VANCOUVER, Dec. 22, 2015 – American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN; OTCQX: AHOTF) announced today the acquisition of its 80th income property – a 133-room hotel located in Lincoln, Nebraska (the "Lincoln Property"). The Lincoln Property features a rail crew lodging contract with a large national U.S. railway and is being acquired for an aggregate purchase price of approximately US$3.9 million, including approximately US$1.2 million for planned capital expenditures, and excluding closing and post-acquisition adjustments. The Lincoln Property is being purchased at a trailing twelve month capitalization rate of approximately 14% after all management fees and an FF&E reserve excluding renovation costs (or approximately 10% after renovation costs are included).
ACQUISITION HIGHLIGHTS
- The Lincoln Property is being purchased for approximately US$21,000 per guestroom, which is well below management's estimate of replacement cost. The planned renovations include conversion of the property to an industry leading Oak Tree Inn rail crew hotel including the addition of "Dark and Quiet" guestrooms, common area upgrades and new property management systems.
- AHIP will fund the purchase of the Lincoln Property with cash on-hand and expects to refinance this acquisition with a conventional mortgage during the first quarter of 2016.
- The Lincoln Property has a rail crew contract with one of the largest railway companies in the United States, which currently guarantees 50 guestrooms per night. AHIP owns ten hotels that currently service this railway company.
- Lincoln is the state capital of Nebraska and has a population base of approximately 275,000. One of the major demand generators in the area includes the University of Nebraska-Lincoln, a member of the Big Ten Conference, a Division I collegiate athletic conference.
- This transaction is expected to be completed in January 2016, subject to customary closing conditions and documentation.
Mr. Rob O'Neill, Chief Executive Officer of AHIP commented, "We are pleased to acquire this rail crew hotel at a trailing, fully loaded, capitalization rate of approximately 10% after our planned renovation. It allows us to build on an existing relationship with one of our key railway customers with the opportunity to accommodate further rail client demand as the railway undertakes major capital projects in the area."
The Property will be managed by TR Lodging Enterprises Inc., a wholly-owned subsidiary of O'Neill Hotels & Resorts Ltd. Upon completion of the Lincoln acquisition, AHIP's portfolio will consist of 80 hotels totaling 7,048 guest rooms, with 45 rail crew hotels totaling 3,718 guest rooms and 35 branded hotels totaling 3,330 guest rooms.
FORWARD-LOOKING INFORMATION
Certain statements contained in this news release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Forward-looking statements in this news release include, without limitation, references to: the acquisition of the Lincoln Property and the expected completion timing therefor; the cost and scope of the planned capital expenditures, the manner in which AHIP will fund the acquisition of the Lincoln Property; post-acquisition adjustments to the purchase price for the Lincoln Property; the refinancing of the purchase price with new debt financing; the future performance of any Oak Tree Inn hotels; the total number of hotels and rooms owned by AHIP after giving effect to the acquisition of the Lincoln Property; and the management of the Lincoln Property by TR Lodging Enterprises Inc.
Forward-looking information is based on a number of key expectations and assumptions made by AHIP, including, without limitation: a reasonably stable North American economy and stock market, the continued strength of the U.S. lodging industry, management's estimate of the replacement cost of the Lincoln Property, the ability to secure financing on the Lincoln Property, the condition of the Lincoln Property, the timing and scope of renovation work required to convert the Lincoln Property to Oak Tree Inn standards and the ability to successfully complete such work, the ability to successfully integrate the Lincoln Property, the long-term strategic benefit of the Lincoln Property, any further rail client demand and major capital projects undertaken by the railway in the area. Although the forward-looking information contained in this news release is based on what AHIP's management believes to be reasonable assumptions, AHIP cannot assure investors that actual results will be consistent with such information.
Forward-looking information reflects current expectations of AHIP's management regarding future events and operating performance as of the date of this news release. Such information involves significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, without limitation, those factors that can be found under "Risk Factors" in AHIP's Annual Information Form dated March 27, 2015 and under "Risks and Uncertainties" in AHIP's Management's Discussion and Analysis dated November 12, 2015, both of which are available on SEDAR at www.sedar.com.
The forward-looking statements contained herein represent AHIP's expectations as of the date of this news release, and are subject to change after this date. AHIP assumes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
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