American Hotel Income Properties REIT LP Announces Strategic Dispositions

American Hotel Income Properties REIT LP (“

AHIP

”, or the “

Company

”) (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.V), today announced further progress on leverage reduction through strategic dispositions.

All amounts presented in this news release are in United States dollars (“U.S. dollars”) unless otherwise indicated.

On September 2, 2024, the Board of Directors (the “Board”) approved the dispositions of five hotel properties with total gross proceeds of $45.9 million. These properties include two hotels in Statesville, North Carolina, and one hotel in each of Melbourne, Florida, Kingsland, Georgia and Houston, Texas. Each disposition is subject to a binding agreement which was entered into following the conclusion of AHIP’s previously disclosed marketing process for the properties. AHIP has received total non-refundable deposits of $4.7 million under such agreements, and the dispositions are currently expected to close in the fourth quarter of 2024.

The dispositions reflect a value per key (1) of $103 thousand based on gross proceeds. AHIP’s current enterprise value per key (1) is $95 thousand, based on the U.S. dollar closing price of US$0.35 per unit on the TSX on August 30, 2024. After adjusting for an industry standard 4% furniture, fixtures, and equipment (“FF&E”) reserve, the combined sales price for these properties represents a blended Cap Rate (1) of 6.9% on 2023 annual hotel EBITDA (1). AHIP’s current enterprise value (1) reflects an implied Cap Rate of 8.4% on 2023 annual hotel EBITDA, based on the U.S. dollar closing price of US$0.35 per unit on the TSX on August 30, 2024. After adjusting for the expected future capital expenditure requirements, these sales represent a blended Cap Rate of 5.5% on 2023 annual hotel EBITDA.

The dispositions of the five hotel properties bring the total gross proceeds of the hotel properties, that have been disposed or are currently under agreements for dispositions in 2024 to $162.0 million. These sales are a key component of the Company’s previously announced plan to address 2024 loan maturities and reduce leverage. Specifically, AHIP intends to use proceeds from the disposition of these five hotel properties to pay off the CMBS mortgage debt secured against three of the properties and to pay down the term loans which form part of AHIP’s senior credit facility (the “Credit Facility”), as discussed further below. Two of the five properties form part of the borrowing base for the Credit Facility; accordingly, the proceeds from the sale of such properties will be used solely to pay down the outstanding term loans under such facility.

“We are pleased to announce further progress on our 2024 plan to demonstrate hotel property value and address our loan maturities.” said Jonathan Korol, CEO. “These dispositions reflect strong demand in the hotel transaction market at values accretive to our current unit price. The streamlined portfolio is expected to generate both higher RevPAR and margins after the dispositions are completed. Further, the completion of the dispositions of the five hotel properties will allow the Company to meet a key requirement to extend the maturity of our senior credit facility.”

The balance of AHIP’s Credit Facility, which is comprised of a revolving credit facility and term loans, was $182.5 million as of June 30, 2024, with a maturity date of December 3, 2024. The Credit Facility includes an option to extend the maturity to June 2025, subject to three primary conditions: (i) reduction of the aggregate maximum facility size to $148.2 million from and after December 3, 2024; (ii) obtaining updated appraisals for the remaining properties under the Credit Facility in order to determine the value of such properties for purposes of setting the maximum borrowing availability under the Credit Facility which is set based on a maximum loan to value ratio of 67.5%; and (iii) compliance with the terms of the agreement governing the Credit Facility at the time of the extension which includes among other things compliance with financial covenants including payout ratio and fixed charge coverage ratio. Subject to the completion of the dispositions of the five hotel properties, the aggregate Credit Facility balance is expected to be reduced to approximately $135.0 million, which will allow the Company to meet one of the three primary requirements to extend the maturity of the Credit Facility to June 2025.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

American Hotel Income Properties REIT LP (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.V), or AHIP, is a limited partnership formed to invest in hotel real estate properties across the United States. AHIP’s portfolio of premium branded, select-service hotels are located in secondary metropolitan markets that benefit from diverse and stable demand. AHIP hotels operate under brands affiliated with Marriott, Hilton, IHG and Choice Hotels through license agreements. AHIP’s long-term objectives are to build on its proven track record of successful investment, deliver monthly U.S. dollar denominated distributions to unitholders, and generate value through the continued growth of its diversified hotel portfolio. More information is available at www.ahipreit.com.

NON-IFRS AND OTHER FINANCIAL MEASURES

Management believes the following non-IFRS financial measures and supplementary financial measures are relevant measures to monitor and evaluate AHIP’s financial and operating performance. These measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures are included to provide investors and management additional information and alternative methods for assessing AHIP’s financial and operating results and should not be considered in isolation or as a substitute for performance measures prepared in accordance with IFRS.

Hotel EBITDA: is a non-IFRS financial measure and calculated by adjusting net operating income for hotel management fees.

Value per key: is a supplementary financial measure and calculated as total gross proceeds divided by total number of hotel keys/rooms of the five hotel properties to be sold.

Blended Capitalization Rate (“Cap Rate”): is a supplementary financial measure and calculated as total 2023 annual hotel EBITDA after adjusting for FF&E, divided by expected total gross proceeds of the five hotel properties to be sold.

Blended Cap Rate after adjusting CAPEX: is a supplementary financial measure and calculated as total 2023 annual hotel EBITDA after adjusting for FF&E, divided by the sum of total gross proceeds and the total expected capital expenditure requirements of the five hotel properties to be sold.

Enterprise value: is a supplementary financial measure and is calculated as (i) the sum of total debt obligations as reflected on the June 30, 2024 balance sheet, AHIP’s market capitalization (which is calculated as the U.S. dollar closing price of the units on the TSX as of August 30, 2024, multiplied by the total number of units issued and outstanding), and face value of series C preferred shares, less (ii) the amount of cash and cash equivalents reflected on the June 30, 2024 balance sheet.

Enterprise value per key: is a supplementary financial measure and is calculated as enterprise value divided by the total number of hotel keys/rooms in the portfolio.

NON-IFRS RECONCILIATION

The following calculation is for the 5 hotel properties to be sold:
(thousands of dollars except the number of keys)
Total gross proceeds – (A)	45,939
2023 annual hotel EBITDA after adjusting for FF&E – (B)	3,180
Blended Cap Rate % = (B)/(A)	6.9%
Total number of keys – (C)	447
Value per key = (A)/(C)	103
Total expected capital expenditures (“CAPEX”) – (D)	11,670
Total gross proceeds after adjusting CAPEX – (E) = (A) + (D)	57,609
Blended Cap Rate after adjusting CAPEX % = (B)/(E)	5.5%

The 3 following calculation is for the AHIP portfolio of 68 hotel properties:
(thousands of dollars except unit price)	June 30, 2024
Number of units outstanding – (a)	79,234
Unit price at August 30, 2024 – (b)	0.35
Market capitalization – (A) = (a) * (b)	27,732
Term loans and revolving credit facility	565,964
Liabilities related to assets held for sale	52,464
Face value of convertible debenture	49,730
Total debt – (B)	668,158
Face value of Series C preferred shares – (C)	50,000
Unrestricted cash – (D)	15,922
Total Enterprise Value – (E) = (A) + (B) + (C) – (D)	729,968
Number of keys – (F)	7,662
Enterprise value per key = (E)/(F)	95
2023 annual hotel EBITDA after adjusting for FF&E – (G)	61,000
Cap Rate % = (G)/(E)	8.4%

FORWARD-LOOKING INFORMATION

Certain statements in this news release may constitute “forward-looking information” and “financial outlook” within the meaning of applicable securities laws. Forward-looking information and financial outlook generally can be identified by words such as “anticipate”, “believe”, “continue”, “expect”, “estimates”, “intend”, “may”, “outlook”, “objective”, “plans”, “should”, “will” and similar expressions suggesting future outcomes or events. Forward-looking information and financial outlook include, but is not limited to, statements made or implied relating to the objectives of AHIP, AHIP’s strategies to achieve those objectives and AHIP’s beliefs, plans, estimates, projections and intentions and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. Forward-looking information and financial outlook in this news release includes, but is not limited to, statements with respect to: AHIP’s planned property dispositions, including the expected terms and timing thereof and the financial impact thereof on AHIP; AHIP’s intent to use the net proceeds from its planned property dispositions to pay down debt; AHIP’s expectation that the planned property dispositions will allow it to meet one of the three primary requirements to extend the maturity of the Credit Facility; and AHIP’s stated long-term objectives.

Although the forward-looking information and financial outlook 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 and financial outlook is based on a number of key expectations and assumptions made by AHIP, including, without limitation: AHIP will complete its planned property dispositions in accordance with the terms and timing currently contemplated; AHIP will satisfy the requirements to extend the maturity of the Credit Facility; AHIP will continue to have sufficient funds to meet its financial obligations; AHIP’s strategies with respect to completion of capital projects, liquidity, addressing near-term debt maturities, divestiture of non-core assets and acquisitions will be successful and achieve their intended effects; capital markets will provide AHIP with readily available access to equity and/or debt financing on terms acceptable to AHIP, including the ability to refinance maturing debt as it becomes due on terms acceptable to AHIP; AHIP’s future level of indebtedness and its future growth potential will remain consistent with AHIP’s current expectations; and AHIP will achieve its long term objectives.

Forward-looking information and financial outlook involve significant risks and uncertainties and should not be read as a guarantee of future performance or results as actual results may differ materially from those expressed or implied in such forward-looking information and financial outlook, accordingly undue reliance should not be placed on such forward-looking information and financial outlook. Those risks and uncertainties include, among other things, risks related to: AHIP may not complete its currently planned property dispositions on the terms currently contemplated or in accordance with the timing currently contemplated, or at all; AHIP may not satisfy the requirements to extend the maturity of the Credit Facility; the new appraisals required under the Credit Facility may report lower than expected values which may trigger paydown requirements under the Credit Facility, and if such pay-downs are required, there is no guarantee that AHIP will have sufficient cash on hand or be able to generate sufficient net proceeds to meet those requirements, which, without relief from the lender, would put AHIP in default under the Credit Facility; AHIP may not achieve its expected performance levels in 2024 and beyond; AHIP’s strategic initiatives with respect to liquidity, addressing near-term debt maturities and providing AHIP with financial stability may not be successful and may not achieve their intended outcomes; AHIP’s strategies for divesting assets to reduce debt may not be successful; AHIP may not be successful in reducing its leverage; AHIP may not be able to refinance debt obligations as they become due or may do so on terms less favorable to AHIP than under AHIP’s existing loan agreements; general economic conditions and consumer confidence; the growth in the U.S. hotel and lodging industry; prices for AHIP’s units and its debentures; liquidity; tax risks; ability to access debt and capital markets; financing risks; changes in interest rates; the financial condition of, and AHIP’s relationships with, its external hotel manager and franchisors; real property risks, including environmental risks; the degree and nature of competition; ability to acquire accretive hotel investments; ability to integrate new hotels; environmental matters; increased geopolitical instability; and changes in legislation and AHIP may not achieve its long term objectives. Management believes that the expectations reflected in the forward-looking information and financial outlook are based upon reasonable assumptions and information currently available; however, management can give no assurance that actual results will be consistent with the forward-looking information and financial outlook contained herein. Additional information about risks and uncertainties is contained in AHIP’s management’s discussion and analysis for the three and six months ended June 30, 2024 and 2023, and AHIP’s annual information form for the year ended December 31, 2023, copies of which are available on SEDAR+ at www.sedarplus.com.

To the extent any forward-looking information constitutes a “financial outlook” within the meaning of applicable securities laws, such information is being provided to investors to assist in their understanding of estimated proceeds from the planned disposition of certain hotel properties and the impact thereof on AHIP’s financial position, leverage and compliance with the terms of the Credit Facility.

The forward-looking information and financial outlook contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information and financial outlook reflect management's current beliefs and is based on information currently available to AHIP. The forward-looking information and financial outlook are made as of the date of this news release and AHIP assumes no obligation to update or revise such information to reflect new events or circumstances, except as may be required by applicable law.

_________________(1) Non-IFRS and other financial measures. See “NON-IFRS AND OTHER FINANCIAL MEASURES” section of this news release.

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