Mr. Jonathan Korol reports

AMERICAN HOTEL INCOME PROPERTIES REIT LP REPORTS 2023 RESULTS WITH 5.9% ANNUAL REVPAR GROWTH

American Hotel Income Properties REIT LP has released its unaudited financial results for the three and 12 months ended Dec. 31, 2023.

All amounts presented in this news release are in U.S. dollars unless otherwise indicated and are unaudited.

2023 HIGHLIGHTS

• Diluted FFO per unit (1) and normalized diluted FFO per unit (1) were $0.48 and $0.36, respectively, for the year ended December 31, 2023, compared to $0.47 and $0.38 for the year ended December 31, 2022.
• ADR (1) increased 5.6% to $131 for the year ended December 31, 2023, compared to $124 for the year ended December 31, 2022.
• Occupancy (1) was 68.7% for the year ended December 31, 2023, compared to 68.9% for the year ended December 31, 2022.
• RevPAR (1) increased 5.9% to $90 for the year ended December 31, 2023, compared to $85 for the year ended December 31, 2022.
• Revenue decreased 0.3% to $280.5 million for the year ended December 31, 2023, compared to $281.4 million for the year ended December 31, 2022, as a result of asset sales and weather-related demand disruption in 2023.
• NOI (1) and normalized NOI (1) were $83.4 million and $86.9 million, respectively, for the year ended December 31, 2023, decreases of 6.5% and 2.6%, respectively, compared to $89.2 million and $89.2 million for the year ended December 31, 2022.
• AHIP had $27.8 million in available liquidity as at December 31, 2023, compared to $24.1 million as at December 31, 2022. The available liquidity of $27.8 million was comprised of an unrestricted cash balance of $17.8 million and borrowing availability of $10.0 million under the revolving credit facility.
• Amendment and extension of AHIP's revolving credit facility and certain term loans.
• Amendment of the master hotel management agreement with reduced and deferred fees.
• Temporary suspension of cash distributions effective November 2023 to enhance liquidity.

"AHIP's portfolio of premium branded select service hotel properties continued to demonstrate strong demand metrics in 2023." said Jonathan Korol, CEO. "Portfolio RevPAR was up meaningfully for the year, finishing at $90, AHIP's highest ever annual RevPAR. Despite disruptions resulting from weather-related events in Q1 and dispositions of non-core properties, revenue decreased only modestly for the year. Costs related to macroeconomic conditions remain elevated, with higher labor and operating costs resulting in substantial pressures to hotel operating margins."

Mr. Korol added: "AHIP's Board and management team have taken a number of decisive actions across the business to preserve cash, enhance financial stability and protect long term value for our unitholders. These actions include an amendment and extension of our revolving credit facility and certain term loans, a reduction and deferral of hotel management fees, and temporary suspension of the distribution. We are currently executing a plan to address near-term debt obligations. These steps will strengthen our liquidity and balance sheet to ensure we are positioned to benefit when industry operating and macroeconomic environment improves. We will continue to monitor conditions and operating performance, while considering further strategic opportunities to deliver value over the long term."

Q4 2023 HIGHLIGHTS

• Diluted FFO per unit and normalized diluted FFO per unit were $0.004 and $0.03, respectively, for the fourth quarter of 2023, compared to $0.11 and $0.07 for the same period of 2022.
• ADR increased 0.8% to $126 for the fourth quarter of 2023, compared to $125 for the same period of 2022.
• Occupancy was 66.5% for the fourth quarter of 2023, an increase of 20 bps compared to 66.3% for the same period of 2022.
• RevPAR increased 1.2% to $84 for the fourth quarter of 2023, compared to $83 for the same period of 2022.
• Revenue decreased 2.9% to $65.8 million for the fourth quarter of 2023, compared to $67.8 million for the same period of 2022.
• NOI was $16.8 million for the fourth quarter of 2023, a decrease of 17.5%, compared to $20.3 million for the same period of 2022.

2023 REVIEW

GROWTH IN ADR AND REVPAR, DECLINE IN OCCUPANCY

For the year ended December 31, 2023, ADR increased 5.6% to $131. The increase in ADR was partially offset by the decrease of 20 bps in occupancy, which is primarily attributable to lower demand at the extended stay and select service properties. Overall, improved ADR resulted in an increase of 5.9% in RevPAR, compared to the year ended December 31, 2022.

This result is attributable to improvements in the corporate and group traveler segments, sustained demand from leisure travelers, as well as the disposition of properties with lower than portfolio average RevPAR. The ability to control and manage daily rates is a key advantage of the lodging sector, which has enabled AHIP to achieve strong growth in ADR in 2023, partially mitigating the effects of escalated labor costs and general inflationary pressures impacting the portfolio.

NOI, NOI MARGIN (1) AND FFO PER UNIT (1)

NOI and normalized NOI (1) were $83.4 million and $86.9 million, respectively, for the year ended December 31, 2023, decreases of 6.5% and 2.6%, respectively, compared to NOI and normalized NOI of $89.2 million for the year ended December 31, 2022. For the year ended December 31, 2023, normalized NOI included $3.5 million in business interruption insurance proceeds as a result of the weather-related damage at several hotel properties in late December 2022. NOI margin was 29.7% in the current year, a decrease of 200 bps compared to 31.7% for the prior year. The decreases in NOI and NOI margin were due to the decline in revenue as a result of fewer properties in the portfolio, lower occupancy, and higher operating expenses as a result of cost inflation, escalated labor costs, and higher property insurance premiums. General inflation resulted in higher costs of operating supplies and higher utilities expenses. Shortages in the overall U.S. labor market resulted in increased room labor expenses due to overtime, higher wages for employees and dependency on contract labor. The increase in the annual premium for property insurance effective June 1, 2023 was approximately $3.5 million. In 2023, AHIP incurred $12.5 million to remediate and rebuild the four damaged hotel properties after the weather-related damage in late December 2022, which resulted in significant improvements to these hotels. The majority of the costs have been funded by the insurance policies.

Diluted FFO per unit and normalized diluted FFO per unit for the year ended December 31, 2023, were $0.48 and $0.36, respectively, compared to diluted FFO per unit of $0.47 and $0.38 for the year ended December 31, 2022. Normalized diluted FFO per unit in the current year excluded non-recurring expected insurance proceeds of $11.2 million as a result of weather-related property damage at several hotel properties in late December 2022. The decrease in normalized diluted FFO per unit was primarily due to lower NOI in the current year.

LEVERAGE AND LIQUIDITY

Debt to gross book value as at December 31, 2023 was 51.9%, a decrease of 70 bps compared to December 31, 2022. Debt to EBITDA as at December 31, 2023 was 10.6x, an increase of 0.8x compared to December 31, 2022. The increase in Debt to EBITDA was mainly due to the decrease in NOI.

As at December 31, 2023, AHIP had $27.8 million in available liquidity, compared to $24.1 million as at December 31, 2022. The available liquidity of $27.8 million was comprised of an unrestricted cash balance of $17.8 million and borrowing availability of $10.0 million under the revolving credit facility. AHIP has an additional restricted cash balance of $31.3 million as at December 31, 2023.

AHIP has 71.3% of its debt at fixed interest rates following the expiry of the interest rate swaps on its senior credit facility on November 30, 2023. The notional value of the interest rate swaps was $130.0 million which expired on November 30, 2023. As a result of this expiry, at the current secured overnight financing rate ("SOFR") of 5.3%, the incremental annual interest expense is estimated to be approximately $5.2 million. The actual increase in interest expense will be dependent on future SOFR.

NON-CASH IMPAIRMENT CHARGES

During the fourth quarter of 2023, the Company recognized non-cash impairment charges of approximately $67.4 million related to twenty-three hotel properties. The impaired hotels are primarily located in Maryland, New Jersey, Pennsylvania, and Texas. AHIP completed the valuation process based on external appraisals, purchase and sales agreements, recent market transactions and internal valuations of properties. The impairment is primarily due to revised expectations on the timeframe for the properties to return to stabilized income level after the impact of the COVID-19 pandemic, higher operating expenses as a result of cost inflation, escalated labor costs, higher property insurance premiums, and local competition factors in select markets.

CAPITAL RECYCLING

In 2022, AHIP completed the strategic dispositions of seven non-core hotel properties for total gross proceeds of $47.5 million. These dispositions i) allowed AHIP to avoid future PIP investments that would not have met returns available elsewhere in the portfolio; ii) increase in estimated annualized portfolio RevPAR by approximately $3, and iii) decrease in estimated annualized Debt to EBITDA ratio by approximately 0.4x.

In June 2023, AHIP completed the disposition of a non-core hotel property for gross proceeds of $11.7 million. As a condition of the fifth amendment to the revolving credit facility and certain term loans, AHIP made a repayment of $1.8 million (50% of the net proceeds of this disposition) to the term loan. This repayment resulted in a permanent reduction of the term loan, which reduced the total borrowing availability from $200.0 million to $198.2 million.

In the fourth quarter of 2023, AHIP entered into agreements to dispose of a hotel property in Harrisonburg, Virginia for $8.55 million, and a hotel property in Cranberry Township, Pennsylvania for $8.25 million. The dispositions are expected to close in the first quarter of 2024. The combined sales price for these properties represents a blended cap rate of 8.6% on 2023 annual hotel EBITDA, after adjusting an industry standard 4% furniture, fixtures, and equipment ("FF&E") reserve. Under the terms of the Sixth Amendment, 50% of the net proceeds from sales of these hotel properties (if any) are required to be used to pay down outstanding amounts under the term loan governed by the Sixth Amendment.

In 2024, AHIP will continue to execute its strategy to divest assets to recycle proceeds into higher return assets in more attractive markets and reduce debt. AHIP is currently marketing selected properties.

SAME PROPERTY KPI

The following table summarizes key performance indicators ("KPIs") for the portfolio for the five most recent quarters with a comparison to the same period in the prior year.

In the fourth quarter of 2023, same property ADR was $126, consistent with the same period in the prior year. Same property occupancy decreased by 80 bps to 66.6%, compared to the same period of 2022. The decrease in occupancy is primarily attributable to lower demand at the extended stay and select service properties.

Same property NOI margin decreased by 480 bps to 26.1% in the fourth quarter of 2023, compared to the same period of 2022. The decrease in same property NOI margin was mainly due to higher operating expenses as a result of cost inflation, escalated labor costs, and higher property insurance premiums. General inflation resulted in higher costs of operating supplies and higher utilities expenses. Shortages in the overall U.S. labor market resulted in increased room labor expenses due to overtime, higher wages for employees and dependency on contract labor.

In Q4 2023, Q3 2023 and Q4 2022, the same property ADR, occupancy, RevPAR and NOI margin calculations excluded nine properties, which is comprised of seven hotels sold in 2022, one hotel sold in 2023, and one hotel in respect of which AHIP is in a managed foreclosure process for this property as of December 31, 2023.

In Q1 and Q2 2023, the same property ADR, occupancy, RevPAR and NOI margin calculations excluded eleven properties, which is comprised of the nine properties mentioned in the immediately preceding paragraph, as well as Residence Inn Neptune and Courtyard Wall in New Jersey as these two hotels had limited availability due to remediation and rebuilding after the weather-related damage in late December 2022.

INITIATIVES TO STRENGTHEN FINANCIAL POSITION AND PRESERVE UNITHOLDER VALUE

The Board of Directors (the "Board") and management implemented a plan to strengthen AHIP's financial position and to preserve unitholder value. Initiatives, both planned and underway, are outlined below.

Amendment and Extension of Revolving Credit Facility and Term Loans

On November 7, 2023, AHIP entered into an amendment to its revolving credit facility (the "RCF") and certain term loans (the "Sixth Amendment"). The borrowing availability under the RCF was temporarily reduced to zero pending the outcome of new appraisals, which were subsequently received in later November 2023. Upon the receipt of such appraisals, the conditions to extend the maturity of the RCF from December 3, 2023, to December 3, 2024, were satisfied and the availability liquidity under the RCF was increased to $10.0 million with no paydown being required.

The total facility size under the Sixth Amendment is $198.2 million. The total appraised value of the 20 hotel properties (the "Borrowing Base Properties") is $286.2 million. This results in maximum borrowing availability under the RCF of $193.2 million in accordance with the Sixth Amendment, which is 67.5% of the total appraised value of the Borrowing Base Properties. The appraised value of $286.2 million for the 20 Borrowing Base Properties (2,070 keys) is equivalent to $138 thousand per key. The fixed charge coverage ratio has been reduced to 1.1x until the end of 2024.

The RCF availability in 2024 is primarily limited by revised calculations based on the lesser of an implied debt service coverage ratio and a loan to value ("LTV") test. The borrowing availability is subject to a maximum of 67.5% LTV based on the appraised value of the Borrowing Base Properties. The covenants governing distribution payments have been revised and are now subject to the satisfaction of a more restrictive FFO payout ratio threshold, calculated on a trailing twelve-months basis on a sliding scale based on the fixed charge coverage ratio.

The Sixth Amendment includes an option to extend the maturity of the term loan and RCF to June 2025, subject to reduction of the aggregate maximum facility size to $148.2 million from and after December 3, 2024.

For further details, see a copy of the Sixth Amendment, which has been filed under AHIP's profile on SEDAR+.

PLAN TO ADDRESS NEAR TERM LOAN MATURITIES

AHIP intends to proceed with a number of transactions that will collectively address all of the Company's near-term debt maturities, while also creating modest improvements in ADR, RevPAR and leverage metrics.

The commercial mortgage-backed securities ("CMBS") debt maturities are $16.3 million in the fourth quarter of 2023, $22.3 million in the first half of 2024, and $58.7 million in the second half of 2024.

To address the Q4 2023 CMBS loan maturities of $16.3 million, AHIP is in the process of divesting of two non-core properties, specifically:

• AHIP entered into an agreement in the fourth quarter of 2023 to dispose of a hotel property in Cranberry Township, Pennsylvania for $8.25 million. The disposition is expected to close in the first quarter of 2024, and the proceeds will be used to repay the $7.0 million non-recourse mortgage debt; and
• AHIP initiated a managed foreclosure process for a hotel property in Pittsburgh, Pennsylvania which is expected to result in a discharge of $9.3 million non-recourse mortgage debt.

To address the Q2 2024 CMBS loan maturity of $22.3 million, AHIP intends to divest of one non-core property and refinance the balance of the loan, specifically:

• AHIP entered into an agreement in the fourth quarter of 2023 to dispose of a hotel property in Harrisonburg, Virginia for $8.55 million. The disposition is expected to close in the first quarter of 2024, and the proceeds will be used to partially satisfy the non-recourse mortgage debt; and
• AHIP expects to close the CMBS refinancing of the remaining 3 assets for this loan in the first quarter of 2024 for gross proceeds of approximately $17.0 million prior to capital reserves contribution of approximately $3.0 million.

To address the Q4 2024 CMBS loan maturity of $58.7 million, AHIP intends to address these maturities through a combination of asset sales and CMBS refinancings.

Amendment of the Master Hotel Management Agreement with Reduced and Deferred Fees

On September 30, 2023, with a retroactive effective date of July 1, 2023, AHIP entered into a third amendment to its master hotel management agreement with One Lodging Management LLC (an affiliate of Aimbridge Hospitality LLC) (the "Amendment"), with estimated annual savings for the first three years following the amendment of approximately $3.7 million.

In accordance with the Amendment, the management fee on certain hotel properties has been reduced or deferred. The reduction of management fees is estimated to provide approximately $0.3 million of cash savings per annum, and the deferral of management fees is estimated to provide approximately $3.4 million of cash savings on average per annum from July 1, 2023, to June 30, 2026. The fees in the years 2027 through 2032 will be slightly higher to offset the fee deferral in the first three years. The cash savings in 2023 were $2.2 million.

The amendment to the master hotel management agreement also includes waivers of all or a portion of termination fees for certain hotels, as well as a limited exception to the exclusivity of the master hotel manager in respect of the acquisition of owner operated hotels, subject to certain conditions. For further details, see a copy of the amendment to the master hotel management agreement, which has been filed under AHIP's profile on SEDAR+.

Reducing Cash Portion of Board Compensation

Effective October 1, 2023, the majority of the Board's compensation is paid in AHIP RSUs which are priced and vest in the form of Units at the end of each fiscal quarter. Previously, Board compensation was paid entirely in cash.

Temporary Suspension of U.S. Dollar Distribution

From February 2022 to October 2023, AHIP's distribution policy provided for the payment of regular monthly U.S. dollar distributions at an annual rate of $0.18 per unit (monthly rate of $0.015 per unit). On November 7, 2023, AHIP announced a temporary suspension of monthly distributions. The Board and management made this decision based on the considerations of recent and forecast operating results, industry and economic conditions, interest rates for debt refinancing, the general financing environment, and future compliance with the adjusted FFO payout ratio covenant in the Sixth Amendment.

The amendment of the distribution policy reduces cash payments by $14.2 million annually, which improves AHIP's balance sheet and liquidity, supporting the long-term enhancement of unitholder value. The Board and management will continue to review AHIP's distribution policy on a quarterly basis.

FINANCIAL INFORMATION

This news release should be read and used as preparation for reading AHIP's the forthcoming audited consolidated financial statements, and management's discussion and analysis for the years ended December 31, 2023 and 2022, which AHIP intends to file under AHIP's profile on SEDAR+ and on AHIP's website in the next week. The financial information contained in this news release remains subject to the completion of the year-end audit and is therefore subject to change. This news release and the financial information contained herein was approved by the Board on February 27, 2024.

Q4 2023 CONFERENCE CALL

Management will host a webcast and conference call at 10:00 a.m. Pacific time on Wednesday, February 28, 2024, to discuss the financial and operational results for the three and twelve months ended December 31, 2023 and 2022.

To participate in the conference call, participants should register online via AHIP's website. A dial-in and unique PIN will be provided to join the call. Participants are requested to register a minimum of 15 minutes before the start of the call. An audio webcast of the conference call is also available, both live and archived, on the Events & Presentations page of AHIP's website.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

American Hotel Income Properties REIT LP (TSX: HOT.UN, TSX: HOT.U, TSX: HOT.DB.V), or AHIP, is a limited partnership formed to invest in hotel real estate properties across the United States. AHIP's portfolio of premium branded, select-service hotels are located in secondary metropolitan markets that benefit from diverse and stable demand. AHIP hotels operate under brands affiliated with Marriott, Hilton, IHG and Choice Hotels through license agreements. AHIP's long-term objectives are to build on its proven track record of successful investment, deliver monthly U.S. dollar denominated distributions to unitholders, and generate value through the continued growth of its diversified hotel portfolio.

We seek Safe Harbor.