American Hotel Income Properties REIT LP (AHIP) (TSX: HOT.UN) (OTCQX: AHOTF) announced yesterday its financial results for the three months and fiscal year ended December 31, 2015.
Rob O'Neill, CEO of AHIP, commented "I am delighted to announce that AHIP was the best performing hotel REIT in North America for 2015 with a total return of approximately 16% and total returns of approximately 33% since our IPO three years ago. This significant achievement demonstrates the value of our strategy of owning two unique and balanced Rail and Branded Hotel portfolios, which we continued to expand through accretive and strategic acquisitions made during the year. We have had a very productive quarter as we renewed 15 rail crew contracts with one of our larger railway customers. In addition, we renegotiated our Rail Hotel credit facility by extending the maturity date and enhancing our liquidity. Our average debt term is now over eight years with fixed interest rates of approximately 4.6%. We will be converting to a U.S. dollar denominated distribution effective April 2016. This will lock in our pro-forma payout ratio at 80% of 2015 AFFO and with our healthy balance sheet, will further improve AHIP's ability to weather the current period of economic uncertainty."
FOURTH QUARTER 2015 FINANCIAL REVIEW
- Funds from operations ("FFO") and adjusted funds from operations ("AFFO") were $7.2 million and $6.2 million, respectively, for the current quarter compared to $4.7 million and $4.2 million, respectively, for the same period last year reflecting the addition of 19 new hotels comprising over 1,800 guestrooms
- For the current quarter, Diluted FFO per Unit was $0.21 (2014 - $0.21) and Diluted AFFO per Unit was $0.18 (2014 - $0.18)
- The portfolio generated revenue per available room ("RevPAR") gains of 1.4% to $56.96 (2014 - $56.19) driven by higher average daily rates ("ADR"), which was offset by somewhat lower occupancy in the Rail Hotels
- Pro-forma RevPAR was up significantly for certain Branded Hotels, which includes operating results for periods prior to their ownership by AHIP, with Florida up by 29.5%, Virginia up by 16.2%, and NC/GA up by 13.5%. This was offset by demand weakness in Texas and Oklahoma-based properties; both of which, however, outperformed their respective competitive set RevPAR
- Certain Rail Hotels were impacted by fewer non-rail crew commercial guests and lower railway volumes, with revenues supported through the contractual rail crew guarantees
- Total revenues for the quarter increased by $12 million to $39.8 million, a 43% increase from the $27.8 million for the prior period
- EBITDA for the quarter was up 46%, or $3.3 million, to $10.4 million compared to $7.1 million in the same period last year and EBITDA margin improved by 50 basis points to 26.2% (2014 - 25.7%)
- AHIP's debt-to-gross book value at December 31, 2015 was 49.6% (2014 - 51.5%) and interest coverage ratio for the current quarter improved to 3.0x (2014 - 2.8x)
- AHIP's weighted average face interest rate declined to 4.59% (2014 - 4.73%) and the weighted average loan term to maturity increased to 8.3 years (2014 - 7.5 years)
- AHIP continued to pay its regular monthly distribution of Cdn$0.075 and the payout ratio improved to 95.5% (2014 - 115.4%) compared to the prior year
- On November 1, 2015, AHIP completed the renewal of 15 rail crew lodging contracts covering 1,363 guestrooms for a 5 year term. The contract will guarantee minimum revenues at 2015 levels with rate escalations over the contract term
- On December 18, 2015, AHIP negotiated a $106 million variable rate, secured credit facility on part of its Rail Hotel portfolio. The credit facility extended the term of various mortgages to March 2023, increased the revolving line of credit from $4 million to $10 million, provided an acquisition line of $10 million, and increased the amortization period to generate annual cash savings of approximately $1 million. AHIP also entered into an interest rate swap contract to fix the interest rate on the mortgage at 4.72% for the entire term
- Acquired 48 newly built guestrooms at high occupancy Rail Hotels in Montana and Missouri
- Acquired two Rail Hotels totaling over 200 guestrooms with existing rail crew lodging contracts in Kansas and Nebraska
FULL YEAR 2015 FINANCIAL REVIEW
- FFO and AFFO were $28.0 million and $24.4 million, respectively, for the current year compared to $16.6 million and $15.0 million, respectively, for the same period last year reflecting hotel acquisitions during the year
- For the current year, Diluted FFO per Unit was $0.93 (2014 - $0.91) and Diluted AFFO per Unit was $0.81 (2014 - $0.82)
- RevPAR was up by 4.6% to $60.12 compared to $57.47 for the same period last year reflecting the impact of the higher ADR contribution from the Branded Hotels as these properties benefited from the continued growth in the U.S. lodging industry
- Pro-forma RevPAR for certain Branded Hotels, which includes operating results for periods prior to their ownership by AHIP, was higher with Florida up by 12.4%, NC/FL up by 11.3%, Texas up by 4.2%, and Virginia was up by 4.1%, somewhat offset by weakness in Pittsburgh and Oklahoma
- Total revenues increased by $50.7 million, to $143.8 million compared to $93.1 million for the prior period a gain of 54%
- EBITDA for the current year was up $16.8 million, or 69% to $41.2 million compared to $24.4 million in the same period last year and EBITDA margin improved by 240 basis points from 26.2% to 28.6%
- AFFO payout ratio decreased to 89.2% from 100.2% in the prior year. With the conversion to a U.S. dollar denominated distribution starting in April 2016, the full year pro-forma payout ratio on 2015 AFFO is 80%
- A conservative debt-to-gross book value ratio of 49.6% as at December 31, 2015
- Interest coverage ratio improved to 3.4x (2014 - 3.0x)
- As at December 31, 2015, AHIP had cash balances of $13.2 million, and restricted cash balances of $15.7 million for Branded Hotels property improvement plans
- Acquired 12 Branded Hotels with 984 guestrooms and seven Rail Hotels totaling 766 guestrooms including a rail crew lodging competitor with five rail crew lodging contracts with over 80% room guarantees and contract terms over nine years
- Total distributions of Cdn$0.90 per Unit were declared during the year
Certain non-IFRS financial measures are included in this news release, which include ADR, RevPAR, Pro-forma RevPAR, NOI, FFO, FFO per Unit, AFFO, AFFO per Unit, payout ratio 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 investment trusts often refer to NOI, FFO, FFO per Unit, AFFO, AFFO per Unit, and payout ratio 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, FFO per Unit, AFFO, AFFO per Unit, and payout ratio 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, FFO per Unit, AFFO, AFFO per Unit, payout ratio, debt and gross book value may differ from other issuers' methods and accordingly may not be comparable to measures used by other issuers. For further information, please refer to AHIP's Management's Discussion and Analysis ("MD&A") dated March 7, 2016, which is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.
ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP
AHIP's current property portfolio is comprised of 80 hotels located in 27 states, representing 7,048 available guestrooms. The Rail Hotel segment, serving the U.S. freight railway industry, consists of 45 hotels comprising 3,748 guestrooms and 27 Penny's Diner restaurants. The Branded Hotel segment consists of 35 hotels comprising 3,330 guestrooms and is affiliated with leading hotel brands including Marriott, Hilton and IHG.
AHIP is a limited partnership formed under the Limited Partnerships Act (Ontario) to invest in hotel real estate properties located substantially in the United States and engaged primarily in the railway employee accommodation, transportation and branded, select service lodging sectors.
AHIP's long-term objectives are to: (i) generate stable and growing cash distributions from hotel properties substantially in the U.S.; (ii) enhance the value of its assets and maximize the long-term value of the hotel properties through active management; and (iii) expand its asset base and increase its AFFO per unit through an accretive acquisition program, participation in strategic development opportunities and improvements to its properties through targeted value-added capital expenditure programs.
Additional information relating to AHIP, including AHIP's financial statements for the three months and year ended December 31, 2015, AHIP's MD&A dated March 7, 2016, and other public filings are available on SEDAR at www.sedar.com.
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