American Hotel Income Properties REIT LP Announces Agreement to Acquire Strategic Railway Lodging Portfolio

VANCOUVER, Aug. 24, 2015 /CNW/ - American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN; OTCQX: AHOTF) announced today that it has agreed to acquire through its subsidiaries a portfolio of five strategic railway lodging facilities (the "Railway Portfolio") for an aggregate purchase price of US$44,775,000, excluding closing and post-acquisition adjustments.

ACQUISITION HIGHLIGHTS

• The Railway Portfolio consists of five hotels containing 586 total guest rooms that are being acquired for approximately US$76,500 per guest room, which is below management's estimate of replacement cost.
  
  
• The five railway lodging facilities include a 160-room hotel in Belen, New Mexico; a 156-room hotel in Gillette, Wyoming; a 118-room hotel in Ravenna, Nebraska; a 96-room hotel in Guernsey, Wyoming; and a 56-room hotel in Edgemont, South Dakota.
  
  
• The Railway Portfolio is secured by long term lodging contracts with one of the U.S.'s top three railway companies, which guarantee in excess of 80% of the available guestrooms for terms averaging nine years. AHIP presently owns three Oak Tree Inn hotels that are contracted with this railway company.
  
  
• The investment is expected to be immediately accretive to adjusted funds from operations ("AFFO") per unit, and at a trailing capitalization rate consistent with other rail hotel acquisitions.
  
  
• AHIP will fund the purchase of the Railway Portfolio with cash on hand from the proceeds of the bought deal that was completed on August 11, 2015, and additional debt financing. AHIP's term financing on the Railway Portfolio will be US$20 million of the aggregate purchase price with a 10-year term and fixed interest rates of approximately 4.00% for the first 5 years.
  
  
• This transaction is expected to close within the coming weeks upon finalization of the formal debt agreements. Upon completion of the Railway Portfolio acquisition, AHIP's portfolio will consist of 78 hotels totaling 6,798 guest rooms with 43 rail hotels totaling 3,467 guest rooms and 35 branded hotels totaling 3,331 guest rooms.

Rob O'Neill, AHIP's Chief Executive Officer, commented, "This transaction will enable AHIP to unlock the embedded value of the five hotel properties through value add programs and management efficiencies. The properties are secured by railway contracts that we expect will create significant incremental value for AHIP and its unitholders. I have been working on this strategic investment for more than two years. There are few strategic hotel operators focused on U.S. railway lodging and we are very pleased to be acquiring all of the lodging properties owned by a competitor that has been accommodating railway crews since 1973. Upon completion of this transaction, AHIP will have more than doubled its locations with a key railway client and will be its sole dedicated crew lodging provider, building on our Oak Tree Inn's tradition of providing "dark and quiet" room stays for railway companies and their employees."

Mr. O'Neill added, "Negotiations are also underway with this railway client for two additional, previously announced property conversions, totaling 250 guestrooms in Mississippi and Kansas. Upon the expected completion of these transactions, these seven rail initiatives are expected to provide further scale and stability to our rail portfolio through diversification of railway clients and longer term contracts."

The Railway Portfolio will be managed for AHIP by its exclusive hotel manager, TR Lodging Enterprises Inc., a wholly owned subsidiary of Tower Rock Hotels & Resorts Ltd. ("Tower Rock"). Tower Rock is a wholly owned subsidiary of O'Neill Hotels and Resorts Ltd.

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", "believe", "budget", "could", "estimate", "expect", "going-in", "intend", "may", "opportunities", "plan", "potential", "predict", "project", "should" "will", "would" 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 following: the acquisition of the Railway Portfolio and the expected completion timing therefor; post-acquisition adjustments to the purchase price for the Railway Portfolio; the manner in which AHIP will fund the acquisition of the Railway Portfolio; management's expectation that the acquisition of the Railway Portfolio will be immediately accretive to AFFO per unit; the assignment of the railway lodging contracts for the Railway Portfolio; the terms of the railway lodging contracts for the Railway Portfolio; management's expectation that the railway lodging contracts will create significant incremental value for AHIP and its unitholders; the ability of AHIP to unlock the embedded value of the Railway Portfolio; the terms of the new debt financing for the Railway Portfolio; references to property conversions in Mississippi and Kansas; the total number of hotels and rooms owned by AHIP after giving effect to the acquisition of the Railway Portfolio; and references to the management of the Railway Portfolio by TR Lodging Enterprises Inc., a wholly owned subsidiary of AHIP's exclusive hotel manager, Tower Rock Hotels & Resorts 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, the ability to secure debt financing, the ability to successfully integrate the Railway Portfolio and expectations and assumptions related to capitalization rates, fees and reserves and replacement costs for the Railway Portfolio, as applicable. 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 August 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.

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 is engaged primarily in the railroad employee accommodation, transportation-oriented, and select-service lodging sectors. AHIP's properties are mostly located in secondary and tertiary markets in the United States in close proximity to railroads, airports, highway interchanges, and other demand generators. AHIP currently owns 73 hotels including 38 hotels serving the U.S. rail industry pursuant to long-term railway contracts and 35 hotels affiliated with leading national and international hotel brands. AHIP's long-term objectives are to: (i) generate stable and growing cash distributions from hotel properties substantially in the U.S.; (ii) enhance the value of its assets and maximize the long-term value of the hotel properties through active management; and (iii) expand its asset base and increase its AFFO per unit through an accretive acquisition program, participation in strategic development opportunities and improvements to its properties through targeted value-added capital expenditure programs.

ADDITIONAL INFORMATION

Additional information relating to AHIP, including its other public filings, is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE ACCURACY OF THIS NEWS RELEASE.

SOURCE American Hotel Income Properties REIT LP

Andrew Greig, Investor Relations
American Hotel Income Properties REIT LP
Suite 1660 - 401 West Georgia Street
Vancouver, B.C. V6B 5A1
Phone: [phone]
Email: [email protected]