HOT.U American Hotel Income Properties REIT LP

• Q2 2021 diluted FFO per unit of $0.14; increasing from ($0.03) per unit in Q1 2021
• Q2 2021 Occupancy of 70.0% vs 60.2% in Q1 2021; Q2 2021 RevPAR of $76.53 vs $57.01 in Q1 2021
• Portfolio recovery highlighted by sequential monthly gains in top-line measures; June ADR & Occupancy of $115.33 and 73.1%, each at 0.96x and 0.88x June 2019 levels
• Operating efficiency gains contributed to Q2 Hotel EBITDA margin of 38.6%
• Revenues increased to $63.6 million in Q2 2021 compared to $27.3 million in Q2 2020
• Total available liquidity at June 30, 2021 was $40.2 million

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

VANCOUVER, BC, Aug 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 and six months ended June 30, 2021.

"The second quarter brought three sequential months of improving revenue and operating margins, a trend that began in January and has continued through July. Accelerating demand from the domestic leisure traveler resulted in rate increases that have narrowed the gap to 2019 pre-COVID levels," said Jonathan Korol, CEO. "The monthly improvements to average daily rate across our portfolio drove hotel EBITDA margins of 38.6% in Q2, surpassing most industry comparables. While our properties have yet to achieve pre-COVID revenues, they are close to 2019 same period cash flow levels due to the improved operating margins."

"June 2021 was our best revenue-generating month since the pandemic began, only to be eclipsed by our recent performance in July. We are encouraged by the sequential monthly rate-driven RevPAR increases that have accompanied higher leisure traffic at our properties." Mr. Korol added: "While we see signals of improving business travel through improving lead volumes and small group activity, the leisure traveler continues to drive hotel demand. As the business traveler returns, we anticipate further improvements to a recovery in weekday demand. Following the completion of our strategic equity financing with BentallGreenOak Real Estate Advisors LP and Highgate Capital Investments, LP Bentall and concurrent amendments to our credit facility completed in Q1, we are confident that AHIP is well positioned to navigate any negative impacts to our business that could result from the ongoing market uncertainty resulting from COVID-19."

"In Q2 we were very pleased to welcome Travis Beatty to our executive team as Chief Financial Officer." Mr. Korol continued: "Travis brings both experience and recognition within the broader investment community and is an important member of a talented team that will be positioning AHIP to grow its portfolio of premium-branded select service hotel properties across the U.S."

THREE MONTHS ENDED JUNE 30, 2021 FINANCIAL HIGHLIGHTS

• AHIP's portfolio Average Daily Rate ("ADR") and Revenue per Available Room ("RevPAR") improved each month during the quarter, contributing to revenues of $63.6 million, an increase of 133.1% from Q2 2020 ($27.3 million), reflecting the recovery from significantly lower demand experienced in the prior year due to the initial onset of COVID-19.
  
  
• RevPAR increased 131.8% to $76.53 (2020 – $33.01) caused by ADR increases of 14.9% to $109.31 (2019 – $95.13) and occupancy increase of 101.7% to 70.0% (2020 – 34.7%).
  
  
• Net income and comprehensive income for the quarter was $0.5 million (2020 – loss of $20.8 million) primarily as a result of higher revenue and NOI and lack of impairment charges in the current period partially offset by the increase in corporate and administrative costs and the change in fair value of warrants.
  
  
• Funds from operations ("FFO") for Q2 2021 increased to $11.5 million (2020: ($9.1) million) and adjusted funds from operations ("AFFO") increased to $10.9 million (2020: ($8.7) million), as a result of higher revenue and NOI.
  
  
• Q2 2021 Diluted FFO per Unit was $0.14 (Q2 2020: ($0.12)) and Diluted AFFO per Unit was $0.13 (Q2 2020: ($0.11)).
  
  
• Strong performance continued through July, with Occupancy of 73.2%, ADR of $119.71 and RevPAR of $87.62, each at 0.90x, 1.00x and 0.90x of July 2019 levels, respectively.

SIX MONTHS ENDED JUNE 30, 2021 FINANCIAL HIGHLIGHTS

• For Premium Branded hotels only and using prior ownership's financial information for the 12 Premium Branded hotels acquired in December 2019, AHIP's portfolio has meaningfully narrowed the previously sizeable gap between 2021 and 2019 demand levels, while exceeding 2019 net operating income ("NOI") Margin levels:

• RevPAR at AHIP's 24 extended stay properties represent approximately 30% of its portfolio on a per key basis and was its strongest performing segment with recovery of RevPAR to 0.84x of 2019 levels.
  
  
• FFO increased to $9.5 million (2020 – ($4.4) million) as a result of higher NOI and AFFO increased to $9.3 million (2020 – ($5.1) million).
  
  
• Diluted FFO per Unit in the first half of 2021 was $0.12 (2020: ($0.06)) and Diluted AFFO per Unit was $0.12 (2020: ($0.06)).
  
  
• 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, outperformed their identified direct competition with an average index rating of 115.3 during the quarter (Q2 2020: 135.4), with 100.0 representing a fair share of the market.
  
  
• NOI for the first half of 2021 increased to $41.4 million (2020: $22.2 million) due to higher revenues and expense reduction initiatives. NOI Margins increased to 37.5% (2020: 24.9%) attributable to extensive cost saving measures and relaxed brand standards which reduced operating expenses during this period compared to the prior period.
  
  
• Loss and comprehensive loss was $13.4 million, compared to the loss and comprehensive loss of $33.4 million in 2020, as a result of higher NOI, fair value changes on interest rate swaps, and lack of impairment charges, partially offset by higher corporate and administrative costs and the change in fair value of warrants.
  
  
• As part of effective asset management of the portfolio, AHIP deferred a number of capital projects in 2020 to preserve cash during the height of the pandemic. AHIP is currently in discussions with Brand partners on these Property Improvement Plans ("PIPs") and expects to restart two small renovations in late 2021.

LEVERAGE AND LIQUIDITY

• On January 28, 2021, AHIP successfully amended its $225 million corporate credit facility with its lending syndicate. These amendments provide flexibility from cash flow covenants and provide increased certainty of the borrowing base calculation. The amendments included:
  
  
• • Waiver of debt service ratio covenants through December 31, 2021 and relaxed covenant measures 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%.
    
    
• As at June 30, 2021, AHIP had an unrestricted cash balance of $11.1 million and available revolver capacity of approximately $29.1 million, therefore a total available liquidity of $40.2 million plus restricted cash of $34.6 million.
  
  
• AHIP's debt-to-gross book value as at June 30, 2021 was 55.4% (June 30, 2020: 58.7%). This improvement between periods was attributable to the strategic preferred equity raise completed in Q1 2021, paydown of debt and improved operating results.
  
  
• As at June 30, 2021, AHIP's debt had a weighted average remaining term of 4.1 years (2020: 5.0 years) and a weighted average interest rate of 4.56% (2020: 4.54% including continuing and discontinued operations).

SECOND QUARTER DEVELOPMENTS

• On June 1, 2021, AHIP announced the appointment of Travis Beatty as Chief Financial Officer. Mr. Beatty was previously the Chief Financial Officer of Northview Apartment REIT ("Northview") from 2016 to 2020. Northview was a Canadian public REIT focused on owning and managing a multi-billion dollar portfolio of residential units across Canada. Mr. Beatty is a strong organizational leader with a proven track record in the public REIT space as well as within the broader Canadian financial community.
  
  
• On April 1, 2021, AHIP paid the remaining $16.1 million plus accrued interest of deferred purchase price in respect of the acquisition of 12 Premium Branded hotel properties that completed in December 2019, which amount was included in accounts payable on AHIP's consolidated statements of financial position as at March 31, 2021, thereby fully discharging the liability.

DISTRIBUTIONS

In January 2021, AHIP completed amendments under its revolving credit facility that included a restriction on payment of distributions to unitholders during the covenant waiver period, which extends until the end of 2021. AHIP's Board of Directors, in consultation with management, will continue to regularly assess the timing of the re-introduction of AHIP's distribution by monitoring hotel performance, capital needs, acquisitions and dispositions and distributions required for AHIP to maintain its REIT status for federal income tax purposes. Based on the expectation that hotel EBITDA will continue to improve, management is currently targeting to re-establish a distribution in 2022 at a level that will be sustainable in the long term.

Q2 2021 FINANCIAL RESULTS CONFERENCE CALL

Management will host a conference call at 1:00 p.m. Eastern time / 10:00 a.m. Pacific time on Wednesday, August 11, 2021 to review the financial results for the three and six months ended June 30, 2021.

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' Q2 2021 Analyst Call.

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

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 8:30 p.m. Eastern time / 5:30 p.m. Pacific time on August 11, 2021 until September 1, 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 2984505 followed by the # key.

NON-IFRS MEASURES

Certain non-IFRS financial measures are included in this news release, which include NOI, NOI margin, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, debt-to-gross book value, Hotel EBITDA, Hotel EBITDA margin. 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, NOI margin, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, Hotel EBITDA and Hotel EBITDA margin as supplemental measures of performance and debt-to-gross book value as a supplemental measure of financial condition.

Debt-to-gross book value, NOI, NOI Margin, FFO, Diluted FFO per Unit, AFFO, Diluted AFFO per Unit, Hotel EBITDA and Hotel EBITDA margin 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, debt-to-gross book value, Hotel EBITDA and Hotel EBITDA margin 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 August 10, 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 anticipating further improvements to a recovery in weekday demand as the business traveler returns; AHIP being confident that it is well positioned to navigate any negative impacts to its business that could result from the ongoing market uncertainty resulting from COVID-19; AHIP currently being in discussions with Brand partners on PIPs and AHIP's expectation that it will restart two small renovations in late 2021; AHIP's Board of Directors, in consultation with management, continuing to regularly assess the timing of the re-introduction of AHIP's distribution by monitoring hotel performance, capital needs, acquisitions and dispositions and distributions required for AHIP to maintain its REIT status for federal income tax purposes; management's expectation that hotel EBITDA will continue to improve, and AHIP targeting to re-establish a distribution in 2022 at a level that will be sustainable in the long term; AHIP's management team positioning AHIP to grow its portfolio of premium-branded select service hotel properties across 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: 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; business travel in the U.S. will continue to improve; recent recovery trends at AHIP's properties will continue and not regress and AHIP will be able to re-establish a distribution in 2022 at a level that will be sustainable in the long term; the vaccination programs in the U.S. will be successful and vaccines effective, and government restrictions related to COVID-19 will alleviate 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; AHIP's management team will be successful in growing AHIP's portfolio of premium-branded select service hotel properties across the U.S; and AHIP will commence PIP renovations in 2021 and such renovations will be completed on time and on budget. 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 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 recent increase in COVID-19 cases attributable primarily to the Delta variant has the potential to reduce corporate and leisure travel in future periods, which may negatively impact AHIP; the pace of recovery cannot be accurately predicated and may be slow; the speed of vaccinations may decline, the effectiveness, acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against emerging variants of COVID-19 (including the Delta variant) all may be less than expected, which may prolong 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 downward pressure on occupancy levels and revenues for an extended period of time; recent recovery trends may not continue and may regress and 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 (which may not be during 2022) or what the amount of the distribution will be; distributions, if reinstated may not be sustainable and may be suspended at any time; PIP renovations may not commence or complete in accordance with currently expected timing and may suffer from increased material costs; AHIP's management team may not be successful in growing AHIP's portfolio of premium-branded select service hotel properties across the U.S 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 August 10, 2021 and annual information form for the year ended December 31, 2020, 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 Interim Financial Statements for the three and six months ended June 30, 2021, AHIP's MD&A dated August 10, 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's 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.

SECOND QUARTER HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

SECOND QUARTER HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

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SOURCE American Hotel Income Properties REIT LP