HOT.U American Hotel Income Properties REIT LP

• Diluted funds from operations per unit ("Diluted FFO per Unit")¹ of $0.05 for the quarter ended March 31, 2022, compared to $(0.03) for the same period in 2021.
• Average daily room rate ("ADR") of $117.05, meeting or exceeding 2019 ADR results for the third consecutive quarter.
• Revenue per available room ("RevPAR") of $74.52, a 0.87x recovery to 2019 which is consistent with the previous two quarters.
• Revenue increase of 32.2% to $61.8 million in Q1 2022 compared to $46.7 million in the same period of 2021.
• Income from operating activities of $6.7 million for the quarter was higher than the $3.6 million for the same quarter in 2021.
• Hotel EBITDA¹ of $15.4 million for the quarter ended March 31, 2022, compared to $13.6 million for the same period in 2021.
• Addressed only 2022 debt maturity with the repayment of a $54.5 million term loan.
• Sale of Fairfield Inn & Suites Lake City, Florida hotel for total gross proceeds of $10.3 million.
• Commencement of monthly distribution of US$0.015 per unit, with the first such distribution announced on February 15, 2022.
• Total available liquidity at March 31, 2022 was $40.0 million plus an additional restricted cash balance of $40.4 million.

VANCOUVER, BC, May 10, 2022 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP", or the "Company") (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.V) today announced its results for the three months ended March 31, 2022. Numbers are in U.S. dollars unless otherwise indicated.

"AHIP's premium branded select-service hotel portfolio continues to achieve solid financial results in an improving demand environment." said Jonathan Korol, CEO. Mr. Korol continued, "After four consecutive quarters of improving RevPAR relative to 2019, we took a modest step back in Q1 2022. This was primarily attributable to the temporary occupancy impact of Omicron in January. Top-line metrics rebounded in February and March, resulting in a third consecutive quarter of ADR matching or exceeding 2019 levels."

"From a margin perspective, results were impacted by higher wages driven by labour scarcity, increasing utility costs and continued supply chain disruptions impacting the cost and availability of hotel operating supplies." Mr. Korol added: "These factors contributed to operating margins below 2019 levels for the first time since 2020. In the current environment, our ability to maintain margins at 2019 levels or better will be determined by achieving revenue growth to offset inflationary cost pressures."

"The second quarter has started well, with preliminary April RevPAR coming in at a robust 0.92x 2019," noted Mr. Korol. "Leisure travel is being propelled by guests' improving willingness and ability to travel. This is translating to higher guest room rates than 2019 accompanied by stable occupancies. As we enter the seasonally strongest period for our portfolio, we remain confident in our ability to navigate the current industry backdrop and maximize long-term unitholder value."

THREE MONTHS ENDED MARCH 31, 2022 FINANCIAL SUMMARY

• Revenue for the quarter increased by $15.1 million (or 32.2%) to $61.8 million (2021 – $46.7 million) compared to the prior year, reflecting the ongoing recovery from lower demand in the prior year due to COVID-19.
• RevPAR increased 30.7% to $74.52 (2021 – $57.01) driven by ADR increasing by 23.6% to $117.05 (2021 – $94.70) and Occupancy increasing by 350 basis points to 63.7% (2021 – 60.2%).
• Loss and comprehensive loss for the quarter was $3.9 million, which was an improvement over the loss of $14.0 million for the same period in 2021. This included a gain of $1.7 million on the sale of Fairfield Inn & Suites Lake City, Florida hotel in the quarter, $1.0 million in business interruption insurance proceeds received in the first quarter from a COVID-19 related claim of lost revenue in 2020 and a $2.4 million increase in the change in fair value of interest rate swap contracts.
• Net operating income ("NOI")¹ for Q1 2022 increased to $17.5 million (2021 – $15.0 million). The increase in NOI is due to improvements in operations.
• Funds from operations ("FFO")¹ for Q1 2022 increased to $3.6 million (2021 – ($2.0) million) and adjusted funds from operations ("AFFO")¹ increased to $2.2 million (2021 – ($1.6) million). The increase in FFO¹ and AFFO¹ is as a result of higher NOI¹ and a $1.3 million non-recurring financing charge.
• Q1 2022 Diluted FFO per Unit¹ was $0.05 (2021 – ($0.03)) and diluted adjusted funds from operations per unit ("Diluted AFFO per Unit")¹ was $0.03 (2021 – ($0.02)).
• The following table summarizes certain portfolio operating metrics for the four most recent quarters with a comparison represented as a multiple of the same period in 2019²:

LEVERAGE AND LIQUIDITY

• As at March 31, 2022, AHIP had total available liquidity of $40.0 million consisting of an unrestricted cash balance of $22.8 million and available capacity of $17.2 million on its Revolving Credit Facility. AHIP also has a restricted cash balance of $40.4 million which will be used to fund future hotel brand mandated property improvement plans ("PIPs") and FF&E expenditures.
• • On April 6, 2022, AHIP repaid a term loan of $54.5 million with a maturity date of July 6, 2022; primarily by borrowing $50 million under its Revolving Credit Facility. As of May 10, 2022, the Revolving Credit Facility had available capacity of approximately $31.1 million.  
• AHIP's Debt-to-Gross Book Value¹ at March 31, 2022 was 54.1% which has remained stable over the last three quarters. Leverage by this measure has decreased by 460 basis points since Q2 2020.
• The weighted average interest rate on AHIP's term loans, Revolving Credit Facility and 2026 Debentures at March 31, 2022 was 4.63% and the weighted average term to maturity on AHIP's term loans, Revolving Credit Facility and 2026 Debentures was 3.6 years.
• As of May 10, 2022, 92.9% of AHIP's long term debt is at fixed rates and there are no debt maturities until the fourth quarter of 2023.
• Effective January 1, 2022, AHIP is no longer in the covenant waiver period under its senior credit facility.

OPERATING HIGHLIGHTS AND OUTLOOK

Select Service properties represent 56% of AHIP's portfolio by room count. For the three months ended March 31, 2022, RevPAR for these properties was $67.66 representing a 0.89x recovery to the same period in 2019, which is a decrease of 0.03x compared to the fourth quarter of 2021. The select service hotel model utilizes less labour per occupied room and has allowed AHIP to outperform industry averages in operating margins. This partially mitigates the impact of national challenges in the labour market where low availability and rising costs have impacted a large number of hospitality operators.

Extended Stay properties represent 29% of AHIP's portfolio by room count. For the three months ended March 31, 2022, RevPAR for these properties was $82.78 representing a 0.88x recovery to the same period in 2019, which is a decrease of 0.04x compared to the fourth quarter of 2021. The Extended Stay properties also contribute to higher overall operating margins as a result of a longer average length of stay.

AHIP's five Embassy Suites properties represent 15% of the portfolio by room count. For the three months ended March 31, 2022, RevPAR for these properties was $84.08 representing a 0.80x recovery to the same period in 2019, which is unchanged from the fourth quarter 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.

DISTRIBUTIONS

AHIP has adopted a distribution policy providing for the payment of regular monthly distributions at an annual rate of US$0.18 per unit (monthly rate of US$0.015 per unit). The first such distribution was declared on February 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.

Q1 2022 FINANCIAL RESULTS CONFERENCE CALL

Management will host a conference call at 11:00 a.m. Eastern time / 8:00 a.m. Pacific time on Wednesday, May 11, 2022 to review the financial results for the three months ended March 31, 2022.

To participate in this conference call, please use the following dial-in information:

Please ask to participate in American Hotel Income Properties' Q1 2022 Analyst Call. To avoid any delays in joining the call, please dial in at least five minutes prior to the call start time. If prompted, please provide entry code 3357115.

An audio webcast of the conference call is also available, both live and archived, on the Events & Presentations page of AHIP's website: www.ahipreit.com. Alternatively, you may register for the webcast directly at the following link: https://produceredition.webcasts.com/starthere.jsp?ei=1544689&tp_key=3a81534a5a

CONFERENCE CALL REPLAY

A replay of the conference call can be accessed after 4:00 p.m. Eastern time / 1:00 p.m. Pacific time on Wednesday, May 11, 2022 at 1-888-203-1112 or 1-647-436-0148 (using entry code 3357115). The replay will be available until 4:00 p.m. Eastern time / 1:00 p.m. Pacific time on May 18, 2022. The webcast recording of this conference call will also be available at www.ahipreit.com on the Events and Presentation page.

The information in this news release should be read in conjunction with AHIP's unaudited condensed consolidated interim financial statements and management's discussion and analysis ("MD&A") for the three months ended March 31, 2022, 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 May 10, 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 information). Forward-looking information 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 includes, but is not limited to, statements made or implied relating to the objectives of AHIP, AHIP's strategies to achieve those objectives and AHIP's beliefs, plans, estimates, projections and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information in this news release includes, but is 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 outlook on the U.S. travel market; 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 hotel 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 senior credit facility or investor rights agreement; 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 involves significant risks and uncertainties and should not be read as a guarantee of future performance or results as actual results may differ materially from those expressed or implied in such forward-looking information, accordingly undue reliance should not be placed on such forward-looking information. 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; and AHIP may not achieve its long term objectives. Management believes that the expectations reflected in the forward-looking information are based upon reasonable assumptions and information currently available; however, management can give no assurance that actual results will be consistent with the forward-looking information contained herein. Additional information about risks and uncertainties is contained in AHIP's MD&A dated May 10, 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 three months ended March 31, 2022, AHIP's MD&A dated May 10, 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 portfolio of premium branded, select-service hotels are located in secondary metropolitan markets that benefit from diverse and stable demand. AHIP hotels operate under brands affiliated with Marriott, Hilton, IHG and Choice Hotels through license agreements. 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.

FIRST QUARTER HIGHLIGHTS AND KEY PERFORMANCE INDICATORS

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SOURCE American Hotel Income Properties REIT LP