Although it is based in Vancouver, the American Hotel Income Properties
REIT invests in U.S. hotel properties in secondary markets. As of the end
of the second quarter, it had 113 hotels in its portfolio, boosted by the
recent acquisition of 18 Marriott and Hilton-branded hotels in markets
along the Eastern Seaboard.
The REIT’s recent financial performance looks impressive. Third-quarter
revenue more than doubled from the same period last year, to $90.3 million
(the REIT reports in U.S. currency). Earnings before interest, taxes,
depreciation, and amortization (EBITDA) rose by 107% to $30 million, funds
from operations (FFO) increased 93.0% to $19.3 million, while adjusted
funds from operations (AFFO) rose 87.6% to $16.7 million. However, it
should be noted that this apparently rapid growth was not organic but
rather fuelled by the addition of new hotel properties.
A possible area of concern is the falloff in AFFO, which is a key measure
of a REIT’s financial health and the basis for its payouts. In the third
quarter, diluted AFFO per unit was unchanged from the year-ago quarter, at
$0.21. The payout ratio improved during the third quarter, to 76.1%,
compared with 82.5% in 2016. For the first nine months, the payout ratio
was 84.0%, compared with 77.1% in 2016.
Net income for the nine months ended Sept. 30 was $5.7 million, compared
with $5.9 million in the prior period. According to the company, this
decline was a result of higher business acquisition costs and an impairment
charge incurred during the second quarter. Diluted net income per unit came
in at $0.09 compared with $0.16 in the same period last year.
“Our third quarter results reflect the impact of the 33 premium branded
hotels we acquired in the last 12 months, which improved the geographic
diversification of our properties and supported our overall RevPAR growth
of 25.2%. Revenue and EBITDA more than doubled from the same quarter last
year, while our payout ratio improved to 76%,” said Rob O’Neill, CEO, AHIP
Overall, this young REIT (it started trading in March 2013) looks
attractive to aggressive investors at the current level. However, it has a
history of volatility, and the high yield suggests that investors are
somewhat leery about its prospects. – Gordon Pape
Gordon Pape is one of Canada’s best-known personal finance commentators and
investment experts. He is the publisher of
The Internet Wealth Builder and The Income Investornewsletters, which are available through the Building Wealth website.
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© 2017 by The Fund Library. All rights reserved.
The foregoing is for general information purposes only and is the opinion
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