Investor Presentation
TSX: HOT.UN (CAD$) TSX: HOT.U (US$) TSX: HOT.DB.U (Debentures)
May 2019 (Q1 2019 Information)
Investor Presentation TSX: HOT.UN (CAD$) TSX: HOT.U (US$) - - PowerPoint PPT Presentation
Investor Presentation TSX: HOT.UN (CAD$) TSX: HOT.U (US$) TSX: HOT.DB.U (Debentures) May 2019 (Q1 2019 Information) Forwardlookingstatements This corporate update is a summary and should be read together with the more detailed
TSX: HOT.UN (CAD$) TSX: HOT.U (US$) TSX: HOT.DB.U (Debentures)
May 2019 (Q1 2019 Information)
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 May 9, 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: Embassy Suites DFW South (Irving, 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 chains, 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 (ie. business parks, sports arenas, medical centres) ▪ In addition, AHIP’s Economy Lodging portfolio caters to the lodging needs of railway crews along major rail lines and smaller tertiary markets
Properties were purchased below replacement cost, with an average trailing 8% cap rate using long-term fixed-rate debt that averages 4.64%.
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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
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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 78,204,277 (diluted weighted average unit outstanding) Convertible Debentures HOT.DB.U (5.0% interest paid semi-annually in USD) Market Cap C$528 million (As at May 9, 2019) Enterprise Value
Debt to Gross Book Value 53.8% Monthly USD cash distribution USD$0.054 FFO Payout Ratio
(Rolling 4-quarters, as at Q1 2019)
90.7% Consensus FFO 2019 Payout Ratio: 86.4% Target FFO Run-rate Payout Ratio
All information as of March31, 2019 unless otherwise noted. Consensus estimate = average of all nine analysts covering AHIP
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Courtyard Wall Township, New Jersey
Shift to higher-quality, premium branded hotels
branded, select-service hotels in secondary markets (U.S. cities
benefit from multiple demand generators
Capital Recycling
longer meet our long-term strategy
premium branded portfolio 8
Focused Asset Management
team continuously evaluates hotel performance and market positioning, to ensure our new 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 stock appreciation. Key to achieving this are three core activities:
AHIP has strategically grown its portfolio since its IPO with a focus on:
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HOTEL PORTFOLIO EVOLUTION Portfolio composition (by NOI) RevPAR
$46.15¹ $73.29
ADR
$56.08¹ $96.43
Portfolio size
32 hotels / 2,565 rooms 112 hotels / 11,523 rooms
Average # of rooms per hotels
80 103
Average value per hotel
$4.0 million $12.5 million
For period: IPO to Dec. 31, 2013 Year ended Dec. 31, 2018
¹ As disclosed at IPO
Premium Branded Economy Lodging (ie. “Rail hotels”)
100% Economy Lodging 79.9% 20.1%
generated through Premium Branded hotels
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World-class brand partners with global distribution, effective brand segmentation, guest loyalty programs and premier system standards
67 Premium Branded hotels; 7,684 guestrooms 45 Economy Lodging hotels; 3,840 guestrooms
AHIP rebranded all Economy Lodging Hotels under various Wyndham hotel brands, to drive increased brand awareness and transient (non-rail crew) guest traffic
Consistent with AHIP’s investment strategy, all properties are strategically located within or near: ▪ Larger population centers ▪ Transportation corridors ▪ Demand generators
112 hotels in 89 cities totaling 11,524 guestrooms
Economy Lodging Hotels Premium Branded Hotels
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SOLD:
Ravenna, NE, Economy Lodging Hotel May 14, 2018
Selling hotels that no longer fit our long-term strategy; Using capital to reinvest in other properties
SOLD:
Livonia (West), LA, Economy Lodging Hotel August 23, 2018
(Our Livonia East property continues to serve our guests)
SOLD:
Comfort, WV, Economy Lodging Hotel
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Continuous review and oversight of each hotel property ensures our properties as best positioned as possible
assigned a collection of properties to monitor, forecast and continuously review
determine what is working well or not working
performance and benchmark them for other properties, while also ensuring activities that hurt hotel performance are quickly dealt with
Modeling and forecasting returns from hotel renovations (PIPs) help us best allocate capital
PIP requirements to ensure we allocate our capital in a way that generates the highest returns, while meeting our hotel brand standards. AHIP’s asset management team is responsible for overseeing
through shared resources, group buying, productivity
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On April 26, 2018, Aimbridge Hospitality assumed all hotel management responsibilities
many of the brands AHIP operates hotels under
Benefitsof working with a large hotel manager: One of the largest independent U.S. hotel management companies
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Embassy Suites Cincinnati – Lobby Renovation
28.6% 30.2% 29.6% 27.7%
0.0% 10.0% 20.0% 30.0% 40.0%
Seasonality to the EBITDA Margin
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Hotels REITs are more seasonal than other real estate sectors AHIP is best reviewed and evaluated on an annual basis to account for seasonal changes
(due to stable monthly distributions and seasonally affected FFO)
77.5% 72.9% 77.6% 91.2%
0% 25% 50% 75% 100% 125%
Seasonality to the FFO Payout Ratio
PEAKS
* EBITDA margin including IFRIC 21 adjustment
VALLEYS
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* Trailing 12 month metrics are based on performance as reported at each quarter end
$154.4 $164.8 $168.9 $173.5 $195.1 $220.0 $265.8 $303.7 $323.1 $343.5 $341.2 $338.6 $338.0 50 100 150 200 250 300 350 400 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
TTM Revenue (USD$ millions)
$30.9 $33.8 $34.9 $36.6 $41.0 $45.0 $54.3 $58.6 $58.3 $61.9 $58.9 $55.5 $55.6 10 20 30 40 50 60 70 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
TTM FFO (USD$ 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 $94.3 20 40 60 80 100 120 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
TTM EBITDA (USD$ millions)
0.80 0.72 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 Q1 2018 Q1 2019
TTM FFO PER UNIT
(USD$)
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ANNUAL RESULTS 2017
12 months ended December 31, 2017
2018
12 months ended December 31, 2018 TTM Q1 2019 12 months ended March 31, 2019
Number of Guestrooms
11,708 11,523 11,524
Revenue (‘000)
$303,710 $338,561 338,026
EBITDA (‘000)
$89,761 $93,839 $94,344
EBITDA Margin
29.6% 27.7% 27.9%
FFO per diluted unit
$0.82 $0.70 $0.72
Debt/Gross Book Value
53.9% 53.6% 53.8%
WA Loan Interest Rate
4.61% 4.65% 4.64%
WA Loan Term
7.6 years 6.4 years 6.2 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 demonstrate a growing hotel sector
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¹ STR Forecasts provided April 25, 2019 for total United States hotel sector
STR Forecasts for U.S. hotel sector1
Metric 2019 Forecast 2020 Forecast Supply 1.9% 1.9% Demand 1.9% 1.7% Occupancy 0.0%
ADR 2.3% 2.2% RevPAR 2.3% 1.9%
STR Forecasts for 2019 by Chain Scale
Chain Scale Occupancy
(% chg)
ADR
(% chg)
RevPAR
(% chg)
Upper Upscale
2.2% 2.2% Upscale
1.9% 1.8% Upper Midscale
1.8% 1.7% Midscale 0.1% 1.9% 2.0% Economy
2.1% 2.0%
(For relevant chain scales that AHIP owns; luxury and Independent segments not shown)
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Guestroom rates can change daily, 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 more variable expenses compared to other real estate sectors
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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
▪ 97% of AHIP’s debt is fixed rate ▪ AHIP has an average term remaining on its debt of 6.4 years, and a weighted average loan face interest rate of 4.64% ▪ No significant debt maturities until June 2022
$0 $50 $100 $150 $200 $250 2019 2020 2021 2022 2023 2024 2025 2026 2027
DEBT MATURITY LADDER (USD$ millions)
Mortgages Convertible Debentures
Hilton Garden Inn White Marsh
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Residence Inn, Ocala, Florida
Driving RevPAR (Revenue per available room) growth through:
▪
Revenue management (yield management)
▪
Hotel upgrades and renovations (PIP projects)
▪
Enhanced marketing and distribution (through brand partners such as Wyndham Hotel Group)
▪
Strong market position within our hotel markets, with an average RevPAR index of more than 100% of our fair market share (Q1 2019: 129.0, with 100 representing ‘fair share’)
Investing in our hotels to make them best in class and drive higher market share and demand
▪
were completed during 2018 for Premium branded hotels
▪
During 2019, AHIP expects to invest $25 million of capital in 10 additional Premium Branded hotel renovations
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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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
▪
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:
1. 2.
3.
Prior to Renovations:
1. 2.
BEFORE AFTER
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Concept for Renovated:
1. 2.
3.
BEFORE:
1. 2.
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 leaderof multiplemajor property launches,turnarounds,andre-positioninginitiatives ▪ 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.)
Executive team has nearly 80 years of collective real estate investing experience
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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. (Expect less hotel disruption and displacement in 2019 than in 2018 due to the kinds of renovations occurring and the layout of these hotels).
Actively reviewing Capital Recycling opportunities Growing our internal asset management team with appointment of SVP, Asset Management & COO
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 X Resid idenc nce Inn Chattanooga nooga (87 guestrooms) X X Homewood ewood Suites Allen entown
X X Homewood ewood Suites Bethle hlehem hem (108 guestrooms) X X Homewood ewood Suites Dover ver (108 guestrooms) 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 X Embassy y Suit ites es Clev evela eland nd (271 guestrooms) X X X Townep epla laceSuit ites es Chattanoog nooga (87 guestrooms) X
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:
34 Four hotels were acquired in North Carolina and Georgia in July 2014 for a purchase price of US$30.5 million and US$1.9 million of PIPs & reserve
NC & GA ACQUISITION: PIPS AND PERFORMANCE (Capex in ‘000)
(Market share measure in region of hotel. 100 = ‘fair share’ of market)
usually involves higher levels of renovations = temporary impact on ANOI (displacement, construction)
from the upgrades (increased market share and ANOI)
Fairfield Inn & Suites (Kingsland, GA)
$927 $249 $546 $187 $574
37% 7% 8%
0% 10% 20% 30% 40% 50% $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2015 2016 2017 2018 4-yr Annual Average Capex ANOI per key - Annual Growth 108 111 114 114 100 102 104 106 108 110 112 114 116 2015 2016 2017 2018
35 www.ahipreit.com info@ahipreit.com (604)630-3134 800-925 West Georgia Street Vancouver, BC V6C 3L2Canada