All amounts presented in this news release are in
“We are pleased with the ongoing revenue performance of our select service hotel portfolio in Q1." commented
2023 FIRST QUARTER HIGHLIGHTS
- Revenue increased 6.0% to
$65.5 million for the first quarter of 2023, compared to$61.8 million for the same period of 2022. - Diluted FFO per unit (1) and normalized diluted FFO per unit (1) were
$0.11 and$0.07 for the first quarter of 2023, respectively, compared to$0.05 and$0.03 for the same period of 2022. - RevPAR increased 13.3% to
$85 for the first quarter of 2023, compared to$75 for the same period of 2022. - ADR increased 12.8% to
$132 for the first quarter of 2023, compared to$117 for the same period of 2022. - Occupancy was 64.1% for the first quarter of 2023, an increase of 40 basis points (“bps”) compared to 63.7% for the same period of 2022.
- NOI increased 7.1% to
$18.7 million for the first quarter of 2023, compared to$17.5 million for the same period of 2022. - Debt to gross book value (1) was 52.0% as of
March 31, 2023 , decreases of 60 bps and 210 bps, respectively, compared to 52.6% as ofDecember 31, 2022 , and 54.1% as ofMarch 31, 2022 . - Weighted average interest rate for all term loans and credit facility, was 4.48% as of
March 31, 2023 , an increase of 2 bps compared to 4.46% as ofDecember 31, 2022 . - Distributions of
$0.015 U.S. dollars per unit paid in each month sinceMarch 2022 .
“This quarter we achieved our highest ADR in the history of the company and an average growth rate in ADR of 10.4% over the most recent four quarters.”
2023 FIRST QUARTER REVIEW
6.0% GROWTH IN REVENUE
Improving demand levels resulted in enhanced pricing power and greater opportunity to manage revenue within various hotel segments. Revenue increased by 6.0% to
AHIP’s five
7.1% GROWTH IN NOI, INCREASES IN
For the three months ended
Diluted FFO per unit and normalized diluted FFO per unit were
INSURANCE AND WEATHER-RELATED DAMAGE
During the final week of
As a result of the weather-related damage, the total write-down of hotel properties is
For property damage insurance, AHIP expects most of the total cost of remediation and rebuilding to be reimbursed in 2023, which is currently estimated to be
As of
LEVERAGE AND LIQUIDITY
KPIs | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | |||||
Debt to gross book value | 52.0% | 52.6% | 52.6% | 53.6% | 54.1% | |||||
Debt to EBITDA (trailing twelve months) | 9.6x | 9.8x | 10.2x | 10.0x | 10.2x |
Debt to gross book value as of
AHIP has 92.2% of its debt at fixed interest rates or effectively fixed by interest rate swaps until
As of
GROWTH AND STRATEGIC CAPITAL DEPLOYMENT
AHIP is evaluating growth opportunities that would increase the number of hotels in the portfolio as well as expand the portfolio’s geographic footprint. As a result of the 2021 investment by BentallGreenOak and
In 2022, AHIP completed the strategic dispositions of seven non-core hotel properties for total gross proceeds of
In
AHIP has adopted a distribution policy providing for the payment of regular monthly
2023 FIRST QUARTER RESULTS
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. The same property KPIs table below excludes the seven hotels sold in 2022, and includes the
SAME PROPERTY KPIs (71 hotels)
KPIs | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | ||||||||||
ADR | $132 | ||||||||||||||
% Change compared to same period in prior year | 10.9% | 9.5% | 7.0% | 13.9% | 23.5% | ||||||||||
Occupancy | 64.1% | 67.2% | 73.8% | 74.5% | 65.6% | ||||||||||
Change compared to same period in prior year – bps increase/(decrease) | (150) | 50 | 310 | 250 | 370 | ||||||||||
RevPAR | $85 | ||||||||||||||
% Change compared to same period in prior year | 9.0% | 10.4% | 11.6% | 17.8% | 30.8% | ||||||||||
NOI Margin | 28.6% | 30.8% | 33.3% | 35.5% | 29.6% | ||||||||||
Change compared to same period in prior year – bps increase/(decrease) | (100) | (400) | (650) | (680) | (380) |
Same property ADR increased by 10.9% to
SELECTED INFORMATION | |||||||||||
(thousands of dollars, except per unit amounts) | Three months ended 2023 | Three months ended 2022 | |||||||||
Revenue | 65,458 | 61,776 | |||||||||
NOI (1) | 18,738 | 17,500 | |||||||||
NOI Margin (1) | 28.6% | 28.3% | |||||||||
16,602 | 15,382 | ||||||||||
25.4% | 24.9% | ||||||||||
EBITDA (1) | 14,044 | 12,807 | |||||||||
EBITDA Margin (1) | 21.5% | 20.7% | |||||||||
Cashflow from operating activities | 13,094 | 7,665 | |||||||||
Distributions declared per unit - basic and diluted | 0.045 | 0.030 | |||||||||
Distributions declared to unitholders - basic | 3,546 | 2,362 | |||||||||
Distributions declared to unitholders - diluted | 4,026 | 2,380 | |||||||||
Dividends declared to Series C holders | 1,000 | 1,000 | |||||||||
Loss and comprehensive loss | (1,600) | (3,875) | |||||||||
Loss and comprehensive loss per unit - basic | (0.02) | (0.05) | |||||||||
Loss and comprehensive loss per unit - diluted | (0.02) | (0.05) | |||||||||
FFO diluted (1) | 9,801 | 3,623 | |||||||||
FFO per unit - diluted (1) | 0.11 | 0.05 | |||||||||
FFO payout ratio - diluted, trailing twelve months (1) | 34.1% | 5.0% | |||||||||
AFFO diluted (1) | 7,081 | 1,466 | |||||||||
AFFO per unit - diluted (1) | 0.08 | 0.02 | |||||||||
AFFO payout ratio - diluted, trailing twelve months (1) | 44.6% | 6.0% | |||||||||
SELECTED INFORMATION | ||||||
(thousands of dollars) | 2023 | 2022 | ||||
Total assets | 1,061,325 | 1,052,795 | ||||
Total liabilities | 745,352 | 730,689 | ||||
Total non-current liabilities | 664,954 | 667,807 | ||||
Term loans and revolving credit facility | 640,776 | 643,929 | ||||
Debt to gross book value (1) | 52.0% | 52.6% | ||||
Debt to EBITDA (times) (1) | 9.6 | 9.8 | ||||
Interest coverage ratio (times) (1) | 2.2 | 2.1 | ||||
Term loans and revolving credit facility: | ||||||
Weighted average interest rate | 4.48% | 4.46% | ||||
Weighted average term to maturity (years) | 2.8 | 3.0 | ||||
Number of rooms | 8,024 | 8,024 | ||||
Number of properties | 71 | 71 | ||||
Number of restaurants | 14 | 14 | ||||
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
Q1 2023 CONFERENCE CALL
Management will host a webcast and conference call at
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 is also available, both live and archived, on the Events & Presentations page of AHIP’s website: www.ahipreit.com.
ABOUT
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
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), for which a reconciliation is provided in this MD&A.
Normalized FFO: calculated as FFO excluding non-recurring items. For the three months ended
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, for which a reconciliation is included below.
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, for which a reconciliation is included below.
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, for which a reconciliation is included below.
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 included below.
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, for which a reconciliation is included below.
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
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
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
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
NOI margin: calculated as NOI 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 2022. For the three months ended
NON-IFRS RECONCILIATION
The following table reconciles FFO and AFFO from income (loss) and comprehensive income (loss), the most comparable IFRS measure as presented in the financial statements:
(thousands of dollars, except per unit amounts) | Three months ended | Three months ended | ||||
Loss and comprehensive loss | (1,600) | (3,875) | ||||
Adjustments: | ||||||
Loss attributable to non-controlling interest | (1,000) | (1,000) | ||||
Depreciation and amortization | 8,621 | 10,219 | ||||
Loss (gain) on sale of property | 3,892 | (1,604) | ||||
IFRIC 21 property taxes | 699 | 543 | ||||
Change in fair value of interest rate swap contracts | 1,091 | (3,348) | ||||
Change in fair value of warrants | (1,570) | 3,345 | ||||
Impairment of cash-generating units | - | 257 | ||||
Warrant issuance costs | - | (3) | ||||
Deferred income tax (recovery)/expense | (1,425) | (911) | ||||
FFO basic (1) | 8,708 | 3,623 | ||||
Interest, accretion, and amortization on convertible debentures | 1,093 | - | ||||
FFO diluted (1) | 9,801 | 3,623 | ||||
FFO per unit – basic (1) | 0.11 | 0.05 | ||||
FFO per unit – diluted (1) | 0.11 | 0.05 | ||||
FFO payout ratio – basic – trailing twelve months (1) | 33.0% | 5.0% | ||||
FFO payout ratio – diluted – trailing twelve months (1) | 34.1% | 5.0% | ||||
Non-recurring items: | ||||||
Other income | (3,342) | (1,294) | ||||
Measurements excluding non-recurring items: | ||||||
FFO diluted (1) | 6,459 | 2,329 | ||||
FFO per unit – diluted (1) | 0.07 | 0.03 | ||||
Weighted average number of units outstanding: | ||||||
Basic (000’s) | 78,800 | 78,553 | ||||
Diluted (000’s) (2) (3) | 89,465 | 79,327 | ||||
(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 months ended (3) The calculation of weighted average number of units outstanding for FFO per unit - diluted and AFFO per unit - diluted excluded the convertible debentures for the three months ended | ||||||
RECONCILIATION OF FFO TO AFFO | ||||||
(thousands of dollars, except per Unit amounts) | Three months ended | Three months ended | ||||
Loss and comprehensive loss | (1,600) | (3,875) | ||||
FFO basic (1) | 8,708 | 3,623 | ||||
FFO diluted (1) | 9,801 | 3,623 | ||||
Maintenance capital expenditures | (2,720) | (2,157) | ||||
AFFO basic (1) | 5,988 | 1,466 | ||||
AFFO diluted (1) | 7,081 | 1,466 | ||||
AFFO per unit - basic (1) | 0.08 | 0.02 | ||||
AFFO per unit - diluted (1) | 0.08 | 0.02 | ||||
AFFO payout ratio – basic – trailing twelve months (1) | 44.6% | 6.0% | ||||
AFFO payout ratio – diluted – trailing twelve months (1) | 44.6% | 6.0% | ||||
Measurements excluding non-recurring items: | ||||||
AFFO diluted (1) | 3,739 | 172 | ||||
AFFO per unit – diluted (1) | 0.04 | - | ||||
(thousands of dollars) | 2023 | 2022 | ||
Term loans and revolving credit facility | 640,776 | 643,929 | ||
2026 Debentures (at face value) | 50,000 | 50,000 | ||
Liabilities related to assets held for sale | 6,577 | - | ||
Unamortized portion of debt financing costs | 4,074 | 4,437 | ||
Lease liabilities | 1,526 | 1,591 | ||
Unamortized portion of mark-to-market adjustments | (63) | (76) | ||
Debt (1) | 702,890 | 699,881 | ||
(thousands of dollars) | 2023 | 2022 | ||
Total assets | 1,061,325 | 1,052,795 | ||
Accumulated depreciation and impairment/write off on property, buildings and equipment | 284,969 | 272,540 | ||
Accumulated amortization on intangible assets | 4,697 | 4,530 | ||
Gross book value (1) | 1,350,991 | 1,329,865 |
The reconciliation of income from operating activities to NOI, hotel EBITDA and EBITDA is shown below:
(thousands of dollars) | Three months ended | Three months ended | ||||||
Income from operating activities | 9,418 | 6,738 | ||||||
Depreciation and amortization | 8,621 | 10,219 | ||||||
IFRIC 21 property taxes | 699 | 543 | ||||||
NOI (1) | 18,738 | 17,500 | ||||||
Management fees | (2,136) | (2,118) | ||||||
16,602 | 15,382 | |||||||
General administrative expenses | (2,558) | (2,575) | ||||||
EBITDA (1) | 14,044 | 12,807 |
The reconciliation of finance costs to interest expense is shown below:
(thousands of dollars) | Three months ended | Three months ended | ||||
Finance costs | 8,692 | 9,442 | ||||
Amortization of debt financing costs | (355) | (492) | ||||
Accretion of Debenture liability | (242) | (182) | ||||
Amortization of Debenture costs | (100) | (74) | ||||
Dividends on Series B preferred shares | (21) | (4) | ||||
Interest Expense (1) | 7,974 | 8,690 |
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
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
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
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, AHIP’s insurance claims with respect to its weather damaged properties may be denied in whole or in part; AHIP may not achieve its expected performance levels in 2023; 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 investor rights agreement 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; AHIP may not be successful in renewing or replacing its interest rate swaps on reasonable terms or at all; 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; general economic conditions and consumer confidence; the growth in the
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.
For additional information, please contact:
Investor Relations
ir@ahipreit.com
Source: American Hotel Income Properties
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