American Hotel Income Properties REIT LP announces US$41.0 million branded hotel portfolio acquisition

VANCOUVER, Nov. 21, 2014 /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 four branded hotel properties (the "Acquisition Properties") located in North Carolina and Florida for an aggregate purchase price of US$41.0 million before customary closing and post-acquisition adjustments. The purchase price does not include a US$2.5 million restricted cash reserve for the completion of brand mandated property improvement plans ("PIPs").

The Acquisition Properties are being purchased at a weighted-average capitalization rate of 8.3% on trailing twelve months net operating income (after inclusion of all hotel management fees, brand franchise fees, a 4.0% FF&E reserve contribution and PIPs).

Acquisition Highlights:

• The Acquisition Properties contain 353 total guest rooms and are being acquired for approximately US$123,000 per guest room inclusive of the cost of the PIPs, which is below management's estimate of replacement cost
• The four select-service hotel properties consist of three Marriott branded properties (a 94-room Courtyard hotel in Statesville, North Carolina, an 83-room Fairfield Inn and Suites in Melbourne, Florida and a 96-room Fairfield Inn and Suites in Titusville, Florida) and one Hilton branded property (an 80-room Hampton Inn in Statesville, North Carolina). The properties are located along major U.S. Interstate Highways near transportation hubs and other significant demand generators
• The investment is expected to be immediately accretive to adjusted funds from operations ("AFFO") per unit
• AHIP will fund the purchase price, including the PIPs, using a combination of cash on hand and a new US$26.1 million CMBS mortgage. The new CMBS mortgage will be for a 10-year term, interest-only for the first seven years with an expected fixed interest rate of 4.30% for the entire term. In addition, the lender has agreed to provide an FF&E reserve waiver for the first two years
• The transaction is expected to close imminently

Robert O'Neill, AHIP's Chief Executive Officer, commented, "This investment is consistent with our stated growth strategy targeting acquisitions of transportation-oriented and branded, select-service hotels located in secondary markets in the United States close to major demand generators. Statesville, North Carolina is an important transportation hub given its location at the intersections of I-77 and I-40 and proximity to numerous manufacturing and distribution centres. Melbourne and Titusville are both located on the I-95 corridor on Florida's Space Coast.  The two Florida hotels will benefit from the Kennedy Space Center, Cape Canaveral Air Force Station, Port Canaveral along with leisure demand generators." Mr. O'Neill continued, "The availability of long-term, low-cost, fixed-rate CMBS debt with a significant interest-only period highlights a key aspect of our conservative approach to leverage, aimed at providing highly stable returns to AHIP's unitholders.  During the past 12 months, we have acquired 23 branded hotels totaling 2,347 guest rooms in order to participate in the growing U.S. lodging industry."

The Acquisition Properties will be managed for AHIP by its exclusive hotel manager, Tower Rock Hotels & Resorts Inc., a wholly owned subsidiary of O'Neill Hotels & 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", "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, the following: references to the purchase and closing costs of the Acquisition Properties; regional lodging demand generators; the completion and estimated costs of PIPs; the near term growth of the Acquisition Properties and U.S. hotel industry overall; the degree to which the Acquisition Properties are accretive; the anticipated closing date of the Acquisition Properties transaction; and the availability of CMBS financing.

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 ability to secure CMBS financing and the ability to successfully integrate the Acquisition Properties. 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 26, 2014.

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 55 hotels including 36 hotels serving the U.S. rail industry pursuant to long-term railway contracts and 19 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 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 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, Tel: [phone], Email: [email protected]