American Hotel Income Properties REIT (AHIP) has closed the acquisition of a portfolio of four hotel properties located in Virginia for an aggregate purchase price of approximately USD37.1m.
The purchase price does not include a USD6m 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 guest rooms in Virginia and consist of three Hampton Inn hotels (a brand controlled by Hilton Worldwide) and one Fairfield Inn & Suites hotel (a brand controlled by Marriott International). The properties are located in Harrisonburg, Emporia and South Hill, Virginia, near transportation hubs and other major demand generators such as James Madison University, manufacturing facilities, distribution centres and medical centres. The properties cater primarily to corporate travellers 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 31 October 2013 and new CMBS financing.
Robert O'Neill, AHIP's chief executive officer, says: "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 US in close proximity to railroads, airports, highway interchanges and other transportation hubs and demand generators. 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 ten-year, 4.97 per cent 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. Through accretive acquisitions and the expansion of our existing rail portfolio, we intend to capitalise on the growth in the US hotel industry and continue to utilise the substantial availability of low cost CMBS financing."