AHIP to acquire dozen Premium Branded hotels for $191 million

American Hotel Income Properties REIT (AHIP) has agreed to acquire a portfolio of a dozen Premium Branded hotels for $191 million in a move to boost its geographic footprint in Texas and the Midwest.

The 12 hotels have a total of 1,203 guestrooms and are located across the states of Minneapolis, Texas, Michigan, Pennsylvania, and North Dakota.

According to AHIP, the properties have all been built within the last five years.

The acquisition is likely to be wrapped up next month to expand AHIP’s portfolio to 79 Premium Branded hotels with a total of 8,887 total guestrooms, that are mainly licensed with Marriott, IHG, and Hilton.

The dozen hotels to be acquired include six Marriott branded properties (two Courtyards, two Residence Inns, one Fairfield Inn & Suites and one TownePlace property), five Hilton branded properties (three Home2 Suites, one Homewood Suites, and one Hampton Inn), and one IHG branded property (a Staybridge Suites).

AHIP to acquire a dozen Premium Branded hotels for $191 million. Photo courtesy of CNW Group/American Hotel Income Properties REIT LP.

Eight of the 12 hotels are all-suite products and all the brands are said to complement the current hotel portfolio of AHIP, which comprises select-service, premium branded, upper-midscale to upper-upscale properties.

AHIP said that all of the properties to be acquired are managed already by Aimbridge Hospitality, which is its exclusive hotel manager. As a result, AHIP expects a seamless transition into its portfolio.

John O’Neill – CEO of American Hotel Income Properties REIT said: “We’re very excited to complete a significant component of our 2019 capital recycling program by adding these 12 high-quality, mostly all-suite focused, recently built select-service hotels to our portfolio of Premium Branded hotels.

“We’re especially pleased with the acquisition cap rate and short closing timeline for this transaction, as the cash flow from these newer hotels will minimize the dilution from the sale of the Economy Lodging portfolio.

“With no major capital renovations required, the hotels in this portfolio should perform without any income displacement. In addition, the improved debt financing terms we’ve secured for this transaction, including interest only payments at lower fixed interest rates, will meaningfully reduce our financing costs and drive higher cash flows.

“We continue to believe higher-quality properties and attractive financing terms will drive better risk-adjusted FFO accretion and create value for our unitholders over the long term.”

AHIP plans to use the net proceeds from the divestiture of its Economy Lodging portfolio and also a new fixed-rate term loan of around $105 million to finance the acquisition.

The acquisition will further diversify the geographic markets of AHIP and will bolster its footprint in markets outside of the US East Coast.

In another development, AHIP has completed the previously announced divestiture of its Economy Lodging portfolio of 45 hotels to VCM, an affiliate of Vukota Capital Management, for $215.5 million.