AHOTF American Hotel Income Properties REIT LP (QX)

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VANCOUVER, Oct. 10, 2013 /CNW/ - American Hotel Income Properties REIT
LP ("AHIP") (Toronto Stock Exchange: HOT.UN; OTCQX: AHOTF) announced today that
it has agreed to acquire four hotel properties located in metropolitan
Pittsburgh, Pennsylvania (the "Acquisition Portfolio") for an aggregate purchase price of approximately US$57.3 million,
excluding post-acquisition adjustments and brand mandated property
improvement plans.

AHIP has also entered into an agreement with a syndicate of underwriters
co-led by Canaccord Genuity Corp. and National Bank Financial Inc.
(collectively, the "Underwriters"), to sell, on a bought deal basis, 3,450,000 subscription receipts ("Subscription Receipts") of AHIP at a price of $10.15 per Subscription Receipt for gross
proceeds to AHIP of approximately $35.0 million (the "Offering").

The Acquisition Portfolio will be purchased at a weighted average
going-in capitalization rate of approximately 9.7% (after consideration
for all hotel management fees, accounting fees, capital expenditure
fees, and a reserve for furniture, fixtures and equipment), or
approximately US$134,000 per suite, after accounting for brand mandated
property improvement plans to upgrade furniture, fixtures and
equipment, which is expected by AHIP to cost, in aggregate,
approximately US$6.0 million.? Including the property improvement plans and closing costs, the
aggregate cost to AHIP for the Acquisition Portfolio is expected to be
approximately US$65.0 million.

Acquisition Highlights:

• 
  
• 
  Quality portfolio of four hotel properties located in metropolitan
  Pittsburgh, Pennsylvania, featuring stable historical operating metrics
  
• 
  
• 
  Entrance into the metropolitan Pittsburgh market, identified by HVS
  Global Hospitality Services, Inc. as the second most stable major
  lodging investment market in the United States
  
• 
  
• 
  Acquisition Portfolio operates under established hotel brand names
  including Hampton Inn (Hilton) and Residence Inn (Marriott)
  
• 
  
• 
  AHIP's pro forma leverage and payout ratios remain conservative after
  giving effect to the Acquisition Portfolio
  
• 
  
• 
  Expected by AHIP management to be immediately accretive to AFFO per unit
  
• 
  
• 
  The acquisition price is significantly below the appraised value and
  management's estimate of replacement cost
  
• 
  

Rob O'Neill, AHIP's CEO, commented "We are very pleased to announce this
acquisition, which represents the first major step in the execution of
our stated growth strategy as outlined at the time of AHIP's initial
public offering targeting acquisitions of transportation-oriented and
select and limited-service hotels, located in secondary markets in the
United States in close proximity to railroads, airports, highway
interchanges and other transportation hubs and demand generators.? This
acquisition represents a unique opportunity for AHIP to purchase a high
quality, well-maintained portfolio at a price that is below its
independently appraised value and below our estimate of its replacement
cost. I am particularly pleased that we will now have a presence in the
Pittsburgh area, which has strong underlying fundamentals with
expectations for near term growth. We expect this acquisition to be
immediately accretive to our AFFO per unit."

The Acquisition Portfolio

AHIP will acquire the Acquisition Portfolio for a purchase price of
approximately US$57.3 million (the "Purchase Price"), subject to working capital and capital expenditure adjustments,
excluding brand mandated property improvement plans to upgrade
furniture, fixtures and equipment, expected to cost, in aggregate,
approximately US$6.0 million.? Including the property improvement plans
and closing costs, the aggregate cost to AHIP for the Acquisition
Portfolio is expected to be approximately US$65.0 million. The
properties comprising the Acquisition Portfolio were independently
appraised by Cushman & Wakefield, Inc., who determined an aggregate
as-is value of US$64.0 million, and an as-stabilized value of US$76.0
million, following the completion of the property improvement plans.

AHIP intends to finance the acquisition of the Acquisition Portfolio
with proceeds from the Offering and first mortgage financing to be
secured against the Acquisition Portfolio in the aggregate amount of
approximately US$38.0 million, bearing an anticipated weighted average
interest rate of approximately 5.15%.

The Acquisition Portfolio is comprised of an aggregate of 472 guest
rooms and consists of three hotels under the 'Hampton Inn' flag (a
Hilton brand), and one hotel under the 'Residence Inn' flag (a Marriott
brand).? The properties are located in suburban areas of the city of
Pittsburgh, Pennsylvania, near transportation hubs and other major
demand generators such as the Pittsburgh International Airport,
universities, hospitals and large office parks. The properties
primarily cater to corporate travelers seeking select and
focused-service lodging, including on an extended-stay basis. The
following table sets out certain key characteristics of the Acquisition
Portfolio:

Following the closing of the Acquisition Portfolio, AHIP's portfolio
will be comprised of 37 hotels located in 20 states across the United
States, representing an aggregate of 3,114 rooms, including a recently
acquired 77-room property in Jefferson City, Missouri, but excluding
the two previously announced properties currently under development
through SunOne Developments Inc. ("SunOne") which are expected by AHIP management to aggregate 81 additional
rooms.

Of AHIP's 33 currently operating properties, 32 operate under AHIP's
flagship 'Oak Tree Inn' brand and one under the 'Best Western' brand.
All 33 properties are specifically designed for railway employee
lodging customers. Following the closing of the Acquisition Portfolio,
management estimates that approximately 61% of the total available
room-nights in AHIP's portfolio will be covered under contracts
containing minimum occupancy guarantees.

Public Offering of Subscription Receipts

AHIP has entered into an agreement with a syndicate of Underwriters
co-led by Canaccord Genuity Corp. and National Bank Financial Inc. to
sell, on a bought deal basis, 3,450,000 subscription receipts of AHIP
at a price of $10.15 per Subscription Receipt for gross proceeds to
AHIP of approximately $35.0 million. AHIP has also granted the
Underwriters an over-allotment option to purchase up to an additional
517,500 Subscription Receipts (or, in certain circumstances, AHIP
units) on the same terms and conditions, exercisable at any time, in
whole or in part, up to 30 days after the closing of the Offering.

A significant portion of the net proceeds from the Offering, together
with new first mortgage financing being arranged with a major
international bank, will be used to fund the acquisition of the
Acquisition Portfolio. The remaining net proceeds of the Offering will
be used for future acquisitions of hotel properties, renovating and
rebranding the recently acquired hotel property in Jefferson City,
Missouri to Oak Tree Inn standards, funding mezzanine loans for
properties to be developed by SunOne in accordance with the development
agreement in place between AHIP and SunOne (including the Oak Tree Inn
hotels being developed in Santa Teresa, New Mexico, and Brunswick,
Maryland), and for general corporate purposes.

On the completion of the acquisition of at least three properties
comprising the Acquisition Portfolio, (i) one unit of AHIP will be
automatically issued in exchange for each Subscription Receipt (subject
to customary anti-dilution protections), without payment of additional
consideration, (ii) holders of Subscription Receipts shall be entitled
to receive, without duplication, an amount per Subscription Receipt
equal to the amount that would have been declared as distributions on
the units issuable on the exchange of such Subscription Receipts, as if
such units had been issued on the closing of the Offering in lieu of
the Subscription Receipts, which amount will be payable on or about the
third business day following the completion of such Acquisition
Portfolio, except that if a distribution has been declared but not
paid, then payment of that distribution will, at AHIP's option, be made
on the date that distribution is paid to unitholders, and (iii) the net
proceeds from the sale of the Subscription Receipts will be released
from escrow to AHIP and will be used in partial payment of the Purchase
Price for such Acquisition Portfolio.

If (i) the completion of the acquisition of at least three properties
comprising the Acquisition Portfolio does not occur on or before
January 10, 2014, or (ii) AHIP delivers a notice declaring that the
acquisition agreement has been terminated or that AHIP will not be
proceeding with the acquisition, or (iii) AHIP formally announces by
press release that it does not intend to proceed with the acquisition
of such Acquisition Portfolio, each Subscription Receipt will entitle
the holder thereof to receive an amount equal to the full offering
price and a pro rata share of interest thereon.

The Subscription Receipts will be offered by way of a short form
prospectus to be filed on or before October 25, 2013 with the
securities commissions and other similar regulatory authorities in each
of the provinces and territories of Canada pursuant to National
Instrument 44-101 - Short Form Prospectus Distributions.

Closing of the Offering is expected to take place on October 31, 2013
and is subject to certain conditions including, but not limited to, the
receipt of all necessary approvals, including the approval of the
Toronto Stock Exchange and the securities regulatory authorities.

Consistent with AHIP's past practices and in the normal course, AHIP
engages in ongoing discussions with respect to possible acquisitions
and has entered into an acquisition agreement in respect of the
Acquisition Portfolio, which is subject to a number of conditions
(including defeasance of the current debt outstanding on the
properties). There can be no assurance that this acquisition will be
completed on the terms of such agreement or at all. AHIP continues to
actively pursue acquisition and investment opportunities.

This news release shall not constitute an offer to sell, or the
solicitation of an offer to buy, any securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful. The
securities being offered have not been and will not be registered under
the U.S. Securities Act of 1933 as amended and may not be offered or
sold in the U.S. absent registration or pursuant to applicable
exemption from registration.

Forward-Looking Statements

This news release contains forward-looking information within the
meaning of applicable securities legislation, which reflects AHIP's
current expectations regarding future events. Forward-looking
information is identified by the use of terms and phrases such as
"anticipate", "believe", "budget", "could", "estimate", "expect",
"going-in", "intend", "may", "plan", "predict", "project", "will",
"would" and similar terms and phrases, and includes, but is not limited
to, the closing of the acquisition of the Acquisition Portfolio
including the new mortgage financing, the aggregate cost of property
improvement plans for the Acquisition Portfolio, the accretive nature
of AHIP's investment in the Acquisition Portfolio, the expected number
of rooms of the two previously announced properties under development?
through SunOne and the closing date of the Offering.

Forward-looking information is based on a number of assumptions and is
subject to a number of risks and uncertainties, many of which are
beyond AHIP's control, that could cause actual results and events to
differ materially from those that are disclosed in, or implied by, such
forward-looking information. Such assumptions include, but are not
limited to, the expected occupancy level for the Acquisition Portfolio
and a reasonably stable North American economy and stock market. Such
risks and uncertainties include, but are not limited to, budgeted net
operating income, going-in capitalization rate and expected return on
equity being materially different than projected as well as the factors
discussed under "Risk Factors" in AHIP's amended Management's
Discussion and Analysis dated September 27, 2013. The forward-looking
information contained herein is made as of the date of this news
release and, except as expressly required by applicable law, AHIP
assumes no obligation to publicly update or revise such information.

About American Hotel Income Properties REIT LP

AHIP is a limited partnership formed under the Limited Partnership Act (Ontario) to invest in hotel real estate properties located
substantially in the United States and engaged primarily in the
railroad employee accommodation, transportation, and contract-focused
lodging sectors. AHIP's long-term objectives are to: (i) generate
stable and growing cash distributions from hotel properties
substantially in the US; (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.

Non-IFRS Measures

This press release uses the term "AFFO", which stands for adjusted funds
from operations. AFFO is not a measure recognized under IFRS and does
not have a standardized meaning prescribed by IFRS. It is a
supplemental measure of performance for real estate investment trusts.
AHIP believes that AFFO is an important measure of economic performance
and is indicative of AHIP's ability to pay distributions.? For more
information on AFFO, reference should be made to AHIP's annual
information form for the year ended December 31, 2012 which has been
filed on SEDAR at www.sedar.com.

Additional Information

Additional information relating to AHIP, including its other public
filings, is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
RESPONSIBILITY FOR THE ADEQUACY OR THE ACCURACY OF THIS NEWS RELEASE.

SOURCE American Hotel Income Properties REIT LP