American Hotel Income Properties REIT LP announces US$57.3 million hotel portfolio acquisition and $35.0 million equity financing
VANCOUVER, Oct. 10, 2013 /CNW/ – American Hotel Income Properties REIT LP (“AHIP”) (Toronto Stock Exchange: HOT.UN; OTCQX: AHOTF) announced today that it has agreed to acquire four hotel properties located in metropolitan Pittsburgh, Pennsylvania (the “Acquisition Portfolio”) for an aggregate purchase price of approximately US$57.3 million, excluding post-acquisition adjustments and brand mandated property improvement plans.
AHIP has also entered into an agreement with a syndicate of underwriters co-led by Canaccord Genuity Corp. and National Bank Financial Inc. (collectively, the “Underwriters”), to sell, on a bought deal basis, 3,450,000 subscription receipts (“Subscription Receipts”) of AHIP at a price of $10.15 per Subscription Receipt for gross proceeds to AHIP of approximately $35.0 million (the “Offering”).
The Acquisition Portfolio will be purchased at a weighted average going-in capitalization rate of approximately 9.7% (after consideration for all hotel management fees, accounting fees, capital expenditure fees, and a reserve for furniture, fixtures and equipment), or approximately US$134,000 per suite, after accounting for brand mandated property improvement plans to upgrade furniture, fixtures and equipment, which is expected by AHIP to cost, in aggregate, approximately US$6.0 million. Including the property improvement plans and closing costs, the aggregate cost to AHIP for the Acquisition Portfolio is expected to be approximately US$65.0 million.
-- Quality portfolio of four hotel properties located in metropolitan Pittsburgh, Pennsylvania, featuring stable historical operating metrics -- Entrance into the metropolitan Pittsburgh market, identified by HVS Global Hospitality Services, Inc. as the second most stable major lodging investment market in the United States -- Acquisition Portfolio operates under established hotel brand names including Hampton Inn (Hilton) and Residence Inn (Marriott) -- AHIP's pro forma leverage and payout ratios remain conservative after giving effect to the Acquisition Portfolio -- Expected by AHIP management to be immediately accretive to AFFO per unit -- The acquisition price is significantly below the appraised value and management's estimate of replacement cost
Rob O’Neill, AHIP’s CEO, commented “We are very pleased to announce this acquisition, which represents the first major step in the execution of our stated growth strategy as outlined at the time of AHIP’s initial public offering targeting acquisitions of transportation-oriented and select and limited-service hotels, located in secondary markets in the United States in close proximity to railroads, airports, highway interchanges and other transportation hubs and demand generators. This acquisition represents a unique opportunity for AHIP to purchase a high quality, well-maintained portfolio at a price that is below its independently appraised value and below our estimate of its replacement cost. I am particularly pleased that we will now have a presence in the Pittsburgh area, which has strong underlying fundamentals with expectations for near term growth. We expect this acquisition to be immediately accretive to our AFFO per unit.”
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