VANCOUVER, British Columbia, Nov. 08, 2022 (GLOBE NEWSWIRE) -- 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 and nine months ended September 30, 2022.
All amounts presented in this news release are in United States dollars ("U.S. dollars") unless otherwise indicated.
"We are pleased with the robust revenue performance of our select service hotel portfolio in Q3." commented Jonathan Korol, CEO. "We continue to see strong occupancy and rate trends from our leisure, corporate and group guest segments. For the second consecutive quarter, we achieved the highest quarterly average daily rate ("ADR") (1) levels in the history of the Company. With the recent amendment to our credit facility completed and our relatively low, primarily fixed interest rate debt structure, we are well-positioned to manage potential economic volatility in the coming quarters."
(1) Non-IFRS and other financial measures. See "NON-IFRS AND OTHER FINANCIAL MEASURES" section of this news release and management's discussion and analysis for the three and nine months ended September 30, 2022 and 2021
2022 THIRD QUARTER HIGHLIGHTS
- Revenue increased 11.3% to $76.2 million in the third quarter of 2022 compared to $68.4 million in the same period of 2021.
- A 33.0% increase in RevPAR (1) for the Embassy Suites sub-portfolio, compared to the same period in 2021.
- Diluted FFO per unit (1) was $0.13 for the third quarter of 2022, compared to normalized diluted FFO per unit (1) of $0.16 for the same period of 2021.
- ADR increased to $127, compared to $125 in the second quarter of 2022, and $118 in the same period of 2021.
- Occupancy (1) was 72.1% in the current quarter, compared to 72.8% in the second quarter of 2022, and 68.8% in the same period of 2021.
- Debt to gross book value (1) decreased to 52.6% as at September 30, 2022, compared to 54.1% as at December 31, 2021.
- Weighted average interest rate for all term loans and credit facility was 4.34% as at September 30, 2022, a reduction of 18 bps compared to 4.52% as at December 31, 2021.
- Paid monthly distributions of $0.015 U.S. dollar per unit in each month since March 2022.
- Cash flow from operating activities was $14.2 million for the third quarter of 2022, an increase of $4.5 million compared to the same period of 2021.
- Net and comprehensive income was $0.3 million for the third quarter of 2022, a decrease of $15.4 million compared to the same period of 2021, primarily due to a non-recurring gain of $14.7 million in the third quarter of 2021.
"This quarter we achieved our highest ADR and RevPAR since the onset of the pandemic. Quarterly RevPAR continued its upward trend, finishing at 97% of 2019 levels." Mr. Korol added: "This was driven by sustained demand from our leisure guests as well as the gradual return of business and group travellers, as demonstrated by the tremendous recovery in our Embassy Suites portfolio during the quarter."
"Recent operating results are negatively impacted by inflation, labor shortages and supply chain disruptions. To address these issues, we are continuing to focus on hiring more in-house labor, reducing turnover and improving housekeeping productivity. We remain well positioned to navigate the current macroeconomy given the lean operating model of our select-service portfolio as well as the diversified demand profile of our guests. This was evident throughout the pandemic, as the portfolio achieved positive hotel EBITDA (1) every month since May 2020. Our balance sheet is well-positioned, with no debt maturities until late 2023 and 93% fixed rate debt. We remain confident in our ability to navigate a dynamic operating environment and to add long-term unitholder value."
2022 THIRD QUARTER REVIEW
11.3% GROWTH IN REVENUE
Improving demand levels resulted in enhanced pricing power and greater opportunity to manage revenue for various hotel segments. As a result, AHIP's revenue continued to improve in the third quarter of 2022. Revenue increased by 11.3% to $76.2 million compared to $68.4 million in the same period of 2021. This improvement was due to higher ADR and increased occupancy. Same property occupancy (1) increased by 310 bps to 72.1% in the current quarter from 69.0% in the same period of 2021, which is a 91% recovery compared to the pre-COVID occupancy level in the same period of 2019. Same property ADR (1) increased by 6.7% to $127 in the current quarter compared to $119 in the same period of 2021, which is 6% higher than the pre-COVID ADR in the same period of 2019.
AHIP's five Embassy Suites properties represent 15% of the portfolio by room count. The performance of these hotels is a key indicator of the recovery level in business and group travel. For the three months ended September 30, 2022, RevPAR for these properties was $100, an increase of 33.0% compared to the same period in 2021 and a 98% recovery compared to pre-COVID pandemic RevPAR in the same period of 2019. The Embassy Suites experienced recovery in business and group travel in the current quarter, supplemented by leisure-oriented groups. AHIP's five Embassy Suites were renovated in 2018 and 2019 and are well positioned to capture improving business and corporate group demand.
NOI MARGIN AND FFO
Same property Net Operating Income ("NOI") margin (1) decreased by 630 bps to 32.4% in the third quarter of 2022, compared to the same period of 2021, which is a 91% recovery compared to the pre-COVID NOI margin in the same period of 2019. The decrease in NOI margin was due to higher operating expenses as a result of inflation, labor shortages and increased hotel operating standards. In 2022, housekeeping frequency, and complimentary food and beverage all increased compared to 2021, to a level closer to pre-COVID standards. Inflation resulted in higher costs of operating supplies and higher utilities expenses. Labor shortages resulted in increased room labor expenses due to the need for overtime and contract labor.
Diluted FFO per unit was $0.13 for the third quarter of 2022, compared to normalized diluted FFO per unit of $0.16 excluding the non-recurring gain of $14.7 million and $1.0 million inventory adjustment expense for the same period of 2021. NOI (1) decreased by $1.8 million in the current quarter compared to the same period of 2021, due to higher operating expenses and the dispositions of two hotel properties since the third quarter of 2021.
LEVERAGE AND LIQUIDITY
Debt to gross book value as at September 30, 2022 decreased by 150 bps to 52.6% compared to 54.1% as at December 31, 2021. The decrease was mainly due to the increase of $8.2 million in cash and restricted cash as a result of improving operating results. Management intends to bring its leverage to a level closer to its peer group over time which would be in the range of 40-50% debt to gross book value. This is expected to be achieved through a combination of improving operating results, a sustainable distribution policy and selective equity issuance in support of growth transactions. AHIP has 93% debt at fixed interest rates or effectively fixed by interest rate swaps until November 2023. AHIP does not have any maturities of debt or interest rate swaps until the fourth quarter of 2023.
On November 3, 2022, AHIP entered into an amendment to the revolving credit facility and certain term loans (the "Fifth Amendment") to, among other things, modify the calculation of the borrowing base availability amount and certain financial covenants. The modifications significantly improve the expected borrowing base availability and reduce the required fixed charge covenant ratio. For further details, see a copy of the Fifth Amendment, which has been filed under AHIP's profile on SEDAR at www.sedar.com.
As at September 30, 2022, AHIP had $35.7 million in available liquidity, compared to $51.1 million as at June 30, 2022. The available liquidity of $35.7 million was comprised of an unrestricted cash balance of $17.3 million and borrowing availability of $18.4 million under the revolving credit facility. In addition, AHIP has restricted cash balance of $44.0 million as at September 30, 2022. The decrease in the available liquidity as at September 30, 2022, compared to June 30, 2022 was due to a decrease in unrestricted cash and a reduction in borrowing availability. The decrease in unrestricted cash is primarily due to cash generated by three Embassy Suite properties located in Ohio and Kentucky in the current quarter being held in restricted cash accounts by the lender, as a result of these properties not meeting the minimum debt service coverage ratio prior to the third quarter of 2022 (the "Cash Management Properties"). The operating performance of the Cash Management Properties has been steadily improving and exceeded the minimum debt service coverage ratio in the third quarter. Management expects this to continue in future periods which would result in a return of a portion of the restricted funds in the first half of 2023.
GROWTH AND STRATEGIC CAPITAL DEPLOYMENT
AHIP is evaluating growth opportunities that would expand the hotel portfolio and geographic footprint. As a result of the investment by BentallGreenOak and Highgate, AHIP is aligned with two well-capitalized strategic partners who support the pursuit of attractive acquisition opportunities. AHIP is also reviewing strategies for divesting assets to recycle proceeds into higher return assets in more attractive markets.
On October 6, 2022, AHIP entered into a purchase and sale agreement for the disposition of four non-core assets located in Oklahoma for gross proceeds of $26.3 million. In addition, management expects a return of restricted cash by the end of the fourth quarter in an amount of $3.1 million. The transaction is expected to be completed in the fourth quarter of 2022 subject to the satisfaction of customary closing conditions. On October 26, 2022, AHIP completed the disposition of a non-core asset located in Pennsylvania for gross proceeds of $5.4 million. These dispositions allow AHIP to avoid future PIP investments in assets that will not meet returns available elsewhere in the portfolio. Management expects that the average quality of the portfolio will improve and that there will be a modest improvement in certain leverage metrics following these dispositions.
U.S. DOLLAR DISTRIBUTION
AHIP has adopted a distribution policy providing 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). Monthly distributions have been declared and paid each month since February 2022. The distribution reintroduced in February 2022 was at a level which is intended to allow AHIP to increase it over time, assuming stable or improving financial results.
2022 THIRD QUARTER RESULTS
The following table summarizes portfolio operating key performance indicators ("KPIs") for the five most recent quarters with a comparison represented as a multiple of the same period in 2019. January to December 2019 KPIs are based on prior ownership's financial information for the 12 premium branded hotels acquired in December 2019, and all data in the Same Property KPIs table below excludes the two hotels sold in 2022.
SAME PROPERTY KPIs (76 hotels)
| KPIs | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 |
| Occupancy | 69.0% | 65.1% | 64.1% | 73.1% | 72.1% |
| Recovery (vs. 2019) | 0.87x | 0.90x | 0.87x | 0.90x | 0.91x |
| ADR | $119 | $114 | $117 | $125 | $127 |
| Recovery (vs. 2019) | 1.00x | 1.00x | 1.01x | 1.05x | 1.06x |
| RevPAR | 82 | 74 | 75 | 91 | 92 |
| Recovery (vs. 2019) | 0.87x | 0.90x | 0.87x | 0.94x | 0.97x |
| NOI margin | 38.7% | 34.0% | 28.6% | 35.2% | 32.4% |
| Recovery (vs. 2019) | 1.08x | 1.06x | 0.83x | 0.94x | 0.91x |
| SELECTED FINANCIAL INFORMATION | ||||
| Three months ended September 30 | Nine months ended September 30 | |||
| (thousands of dollars, except per unit amounts) | 2022 | 2021 | 2022 | 2021 |
| Revenue | 76,171 | 68,411 | 213,596 | 178,714 |
| NOI(1) | 24,675 | 26,432 | 68,830 | 67,782 |
| NOI margin(1) | 32.4% | 38.6% | 32.2% | 37.9% |
| Hotel EBITDA(1) | 22,194 | 24,509 | 61,741 | 62,660 |
| Hotel EBITDA margin(1) | 29.1% | 35.8% | 28.9% | 35.1% |
| EBITDA(1) | 20,539 | 22,399 | 55,589 | 54,308 |
| EBITDA margin(1) | 27.0% | 32.7% | 26.0% | 30.4% |
| Cashflows provided by operating activities | 14,165 | 9,648 | 36,524 | 7,539 |
| Distributions declared per unit - basic and diluted | 0.045 | - | 0.120 | - |
| Distributions declared to unitholders - basic | 3,544 | - | 9,450 | - |
| Distributions declared to unitholders - diluted | 4,027 | - | 10,426 | - |
| Dividends declared to Series C holders | 1,022 | 1,022 | 3,033 | 2,722 |
| Net and comprehensive income | 315 | 15,685 | 10,125 | 2,241 |
| Net and comprehensive income per unit - basic | - | 0.20 | 0.12 | 0.03 |
| Net and comprehensive income per unit - diluted | - | 0.18 | 0.13 | 0.03 |
| FFO diluted(1) | 11,433 | 27,243 | 32,370 | 35,893 |
| FFO per unit - diluted(1) | 0.13 | 0.32 | 0.36 | 0.46 |
| FFO payout ratio - diluted, trailing twelve months(1) | 27.6% | - | 27.6% | - |
| AFFO diluted(1) | 8,443 | 25,703 | 24,541 | 32,463 |
| AFFO per unit - diluted(1) | 0.09 | 0.30 | 0.27 | 0.41 |
| AFFO payout ratio - diluted, trailing twelve months(1) | 31.3% | - | 31.3% | - |
| SELECTED INFORMATION | ||
| (thousands of dollars) | September 30, 2022 | December 31, 2021 |
| Total assets | 1,131,162 | 1,150,490 |
| Total liabilities | 759,098 | 775,886 |
| Total non-current liabilities | 685,422 | 674,339 |
| Term loans and revolving credit facility | 679,860 | 695,796 |
| Debt to gross book value(1) | 52.6% | 54.1% |
| Debt to EBITDA (times)(1) | 10.2 | 10.7 |
| Interest coverage ratio (times)(1) | 2.1 | 1.9 |
| Term loans and revolving credit facility: | ||
| Weighted average interest rate | 4.34% | 4.52% |
| Weighted average term to maturity (years) | 3.2 | 3.8 |
| Number of rooms | 8,580 | 8,801 |
| Number of properties | 76 | 78 |
| Number of restaurants | 16 | 16 |
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 and nine months ended September 30, 2022 and 2021, that are available on AHIP's website at www.ahipreit.com, and under AHIP's profile on SEDAR at www.sedar.com.
Q3 2022 CONFERENCE CALL
Management will host a webcast and conference call at 10:00 a.m. Eastern time / 7:00 a.m. Pacific time on Wednesday, November 9, 2022, to discuss the financial and operational results for the three and nine months ended September 30, 2022 and 2021.
To participate in the conference call, participants should register online. 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 is also available, both live and archived, on the Events & Presentations page of AHIP's website: 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 net and comprehensive income (loss) for depreciation and amortization, gain or loss on disposal of property, International Financial Reporting Interpretations Committee ("IFRIC") 21 property taxes, fair value gain or loss, 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 net and comprehensive income (loss).
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 net and comprehensive income (loss).
Normalized FFO: calculated as FFO for the three and nine months ended September 30, 2021, excluding the non-recurring $14.7 million gain and $1.0 million inventory adjustment expense.
NOI: calculated by adjusting income from operating activities for depreciation and amortization, and IFRIC 21 property taxes. The most comparable IFRS measure to NOI is income from operating activities.
Hotel EBITDA: calculated by adjusting income from operating activities for depreciation and amortization, IFRIC 21 property taxes and management fees for hotel. The most comparable IFRS measure to hotel EBITDA is income from operating activities.
EBITDA: calculated by adjusting income from operating activities for depreciation and amortization, IFRIC 21 property taxes, 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 income from operating activities.
Debt: calculated as the sum of term loans and revolving credit facility, the face value of convertible debentures, unamortized portion of debt financing costs, government guaranteed loan, lease liabilities and unamortized portion of mark-to-market adjustments. The most comparable IFRS measure to debt is total liabilities.
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.
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 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.
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.
FFO payout ratio - basic, trailing twelve months: calculated as total distributions declared to unitholders - basic, divided by total basic FFO, for the twelve months ended September 30, 2022 and 2021.
FFO payout ratio - diluted, trailing twelve months: calculated as total distributions declared to unitholders - diluted, divided by total diluted FFO, for the twelve months ended September 30, 2022 and 2021.
AFFO payout ratio - basic, trailing twelve months: calculated as total distributions declared to unitholders - basic, divided by total basic AFFO, for the twelve months ended September 30, 2022 and 2021.
AFFO payout ratio - diluted, trailing twelve months: calculated as total distributions declared to unitholders - diluted, divided by total diluted AFFO, for the twelve months ended September 30, 2022 and 2021.
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 for the trailing twelve months divided by interest expense for the trailing twelve months period. The interest coverage ratio measures AHIP's ability to meet required interest payments related to 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, NOI and NOI margin: measured for properties owned by AHIP for both the current reporting periods and the same periods in 2021 and pre-COVID in 2019. For the three and nine months ended September 30, 2022, same property occupancy, ADR, RevPAR, NOI include 76 hotels (excluding the two hotels sold in 2022).
NON-IFRS RECONCILIATION
The following table reconciles FFO and AFFO from net and comprehensive income (loss), the most comparable IFRS measure as presented in the financial statements:
| Three months ended September 30 | Nine months ended September 30 | |||
| (thousands of dollars, except per unit amounts) | 2022 | 2021 | 2022 | 2021 |
| Net comprehensive income | 315 | 15,685 | 10,125 | 2,241 |
| Adjustments: | ||||
| Net income attributable to non-controlling interest | (1,022) | (1,022) | (3,033) | (2,722) |
| Depreciation and amortization | 8,932 | 10,829 | 29,230 | 32,427 |
| (Gain) loss on disposal of property | (9) | (23) | (1,058) | 1,287 |
| IFRIC 21 property taxes | (193) | 361 | (937) | (1,122) |
| Fair value changes of interest rate swaps | (1,249) | (382) | (5,878) | (1,804) |
| Fair value changes of warrants | (1,627) | (298) | (4,477) | 4,006 |
| Impairment of property | 4,417 | - | 4,674 | - |
| Transaction costs related to warrants | - | - | - | 325 |
| Deferred income tax expense | 780 | 1,259 | 615 | 1,243 |
| Loss on disposal of discontinued operations | - | 5 | - | 12 |
| FFO basic (1) | 10,344 | 26,414 | 29,261 | 35,893 |
| Interest, accretion and amortization on convertible debentures | 1,089 | 829 | 3,109 | 2,466 |
| FFO diluted (1) | 11,433 | 27,243 | 32,370 | 35,893 |
| FFO per unit - basic (1) | 0.13 | 0.34 | 0.37 | 0.46 |
| FFO per unit - diluted (1) | 0.13 | 0.32 | 0.36 | 0.46 |
| FFO payout ratio - basic - trailing twelve months (1) | 26.8% | - | 26.8% | - |
| FFO payout ratio - diluted - trailing twelve months (1) | 27.6% | - | 27.6% | - |
| Weighted average number of units outstanding: | ||||
| Basic (000's) | 78,766 | 78,641 | 78,747 | 78,569 |
| Diluted (000's) (2) | 89,485 | 84,837 | 89,246 | 78,837 |
(2) The calculation of weighted average number of units outstanding for FFO per unit - diluted and AFFO per unit diluted included the convertible debentures for the three and nine months ended September 30, 2022 and 2021 because they were dilutive.
| RECONCILIATION OF FFO TO AFFO | ||||
| Three months ended September 30 | Nine months ended September 30 | |||
| (thousands of dollars, except per unit amounts) | 2022 | 2021 | 2022 | 2021 |
| FFO basic (1) | 10,344 | 26,414 | 29,261 | 35,893 |
| FFO diluted (1) | 11,433 | 27,243 | 32,370 | 35,893 |
| Maintenance capital expenditures | (2,990) | (1,540) | (7,829) | (3,430) |
| AFFO basic (1) | 7,354 | 24,874 | 21,432 | 32,463 |
| AFFO diluted (1) | 8,443 | 25,703 | 24,541 | 32,463 |
| AFFO per unit - basic (1) | 0.09 | 0.32 | 0.27 | 0.41 |
| AFFO per unit - diluted (1) | 0.09 | 0.30 | 0.27 | 0.41 |
| AFFO payout ratio - basic - trailing twelve months (1) | 30.6% | - | 30.6% | - |
| AFFO payout ratio - diluted - trailing twelve months (1) | 31.3% | - | 31.3% | - |
| (thousands of dollars) | September 30, 2022 | December 31, 2021 |
| Term loans and revolving credit facility | 679,860 | 695,796 |
| 2026 Debentures (at face value) | 50,000 | 50,000 |
| Unamortized portion of debt financing costs | 4,864 | 6,402 |
| Government guaranteed loans | - | 345 |
| Lease liabilities | 1,707 | 1,986 |
| Unamortized portion of mark-to-market adjustments | (90) | (131) |
| Debt | 736,341 | 754,398 |
| (thousands of dollars) | September 30, 2022 | December 31, 2021 |
| Total assets | 1,131,162 | 1,150,490 |
| Accumulated depreciation and impairment on property, buildings and equipment | 263,760 | 241,338 |
| Accumulated amortization on intangible assets | 4,215 | 3,675 |
| Gross book value | 1,399,137 | 1,395,503 |
The reconciliation of income from operating activities to NOI, hotel EBITDA and EBITDA is shown below:
| Three months ended September 30 | Nine months ended September 30 | |||
| (thousands of dollars) | 2022 | 2021 | 2022 | 2021 |
| Income from operating activities | 15,936 | 15,242 | 40,537 | 36,477 |
| Depreciation and amortization | 8,932 | 10,829 | 29,230 | 32,427 |
| IFRIC 21 property taxes | (193) | 361 | (937) | (1,122) |
| NOI | 24,675 | 26,432 | 68,830 | 67,782 |
| Management fees | (2,481) | (1,923) | (7,089) | (5,122) |
| Hotel EBITDA | 22,194 | 24,509 | 61,741 | 62,660 |
| General administrative expenses | (1,655) | (2,110) | (6,152) | (8,352) |
| EBITDA | 20,539 | 22,399 | 55,589 | 54,308 |
The reconciliation of finance costs to interest expense is shown below:
| Three months ended September 30 | Nine months ended September 30 | |||
| (thousands of dollars) | 2022 | 2021 | 2022 | 2021 |
| Finance costs | 9,187 | 9,580 | 25,428 | 30,368 |
| Gain on debt settlement | - | - | 2,344 | - |
| Amortization of debt financing costs | (487) | (499) | (1,599) | (1,443) |
| Accretion of Debenture liability | (231) | (115) | (596) | (339) |
| Amortization of Debenture costs | (95) | (103) | (241) | (302) |
| Dividends on Series B preferred shares | (4) | (4) | (12) | (12) |
| Amortization of mark-to-market adjustments | 14 | 14 | 41 | 40 |
| Interest expense | 8,384 | 8,873 | 25,365 | 28,312 |
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 and nine months ended September 30, 2022 and 2021, available on AHIP's website at www.ahipreit.com, and under AHIP's profile on SEDAR at www.sedar.com, which is incorporated by reference into this news release.
FORWARD-LOOKING INFORMATION
Certain statements in this news release may constitute "forward-looking information" within the meaning of applicable securities laws. Forward-looking information 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 includes, but is 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 in this news release includes, but is not limited to, statements with respect to: AHIP's expectations with respect to its future performance, including specific expectations in respect to certain categories of its properties, including the Embassy Suites properties; AHIP's leverage and liquidity strategies and goals, including its target debt to gross book value ratio; AHIP's expectation that a portion of the restricted cash currently held by the lenders to the Cash Management Properties will be received in the first half of 2023; the pending sale of four non-core assets in Oklahoma and the expected timing and impacts of such transaction; AHIP's outlook on the U.S. travel market; the expected timing for the declaration, record date and payment of monthly distributions, and any increase thereof; and AHIP's stated long-term objectives.
Although the forward-looking information contained in this news release is based on what AHIP's management believes to be reasonable assumptions, AHIP cannot assure investors that actual results will be consistent with such information. Forward-looking information is 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; the COVID-19 pandemic will continue to negatively impact (although to a lesser extent than previously) 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's strategies with respect to margin enhancement, completion of capital projects, liquidity and divestiture of non-core assets and acquisitions will be successful; capital projects will be completed on time and on budget; AHIP will continue to have good relationships with its hotel brand partners; ADR and Occupancy will be stable or rise in 2022 and beyond; the future performance of the Cash Management Properties will be consistent with AHIP's expectations; the appraisals on the borrowing base properties will be consistent with AHIP's expectations; the sale of the four non-core assets in Oklahoma will be completed in the fourth quarter of 2022; AHIP's distribution policy will be sustainable and AHIP will not be prohibited from paying distributions under the terms of its term loans, revolving credit facility and investor rights agreement; AHIP's ability to increase distribution level in future periods assuming stable or improving operating results; 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; AHIP's future level of indebtedness and its future growth potential will remain consistent with AHIP's current expectations; and AHIP will achieve its long term objectives.
Forward-looking information involves significant risks and uncertainties and should not be read as a guarantee of future performance or results as actual results may differ materially from those expressed or implied in such forward-looking information, accordingly undue reliance should not be placed on such forward-looking information. Those risks and uncertainties include, among other things, risks related to: inflation, labor shortages, supply chain disruptions, the COVID-19 pandemic and related government measures and their impact on the U.S. economy, the U.S. hotel industry, and AHIP's business; AHIP may not achieve its expected performance levels in 2022 and beyond; AHIP's brand partners may impose revised service standards and capital requirements which are adverse to AHIP; property improvement plan renovations may not commence or complete in accordance with currently expected timing and may suffer from increased material and labor costs; recent recovery trends at AHIP's properties may not continue and may regress; AHIP's strategies with respect to margin enhancement, completion of accretive capital projects, liquidity, divestiture of non-core assets and acquisitions may not be successful; AHIP may not be successful in reducing its leverage; monthly cash distributions are not guaranteed and remain subject to the approval of the Board of Directors, compliance with the terms of its credit facility and may be reduced or suspended at any time at the discretion of the Board; AHIP may not be able to refinance debt obligations as they become due; the appraisals for the borrowing base properties may be lower than expected which may result in a reduction in some or all of the available capacity of the revolving credit facility; the performance of the Cash Management Properties may regress which could result in the lender thereto not returning certain restricted cash to AHIP in the first half of 2023 or at all; the sale of the four non-core assets in Oklahoma may not complete in accordance with the currently expected timing or at all; general economic conditions and consumer confidence; the growth in the U.S. hotel and lodging industry; prices for AHIP's units and its 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; increased geopolitical instability; and changes in legislation and AHIP may not achieve its long term objectives. Management believes that the expectations reflected in the forward-looking information are based upon reasonable assumptions and information currently available; however, management can give no assurance that actual results will be consistent with the forward-looking information contained herein. Additional information about risks and uncertainties is contained in AHIP's management's discussion and analysis for the three and nine months ended September 30, 2022 and AHIP's annual information form for the year ended December 31, 2021, copies of which are available on SEDAR at www.sedar.com.
The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information reflects management's current beliefs and is based on information currently available to AHIP. The forward-looking information is 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.
THIRD PARTY INFORMATION
This news release includes market information and industry data from independent industry publications, market research and analyst reports, surveys and other publicly available sources. Although AHIP management believes these sources to be generally reliable, market and industry data is subject to interpretation and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. Accordingly, the accuracy and completeness of this data are not guaranteed. AHIP has not independently verified any of the data from third party sources referred to in this news release nor ascertained the underlying assumptions relied upon by such sources.
For additional information, please contact:
Investor Relations
ir@ahipreit.com
