HOT.U American Hotel Income Properties REIT LP

• Revenue in Q4 2021 improved by 58.8% to $62.6 million, compared to $39.4 million in Q4 2020
• RevPAR in Q4 2021 improved by 56.1% to $73.76, compared to $47.25 in Q4 2020
• Q4 2021 Diluted FFO per Unit¹ increased to $0.07, compared to $(0.07) in Q4 2020
• Monthly distribution reinstated in February 2022 at an annual rate of USD$0.18 per unit
• Refinancing of $50.0 million convertible debentures, scheduled to mature in June 2022
• Total liquidity as at December 31, 2021 was $44.2 million
• Successfully completed strategic disposition of a non-core asset located in Florida in January 2022 for total gross proceeds of $10.3 million

VANCOUVER, BC, March 8, 2022 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP", or the "Company") (TSX: HOT.UN) (TSX: HOT.U) (TSX: HOT.DB.V) today announced results for the three months and year ended December 31, 2021. Numbers are in U.S. dollars unless otherwise indicated.

"Operating fundamentals continued to improve during the fourth quarter of 2021, with RevPAR achieving its highest level relative to 2019 since the onset of the pandemic, at 0.90x." said Jonathan Korol, CEO. Mr. Korol continued, "Rate recovery continues to outpace occupancy with Q4 average daily rate matching 2019 levels for the second consecutive quarter. We continue to benefit from modified brand services and amenities, evidenced by operating margins finishing above 2019 levels for the third consecutive quarter. These results demonstrate the resiliency and quality of our portfolio, and our constant focus on maximizing profitability through active asset management."

"Despite the various challenges resulting from the pandemic, we were able to execute on many of our strategic objectives over the last 12 months, including operational outperformance relative to the industry, the reinstatement of our monthly distribution, satisfying deferred obligations, and most recently, the refinancing of our convertible debentures." Mr. Korol added: "These achievements would not have been possible without the hard work and resolve of both our corporate team and hotel associates."

"We enter 2022 positioned to benefit from an improving backdrop and focused on our primary objective of creating long-term unitholder value." concluded Mr. Korol. "As we approach our highest demand period of the year, we are optimistic about the effects of improving national consumer confidence on demand from both leisure and business customers."

THREE MONTHS ENDED DECEMBER 31, 2021 FINANCIAL HIGHLIGHTS

• Revenue for the quarter increased by $23.2 million (or 58.8%) to $62.6 million (2020 – $39.4 million) compared to the prior year, reflecting the ongoing recovery from significantly lower demand in the prior year due to COVID-19.
• Revenue per available room ("RevPAR") increased 56.1% to $73.76 (2020 – $47.25) driven by Average Daily Rate ("ADR") increasing by 23.6% to $113.58 (2020 – $91.92) and Occupancy increasing by 1,350 basis points to 64.9% (2020 – 51.4%).
• Loss and comprehensive loss for the quarter was $14.1 million, compared to a loss of $20.9 million for the same period in 2020.
• Net operating income ("NOI")¹ for Q4 2021 increased to $21.1 million (2020 – $9.8 million). The increase in NOI is due to improvements in RevPAR and stronger operating margins.
• Funds from operations ("FFO")¹ for Q4 2021 increased to $6.0 million (2020 – ($5.2) million) and adjusted funds from operations ("AFFO")¹ increased to $5.5 million (2020 – ($4.1) million). The increase in FFO¹ and AFFO¹ is as a result of an improvement in operations.
• Q4 2021 Diluted FFO per Unit¹ was $0.07 (2020 – ($0.07)) and Diluted AFFO per Unit¹ was $0.07 (2020 – ($0.05)).

YEAR ENDED DECEMBER 31, 2021 FINANCIAL HIGHLIGHTS

• For AHIP's current portfolio of premium branded hotels only and using prior ownership's financial information for the 12 premium branded hotels acquired in December 2019, AHIP's existing portfolio has meaningfully narrowed the previously sizeable gap between 2021 and 2019 demand levels, while exceeding 2019 net operating income margin levels:

• RevPAR increased by 40.4% to $72.27 (2020 – $51.49) with Occupancy increasing by 1,470 basis points to 66.0% (2020 – 51.3%). ADR increased by 9.1% to $109.5 (2020 – $100.38), partially offset by two months of higher pre-COVID ADR in January and February 2020.
• 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 114.9 during the quarter (Q4 2020 – 122.0), with 100.0 representing a fair share of the market.
• FFO¹ increased to $41.9 million (2020 – ($9.5) million) as a result of recognizing $14.7 million of income from estimated forgiveness on the government-guaranteed loans and higher NOI¹. AFFO¹ increased to $41.0 million (2020 – ($9.0) million) for the same reasons. Excluding non-recurring items, FFO¹ and AFFO¹ for the twelve-months ended December 31, 2021 were $28.2 million and $27.3 million, respectively.
• Diluted FFO per Unit¹ was $0.48 (2020 – $0.12) and Diluted AFFO per Unit¹ was $0.46 (2020 – $0.11).
• NOI¹ increased to $88.9 million (2020 – $46.6 million) due to higher revenues and expense reduction initiatives. NOI Margin² increased to 36.8% (2020 – 26.6%) 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 $11.8 million (2020 – loss of $66.4 million), as a result of a $14.7 million gain from estimated forgiveness on the government-guaranteed loans. Higher NOI¹, further contributed to AHIP's positive performance.
• As part of asset management of the portfolio, AHIP deferred capital projects in 2020 and 2021. In November 2021, AHIP restarted two smaller Property Improvement Plans in Amarillo, TX, which had been suspended at the onset of the pandemic in March 2020. These projects were completed in February 2022.

LEVERAGE AND LIQUIDITY

• As at December 31, 2021, AHIP had total available liquidity of $44.2 million (2020 - $35.8 million) consisting of an unrestricted cash balance of $14.7 million (2020 - $20.1 million) and available capacity of approximately $29.5 million (2020 - $15.7 million) in its revolving credit facility. AHIP also has a restricted cash balance of $38.4 million which will be used to fund future Property Improvement Plans and FF&E expenditures.
• o Improvement in liquidity to $44.2 million at December 31, 2021 compared to the $35.8 million in the prior year is linked to both an improvement in operations and net cash generated from financing for the twelve months ended December 31, 2021.
• o Cash generated from operations increased to $10.4 million (2020 – ($1.6) million) as a result of higher operating income from the relative improvement of operations between comparative periods.
• AHIP's Debt-to-Gross Book Value¹ as at December 31, 2021 was 54.1% (2020 – 58.3%). This improvement is attributable to the decrease in the revolving credit facility and government-guaranteed loans that have been forgiven.
• As at December 31, 2021, AHIP's term loans, revolving credit facility and 2026 Debentures had a weighted average remaining term of 3.9 years (2020 – 4.5 years) and a AHIP's term loans and 2026 Debentures as at December 31, 2021 had a weighted average interest rate of 4.62% (2020 – 4.55%).
• Effective January 1, 2022, AHIP is no longer in the covenant waiver period under the revolving credit facility.

OPERATING HIGHLIGHTS AND OUTLOOK

Select service properties represent 56% of AHIP's portfolio by room count. For the year ended December 31, 2021, RevPAR for these properties was $65.98, which represents 0.82x recovery to the year ended December 31, 2019. The select service hotel model utilizes less labor per occupied room and has allowed AHIP to outperform industry averages in operating margins. This has largely mitigated the impact of national challenges in the labor market where low availability and rising wages have impacted most hospitality operators.

Extended stay properties represent 29% of AHIP's portfolio and continue to exceed overall industry demand levels. For the year ended December 31, 2021, RevPAR for these properties was $86.35, which represents 0.87x recovery to the year ended December 31, 2019. The extended stay properties also contribute to higher overall operating margins as a result of the longer average stay of the typical guest.

AHIP's five Embassy Suites properties represent 15% of the portfolio. Although the Embassy Suites remained 20% below 2019 RevPAR levels, this was an improvement over the third quarter of 2021 where RevPAR was 26% below 2019 levels. The improvement was largely occupancy driven as occupancy rose from 57.8% to 59.1% between the third and fourth quarters of 2021. The Embassy Suites rely in part on business demand from conference and group bookings which have not recovered at the same pace as other demand segments of the hotel sector during the pandemic. The Embassy Suites experienced some recovery in business travel in the quarter, supplemented by leisure-oriented groups: family reunions, youth sports, local events and weddings. AHIP's five Embassy Suites' were all renovated in 2018 and 2019 and are well positioned to capture both business and corporate group demand as these segments continue to recover in 2022. 

January occupancy was approximately 55%, ADR was consistent with December at approximately $110 and RevPAR was approximately $60 which represents 0.81x of 2019 levels. In February, RevPAR increased by 30% compared to January to approximately $78 which is 0.91x of 2019 levels. Occupancy and ADR was approximately 66%, and $118 respectively.

DISTRIBUTIONS

In November 2021, AHIP announced its intention to resume payment of regular monthly distributions commencing in March 2022 at an annual rate of USD$0.18 per common unit (monthly rate of USD$0.015 per unit). The first regular monthly distribution was declared on February 15, 2022, with a record date as of February 28, 2022 and is payable on March 15, 2022. The declaration and payment of each monthly distribution under AHIP's distribution policy will remain subject to Board approval, and compliance by AHIP with the terms of its revolving credit facility and its investor rights agreement. Distributions are not guaranteed and may be reduced or suspended at any time at the discretion of the Board of Directors should operating conditions or outlook change. See "Forward Looking Information" for further details.

In addition, AHIP paid the deferred March 2020 distribution on December 31, 2021, to the unitholders of record as of March 31, 2020.

SUBSEQUENT EVENTS

Sale of hotel

AHIP received gross proceeds of $10.3 million from the sale of the Fairfield Inn & Suites Lake City, Florida in January 2022. Following this disposition, AHIP owns 11 hotels in Florida, representing 12.5% of AHIP's portfolio by room count. The strategic rationale for this sale included a compelling per-key and cap rate exit value, avoidance of upcoming capital spend requirements and new supply coming to the market.

Change in Board of Directors

The REIT's Board also announced today the concurrent resignation of Mark Van Zant as a Director and the appointment of Matthew Cervino as a Director effective March 8, 2022. Mr. Cervino is a Managing Director and Portfolio Manager of the U.S. Value-Add Funds for BentallGreenOak ("BGO"). Mr Cervino has more than 16 years of experience in acquisitions and dispositions of real estate assets across the U.S. and plays an active role in many parts of BGO's value add investment strategy, including ESG and diversity initiatives. This change is as a result of Mr. Van Zandt's departure from BGO in March of 2022. Michael Murphy, Chairman of the Board of the REIT commented, "We are pleased to welcome Matthew as a valuable addition to the REIT's Board of Directors which will support our ongoing strategic partnership with BentallGreenOak. I would also like to express our gratitude to Mr. Van Zandt for his contributions in establishing a meaningful partnership and equity contribution to the REIT in early 2021."

Q4 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, March 9, 2022 to review the financial results for the three months and year ended December 31, 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' Q4 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 4:00 p.m. Eastern time / 1:00 p.m. Pacific time on March 9, 2022 until March 16, 2022. 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.

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, 2021, which are available on AHIP's website at www.ahipreit.com and on SEDAR at www.sedar.com

NON-IFRS MEASURES

Certain non-IFRS financial measures and non-IFRS ratios are included in this news release. The non-IFRS financial measures used in this news release include Debt, Gross Book Value, FFO, AFFO, Diluted FFO per Unit, Diluted AFFO per Unit, NOI, EBITDA, Hotel EBITDA and Interest Expense, and the non-IFRS ratios used in this news release include Debt-to-Gross Book Value, NOI Margin, EBITDA Margin, Hotel EBITDA Margin, Interest Coverage Ratio, Debt-to-EBITDA, FFO Payout Ratio and AFFO Payout Ratio. 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, and Diluted AFFO per Unit as supplemental measures of performance and Debt-to-Gross Book Value as a supplemental measure of financial condition. Non-IFRS financial measures and non-IFRS ratios 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 these measures and ratios may differ from other issuers' methods and accordingly may not be comparable to measures used by other issuers.

For further information on these non-IFRS financial measures and non-IFRS ratios please refer to AHIP's MD&A dated March 8, 2022 in the Non-IFRS Measures section, which is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

a)      Debt:

Debt is reconciled to current and long-term portions of term loans and revolving credit facility as follows:

b)      Gross Book Value:

Gross Book Value is reconciled to Total Assets as follows:

c)       Debt-to-Gross Book Value:

Debt-to-Gross Book Value is the ratio of Debt divided by Gross Book Value.

d)      FFO and AFFO:

FFO is reconciled to net income (loss) and comprehensive income (loss) as follows:

AFFO is reconciled to cash flow from operating activities as follows:

e)      NOI:

NOI is reconciled to income from operating activities as shown below.

f)       NOI Margin:

AHIP calculates NOI Margin as NOI divided by total revenues. 

g)      EBITDA:

EBITDA is reconciled to income from operating activities per the audited consolidated financial statements ("Financial Statements") as shown below.

h)      EBITDA Margin:

AHIP calculates EBITDA Margin as EBITDA divided by total revenues.

i)        Hotel EBITDA:

HOTEL EBITDA is reconciled to income from operating activities per the Financial Statements as shown below.

j)        Hotel EBITDA Margin:

AHIP calculates Hotel EBITDA Margin as Hotel EBITDA divided by total revenues.

k)      Interest Expense:

The reconciliation of finance costs per the Financial Statements to Interest Expense is show below:

l)        Interest Coverage Ratio:

AHIP calculates Interest Coverage Ratio as EBITDA for the trailing twelve-month period divided by Interest Expense for the trailing twelve-month period.

m)    Debt-to-EBITDA:

AHIP calculates the Debt-to-EBITDA as Debt divided by the trailing twelve months of EBITDA.

n)      FFO Payout Ratio and AFFO Payout Ratio:

AHIP calculates its FFO Payout Ratio as distributions declared divided by FFO for the period and AFFO Payout Ratio as distributions declared divided by AFFO for the period. The reconciliation of net income (loss) and comprehensive income (loss) to FFO and AFFO is shown above under the definition of FFO.

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 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 are 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 include, but are not limited to, statements with respect to: AHIP's expectations with respect to its future performance, including specific expectations in respect to certain categories of its properties; AHIP's planned capital expenditures, including the estimated amount and timing of such expenditures; AHIP anticipating strong operating results in March 2022, and the underlying reasons for such expectation; the expected timing for the declaration, record date and payment of monthly distributions; and AHIP's stated long-term objectives.

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 based on a number of key expectations and assumptions made by AHIP, including, without limitation: the COVID-19 pandemic will continue to negatively impact (although to a lesser extent than previously) the U.S. economy, U.S. hotel industry and AHIP's business; AHIP will continue to have sufficient funds to meet its financial obligations; AHIP's strategies with respect to margin enhancement, completion of capital projects, liquidity and divestiture of non-core assets and acquisitions will be successful; capital projects will be completed on time and on budget; AHIP's will continue to have good relationships with its Brand partners; occupancy rates will be stable or rise in 2022; AHIP's distribution policy will be sustainable and AHIP will not be prohibited from paying distributions under the terms of its Credit Facility or investor rights agreement; the portion of the government-guaranteed loans to be forgiven will be consistent with AHIP's estimates; 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; 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 guarantees 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 or financial outlook. Those risks and uncertainties include, among other things, risks related to: the COVID-19 pandemic and related government measures and their impact on the U.S. economy, the hotel industry, and AHIP's business,; AHIP may not achieve its expected performance levels in 2022; AHIP's brand partners may impose revised service standards and capital requirements which are adverse to AHIP; PIP renovations may not commence or complete in accordance with currently expected timing and may suffer from increased material costs; recent recovery trends at AHIP's properties may not continue and may regress; AHIP's strategies with respect to margin enhancement, completion of accretive capital projects, liquidity, divestiture of non-core assets and acquisitions may not be successful; AHIP may not be successful in reducing its leverage; monthly cash distributions are not guaranteed and remain subject to the approval of Board of Directors and may be reduced or suspended at any time at the discretion of the Board; AHIP may not be able to refinance debt obligations as they become due; AHIP may not satisfy the criteria for forgiveness of certain government-guaranteed loans obtained by AHIP. 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 8, 2022 and AHIP's most recently filed annual information form, 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, 2021, AHIP's MD&A dated March 8, 2022, 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.V), or AHIP, is a limited partnership formed to invest in hotel real estate properties across the United States. AHIP's 77 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 increase the value of its hotel properties through operating excellence, active asset management and investing in value-added capital expenditures, expand its hotel portfolio through selective acquisitions on an accretive basis and increase unitholder value and distributions to unitholders. More information is available at www.ahipreit.com.

FOURTH QUARTER HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

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SOURCE American Hotel Income Properties REIT LP