HOT.U American Hotel Income Properties REIT LP

American Hotel Income Properties REIT LP (“AHIP”, or the “Company”) (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB. V), today announced its financial results for the three months ended March 31, 2024.

All amounts presented in this news release are in United States dollars (“U.S. dollars”) unless otherwise indicated.

2024 FIRST QUARTER HIGHLIGHTS

• Diluted FFO per unit (1) and normalized diluted FFO per unit (1) were $0.03 and $0.02, respectively, for the first quarter of 2024, compared to $0.11 and $0.07 for the same period of 2023.
• Occupancy (1) was 66.4% for the first quarter of 2024, an increase of 230 basis points (“bps”) compared to 64.1% for the same period of 2023.
• ADR (1) decreased 0.8% to $131 for the first quarter of 2024, compared to $132 for the same period of 2023.
• Revenue increased 1.6% to $66.5 million for the first quarter of 2024, compared to $65.5 million for the same period in 2023.
• NOI and normalized NOI (1) were $17.2 million and $17.3 million, respectively, for the first quarter of 2024, decreases of 8.0% and 12.2%, respectively, compared to $18.7 million and $19.7 million for the same period in 2023.
• AHIP had $25.5 million in available liquidity as at March 31, 2024, compared to $27.8 million as at December 31, 2023. The available liquidity of $25.5 million was comprised of an unrestricted cash balance of $15.5 million and borrowing availability of $10.0 million under the revolving credit facility.

“AHIP’s portfolio of premium branded select service hotel properties continued to demonstrate strong demand metrics in 2024.” said Jonathan Korol, CEO. “Portfolio RevPAR and occupancy increased by 2.4% and 230 bps respectively compared to Q1 2023. Excluding hotels with disrupted operations in the first quarter of 2023, RevPAR decreased by 1.6% compared to the same period in the prior year. Preliminary results for April show an improvement with an increase in RevPAR of approximately 5% excluding hotels with disrupted operations in 2023. Costs related to macroeconomic conditions remain elevated, with higher insurance premiums and elevated labor and operating costs resulting in pressures to hotel operating margins.”

Mr. Korol added: “AHIP’s Board and management team are taking a number of actions across the business in recent quarters to preserve cash, enhance financial stability and protect long term value for our unitholders. As previously disclosed, these actions include the recently completed, amendment and extension of our revolving credit facility, reduction and deferral of hotel management fees, and temporary suspension of the distribution. In 2024, we are currently executing a plan to address 2024 debt obligations with asset sales and loan refinancings. These steps are expected to strengthen our liquidity and balance sheet to ensure we are positioned to benefit when the industry operating and macroeconomic environment improves. We will continue to monitor conditions and operating performance, while considering further strategic opportunities to deliver value over the long term.”

2024 FIRST QUARTER REVIEW

FINANCIAL AND OPERATIONAL HIGHLIGHTS

For the three months ended March 31, 2024, occupancy increased 230 bps to 66.4%, compared to the same period in the prior year. The increase in occupancy was partially offset by a slight decrease of 0.8% in ADR. Overall, improved occupancy resulted in an increase of 2.4% in RevPAR, compared to the same period in 2023.

The improved RevPAR is attributable to higher demand for the extended stay and select service properties. This is primarily due to improved performance of properties disrupted in 2023 by the weather-related damage and renovation at three hotels, as well as the disposition of properties with lower-than-average portfolio RevPAR. Excluding the hotels disrupted in the first quarter of 2023 and properties sold since the first quarter of 2023, ADR and occupancy decreased by less than 1.0%, and RevPAR decreased by 1.6%, compared to the same period in the prior year.

The ability to control and manage daily rates is a key advantage of the lodging sector, which has enabled AHIP to achieve growth in RevPAR, partially mitigating the effects of rising labor costs and general inflationary pressures across the portfolio.

NOI, NOI MARGIN (1) AND DILUTED FFO PER UNIT (1)

NOI and normalized NOI (1) were $17.2 million and $17.3 million, respectively, for the three months ended March 31, 2024, decreases of 8.0% and 12.2%, respectively, compared to NOI of $18.7 million and normalized NOI of $19.7 million for the same period in 2023. NOI margin was 25.9% in the current quarter, a decrease of 270 bps compared to the same period in 2023. The decreases in NOI and NOI margin were due to higher operating expenses as a result of general cost inflation and higher property insurance premiums. General inflation resulted in increased labor costs and higher costs of operating supplies. The increase in the annual premium for property insurance effective June 1, 2023 is approximately $3.5 million. 

Diluted FFO per unit and normalized diluted FFO per unit (1) were $0.03 and $0.02 for the first quarter of 2024, respectively, compared to diluted FFO per unit of $0.11 and normalized diluted FFO per unit of $0.07 for the same period in 2023. Normalized diluted FFO per unit in the current quarter excluded non-recurring expected insurance proceeds of $1.1 million as a result of weather-related property damage at several hotel properties in late December 2022. The decrease in normalized diluted FFO per unit was due to lower NOI and higher finance costs in the current quarter, compared to the same period in 2023.

LEVERAGE AND LIQUIDITY

KPIs	Q1 2024	Q4 2023	Q3 2023	Q2 2023	Q1 2023
Debt-to-GBV (1)	52.2%	51.9%	51.1%	51.6%	52.0%
Debt-to-TTM EBITDA (1)	10.5x	10.6x	10.1x	9.8x	9.6x

Debt to gross book value as at March 31, 2024 was 52.2%, an increase of 30 bps compared to December 31, 2023. Debt to TTM EBITDA as at March 31, 2024 was 10.5x, an increase of 0.9x compared to March 31, 2023. The increase in Debt to TTM EBITDA was mainly due to the decrease in NOI.

As at March 31, 2024, AHIP had $25.5 million in available liquidity, compared to $27.8 million as at December 31, 2023. The available liquidity of $25.5 million was comprised of an unrestricted cash balance of $15.5 million and borrowing availability of $10.0 million under the revolving credit facility. AHIP has an additional restricted cash balance of $33.5 million as at March 31, 2024.

AHIP has 70.6% of its debt at fixed interest rates following the expiry of the interest rate swaps on its senior credit facility on November 30, 2023. The notional value of the interest rate swaps was $130.0 million which expired on November 30, 2023. As a result of this expiry, at the current average secured overnight financing rate (“SOFR”) of 5.3%, the incremental annual interest expense is estimated to be approximately $5.2 million for the twelve months ended November 30, 2024. The actual increase in interest expense will be dependent on future SOFR.

CAPITAL RECYCLING

In March 2024, AHIP completed the strategic dispositions of non-core hotel properties in Harrisonburg, Virginia and Cranberry Township, Pennsylvania for gross proceeds of $8.55 million and $8.25 million respectively. The combined sales price for these properties represents a blended cap rate of 8.6% on 2023 annual hotel EBITDA, after adjusting for an industry standard 4% furniture, fixtures, and equipment reserve. Under the terms of the revolving credit facility, 50% of the net proceeds from the sale of these two hotel properties, which is approximately $0.8 million, will be used to pay down outstanding amounts under the term loans in the second quarter of 2024.

In March and April 2024, AHIP entered into agreements to dispose of two non-core hotel properties in Amarillo, Texas for $9.3 million and $8.3 million, respectively, subject to customary adjustments at closing. The dispositions are currently expected to close in the third quarter of 2024. AHIP intends to use the proceeds from these dispositions to pay down debt.

AHIP will continue to execute its strategy to divest assets to reduce debt and is currently marketing a selected number of additional properties which are expected to demonstrate value above the current unit trading price.

SAME PROPERTY KPI

The following table summarizes key performance indicators (“KPIs”) for the portfolio for the five most recent quarters with a comparison to the same period in the prior year.

KPIs	Q1 2024	Q4 2023	Q3 2023	Q2 2023	Q1 2023
ADR	$132	$127	$133	$133	$133
Change compared to same period in prior year - % increase/(decrease)	(0.8%)	-	2.7%	5.3%	11.4%
Occupancy	67.3%	66.9%	71.6%	74.4%	66.3%
Change compared to same period in prior year - bps increase/(decrease)	100	(83)	(223)	(5)	53
RevPAR	$89	$85	$95	$99	$88
Change compared to same period in prior year - % increase/(decrease)	1.1%	(1.3%)	(0.4%)	4.5%	12.3%
NOI Margin	26.9%	26.1%	30.5%	33.3%	29.4%
Change compared to same period in prior year - bps decrease	(250)	(514)	(275)	(212)	(19)

Same property ADR in the current quarter is $132, largely consistent with the same period of 2023. Same property occupancy increased by 100 bps to 67.3% in the current quarter compared to 66.3% the same periods in 2023. The increase in occupancy is primarily attributable to higher demand for the extended stay and select service properties.

Same property NOI margin decreased by 250 bps to 26.9% for the first quarter of 2024, compared to the same period in 2023. The decrease in the same property NOI margin was mainly due to higher operating expenses as a result of cost inflation, escalated labor costs, and higher property insurance premiums. The labor environment is improving although labor is expected to remain a challenge in 2024 with increased turnover and hourly wage costs.

SELECTED INFORMATION

		Three months ended March 31
(thousands of dollars, except per Unit amounts)		2024			2023
Revenue		66,489			65,458
Income from operating activities		7,569			9,418
Loss and comprehensive loss		(8,109	)		(1,600		)
NOI		17,190			18,738
NOI Margin (1)		25.9	%		28.6		%
Hotel EBITDA (1)		15,673			16,602
Hotel EBITDA Margin (1)		23.6	%		25.4		%
EBITDA (1)		13,320			14,044
EBITDA Margin (1)		20.0	%		21.5		%
Cashflow from operating activities		43			13,094
Distributions declared per unit - basic and diluted		-			0.045
Distributions declared to unitholders - basic		-			3,546
Distributions declared to unitholders - diluted		-			4,026
Dividends declared to Series C holders		1,099			1,000
FFO diluted (1)		2,334			9,801
FFO per unit - diluted (1)		0.03			0.11
Normalized FFO per unit - diluted (1)		0.02			0.02
AFFO diluted (1)		(668	)		7,081
AFFO per unit - diluted (1)		(0.01	)		0.08
(1) See “Non-IFRS and Other Financial Measures”

SELECTED INFORMATION

(thousands of dollars)		March 31,2024			December 31,2023
Total assets		929,771			954,887
Total liabilities		705,975			721,937
Total non-current liabilities		527,201			529,178
Term loans and revolving credit facility		567,602			599,873
Debt to gross book value (1)		52.2	%		51.9	%
Debt to EBITDA (times) (1)		10.5			10.6
Interest coverage ratio (times) (1)		1.8			1.9
Term loans and revolving credit facility:
Weighted average interest rate		5.79	%		4.95	%
Weighted average term to maturity (years)		2.1			2.2
Number of rooms		7,662			7,917
Number of properties		68			70
Number of restaurants		14			14
(1) See “Non-IFRS and Other Financial Measures”

2024 FIRST QUARTER OPERATING RESULTS

		Three months ended March 31
(thousands of dollars)		2024			2023
ADR (1)		131			132
Occupancy (1)		66.4	%		64.1	%
RevPAR (1)		87			85
Revenue		66,489			65,458
Operating expenses		36,389			35,526
Energy		2,990			3,222
Property maintenance		4,219			3,524
Property taxes, insurance and ground lease before IFRIC 21		5,701			4,448
Total expenses		49,299			46,720
NOI		17,190			18,738
NOI Margin % (1)		25.9	%		28.6	%
IFRIC 21 property taxes adjustment		892			699
Depreciation and amortization		8,729			8,621
Income from operating activities		7,569			9,418
Other expenses		17,411			12,427
Current income tax expense		87			16
Deferred income tax recovery		(1,820	)		(1,425	)
Loss and comprehensive loss		(8,109	)		(1,600	)
(1) See “Non-IFRS and Other Financial Measures”

INITIATIVES TO STRENGTHEN FINANCIAL POSITION AND PRESERVE UNITHOLDER VALUE

The Board of Directors (the “Board”), together with management, have implemented a plan to strengthen AHIP’s financial position and to preserve unitholder value. Initiatives, both planned and underway, are outlined below.

PLAN TO ADDRESS NEAR TERM LOAN MATURITIES

AHIP is in the process of executing its plan to address the Company’s near-term debt maturities in 2024, while creating modest improvements in ADR, RevPAR and leverage metrics.

The commercial mortgage-backed securities (“CMBS”) loan maturities are $22.3 million in the second quarter of 2024, and $58.7 million in the fourth quarter of 2024.

To address the Q2 2024 CMBS loan maturity of $22.3 million, AHIP completed the disposition of one non-core hotel property and refinanced the balance of the loan in March 2024, specifically:

• AHIP completed the strategic disposition of a hotel property in Harrisonburg, Virginia for $8.55 million. The net proceeds were used to partially satisfy the non-recourse mortgage debt; and
• AHIP completed the CMBS refinancing for the remaining three assets secured against this loan with gross proceeds of $17.5 million prior to initial capital reserves contribution of approximately $5.0 million. The term of this new CMBS loan is five years at a fixed annual interest rate of 7.8%.

To address the Q4 2024 CMBS loan maturities of $58.7 million, AHIP intends to dispose of four non-core properties and refinance the balance of the loan, specifically:

• In March and April 2024, AHIP entered into agreements to dispose of two non-core hotel properties in Amarillo, Texas for $9.3 million and $8.3 million, respectively. The dispositions are expected to close in the third quarter of 2024. In addition, AHIP is currently marketing non-core hotel properties in each of Amarillo and Dallas, Texas; and
• AHIP expects to refinance a $24.9 million CMBS loan secured against four hotel properties in Florida and North Carolina before its maturity date in the fourth quarter of 2024.

NORTHEAST PORTFOLIO III CMBS LOAN

During the first quarter of 2024, AHIP notified the loan servicer for the AHIP Northeast Portfolio III CMBS Loan (“Loan Portfolio” or “CMBS Loan”) of an imminent change in circumstances which resulted in the master servicer issuing a notice of default as well as a notice of acceleration and demand for payment on April 19, 2024. AHIP is negotiating a transfer and cooperation agreement with the special servicer, which is expected to result in the consensual transfer of the collateralized hotels by AHIP to the master servicer in the second quarter of 2024. This Loan Portfolio is secured by four hotels: a Fairfield Inn & Suites and a Hampton Inn located in White Marsh, MD, a Homewood Suites located in Egg Harbor Township, NJ and a SpringHill Suites located in Brookhaven, NY (collectively, the “Hotels” or “Assets”). The principal amount of this non-recourse CMBS Loan as of March 31, 2024 was $51.0 million and AHIP is current on principal and interest payments. AHIP expects to cease recognizing revenue and expenses, relating to the Hotels, on the effective date of the transfer and cooperation agreement. The CMBS Loan and Assets will remain on AHIP’s balance sheet until the Hotels have been transferred to or sold by the special servicer.

AMENDMENT OF THE MASTER HOTEL MANAGEMENT AGREEMENT WITH REDUCED AND DEFERRED FEES

On September 30, 2023, with a retroactive effective date of July 1, 2023, AHIP entered into a third amendment to its master hotel management agreement with One Lodging Management LLC (an affiliate of Aimbridge Hospitality LLC) (the “Amendment”), with an estimated annual savings for the first three years following the amendment of approximately $3.7 million.

In accordance with the Amendment, the management fee on certain hotel properties has been reduced or deferred. The reduction of management fees is estimated to provide approximately $0.3 million of cash savings per annum, and the deferral of management fees is estimated to provide approximately $3.4 million of cash savings on average per annum from July 1, 2023 to June 30, 2026. The fees in the years 2027 through 2032 will be slightly higher to offset the fee deferral in the first three years. The cash savings in the first quarter of 2024 were $0.8 million, and the cumulative savings since the effective date of the Amendment were $3.0 million.

For further details, see a copy of the amendment to the master hotel management agreement, which has been filed under AHIP’s profile on SEDAR+ at www.sedarplus.com.

TEMPORARY SUSPENSION OF U.S. DOLLAR DISTRIBUTION

From February 2022 to October 2023, AHIP’s distribution policy provided for the payment of regular monthly U.S. dollar distributions at an annual rate of $0.18 per unit (monthly rate of $0.015 per unit). On November 7, 2023, AHIP announced a temporary suspension of monthly distributions. The Board and management made this decision based on the considerations of recent and forecast operating results, industry and economic conditions, interest rates for debt refinancing, the general financing environment, and future compliance with the adjusted FFO payout ratio covenant in the Sixth Amendment.

The amendment of the distribution policy reduces cash payments by $14.2 million annually, which improves AHIP’s balance sheet and liquidity, supporting the long-term enhancement of unitholder value. The Board and management will continue to review AHIP’s distribution policy on a quarterly basis.

FINANCIAL INFORMATION

This news release should be read in conjunction with AHIP’s unaudited condensed consolidated interim financial statements, and management’s discussion and analysis for the three months ended March 31, 2024 and 2023, that are available on AHIP’s website at www.ahipreit.com, and under AHIP’s profile on SEDAR+ at www.sedarplus.com.

Q1 2024 CONFERENCE CALL

Management will host a webcast and conference call at 8:00 a.m. Pacific time on Wednesday, May 8, 2024, to discuss the financial and operational results for the three months ended March 31, 2024 and 2023.

To participate in the conference call, participants should register online via AHIP’s website. A dial-in and unique PIN will be provided to join the call. Participants are requested to register a minimum of 15 minutes before the start of the call. An audio webcast of the conference call may be accessed on AHIP’s website at www.ahipreit.com.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

American Hotel Income Properties REIT LP (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.V), or AHIP, is a limited partnership formed to invest in hotel real estate properties across the United States. AHIP’s portfolio of 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 and Choice Hotels through license agreements. AHIP’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.

NON-IFRS AND OTHER FINANCIAL MEASURES

Management believes the following non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures are relevant measures to monitor and evaluate AHIP’s financial and operating performance. These measures and ratios do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures and ratios are included to provide investors and management additional information and alternative methods for assessing AHIP’s financial and operating results and should not be considered in isolation or as a substitute for performance measures prepared in accordance with IFRS.

NON-IFRS FINANCIAL MEASURES:

FFO: FFO measures operating performance and is calculated in accordance with Real Property Association of Canada’s (“REALPAC”) definition. FFO – basic is calculated by adjusting loss and comprehensive income (loss) for depreciation and amortization, gain or loss on disposal of property, IFRIC 21 property taxes, fair value gain or loss, impairment of property, deferred income tax, and other applicable items. FFO – diluted is calculated as FFO – basic plus the interest, accretion, and amortization on convertible debentures if convertible debentures are dilutive. The most comparable IFRS measure to FFO is income (loss) and comprehensive income (loss), for which a reconciliation is provided in this news release.

AFFO: AFFO is defined as a recurring economic earnings measure and calculated in accordance with REALPAC’s definition. AFFO – basic is calculated as FFO – basic less maintenance capital expenditures. AFFO – diluted is calculated as FFO – diluted less maintenance capital expenditures. The most comparable IFRS measure to AFFO is income (loss) and comprehensive income (loss), for which a reconciliation is provided in this news release.

Normalized FFO: calculated as FFO adjusting for non-recurring items. For the three months ended March 31, 2024 and 2023, normalized FFO is calculated as FFO excluding the non-recurring insurance proceeds of $1.1 million and $3.3 million, respectively, for property damage claims related to the weather-related damage at several hotel properties in late December 2022. The most comparable IFRS measure to normalized FFO is income (loss) and comprehensive income (loss), for which a reconciliation is provided in this news release.

Normalized NOI: calculated as NOI adjusting for non-recurring items. For the three months ended March 31, 2024 and 2023, normalized NOI included the non-recurring insurance proceeds of $0.1 million and $1.0 million, respectively, for business interruption claims related to the weather-related damage at several hotel properties in late December 2022. The most comparable IFRS measure to normalized NOI is NOI, for which a reconciliation is provided in this news release.

Hotel EBITDA: calculated by adjusting NOI for management fees for hotel. The most comparable IFRS measure to hotel EBITDA is NOI, for which a reconciliation is provided in this news release.

EBITDA: calculated by adjusting NOI for management fees for hotel and general administrative expenses. The sum of management fees for hotel and general administrative expenses is equal to corporate and administrative expenses in the Financial Statements. The most comparable IFRS measure to EBITDA is NOI, for which a reconciliation is provided in this news release.

Debt: calculated as the sum of term loans and revolving credit facility, the face value of convertible debentures, unamortized portion of debt financing costs, lease liabilities and unamortized portion of mark-to-market adjustments. The most comparable IFRS measure to debt is total liabilities, for which a reconciliation is provided in this news release.

Gross book value: calculated as the sum of total assets, accumulated depreciation and impairment on property, buildings and equipment, and accumulated amortization on intangible assets. The most comparable IFRS measure to gross book value is total assets, for which a reconciliation is provided in this news release.

Interest expense: calculated by adjusting finance costs for gain/loss on debt settlement, amortization of debt financing costs, accretion of debenture liability, amortization of debenture costs, dividends on series B preferred shares and amortization of mark-to-market adjustments, accretion of management fee because interest expense excludes certain non-cash accounting items and dividends on preferred shares. The most comparable IFRS measure to interest expense is finance costs, for which a reconciliation is provided in this news release.

NON-IFRS RATIOS:

FFO per unit – basic/diluted: calculated as FFO – basic/diluted divided by weighted average number of units outstanding - basic/diluted respectively for the reporting periods.

Normalized FFO per unit – basic/diluted: calculated as normalized FFO – basic/diluted divided by weighted average number of units outstanding - basic/diluted respectively for the reporting periods.

AFFO per unit – basic/diluted: calculated as AFFO – basic/diluted divided by weighted average number of units outstanding - basic/diluted respectively for the reporting periods.

NOI margin: calculated as NOI divided by total revenue.

Hotel EBITDA margin: calculated as hotel EBITDA divided by total revenue.

EBITDA margin: calculated as EBITDA divided by total revenue.

CAPITAL MANAGEMENT MEASURES:

Debt to gross book value: calculated as debt divided by gross book value. Debt to gross book value is a primary measure of capital management and leverage.

Debt to EBITDA: calculated as debt divided by the trailing twelve months of EBITDA. Debt to EBITDA measures the amount of income generated and available to pay down debt before covering interest, taxes, depreciation, and amortization expenses.

Interest coverage ratio: calculated as EBITDA divided by interest expense for the trailing twelve months. The interest coverage ratio is a measure of AHIP’s ability to service the interest requirements of its outstanding debt.

SUPPLEMENTARY FINANCIAL MEASURES:

Occupancy is a major driver of room revenue as well as food and beverage revenues. Fluctuations in occupancy are accompanied by fluctuations in most categories of variable hotel operating expenses, including housekeeping and other labor costs. ADR also helps to drive room revenue with limited impact on other revenues. Fluctuations in ADR are accompanied by fluctuations in limited categories of hotel operating expenses, such as franchise fees and credit card commissions, since variable hotel operating expenses, such as labor costs, generally do not increase or decrease correspondingly. Thus, increases in RevPAR attributable to increases in occupancy typically reduce EBITDA and EBITDA margins, while increases in RevPAR attributable to increases in ADR typically result in increases in EBITDA and EBITDA margins.

Occupancy: calculated as total number of hotel rooms sold divided by total number of rooms available for the reporting periods. Occupancy is a metric commonly used in the hotel industry to measure the utilization of hotels’ available capacity.

Average daily rate (“ADR”): calculated as total room revenue divided by total number of rooms sold for the reporting periods. ADR is a metric commonly used in the hotel industry to indicate the average revenue earned per occupied room in a given time period.

Revenue per available room (“RevPAR”): calculated as occupancy multiplied by ADR for the reporting periods.

Same property occupancy, ADR, RevPAR, revenue, expense, NOI and NOI margin: measured for properties owned by AHIP for both the current reporting periods and the same periods in 2023. In Q1 2023 and Q2 2023, the same property ADR, occupancy, RevPAR and NOI margin calculations excluded three hotel properties, which is comprised of one hotel in respect of which AHIP is in a managed foreclosure process as of March 31, 2024, as well as the Residence Inn Neptune and Courtyard Wall in New Jersey as these two hotels had limited availability due to remediation and rebuilding after the weather-related damage in late December 2022. In Q1 2024, the same property ADR, occupancy, RevPAR and NOI margin calculations excluded the same three hotel properties mentioned in the immediately preceding sentence for comparison purposes. In Q3 2023 and Q4 2023, the same property ADR, occupancy, RevPAR and NOI margin calculations excluded one hotel in respect of which AHIP is in a managed foreclosure process as of March 31, 2024.

NON-IFRS RECONCILIATION

The following table reconciles FFO to income (loss) and comprehensive income (loss), the most comparable IFRS measure as presented in the financial statements:

	Three months ended March 31
(thousands of dollars, except per unit amounts)	2024			2023
Loss and comprehensive loss	(8,109	)		(1,600	)
Adjustments:
Income attributable to non-controlling interest	(1,099	)		(1,000	)
Depreciation and amortization	8,729			8,621
Write-off of property, building and equipment	-			3,892
Gain on sale of properties	(242	)		-
IFRIC 21 property taxes adjustment	892			699
Change in fair value of interest rate swap contracts	-			1,091
Change in fair value of warrants	(120	)		(1,570	)
Impairment of cash-generating units	4,103			-
Deferred income tax recovery	(1,820	)		(1,425	)
FFO basic (1)	2,334			8,708
Interest, accretion and amortization on convertible debentures	-			1,093
FFO diluted (1)	2,334			9,801
FFO per unit – basic (1)	0.03			0.11
FFO per unit – diluted (1)	0.03			0.11
Non-recurring items:
Other income	(1,102	)		(3,342	)
Measurements excluding non-recurring items:
Normalized FFO diluted (1)	1,232			6,459
Normalized FFO per unit – diluted (1)	0.02			0.07
Weighted average number of units outstanding:
Basic (000’s)	79,045			78,800
Diluted (000’s) (2)	79,930			89,466

(1)

See “Non-IFRS and Other Financial Measures”.

(2)

The calculation of FFO diluted, FFO per unit – diluted, normalized FFO diluted, normalized FFO per unit – diluted, weighted average number of units outstanding - diluted for the three months ended March 31, 2024, excluded the convertible debentures because they were anti-dilutive. The calculation of FFO diluted, FFO per unit – diluted, normalized FFO diluted, normalized FFO per unit – diluted, weighted average number of units outstanding - diluted for the three ended March 31, 2023, included the convertible debentures because they were dilutive.

RECONCILIATION OF FFO TO AFFO

	Three months ended March 31
(thousands of dollars, except per Unit amounts)	2024			2023
FFO basic (1)	2,334			8,708
FFO diluted (1)	2,334			9,801
Maintenance capital expenditures	(3,002	)		(2,720	)
AFFO basic (1)	(668	)		5,988
AFFO diluted (1)	(668	)		7,081
AFFO per unit - basic (1)	(0.01	)		0.08
AFFO per unit - diluted (1)	(0.01	)		0.08
Measurements excluding non-recurring items:
AFFO diluted (1)	(1,770	)		3,739
AFFO per unit - diluted (1)	(0.02	)		0.04

(1)	See “Non-IFRS and Other Financial Measures”

DEBT TO GROSS BOOK VALUE

(thousands of dollars)		March 31, 2024			December 31, 2023
Debt		675,014			688,585
Gross Book Value		1,292,654			1,326,070
Debt-to-Gross Book Value		52.2	%		51.9	%
(thousands of dollars)		March 31, 2024			December 31, 2023
Term loans and revolving credit facility		620,074			633,298
2026 Debentures (at face value)		50,000			50,000
Unamortized portion of debt financing costs		3,764			4,065
Lease liabilities		1,188			1,239
Unamortized portion of mark-to-market adjustments		(12	)		(17	)
Debt		675,014			688,585
(thousands of dollars)		March 31, 2024			December 31, 2023
Total Assets		929,771			954,887
Accumulated depreciation and impairment		357,465			365,970
on property, buildings and equipment
Accumulated amortization on intangible assets		5,418			5,213
Gross Book Value		1,292,654			1,326,070

DEBT TO EBITDA

(thousands of dollars)	March 31, 2024			December 31, 2023
Debt	675,014			688,585
EBITDA (trailing twelve months)	64,008			64,732
Debt-to-EBITDA (times)	10.5x			10.6x

INTEREST COVERAGE RATIO

(thousands of dollars)	March 31, 2024			December 31, 2023
EBITDA (trailing twelve months)	64,008			64,732
Interest Expense (trailing twelve months)	35,774			33,725
Interest Coverage Ratio (times)	1.8x			1.9x

The reconciliation of NOI to hotel EBITDA and EBITDA is shown below:

	Three months ended March 31
(thousands of dollars)	2024			2023
NOI	17,190			18,738
Management fees	(1,517	)		(2,136		)
Hotel EBITDA	15,673			16,602
General administrative expenses	(2,353	)		(2,558		)
EBITDA	13,320			14,044

The reconciliation of NOI to normalized NOI is shown below:

	Three months ended March 31
(thousands of dollars)	2024			2023
NOI	17,190			18,738
Business interruption insurance proceeds	92			1,000
Normalized NOI	17,282			19,738

The reconciliation of finance costs to interest expense is shown below:

	Three months ended March 31
(thousands of dollars)	2024			2023
Finance costs	11,048			8,692
Loss on debt settlement	(11	)		-
Amortization of debt financing costs	(665	)		(355	)
Accretion of Debenture liability	(263	)		(242	)
Amortization of Debenture costs	(113	)		(100	)
Dividends on Series B preferred shares	-			(21	)
Interest Expense	9,996			7,974

For information on the most directly comparable IFRS measures, composition of the measures, a description of how AHIP uses these measures, and an explanation of how these measures provide useful information to investors, please refer to AHIP’s management discussion and analysis for the three months ended March 31, 2024 and 2023, available on AHIP’s website at www.ahipreit.com, and under AHIP’s profile on SEDAR+ at www.sedarplus.com.

FORWARD-LOOKING INFORMATION

Certain statements in this news release may constitute “forward-looking information” and “financial outlook” within the meaning of applicable securities laws. Forward-looking information and financial outlook generally can be identified by words such as “anticipate”, “believe”, “continue”, “expect”, “estimates”, “intend”, “may”, “outlook”, “objective”, “plans”, “should”, “will” and similar expressions suggesting future outcomes or events. Forward-looking information and financial outlook include, but are not limited to, statements made or implied relating to the objectives of AHIP, AHIP’s strategies to achieve those objectives and AHIP’s beliefs, plans, estimates, projections and intentions and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. Forward-looking information and financial outlook in this news release includes, but is not limited to, statements with respect to: AHIP management’s expectation as to the impacts on AHIP’s business of the seasonal nature of the lodging industry, inflation (including on labor and materials costs), competition, overall economic cycles, weather conditions; AHIP’s expectations with respect to the timing and amount of insurance proceeds for weather related damage and lost income in respect of four properties; AHIP’s leverage and liquidity strategies and goals; AHIP’s expectations with respect to the performance of its hotel portfolio, including specific segments thereof; AHIP’s expectations with respect to inflation, labor supply, labor costs, interest rates, consumer spending, new hotel construction and other market financial and macroeconomic conditions in 2024 and beyond and the expected impacts thereof on AHIP’s financial position and performance, including on ADR, occupancy, RevPAR, NOI, NOI margins and cash flows; AHIP’s strategic initiatives and the intended outcomes thereof, including improved liquidity, addressing near-term debt maturities and providing AHIP with financial stability and protecting long-term value for unitholders; AHIP’s expectations with respect to the macroeconomic and operating environment, including certain specific expectations for the 2024 fiscal year; AHIP continuing to execute its strategy to divest assets and reduce debt; AHIP’s planned property dispositions, including the expected terms and timing thereof and the financial impact thereof on AHIP and AHIP’s expectation that the sale of such properties will demonstrate value above the current unit trading price; AHIP’s expectation that it will enter into a cooperation and transfer agreement with the special servicer for the AHIP Northeast Portfolio III CMBS Loan and will transfer the Hotels secured thereby to the special loan servicer in Q2 2024, and the expected impact thereof on AHIP’s financial position;; AHIP’s intended strategies for near-term debt maturities, including planned sales of assets and loan refinancing; the possibility that AHIP may utilize non-recourse foreclosure processes where loan value at maturity is greater than the ability to refinance the loan and market value of the hotel; AHIP’s expectations as to the financial impact of the expired of interest rate swaps for certain term loans, which will be dependent on SOFR; the estimated savings as a result of reductions and deferrals of management fees under the master hotel management agreement as well as increased fees in certain future years when deferred fees become payable; the estimated savings from the temporary suspension of cash distributions and expectation that such amendment to the distribution policy will strengthen AHIP’s balance sheet and liquidity and support long-term enhancement of unitholder value; the statement that the Board and management will continue to review AHIP’s distribution policy on a quarterly basis; and AHIP’s stated long-term objectives.

Although the forward-looking information and financial outlook contained in this news release are 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 based on a number of key expectations and assumptions made by AHIP, including, without limitation: inflation, labor shortages, and supply chain disruptions will negatively impact the U.S. economy, U.S. hotel industry and AHIP’s business; AHIP will continue to have sufficient funds to meet its financial obligations; AHIP will be able generate sufficient funds to meet any paydown obligations under the new LTV covenants set forth in the Sixth Amendment; AHIP’s strategies with respect to completion of capital projects, liquidity, addressing near-term debt maturities, divestiture of non-core assets and acquisitions will be successful and achieve their intended effects; estimated savings from the amendment to the master hotel management agreement are based on assumptions about future hotel revenues and certain expenses; capital projects will be completed on time and on budget; AHIP will complete its currently planned divestitures and loan refinancings on the terms currently contemplated and in accordance with the timing currently contemplated; AHIP will enter into a cooperation and transfer agreement with the special servicer for the AHIP Northeast Portfolio III CMBS Loan and will transfer the Hotels secured thereby to the special loan servicer in Q2 2024, and impact thereof on AHIP’s financial position will be consistent with management’s expectations, and such transactions will be completed on a non-recourse basis; AHIP will receive insurance proceeds in an amount consistent with AHIP’s estimates in respect of its weather-damaged properties; AHIP will continue to have good relationships with its hotel brand partners; capital markets will provide AHIP with readily available access to equity and/or debt financing on terms acceptable to AHIP, including the ability to refinance maturing debt as it becomes due on terms acceptable to AHIP; AHIP’s future level of indebtedness and its future growth potential will remain consistent with AHIP’s current expectations; the useful lives and replacement cost of AHIP’s assets being consistent with management’s estimates thereof; AHIP will be able to successfully integrate properties acquired into its portfolio, if any; the U.S. REIT will continue to qualify as a real estate investment trust for U.S. federal income tax purposes; the impact of the current economic climate and the current global financial conditions on AHIP’s operations, including AHIP’s financing capability and asset value, will remain consistent with AHIP’s current expectations; there will be no material changes to tax laws, government and environmental regulations adversely affecting AHIP’s operations, financing capability, structure or distributions; conditions in the international and, in particular, the U.S. hotel and lodging industry, including competition for acquisitions, will be consistent with the current economic climate; and AHIP will achieve its long term objectives.

Forward-looking information and financial outlook involve significant risks and uncertainties and should not be read as guarantees of future performance or results as actual results may differ materially from those expressed or implied in such forward-looking information and financial outlook, accordingly undue reliance should not be placed on such forward-looking information or financial outlook. Those risks and uncertainties include, among other things, risks related to: AHIP may not achieve its expected performance levels in 2024 and beyond; inflation, labor shortages, supply chain disruptions; AHIP’s insurance claims with respect to its weather damaged properties may be denied in whole or in part; AHIP’s brand partners may impose revised service standards and capital requirements which are adverse to AHIP; PIP renovations may not commence or complete in accordance with currently expected timing and may suffer from increased material costs; AHIP’s strategic initiatives with respect to liquidity, addressing near-term debt maturities and providing AHIP with financial stability may not be successful and may not achieve their intended outcomes; AHIP’s strategies for divesting assets to reduce debt may not be successful; AHIP may not complete its currently planned divestures and loan refinancings on the terms currently contemplated or in accordance with the timing currently contemplated, or at all; AHIP’s planned dispositions, once completed, may not demonstrate value above the current unit trading price; savings from the amendments to the master hotel management agreement may be less than expected; AHIP may not be successful in reducing its leverage; 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 suspension of monthly distributions is expected to negatively impact the market price of AHIP’s Units and debentures; AHIP may not be able to refinance debt obligations as they become due or may do so on terms less favorable to AHIP than under AHIP’s existing loan agreements; AHIP has not replaced its interest rate swaps, which is expected to create continued increased interest expense; AHIP may not enter into a cooperation and transfer agreement with the special servicer for the AHIP Northeast Portfolio III CMBS Loan on the terms currently contemplated or in accordance with the timing currently contemplated, or at all, and the financial impact of such transactions, if completed, may not be consistent with management’s expectations, and such transactions may not be able to be completed on a non-recourse basis; the actual financial impact on AHIP of entering into an agreement with the special servicer for the Loan Portfolio to transfer control of such portfolio to a receiver, including on AHIP’s financial position, cashflows, NOI and capital expenditure obligations, and anticipated timing of the completion of the underlying transactions may not be consistent with management’s expectations and such transactions may not complete in accordance with the expected timing; general economic conditions and consumer confidence; the growth in the U.S. hotel and lodging industry; prices for the Units and debentures; liquidity; tax risks; ability to access debt and capital markets; financing risks; changes in interest rates; the financial condition of, and AHIP’s relationships with, its external hotel manager and franchisors; real property risks, including environmental risks; the degree and nature of competition; ability to acquire accretive hotel investments; ability to integrate new hotels; environmental matters; and changes in legislation. Additional information about risks and uncertainties is contained in this new release and in AHIP’s most recently filed AIF, a copy of which is available on SEDAR+ at www.sedarplus.com.

To the extent any forward-looking information constitutes a “financial outlook” within the meaning of applicable securities laws, such information is being provided to investors to assist in their understanding of: expected proceeds of insurance in respect of AHIP’s weather-damaged properties; estimated potential cash savings from the amendment to the master hotel management agreement and temporary suspension of distributions; the estimated financial impact on AHIP of increased insurance premiums; the estimated financial impact on AHIP of increased interest costs associated with the expiry of interest swaps for certain term loans and the refinancing of certain loans; and management’s expectations for certain aspects of AHIP’s financial performance for the remainder of 2024.

The forward-looking information and financial outlook contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information and financial outlook reflect management's current beliefs and are based on information currently available to AHIP. The forward-looking information and financial outlook are made 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.

For additional information, please contact:

Investor Relationsir@ahipreit.com