VANCOUVER—The portfolio of 32 railroad-focused hotels acquired in February by American Hotel Income Properties REIT LP has been a hotshot so far and the company is looking for other such deals, the REIT’s CEO Robert O’Neill told the Hotel Investment Barometer last week.
The REIT, which is listed on the Toronto Stock Exchange, used proceeds from its $92.9-million IPO to buy the hotels from Lodging Enterprises LLC. The portfolio included the Oak Tree Inn-flagged hotels and a development pipeline of properties under construction. The portfolio is comprised of select-service, extended-stay and economy hotels.
“It was a unique opportunity,” he said of the deal. “It fit my background.” From 1977 to 1991, O’Neill was president and COO of O’Neill Railway Catering Limited, a company which served the CP Rail in Western Canada and the BC Railway in British Columbia on and offline.
“Excellent,” O’Neill said when asked about the portfolio’s performance. “To use a railway term, we’re on track.”
The hotels, located in 19 U.S. states, are targeted at serving railway crews, O’Neill said. This means the properties come equipped with amenities designed to encourage rest, such as white noise to block out air conditioner noises.
“Of course, that’s what we all want in a hotel anyway,” he said.
Future deals
During the 35th Annual New York University International Hospitality Industry Investment Conference earlier this month, O’Neill said he had some conversations with fellow attendees about potentially acquiring additional portfolios. He said the company is not just looking at railway markets, but also secondary and tertiary markets in general. Just as is with the former Lodging Enterprises portfolio, AHIP is interested in select-service, extended-stay and economy hotels.
To help lead this effort, AHIP in April announced the hiring of Dan Miller, formerly of Lodging & Leisure Investment Advisors LLC, to lead the company’s acquisition efforts. AHIP has 34 hotels in its portfolio, all located in the United States.
“We have a fair amount of cash in hand from our very successful IPO, and we believe we have money available throughout the Canadian financing market to raise such funds” for future acquisitions, O’Neill said.
O’Neill referenced a bullish vibe coming out of the NYU Investment Conference related to deal making. He said he joins in that thinking.
“I think it’ll be a big transactions year,” he said. “There are a lot of quality portfolios … and a lot of competition for them.” O’Neill also said that he expects to see a flurry of Canadian dollars looking to do deals in the U.S. because of favorable exchange rates.
In terms of finding development financing, O’Neill said the REIT is “very, very conservative.”
He said the company typically looks to do deals that are split evenly between equity and debt. “That kind of money is available all day long,” O’Neill said.