INVESTOR PRESENTATION
TSX: HOT.UN (CAD$) | TSX: HOT.U (US$) | TSX: HOT.DB.U (Debentures)
INVESTOR PRESENTATION December 4, 2019 TSX: HOT.UN (CAD$) | TSX: - - PowerPoint PPT Presentation
INVESTOR PRESENTATION December 4, 2019 TSX: HOT.UN (CAD$) | TSX: HOT.U (US$) | TSX: HOT.DB.U (Debentures) Forwardlookingstatements This corporate update is a summary and should be read together with the more detailed information, financial
TSX: HOT.UN (CAD$) | TSX: HOT.U (US$) | TSX: HOT.DB.U (Debentures)
This corporate update is a summary and should be read together with the more detailed information, financial data and statements made available by American Hotel Income Properties REIT LP (the “REIT”). This corporate update contains forward- looking statements which reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance and business prospects and opportunities of the REIT. The words “plans”, “expects”, “scheduled”, “estimates”, “intends”, “anticipates”, “projects”, “believes” or variations of such words and phrases or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “might”, “occur”, “be achieved” or “continue” and similar expressions identify forward-looking statements. Some of the specific forward- looking statements in this corporate update include, but are not limited to, statements with respect to the ability of the REIT to execute its growth strategies; the expected tax treatment of the REIT and of the REIT’s distribution to Unitholders; the expected growth in the U.S. lodging industry and trends; and other considerations which are outlined in the REIT’s Annual Information Form dated March 22,
reasonable by management of the REIT as of the date of this corporate update, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The REIT’s estimates, beliefs and assumptions, which may prove to be incorrect, include the various assumptions set forth herein, including, but not limited to the REIT’s future growth potential, results of operations, future prospects and opportunities, industry trends remaining unchanged, no change in legislative or regulatory matters, future levels of indebtedness, the tax laws as currently in effect remaining unchanged, the continual availability of capital and the current economic conditions remaining
to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be
in the forward-looking statements, including, but not limited to, the factors discussed under the “Risk Factors” in the REIT’s latest Management’s Discussion and Analysis. The forward- looking information contained herein is made as of December 4, 2019 and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise such information. Allfigur urespresen ented edarein inU.S.doll llars,unless ssother erwise sestated ed. Courtyard Wall Township, New Jersey
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Cover image: Hampton Inn & Suites Corpus Christi (TX)
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American Hotel Income Properties REIT LP (“AHIP”)
▪ Invests in high-quality premium branded hotel properties, primarily in the Upper-midscale to Upper-Upscale chain scale segments, including such brands as Embassy Suites, Residence Inn, Hampton Inn and Holiday Inn Express ▪ Hotels are located across the U.S., primarily in larger secondary markets (such as Cincinnati or Baltimore) that benefit from multiple demand generators (i.e. business parks, sports arenas, medical centres)
Properties were purchased below replacement cost, with an average trailing 8% cap rate using long-term fixed-rate debt.
CURRENT PORTFOLIO:
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Canadian dollar TSX ticker HOT.UN (trades in CAD$, monthly distributions paid in USD) US dollar TSX ticker HOT.U (trades in USD$, monthly distributions paid in USD) Units outstanding 78,122,528 (unit outstanding) Convertible Debentures HOT.DB.U (5.0% interest paid semi-annually in USD) Market Cap C$530 million (As at December 3, 2019) Debt to Gross Book Value 54.1% Monthly USD cash distribution USD$0.054 FFO Payout Ratio (Rolling 4-quarters, as at Q3 2019) 92.0% Target FFO Run-rate Payout Ratio Approximately 72% (at the completion of AHIP’s hotel renovation program)
All information as of September 30, 2019 unless otherwise noted.
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Courtyard Wall Township, New Jersey
branded, select-service hotels in secondary markets (U.S. cities
benefit from multiple demand generators
hotels that no longer met our long- term strategy, such as the Economy Lodging portfolio.
12 additional Premium Branded hotels that are on average only four years in age.
to enhance our hotel portfolio through other capital recycling or growth opportunities 6
team continuously evaluates hotel performance and market positioning, to ensure our third- party hotel manager delivers the best possible performance AHIP’s strategy is focused on generating sustainable, growing cash flows from proven hotel properties, to deliver long-term value to our unitholders through monthly distributions and unit price appreciation. Key to achieving this are three core activities:
On November 28, 2019, AHIP sold its 45 Economy Lodging hotels to Vukota Capital Management (“VCM”) for US$215.5 million, excluding adjustments
Days Inn, Super 8 or Travelodge brands (Wyndham brands)
growing and driving performance of its growing Premium Branded hotel portfolio
Branded hotels 7
On December 3, 2019, AHIP acquired 12 Premium Branded hotels for $191 million excluding closing and post-closing adjustments
net operating income and AHIP’s cost structure
replacement cost at $158,800/key
under Marriott, Hilton or IHG flags
growing our exposure in the U.S. Midwest and Texas (10 of the 12 hotels are located in new markets for AHIP)
demand generators
portfolio, alongside a $105 million new fixed rate term loan to finance the acquisition 8
Why grow in Pittsburgh? CBRE now lists Pittsburgh as having the second highest long-term RevPAR growth expectations (until 2024) of all U.S. markets, following
Why expand in Texas? The markets the six Texas hotels are located in all benefit from multiple demand generators, or are strategically located:
Corpus pus Christi sti – near the expandingport Houston ston– largeeconomic center Midland dland– locatedacross the street from a newly established10,000 sq. ft.corporate headoffice San Angel gelo – Near military base, medical centers, agricultural auctions, in additional to government agencies, oil and gas firms, and agricultural research centers.
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Courtyard Bismark North (ND) Courtyard St. Paul Woodbury (MN) Fairfield Inn & Suites Pittsburgh Airport Robinson Township (PA)
Growing our presence in the U.S. Midwest, with these six properties:
Towneplace Suites Pittsburgh Airport Robinson Township (PA) Residence Inn St. Paul Woodbury (MN) Homewood Suites Kalamazoo Portage (MI)
1.7 years old | 120 guestrooms 3.9 years old | 97 guestrooms 4.0 years old | 103 guestrooms 3.0 years old | 116 guestrooms 5.0 years old | 89 guestrooms 3.3 years old | 93 guestrooms
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Hampton Inn & Suites Corpus Christi (TX) Residence Inn San Angelo (TX) Home2 Suites San Angelo (TX) Home2 Suites Midland (TX) Staybridge Suites Midland (TX) Home2 Suites Houston Willowbrook(TX)
Growing our presence in Texas, with these six properties:
4.0 years old | 101 guestrooms 4.0 years old | 92 guestrooms 4.0 years old | 98 guestrooms 3.1 years old | 108 guestrooms 4.2 years old | 93 guestrooms 4.7 years old | 93 guestrooms
Hotels located in secondary metropolitan markets across the U.S. (such as Cincinnati or Columbus)
AHIP’S PREMIUM BRANDED HOTELS 12 RECENTLY ACQUIRED HOTELS ADDED TO AHIP’S PORTFOLIO
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Consistent with AHIP’s investment strategy, all properties are strategically located within or near: ▪ Larger population centers ▪ Transportation corridors ▪ Demand generators
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HOTEL PORTFOLIO EVOLUTION Portfolio composition (by NOI) RevPAR $46.15¹ $73.29 $76.80 $97.00 ADR $56.52¹ $96.43 $114.58 $128.00 Portfolio size 32 hotels / 2,565 rooms 112 hotels / 11,523 rooms 67 hotels / 7,684 rooms 12 hotels / 1,203 Average # of rooms per hotels 80 103 115 100
For period: IPO to Dec. 31, 2013 Year ended Dec. 31, 2018
Premium Branded Economy Lodging (i.e. “Rail hotels”)
100% Economy Lodging 79.9%
20.1% AHIP’s established67 Premium Branded hotels
(TTM Sept. 30, 2019)
100% % Premium emium Bran anded ded 12 hotels recently acquired
(TTM Sept. 30, 2019)
100% % Premium emium Bran anded ded
13 Select-service hotels generally benefit from higher margins than luxury hotels, by operating newer, more efficient hotels than many full-service properties. AHIP focuses its portfolio on hotels that are franchised under some of the world’s leading hotel brands – through Marriott, Hilton and Intercontinental Hotel Group (IHG).
AHIP’S PREMIUM BRANDED HOTELS OPERATE UNDER THE FOLLOWING BRANDS:
forecast and continuously review
determine what is working well or not working
performance and benchmark them for other properties, while also ensuring immediate issues are quickly addressed
condition of our hotels, their market position, and forecasted PIP requirements to ensure we allocate
returns, while meeting our brand standards. AHIP’s asset management team is responsible for
Hospitality
driving optimal results for our properties
through shared resources, group buying, productivity
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In April 2018, Aimbridge Hospitality assumed all hotel management responsibilities On October 25, 2019, Aimbridge merged with Interstate Hotels and Resorts, positioning them as the largest independent hotel management company in the U.S., managing more than 1,400 hotels
Benefits of working with a large hotel manager:
brands AHIP’s hotels are licensed with
On November 7, 2019, AHIP announced that it had negotiated new contract terms with Aimbridge that are expected to strengthen AHIP’s margins, cash flow and growth potential over the next several years
(from date of acquisition)
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Embassy Suites Cincinnati – Lobby Renovation
$0.76 $0.71
Q3 2018 Q3 2019
TTM FFO PER UNIT
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* Trailing 12 month metrics are based on performance as reported at each quarter end
(USD$)
Hotels REITs are more seasonal than other real estate sectors with Q2 and Q3 seasonally stronger AHIP is best reviewed and evaluated on a TTMor annual basis to account for seasonal changes
$154.4 $164.8 $168.9 $173.5 $195.1 $220.0 $265.8 $303.7 $323.1 $343.5 $341.2 $338.6 $338.0 $338.2 $338.7
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
TTM Revenue (USD$ millions)
$45.0 $49.0 $50.7 $52.4 $58.5 $65.8 $81.4 $89.8 $93.3 $101.0 $96.8 $93.8 $94.1 $94.0 $93.2
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
TTM EBITDA (USD$ millions)
$30.9 $33.8 $34.9 $36.6 $41.0 $45.0 $54.3 $58.6 $58.3 $61.9 $58.9 $55.6 $55.7 $55.7 $54.9
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
TTM FFO (USD$ millions)
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ANNUAL RESULTS 2017
12 months ended December 31, 2017
2018
12 months ended December 31, 2018 TTM Q3 2019 12 months ended
Number of Guestrooms
11,708 11,523 11,524
Revenue (‘000)
$303,710 $338,561 $338,652
EBITDA (‘000)
$89,761 $93,839 $93,452
EBITDA Margin
29.6% 27.7% 27.6%
FFO per diluted unit
$0.82 $0.70 $0.71
Debt/Gross Book Value
53.9% 53.6% 54.1%
WA Loan Interest Rate
4.61% 4.65% 4.64%
WA Loan Term
7.6 years 6.4 years 5.7 years
Wingate Tampa, Florida Residence Inn Mount Laurel, NJ
AHIP’s performance is best reviewed on an annual or trailing 12-month basis, to account for seasonal differences that materially affect quarter results
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Springhill Suites Arundel Mills (Baltimore)
STR1 forecasts for 2019 and 2020:
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¹ STR Forecasts provided November 19, 2019 for total United States hotel sector
STR Forecasts for U.S. hotel sector1
Metric 2019 Forecast 2020 Forecast Supply 2.0% 2.0% Demand 1.8% 1.5% Occupancy
ADR 1.0% 0.9% RevPAR 0.8% 0.5%
RevPAR growth that is driven by rising ADR should contribute to margin expansion
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Guestroom rates can change daily (ability to mitigate any inflationary risk)
▪ Unlike other REIT sectors where revenue is derived from long-term leases, hotel REITs provide a natural inflationary hedge due to the daily pricing adjustments of guestroom rates ▪ Useful in offsetting cost pressures in inflationary times ▪ Yield management allows our hotel manager to price rooms inventory according to daily changes in demand and room rate trends
Hilton Garden Inn White Marsh
Secondary market locations are better positioned for recessionary periods
▪ AHIP hotels are located in secondary markets that often benefit from multiple demand generators (such as hospitals and universities), as opposed to tourism-led markets (which often experience the most performance volatility) ▪ Business travellers often downgrade from luxury hotels to mid-scale hotels (such as AHIP’s hotels) in challenging economic periods ▪ As hotels are operating businesses, AHIP’s hotel manager has the ability to adjust certain variable expenses compared to
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Leveraged to growing economy, not interest rates Long-term, fixed rate debt structure shields AHIP from short-term changes in interest rates
▪ Majority of AHIP’s debt is fixed rate ▪ No significant debt maturities until June 2022
Hilton Garden Inn White Marsh
DEBT MATURITY LADDER (As at December 3, 2019, USD$ millions)
$0 $50 $100 $150 $200 2019 2020 2021 2022 2023 2024 2025 2026 2027 Loans and Mortgages Convertible Debentures
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Residence Inn, Ocala, Florida
Focusing entirely on growing our portfolio of Premium Branded hotel properties
▪
In the past year AHIP has sold economy 48 hotels that no longer fit the Company’s long-term strategy
▪
Reinvested the proceeds from hotel sales into 12 newer, higher-quality hotels to expand our purely Premium Branded portfolio of hotels
Driving RevPAR (Revenue per available room) growth through:
▪
Revenue management (yield management)
▪
Hotel upgrades and renovations (PIP projects)
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Strong market position within our hotel markets, with an average Premium Branded hotel RevPAR index of more than 100%
Investing in our hotels to make them best in class and drive higher market share and demand
▪
During 2019, AHIP expects to invest $25 million of capital in 10 Premium Branded hotel renovations
▪
Five hotels have already completed their renovations in 2019
▪
completed during 2018 for Premium Branded hotels
Implemented an Internal asset management team
▪
Overseeing and enhancing the performance of the hotel portfolio to drive stronger returns for unitholders
▪
Working closely with AHIP’s external hotel manager, the Asset Management team monitors the supply and demand dynamics of specific hotel markets to ensure that each property is consistently well positioned to maximize profitability
▪
Developing long-term strategic plans for each hotel property, including all hotel renovations and capital recycling
▪
Focus on margin expansion, with oversight regarding cost containment initiatives
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Residence Inn Chattanooga near Hamilton Place (TN) – approx. $1.5 million
▪
Updated all guestroom furniture, artwork, window treatments, carpeting and wall finishings
▪
Modernized the lobby and meeting rooms, with new carpeting, wall finishings, drapery, and lighting.
▪
Expanded and renovated the fitness center, and updated with all-new exercise equipment
Homewood Suites Bethlehem (PA) –
▪
COMPLETED JULY 2019
▪
Complete transformation of the lobby
▪
All guest suites remodeled with new furniture and soft goods, new TVs, and new wall finishings
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The renovated lobby of the Residence Inn Chattanooga The renovated lobby of the Residence Inn Chattanooga
Embassy Suites Phoenix Tempe (AZ) –
▪
Complete guestroom remodeling, including new wall finishings, carpeting/flooring, furniture and electronics
Fairfield Inn & Suites Jacksonville (FL) – approx. $0.9 million
▪
COMPLETED JULY 2019
▪
Updates to the lobby, all guestrooms, corridors and public areas
Homewood Suites Allentown (PA) –
▪
COMPLETED JULY 2019
▪
Complete transformation of the lobby
▪
All guest suites remodeled with new furniture and soft goods, new TVs, and new wall finishings
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Updated guestroom at the Embassy Suites Phoenix Tempe Updated lobby of the Homewood Suites Allentown
Embassy Suites, DFW South (Irving, TX) –
▪
Complete atrium and lobby renovation
▪
Modernized restaurant and lobby bar concept
▪
Elevator replacements and modernization
Embassy Suites, Cincinnati RiverCenter (Covington, KY) – approx. $2.3 million
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COMPLETED NOVEMBER 2018
▪
Complete atrium and lobby renovation
▪
Modernized restaurant and lobby bar concept
▪
Guestroom corridor updates
▪
Guestroom furniture/artwork updates
▪
Guestroom bathroom updates
▪
Updated public restrooms
▪
Renovated pre-conference lobby
Embassy Suites, Columbus (Dublin, OH) –
▪
COMPLETED JANUARY 2019
▪
Complete atrium and lobby renovation
▪
Modernized restaurant and lobby bar concept
▪
Updated public restrooms
▪
Renovated conference and boardrooms and pre- conference lobby
▪
Guestroom bathroom updates
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Final renovated atrium and lobby bar at DFW South Renovated Trattoria restaurant at DFW South
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After Renovations:
3.
Prior to Renovations:
BEFORE AFTER
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John O’Neill
Chief Executive Officer
Azim Lalani
Chief Financial Officer
Chris Cameron
Chief Investment Officer
Bruce Pittet
SVP, Asset Management & COO
Anne Yu
Vice President, Finance
▪ Hotel industry veteran, with 30 years of experience in hotel investment, development and management ▪ Co-Founder of American Hotel Income Properties REIT LP ▪ Previously CEO of ONE Lodging – AHIP’s former external hotel manager ▪ More than 20 years of experience in financial reporting, corporate finance, operations, business valuation, taxation and risk management ▪ Senior Vice President of Operations for two TSX-listed commercial REITs ▪ Vice President of Real Estate and Risk Management at SilverBirch Hotels & Resorts ▪ Audit Manager at KPMG ▪ A Chartered Professional Accountant with more than 14 years of experience in the hotel industry ▪ Has led acquisitions, debt financing and hotel operations teams in prior roles ▪ Previously Senior Vice President at a North American hotel owner, developer and operator. ▪ Worked with AHIP on its IPO and advised AHIP during several other portfolio acquisitions since AHIP’s inception ▪ More than 30 years of hotel management, planning and operating experience across North America, with the last 20 years spent in the U.S. ▪ Has experience in, and has completed market analysis of, more than 100 U.S. hotel markets ▪ Has been a leader of multiple major property launches, turnarounds, and re-positioning initiatives ▪ Previously Senior Vice President at ONE Lodging, which is a part of Aimbridge Hospitality, where he oversaw AHIP’s hotel portfolio ▪ More than 15 years experience in financial reporting, internal controls, corporate finance and Canadian and US tax. ▪ Manager at Pricewaterhouse Coopers ▪ Controller and Manager of Financial Reporting of Sterling Shoes Inc. ▪ Controller of Ventyx Software Solutions Inc. (formerly MDSI Mobile Data Solutions Inc.)
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TAKING ACTION TO DRIVE STRONGER PERFORMANCE
Investing in our hotels to make them best in class and drive higher market share and demand
completed during 2018.
completed in 2019.
Actively acting on Capital Recycling opportunities
long-term strategy
Growing our Premium Branded hotel portfolio
Branded hotels that were all built in the last five years
Staybridge Suites Tampa East Embassy Suites Cincinnati
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Residence Inn, Pittsburgh Cranberry Township
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0.0 1.0 2.0 3.0 4.0 5.0 Primary Secondary Markets
Economic Outlook
fueled by rising ADR Area of Opportunity 3.4M guestrooms U.S. Canada
U.S. Secondary Markets
centres (>2M pop.), transportation corridors and demand generators
Select Service Hotel Advantages
service hotels
Million guestrooms
400,000 guestrooms
Top 6 Cities Top 25 Cities
GUESTROOMS BY COUNTRY / MAJOR CITIES
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Scheduled Renovation Dates
Hotel Name and and Guestroo
Q1 2019 Q2 2019 Q3 2019 Q4 2019
Fair irfield ield Inn n & Suites Jacksonville
X Completed Resid idenc nce Inn Chattanooga nooga (87 guestrooms) X X Completed Homewood ewood Suites Allen entown
X Completed Homewood ewood Suites Bethle hlehem hem (108 guestrooms) X Completed Homewood ewood Suites Dover ver (108 guestrooms) X X X Holid iday y Inn Expr press ess Fort Myers (111 guestrooms) X X Holid iday y Inn Expr press ess Sarasot
X X Embassy y Suit ites es Tempe pe (224 guestrooms) X Completed Embassy y Suit ites es Clev evela eland nd (271 guestrooms) X X Completed Townep epla laceSuit ites es Chattanoog nooga (87 guestrooms) Completed
During 2019, AHIP expects to invest approx. $25 million of capital in hotel renovations. Due to the type of hotel upgrades being completed, AHIP forecasts less than $2 million of impact to NOI from renovation displacement. The following hotel properties are scheduled to undergo renovation projects in 2019:
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Scheduled Renovation Dates
Hotel Name and and Guestroo
Q1 2018 2018 Q2 2018 Q3 2018 2018 Q4 2018 2018
Embassy y Suit ites es Cinc ncinna innati i (227 guestrooms) Ongoing Ongoing Completed Embassy y Suit ites es DFW W South uth (305 guestrooms) Ongoing Ongoing Completed Hilton
en Inn Whit ite e Marsh h (155 guestrooms) Completed Embassy y Suit ites es Colum umbus us (284 guestrooms) Ongoing Ongoing Completed Staybrid idge e Suit ites es Tampa pa East/Brando ndon n (100 guestrooms) Completed Resid idenc nce Inn Baltimor more e Whit ite Marsh h (131 guestrooms) Completed
The following hotel properties completed PIP projects that were valued at more than US$500,000 in 2018:
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Embassy Suites Dallas Fort Worth (Airport South) Embassy Suites Cleveland Springhill Suites Arundel Mills (Baltimore)
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Embassy Suites Cincinnati Embassy Suites Columbus (Dublin) Embassy Suites Phoenix Tempe
37 www.ahipreit.com info@ahipreit.com (604)630-3134 800-925 West Georgia Street Vancouver, BC V6C 3L2Canada