 – 7.1 years) and a weighted average interest rate of 4.64% (Q1 2018 – 4.64%). Approximately 97% of AHIP's term loans have fixed interest rates.
  
  
• As at March 31, 2019, AHIP had an unrestricted cash balance of $12.3 million and approximately $22.0 million available through revolving credit facilities. The Company also had a restricted cash balance of approximately $33.4 million, including approximately $16.7 million on deposit for upcoming property improvement plans ("PIPs").
  
  
• AHIP's debt-to-gross book value as at March 31, 2019 was 53.8% (March 31, 2018 – 53.6%), which is within AHIP's target range of 50% to 55%.
  
  
• AHIP paid U.S. dollar monthly distributions of $0.054 per Unit during the quarter, which is equivalent to $0.648 per Unit on an annualized basis. AHIP's business is seasonal in nature and generates lower FFO in Q1 and Q4 and higher FFO in Q2 and Q3. Therefore, it is strongly advised that investors review the payout ratios on a 12 months trailing basis. On a trailing 12-month basis, the FFO Payout Ratio at the end of Q1 2019 was 90.7% (Q1 2018 – 83.5%). Similarly, on a trailing 12-month basis, the AFFO Payout Ratio at the end of Q1 2019 was 98.7% (Q1 2018 – 93.9%). Following the completion of AHIP's renovation program, the Company's target annual run-rate AFFO Payout Ratio is expected to be approximately 85.0%.

FIRST QUARTER DEVELOPMENTS

• On January 16, 2019, the Company announced that it had completed $3.0 million of renovations at the Embassy Suites Columbus (in Dublin, Ohio).
  
  
• On January 28, 2019, AHIP announced the resignation of its President.
  
  
• On February 1, 2019, AHIP announced the completion of $4.2 million of renovations at the Staybridge Suites Tampa East (in Tampa Florida) and the Residence Inn Baltimore White Marsh (in Baltimore, Maryland).
  
  
• On February 11, 2019, AHIP appointed Chris Cameron as its Chief Investment Officer.

SUBSEQUENT EVENTS

• On April 2, 2019, AHIP announced that it had purchased the land associated with its Fairfield Inn & Suites White Marsh hotel in Baltimore, Maryland for approximately $1.9 million plus closing costs.
  
  
• On April 29, 2019, AHIP announced it had appointed Bruce Pittet as Senior Vice President, Asset Management & Chief Operating Officer.

The information in this news release should be read in conjunction with AHIP's unaudited condensed consolidated interim financial statements and management's discussion and analysis ("MD&A") for the three months ended March 31, 2019, which are available on AHIP's website at www.ahipreit.com and on SEDAR at www.sedar.com.

Q1 2019 FINANCIAL RESULTS CONFERENCE CALL

Management will host a conference call at 5:30 p.m. (Eastern), 2:30 p.m. (Pacific) on Wednesday, May 8, 2019 to review the financial results for the three months ended March 31, 2019.

To participate in this conference call, please dial one of the following numbers at least five minutes prior to the commencement of the call and ask to join the American Hotel Income Properties' Q1 2019 Analyst Call.

The conference call will also be webcast live (in listen-only mode).  The link to the webcast can be found on the Events tab of the following webpage:  https://www.ahipreit.com/news-and-events/

CONFERENCE CALL REPLAY

A replay of the conference call will be available by dialing one of the following replay numbers. The replay will be available after 5:30 pm Pacific time / 8:30 pm Eastern time on May 8, 2019 until June 7, 2019. The webcast recording of this conference call will also be available at www.ahipreit.com on the Events and Presentation page.

Please enter replay PIN number 4893798 followed by the # key.

NON-IFRS MEASURES

Certain non-IFRS financial measures are included in this news release, which include NOI, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, FFO Payout Ratio, AFFO 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 issuers often refer to NOI, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, FFO Payout Ratio and AFFO Payout Ratio as supplemental measures of performance and debt-to-gross book value as a supplemental measure of financial condition.

Debt-to-gross book value, NOI, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, FFO Payout Ratio and AFFO Payout Ratio 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, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, FFO Payout Ratio, AFFO Payout Ratio and 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, including reconciliations of certain of these non-IFRS financial measures to the closest comparable IFRS measure, please refer to AHIP's MD&A dated May 7, 2019, 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" within the meaning of applicable securities laws (also known as forward-looking statements). Forward looking information involves known and unknown risks, uncertainties and other factors, which 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: the increased value of AHIP's U.S. dollar cash distributions combined with AHIP's estimate that 60% of its distributions will be taxable as U.S. sourced income in 2019 should continue to enhance the total return for Canadian Unitholders as AHIP unlocks value through hotel renovations, capital recycling and asset management; AHIP's target run-rate AFFO Payout Ratio; and AHIP's objective to build on its proven track record of successful investment, deliver reliable and consistent U.S. dollar denominated distributions to unitholders, and generate value through the continued growth of its diversified hotel portfolio.

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; capital markets will provide AHIP with readily available access to equity and/or debt financing on terms acceptable to AHIP; the accuracy of third party reports with respect to lodging industry data; the value of the U.S. dollar; renovations will be completed in accordance with the timing currently expected and on budget; AHIP will realize the expected benefits of such renovations; the portion of AHIP's distributions that will taxable as U.S. sourced income will be consistent with management's estimates; there will be no adverse changes to taxation laws applicable to AHIP's distributions;. 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 as actual results may differ materially from those expressed or implied in such forward-looking statements. Those risks and uncertainties include, among other things, risks related to: AHIP may not realize the expected benefits of renovations to be completed 2019 and that such renovations may not be completed in accordance with expected timing or budgets; renovations completed in 2019 may be more disruptive than expected; AHIP's capital recycling strategy may not be successful and AHIP may not be able to accretively redeploy any proceeds generated therefrom; AHIP may not achieve its target annual run-rate AFFO Payout Ratio; distributions are not guaranteed and may be reduced or suspended at any time at the discretion of AHIP's board of directors; 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; the portion of AHIP's distributions that will taxable as U.S. sourced income may not be consistent with management's estimates; applicable taxation laws may change, which may impact the taxation of AHIP's distributions in the hands of its unitholders; the references to the tax treatment of AHIP's distributions contained in this news release is not exhaustive of all possible income tax considerations applicable to an investment in AHIP's Units, including the taxation of AHIP's distributions, and the income and other tax consequences of acquiring, holding or disposing of Units and receiving distributions will vary depending on the particular circumstances applicable to each investor and as such the tax information contained in this news release may not accurately reflect the tax treatment of AHIP's distributions for any particular investor; 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 dated May 7, 2019 and annual information form for the year ended December 31, 2018, 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.

THIRD PARTY INFORMATION

This news release includes market information and industry data from independent industry publications, market research and analyst reports, surveys and other publicly available sources. Although AHIP management believes these sources to be generally reliable, market and industry data is subject to interpretation and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. Accordingly, the accuracy and completeness of this data are not guaranteed. AHIP has not independently verified any of the data from third party sources referred to in this news release nor ascertained the underlying assumptions relied upon by such sources.

ADDITIONAL INFORMATION

Additional information relating to AHIP, including AHIP's unaudited condensed consolidated interim financial statements for the three months ended March 31, 2019, AHIP's MD&A dated May 7, 2019, and other public filings are available on SEDAR at www.sedar.com.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

American Hotel Income Properties REIT LP (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.U), or AHIP, is a limited partnership formed to invest in hotel real estate properties located in the United States. AHIP currently has 112 hotels, and is engaged in growing its portfolio of premium branded, select-service hotels in larger secondary markets that have diverse and stable demand. AHIP hotels operate under brands affiliated with Marriott, Hilton, IHG, Wyndham and Choice Hotels through license agreements.  The company's long-term objectives are to build on its proven track record of successful investment, deliver reliable and consistent U.S. dollar denominated distributions to unitholders, and generate value through the continued growth of its diversified hotel portfolio.  More information is available at www.ahipreit.com.

FIRST QUARTER HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

SOURCE American Hotel Income Properties REIT LP

Related Links

www.ahipreit.com

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