Good morning and welcome to American Hotel Income Properties REIT LP's first quarter results conference call. At this time, all participants are in a listen-only mode. Following the formal remarks, there will be a question-and-answer session for analysts only. Instructions will be provided at that time for you to queue up for questions. Before beginning the call, AHIP would like to remind listeners that the following discussions will include forward-looking information within the meaning of applicable Canadian securities laws, which forward-looking information is qualified by this statement. Comments that are not a statement of fact, including projections of future earnings, revenue, income, and FFO, are considered forward-looking. Participants on this call should not place undue reliance on such information, which is provided based on management's expectations and assumptions as of the date of this call.
AHIP does not undertake any obligation to publicly update such information to reflect subsequent events or circumstances except as required by law. On this call, AHIP will discuss certain non-IFRS financial measures. For the definition of these non-IFRS financial measures, the most directly comparable IFRS financial measure, and a reconciliation between the two, please refer to their MDMA. References to prior year operating results are comparisons of AHIP's portfolio of 46 properties' results in that period versus the same properties' results today. All figures discussed on today's call are in US dollars unless otherwise indicated. A replay of this call will be available on AHIP's website. Discussing AHIP's performance today are Jonathan Korol, Chief Executive Officer; Bruce Pittet, Chief Operating Officer; and Travis Beatty, Chief Financial Officer. I'll now turn the call over to Jonathan Korol, Chief Executive Officer.
Thank you, Operator, and thank you, everyone, for joining us today for our first quarter financial results conference call. AHIP's current portfolio of 46 hotels continues to demonstrate strong top-line performance. For the quarter, total revenue grew by 1.2%, and RevPAR finished at $93, a 2.4% improvement over Q1 2024. This increase was driven by material gains in occupancy, primarily attributable to higher demand for extended stay and select service properties. We continue to face challenges from a margin standpoint due to occupancy-driven RevPAR growth and higher operating expenses as a result of general cost inflation. NOI margin decreased by 107 basis points to 27.5% for the quarter compared to the same period in 2024. Inconsistent operating performance at the asset level and elevated undistributed expenses continue to negatively impact the bottom line.
However, we have seen wages, turnover, and productivity continuing to stabilize, and dependency on contract labor has tapered. We remain focused on cost control initiatives across the portfolio, but despite the headway we've made, we expect these costs to remain elevated in 2025. We continue to make progress on the disposition program that began in 2024. During the quarter, we completed the dispositions of three hotel properties for total gross proceeds of $41.2 million. After adjusting for an industry-standard 4% FF&E reserve, the combined sale price for the three properties sold represents a blended cap rate of 6.9% on 2024 annual hotel EBITDA. Furthermore, we have nine more properties under purchase and sales agreements for estimated total gross proceeds of $49.7 million. Eight of these nine dispositions are currently expected to close in the second quarter of 2025, and one disposition is expected to close in the fourth quarter.
As a reminder, AHIP's disposition efforts to this point have mainly focused on low EBITDA, high near-term CapEx properties in markets with new supply and low demand growth. Leverage reduction remains a top priority for us, and AHIP intends to use the net proceeds from these dispositions to repay certain CMBS mortgage loans and a portion of our portfolio loan. AHIP's board and management team continue to advance our plan to strengthen AHIP's financial position and preserve long-term value for our unit holders. Over the past 15 months, AHIP has made significant progress on our plan to address upcoming debt obligations with asset sales and loan refinancings. In addition to the aforementioned disposition efforts, during the quarter, we completed two refinancings for initial total gross proceeds of $144.3 million, which resulted in the full repayment of our senior credit facility.
While our next loan maturity is not until the fourth quarter of 2026, assuming the property is currently under contract for sale and closes as expected, effective January 28, 2026, the distribution rate on our outstanding Series C shares increases from 9% to 14% per annum, and certain other provisions under the investor rights agreement will be triggered on such date, which will reduce our operational flexibility if the Series C shares have not been fully redeemed as of such date. Additionally, AHIP's 6% unsecured subordinated convertible debentures are due December 31, 2026. Accordingly, over the next 12-18 months, AHIP's objective is to raise sufficient capital to address the redemption of the Series C shares and the debentures. With the recently completed asset sales and refinancings, we have sufficient time with a stable cash position to consider alternatives to address these future obligations in an orderly manner.
Alternatives may include further hotel sales, full or partial recapitalization of the debentures and/or Series C shares, or a combination thereof. Regarding potential dispositions, while we intend to bring approximately 20 additional hotels to market in 2025 to maintain optionality, it is unlikely we sell all of them due to dynamic market conditions, typical complexities of selling hotels, and our focus on maximizing value. Over the coming months, we will assess which of the marketed hotels will provide the most attractive combination of certainty, valuation, and net proceeds to address these future obligations. The number of potential hotel dispositions will be dependent upon, among other things, regional market factors, hotel performance, hotel size, nature and value of offers, and whether or not any portion of the Series C shares or debentures are recapitalized.
As a reminder, on July 19, 2024, AHIP announced that AHIP and certain of its subsidiaries are in a dispute with Hotel Manager One Lodging Holdings LLC, itself a subsidiary of Ambridge Hospitality and various of its own subsidiaries related to Ambridge's mismanagement of AHIP's hotel portfolio. Notwithstanding the dispute, AHIP's asset management team continues to work closely with Ambridge to deliver on AHIP's pledge to its unit holders. That is, to increase the value of its hotel properties through operating excellence, active asset management, and investing in value-added capital expenditures. In December 2024, the Toronto Stock Exchange accepted AHIP's notice of intention to make a normal course issuer bid. The notice provides that we may, during the 12-month period commencing December 30, 2024, and ending December 29, 2025, purchase up to 7.5 million units, representing 10% of the public float.
We believe that our units are currently trading below their underlying value based on AHIP's assets. As of yesterday, we had purchased around 1.3 million units for gross proceeds of CAD 0.9 million, which results in an average purchase price of CAD 0.69 per unit. I'll now turn the call over to Bruce to discuss first quarter hotel operations. Travis will then highlight key financial metrics. Bruce.
Thank you, Jonathan, and good morning, everyone. Looking at the first quarter, AHIP's portfolio of premium-branded select service hotel properties continued to demonstrate strong demand metrics during what is currently the slowest demand quarter of the year, with RevPAR finishing at $93, which represents a 2.4% increase versus last year. Total revenue increased by $564,000 for our portfolio of 46 assets. Occupancy was up 178 basis points to 68.4% compared to the same period in 2024, driven primarily by strong extended stay vertical demand. Average daily rate finished at $136 for the quarter, which was in line with Q1 2024 levels. There was a benefit from the timing of the Easter holiday, which improved March hotel demand but reduced demand in April of 2025. Looking at the various segments, the leisure segment remains strong, and we've also seen higher demand related to business travel.
There was a pullback in group travel during Q1, with government group travel being impacted by the U.S. government reductions. However, government transient travel remains in line with the prior year. In 2024, 6% of revenue was from government segments across our portfolio. Initial results for April suggest a RevPAR decline of approximately 5% year over year as we face challenging calendar comparisons related to the aforementioned shift of Easter and also the solar eclipse from last year, which impacted year-over-year demand patterns. We reference three distinct segments of our business: extended stay, select service, and our Embassy Suites hotels. During Q1, the extended stay was our strongest performing vertical in the AHIP portfolio, with RevPAR finishing at $97, or up 7% over Q1 2024. The select service segment achieved a RevPAR of $88. This represents a 2% increase over 2024 levels.
The Embassy Suites segment achieved a RevPAR of $99, or down 2% year over year. Similar to 2024, margins continue to be pressured by the elevated operating expense environment. For our portfolio of 46 assets, NOI margin finished at 27.5%, 107 basis points below Q1 2024. Rooms expenses continue to stabilize and were approximately flat year over year as a percentage of revenue. We continue to see expense cost moderating in key areas such as rooms wage growth, with the average hourly rate up 2.5% versus the same period last year. Reliance on third-party labor has continued to decline, with third-party full-time equivalents down approximately 50% from Q1 2024, helping stabilize rooms department costs and improve housekeeping efficiency. However, undistributed expenses, particularly labor, remain elevated.
We saw significant increases in both utility expenses driven by colder-than-average temperatures in the Midwest and Northeast in Q1, as well as repairs and maintenance costs, which included elevated snow removal expenses on a year-over-year basis. Turning to AHIP's capital program, total FF&E spend for the quarter was $2.4 million, and PIP spend was approximately $100,000. The 2025 capital plan is estimated to include $6.9 million in PIPs and $7.5 million in FF&E improvements, respectively, which will be funded primarily by restricted cash accounts and cash flow from operating activities as required. While we haven't seen any material tariff impacts in Q1, we anticipate the greatest impact from tariffs may be on hotel renovations, but it's difficult to quantify at the moment given the evolving environment.
With that update on our hotel operations, I'll now turn the call over to Travis to highlight key financial and capital metrics for the first quarter.
Thank you, Bruce. Good morning, everyone. On a same-store basis, revenue increased by 1% to $46.4 million in the first quarter of 2025 compared to $45.8 million in the first quarter of 2024. Normalized diluted funds from operations, or FFO, was negative $0.02 per unit for the quarter compared to normalized FFO of $0.02 per unit in Q1 2024. At March 31, 2025, AHIP had an unrestricted cash balance of $17.8 million compared to $27.9 million at the end of the year. The reduction in cash is primarily due to net outflows from completed refinancings and debt repayment, which resulted in one property becoming unencumbered by debt during the quarter. AHIP held a restricted cash balance of $30.5 million and had an additional $24.7 million available under our portfolio loan for capital improvements related to the properties secured by this loan.
Debt-to-growth book value was 48.7% at March 31, 2025, a decrease of 60 basis points compared to December 31, 2024. Debt-to-EBITDA as at March 31, 2025, was 7.9 times, a decrease of 0.1 times compared to December 31, 2024. In January, we completed a CMBS refinancing for five hotel properties with total gross proceeds of $43 million. The CMBS loan has a five-year term and bears interest at a fixed annual interest rate of 7.6%. In March, AHIP completed a non-recourse debt refinancing and repayment in full of its credit facility. The gross loan proceeds are $101 million secured against 12 hotel properties, with additional advances up to $24 million for renovations. The portfolio loan bears interest at SOFR plus 465 basis points and has a two-year term with the option to extend for one additional year.
To address the variable rate exposure of the portfolio loan, AHIP entered into a derivative contract, which provides for a maximum one-month SOFR rate of 4.03% on a notional value of $100 million for a one-year period from May 2025 to May 2026. To summarize, during the quarter, we successfully completed two refinancing's for a total initial proceeds of $144 million, which resulted in the full repayment of our senior credit facility. We also fully repaid the $55 million CMBS mortgage loan associated with the assets sold this quarter. We have no further debt maturities until the fourth quarter of 2026, and our leverage metrics continue to improve. I'll turn the call back to Jonathan for some closing remarks.
Thanks, Travis. While we continue to face headwinds in the form of macroeconomic uncertainty, softening demand, and tariffs, we remain positive about long-term prospects of our business. In prior times of disruption, select service hotels have outperformed on a relative basis, and I believe AHIP's diversified portfolio of premium-branded select service hotels with a focused operating model is well-positioned to generate long-term value for unit holders. We are thrilled with the progress we have made on this strategic plan we announced at the end of 2023, which has seen us address near-term obligations and strengthen our balance sheet to ensure we are positioned to outperform as the operating and macroeconomic environment improves for the industry.
I remain confident in our business model and in our ability to execute on our next objective of raising sufficient capital to address the redemption of the Series C shares and the debentures over the next 12-18 months. With that overview of our first quarter results, we'll now open the call to questions from analysts. Operator?
Thank you. As a reminder to ask a question, you will need to press Star one one on your telephone. To remove yourself from the queue, you may press Star one one again. Please stand by while we compile the Q&A roster. Again, that's Star one one on your telephone to ask a question. Gentlemen, there appear to be no questions in queue at this time.
Great. Thanks, everyone, and thanks for joining us on our call today. Look forward to speaking with you in August when we report our second quarter 2025 results.
This concludes today's conference call. Thank you for participating, and you may now disconnect.