VANCOUVER—American Hotel Income Properties REIT LP announced the closing of its previously announced acquisition of a portfolio of four hotel properties located in Virginia for an aggregate purchase price of approximately $37.1 million, including up to $1.6 million for defeasance of existing debt and before customary closing and post-acquisition adjustments. The purchase price does not include a $6 million restricted cash reserve established by AHIP for brand mandated property improvement plans (PIPs) related to the acquisition properties.
The acquisition properties represent a total of 403 guestrooms in Virginia and consist of three Hampton Inn hotels and one Fairfield Inn and Suites hotel. The properties are located in Harrisonburg, Emporia, and South Hill, Va., near transportation hubs and other major demand generators such as James Madison University, manufacturing facilities, distribution centers, and medical centers. The properties cater primarily to corporate travelers seeking select-service lodging.
AHIP funded the purchase price for the acquisition and the financing of the PIPs using a combination of cash from AHIP’s bought deal offering of subscription receipts that closed on Oct. 31, 2013, and new CMBS financing.
“This investment is consistent with our stated growth strategy targeting acquisitions of transportation-oriented and select- and limited-service hotels, located in secondary markets in the United States in close proximity to railroads, airports, highway interchanges, and other transportation hubs and demand generators,” Robert O’Neill, AHIP’s chief executive officer, commented. “All four properties are proximate to Interstate highway exits. James Madison University in Harrisonburg, a NCAA Division I school with approximately 20,000 students enrolled, is an ideal lodging demand generator. The 10-year, 4.97 percent fixed interest rate CMBS financing also highlights a key aspect of our conservative approach to leverage, aimed at providing highly stable returns to our unitholders.
“This high-quality and well-maintained portfolio has been purchased at a price below our estimate of its replacement cost, in markets that have strong underlying fundamentals with expectations for near term growth,” he continued. “Through accretive acquisitions and the expansion of our existing rail portfolio, we intend to capitalize on the growth in the U.S. hotel industry and continue to utilize the substantial availability of low cost CMBS financing.”
The acquisition properties will be managed for AHIP by its exclusive hotel manager, Tower Rock Hotels and Resorts Inc., a wholly owned subsidiary of O’Neill Hotels and Resorts Ltd.