American Hotel Income Properties REIT LP (“
AHIP”,
or the “
Company”) (TSX: HOT.UN, TSX: HOT.U, TSX:
HOT.DB. V), today announced its financial results for the three
months ended March 31, 2024.
All amounts presented in this news release are
in United States dollars (“U.S. dollars”) unless
otherwise indicated.
2024 FIRST QUARTER HIGHLIGHTS
- Diluted FFO per
unit (1) and normalized diluted FFO per unit (1) were $0.03 and
$0.02, respectively, for the first quarter of 2024, compared to
$0.11 and $0.07 for the same period of 2023.
- Occupancy (1) was
66.4% for the first quarter of 2024, an increase of 230 basis
points (“bps”) compared to 64.1% for the same period of 2023.
- ADR (1) decreased
0.8% to $131 for the first quarter of 2024, compared to $132 for
the same period of 2023.
- Revenue increased
1.6% to $66.5 million for the first quarter of 2024, compared to
$65.5 million for the same period in 2023.
- NOI and normalized
NOI (1) were $17.2 million and $17.3 million, respectively, for the
first quarter of 2024, decreases of 8.0% and 12.2%, respectively,
compared to $18.7 million and $19.7 million for the same period in
2023.
- AHIP had $25.5
million in available liquidity as at March 31, 2024, compared to
$27.8 million as at December 31, 2023. The available liquidity
of $25.5 million was comprised of an unrestricted cash balance of
$15.5 million and borrowing availability of $10.0 million under the
revolving credit facility.
“AHIP’s portfolio of premium branded select
service hotel properties continued to demonstrate strong demand
metrics in 2024.” said Jonathan Korol, CEO. “Portfolio RevPAR
and occupancy increased by 2.4% and 230 bps respectively compared
to Q1 2023. Excluding hotels with disrupted operations in the first
quarter of 2023, RevPAR decreased by 1.6% compared to the same
period in the prior year. Preliminary results for April show an
improvement with an increase in RevPAR of approximately 5%
excluding hotels with disrupted operations in 2023. Costs related
to macroeconomic conditions remain elevated, with higher insurance
premiums and elevated labor and operating costs resulting in
pressures to hotel operating margins.”
Mr. Korol added: “AHIP’s Board and management
team are taking a number of actions across the business in recent
quarters to preserve cash, enhance financial stability and protect
long term value for our unitholders. As previously disclosed, these
actions include the recently completed, amendment and extension of
our revolving credit facility, reduction and deferral of hotel
management fees, and temporary suspension of the distribution. In
2024, we are currently executing a plan to address 2024 debt
obligations with asset sales and loan refinancings. These steps are
expected to strengthen our liquidity and balance sheet to ensure we
are positioned to benefit when the industry operating and
macroeconomic environment improves. We will continue to monitor
conditions and operating performance, while considering further
strategic opportunities to deliver value over the long term.”
2024 FIRST QUARTER REVIEW
FINANCIAL AND OPERATIONAL
HIGHLIGHTS
For the three months ended March 31, 2024,
occupancy increased 230 bps to 66.4%, compared to the same period
in the prior year. The increase in occupancy was partially offset
by a slight decrease of 0.8% in ADR. Overall, improved occupancy
resulted in an increase of 2.4% in RevPAR, compared to the same
period in 2023.
The improved RevPAR is attributable to higher
demand for the extended stay and select service properties. This is
primarily due to improved performance of properties disrupted in
2023 by the weather-related damage and renovation at three hotels,
as well as the disposition of properties with lower-than-average
portfolio RevPAR. Excluding the hotels disrupted in the first
quarter of 2023 and properties sold since the first quarter of
2023, ADR and occupancy decreased by less than 1.0%, and RevPAR
decreased by 1.6%, compared to the same period in the prior
year.
The ability to control and manage daily rates is
a key advantage of the lodging sector, which has enabled AHIP to
achieve growth in RevPAR, partially mitigating the effects of
rising labor costs and general inflationary pressures across the
portfolio.
NOI, NOI MARGIN
(1) AND DILUTED FFO PER UNIT
(1)
NOI and normalized NOI (1) were $17.2 million
and $17.3 million, respectively, for the three months ended March
31, 2024, decreases of 8.0% and 12.2%, respectively, compared to
NOI of $18.7 million and normalized NOI of $19.7 million for the
same period in 2023. NOI margin was 25.9% in the current quarter, a
decrease of 270 bps compared to the same period in 2023. The
decreases in NOI and NOI margin were due to higher operating
expenses as a result of general cost inflation and higher property
insurance premiums. General inflation resulted in increased labor
costs and higher costs of operating supplies. The increase in the
annual premium for property insurance effective June 1, 2023 is
approximately $3.5 million.
Diluted FFO per unit and normalized diluted FFO
per unit (1) were $0.03 and $0.02 for the first quarter of 2024,
respectively, compared to diluted FFO per unit of $0.11 and
normalized diluted FFO per unit of $0.07 for the same period in
2023. Normalized diluted FFO per unit in the current quarter
excluded non-recurring expected insurance proceeds of $1.1 million
as a result of weather-related property damage at several hotel
properties in late December 2022. The decrease in normalized
diluted FFO per unit was due to lower NOI and higher finance costs
in the current quarter, compared to the same period in 2023.
LEVERAGE AND LIQUIDITY
KPIs |
Q1 2024 |
Q4 2023 |
Q3 2023 |
Q2 2023 |
Q1 2023 |
Debt-to-GBV (1) |
52.2% |
51.9% |
51.1% |
51.6% |
52.0% |
Debt-to-TTM EBITDA (1) |
10.5x |
10.6x |
10.1x |
9.8x |
9.6x |
Debt to gross book value as at March 31,
2024 was 52.2%, an increase of 30 bps compared to December 31,
2023. Debt to TTM EBITDA as at March 31, 2024 was 10.5x, an
increase of 0.9x compared to March 31, 2023. The increase in Debt
to TTM EBITDA was mainly due to the decrease in NOI.
As at March 31, 2024, AHIP had $25.5 million in
available liquidity, compared to $27.8 million as at
December 31, 2023. The available liquidity of $25.5 million
was comprised of an unrestricted cash balance of $15.5 million and
borrowing availability of $10.0 million under the revolving credit
facility. AHIP has an additional restricted cash balance of $33.5
million as at March 31, 2024.
AHIP has 70.6% of its debt at fixed interest
rates following the expiry of the interest rate swaps on its senior
credit facility on November 30, 2023. The notional value of the
interest rate swaps was $130.0 million which expired on November
30, 2023. As a result of this expiry, at the current average
secured overnight financing rate (“SOFR”) of 5.3%, the
incremental annual interest expense is estimated to be
approximately $5.2 million for the twelve months ended November 30,
2024. The actual increase in interest expense will be dependent on
future SOFR.
CAPITAL RECYCLING
In March 2024, AHIP completed the strategic
dispositions of non-core hotel properties in Harrisonburg, Virginia
and Cranberry Township, Pennsylvania for gross proceeds of $8.55
million and $8.25 million respectively. The combined sales price
for these properties represents a blended cap rate of 8.6% on 2023
annual hotel EBITDA, after adjusting for an industry standard 4%
furniture, fixtures, and equipment reserve. Under the terms of the
revolving credit facility, 50% of the net proceeds from the sale of
these two hotel properties, which is approximately $0.8 million,
will be used to pay down outstanding amounts under the term loans
in the second quarter of 2024.
In March and April 2024, AHIP entered into
agreements to dispose of two non-core hotel properties in Amarillo,
Texas for $9.3 million and $8.3 million, respectively, subject to
customary adjustments at closing. The dispositions are currently
expected to close in the third quarter of 2024. AHIP intends to use
the proceeds from these dispositions to pay down debt.
AHIP will continue to execute its strategy to
divest assets to reduce debt and is currently marketing a selected
number of additional properties which are expected to demonstrate
value above the current unit trading price.
SAME PROPERTY KPI
The following table summarizes key performance
indicators (“KPIs”) for the portfolio for the five
most recent quarters with a comparison to the same period in the
prior year.
KPIs |
Q1 2024 |
Q4 2023 |
Q3 2023 |
Q2 2023 |
Q1 2023 |
ADR |
$132 |
$127 |
$133 |
$133 |
$133 |
Change compared to same period in prior year - %
increase/(decrease) |
(0.8%) |
- |
2.7% |
5.3% |
11.4% |
Occupancy |
67.3% |
66.9% |
71.6% |
74.4% |
66.3% |
Change compared to same period in prior year - bps
increase/(decrease) |
100 |
(83) |
(223) |
(5) |
53 |
RevPAR |
$89 |
$85 |
$95 |
$99 |
$88 |
Change compared to same period in prior year - %
increase/(decrease) |
1.1% |
(1.3%) |
(0.4%) |
4.5% |
12.3% |
NOI Margin |
26.9% |
26.1% |
30.5% |
33.3% |
29.4% |
Change compared to same period in prior year - bps decrease |
(250) |
(514) |
(275) |
(212) |
(19) |
Same property ADR in the current quarter is
$132, largely consistent with the same period of 2023. Same
property occupancy increased by 100 bps to 67.3% in the current
quarter compared to 66.3% the same periods in 2023. The increase in
occupancy is primarily attributable to higher demand for the
extended stay and select service properties.
Same property NOI margin decreased by 250 bps to
26.9% for the first quarter of 2024, compared to the same period in
2023. The decrease in the same property NOI margin was mainly due
to higher operating expenses as a result of cost inflation,
escalated labor costs, and higher property insurance premiums. The
labor environment is improving although labor is expected to remain
a challenge in 2024 with increased turnover and hourly wage
costs.
SELECTED INFORMATION
|
|
Three months ended March 31 |
(thousands of dollars, except per Unit
amounts) |
|
2024 |
|
|
2023 |
|
|
|
|
|
Revenue |
|
66,489 |
|
|
65,458 |
|
Income from operating
activities |
|
7,569 |
|
|
9,418 |
|
Loss and comprehensive
loss |
|
(8,109 |
) |
|
(1,600 |
) |
NOI |
|
17,190 |
|
|
18,738 |
|
NOI Margin (1) |
|
25.9 |
% |
|
28.6 |
% |
|
|
|
|
Hotel EBITDA (1) |
|
15,673 |
|
|
16,602 |
|
Hotel EBITDA Margin (1) |
|
23.6 |
% |
|
25.4 |
% |
EBITDA (1) |
|
13,320 |
|
|
14,044 |
|
EBITDA Margin (1) |
|
20.0 |
% |
|
21.5 |
% |
|
|
|
|
Cashflow from operating
activities |
|
43 |
|
|
13,094 |
|
Distributions declared per
unit - basic and diluted |
|
- |
|
|
0.045 |
|
Distributions declared to
unitholders - basic |
|
- |
|
|
3,546 |
|
Distributions declared to
unitholders - diluted |
|
- |
|
|
4,026 |
|
Dividends declared to Series C
holders |
|
1,099 |
|
|
1,000 |
|
|
|
|
|
FFO diluted (1) |
|
2,334 |
|
|
9,801 |
|
FFO per unit - diluted
(1) |
|
0.03 |
|
|
0.11 |
|
Normalized FFO per unit -
diluted (1) |
|
0.02 |
|
|
0.02 |
|
|
|
|
|
AFFO diluted (1) |
|
(668 |
) |
|
7,081 |
|
AFFO per unit - diluted
(1) |
|
(0.01 |
) |
|
0.08 |
|
(1) See
“Non-IFRS and Other Financial Measures” |
|
SELECTED INFORMATION
(thousands of dollars) |
|
March 31,2024 |
|
December 31,2023 |
|
|
|
|
Total assets |
|
929,771 |
|
|
954,887 |
|
Total liabilities |
|
705,975 |
|
|
721,937 |
|
Total non-current
liabilities |
|
527,201 |
|
|
529,178 |
|
Term loans and revolving
credit facility |
|
567,602 |
|
|
599,873 |
|
|
|
|
|
Debt to gross book value
(1) |
|
52.2 |
% |
|
51.9 |
% |
Debt to EBITDA (times)
(1) |
|
10.5 |
|
|
10.6 |
|
Interest coverage ratio
(times) (1) |
|
1.8 |
|
|
1.9 |
|
|
|
|
|
Term loans and revolving
credit facility: |
|
|
|
Weighted average interest
rate |
|
5.79 |
% |
|
4.95 |
% |
Weighted average term to
maturity (years) |
|
2.1 |
|
|
2.2 |
|
|
|
|
|
Number of rooms |
|
7,662 |
|
|
7,917 |
|
Number of properties |
|
68 |
|
|
70 |
|
Number
of restaurants |
|
14 |
|
|
14 |
|
(1) See “Non-IFRS and Other Financial Measures” |
|
|
|
2024 FIRST QUARTER OPERATING
RESULTS
|
|
Three months ended March 31 |
(thousands of dollars) |
|
2024 |
|
|
2023 |
|
|
|
|
|
ADR (1) |
|
131 |
|
|
132 |
|
Occupancy (1) |
|
66.4 |
% |
|
64.1 |
% |
RevPAR
(1) |
|
87 |
|
|
85 |
|
|
|
|
|
Revenue |
|
66,489 |
|
|
65,458 |
|
|
|
|
|
Operating expenses |
|
36,389 |
|
|
35,526 |
|
Energy |
|
2,990 |
|
|
3,222 |
|
Property maintenance |
|
4,219 |
|
|
3,524 |
|
Property taxes, insurance and ground lease before IFRIC 21 |
|
5,701 |
|
|
4,448 |
|
Total expenses |
|
49,299 |
|
|
46,720 |
|
|
|
|
|
NOI |
|
17,190 |
|
|
18,738 |
|
NOI
Margin % (1) |
|
25.9 |
% |
|
28.6 |
% |
|
|
|
|
IFRIC 21 property taxes
adjustment |
|
892 |
|
|
699 |
|
Depreciation and amortization |
|
8,729 |
|
|
8,621 |
|
Income from operating activities |
|
7,569 |
|
|
9,418 |
|
|
|
|
|
Other expenses |
|
17,411 |
|
|
12,427 |
|
Current income tax
expense |
|
87 |
|
|
16 |
|
Deferred income tax
recovery |
|
(1,820 |
) |
|
(1,425 |
) |
|
|
|
|
Loss
and comprehensive loss |
|
(8,109 |
) |
|
(1,600 |
) |
(1) See
“Non-IFRS and Other Financial Measures” |
INITIATIVES TO STRENGTHEN FINANCIAL
POSITION AND PRESERVE UNITHOLDER VALUE
The Board of Directors (the “Board”), together
with management, have implemented a plan to strengthen AHIP’s
financial position and to preserve unitholder value. Initiatives,
both planned and underway, are outlined below.
PLAN TO ADDRESS NEAR TERM LOAN
MATURITIES
AHIP is in the process of executing its plan to
address the Company’s near-term debt maturities in 2024, while
creating modest improvements in ADR, RevPAR and leverage
metrics.
The commercial mortgage-backed securities
(“CMBS”) loan maturities are $22.3 million in the second quarter of
2024, and $58.7 million in the fourth quarter of 2024.
To address the Q2 2024 CMBS loan maturity of
$22.3 million, AHIP completed the disposition of one non-core hotel
property and refinanced the balance of the loan in March 2024,
specifically:
- AHIP completed the
strategic disposition of a hotel property in Harrisonburg, Virginia
for $8.55 million. The net proceeds were used to partially satisfy
the non-recourse mortgage debt; and
- AHIP completed the
CMBS refinancing for the remaining three assets secured against
this loan with gross proceeds of $17.5 million prior to initial
capital reserves contribution of approximately $5.0 million. The
term of this new CMBS loan is five years at a fixed annual interest
rate of 7.8%.
To address the Q4 2024 CMBS loan maturities of
$58.7 million, AHIP intends to dispose of four non-core properties
and refinance the balance of the loan, specifically:
- In March and April
2024, AHIP entered into agreements to dispose of two non-core hotel
properties in Amarillo, Texas for $9.3 million and $8.3 million,
respectively. The dispositions are expected to close in the third
quarter of 2024. In addition, AHIP is currently marketing non-core
hotel properties in each of Amarillo and Dallas, Texas; and
- AHIP expects to
refinance a $24.9 million CMBS loan secured against four hotel
properties in Florida and North Carolina before its maturity date
in the fourth quarter of 2024.
NORTHEAST PORTFOLIO III CMBS
LOAN
During the first quarter of 2024, AHIP notified
the loan servicer for the AHIP Northeast Portfolio III CMBS Loan
(“Loan Portfolio” or “CMBS Loan”) of an imminent change in
circumstances which resulted in the master servicer issuing a
notice of default as well as a notice of acceleration and demand
for payment on April 19, 2024. AHIP is negotiating a transfer and
cooperation agreement with the special servicer, which is expected
to result in the consensual transfer of the collateralized hotels
by AHIP to the master servicer in the second quarter of 2024. This
Loan Portfolio is secured by four hotels: a Fairfield Inn &
Suites and a Hampton Inn located in White Marsh, MD, a Homewood
Suites located in Egg Harbor Township, NJ and a SpringHill Suites
located in Brookhaven, NY (collectively, the “Hotels” or “Assets”).
The principal amount of this non-recourse CMBS Loan as of March 31,
2024 was $51.0 million and AHIP is current on principal and
interest payments. AHIP expects to cease recognizing revenue and
expenses, relating to the Hotels, on the effective date of the
transfer and cooperation agreement. The CMBS Loan and Assets will
remain on AHIP’s balance sheet until the Hotels have been
transferred to or sold by the special servicer.
AMENDMENT OF THE MASTER HOTEL MANAGEMENT
AGREEMENT WITH REDUCED AND DEFERRED FEES
On September 30, 2023, with a retroactive
effective date of July 1, 2023, AHIP entered into a third amendment
to its master hotel management agreement with One Lodging
Management LLC (an affiliate of Aimbridge Hospitality LLC) (the
“Amendment”), with an estimated annual savings for the first three
years following the amendment of approximately $3.7 million.
In accordance with the Amendment, the management
fee on certain hotel properties has been reduced or deferred. The
reduction of management fees is estimated to provide approximately
$0.3 million of cash savings per annum, and the deferral of
management fees is estimated to provide approximately $3.4 million
of cash savings on average per annum from July 1, 2023 to June 30,
2026. The fees in the years 2027 through 2032 will be slightly
higher to offset the fee deferral in the first three years. The
cash savings in the first quarter of 2024 were $0.8 million, and
the cumulative savings since the effective date of the Amendment
were $3.0 million.
For further details, see a copy of the amendment
to the master hotel management agreement, which has been filed
under AHIP’s profile on SEDAR+ at www.sedarplus.com.
TEMPORARY SUSPENSION OF U.S. DOLLAR
DISTRIBUTION
From February 2022 to October 2023, AHIP’s
distribution policy provided for the payment of regular monthly
U.S. dollar distributions at an annual rate of $0.18 per unit
(monthly rate of $0.015 per unit). On November 7, 2023, AHIP
announced a temporary suspension of monthly distributions. The
Board and management made this decision based on the considerations
of recent and forecast operating results, industry and economic
conditions, interest rates for debt refinancing, the general
financing environment, and future compliance with the adjusted FFO
payout ratio covenant in the Sixth Amendment.
The amendment of the distribution policy reduces
cash payments by $14.2 million annually, which improves AHIP’s
balance sheet and liquidity, supporting the long-term enhancement
of unitholder value. The Board and management will continue to
review AHIP’s distribution policy on a quarterly basis.
FINANCIAL INFORMATION
This news release should be read in conjunction
with AHIP’s unaudited condensed consolidated interim financial
statements, and management’s discussion and analysis for the three
months ended March 31, 2024 and 2023, that are available on AHIP’s
website at www.ahipreit.com, and under AHIP’s profile on SEDAR+ at
www.sedarplus.com.
Q1 2024 CONFERENCE CALL
Management will host a webcast and conference
call at 8:00 a.m. Pacific time on Wednesday, May 8, 2024, to
discuss the financial and operational results for the three months
ended March 31, 2024 and 2023.
To participate in the conference call,
participants should register online via AHIP’s website. A dial-in
and unique PIN will be provided to join the call. Participants are
requested to register a minimum of 15 minutes before the start of
the call. An audio webcast of the conference call may be accessed
on AHIP’s website at www.ahipreit.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. AHIP’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.
NON-IFRS AND OTHER FINANCIAL
MEASURES
Management believes the following non-IFRS
financial measures, non-IFRS ratios, capital management measures
and supplementary financial measures are relevant measures to
monitor and evaluate AHIP’s financial and operating performance.
These measures and ratios do not have any standardized meaning
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other issuers. These measures and
ratios are included to provide investors and management additional
information and alternative methods for assessing AHIP’s financial
and operating results and should not be considered in isolation or
as a substitute for performance measures prepared in accordance
with IFRS.
NON-IFRS FINANCIAL
MEASURES:
FFO: FFO measures operating
performance and is calculated in accordance with Real Property
Association of Canada’s (“REALPAC”) definition. FFO – basic is
calculated by adjusting loss and comprehensive income (loss) for
depreciation and amortization, gain or loss on disposal of
property, IFRIC 21 property taxes, fair value gain or loss,
impairment of property, deferred income tax, and other applicable
items. FFO – diluted is calculated as FFO – basic plus the
interest, accretion, and amortization on convertible debentures if
convertible debentures are dilutive. The most comparable IFRS
measure to FFO is income (loss) and comprehensive income (loss),
for which a reconciliation is provided in this news release.
AFFO: AFFO is defined as a
recurring economic earnings measure and calculated in accordance
with REALPAC’s definition. AFFO – basic is calculated as FFO –
basic less maintenance capital expenditures. AFFO – diluted is
calculated as FFO – diluted less maintenance capital expenditures.
The most comparable IFRS measure to AFFO is income (loss) and
comprehensive income (loss), for which a reconciliation is provided
in this news release.
Normalized FFO: calculated as
FFO adjusting for non-recurring items. For the three months ended
March 31, 2024 and 2023, normalized FFO is calculated as FFO
excluding the non-recurring insurance proceeds of $1.1 million and
$3.3 million, respectively, for property damage claims related to
the weather-related damage at several hotel properties in late
December 2022. The most comparable IFRS measure to normalized FFO
is income (loss) and comprehensive income (loss), for which a
reconciliation is provided in this news release.
Normalized NOI: calculated as
NOI adjusting for non-recurring items. For the three months ended
March 31, 2024 and 2023, normalized NOI included the non-recurring
insurance proceeds of $0.1 million and $1.0 million, respectively,
for business interruption claims related to the weather-related
damage at several hotel properties in late December 2022. The most
comparable IFRS measure to normalized NOI is NOI, for which a
reconciliation is provided in this news release.
Hotel EBITDA: calculated by
adjusting NOI for management fees for hotel. The most comparable
IFRS measure to hotel EBITDA is NOI, for which a reconciliation is
provided in this news release.
EBITDA: calculated by adjusting
NOI for management fees for hotel and general administrative
expenses. The sum of management fees for hotel and general
administrative expenses is equal to corporate and administrative
expenses in the Financial Statements. The most comparable IFRS
measure to EBITDA is NOI, for which a reconciliation is provided in
this news release.
Debt: calculated as the sum of
term loans and revolving credit facility, the face value of
convertible debentures, unamortized portion of debt financing
costs, lease liabilities and unamortized portion of mark-to-market
adjustments. The most comparable IFRS measure to debt is total
liabilities, for which a reconciliation is provided in this news
release.
Gross book value: calculated as
the sum of total assets, accumulated depreciation and impairment on
property, buildings and equipment, and accumulated amortization on
intangible assets. The most comparable IFRS measure to gross book
value is total assets, for which a reconciliation is provided in
this news release.
Interest expense: calculated by
adjusting finance costs for gain/loss on debt settlement,
amortization of debt financing costs, accretion of debenture
liability, amortization of debenture costs, dividends on series B
preferred shares and amortization of mark-to-market adjustments,
accretion of management fee because interest expense excludes
certain non-cash accounting items and dividends on preferred
shares. The most comparable IFRS measure to interest expense is
finance costs, for which a reconciliation is provided in this news
release.
NON-IFRS RATIOS:
FFO per unit – basic/diluted:
calculated as FFO – basic/diluted divided by weighted average
number of units outstanding - basic/diluted respectively for the
reporting periods.
Normalized FFO per unit –
basic/diluted: calculated as normalized FFO –
basic/diluted divided by weighted average number of units
outstanding - basic/diluted respectively for the reporting
periods.
AFFO per unit – basic/diluted: calculated as
AFFO – basic/diluted divided by weighted average number of units
outstanding - basic/diluted respectively for the reporting
periods.
NOI margin: calculated as NOI
divided by total revenue.
Hotel EBITDA margin: calculated as hotel EBITDA
divided by total revenue.
EBITDA margin: calculated as
EBITDA divided by total revenue.
CAPITAL MANAGEMENT
MEASURES:
Debt to gross book value:
calculated as debt divided by gross book value. Debt to gross book
value is a primary measure of capital management and leverage.
Debt to EBITDA: calculated as
debt divided by the trailing twelve months of EBITDA. Debt to
EBITDA measures the amount of income generated and available to pay
down debt before covering interest, taxes, depreciation, and
amortization expenses.
Interest coverage ratio:
calculated as EBITDA divided by interest expense for the trailing
twelve months. The interest coverage ratio is a measure of AHIP’s
ability to service the interest requirements of its outstanding
debt.
SUPPLEMENTARY FINANCIAL
MEASURES:
Occupancy is a major driver of room revenue as
well as food and beverage revenues. Fluctuations in occupancy are
accompanied by fluctuations in most categories of variable hotel
operating expenses, including housekeeping and other labor costs.
ADR also helps to drive room revenue with limited impact on other
revenues. Fluctuations in ADR are accompanied by fluctuations in
limited categories of hotel operating expenses, such as franchise
fees and credit card commissions, since variable hotel operating
expenses, such as labor costs, generally do not increase or
decrease correspondingly. Thus, increases in RevPAR attributable to
increases in occupancy typically reduce EBITDA and EBITDA margins,
while increases in RevPAR attributable to increases in ADR
typically result in increases in EBITDA and EBITDA margins.
Occupancy: calculated as total
number of hotel rooms sold divided by total number of rooms
available for the reporting periods. Occupancy is a metric commonly
used in the hotel industry to measure the utilization of hotels’
available capacity.
Average daily rate (“ADR”):
calculated as total room revenue divided by total number of rooms
sold for the reporting periods. ADR is a metric commonly used in
the hotel industry to indicate the average revenue earned per
occupied room in a given time period.
Revenue per available room
(“RevPAR”): calculated as occupancy multiplied by ADR for
the reporting periods.
Same property occupancy, ADR, RevPAR,
revenue, expense, NOI and NOI margin: measured for
properties owned by AHIP for both the current reporting periods and
the same periods in 2023. In Q1 2023 and Q2 2023, the same property
ADR, occupancy, RevPAR and NOI margin calculations excluded three
hotel properties, which is comprised of one hotel in respect of
which AHIP is in a managed foreclosure process as of March 31,
2024, as well as the Residence Inn Neptune and Courtyard Wall in
New Jersey as these two hotels had limited availability due to
remediation and rebuilding after the weather-related damage in late
December 2022. In Q1 2024, the same property ADR, occupancy, RevPAR
and NOI margin calculations excluded the same three hotel
properties mentioned in the immediately preceding sentence for
comparison purposes. In Q3 2023 and Q4 2023, the same property ADR,
occupancy, RevPAR and NOI margin calculations excluded one hotel in
respect of which AHIP is in a managed foreclosure process as of
March 31, 2024.
NON-IFRS RECONCILIATION
The following table reconciles FFO to income (loss) and
comprehensive income (loss), the most comparable IFRS measure as
presented in the financial statements:
|
Three months ended March 31 |
(thousands of dollars, except per unit
amounts) |
2024 |
|
|
2023 |
|
|
|
|
Loss and comprehensive
loss |
(8,109 |
) |
|
(1,600 |
) |
Adjustments: |
|
|
Income attributable to
non-controlling interest |
(1,099 |
) |
|
(1,000 |
) |
Depreciation and
amortization |
8,729 |
|
|
8,621 |
|
Write-off of property,
building and equipment |
- |
|
|
3,892 |
|
Gain on sale of
properties |
(242 |
) |
|
- |
|
IFRIC 21 property taxes
adjustment |
892 |
|
|
699 |
|
Change in fair value of
interest rate swap contracts |
- |
|
|
1,091 |
|
Change in fair value of
warrants |
(120 |
) |
|
(1,570 |
) |
Impairment of cash-generating
units |
4,103 |
|
|
- |
|
Deferred income tax recovery |
(1,820 |
) |
|
(1,425 |
) |
|
|
|
FFO basic (1) |
2,334 |
|
|
8,708 |
|
Interest, accretion and
amortization on convertible debentures |
- |
|
|
1,093 |
|
|
|
|
FFO
diluted (1) |
2,334 |
|
|
9,801 |
|
|
|
|
FFO per unit – basic (1) |
0.03 |
|
|
0.11 |
|
FFO per unit – diluted
(1) |
0.03 |
|
|
0.11 |
|
|
|
|
Non-recurring
items: |
|
|
Other
income |
(1,102 |
) |
|
(3,342 |
) |
|
|
|
Measurements excluding
non-recurring items: |
|
|
Normalized FFO diluted (1) |
1,232 |
|
|
6,459 |
|
Normalized FFO per unit – diluted (1) |
0.02 |
|
|
0.07 |
|
|
|
|
Weighted average number of
units outstanding: |
|
|
Basic (000’s) |
79,045 |
|
|
78,800 |
|
Diluted
(000’s) (2) |
79,930 |
|
|
89,466 |
|
(1) |
See “Non-IFRS and Other Financial Measures”. |
(2) |
The calculation of FFO diluted,
FFO per unit – diluted, normalized FFO diluted, normalized FFO per
unit – diluted, weighted average number of units outstanding -
diluted for the three months ended March 31, 2024, excluded the
convertible debentures because they were anti-dilutive. The
calculation of FFO diluted, FFO per unit – diluted, normalized FFO
diluted, normalized FFO per unit – diluted, weighted average number
of units outstanding - diluted for the three ended March 31, 2023,
included the convertible debentures because they were
dilutive. |
RECONCILIATION OF FFO TO
AFFO
|
Three months ended March 31 |
(thousands of dollars, except per Unit
amounts) |
2024 |
|
|
2023 |
|
|
|
|
FFO basic (1) |
2,334 |
|
|
8,708 |
|
FFO diluted (1) |
2,334 |
|
|
9,801 |
|
Maintenance capital expenditures |
(3,002 |
) |
|
(2,720 |
) |
|
|
|
AFFO basic (1) |
(668 |
) |
|
5,988 |
|
AFFO diluted (1) |
(668 |
) |
|
7,081 |
|
AFFO per unit - basic (1) |
(0.01 |
) |
|
0.08 |
|
AFFO
per unit - diluted (1) |
(0.01 |
) |
|
0.08 |
|
|
|
|
Measurements excluding
non-recurring items: |
|
|
AFFO diluted (1) |
(1,770 |
) |
|
3,739 |
|
AFFO
per unit - diluted (1) |
(0.02 |
) |
|
0.04 |
|
(1) |
See “Non-IFRS and Other Financial Measures” |
DEBT TO GROSS BOOK VALUE
|
|
|
|
(thousands of dollars) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
|
|
|
|
Debt |
|
675,014 |
|
|
688,585 |
|
Gross
Book Value |
|
1,292,654 |
|
|
1,326,070 |
|
Debt-to-Gross Book Value |
|
52.2 |
% |
|
51.9 |
% |
|
|
|
|
|
|
|
|
(thousands of dollars) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
|
|
|
|
Term loans and revolving
credit facility |
|
620,074 |
|
|
633,298 |
|
2026 Debentures (at face
value) |
|
50,000 |
|
|
50,000 |
|
Unamortized portion of debt
financing costs |
|
3,764 |
|
|
4,065 |
|
Lease liabilities |
|
1,188 |
|
|
1,239 |
|
Unamortized portion of mark-to-market adjustments |
|
(12 |
) |
|
(17 |
) |
Debt |
|
675,014 |
|
|
688,585 |
|
|
|
|
|
|
|
|
|
(thousands of dollars) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
|
|
|
|
Total Assets |
|
929,771 |
|
|
954,887 |
|
Accumulated depreciation and
impairment |
|
357,465 |
|
|
365,970 |
|
on property, buildings and equipment |
|
|
|
Accumulated amortization on intangible assets |
|
5,418 |
|
|
5,213 |
|
Gross Book Value |
|
1,292,654 |
|
|
1,326,070 |
|
|
|
|
|
DEBT TO EBITDA
|
|
|
|
|
|
(thousands of dollars) |
March 31, 2024 |
|
|
December 31, 2023 |
|
|
|
|
|
|
|
Debt |
675,014 |
|
|
688,585 |
|
EBITDA
(trailing twelve months) |
64,008 |
|
|
64,732 |
|
Debt-to-EBITDA (times) |
10.5x |
|
|
10.6x |
|
INTEREST COVERAGE RATIO
|
|
|
|
|
|
(thousands of dollars) |
March 31, 2024 |
|
|
December 31, 2023 |
|
|
|
|
|
|
|
EBITDA (trailing twelve
months) |
64,008 |
|
|
64,732 |
|
Interest Expense (trailing twelve months) |
35,774 |
|
|
33,725 |
|
Interest Coverage Ratio (times) |
1.8x |
|
|
1.9x |
|
The reconciliation of NOI to hotel EBITDA and
EBITDA is shown below:
|
|
|
|
Three months ended March 31 |
(thousands of dollars) |
2024 |
|
|
2023 |
|
|
|
|
NOI |
17,190 |
|
|
18,738 |
|
Management fees |
(1,517 |
) |
|
(2,136 |
) |
Hotel EBITDA |
15,673 |
|
|
16,602 |
|
|
|
|
General
administrative expenses |
(2,353 |
) |
|
(2,558 |
) |
EBITDA |
13,320 |
|
|
14,044 |
|
The reconciliation of NOI to normalized NOI is
shown below:
|
Three months ended March 31 |
|
(thousands of dollars) |
2024 |
|
|
2023 |
|
|
|
|
|
|
|
NOI |
17,190 |
|
|
18,738 |
|
Business interruption insurance proceeds |
92 |
|
|
1,000 |
|
Normalized NOI |
17,282 |
|
|
19,738 |
|
The reconciliation of finance costs to interest
expense is shown below:
|
Three months ended March 31 |
(thousands of dollars) |
2024 |
|
|
2023 |
|
|
|
|
Finance costs |
11,048 |
|
|
8,692 |
|
Loss on debt settlement |
(11 |
) |
|
- |
|
Amortization of debt financing
costs |
(665 |
) |
|
(355 |
) |
Accretion of Debenture
liability |
(263 |
) |
|
(242 |
) |
Amortization of Debenture
costs |
(113 |
) |
|
(100 |
) |
Dividends on Series B
preferred shares |
- |
|
|
(21 |
) |
Interest Expense |
9,996 |
|
|
7,974 |
|
For information on the most directly comparable
IFRS measures, composition of the measures, a description of how
AHIP uses these measures, and an explanation of how these measures
provide useful information to investors, please refer to AHIP’s
management discussion and analysis for the three months ended March
31, 2024 and 2023, available on AHIP’s website at www.ahipreit.com,
and under AHIP’s profile on SEDAR+ at www.sedarplus.com.
FORWARD-LOOKING INFORMATION
Certain statements in this news release may
constitute “forward-looking information” and “financial outlook”
within the meaning of applicable securities laws. 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 includes, but is not limited to,
statements with respect to: AHIP management’s expectation as to the
impacts on AHIP’s business of the seasonal nature of the lodging
industry, inflation (including on labor and materials costs),
competition, overall economic cycles, weather conditions; AHIP’s
expectations with respect to the timing and amount of insurance
proceeds for weather related damage and lost income in respect of
four properties; AHIP’s leverage and liquidity strategies and
goals; AHIP’s expectations with respect to the performance of its
hotel portfolio, including specific segments thereof; AHIP’s
expectations with respect to inflation, labor supply, labor costs,
interest rates, consumer spending, new hotel construction and other
market financial and macroeconomic conditions in 2024 and beyond
and the expected impacts thereof on AHIP’s financial position and
performance, including on ADR, occupancy, RevPAR, NOI, NOI margins
and cash flows; AHIP’s strategic initiatives and the intended
outcomes thereof, including improved liquidity, addressing
near-term debt maturities and providing AHIP with financial
stability and protecting long-term value for unitholders; AHIP’s
expectations with respect to the macroeconomic and operating
environment, including certain specific expectations for the 2024
fiscal year; AHIP continuing to execute its strategy to divest
assets and reduce debt; AHIP’s planned property dispositions,
including the expected terms and timing thereof and the financial
impact thereof on AHIP and AHIP’s expectation that the sale of such
properties will demonstrate value above the current unit trading
price; AHIP’s expectation that it will enter into a cooperation and
transfer agreement with the special servicer for the AHIP Northeast
Portfolio III CMBS Loan and will transfer the Hotels secured
thereby to the special loan servicer in Q2 2024, and the expected
impact thereof on AHIP’s financial position;; AHIP’s intended
strategies for near-term debt maturities, including planned sales
of assets and loan refinancing; the possibility that AHIP may
utilize non-recourse foreclosure processes where loan value at
maturity is greater than the ability to refinance the loan and
market value of the hotel; AHIP’s expectations as to the financial
impact of the expired of interest rate swaps for certain term
loans, which will be dependent on SOFR; the estimated savings as a
result of reductions and deferrals of management fees under the
master hotel management agreement as well as increased fees in
certain future years when deferred fees become payable; the
estimated savings from the temporary suspension of cash
distributions and expectation that such amendment to the
distribution policy will strengthen AHIP’s balance sheet and
liquidity and support long-term enhancement of unitholder value;
the statement that the Board and management will continue to review
AHIP’s distribution policy on a quarterly basis; and AHIP’s stated
long-term objectives.
Although the forward-looking information and
financial outlook contained in this news release are 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: inflation, labor shortages, and supply chain
disruptions will negatively impact 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 will be able generate
sufficient funds to meet any paydown obligations under the new LTV
covenants set forth in the Sixth Amendment; AHIP’s strategies with
respect to completion of capital projects, liquidity, addressing
near-term debt maturities, divestiture of non-core assets and
acquisitions will be successful and achieve their intended effects;
estimated savings from the amendment to the master hotel management
agreement are based on assumptions about future hotel revenues and
certain expenses; capital projects will be completed on time and on
budget; AHIP will complete its currently planned divestitures and
loan refinancings on the terms currently contemplated and in
accordance with the timing currently contemplated; AHIP will enter
into a cooperation and transfer agreement with the special servicer
for the AHIP Northeast Portfolio III CMBS Loan and will transfer
the Hotels secured thereby to the special loan servicer in Q2 2024,
and impact thereof on AHIP’s financial position will be consistent
with management’s expectations, and such transactions will be
completed on a non-recourse basis; AHIP will receive insurance
proceeds in an amount consistent with AHIP’s estimates in respect
of its weather-damaged properties; AHIP will continue to have good
relationships with its hotel brand partners; 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 on terms acceptable to
AHIP; AHIP’s future level of indebtedness and its future growth
potential will remain consistent with AHIP’s current expectations;
the useful lives and replacement cost of AHIP’s assets being
consistent with management’s estimates thereof; AHIP will be able
to successfully integrate properties acquired into its portfolio,
if any; the U.S. REIT will continue to qualify as a real estate
investment trust for U.S. federal income tax purposes; the impact
of the current economic climate and the current global financial
conditions on AHIP’s operations, including AHIP’s financing
capability and asset value, will remain consistent with AHIP’s
current expectations; there will be no material changes to tax
laws, government and environmental regulations adversely affecting
AHIP’s operations, financing capability, structure or
distributions; conditions in the international and, in particular,
the U.S. hotel and lodging industry, including competition for
acquisitions, will be consistent with the current economic climate;
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: AHIP may not achieve
its expected performance levels in 2024 and beyond; inflation,
labor shortages, supply chain disruptions; AHIP’s insurance claims
with respect to its weather damaged properties may be denied in
whole or in part; 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; AHIP’s strategic initiatives with respect to liquidity,
addressing near-term debt maturities and providing AHIP with
financial stability may not be successful and may not achieve their
intended outcomes; AHIP’s strategies for divesting assets to reduce
debt may not be successful; AHIP may not complete its currently
planned divestures and loan refinancings on the terms currently
contemplated or in accordance with the timing currently
contemplated, or at all; AHIP’s planned dispositions, once
completed, may not demonstrate value above the current unit trading
price; savings from the amendments to the master hotel management
agreement may be less than expected; AHIP may not be successful in
reducing its leverage; there is no guarantee that monthly
distributions will be reinstated, and if reinstated, as to the
timing thereof or what the amount of the monthly distribution will
be; the suspension of monthly distributions is expected to
negatively impact the market price of AHIP’s Units and debentures;
AHIP may not be able to refinance debt obligations as they become
due or may do so on terms less favorable to AHIP than under AHIP’s
existing loan agreements; AHIP has not replaced its interest rate
swaps, which is expected to create continued increased interest
expense; AHIP may not enter into a cooperation and transfer
agreement with the special servicer for the AHIP Northeast
Portfolio III CMBS Loan on the terms currently contemplated or in
accordance with the timing currently contemplated, or at all, and
the financial impact of such transactions, if completed, may not be
consistent with management’s expectations, and such transactions
may not be able to be completed on a non-recourse basis; the actual
financial impact on AHIP of entering into an agreement with the
special servicer for the Loan Portfolio to transfer control of such
portfolio to a receiver, including on AHIP’s financial position,
cashflows, NOI and capital expenditure obligations, and anticipated
timing of the completion of the underlying transactions may not be
consistent with management’s expectations and such transactions may
not complete in accordance with the expected timing; general
economic conditions and consumer confidence; the growth in the U.S.
hotel and lodging industry; prices for the Units and debentures;
liquidity; tax risks; ability to access debt and capital markets;
financing risks; changes in interest rates; the financial condition
of, and AHIP’s relationships with, its external hotel manager and
franchisors; real property risks, including environmental risks;
the degree and nature of competition; ability to acquire accretive
hotel investments; ability to integrate new hotels; environmental
matters; and changes in legislation. Additional information about
risks and uncertainties is contained in this new release and in
AHIP’s most recently filed AIF, a copy of which is available on
SEDAR+ at www.sedarplus.com.
To the extent any forward-looking information
constitutes a “financial outlook” within the meaning of applicable
securities laws, such information is being provided to investors to
assist in their understanding of: expected proceeds of insurance in
respect of AHIP’s weather-damaged properties; estimated potential
cash savings from the amendment to the master hotel management
agreement and temporary suspension of distributions; the estimated
financial impact on AHIP of increased insurance premiums; the
estimated financial impact on AHIP of increased interest costs
associated with the expiry of interest swaps for certain term loans
and the refinancing of certain loans; and management’s expectations
for certain aspects of AHIP’s financial performance for the
remainder of 2024.
The forward-looking information and financial
outlook contained herein is expressly qualified in its entirety by
this cautionary statement. Forward-looking information and
financial outlook reflect management's current beliefs and are
based on information currently available to AHIP. The
forward-looking information and financial outlook are 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.
For additional information, please
contact:
Investor Relationsir@ahipreit.com
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