American Hotel Income Properties REIT LP Reports Third Quarter 2021 Results

• Revenues increased to $68.4 million compared to $63.6 million in Q2 2021
• Q3 ADR of $118.49 matched Q3 2019 levels, Occupancy of 68.8% & RevPAR of $81.50
• Q3 2021 diluted FFO per unit of $0.32¹; or $0.16 per unit excluding non-recurring items
• New distribution policy adopted; reinstating monthly distributions in March 2022 at an annual rate of USD$0.18 per unit
• Payment of deferred March 2020 distribution to be made on December 31, 2021
• Total liquidity as at September 30, 2021 was $43.6 million

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

VANCOUVER, BC, Nov. 9, 2021 /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, 2021.

"During the third quarter our portfolio continued to post impressive results, with both top and bottom-line measures nearing pre-COVID levels." said Jonathan Korol, CEO. Mr. Korol continued, "Persistent demand from the domestic leisure traveller and signs of improvement from business customers resulted in Q3 average daily rate matching Q3 2019 numbers. In addition, steady Occupancy together with persistent margin improvements resulted in portfolio net operating income finishing within three percentage points of 2019 levels. These results demonstrate signs of continued improvement despite the ongoing COVID-19 pandemic."

"We are pleased to announce that the Board has approved the re-instatement of monthly distributions on our units with payment commencing in March 2022 at an annual rate of USD$0.18 per unit. In addition, the Board also approved the payment of our deferred March 2020 distribution on December 31, 2021." Mr. Korol added: "The return of our monthly distribution is appropriate and possible due to the financial resiliency of our portfolio. Throughout the pandemic, AHIP's portfolio has demonstrated one of the primary benefits of the premium-branded select service hotel operating model – the ability to generate cash flow at fluctuating levels of demand."

"We believe this distribution policy is sustainable and will help us manage our liquidity and maintain discipline with our balance sheet, which in turn will improve AHIP's access to capital markets to fund new acquisitions." Mr. Korol continued: "As one of the first North American public lodging REITs to announce the re-instatement of regular distributions, I am extremely proud of the measures adopted by our team during the pandemic and the ongoing dedication of our hotel associates, absent which we would not have reached this milestone so soon."

THREE MONTHS ENDED SEPTEMBER 30, 2021 FINANCIAL HIGHLIGHTS

• Revenues for the quarter increased by $22.1 million (or 47.7%) to $68.4 million (2020 – $46.3 million) compared to the prior year, reflecting the ongoing recovery from significantly lower demand in the prior year due to COVID-19.
• Revenue per Available Room ("RevPAR") increased 47.9% to $81.50 (2020 – $55.12) caused by Average Daily Rate ("ADR") increases of 22.7% to $118.49 (2020 – $96.53) and Occupancy increase by 1,170 basis points to 68.8% (2020 – 57.1%).
• Net income and comprehensive income for the quarter was $15.7 million (2020 – loss of $12.7 million) primarily as a result of the recognition of $14.7 million of other income from the estimated forgiveness of government-guaranteed loans and changes in the fair value of the interest rate swaps and warrants in the period. A strong recovery in leisure travel and decrease in finance costs further strengthened AHIP's financial performance.
• Net operating income ("NOI") for Q3 2021 increased to $26.4 million (2020 – $14.6 million). The increase in NOI is due to overall improvements in ADR.
• Funds from operations ("FFO") for Q3 2021 increased to $26.4 million (2020 – $0.1 million) and adjusted funds from operations ("AFFO") increased to $26.1 million (2020 – $0.2 million). The increase in FFO and AFFO is due to higher NOI from an improvement in operations and two non-recurring items: $14.7 million of other income from the estimated forgiveness of government-guaranteed loans offset by a $1.0 million expense for an inventory adjustment. Excluding these two non-recurring items FFO and AFFO were $12.7 million and $12.4 million respectively.
• Q3 2021 Diluted FFO per Unit was $0.32 (2020 – $0.00) and Diluted AFFO per Unit was $0.32 (2020 – $0.00). Excluding the two above noted non-recurring items, these amounts were $0.16 and $0.15 per Unit, respectively.
• Strong performance continued through October 2021, with Occupancy of 70.2%, ADR of $117.88 and RevPAR of $82.70, each at 0.89x, 0.98x and 0.87x of October 2019 levels, respectively.
• During the three months ended September 30, 2021, AHIP estimated that approximately $14.7 million of its total $15.1 million government-guaranteed loans will meet the specific criteria for forgiveness. Accordingly, for the three and nine months ended September 30, 2021, AHIP recorded $14.7 million as other income and reduced the carrying value of these loans to the estimated settlement amount.

NINE MONTHS ENDED SEPTEMBER 30, 2021 FINANCIAL HIGHLIGHTS

• For AHIP's current portfolio of premium branded hotels only and using prior ownership's financial information for the 12 premium branded hotels acquired in December 2019, AHIP's existing portfolio has meaningfully narrowed the previously sizeable gap between 2021 and 2019 demand levels, while exceeding 2019 net operating income margin levels:

• AHIP's five Embassy Suites properties, which represent 1,311 rooms or 15% of our portfolio, remained 26% below 2019 RevPAR largely driven by an 1,887 basis points decrease in Occupancy levels. This is a significant improvement from the second quarter where RevPAR was 36% below 2019 levels and 2,130 basis points below 2019 Occupancy rates.
• RevPAR increased by 35.5% to $71.76 (2020 – $52.95) with Occupancy increasing by 1,510 basis points to 66.4% (2020 – 51.3%). ADR increased by 4.8% to $108.15 (2020 – $103.21), partially offset by two months of higher pre-COVID ADR in January and February 2020.
• AHIP's 24 extended stay properties were the strongest performing segment with recovery of RevPAR to 0.85x of 2019 RevPAR.
• FFO increased to $35.9 million (2020 – ($4.3) million). AFFO increased to $35.5 million (2020 – ($4.8) million). Excluding the two above noted non-recurring items, these amounts are $22.2 million and $21.8 million, respectively.
• Diluted FFO per Unit was $0.46 (2020 – ($0.06)) and Diluted AFFO per Unit was $0.44 (2020 – ($0.06)). Excluding the two above noted non-recurring items, these amounts are $0.28 and $0.28 per Unit, respectively.
• 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, outperformed their identified direct competition with an average index rating of 109.5 during the quarter (Q3 2020 – 122.4), with 100.0 representing a fair share of the market.
• NOI increased to $67.8 million (2020 – $36.6 million) due to higher revenues and expense reduction initiatives. NOI Margins increased to 37.9% (2020 – 27.2%) attributable to extensive cost saving measures and relaxed brand standards which reduced operating expenses during this period compared to the prior period.
• Net income and comprehensive income was $2.2 million (2020 – loss of $45.5 million), as a result of a $14.7 million gain recognized from loan forgiveness. A higher NOI, lack of impairment charges, partially offset by higher deferred tax expense, further contributed to AHIP's positive performance.
• As part of effective asset management of the portfolio, AHIP deferred a number of capital projects in 2020 to preserve cash during the height of the pandemic. With approval from the hotel franchisors, all 2020 capital projects have been deferred to late 2021 and beyond in order to maximize cash balances. Franchisors have also provided temporary waivers of AHIP's obligations to fund ongoing Furniture, Fixtures and Equipment ("FF&E") reserves.

LEVERAGE AND LIQUIDITY

• As at September 30, 2021, AHIP had a total available liquidity of $43.6 million (2020 - $35.8 million) including an unrestricted cash balance of $14.8 million (2020 - $20.1 million) and available revolver capacity of approximately $28.8 million (2020 - $15.7 million). AHIP also has a restricted cash balance of $36.6 million which will be used to fund future Property Improvement Plans ("PIPs") and FF&E expenditures.
• Improvement in liquidity to $43.6 million at September 30, 2021 compared to the $35.8 million in the prior year is linked to both improvement in operations and net cash generated from financing for the nine months ended September 30, 2021.
• Cash generated from operations increased to $7.5 million (2020 - $ 5.1 million) as a result of higher operating income from the relative improvement of operations between comparative periods.
• AHIP's debt-to-gross book value as at September 30, 2021 was 54.0% (2020 – 58.2%). This improvement is attributable to the decrease in the revolving credit facility, and government-guaranteed loans that are expected to be forgiven.
• As at September 30, 2021, AHIP's debt had a weighted average remaining term of 3.8 years (2020 – 4.8 years) and a weighted average interest rate of 4.56% (2020 – 4.55%) including continuing and discontinued operations.

DISTRIBUTIONS

AHIP is pleased to announce that its Board of Directors has approved (i) the payment of the deferred March 2020 distribution, with such payment to be made on December 31, 2021 to the unitholders of record as of March 31, 2020, and (ii) the adoption of a distribution policy providing for the payment of regular monthly distributions commencing in March 2022 at an annual rate of USD$0.18 per unit (monthly rate of USD$0.015 per unit). The first regular monthly distribution is currently expected to be declared in mid-February 2022, with a record date at the end of February 2022 and payable in March 2022. The declaration and payment of each monthly distribution under AHIP's distribution policy will remain subject to Board approval, and compliance by AHIP with the terms of its Credit Facility and investor rights agreement.

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, 2021, which are available on AHIP's website at www.ahipreit.com and on SEDAR at www.sedar.com

Q3 2021 FINANCIAL RESULTS CONFERENCE CALL

Management will host a conference call at 10:00 a.m. Eastern time / 7:00 a.m. Pacific time on Wednesday, November 10, 2021 to review the financial results for the three and nine months ended September 30, 2021.

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 2021 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 8:30 p.m. Eastern time / 5:30 p.m. Pacific time on November 10, 2021 until December 1, 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 2984505 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, debt-to-gross book value, Hotel EBITDA, Hotel EBITDA margin. 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, Diluted AFFO per Unit, Hotel EBITDA and Hotel EBITDA margin as supplemental measures of performance and debt-to-gross book value as a supplemental measure of financial condition.

NOI, NOI Margin, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, Hotel EBITDA, Hotel EBITDA margin 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, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, debt-to-gross book value, Hotel EBITDA and Hotel EBITDA margin 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, 2021, 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 it 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 reinstatement of regular monthly distributions with payment commencing in March 2022 and the annual and monthly rates thereof; the expected timing for the declaration, record date and payment of the first regular monthly distribution; the payment of the deferred March 2020 distribution on December 31, 2021; AHIP's belief that the new distribution policy is sustainable and will help AHIP manage its liquidity and maintain discipline with its balance sheet, which in turn will improve AHIP's access to capital markets to fund new acquisitions; all 2020 capital projects have been deferred to late 2021 and beyond in order to maximize cash balances; AHIP's restricted cash balance will be used to fund future PIPs; 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 (although to a lesser extent than previously as vaccinations increase), the U.S. economy, U.S. hotel industry and AHIP's business, and the extent and duration of such impact; business travel in the U.S. will continue to improve; recent recovery trends at AHIP's properties will continue and not regress; AHIP's new distribution policy will be sustainable and will be commenced in accordance with the currently contemplated timing; the March 2020 distribution will be paid on December 31, 2021; AHIP will not be prevented from paying distributions under the terms of its Credit Facility or investor rights agreement; the vaccination programs in the U.S. will be successful and vaccines effective, and government restrictions related to COVID-19 will alleviate and the expected positive impacts thereof on the U.S. economy, U.S. hotel industry, consumer confidence in travel, consumer behavior and AHIP's business will be consistent with AHIP's expectations; AHIP's management team will be successful in growing AHIP's portfolio of premium-branded select service hotel properties across the U.S; AHIP will commence PIP renovations in 2021 and such renovations will be completed on time and on budget; and AHIP will achieve its long term objectives. 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: the impacts of the COVID-19 pandemic on the U.S. economy, the hotel industry, the willingness of the general public to travel, demand for travel, transient and group business, guest traffic and guest reservations, 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 (although to a lesser extent than previously as vaccinations increase), 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; the recent increase in COVID-19 cases attributable primarily to the Delta variant has the potential to reduce corporate and leisure travel in future periods, which may negatively impact AHIP; vaccination rates remain low in various regions, and the effectiveness, acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against emerging variants of COVID-19 (including the Delta variant) all may be less than expected, which may prolong the impacts of COVID-19 on the U.S. economy, lodging industry and AHIP and cause various levels of government to consider the imposition of new travel and other restrictions and may negatively impact corporate travel policies and consumer behavior, which could put downward pressure on Occupancy levels and revenues for an extended period of time; recent recovery trends may not continue and may regress and AHIP may not achieve its expected performance improvements in 2021; monthly cash distributions are not guaranteed and remain subject to the approval of Board of Directors and may be reduced or suspended at any time at the discretion of the Board; the payment of distributions by AHIP to its unitholders, other than the deferred March 2020 distribution, is not permitted during the current covenant waiver period under AHIP's Credit Facility, and thereafter will remain subject to the satisfaction of certain financial covenants under the Credit Facility; in addition, the AHIP's investor rights agreement prohibits the payment of distributions by AHIP in certain circumstances; accordingly, the announced recommencement of regular monthly distributions remains subject to the expiry of the covenant waiver period and the satisfaction of such covenants under the agreement governing the Credit Facility and compliance with the terms of the investor rights agreement; PIP renovations may not commence or complete in accordance with currently expected timing and may suffer from increased material costs; AHIP's restricted cash reserves may be used for purposes other than to fund PIP renovations; AHIP's restricted cash reserves may not be sufficient to fully fund AHIP's PIP obligations or capital plans; AHIP's management team may not be successful in growing AHIP's portfolio of premium-branded select service hotel properties across the U.S; 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 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 November 9, 2021 and annual information form for the year ended December 31, 2020, 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 Interim Financial Statements for the three and nine months ended September 30, 2021, AHIP's MD&A dated November 9, 2021, 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 typically stable demand. AHIP's hotels operate under brands affiliated with Marriott, Hilton, IHG and Choice Hotels through license agreements.  The Company's long-term objectives are to increase the value of its hotel properties through operating excellence, active asset management and investing in value-added capital expenditures, expand its hotel portfolio through selective acquisitions on an accretive basis and increase unitholder value and distributions to unitholders. More information is available at www.ahipreit.com.

THIRD QUARTER HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

SOURCE American Hotel Income Properties REIT LP

Related Links

https://www.ahipreit.com/

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