HOT.U American Hotel Income Properties REIT LP

• New CEO, Jonathan Korol, started on October 7, 2020
• Q4 2020 occupancy of 51.4%, RevPAR of $47.25, and revenues of $39.4 million
• Q4 2020 diluted FFO per unit of ($0.07)
• Occupancy levels improved significantly in February, to 59.9%; Upward trend in Occupancy has continued into March
• $50 million strategic Preferred Equity investment, closed January 28, 2021, reduced leverage and enhanced liquidity
• Amended credit facility provides waiver of covenants through December 31, 2021

(All numbers are in U.S. dollars unless otherwise indicated)

VANCOUVER, BC, March 10, 2021 /CNW/ - American Hotel Income Properties REIT LP ("AHIP", or the "Company") (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.U) announced today its financial results for the three months and year ended December 31, 2020. 

"2020 was an extraordinarily difficult year for our industry.  Our Company responded to the challenges caused by the COVID-19 pandemic through measures to rationalize our costs, protect our liquidity, and strengthen our balance sheet," said Jonathan Korol, CEO.  "As we enter a new year and an improving operating environment, AHIP is well-positioned, with the addition of strategic investment partners through our recent $50 million preferred equity private placement. We are focused on driving revenue growth alongside sustained margin enhancement, as well as improving our debt profile and balance sheet.  With a strong platform and an improving sector outlook, we are optimistic about the opportunities ahead."

Mr. Korol continued: "Our fourth quarter performance reflected the seasonality of our portfolio, with expected occupancy and rate pressures in December. In 2021 we are beginning to see a clearer path to improved sector performance, with COVID-19 vaccinations underway across the U.S. bringing growing leisure travel demand – demonstrated at AHIP by the stronger occupancy figures we have seen the last several weeks. We are witnessing meaningful occupancy improvements, led by strong performance at our Florida and Texas hotels.  February portfolio occupancy was 59.9% and many of our Florida properties were 100% full the last several weekends, demonstrating the rapidly improving leisure travel dynamics underway.  Our properties have been able to generate positive hotel EBITDA since May 2020 as a result of rising occupancies, despite continuing challenges in maintaining rate growth.  We expect this pattern to continue in the near term until broad based market demand is re-established."

THREE MONTHS ENDED DECEMBER 31, 2020 FINANCIAL HIGHLIGHTS

• Revenues for the fourth quarter decreased 48.2% to $39.4 million (Q4 2019 – $76.1 million), as a result of lower demand levels resulting from the ongoing impact of COVID-19 and from portfolio changes between periods.
• Revenue per Available Room ("RevPAR") for the quarter decreased 34.6% from Q4 last year to $47.25, due to occupancy decreasing 19.1 points to 51.4% and Average Daily Rate ("ADR") decreasing 10.3% to $91.92 due to lower demand caused by the impacts of COVID-19.
• • Overall U.S. hotel RevPAR declined by 50.6% with occupancy declining by 19.8 points and ADR declining 27.2%. AHIP's ADR decline was less pronounced due to portfolio changes last year following the strategic decision to sell the lower ADR-generating Economy Lodging Portfolio and acquiring newer, premium branded hotels with higher ADR.
• The STR RevPAR index, which compares the performance of AHIP-owned hotels to their competitive set in each region, indicated AHIP's 78 Premium Branded hotels have, in aggregate, significantly outperformed their identified direct competition with an average index rating of 120.5 during the quarter (Q4 2019 – 122.6) – with 100.0 representing a 'fair share' of the market.
• Net Operating Income ("NOI") decreased by 59.0% to $9.8 million (Q4 2019 – $23.9 million) due to lower revenues, partially offset by expense reduction initiatives. NOI Margins decreased to 24.9% (Q4 2019 – 31.4%) as a result of lower revenue.
• Loss and comprehensive loss for the seasonally slow fourth quarter was $20.9 million, compared to the loss and comprehensive loss of $14.5 million in Q4 2019, due to lower NOI, impairment charges at certain hotels, higher interest expense and corporate charges.
• Diluted loss per Unit for the quarter was $0.27 compared to a diluted loss per Unit of $0.19 in Q4 2019.
• Funds from operations ("FFO") for Q4 2020 was ($5.2) million (Q4 2019 – $10.2 million) and adjusted funds from operations ("AFFO") was ($4.1) million (Q4 2019 – $9.2 million), primarily due to the impacts of COVID-19.
• Q4 2020 Diluted FFO per Unit was ($0.07) (Q4 2019 – $0.13) and Diluted AFFO per Unit was ($0.05) (Q4 2019 – $0.12).

Premium Branded Hotels  
In November 2019, AHIP sold its Economy Lodging Portfolio and in December 2019, acquired 12 additional Premium Branded hotels.  The following metrics represent the performance of all Premium Branded hotels at the end of Q4 2020 compared to all Premium Branded hotels owned at the end of Q4 2019. 

• Premium Branded total revenues decreased 39.4% in Q4 2020 to $39.4 million (Q4 2019 – $65.1 million), due to reduced demand caused by COVID-19, partially offset by full period performance from the 12 additional Premium Branded hotels acquired in December 2019.
• Premium branded RevPAR decreased by 41.7% to $47.25 (Q4 2019 – $80.98), with occupancy declining 20.9 points to 51.4% and ADR declining 17.9% to $91.92.
• • AHIP's 24 extended stay hotels continued to be the best performing segment of the portfolio, with average occupancy of 62.4% and RevPAR declines of only 31.6% during Q4.
  • RevPAR declines were less pronounced at certain AHIP properties located in Tennessee and New Jersey, which saw RevPAR declines of 23.5% and 34.1%, respectively, led by demand from leisure customers, contract business and government agencies.
  • RevPAR declines were most significant in Kentucky and Ohio, with RevPAR declines of 65.9% and 68.0%, respectively – reflecting lower demand at AHIP's larger Embassy Suites hotels, which are located in these regions.

Same-Property Results
Same-property metrics represent the performance of the 66 Premium Branded hotels owned in both the current and comparative period, or 85% of AHIP's total current hotel portfolio based on number of hotels. 

• Same-property total revenues for the fourth quarter decreased 45.6% to $33.8 million (Q4 2019 – $62.1 million).
• Same-property RevPAR decreased 42.7% from Q4 last year to $46.85, due to occupancy decreasing 21.3 points to 51.5% and ADR decreasing 19.0% to $90.98 as a result of lower demand arising from the impacts of COVID-19.
• Same-property NOI was $8.3 million (Q4 2019 – $18.5 million) and the NOI margin was 24.4% (Q4 2019 – 29.8%). Declines were due to lower revenues. Taxes and insurance expenses also increased as a result of higher property tax refunds received in 2019.

Capital Metrics (as at December 31, 2020)

• As at December 31, 2020, AHIP's debt had a weighted average remaining term of 4.5 years (2019 – 5.5 years) and a weighted average interest rate of 4.55% (2019 – 4.41%).
• As at December 31, 2020, AHIP had an unrestricted cash balance of $20.1 million, restricted cash balances of $26.1 million, and available revolver capacity of approximately $15.7 million. Following the preferred equity private placement completed on January 28, 2021, AHIP had an unrestricted cash balance of approximately $38.2 million, revolver capacity of approximately $24.3 million and minimum unrestricted liquidity of approximately $62.5 million.
• AHIP's debt-to-gross book value as at December 31, 2020 was 58.3% (December 31, 2019 – 55.7%). Following the preferred equity private placement completed on January 28, 2021, AHIP's pro-forma debt-to-gross book value was 55.6%.

YEAR ENDED DECEMBER 31, 2020 FINANCIAL HIGHLIGHTS

• 2020 revenues declined 47.8% to $174.9 million (2019 - $335.2 million) primarily due to COVID-19 related impacts and portfolio changes between periods.
• RevPAR for 2020 decreased 30.7% from 2019 to $51.49, due to occupancy decreasing 23.2 points to 51.3%. ADR increased by 0.6% to $100.38 due to portfolio changes compared to 2019, including the addition of higher quality hotels.
• NOI for 2020 decreased by 58.3% to $46.6 million (Q4 2019 – $111.8 million) due to lower revenues, partially offset by expense reduction initiatives. NOI Margin decreased to 26.6% (2019 – 33.4%) as a result of lower revenue.
• Loss and comprehensive loss for 2020 was $66.4 million, compared to net loss of $7.0 million in 2019, as a result of lower NOI, fair value changes on interest rate swaps, impairment charges related to certain hotels, increased interest expense and higher corporate expenses. Diluted loss per Unit was $0.85 in 2020, compared to diluted loss per Unit of $0.09 in 2019.
• FFO for 2020 decreased to ($9.5) million (2019 – $55.3 million), while AFFO decreased to ($9.0) million (2019 – $49.9 million) primarily due to the impacts of COVID-19.
• For 2020, diluted FFO per Unit was ($0.12) (2019 – $0.70) and Diluted AFFO per Unit was ($0.11) (2019 – $0.63).
• Same-property revenues for 2020 were $148.1 million, a 44.1% decrease from $264.8 million in 2019.
• Same-property RevPAR for 2020 declined 42.6% to $50.72 (2019 – $88.37). ADR decreased 13.8% to $99.25 (2019 – $115.07) and occupancy declined 25.7 points to 51.1% (2019 – 76.8%).
• Same-property NOI for 2020 declined to $38.5 million (2019 – $89.2 million) and Same-property NOI margin declined to 26.0% (2019 – 33.7%).

FOURTH QUARTER DEVELOPMENTS

• On October 7, 2020, Jonathan Korol joined the Company as Chief Executive Officer.
• On October 13, 2020, AHIP completed loan relief negotiations on four CMBS loans totaling approximately $57 million. The relief provisions include the waiver of the requirement to fund FF&E reserves for six months, along with covenant waivers. In total, during 2020, AHIP was able to obtain temporary relief on all 20 of its CMBS loans.
• On October 30, 2020, the purchaser of AHIP's former Economy Lodging Portfolio repaid a $2.4 million short term loan including accrued interest. The net proceeds were applied towards paying down AHIP's credit facility revolver.
• On November 6, 2020, AHIP entered into an agreement to extend the time for payment of the remaining deferred purchase price (currently $16.1 million) for the acquisition of 12 Premium Branded properties that completed December 3, 2019 from December 31, 2020 to periodic payments ending December 31, 2021.
• On December 4, 2020, AHIP notified its loan servicers on two single-property, non-recourse loans totaling approximately $18.4 million of an imminent change in circumstances and requested the loans be transferred to the special loan servicer to renegotiate modified loan terms. The loans involve two non-core assets located in Pittsburgh that had impairment charges recorded during the fourth quarter. One of the loans is currently under cash management and the lender has used funds from operations to continue making required loan payments. For the second loan, following the notice to the servicers, AHIP did not make the required loan payments on December 4, 2020, January 6, 2021, February 5, 2021, and March 5, 2021 and as a result, AHIP received a notice from the special loan servicer of the occurrence of an event of default. AHIP has commenced negotiations to modify the terms of both loans, which are non-recourse and do not trigger any cross-default provisions with any other loans.

SUBSEQUENT EVENTS

• On January 28, 2021, HCI-BGO Victoria JV LP (the "Investor"), a joint venture limited partnership formed by BentallGreenOak Real Estate Advisors LP and Highgate Capital Investments, LP, made an aggregate $50 million strategic investment in AHIP and its direct subsidiary American Hotel Income Properties REIT Inc. ("US REIT"), on a private placement basis, through the issuance of 50,000 newly-created shares of Series C preferred stock of the US REIT (the "Series C Preferred Stock") and 19,608,755 warrants to acquire Units of AHIP (the "Warrants"), which warrants may only be exercised on a cashless basis (the "Investment"). In connection with the Investment, the Investor entered into an investor rights agreement with AHIP and US REIT providing for, among other things, the right to nominate two directors to AHIP's board of directors, customary registration rights, participation rights, and certain standstill and transfer restriction rights including a 24-month lockup on both the Series C Preferred Stock and the Warrants. Mr. Mark Van Zandt, Managing Partner of BentallGreenOak, and Mr. Mahmood Khimji, Co-Founder and Managing Principal of Highgate, were appointed to the Board of Directors on closing of the Investment.
• On January 28, 2021, AHIP amended its $225 million corporate credit 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 was fixed at approximately $159 million 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%.
• During February 2021, various AHIP subsidiaries obtained government-guaranteed loans totaling approximately $5.0 million. The loans carry an interest rate of 1.00% per annum, and are repayable over five years. Under the terms of these loans, all or a portion of the loans may be forgiven if the loan proceeds are used for qualifying expenses and if other specific criteria are met.

TAXATION OF 2020 DISTRIBUTIONS

• For 2020, 100% of AHIP's paid distributions were considered return of capital. Unitholders should consult their own tax advisors for advice with respect to the tax consequences of their investment in Units based on their particular circumstances.

The information in this news release should be read in conjunction with AHIP's audited consolidated financial statements and management's discussion and analysis ("MD&A") for the three months and year ended December 31, 2020, which are available on AHIP's website at www.ahipreit.com and on SEDAR at www.sedar.com.

Q4 2020 FINANCIAL RESULTS CONFERENCE CALL

Management will host a conference call at 1:00 p.m. Eastern time / 10:00 a.m. Pacific time on Thursday, March 11, 2021 to review the financial results for the three months and year ended December 31, 2020.

To participate in this conference call, please dial one of the following numbers at least five minutes prior to the commencement of the call and ask to join the American Hotel Income Properties' Q4 2020 Analyst Call.

The conference call will also be webcast live (in listen-only mode).   The link to the webcast can be found on the following webpage:  https://www.ahipreit.com/investor-relations/events-and-presentations/

CONFERENCE CALL REPLAY

A replay of the conference call will be available by dialing one of the following replay numbers. The replay will be available after 11:30 a.m. Eastern time / 8:30 a.m. Pacific time on March 11, 2021 until March 31, 2021. The webcast recording of this conference call will also be available at www.ahipreit.com on the Events and Presentation page.

Please enter replay PIN number 8081524 followed by the # key.

NON-IFRS MEASURES

Certain non-IFRS financial measures are included in this news release, which include NOI, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, and debt-to-gross book value. These terms are not measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. Real estate issuers often refer to NOI, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit as supplemental measures of performance and debt-to-gross book value as a supplemental measure of financial condition.

Debt-to-gross book value, NOI, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, should not be construed as alternatives to measurements determined in accordance with IFRS as indicators of AHIP's performance or financial condition. AHIP's method of calculating NOI, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, and 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 March 9, 2021, which is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

FORWARD-LOOKING INFORMATION

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 it 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 statements in this news release include, but are not limited to, statements with respect to: AHIP beginning to see a clearer path to improved sector performance, with COVID-19 vaccinations underway across the U.S. bringing growing leisure travel demand; AHIP's expectation that it will continue to see challenges in maintaining rate growth in the near term until broad based market demand is re-established; AHIP's focus on driving revenue growth alongside sustained margin enhancement, as well as improving its debt profile and balance sheet; AHIP's optimism about opportunities ahead given its strong platform and improving sector outlook; the potential for all or a portion of government guaranteed loans received by certain of AHIP's subsidiaries to be forgiven; 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: the COVID-19 pandemic will continue to negatively impact the U.S. economy, U.S. hotel industry and AHIP's business, and the extent and duration of such impact; AHIP's occupancy levels will not materially deteriorate from current levels; AHIP will be able to continue to operate its 78 hotels during the COVID-19 pandemic; AHIP will not cease guest operations at a material number of additional properties as a result of government regulations, lack of sufficient guest bookings or other reasons; AHIP's cost reduction, cash conservation and liquidity strategies will achieve their stated objectives and AHIP will continue to have sufficient funds to meet its financial obligations; the vaccination programs in the U.S. will be successful and vaccines effective, and the expected positive impacts thereof on the U.S. economy, U.S. hotel industry, consumer confidence in travel, consumer behavior and AHIP's business will be consistent with AHIP's expectations; recent occupancy improvement trends will continue; AHIP will be successful in obtaining any further loan relief required from its CMBS loan servicers; AHIP will not require covenant waivers under its credit facility subsequent to Q4 2021 or covenant modifications subsequent to Q4 2022, and if required, such waivers will be provided by its credit facility syndicate; a portion of the government-guaranteed loans that AHIP received will be forgivable. 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 statements are 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 statements involve 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 statements. Those risks and uncertainties include, among other things, risks related to: the impacts of the COVID-19 pandemic, including recent increases in case numbers and new variants, on the U.S. economy, the hotel industry, the willingness of the general public to travel, demand for travel, transient and group business, guest traffic and guest reservations, the level of consumer confidence in the safety of travel, consumer and corporate behavior with respect to travel and AHIP's business, all of which have negatively impacted, and are expected to continue to negatively impact, AHIP and may materially adversely affect AHIP's investments, results of operations, financial condition and AHIP's ability to obtain additional equity or debt financing, or re-finance existing debt, or make interest and principal payments to its lenders and to holders of AHIP's debentures, and otherwise satisfy its financial obligations and may cause AHIP to be in non-compliance with one or more of the financial or other covenants under its existing credit facilities and cause a default, or engage certain restrictive provisions (including cash management provisions), thereunder; the pace of recovery following the COVID-19 pandemic cannot be accurately predicated and may be slow; the speed of the vaccine roll-out may be slower than expected, the effectiveness, acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against emerging variants of COVID-19 all may be less than expected, which may pro-long the impacts of COVID-19 on the U.S. economy, lodging industry and AHIP and cause various levels of government to consider the imposition of new travel and other restrictions and may negatively impact corporate travel policies and consumer behavior, which could put further downward pressure on occupancy levels and revenues for an extended period of time; forecasts in third party reports with respect to a recovery in the U.S. hotel industry may not be accurate; AHIP may not achieve its expected performance improvements in 2021; there is no guarantee that distributions will be reinstated, and if reinstated, as to the timing thereof or what the amount of the distribution will be; AHIP may require additional debt or equity capital in order to replenish any reserve funds drawn in accordance with the timing required by its CMBS loan servicers and to satisfy AHIP's other contractual obligations, and such funds may not be available to AHIP on reasonable terms, or at all; AHIP may require covenant waivers under its credit facility subsequent to Q4 2021 and covenant modifications subsequent to Q4 2022, and if required, such waivers may not be provided by its credit facility syndicate on terms acceptable to AHIP, or at all; AHIP may require further relief from its CMBS loan servicers, and if required, such relief may not be provided by such CMBS loan servicers on terms acceptable to AHIP, or at all; the CMBS loan servicers for certain of AHIP's CMBS loans could invoke the cash management provisions of such loans; the recoverable amount of its hotel properties could lead to impairment charges on hotel properties in future periods; AHIP may not be successful in negotiating modified terms for its two-single property loans which have been transitioned to special servicers, and the loan servicers may seek to enforce their security under such loans including through foreclosure general economic conditions; future growth potential; Unit prices; liquidity; tax risk; tax laws currently in effect remaining unchanged; ability to access capital markets; competition for real property investments; environmental matters; the value of the U.S. dollar; and changes in legislation or regulations. Management believes that the expectations reflected in forward-looking statements are based upon reasonable assumptions and information currently available; however, management can give no assurance that actual results will be consistent with these forward-looking statements. Additional information about risks and uncertainties is contained in AHIP's MD&A dated March 9, 2021 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.

THIRD PARTY INFORMATION

This news release includes market information and industry data from independent industry publications, market research and analyst reports, surveys and other publicly available sources. Although AHIP management believes these sources to be generally reliable, market and industry data is subject to interpretation and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. Accordingly, the accuracy and completeness of this data are not guaranteed. AHIP has not independently verified any of the data from third party sources referred to in this news release nor ascertained the underlying assumptions relied upon by such sources.

ADDITIONAL INFORMATION

Additional information relating to AHIP, including AHIP's audited consolidated financial statements for the year ended December 31, 2020, AHIP's MD&A dated March 9, 2021, and other public filings are available on SEDAR at www.sedar.com.

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 typically 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 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.

FOURTH QUARTER HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

 2020 ANNUAL HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

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SOURCE American Hotel Income Properties REIT LP