American Hotel Income Properties REIT LP has closed the previously announced acquisition of 12 Premium Branded hotels for $191 million. In addition, AHIP has secured a five-year $105 million interest-only term loan to partially finance the acquisition and has entered into a swap rate agreement to fix the interest rate on the term loan to a maximum of 3.52% for four years. AHIP has also secured a $60.0 million variable rate revolving credit facility with an initial term of four years to replace its current revolving credit facility with the same lender.
The 12 Premium Branded hotels were acquired for approximately $158,800 per key, which is below AHIP’s estimate of replacement cost. These properties were all built in the last five years, have been well maintained, and require no major property improvements. As all of these properties were already being managed by Aimbridge Hospitality – AHIP’s exclusive hotel manager, it should ensure for a seamless transition into AHIP’s portfolio with continuity of hotel systems and staff.
“We’re very pleased with how quickly this acquisition was completed, as it has allowed us to redeploy the proceeds from the sale of the 45 Economy Lodging properties in less than a week. Now that these two strategic initiatives have been accomplished, we look forward to focusing on driving growth from our higher-quality portfolio of 79 Premium Branded select-service hotels,” said John O’Neill, CEO.
Mr. O’Neill continued: “This acquisition further diversifies our geographic markets across the U.S. and expands our portfolio of suites-focused and extended-stay hotels, which generally benefit from higher margins. As well, the favourable debt terms we’ve secured to partially finance this acquisition will provide AHIP with meaningful cost savings and improve our cash flow. For example, we estimate this new term loan will generate more than $6 million in improved cash flow in 2020 compared to the debt previously secured for the 45 Economy Lodging properties we sold.”