- Institutional Preferred Equity Stock offering to
BentallGreenOak and Highgate
- Enhances AHIP's liquidity, reduces leverage and positions
Company for growth opportunities
- Extension of waivers and covenants on corporate credit
facility
All amounts in U.S. dollars unless otherwise noted
VANCOUVER, BC, Jan. 28, 2021 /CNW/ - American Hotel Income
Properties REIT LP ("AHIP" or the "Company") (TSX:
HOT.UN, TSX: HOT.U, TSX: HOT.DB.U) is pleased to announce that
BentallGreenOak Real Estate Advisors LP ("BentallGreenOak")
and Highgate Capital Investments, LP ("Highgate") through HCI-BGO Victoria JV LP
(the "Investor"), a joint venture limited partnership, have
made an aggregate $50 million
strategic investment (the "Investment") in AHIP and its
subsidiary, American Hotel Income Properties REIT Inc., ("AHIP
REIT"), through the issuance of newly-created Series C
preferred equity stock of AHIP REIT (the "Preferred Stock")
and warrants to acquire Units of AHIP ("Warrants"), on a
private placement basis. As part of the Investment, the
Investor has nominated two seasoned investment and industry
professionals to AHIP's Board of Directors ("Board").
The Investment provides several immediate strategic benefits to
AHIP:
- Validation of AHIP's Business: The Investment
demonstrates the strength of AHIP's premium branded select-service
hotel portfolio and asset management platform, and highlights that
BentallGreenOak and Highgate, two
leading institutional investors with significant experience in real
estate and hospitality investing, recognize the value and growth
potential of AHIP.
- Establishes Long-Term Strategic Unitholders: The
addition of two well-capitalized strategic partners positions AHIP
to pursue and capitalize on attractive acquisition
opportunities.
- Strengthens AHIP's Balance Sheet: Proceeds from the
investment will enhance AHIP's overall liquidity and capital
structure, with net proceeds expected to be used towards immediate
debt reduction. For accounting purposes, the Preferred Stock will
be treated as $48.1 million in
equity, and the Warrants will be recorded as a $1.9 million liability, on AHIP's balance sheet.
As a result of the Investment, AHIP now has total available
liquidity of approximately $75
million, up from approximately $40
million at September 30, 2020,
while at the same time decreasing AHIP's pro-forma net
debt-to-gross book value to 52.2%, compared to 56.2% at
September 30, 2020.
- Equity Participation at Attractive Pricing: The exercise
price for the Warrants of $3.20 per
unit (approximately C$4.10)
represents a 30.5% premium to AHIP's closing price of C$3.14 on January 28,
2021, a 31.8% premium to AHIP's 10-day volume weighted
average Canadian dollar trading price as of January 28, 2021.
"This investment illustrates the quality of our portfolio and
strategy, as recognized by two leading institutional investors in
the hospitality space," said Jonathan
Korol, CEO of AHIP. "The proceeds received will assist us in
strengthening our balance sheet, improving our capital structure,
and enhancing our ability to act on growth opportunities that may
arise. BentallGreenOak and Highgate are aligned with our strategy, and we
are excited to have established this partnership as we continue to
improve on the temporary sector challenges from the COVID-19
pandemic and advance our portfolio's growth and cash flow
objectives."
Mr. Korol also said, "I am also very pleased to welcome
Mark Van Zandt of BentallGreenOak
and Mahmood Khimji of Highgate to AHIP's Board of Directors."
Mark Van Zandt, Managing Partner
of BentallGreenOak, said, "We believe AHIP's premium branded
select-service portfolio, under the leadership of this high quality
management team, is well positioned to outperform during the
ongoing hotel market recovery. We're excited to partner with our
friends at Highgate on this
strategic investment and look forward to working with AHIP to
achieve the Company's growth objectives."
Mahmood Khimji, Co-Founder and
Managing Principal of Highgate,
said, "Highgate is thrilled to
commence this partnership with AHIP, along with BentallGreenOak.
AHIP's select service and extended stay portfolio, overseen by an
exceptionally talented management team, is well-positioned for a
robust recovery as national lodging fundamentals emerge from
COVID-driven disruption. We look forward to partnering with
Jonathan and the AHIP team over the coming years, and collaborating
with the Company in the pursuit of future growth initiatives."
TRANSACTION SUMMARY
Key terms of the Investment include:
- The Investor received 50,000 Preferred Stock (the "Purchased
Preferred Stock") which is perpetual and redeemable by AHIP,
and will be treated as equity on AHIP's balance sheet. Subject to
certain terms and conditions, the Purchased Preferred Stock
provides for an annual dividend of 8.00% per annum for the first
three years after issuance, and, to the extent still outstanding,
increases to 9.00% per annum on the third anniversary of the
issuance with further escalations after the fifth anniversary of
the issuance.
- The Investor received 19,608,775 Warrants (the "Purchased
Warrants") exercisable at any time prior to January 28, 2026 for units in AHIP (each a
"Unit") on the Toronto Stock Exchange (the "TSX"), at
an exercise price (the "Exercise Price") of $3.20 per Unit (approximately C$4.10), equivalent to 19.99% of the outstanding
Units of AHIP following the Investment on an as-exercised basis.
The Purchased Warrants may only be exercised by means of cashless
exercise which will lead to an exercised ownership position of less
than 19.99%.
In connection with the Investment, the Investor entered into an
investor rights agreement with AHIP providing for, among other
things, the right to nominate two directors to AHIP's Board,
customary registration rights, participation rights, and certain
standstill and transfer restriction rights including a 24-month
lockup on both the Purchased Preferred Stock and the Purchased
Warrants. With the addition of Mr. Van
Zandt and Mr. Khimji, AHIP's Board now consists of eight
members.
Additional information regarding the Investment and the terms of
the Purchased Preferred Stock and Purchased Warrants will be
included in a material change report to be filed by AHIP on SEDAR
at www.sedar.com. This news release is only a summary of
certain principal terms of the Investment and is qualified in its
entirety by reference to the more detailed information contained in
the material change report.
REVOLVING CREDIT FACILITY AND TERM LOAN UPDATE
On January 28, 2021, AHIP amended
its $225 million corporate credit
facility (the "Facility") with its lending syndicate. These
amendments include:
- Waiver of key financial covenants through December 31, 2021 and modified covenants through
December 31, 2022;
- Availability under the Facility fixed through December 31, 2021; and
- Borrowings not subject to swap agreements will remain at LIBOR
+ 300 basis points with a minimum LIBOR balance of 0.25%.
Additional information regarding the Facility and its terms will
be included in a material change report to be filed by AHIP on
SEDAR at www.sedar.com. This news release is only a summary of
certain principal terms of the Facility and is qualified in its
entirety by reference to the more detailed information contained in
the material change report.
TRANSACTION ADVISORS
CIBC Capital Markets and Deutsche Bank Securities Inc. acted as
financial advisors and Farris LLP and Womble Bond Dickinson (US) LLP acted as legal
advisors to AHIP. Latham & Watkins LLP and Davies Ward Phillips
& Vineberg LLP acted as legal advisors to BentallGreenOak and
Highgate.
ADDITIONAL EARLY WARNING DISCLOSURE OF INVESTOR
BentallGreenOak and Highgate
are making the Investment through the Investor, a joint venture
Delaware limited partnership
organized for purposes of making the Investment.
Pursuant to the subscription agreement with AHIP, the general
partner of AHIP and AHIP REIT, the Investor subscribed for the
Purchased Warrants. Of the total $50
million price paid by the Investor for the Purchased
Preferred Stock and the Purchased Warrants, $1.9 million (approximately C$2.4 million) was allocated to the Purchased
Warrants (or C$0.12 per Purchased
Warrant). Each Purchased Warrant initially entitles the Investor to
purchase one Unit at the Exercise Price per underlying Unit. The
Purchased Warrants may be exercised at any time prior to
January 28, 2026.
Immediately prior to the Investment, the Investor and its
affiliates owned no voting or equity securities in the capital of
AHIP. The Purchased Warrants may only be exercised by means of a
cashless exercise whereby the in-the-money value of a portion of
any exercised Purchased Warrants must be applied to fund the
Exercise Price for the balance of the exercised Purchased
Warrants. As of the date hereof, the Exercise Price exceeds
the current market price of the Units and, consequently, the
Investor is not entitled to acquire any Units on its exercise of
the Purchased Warrants. However, if the Investor was entitled to,
and did, exercise all of the Purchased Warrants by paying the full
Exercise Price in cash, and not pursuant to a cashless exercise,
the Investor and its affiliates would own 19,608,755 Units, or
approximately 19.99% of the currently outstanding Units on a
partially diluted basis, after giving effect to such
exercise.
The Investor intends to hold the Purchased Preferred Stock,
Purchased Warrants and any Units issued to the Investor on the
exercise of the Purchased Warrants for investment purposes.
Depending on market conditions and other factors, including AHIP's
business and financial condition, the Investor or its affiliates
(including BentallGreenOak and Highgate) may acquire additional securities of
AHIP or its subsidiaries or dispose of some or all of the
securities of AHIP or its subsidiaries that it owns at such
time.
An early warning report with additional information in respect
of the foregoing matters will be filed and made available on the
System for Electronic Document Analysis and Review (SEDAR) at
www.sedar.com under AHIP's profile. To obtain a copy of this
report, you may also contact Rahim
Ladha at (416) 681-6309. The Investor's address is 870
7th Avenue, 2nd Floor, New York,
NY 10019.
NON-IFRS MEASURES
Certain non-IFRS financial measures are included in this news
release, which includes net debt-to-gross book value. This term is
not a measure recognized under International Financial Reporting
Standards ("IFRS") and does not have a standardized meaning
prescribed by IFRS. Real estate issuers often refer to net
debt-to-gross book value as a supplemental measure of financial
condition.
Net debt-to-gross book values should not be construed as an
alternative to measurement determined in accordance with IFRS as an
indicator of AHIP's financial condition. AHIP's method of
calculating net debt-to-gross book value may differ from other
issuers' methods and accordingly may not be comparable to measures
used by other issuers. For further information, including
reconciliations of certain of these non-IFRS financial measures to
the closest comparable IFRS measure, please refer to AHIP's
MD&A dated November 9, 2020,
which is available on SEDAR at www.sedar.com and on AHIP's website
at www.ahipreit.com.
FORWARD-LOOKING STATEMENTS
Certain statements in this news release may constitute
"forward-looking information" within the meaning of applicable
securities laws (also known as forward-looking statements).
Forward-looking information involves known and unknown risks,
uncertainties and other factors, and may cause actual results,
performance or achievements or industry results to be materially
different from any future results, performance or achievements or
industry results expressed or implied by such forward-looking
information. Forward-looking information generally can be
identified by the use of terms and phrases such as "anticipate",
"believe", "could", "estimate", "expect", "feel", "intend", "may",
"plan", "predict", "project", "subject to", "will", "would", and
similar terms and phrases, including references to assumptions.
Some of the specific forward-looking information in this news
release includes, but is not limited to, statements with respect
to: AHIP's belief that the addition of BentallGreenOak and
Highgate positions it to pursue
and capitalize on attractive acquisition opportunities; proceeds
from the Investment will enhance AHIP's overall liquidity and
capital structure, with net proceeds expected to be used towards
immediate debt reduction; the treatment of the Preferred Stock and
the Warrants will be equity and a liability, respectively, for
accounting purposes; AHIP's expectation of having a strengthened
balance sheet with total available liquidity of approximately
$75 million and decreasing its
pro-forma net debt-to-gross book value to 52.2%; the belief that
AHIP's premium branded select-service portfolio is well positioned
to outperform during an ongoing hotel market recovery in the U.S.;
and AHIP's stated long-term objectives.
Forward-looking information is based on a number of key
expectations and assumptions made by AHIP, including, without
limitation: AHIP will be able to capitalize on attractive
acquisition opportunities with the assistance from BentallGreenOak
and Highgate; AHIP's overall
liquidity and capital structure will be enhanced, and its balance
sheet strengthened, from the Investment; the Preferred Stock and
Warrants will be treated for accounting purposes as equity and a
liability, respectively; sector challenges and disruption arising
from the COVID-19 pandemic are of a temporary nature; there will be
a sustained recovery of AHIP's portfolio in 2021 and there will be
a meaningful and sustained economic recovery in the U.S. and within
the U.S. hotel industry overall. 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 is provided for the purpose of
presenting information about management's current expectations and
plans relating to the future and readers are cautioned that such
statements may not be appropriate for other purposes.
Forward-looking information involves significant risks and
uncertainties and should not be read as guarantees of future
performance or results as actual results may differ materially from
those expressed or implied in such forward-looking information.
Those risks and uncertainties include, among other things, risks
related to: AHIP will not be able to capitalize on attractive
acquisition opportunities despite the assistance of BentallGreenOak
and Highgate; the Investment does
not meaningfully enhance AHIP's overall liquidity and capital
structure, nor strengthen its balance sheet; the Preferred Stock is
not treated for accounting purposes as equity; sector challenges
and disruptions arising from the COVID-19 pandemic are not of a
temporary nature; there will not be a sustained recovery of AHIP's
portfolio in 2021 and a meaningful and sustained economic recovery
in the U.S. and within the U.S. hotel industry overall may be
delayed or muted; and AHIP may not achieve its stated long-term
objectives. Management believes that the expectations reflected in
forward-looking information contained herein are based upon
reasonable assumptions and information currently available;
however, management can give no assurance that actual results will
be consistent with this forward-looking information. Additional
information about risks and uncertainties is contained in AHIP's
MD&A dated November 9, 2020 and
annual information form for the year ended December 31, 2019, copies of which are available
on SEDAR at www.sedar.com.
The forward-looking information contained herein is expressly
qualified in its entirety by this cautionary statement.
Forward-looking information reflects management's current beliefs
and is based on information currently available to AHIP. The
forward-looking information is 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.
ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP
American Hotel Income Properties REIT LP (TSX: HOT.UN, TSX:
HOT.U, TSX: HOT.DB.U), or AHIP, is a limited partnership formed to
invest in hotel real estate properties across the United States. AHIP's 78 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. The Company'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.
ABOUT BENTALLGREENOAK
BentallGreenOak is a leading, global real estate investment
management advisor and a globally-recognized provider of real
estate services. BentallGreenOak serves the interests of more
than 750 institutional clients with approximately $50 billion of assets under management (as of
September 30, 2020) and expertise in
the asset management of office, industrial, multi-residential,
retail, and hotel property across the globe. BentallGreenOak has
offices in 24 cities across twelve countries with deep, local
knowledge, experience, and extensive networks in the regions where
we invest in and manage real estate assets on behalf of our
clients. BentallGreenOak is a part of SLC Management, which is the
institutional alternatives and traditional asset management
business of Sun Life.
The assets under management shown above include real estate
equity and mortgage investments managed by the BentallGreenOak
group of companies and their affiliates.
For more information, please visit www.bentallgreenoak.com.
ABOUT HIGHGATE
Highgate is a fully-integrated
real estate investment and hospitality management company with over
$10 billion of hotels under
management. Highgate has a
longstanding track record of operating assets for the industry's
largest REITs, private equity firms, institutional funds and
private investors. Highgate is an
active investor in key gateway markets, and operates more than 160
hotels and approximately 45,000 rooms around the world.
For more information, please visit www.highgate.com.
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SOURCE American Hotel Income Properties REIT LP