American Hotel Income Properties REIT (AHIP) has taken a step ahead in its leverage reduction strategy by offloading five hotel properties.
This is set to generate total gross proceeds of $45.9m.
The board of directors approved the sale of these properties, which comprise two hotels in Statesville, North Carolina and one each in Melbourne, Florida; Kingsland, Georgia; and Houston, Texas.
Each transaction is governed by a binding agreement, following AHIP’s marketing process announced last month.
AHIP secured non-refundable deposits totalling $4.7m for these agreements, with the dispositions due to be finalised in the fourth quarter of 2024.
The sales reflect a value per key of $103,000, compared to AHIP’s current enterprise value per key of $95,000, based on the US dollar closing price of $0.35 per unit on the Toronto Stock Exchange (TSX) as of 30 August 2024.
These latest dispositions bring the total gross proceeds from hotel property sales in 2024 to $162m.
This aligns with AHIP’s plan announced in August to address 2024 loan maturities and reduce leverage.
Proceeds from the sale will be allocated to repay the CMBS mortgage debt secured against three of the properties and reduce term loans under AHIP’s senior credit facility.
Notably, two of the sold properties are part of the borrowing base for the credit facility, their sale proceeds will be used to pay down the outstanding term loans.
As of 30 June 2024, AHIP’s Credit Facility, consisting of a revolving credit facility and term loans, had a balance of $182.5m and is set to mature on 3 December 2024.
AHIP CEO Jonathan Korol said: “We are pleased to announce further progress on our 2024 plan to demonstrate hotel property value and address our loan maturities. These dispositions reflect strong demand in the hotel transaction market at values accretive to our current unit price.
“The streamlined portfolio is expected to generate both higher RevPAR and margins after the dispositions are completed. Further, the completion of the dispositions of the five hotel properties will allow the company to meet a key requirement to extend the maturity of our senior credit facility.”
