(All amounts expressed in U.S. dollars unless otherwise indicated)
American Hotel Income Properties REIT LP (AHIP) (TSX: HOT.UN) (OTCQX: AHOTF) announced yesterday its financial results for the three months ended March 31, 2017.
Q1 2017 EXECUTIVE SUMMARY
During the first quarter, AHIP continued its disciplined investment strategy to offer investors U.S. dollar denominated distributions through the acquisition of premium branded, select-service hotels in larger secondary U.S. markets with diverse and stable demand from corporate and transient travelers as well as long standing contractual railway customers.
In Q1 2017, funds from operations (“FFO“) increased by 61.0% to $11.6 million, while adjusted funds from operations (“AFFO“) rose 60.7% to $9.8 million as a result of the addition of new hotels to AHIP’s portfolio. Total revenues for the quarter increased by 53.8% to $61.7 million, EBITDA rose 57.9% to $16.9 million and EBITDA margin was up by 70 basis points to 27.3%.
“AHIP’s first quarter results were strong and reflected our disciplined and focused investment strategy. During this quarter, AHIP acquired five premium select-service, Embassy Suites by Hilton hotels totaling 1,311 guestrooms in larger secondary U.S. markets in Texas, Arizona and Ohio,” said Rob O’Neill, AHIP’s CEO. Mr. O’Neill continued, “These acquisitions totaling over $180 million reflect our pragmatic acquisition strategy to diversify the portfolio geographically with strong, demand focused hotels that deliver higher margins with lower volatility and partnering with some of the world’s preeminent and trusted hotel brand families.”
- Total revenues for the quarter increased by 53.8% to $61.7 million compared to $40.1 million for the same quarter last year as a result of the acquisition of new hotels between reporting periods.
- Net income for the quarter rose to $2.4 million compared to a loss of $1.5 million in the prior year. Diluted net income per Unit was $0.04 compared to a diluted net loss per Unit of $0.04 in the prior year.
- For the quarter, FFO was up 61.0% to $11.6 million (2016 – $7.2 million) and AFFO was up 60.7% to $9.8 million (2016 – $6.1 million) as a result of the 16 new hotels added over the last two quarters.
- For the quarter, Diluted FFO per Unit was $0.20 (2016 – $0.21) and Diluted AFFO per Unit was $0.17 (2016 – $0.18) with results being affected by the temporary dilution caused by the unutilized cash from the December 2016 Offering.
- Same-property revenue per available room (“RevPAR“) for Branded Hotels was up 2.1% led by Florida, Central, North Carolina and Texas properties with significant RevPAR increases of between 3.9% and 7.6%. This was offset by weakness in the Oklahoma and Pittsburgh properties which saw RevPAR declines of 1.1% and 8.8%, respectively. According to STR, Inc., first quarter 2017 RevPAR for the U.S. hotel industry increased by 3.4%.
- Total portfolio same-property revenues for the quarter were $39.0 million (2016 – $39.8 million) with Branded Hotel same-property revenue growth of 1.5% offset by declines in Rail Hotel same-property revenues as a result of recent contract negotiations which lowered minimum contractual occupancy guarantees in exchange for higher average rates. Total portfolio same-property NOI was $13.0 million (2016 – $14.2 million).
- EBITDA for the quarter was up 57.9% to $16.9 million compared to $10.7 million in the same period last year and EBITDA margin improved by 70 basis points to 27.3% (2016 – 26.6%).
- The AFFO payout ratio during the quarter was 96.6% (2016 – 93.5%) reflecting the issuance of Units from the December 2016 Offering, the net proceeds of which were partially invested during the quarter.
- AHIP’s interest coverage ratio for the first quarter was 3.0x (2016 – 3.1x).
- AHIP paid monthly distributions of $0.054 per Unit during the first quarter, which is equivalent to $0.648 per Unit on an annualized basis.
- As at March 31, 2017, AHIP had an unrestricted cash balance of $20.7 million, restricted cash balance of $33.8 million and an unutilized revolving line of credit of $10.0 million.
- AHIP’s debt-to-gross book value as at March 31, 2017 was 48.4% compared to 44.0% as at December 31, 2016.
FIRST QUARTER DEVELOPMENTS
- On January 6, 2017, AHIP completed the acquisition of the 529-room select-service Embassy Suites by Hilton portfolio in Dallas and Tempe for an aggregate purchase price of approximately $57.6 million before closing adjustments and property improvement plans (“PIPs“). The acquisition was funded using a combination of cash from AHIP’s bought deal offerings completed in July 2016 and December 2016, the assumption of an existing $19.0 million mortgage on the Dallas property, a new $13.5 million mortgage on the Tempe property, and the issuance of approximately $17.4 million (or 2,242,761) in new Units from treasury.
- On January 19, 2017, AHIP completed the acquisition of the 782-room select-service Embassy Suites by Hilton portfolio located in proximity to Columbus, Cleveland and Cincinnati, Ohio for an aggregate purchase price of approximately $124.0 million including the expected cost of capital work on acquisition and PIPs. The acquisition was funded by cash on hand from AHIP’s December 2016 bought deal offering of units and a new $65.0 million mortgage.
- On March 15, 2017, AHIP completed the sale of the 77-room Country Inn & Suites by Carlson hotel in Norman, Oklahoma, a non-core branded hotel, for gross proceeds of $4.5 million.
Ian McAuley, President of AHIP, commented, “We are building on our successful track record of delivering reliable and consistent U.S. dollar denominated cash flows to unitholders while growing our diversified hotel portfolio. The growth in EBITDA, FFO and AFFO during the first quarter continues to support and reflect our ongoing growth strategy.”
ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP
AHIP is a limited partnership formed under the Limited Partnerships Act (Ontario) to invest in hotel real estate properties located substantially in the United States and engaged primarily in growing a portfolio of premium branded, select-service hotels in larger secondary markets with diverse and stable demand generators as well as long standing contractual railway customers.
AHIP’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 add value through ongoing growth of its diversified hotel portfolio.