American Hotel Income Properties REIT LP Reports Second Quarter 2020 Results
August 07, 2020 at 07:30 AM EDT
(All numbers are in U.S. dollars unless otherwise indicated)
VANCOUVER, BC, Aug. 7, 2020 /PRNewswire/ - American Hotel Income Properties REIT LP ("AHIP", or the "Company") (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.U) announced today its financial results for the three and six months ended June 30, 2020.
"During the second quarter we successfully navigated what was likely the most severe hotel sector downturn in modern history, but we're cautiously optimistic that the worst impacts of COVID-19 are now behind us," said John O'Neill, CEO. "All of our 79 hotels are now open, our hotel occupancy has consistently improved since the lows experienced in April, and in July we recorded 55.3% average occupancy – enabling us to achieve our first cash flow positive month since the pandemic began."
Mr. O'Neill continued: "While lingering negative impacts of COVID-19 are expected to continue for the foreseeable future, and business levels continue to be pressured relative to a normalized environment, we are pleased that our revenues have now improved enough alongside our expense reduction initiatives to enable us to generate positive cash flows once again. This is a fairly unique position to be in, as many publicly traded US hotel REITs continue operations with closed hotels and with negative cash flow. We believe our strategic focus on select-service, premium branded hotels in secondary markets – not gateway cities, has provided us with the advantage of a more durable business model. We also remain vigilant in appropriately balancing our previously implemented cost containment measures with increasing hotel occupancy, to ensure we drive margin expansion and stay well positioned within this dynamic and evolving market environment."
Mr. O'Neill added: "We are pleased to be welcoming guests to our hotels with increased health and safety measures in place. We continue to see the strongest performance from our 24 extended stay properties, which averaged 54.1% occupancy during the second quarter, and 64.6% in the month of July, with our Residence Inn by Marriott branded properties performing particularly well relative to the U.S. hotel industry. Leisure travelers, government agency and essential service groups continue to drive this occupancy recovery."
Mr. Azim Lalani, CFO, added: "Our enhanced liquidity, previously announced debt covenant waivers and long- term loan maturity schedule provide us with a solid foundation to sustain our operations as we navigate lingering COVID-19 challenges. As we have started to generate positive cash flow, our focus is shifting to paying down debt and further enhancing our liquidity."
THREE MONTHS ENDED JUNE 30, 2020 FINANCIAL HIGHLIGHTS
Same-property metrics represent the performance of the 67 Premium Branded hotels owned in both the current and comparative period, or 85% of AHIP's total current hotel portfolio based on number of hotels.
SIX MONTHS ENDED JUNE 30, 2020 FINANCIAL HIGHLIGHTS
CAPITAL METRICS AND LIQUIDITY
SECOND QUARTER DEVELOPMENTS
The information in this news release should be read in conjunction with AHIP's unaudited condensed consolidated interim financial statements and management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2020, which are available on AHIP's website at www.ahipreit.com and on SEDAR at www.sedar.com.
Q2 2020 FINANCIAL RESULTS CONFERENCE CALL
Management will host a conference call at 1:00 p.m. Eastern time / 10:00 a.m. Pacific time on Friday, August 7, 2020 to review the financial results for the three months ended June 30, 2020.
To participate in this conference call, please dial one of the following numbers at least five minutes prior to the commencement of the call and ask to join the American Hotel Income Properties' Q2 2020 Analyst Call.
The conference call will also be webcast live (in listen-only mode). The link to the webcast can be found on the Events tab of the following webpage: https://www.ahipreit.com/news-and-events/
CONFERENCE CALL REPLAY
A replay of the conference call will be available by dialing one of the following replay numbers. The replay will be available after 4:00 p.m. Eastern time / 1:00 p.m. Pacific time on August 7, 2020 until August 28, 2020. The webcast recording of this conference call will also be available at www.ahipreit.com on the Events and Presentation page.
Please enter replay PIN number 8185616 followed by the # key.
Certain non-IFRS financial measures are included in this news release, which include NOI, NOI Margin FFO, diluted FFO per Unit, AFFO, diluted AFFO per Unit, and debt-to-gross book value. These terms are not measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. Real estate issuers often refer to NOI, NOI Margin FFO, Diluted FFO per Unit, AFFO, and Diluted AFFO per Unit as supplemental measures of performance and debt-to-gross book value as a supplemental measure of financial condition.
Debt-to-gross book value, NOI, NOI Margin, FFO, diluted FFO per Unit, AFFO, diluted AFFO per Unit and debt-to-gross book value, should not be construed as alternatives to measurements determined in accordance with IFRS as indicators of AHIP's performance or financial condition. AHIP's method of calculating NOI, NOI Margin, FFO, diluted FFO per Unit, AFFO, diluted AFFO per Unit, and debt-to-gross book value may differ from other issuers' methods and accordingly may not be comparable to measures used by other issuers. For further information, including reconciliations of certain of these non-IFRS financial measures to the closest comparable IFRS measure, please refer to AHIP's MD&A dated August 6, 2020, which is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.
Certain statements in this news release may constitute "forward-looking information" within the meaning of applicable securities laws (also known as forward-looking statements). Forward looking information involves known and unknown risks, uncertainties and other factors, and may cause actual results, performance or achievements or industry results, to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking information. Forward-looking information generally can be identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "feel", "intend", "may", "plan", "predict", "project", "subject to", "will", "would", and similar terms and phrases, including references to assumptions. Some of the specific forward-looking information in this news release includes, but is not limited to, statements with respect to: AHIP being cautiously optimistic that the worst impacts of COVID-19 have past; AHIP's expectation that lingering negative impacts of COVID-19 will continue for the foreseeable future; AHIP remaining vigilant in appropriately balancing its previously implemented cost containment measures with increasing hotel occupancy, to ensure AHIP drives margin expansion and stays well positioned within the current dynamic and evolving market environment; AHIP's enhanced liquidity, previously announced debt covenant waivers and long- term loan maturity schedule providing AHIP with a solid foundation to sustain its operations as it navigates lingering COVID-19 challenges; AHIP shifting its focus to paying down debt and further enhancing its liquidity as AHIP has started to generate positive cash flow; AHIP's expectation that a portion of government-guaranteed loans it received will be forgivable; AHIP's lending syndicate providing covenant waivers under the credit facility through Q1 2021; AHIP's expectation that it will complete agreements with its CMBS loan servicers that will permit AHIP to access certain reserves to fund upcoming debt payments and to temporarily cease funding FF&E reserve contributions on its eight remaining CMBS loans covering 20 hotels; the sale by AHIP of its Wingate Tampa hotel, and the expectation that such sale will close by August 31, 2020; and AHIP's stated long-term objectives.
Forward-looking information is based on a number of key expectations and assumptions made by AHIP, including, without limitation: the COVID-19 pandemic will continue to negatively impact the U.S. economy, U.S. hotel industry and AHIP's business, and the extent and duration of such impact; AHIP's occupancy levels will not materially deteriorate from current levels; AHIP will be able to continue to operate its 79 hotels during the COVID-19 pandemic; AHIP will not cease guest operations at a material number of properties as a result of government regulations, lack of sufficient guest bookings or other reasons; AHIP's cost reduction, cash conservation and liquidity strategies will achieve their stated objectives and AHIP will continue to have sufficient funds to meet its financial obligations; AHIP's will complete agreements with its CMBS loan servicers with respect to its eight remaining CMBS loans in order to be permitted to access certain reserves to fund upcoming debt payments and to temporarily cease funding FF&E reserve contributions; AHIP's select-service portfolio will be better positioned to capture market share during the expected economic recovery in the near term compared to full service hotels focused on gateway markets; there will be a meaningful economic recovery in the U.S. and within the U.S. hotel industry; a portion of the government-guaranteed loans that AHIP received will be forgivable; AHIP will continue to generate positive cash flows; recent occupancy recovery trends will continue; and AHIP will complete the sale of its Wingate Tampa hotel by August 31, 2020. 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 provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. 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. Those risks and uncertainties include, among other things, risks related to: the impacts of the COVID-19 pandemic on the U.S. economy, the hotel industry, the willingness of the general public to travel, the level of consumer confidence in the safety of travel and AHIP's business, all of which have negatively impacted, and are expected to continue to negatively impact, AHIP and may materially adversely affect AHIP's investments, results of operations, financial condition and AHIP's ability to obtain additional equity or debt financing, or re-finance existing debt, or make interest and principal payments to its lenders and to holders of AHIP's debentures, and otherwise satisfy its financial obligations and may cause AHIP to be in non-compliance with one or more of the financial covenants under its existing credit facilities and cause a default thereunder; 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 pace of recovery following the COVID-19 pandemic cannot be accurately predicated and may be slow; AHIP's cost reduction and cash conservation initiatives may not achieve their stated objectives, and cash savings may be less than anticipated; AHIP's liquidity initiatives may not achieve their stated objectives, and liquidity generated may be less than anticipated; AHIP may not receive necessary approvals from its remaining CMBS loan servicers to use certain reserves to fund upcoming debt service payments and to temporarily cease funding FF&E reserves, and such approvals if received may not be on terms acceptable to AHIP; AHIP may require additional debt or equity capital in order to replenish any reserve funds drawn in accordance with the timing required by its CMBS loan servicers, and such funds may not be available to AHIP on reasonable terms, or at all; AHIP may require covenant waivers under its credit facility subsequent to Q1 2021, and if required, such waivers may not be provided by its credit facility syndicate on terms acceptable to AHIP, or at all; current occupancy recovery trends at AHIP's hotels may not continue, may decelerate or regress; AHIP's portfolio may not capture anticipated market share in connection with the expected economic recovery in the near term, or at all; the impacts of COVID-19 on AHIP's anticipated revenue levels and the recoverable amount of its hotel properties could lead to impairment charges on hotel properties in future periods; AHIP may not complete the sale of its Wingate Tampa hotel by August 31, 2020; AHIP may not satisfy the criteria for forgiveness of certain government guaranteed loans obtained by AHIP; general economic conditions; future growth potential; Unit prices; liquidity; tax risk; tax laws currently in effect remaining unchanged; ability to access capital markets; competition for real property investments; environmental matters; the value of the U.S. dollar; and changes in legislation or regulations. Management believes that the expectations reflected in the forward-looking information contained herein are based upon reasonable assumptions and information currently available; however, management can give no assurance that actual results will be consistent with such forward-looking information. Additional information about risks and uncertainties is contained in AHIP's MD&A dated August 6, 2020 and annual information form for the year ended December 31, 2019, 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 stated 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.
Additional information relating to AHIP, including AHIP's unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2020, AHIP's MD&A dated August 6, 2020, and other public filings are available on SEDAR at www.sedar.com.
ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP
American Hotel Income Properties REIT LP (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.U), or AHIP, is a limited partnership formed to invest in hotel real estate properties across the United States. AHIP's 79 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, Wyndham and Choice Hotels through license agreements. The Company'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.
SOURCE American Hotel Income Properties REIT LP