American Hotel Income Properties announces strategic dispositions

American Hotel Income Properties REIT announced further progress on leverage reduction through strategic dispositions. On September 2, 2024, the Board of Directors approved the dispositions of five hotel properties with total gross proceeds of $45.9 million. These properties include two hotels in Statesville, North Carolina, and one hotel in each of Melbourne, Florida, Kingsland, Georgia and Houston, Texas. Each disposition is subject to a binding agreement which was entered into following the conclusion of AHIP’s previously disclosed marketing process for the properties. AHIP has received total non-refundable deposits of $4.7 million under such agreements, and the dispositions are currently expected to close in the fourth quarter of 2024. The dispositions reflect a value per key of $103 thousand based on gross proceeds. AHIP’s current enterprise value per key is $95 thousand, based on the U.S. dollar closing price of US$0.35 per unit on the TSX on August 30, 2024. After adjusting for an industry standard 4% furniture, fixtures, and equipment reserve, the combined sales price for these properties represents a blended Cap Rate of 6.9% on 2023 annual hotel EBITDA. AHIP’s current enterprise value reflects an implied Cap Rate of 8.4% on 2023 annual hotel EBITDA, based on the U.S. dollar closing price of US$0.35 per unit on the TSX on August 30, 2024. After adjusting for the expected future capital expenditure requirements, these sales represent a blended Cap Rate of 5.5% on 2023 annual hotel EBITDA. The dispositions of the five hotel properties bring the total gross proceeds of the hotel properties, that have been disposed or are currently under agreements for dispositions in 2024 to $162.0 million. These sales are a key component of the Company’s previously announced plan to address 2024 loan maturities and reduce leverage. Specifically, AHIP intends to use proceeds from the disposition of these five hotel properties to pay off the CMBS mortgage debt secured against three of the properties and to pay down the term loans which form part of AHIP’s senior credit facility. Two of the five properties form part of the borrowing base for the Credit Facility; accordingly, the proceeds from the sale of such properties will be used solely to pay down the outstanding term loans under such facility.