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 and
nine months ended September 30, 2022.
All amounts presented in this news release are
in United States dollars (“U.S. dollars”) unless
otherwise indicated.
“We are pleased with the robust revenue
performance of our select service hotel portfolio in Q3." commented
Jonathan Korol, CEO. "We continue to see strong occupancy and rate
trends from our leisure, corporate and group guest segments. For
the second consecutive quarter, we achieved the highest
quarterly average daily rate (“ADR”)
(1) levels in the history of the Company. With the recent
amendment to our credit facility completed and our relatively low,
primarily fixed interest rate debt structure, we are
well-positioned to manage potential economic volatility in the
coming quarters.”
(1) Non-IFRS and other financial measures. See “NON-IFRS AND
OTHER FINANCIAL MEASURES” section of this news release and
management’s discussion and analysis for the three and nine months
ended September 30, 2022 and 2021
2022 THIRD QUARTER HIGHLIGHTS
- Revenue increased
11.3% to $76.2 million in the third quarter of 2022 compared to
$68.4 million in the same period of 2021.
- A 33.0% increase in
RevPAR (1) for the Embassy Suites sub-portfolio, compared to
the same period in 2021.
- Diluted FFO per
unit (1) was $0.13 for the third quarter of 2022, compared to
normalized diluted FFO per unit (1) of $0.16 for the same
period of 2021.
- ADR increased to
$127, compared to $125 in the second quarter of 2022, and $118 in
the same period of 2021.
- Occupancy (1)
was 72.1% in the current quarter, compared to 72.8% in the second
quarter of 2022, and 68.8% in the same period of 2021.
- Debt to gross book
value (1) decreased to 52.6% as at September 30, 2022,
compared to 54.1% as at December 31, 2021.
- Weighted average
interest rate for all term loans and credit facility was 4.34% as
at September 30, 2022, a reduction of 18 bps compared to 4.52% as
at December 31, 2021.
- Paid monthly
distributions of $0.015 U.S. dollar per unit in each month since
March 2022.
- Cash flow from
operating activities was $14.2 million for the third quarter of
2022, an increase of $4.5 million compared to the same period of
2021.
- Net and
comprehensive income was $0.3 million for the third quarter of
2022, a decrease of $15.4 million compared to the same period of
2021, primarily due to a non-recurring gain of $14.7 million in the
third quarter of 2021.
“This quarter we achieved our highest ADR and
RevPAR since the onset of the pandemic. Quarterly RevPAR continued
its upward trend, finishing at 97% of 2019 levels.” Mr. Korol
added: “This was driven by sustained demand from our leisure guests
as well as the gradual return of business and group travellers, as
demonstrated by the tremendous recovery in our Embassy Suites
portfolio during the quarter.”
"Recent operating results are negatively
impacted by inflation, labor shortages and supply chain
disruptions. To address these issues, we are continuing
to focus on hiring more in-house labor, reducing turnover and
improving housekeeping productivity. We remain well
positioned to navigate the current macroeconomy given the
lean operating model of our select-service portfolio as well
as the diversified demand profile of our
guests. This was evident throughout the pandemic, as the
portfolio achieved positive hotel EBITDA (1) every month
since May 2020. Our balance sheet is
well-positioned, with no debt maturities until late
2023 and 93% fixed rate debt. We remain confident in
our ability to navigate a dynamic operating
environment and to add long-term unitholder value."
2022 THIRD QUARTER REVIEW
11.3% GROWTH IN REVENUE
Improving demand levels resulted in enhanced
pricing power and greater opportunity to manage revenue for various
hotel segments. As a result, AHIP’s revenue continued to improve in
the third quarter of 2022. Revenue increased by 11.3% to $76.2
million compared to $68.4 million in the same period of 2021. This
improvement was due to higher ADR and increased occupancy. Same
property occupancy (1) increased by 310 bps to 72.1% in the current
quarter from 69.0% in the same period of 2021, which is a 91%
recovery compared to the pre-COVID occupancy level in the same
period of 2019. Same property ADR (1) increased by 6.7% to $127 in
the current quarter compared to $119 in the same period of 2021,
which is 6% higher than the pre-COVID ADR in the same period of
2019.
AHIP’s five Embassy Suites properties represent
15% of the portfolio by room count. The performance of these hotels
is a key indicator of the recovery level in business and group
travel. For the three months ended September 30, 2022, RevPAR for
these properties was $100, an increase of 33.0% compared to the
same period in 2021 and a 98% recovery compared to pre-COVID
pandemic RevPAR in the same period of 2019. The Embassy Suites
experienced recovery in business and group travel in the current
quarter, supplemented by leisure‐oriented groups. AHIP’s five
Embassy Suites were renovated in 2018 and 2019 and are well
positioned to capture improving business and corporate group
demand.
NOI MARGIN AND FFO
Same property Net Operating Income
(“NOI”) margin (1) decreased by 630 bps to 32.4%
in the third quarter of 2022, compared to the same period of 2021,
which is a 91% recovery compared to the pre-COVID NOI margin in the
same period of 2019. The decrease in NOI margin was due to higher
operating expenses as a result of inflation, labor shortages and
increased hotel operating standards. In 2022, housekeeping
frequency, and complimentary food and beverage all increased
compared to 2021, to a level closer to pre-COVID standards.
Inflation resulted in higher costs of operating supplies and higher
utilities expenses. Labor shortages resulted in increased room
labor expenses due to the need for overtime and contract labor.
Diluted FFO per unit was $0.13 for the third
quarter of 2022, compared to normalized diluted FFO per unit of
$0.16 excluding the non-recurring gain of $14.7 million and $1.0
million inventory adjustment expense for the same period of 2021.
NOI (1) decreased by $1.8 million in the current quarter compared
to the same period of 2021, due to higher operating expenses and
the dispositions of two hotel properties since the third quarter of
2021.
LEVERAGE AND LIQUIDITY
Debt to gross book value as at September 30,
2022 decreased by 150 bps to 52.6% compared to 54.1% as at December
31, 2021. The decrease was mainly due to the increase of $8.2
million in cash and restricted cash as a result of improving
operating results. Management intends to bring its leverage to a
level closer to its peer group over time which would be in the
range of 40-50% debt to gross book value. This is expected to be
achieved through a combination of improving operating results, a
sustainable distribution policy and selective equity issuance in
support of growth transactions. AHIP has 93% debt at fixed interest
rates or effectively fixed by interest rate swaps until November
2023. AHIP does not have any maturities of debt or interest rate
swaps until the fourth quarter of 2023.
On November 3, 2022, AHIP entered into
an amendment to the revolving credit facility and certain term
loans (the “Fifth Amendment”) to, among other things, modify the
calculation of the borrowing base availability amount and certain
financial covenants. The modifications significantly improve the
expected borrowing base availability and reduce the required fixed
charge covenant ratio. For further details, see a copy of the Fifth
Amendment, which has been filed under AHIP’s profile on SEDAR at
www.sedar.com.
As at September 30, 2022, AHIP had $35.7 million
in available liquidity, compared to $51.1 million as at June 30,
2022. The available liquidity of $35.7 million was comprised of an
unrestricted cash balance of $17.3 million and borrowing
availability of $18.4 million under the revolving credit facility.
In addition, AHIP has restricted cash balance of $44.0 million as
at September 30, 2022. The decrease in the available liquidity as
at September 30, 2022, compared to June 30, 2022 was due to a
decrease in unrestricted cash and a reduction in borrowing
availability. The decrease in unrestricted cash is primarily due to
cash generated by three Embassy Suite properties located in Ohio
and Kentucky in the current quarter being held in restricted cash
accounts by the lender, as a result of these properties not meeting
the minimum debt service coverage ratio prior to the third quarter
of 2022 (the “Cash Management Properties”). The operating
performance of the Cash Management Properties has been steadily
improving and exceeded the minimum debt service coverage ratio in
the third quarter. Management expects this to continue in future
periods which would result in a return of a portion of the
restricted funds in the first half of 2023.
GROWTH AND STRATEGIC CAPITAL
DEPLOYMENT
AHIP is evaluating growth opportunities that
would expand the hotel portfolio and geographic footprint. As a
result of the investment by BentallGreenOak and Highgate, AHIP is
aligned with two well-capitalized strategic partners who support
the pursuit of attractive acquisition opportunities. AHIP is also
reviewing strategies for divesting assets to recycle proceeds into
higher return assets in more attractive markets.
On October 6, 2022, AHIP entered into a purchase
and sale agreement for the disposition of four non-core assets
located in Oklahoma for gross proceeds of $26.3 million. In
addition, management expects a return of restricted cash by the end
of the fourth quarter in an amount of $3.1 million. The transaction
is expected to be completed in the fourth quarter of 2022 subject
to the satisfaction of customary closing conditions. On October 26,
2022, AHIP completed the disposition of a non-core asset located in
Pennsylvania for gross proceeds of $5.4 million. These dispositions
allow AHIP to avoid future PIP investments in assets that will not
meet returns available elsewhere in the portfolio. Management
expects that the average quality of the portfolio will improve and
that there will be a modest improvement in certain leverage metrics
following these dispositions.
U.S. DOLLAR DISTRIBUTION
AHIP has adopted a distribution policy providing
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).
Monthly distributions have been declared and paid each month since
February 2022. The distribution reintroduced in February 2022 was
at a level which is intended to allow AHIP to increase it over
time, assuming stable or improving financial results.
2022 THIRD QUARTER RESULTS
The following table summarizes portfolio
operating key performance indicators (“KPIs”) for the five most
recent quarters with a comparison represented as a multiple of the
same period in 2019. January to December 2019 KPIs are based on
prior ownership’s financial information for the 12 premium branded
hotels acquired in December 2019, and all data in the Same Property
KPIs table below excludes the two hotels sold in 2022.
SAME PROPERTY KPIs (76
hotels)
KPIs |
Q3 2021 |
Q4 2021 |
Q1 2022 |
Q2 2022 |
Q3 2022 |
Occupancy |
69.0% |
65.1% |
64.1% |
73.1% |
72.1% |
Recovery (vs. 2019) |
0.87x |
0.90x |
0.87x |
0.90x |
0.91x |
ADR |
$119 |
$114 |
$117 |
$125 |
$127 |
Recovery (vs. 2019) |
1.00x |
1.00x |
1.01x |
1.05x |
1.06x |
RevPAR |
82 |
74 |
75 |
91 |
92 |
Recovery (vs. 2019) |
0.87x |
0.90x |
0.87x |
0.94x |
0.97x |
NOI margin |
38.7% |
34.0% |
28.6% |
35.2% |
32.4% |
Recovery (vs. 2019) |
1.08x |
1.06x |
0.83x |
0.94x |
0.91x |
SELECTED FINANCIAL INFORMATION |
|
Three months ended September
30 |
Nine months ended September
30 |
(thousands of dollars, except per unit amounts) |
2022 |
2021 |
2022 |
2021 |
|
|
|
|
|
Revenue |
76,171 |
68,411 |
213,596 |
178,714 |
NOI(1) |
24,675 |
26,432 |
68,830 |
67,782 |
NOI margin(1) |
32.4% |
38.6% |
32.2% |
37.9% |
|
|
|
|
|
Hotel EBITDA(1) |
22,194 |
24,509 |
61,741 |
62,660 |
Hotel EBITDA margin(1) |
29.1% |
35.8% |
28.9% |
35.1% |
EBITDA(1) |
20,539 |
22,399 |
55,589 |
54,308 |
EBITDA margin(1) |
27.0% |
32.7% |
26.0% |
30.4% |
|
|
|
|
|
Cashflows provided by operating
activities |
14,165 |
9,648 |
36,524 |
7,539 |
Distributions declared per unit –
basic and diluted |
0.045 |
- |
0.120 |
- |
Distributions declared to
unitholders – basic |
3,544 |
- |
9,450 |
- |
Distributions declared to
unitholders – diluted |
4,027 |
- |
10,426 |
- |
Dividends declared to Series C
holders |
1,022 |
1,022 |
3,033 |
2,722 |
|
|
|
|
|
Net and comprehensive income |
315 |
15,685 |
10,125 |
2,241 |
Net and comprehensive income per
unit – basic |
- |
0.20 |
0.12 |
0.03 |
Net and comprehensive income per
unit – diluted |
- |
0.18 |
0.13 |
0.03 |
|
|
|
|
|
FFO diluted(1) |
11,433 |
27,243 |
32,370 |
35,893 |
FFO per unit – diluted(1) |
0.13 |
0.32 |
0.36 |
0.46 |
FFO payout ratio – diluted,
trailing twelve months(1) |
27.6% |
- |
27.6% |
- |
|
|
|
|
|
AFFO diluted(1) |
8,443 |
25,703 |
24,541 |
32,463 |
AFFO per unit – diluted(1) |
0.09 |
0.30 |
0.27 |
0.41 |
AFFO payout ratio – diluted, trailing twelve months(1) |
31.3% |
- |
31.3% |
- |
SELECTED INFORMATION |
(thousands of dollars) |
September 30, 2022 |
December 31, 2021 |
|
|
|
Total assets |
1,131,162 |
1,150,490 |
Total liabilities |
759,098 |
775,886 |
Total non-current liabilities |
685,422 |
674,339 |
Term loans and revolving credit facility |
679,860 |
695,796 |
|
|
|
Debt to gross book value(1) |
52.6% |
54.1% |
Debt to EBITDA (times)(1) |
10.2 |
10.7 |
Interest coverage ratio (times)(1) |
2.1 |
1.9 |
|
|
|
Term loans and revolving credit facility: |
|
|
Weighted average interest rate |
4.34% |
4.52% |
Weighted average term to maturity (years) |
3.2 |
3.8 |
|
|
|
Number of rooms |
8,580 |
8,801 |
Number of properties |
76 |
78 |
Number of restaurants |
16 |
16 |
|
|
|
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
and nine months ended September 30, 2022 and 2021, that are
available on AHIP’s website at www.ahipreit.com, and under AHIP’s
profile on SEDAR at www.sedar.com.
Q3 2022 CONFERENCE CALL
Management will host a webcast and conference
call at 10:00 a.m. Eastern time / 7:00 a.m. Pacific time on
Wednesday, November 9, 2022, to discuss the financial and
operational results for the three and nine months ended September
30, 2022 and 2021.
To participate in the conference call,
participants should register online. 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 is also
available, both live and archived, on the Events &
Presentations page of AHIP’s website: 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 net and comprehensive income
(loss) for depreciation and amortization, gain or loss on disposal
of property, International Financial Reporting Interpretations
Committee (“IFRIC”) 21 property taxes, fair value gain or loss,
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 net and
comprehensive income (loss).
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 net and comprehensive
income (loss).
Normalized FFO: calculated as
FFO for the three and nine months ended September 30, 2021,
excluding the non-recurring $14.7 million gain and $1.0 million
inventory adjustment expense.
NOI: calculated by adjusting
income from operating activities for depreciation and amortization,
and IFRIC 21 property taxes. The most comparable IFRS measure to
NOI is income from operating activities.
Hotel EBITDA: calculated by
adjusting income from operating activities for depreciation and
amortization, IFRIC 21 property taxes and management fees for
hotel. The most comparable IFRS measure to hotel EBITDA is income
from operating activities.
EBITDA: calculated by adjusting
income from operating activities for depreciation and amortization,
IFRIC 21 property taxes, 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 income from operating
activities.
Debt: calculated as the sum of
term loans and revolving credit facility, the face value of
convertible debentures, unamortized portion of debt financing
costs, government guaranteed loan, lease liabilities and
unamortized portion of mark-to-market adjustments. The most
comparable IFRS measure to debt is total liabilities.
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.
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
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.
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.
FFO payout ratio – basic,
trailing twelve months:
calculated as total distributions declared to unitholders – basic,
divided by total basic FFO, for the twelve months ended September
30, 2022 and 2021.
FFO payout ratio – diluted,
trailing twelve months: calculated as total
distributions declared to unitholders – diluted, divided by total
diluted FFO, for the twelve months ended September 30, 2022 and
2021.
AFFO payout ratio – basic,
trailing twelve months:
calculated as total distributions declared to unitholders – basic,
divided by total basic AFFO, for the twelve months ended September
30, 2022 and 2021.
AFFO payout ratio – diluted,
trailing twelve months:
calculated as total distributions declared to unitholders –
diluted, divided by total diluted AFFO, for the twelve months ended
September 30, 2022 and 2021.
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 for the trailing twelve months divided by
interest expense for the trailing twelve months period. The
interest coverage ratio measures AHIP’s ability to meet required
interest payments related to 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,
NOI and NOI margin: measured for properties owned by AHIP
for both the current reporting periods and the same periods in 2021
and pre-COVID in 2019. For the three and nine months ended
September 30, 2022, same property occupancy, ADR, RevPAR, NOI
include 76 hotels (excluding the two hotels sold in 2022).
NON-IFRS RECONCILIATION
The following table reconciles FFO and AFFO from
net and comprehensive income (loss), the most comparable IFRS
measure as presented in the financial statements:
|
Three months ended September
30 |
Nine months ended September
30 |
(thousands of dollars, except per unit amounts) |
2022 |
2021 |
2022 |
2021 |
|
|
|
|
|
Net comprehensive income |
315 |
15,685 |
10,125 |
2,241 |
Adjustments: |
|
|
|
|
Net income attributable to
non-controlling interest |
(1,022) |
(1,022) |
(3,033) |
(2,722) |
Depreciation and
amortization |
8,932 |
10,829 |
29,230 |
32,427 |
(Gain) loss on disposal of
property |
(9) |
(23) |
(1,058) |
1,287 |
IFRIC 21 property taxes |
(193) |
361 |
(937) |
(1,122) |
Fair value changes of interest
rate swaps |
(1,249) |
(382) |
(5,878) |
(1,804) |
Fair value changes of
warrants |
(1,627) |
(298) |
(4,477) |
4,006 |
Impairment of property |
4,417 |
- |
4,674 |
- |
Transaction costs related to
warrants |
- |
- |
- |
325 |
Deferred income tax
expense |
780 |
1,259 |
615 |
1,243 |
Loss on disposal of discontinued operations |
- |
5 |
- |
12 |
FFO basic (1) |
10,344 |
26,414 |
29,261 |
35,893 |
Interest, accretion and amortization on convertible debentures |
1,089 |
829 |
3,109 |
2,466 |
FFO diluted (1) |
11,433 |
27,243 |
32,370 |
35,893 |
FFO
per unit – basic (1) |
0.13 |
0.34 |
0.37 |
0.46 |
FFO per unit – diluted (1) |
0.13 |
0.32 |
0.36 |
0.46 |
FFO payout ratio – basic –
trailing twelve months (1) |
26.8% |
- |
26.8% |
- |
FFO payout ratio – diluted – trailing twelve months (1) |
27.6% |
- |
27.6% |
- |
Weighted average number of units outstanding: |
|
|
|
|
Basic (000’s) |
78,766 |
78,641 |
78,747 |
78,569 |
Diluted (000’s) (2) |
89,485 |
84,837 |
89,246 |
78,837 |
(2) The calculation of weighted average number
of units outstanding for FFO per unit - diluted and AFFO per unit
diluted included the convertible debentures for the three and nine
months ended September 30, 2022 and 2021 because they were
dilutive.
RECONCILIATION OF FFO TO AFFO |
|
|
|
|
|
Three months ended September
30 |
Nine months ended September
30 |
(thousands of dollars, except per unit amounts) |
2022 |
2021 |
2022 |
2021 |
|
|
|
|
|
FFO basic (1) |
10,344 |
26,414 |
29,261 |
35,893 |
FFO diluted (1) |
11,433 |
27,243 |
32,370 |
35,893 |
Maintenance capital expenditures |
(2,990) |
(1,540) |
(7,829) |
(3,430) |
AFFO basic (1) |
7,354 |
24,874 |
21,432 |
32,463 |
AFFO diluted (1) |
8,443 |
25,703 |
24,541 |
32,463 |
AFFO per unit – basic (1) |
0.09 |
0.32 |
0.27 |
0.41 |
AFFO per unit – diluted (1) |
0.09 |
0.30 |
0.27 |
0.41 |
AFFO payout ratio – basic – trailing twelve months (1) |
30.6% |
- |
30.6% |
- |
AFFO payout ratio – diluted – trailing twelve months (1) |
31.3% |
- |
31.3% |
- |
(thousands of dollars) |
September 30, 2022 |
December 31, 2021 |
Term loans and revolving credit facility |
679,860 |
695,796 |
2026 Debentures (at face
value) |
50,000 |
50,000 |
Unamortized portion of debt
financing costs |
4,864 |
6,402 |
Government guaranteed loans |
- |
345 |
Lease liabilities |
1,707 |
1,986 |
Unamortized portion of mark-to-market adjustments |
(90) |
(131) |
Debt |
736,341 |
754,398 |
|
|
|
(thousands of dollars) |
September 30, 2022 |
December 31, 2021 |
Total assets |
1,131,162 |
1,150,490 |
Accumulated depreciation and
impairment on property, buildings and equipment |
263,760 |
241,338 |
Accumulated amortization on intangible assets |
4,215 |
3,675 |
Gross book value |
1,399,137 |
1,395,503 |
The reconciliation of income from operating
activities to NOI, hotel EBITDA and EBITDA is shown below:
|
Three months ended September
30 |
Nine months ended September
30 |
(thousands of dollars) |
2022 |
2021 |
2022 |
2021 |
Income from operating activities |
15,936 |
15,242 |
40,537 |
36,477 |
Depreciation and
amortization |
8,932 |
10,829 |
29,230 |
32,427 |
IFRIC 21 property taxes |
(193) |
361 |
(937) |
(1,122) |
NOI |
24,675 |
26,432 |
68,830 |
67,782 |
Management fees |
(2,481) |
(1,923) |
(7,089) |
(5,122) |
Hotel EBITDA |
22,194 |
24,509 |
61,741 |
62,660 |
General administrative expenses |
(1,655) |
(2,110) |
(6,152) |
(8,352) |
EBITDA |
20,539 |
22,399 |
55,589 |
54,308 |
The reconciliation of finance costs to interest
expense is shown below:
|
Three months ended September
30 |
Nine months ended September
30 |
(thousands of dollars) |
2022 |
2021 |
2022 |
2021 |
Finance costs |
9,187 |
9,580 |
25,428 |
30,368 |
Gain on debt settlement |
- |
- |
2,344 |
- |
Amortization of debt financing
costs |
(487) |
(499) |
(1,599) |
(1,443) |
Accretion of Debenture
liability |
(231) |
(115) |
(596) |
(339) |
Amortization of Debenture
costs |
(95) |
(103) |
(241) |
(302) |
Dividends on Series B preferred
shares |
(4) |
(4) |
(12) |
(12) |
Amortization of mark-to-market adjustments |
14 |
14 |
41 |
40 |
Interest expense |
8,384 |
8,873 |
25,365 |
28,312 |
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 and nine months
ended September 30, 2022 and 2021, available on AHIP’s website at
www.ahipreit.com, and under AHIP’s profile on SEDAR at
www.sedar.com, which is incorporated by reference into this news
release.
FORWARD-LOOKING INFORMATION
Certain statements in this news release may
constitute “forward-looking information” within the meaning of
applicable securities laws. 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, including the Embassy Suites properties; AHIP’s
leverage and liquidity strategies and goals, including its target
debt to gross book value ratio; AHIP’s expectation that a portion
of the restricted cash currently held by the lenders to the Cash
Management Properties will be received in the first half of 2023;
the pending sale of four non-core assets in Oklahoma and the
expected timing and impacts of such transaction; AHIP’s outlook on
the U.S. travel market; the expected timing for the declaration,
record date and payment of monthly distributions, and any increase
thereof; 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: inflation, labor shortages, and supply chain
disruptions will negatively impact the U.S. economy, U.S. hotel
industry and AHIP’s business; 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 will
continue to have good relationships with its hotel brand partners;
ADR and Occupancy will be stable or rise in 2022 and beyond; the
future performance of the Cash Management Properties will be
consistent with AHIP’s expectations; the appraisals on the
borrowing base properties will be consistent with AHIP’s
expectations; the sale of the four non-core assets in Oklahoma will
be completed in the fourth quarter of 2022; AHIP’s distribution
policy will be sustainable and AHIP will not be prohibited from
paying distributions under the terms of its term loans, revolving
credit facility and investor rights agreement; AHIP’s ability to
increase distribution level in future periods assuming stable or
improving operating results; 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: inflation, labor
shortages, supply chain disruptions, the COVID-19 pandemic and
related government measures and their impact on the U.S. economy,
the U.S. hotel industry, and AHIP’s business; AHIP may not achieve
its expected performance levels in 2022 and beyond; AHIP’s brand
partners may impose revised service standards and capital
requirements which are adverse to AHIP; property improvement plan
renovations may not commence or complete in accordance with
currently expected timing and may suffer from increased material
and labor 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 the Board of Directors, compliance with the terms
of its credit facility 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; the appraisals for the
borrowing base properties may be lower than expected which may
result in a reduction in some or all of the available capacity of
the revolving credit facility; the performance of the Cash
Management Properties may regress which could result in the lender
thereto not returning certain restricted cash to AHIP in the first
half of 2023 or at all; the sale of the four non-core assets in
Oklahoma may not complete in accordance with the currently expected
timing or at all; general economic conditions and consumer
confidence; the growth in the U.S. hotel and lodging industry;
prices for AHIP’s units and its 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; increased geopolitical instability; and changes in
legislation 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
management’s discussion and analysis for the three and nine months
ended September 30, 2022 and AHIP’s annual information form for the
year ended December 31, 2021, 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.
For additional information, please
contact:
Investor Relationsir@ahipreit.com
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