American Hotel Income Properties REIT LP Reports Third Quarter 2020 Results

• All hotels currently open, with Q3 2020 occupancy of 57.1%, representing a 22.4 percentage point increase over Q2 2020 occupancy of 34.7%
• One of the few U.S. hotel REITs reporting positive FFO and cash flow during the third quarter
• AHIP's hotels outperformed their competitive sets with a RevPAR Index of 122.6 during Q3
• Total revenues of $46.3 million and NOI of $14.6 million during the third quarter
• Continued focus on capital preservation, liquidity and cost containment
• CMBS loan relief now obtained for all of AHIP's CMBS loans, totalling $578 million

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

VANCOUVER, BC, Nov. 9, 2020 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP", or the "Company") (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.U) announced today its financial results for the three and nine months ended September 30, 2020. 

"While AHIP's third quarter was impacted by the ongoing pandemic, we were pleased to see continued occupancy and RevPAR improvement across our portfolio of 78 Premium Branded hotels – all of which have been open since mid-June," said Jonathan Korol, CEO.  "Our team's operational emphasis on cost containment has yielded impressive results with higher Q3 NOI margins of 31.5% compared to 15.8% in Q2. We have also successfully negotiated loan relief for all of our loans, and remain focused on our balance sheet to further enhance our liquidity position."

Mr. Korol continued: "While we expect the trend of sequential occupancy and RevPAR improvement to moderate as we enter the seasonally slower winter months, our strategically well-positioned suite-focused hotels, primarily in drive-to secondary markets, should continue to see higher demand, compared to hotels in more urban environments and hotels that are more reliant on group and corporate customers."

THREE MONTHS ENDED SEPTEMBER 30, 2020 FINANCIAL HIGHLIGHTS

• Revenues for the quarter decreased 47.7% to $46.3 million (Q3 2019 – $88.5 million) as a result of lower demand due to the significant impact of COVID-19 and portfolio changes between periods. On a sequential basis, revenue for the quarter increased 69.8% from Q2 2020. All of AHIP's hotels segments experienced material revenue growth compared to Q2 2020, including AHIP's extended-stay, select-service and Embassy Suites properties.
• Average Daily Rate ("ADR") for the quarter decreased 3.7% compared to Q3 2019, to $96.53 (Q3 2019 – $100.19) due to the impact of COVID-19 and portfolio changes between periods. On a sequential basis, ADR increased 1.5% from Q2 2020.
• Occupancy during the third quarter decreased 19.4 percentage points to 57.1% (Q3 2019 – 76.5%). Average occupancy in July was 55.3%. Average occupancy in August was 58.3%. Average occupancy in September was 57.7%. On a sequential basis, third quarter occupancy increased 22.4 percentage points compared to Q2 2020 occupancy of 34.7%. AHIP's 24 extended-stay properties continued to see strong occupancy during the third quarter, recording 70.6% average occupancy.
• Revenue per Available Room ("RevPAR") for the quarter decreased 28.1% to $55.12 (Q3 2019 – $76.65) due to significantly reduced demand related to COVID-19. On a sequential basis, RevPAR increased 67.0% from Q2 2020.
• The STR RevPAR index, which compares the performance of AHIP-owned hotels to their competitive set in each region, indicated AHIP's 78 Premium Branded hotels have, in aggregate, significantly outperformed their identified direct competition with an average index rating of 122.6 during the quarter (Q3 2019 – 118.3) – with 100.0 representing a 'fair share' of the market.
• Net Operating Income ("NOI") decreased by 50.8% to $14.6 million (Q3 2019 – $29.7 million) due to lower revenues, partially offset by expense reduction initiatives. On a sequential basis, NOI increased 239% from Q2 2020.
• NOI Margins decreased to 31.5% (Q3 2019 – 33.5%) as a result of lower revenue.
• Loss and comprehensive loss for the third quarter was ($12.1) million, compared to net income and comprehensive income of $2.1 million in Q3 2019, as a result of lower NOI, higher interest expenses, and $2.5 of non-cash impairment charges related to three hotels.
• Diluted loss per Unit for the quarter was ($0.15) compared to a diluted income per Unit of $0.03 in Q3 2019.
• Funds from operations ("FFO") in Q3 2020 decreased to $0.1 million (Q3 2019 – $15.6 million) and adjusted funds from operations ("AFFO") decreased to $0.2 million (Q3 2019 – $14.1 million), due to the impact of COVID-19.
• Q3 2020 diluted FFO per Unit was $0.00 (Q3 2019 – $0.20) and diluted AFFO per Unit was $0.00 (Q3 2019 – $0.18).

Same-Property Results

Same-property metrics represent the performance of the 66 Premium Branded hotels owned in both the current and comparative period, or 85% of AHIP's total current hotel portfolio based on number of hotels.

• Same-property revenues for the second quarter decreased 42.4% to $39.3 million (Q3 2019 – $68.3 million) due to lower demand as a result of the impact of COVID-19.
• Same-property ADR decreased 18.2% to $95.54 (Q3 2019 – $116.86).
• Same-property RevPAR decreased 41.0% to $54.46 (Q3 2019 – $92.32).
• Same-property occupancy decreased 22.0 percentage points to 57.0% (Q3 2019 – 79.0%).
• Same-property NOI was $12.3 million (Q3 2019 – $23.2 million) and the NOI margin was 31.4% (Q3 2019 – 34.1%). NOI declines were due to lower revenues caused by lower demand as a result of the impact of COVID-19, which were partially offset by expense reduction initiatives.

NINE MONTHS ENDED SEPTEMBER 30, 2020 FINANCIAL HIGHLIGHTS

• Revenues for the first nine months of 2020 decreased 47.7% to $135.4 million (2019 – $259.1 million) as a result of lower demand due to the significant impacts from COVID-19 and portfolio changes between periods.
• Average Daily Rate ("ADR") increased 4.2% compared to the first nine months of 2019, to $103.21 (2019 – $99.01) due to portfolio changes between periods, partially offset by the impacts from COVID-19.
• Occupancy during the first nine months of 2020 decreased 24.4 percentage points to 51.3% (2019 – 75.7%) as a result of lower demand due to the significant impacts from COVID-19.
• Revenue per Available Room ("RevPAR") decreased 29.4% compared to the first nine months of last year, to $52.95 (2019 – $74.95).
• Net Operating Income ("NOI") decreased by 58.2% to $36.8 million (2019 – $87.9 million) due to lower revenues, and partially offset by expense reduction initiatives.
• NOI Margins decreased to 27.1% (2019 – 33.9%) as a result of lower revenue.
• Loss and comprehensive loss for the first nine months of 2020 was ($45.5) million, compared to net income and comprehensive income of $7.5 million in 2019, as a result of lower NOI, fair value changes on interest rate swaps, impairment charges related to certain hotels, and increased interest expense.
• Diluted loss per Unit for the first nine months was ($0.58) compared to a diluted income per Unit of $0.10 in the first nine months of 2019.
• Funds from operations ("FFO") in the first nine months of 2020 decreased to ($4.3) million (2019 – $45.1 million) and adjusted funds from operations ("AFFO") decreased to ($4.8) million (2019 – $40.7 million), due to the impact of COVID-19.
• Diluted FFO per Unit in the first nine months of 2020 was ($0.06) (2019 – $0.57) and diluted AFFO per Unit was ($0.06) (2019 – $0.51).

Capital Metrics and Liquidity

• As at September 30, 2020, AHIP had an unrestricted cash balance of $26.9 million (December 31, 2019 – $17.8 million), a restricted cash balance of $25.7 million and available revolver capacity of $13.3 million.
• AHIP is current on all of its loan payments and has successfully obtained loan relief under all of its loan agreements, including all of its CMBS loans totaling approximately $578 million. The relief provisions under AHIP's CMBS loans allow for the use of restricted cash reserves to fund debt service and/or provide waivers of the requirement to fund FF&E reserves for periods of up to 90 days. These relief initiatives provide additional flexibility for AHIP as the Company continues to recover from the impact of COVID-19 on the hotel sector.
• As at September 30, 2020, AHIP's debt had a weighted average remaining term of 4.8 years (Q3 2019 – 5.7 years) and a weighted average interest rate of 4.55% (Q3 2019 – 4.64%), with no significant debt maturities until June 2022.
• AHIP's debt-to-gross book value as at September 30, 2020 was 58.2% (September 30, 2019 – 53.6%).

THIRD QUARTER DEVELOPMENTS

• On August 31, 2020, AHIP completed the sale of its 86-room Wingate Tampa hotel property for gross purchase price of $7.5 million.

SUBSEQUENT EVENTS

• On October 7, 2020, Jonathan Korol joined AHIP as Chief Executive Officer, and has agreed to receive half of his salary in units through 2021 to further align his interests with unitholders.
• On October 30, 2020, the purchaser of AHIP's former Economy Lodging Portfolio repaid a $2.4 million short term loan including accrued interest.
• Average hotel occupancy for the month of October 2020 was 58.3%.
• On November 6, 2020, AHIP entered into an agreement to extend the time for payment of the remaining deferred purchase price of $17.1 million for the acquisition of 12 Premium Branded properties that completed December 3, 2019 from December 31, 2020 to periodic payments ending December 31, 2021.

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 and nine months ended September 30, 2020, which are available on AHIP's website at www.ahipreit.com and on SEDAR at www.sedar.com.

Q3 2020 FINANCIAL RESULTS CONFERENCE CALL

Management will host a conference call at 1:00 p.m. Eastern time / 10:00 a.m. Pacific time on Wednesday, November 10, 2020 to review the financial results for the three months ended September 30, 2020.

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' Q3 2020 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 4:00 p.m. Eastern time / 1:00 p.m. Pacific time on November 10, 2020 until January 12, 2021. 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 9064238 followed by the # key.

NON-IFRS MEASURES

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

Debt-to-gross book value, NOI, NOI Margin, FFO, diluted FFO per Unit, AFFO, diluted AFFO per Unit 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, NOI Margin, FFO, diluted FFO per Unit, AFFO, diluted AFFO per Unit, 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 November 9, 2020, 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, and 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 information in this news release includes, but is not limited to, statements with respect to: AHIP remaining focused on its balance sheet to further enhance its liquidity position; AHIP's expectation that the sequential occupancy and RevPAR improvement will moderate in the seasonally slower winter months; AHIP's belief that its hotels should continue to see higher demand compared to hotels in more urban environments and hotels that are more reliant on group and corporate customers; the relief AHIP has received from its CMBS loan servicers providing additional flexibility for AHIP as AHIP continues to recover from the impact of COVID-19 on the hotel sector; and AHIP's stated long-term objectives.

Forward-looking information is based on a number of key expectations and assumptions made by AHIP, including, without limitation: the COVID-19 pandemic will continue to negatively impact the U.S. economy, U.S. hotel industry and AHIP's business, and the extent and duration of such impact; AHIP's occupancy levels will not materially deteriorate from current levels; AHIP will be able to continue to operate its 78 hotels during the COVID-19 pandemic; AHIP will not cease guest operations at a material number of properties as a result of government regulations, lack of sufficient guest bookings or other reasons; AHIP's cost reduction, cash conservation and liquidity strategies will achieve their stated objectives and AHIP will continue to have sufficient funds to meet its financial obligations; AHIP's hotels will continue to see higher demand compared to hotels in more urban environments and hotels that are more reliant on group and corporate customers; there will be a meaningful economic recovery in the U.S. and within the U.S. hotel industry; and AHIP will continue to generate positive cash flows; recent occupancy and RevPAR recovery trends will moderate but not significantly regress in the winter months.  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 is 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 information involves significant risks and uncertainties and should not be read as a guarantee of future performance or results as actual results may differ materially from those expressed or implied in such forward-looking information. Those risks and uncertainties include, among other things, risks related to: the impacts of the COVID-19 pandemic on the U.S. economy, the hotel industry, the willingness of the general public to travel, the level of consumer confidence in the safety of travel, consumer and corporate behavior with respect to travel and AHIP's business, all of which have negatively impacted, and are expected to continue to negatively impact, AHIP and may materially adversely affect AHIP's investments, results of operations, financial condition and AHIP's ability to obtain additional equity or debt financing, or re-finance existing debt, or make interest and principal payments to its lenders and to holders of AHIP's debentures, and otherwise satisfy its financial obligations and may cause AHIP to be in non-compliance with one or more of the financial or other covenants under its existing credit facilities and cause a default, or engage certain restrictive provisions (including cash management provisions), thereunder; 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; the pace of recovery following the COVID-19 pandemic cannot be accurately predicated and may be slow; AHIP's cost reduction and cash conservation initiatives may not achieve their stated objectives, and cash savings may be less than anticipated; AHIP's liquidity initiatives may not achieve their stated objectives, and liquidity generated may be less than anticipated; AHIP may require additional debt or equity capital in order to replenish any reserve funds drawn in accordance with the timing required by its CMBS loan servicers, and such funds may not be available to AHIP on reasonable terms, or at all; AHIP may require covenant waivers under its credit facility subsequent to Q1 2021, and if required, such waivers may not be provided by its credit facility syndicate on terms acceptable to AHIP, or at all; current occupancy and RevPAR recovery trends at AHIP's hotels may not continue, may decelerate or regress; AHIP's hotels may not continue to see higher demand compared to hotels in more urban environments and hotels that are more reliant on group and corporate customers; the impacts of COVID-19 on AHIP's anticipated revenue levels and the recoverable amount of its hotel properties could lead to impairment charges on hotel properties in future periods; AHIP may not satisfy the criteria for forgiveness of certain government guaranteed loans obtained by AHIP; 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 the forward-looking information contained herein are based upon reasonable assumptions and information currently available; however, management can give no assurance that actual results will be consistent with such forward-looking information. Additional information about risks and uncertainties is contained in AHIP's MD&A dated November 9, 2020 and annual information form for the year ended December 31, 2019, 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 stated 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 and nine months ended September 30, 2020, AHIP's MD&A dated November 9, 2020, 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 across the United States. AHIP's 78 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.  The Company'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 its diversified hotel portfolio. More information is available at www.ahipreit.com.

THIRD QUARTER HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

FIRST NINE MONTHS HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

SOURCE American Hotel Income Properties REIT LP

Related Links

www.ahipreit.com

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