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American Hotel Income Properties REIT (AHIP) has agreements to sell five additional hotels in the U.S. for $45.9 million (all figures US), as the Vancouver-headquartered company continues its efforts to lower its debt.
The properties are two hotels in Statesville, N.C.; and one each in Melbourne, Fla.; Kingsland, Ga.; and Houston, Texas.
The dispositions are expected to close in Q4. The transaction values the sale properties at $103,000 per key, AHIP said in this week's announcement.
“We are pleased to announce further progress on our 2024 plan to demonstrate hotel property value and address our loan maturities,” AHIP CEO Jonathan Korol said in the release. “These dispositions reflect strong demand in the hotel transaction market at values accretive to our current unit price.”
AHIP is working to reduce its leverage and extend its loan maturities. To date, the company has sold or is in agreements to sell a total of $162 million in hotel properties this year.
AHIP’s hotels it aims to sell
The assets AHIP looks to sell are:
- Courtyard by Marriott with 94 rooms and Hampton Inn with 80 rooms in Statesville;
- Fairfield Inn & Suites in Melbourne with 83 rooms;
- Fairfield Inn & Suites in Kingsland with 82 rooms; and
- Home2 Suites with 108 suites in Houston.
AHIP received total non-refundable deposits of $4.7 million per disposition as part of binding agreements following its marketing process for the properties.
The combined sales price for the five properties reflect a blended cap rate of 6.9 per cent on AHIP’s 2023 annual hotel EBITDA, adjusted for a four per cent furniture, fixtures and equipment reserve. Adjusted for future cap ex requirements, the sales represent a blended cap rate of 5.5 per cent on 2023 annual hotel EBITDA, AHIP said.
AHIP’s plan to reduce its debt
Reducing debt has been a focus for AHIP, which reported $672 million of total debt against assets of $1.29 billion in its Q2 financials. That represents a 52 per cent debt-to-gross-book-value.
It reports debt of $672 million for its remaining 68 properties in this week's announcement.
In its Q2 financial report, Korol said AHIP was executing a plan to address its debt with asset sales and loan refinancings. In Q1, it sold two properties and refinanced mortgage debt for three hotels.
In addition to the five sales announced this week, it is under contract to divest six other U.S. properties with the sales expected to close in Q3 and Q4.
The balance of its credit facility was $182.5 million as of June 30, with a maturity date of Dec. 3. Selling the five properties will help AHIP meet one of three conditions to extend the maturity of the credit facility to June 2025.
The company operated at a loss of approximately $1.6 million in Q2, compared to $10.6-million net income in Q2 2023.
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