All amounts presented in this news release are in
“We are pleased with the robust revenue performance of our select service hotel portfolio in Q3." commented
(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
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 atDecember 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 atDecember 31, 2021 . - Paid monthly distributions of
$0.015 U.S. dollar per unit in each month sinceMarch 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.”
"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
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
AHIP’s five
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
LEVERAGE AND LIQUIDITY
Debt to gross book value as at
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
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
On
AHIP has adopted a distribution policy providing for the payment of regular monthly
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
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 | $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 | Nine months ended | |||
(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% |
22,194 | 24,509 | 61,741 | 62,660 | |
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) | ||
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
Q3 2022 CONFERENCE CALL
Management will host a webcast and conference call at
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
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).
Normalized FFO: calculated as FFO for the three and nine 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.
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
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 2021 and pre-COVID in 2019. For the three and nine months ended
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 | Nine months ended | |||
(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
RECONCILIATION OF FFO TO AFFO | ||||
Three months ended | Nine months ended | |||
(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) | ||
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) | ||
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 | Nine months ended | |||
(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) |
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 | Nine months ended | |||
(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
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, the COVID-19 pandemic and related government measures and their impact on 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.
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
Source: American Hotel Income Properties
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