VANCOUVER, British Columbia, Nov. 06, 2024 (GLOBE NEWSWIRE) -- American Hotel Income Properties REIT LP ("AHIP”, or the "Company”) (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB. V), today announced its financial results for the three and nine months ended September 30, 2024.
All amounts presented in this news release are in United States dollars ("U.S. dollars”) unless otherwise indicated.
2024 THIRD QUARTER HIGHLIGHTS
- AHIP is taking decisive steps to improve its balance sheet and address near term debt maturities through strategic dispositions of non-core hotels and planned refinancings.
- Same property RevPAR (1) was $98 for the third quarter of 2024, an increase of 2.1% compared to the same period of 2023 with increases in both ADR (1) and occupancy (1).
- Same property NOI was $19.0 million for the third quarter of 2024, an increase of 0.5% compared to the same period of 2023.
- Same property NOI margin was 30.2% for the third quarter of 2024, a decrease of 50 bps compared to the same period of 2023.
- Diluted FFO per unit (1) and normalized diluted FFO per unit (1) were $0.06 and $0.07, respectively, for the third quarter of 2024, compared to $0.17 and $0.11 for the same period of 2023.
- Completed dispositions of five hotel properties for total gross proceeds of $54.7 million in the current quarter, with a blended Cap Rate (1) of 7.3% on 2023 annual hotel EBITDA (1), after adjusting for an industry standard 4% FF&E reserve.
- Since September 30, 2024, the dispositions of four hotel properties for total gross proceeds of $40.8 million were completed, and the dispositions of five additional hotel properties for total gross proceeds of $52.8 million are expected to be completed in the fourth quarter of 2024. These dispositions represent a blended Cap Rate of 6.9%, and 6.4%, respectively, both on 2023 annual hotel EBITDA, after adjusting for an industry standard 4% FF&E reserve.
- The dispositions completed in the current quarter resulted in total debt repayment of $49.5 million. Including dispositions completed since September 30, 2024, and expected to be completed in the fourth quarter of 2024, total estimated debt repayment is $78.0 million which includes estimated repayments of $35.4 million to the term loans governed by the Sixth Amendment (defined below), which will satisfy the primary remaining condition to extend the maturity of the revolving credit facility and term loans.
- Debt to gross book value (1) was 50.1% as at September 30, 2024, a decrease of 180 bps compared to 51.9% as at December 31, 2023.
- Debt to TTM EBITDA (1) was 9.1x as at September 30, 2024, a decrease of 1.0x compared to 10.1x as at September 30, 2023.
- AHIP had $36.5 million in available liquidity as at September 30, 2024, compared to $27.8 million as at December 31, 2023. The available liquidity of $36.5 million was comprised of an unrestricted cash balance of $25.8 million and borrowing availability of $10.7 million under the revolving credit facility.
Mr. Korol added: "In 2024, AHIP made significant progress on our plan to reduce debt and high-grade the portfolio through asset sales and loan refinancings. AHIP has completed the dispositions of eleven hotel properties and has five additional hotel properties under contract for sale for total gross proceeds of $165.2 million. These dispositions are expected to result in an improvement to the portfolio with a pro forma increase in RevPAR, NOI margin and EBITDA per hotel. AHIP also signed a non-binding term sheet with a major US Bank to refinance certain borrowing base hotel properties under our senior credit facility, which will significantly reduce the balance of our term loans and revolving credit facility in the fourth quarter of 2024.
Once completed, these steps will strengthen our liquidity and balance sheet and resolve all of our 2024 debt maturities. With the US economy remaining strong, we are positioned to benefit if the industry operating environment improves in 2025. We will continue to monitor macroeconomic conditions and operating performance, while considering further strategic opportunities to deliver value to unitholders over the long term.”
2024 THIRD QUARTER REVIEW
FINANCIAL AND OPERATIONAL HIGHLIGHTS
For the three months ended September 30, 2024, ADR, occupancy, and RevPAR were consistent with the same period in 2023. The improved RevPAR for the extended stay and select service properties was offset by lower RevPAR for the Embassy Suites properties.
NOI and normalized NOI were $19.5 million and $19.9 million for the three months ended September 30, 2024, decreases of 12.6% and 12.7%, respectively, compared to NOI of $22.3 million and normalized NOI of $22.8 million for the same period in 2023. The decrease in NOI and normalized NOI was primarily due to the disposition of the seven hotel properties completed during the nine months ended September 30, 2024.
NOI margin was 29.6% in the current quarter, a decrease of 60 bps compared to the same period in 2023. The decrease in NOI margin was due to higher operating expenses as a result of higher salaries and repair and maintenance expenses in the current quarter. Although certain operating expenses are expected to remain a challenge in 2024, the year-over-year NOI margin decline has improved from 270 bps in the first quarter of 2024 to 60 bps in the current quarter.
AHIP completed its property insurance renewal effective June 1, 2024, with a decrease in premiums compared to the prior period ended May 31, 2024. On an annualized basis, the decrease from the prior period is approximately $1.6 million, which will be recognized in earnings over a twelve-month period.
Diluted FFO per unit and normalized diluted FFO per unit were $0.06 and $0.07 for the third quarter of 2024, respectively, compared to diluted FFO per unit of $0.17 and normalized diluted FFO per unit of $0.11 for the same period in 2023. The decrease in normalized diluted FFO per unit was mainly due to lower NOI and higher financing costs, partially offset by lower corporate and administrative expenses in the current quarter.
SAME PROPERTY KPIs
The following table summarizes key performance indicators ("KPIs”) for the portfolio for the five most recent quarters with a comparison to the same period in the prior year.
| KPIs | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 |
| ADR | $135 | $137 | $134 | $128 | $134 |
| Change compared to same period in prior year - % increase/(decrease) | 0.7% | 1.7% | (1.0%) | - | 3.3% |
| Occupancy | 72.7% | 75.6% | 67.4% | 67.2% | 71.9% |
| Change compared to same period in prior year - bps increase/(decrease) | 80 | 86 | 54 | (114) | (208) |
| RevPAR | $98 | $104 | $90 | $86 | $96 |
| Change compared to same period in prior year - % increase/(decrease) | 2.1% | 2.8% | (0.2%) | (1.7%) | 0.4% |
| NOI (thousands of dollars) | $18,983 | $20,618 | $15,805 | $14,272 | $18,882 |
| Change compared to same period in prior year - % increase/(decrease) | 0.5% | (2.4%) | (4.3%) | (20.2%) | (6.0%) |
| NOI Margin | 30.2% | 32.5% | 28.1% | 25.6% | 30.7% |
| Change compared to same period in prior year - bps increase/(decrease) | (50) | (164) | (213) | (651) | (256) |
Same property ADR in the current quarter is $135, an increase of 0.7% compared to the same period of 2023. Same property occupancy increased by 80 bps to 72.7% in the current quarter compared to the same period of 2023. The increase in ADR and occupancy is primarily attributable to higher demand for extended stay and select service properties.
Same property NOI margin decreased by 50 bps to 30.2% compared to the same period of 2023. The decrease in the same property NOI margin was due to higher operating expenses as a result of higher salaries and repair and maintenance expenses in the current quarter. Although certain operating expenses are expected to remain a challenge in 2024, the year-over-year same property NOI margin decline has improved for four consecutive quarters since the fourth quarter of 2023.
LEVERAGE AND LIQUIDITY
| KPIs | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 |
| Debt-to-GBV | 50.1% | 52.0% | 52.2% | 51.9% | 51.1% |
| Debt-to-TTM EBITDA | 9.1x | 9.7x | 10.5x | 10.6x | 10.1x |
Debt to gross book value as at September 30, 2024 was 50.1%, a decrease of 180 bps compared to December 31, 2023. Debt to TTM EBITDA as at September 30, 2024 was 9.1x, a decrease of 1.0x compared to September 30, 2023. The improvement in debt to gross book value and debt to TTM EBITDA was due to the use of net proceeds from the completed dispositions to pay down CMBS mortgage debt and the term loans governed by the Sixth Amendment.
As at September 30, 2024, AHIP had $36.5 million in available liquidity, compared to $27.8 million as at December 31, 2023. The available liquidity of $36.5 million was comprised of an unrestricted cash balance of $25.8 million and borrowing availability of $10.7 million under the revolving credit facility. AHIP had an additional restricted cash balance of $35.4 million as at September 30, 2024.
CAPITAL RECYCLING
2024 Hotel Dispositions Summary
| Hotel | Location | Gross Proceeds (millions of dollars) | Keys | Gross proceeds
per key | Cap Rate on 2023 annual hotel EBITDA | Closing Date (Actual/ Expected) | ||
| Completed Dispositions: | ||||||||
| Hampton Inn Harrisonburg University | Harrisonburg, Virginia | $8.6 | 159 | $54,000 | 7.9% | Q1 2024 | ||
| Residence Inn Cranberry | Cranberry, Pennsylvania | $8.3 | 96 | $86,000 | 9.3% | Q1 2024 | ||
| Total completed in Q1 2024 | $16.9 | 255 | $66,000 | 8.6% | ||||
| Holiday Inn Amarillo West Medical Center | Amarillo, Texas | $8.3 | 151 | $55,000 | 3.6% | Q3 2024 | ||
| Fairfield Inn & Suites Amarillo Airport | Amarillo, Texas | $9.3 | 79 | $118,000 | 8.1% | Q3 2024 | ||
| Residence Inn Egg Harbor Township | Egg Harbor, New Jersey | $11.1 | 101 | $110,000 | 4.4% | Q3 2024 | ||
| Residence Inn Ocala | Ocala, Florida | $11.1 | 87 | $128,000 | 10.1% | Q3 2024 | ||
| Courtyard Ocala | Ocala, Florida | $14.9 | 169 | $88,000 | 8.8% | Q3 2024 | ||
| Total completed in Q3 2024 | $54.7 | 587 | $93,000 | 7.3% | ||||
| Courtyard Statesville Mooresville Lake Norman | Statesville, North Carolina | $13.0 | 94 | $138,000 | 7.6% | Q4 2024 | ||
| Hampton Inn Statesville | Statesville, North Carolina | $12.2 | 80 | $153,000 | 8.0% | Q4 2024 | ||
| Fairfield Inn & Suites Melbourne West | Melbourne, Florida | $6.6 | 83 | $80,000 | 7.7% | Q4 2024 | ||
| Home2 Suites Houston Willowbrook | Houston, Texas | $9.0 | 108 | $84,000 | 3.7% | Q4 2024 | ||
| Total completed in Q4 2024 | $40.8 | 365 | $112,000 | 6.9% | ||||
| Total completed in 2024 | $112.4 | 1,207 | $93,000 | 7.3% | ||||
| Dispositions Under Contract: | ||||||||
| Fairfield Inn & Suites Kingsland | Kingsland, Georgia | $5.2 | 82 | $63,000 | 7.3% | Q4 2024 | ||
| Embassy Suites DFW Airport South | Dallas, Texas | $27.0 | 305 | $89,000 | 8.3% | Q4 2024 | ||
| Hampton Inn & Suites Corpus Christi | Corpus Christi, Texas | $10.3 | 101 | $101,000 | 5.7% | Q4 2024 | ||
| Fairfield Inn & Suites Ocala | Ocala, Florida | $7.7 | 96 | $80,000 | 4.8% | Q4 2024 | ||
| Sleep Inn & Suites Amarillo | Amarillo, Texas | $2.6 | 63 | $41,000 | -7.5% | Q4 2024 | ||
| Total under contract | $52.8 | 647 | $82,000 | 6.4% | ||||
| Total completed and under contract | $165.2 | 1,854 | $89,000 | 7.0% | ||||
As of the date of the news release, AHIP has completed the dispositions of eleven properties for total gross proceeds of $112.4 million during the current financial year. In addition, AHIP has five hotel properties under purchase and sales agreements for total gross proceeds of $52.8 million. AHIP intends to use the net proceeds from these dispositions to repay certain CMBS mortgage loans and reduce the balance of the term loans governed by the Sixth Amendment.
After adjusting for an industry standard 4% FF&E reserve, the combined sales price for the 16 properties either sold in 2024 or currently under contract for sale represents a blended Cap Rate of 7.0% on 2023 annual hotel EBITDA. AHIP's current enterprise value reflects an implied Cap Rate of 8.7% on 2023 annual hotel EBITDA for the portfolio of 58 hotel properties, excluding the five hotel properties in respect of which AHIP is in managed foreclosure as of September 30, 2024, based on the U.S. dollar closing price of US$0.44 per unit on the TSX on November 5, 2024.
AHIP intends to continue to execute its strategy to divest assets to reduce debt and is currently marketing a selected number of additional properties which are expected to demonstrate value above the current unit trading price.
INITIATIVES TO STRENGTHEN FINANCIAL POSITION AND PRESERVE UNITHOLDER VALUE
The Board of Directors (the "Board”), together with management, have implemented a plan to strengthen AHIP's financial position and to preserve unitholder value. Initiatives, and progress made to date, are outlined below.
PLAN TO ADDRESS LOAN MATURITIES
AHIP has made significant progress with its plan to address the Company's upcoming debt maturities. These efforts continue to improve leverage metrics.
To address the Q2 2024 commercial mortgage-backed securities ("CMBS”) loan maturities of $22.3 million, AHIP completed the disposition of one hotel property and refinanced the balance of the loan in March 2024, specifically:
- AHIP completed the disposition of a hotel property in Harrisonburg, Virginia for gross proceeds of $8.6 million. The net proceeds were used to partially satisfy the non-recourse mortgage debt; and
- AHIP completed the CMBS refinancing for the remaining three assets secured against this loan with gross proceeds of $17.5 million prior to initial capital reserves contribution of approximately $5.0 million. The term of this new CMBS loan is five years at a fixed annual interest rate of 7.8%.
- In August 2024, AHIP completed the dispositions of two hotel properties in Amarillo, Texas for gross proceeds of $9.3 million and $8.3 million, respectively. The CMBS mortgage loan of $16.0 million was fully repaid in the third quarter of 2024.
- In September 2024, AHIP completed the dispositions of two hotel properties in Ocala, Florida for gross proceeds of $11.1 million and $14.9 million, respectively. The CMBS mortgage loan of $19.0 million was fully repaid in the third quarter of 2024.
- In October and November 2024, AHIP completed the dispositions of two hotel properties in Statesville, North Carolina, and one hotel property in Melbourne, Florida for gross proceeds of $13.0 million, $12.2 million and $6.6 million, respectively. The CMBS mortgage loan of $24.9 million was fully repaid in the fourth quarter of 2024.
- In addition, 50% of the net proceeds remaining after the CMBS mortgage loan repayment from the dispositions of these seven hotel properties, which was $8.0 million, was used to pay down outstanding amounts under the term loans governed by the Sixth Amendment in the third and fourth quarters of 2024.