VANCOUVER—American Hotel Income Properties REIT LP (AHIP) has acquired its 80th income property—a 133-room hotel located in Lincoln, NE. The property features a rail-crew lodging contract with a large national U.S. railway and is being acquired for an aggregate purchase price of approximately $3.9 million, including approximately $1.2 million for planned capital expenditures, and excluding closing and post-acquisition adjustments. The hotel is being purchased at a trailing 12-month capitalization rate of approximately 14% after all management fees and an FF&E reserve excluding renovation costs (or approximately 10% after renovation costs are included).
“We are pleased to acquire this rail crew hotel at a trailing, fully loaded, capitalization rate of approximately 10% after our planned renovation,” said Rob O’Neill, CEO of AHIP. “It allows us to build on an existing relationship with one of our key railway customers with the opportunity to accommodate further rail client demand as the railway undertakes major capital projects in the area.”
The property is being purchased for approximately $21,000 per key, which is well below management’s estimate of replacement cost. The planned renovations include conversion of the hotel to an Oak Tree Inn rail-crew hotel, including the addition of Dark and Quiet guestrooms, common area upgrades and new property management systems.
AHIP will fund the purchase with cash on-hand and expects to refinance the acquisition with a conventional mortgage during the first quarter of 2016.
According to the REIT, the property has a rail-crew contract with one of the largest railway companies in the U.S., which currently guarantees 50 guestrooms per night. AHIP owns 10 hotels that currently service this railway company.
The transaction is expected to be completed in January, subject to customary closing conditions and documentation.
The hotel will be managed by TR Lodging Enterprises Inc., a wholly owned subsidiary of O’Neill Hotels & Resorts Ltd. Upon completion of the acquisition, AHIP’s portfolio will consist of 80 hotels totaling 7,048 guestrooms, with 45 rail-crew hotels totaling 3,718 guestrooms and 35 branded hotels totaling 3,330 guestrooms.