Good morning and welcome to American Hotel Income Properties REIT LP's Third Quarter Results Conference Call. At this time, all participants are on 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 we begin the call, AHIP would like to remind listeners that the following discussions will include forward-looking information within the meanings of applicable Canadian and securities laws. Which forward-looking statements' information is qualified by this statement. Comments that are not a statement of fact, including projections or future earnings, revenue, income, and FFO, are considered forward-looking. Participants on this call should not place any 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 measures and reconciliations between the two, please refer to the MD&A. References to prior year operating results are comparisons of AHIP's portfolio of 37 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 third quarter financial results conference call. In the third quarter, AHIP's current portfolio of 37 hotels returned to demonstrating strong top-line performance. Total revenue grew by 2.1%, and RevPAR finished at $106, a 1.9% improvement over Q3 2024. This increase was driven by gains in occupancy, primarily attributable to higher demand for extended stay properties. RevPAR Index, the industry's best indicator of market share, increased 170 basis points versus Q2 to end the quarter close to 117%. This is also up over 3% year over year. This metric is an indicator of the benefits of the work our team has done to high-grade our portfolio via asset dispositions over the last couple of years.
Bruce will discuss the challenges that we continue to face on certain operational expense line items with GM turnover and elevated maintenance and utilities expenses continuing to negatively impact the bottom line for AHIP and the industry as a whole. We continue to make progress on our disposition program in Q3. During the quarter, we completed the disposition of one hotel property for total gross proceeds of $17.4 million. Thus far, in 2024, AHIP has completed the disposition of 12 hotel properties for total gross proceeds of $90.8 million. After adjusting for an industry-standard 4% FF&E reserve, the combined sales price for the 12 hotel properties sold represents a blended cap rate of 6.9% on 2024 annual hotel EBITDA.
Furthermore, we have eight more properties under purchase and sale agreements for estimated total gross proceeds of $90 million, all of which are expected to close in the fourth quarter of 2025. As a reminder, AHIP's disposition efforts to this point have mainly focused on low EBITDA, high near-term CapEx properties, and markets with new supply and low demand growth. 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 two years, AHIP has made significant progress on our plan to address upcoming debt obligations with asset sales and loan refinancings. During the first three quarters of 2025, in addition to the aforementioned dispositions, AHIP completed two loan refinancings for total gross proceeds of $144.3 million.
The net proceeds from these sales, along with a portion of the proceeds from the recent loan refinancings, were used to repay the CMBS loans secured by those properties and a portion of the portfolio loan. These transactions significantly improved the loan maturity profile of AHIP's balance sheet, with December 2026 being our nearest debt maturity date. With the recently completed asset sales and refinancings, AHIP has a stable, unrestricted cash position and has sufficient time to consider alternatives to address these future obligations in an orderly manner. Alternatives may include further hotel sales, full or partial recapitalization of the Series C shares, and/or the ventures or a combination thereof. Over the remainder of 2025 and into 2026, AHIP will assess which of the marketed hotels will provide the most attractive combination of certainty, valuation, and net proceeds to address future obligations.
The number of hotel dispositions will be dependent upon, among other things, regional market factors, hotel performance, hotel size, offer levels, and whether any portion of the Series C shares and/or the ventures are recapped. In December 2024, the TSX 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. AHIP also entered into an automatic securities purchase plan with a designated broker. The ASPP allows for the purchase of units under the NCIB when AHIP would ordinarily not be permitted to purchase units due to regulatory restrictions and customary self-imposed blackout periods. We believe that our units are currently trading below their underlying value based on AHIP's assets.
As of October 31, 2025, we had purchased approximately 4.5 million units, or 5.8% of total units outstanding, at an average purchase price of CAD 0.51. I'll now turn the call over to Bruce to discuss third quarter hotel operations. Travis will then highlight key financial metrics. Bruce?
Thank you, Jonathan, and good morning, everyone. Looking at the third quarter, AHIP's portfolio of premium-branded select service hotel properties saw a RevPAR increase of 1.9%, finishing at $106. Specifically, Q3 RevPAR performance by month showed July up 2.8%, August down 1.1%, and September up 3.8%. Total revenue increased by $988,000 for our portfolio of 37 assets. Occupancy was up 68 basis points to 75% compared to the same period in 2024. An average daily rate finished at $141 for the quarter, which was 80 basis points above Q3 2024 levels. Looking at the various demand segments, leisure-linked segments were flat year over year in both the higher and lower demand segments. Government revenue grew 13% year over year due to significant project work in several markets, while broad government demand generally declined.
Group revenue dropped 3% year over year, driven by a combination of sales performance and market demand shifts. With reference to three distinct segments of our business, extended stay, select service, and our Embassy Suites hotels, the portfolio revenue growth in 2024 was driven by extended stay and select service verticals. During Q3 of this year, extended stay continued to be the strongest performing vertical in the AHIP portfolio, with RevPAR finishing at $115, or 8% above Q3 2024 levels. The select service segment achieved a RevPAR of $98. This represented a 3% decline over Q3 2024 levels. Finally, the Embassy Suites segment achieved a RevPAR of $108, up 1.1% year over year. Similar to the first half of 2025, margins continued to be pressured by the elevated operating expense environment. For our portfolio of 37 assets, the NOI margin finished at 29%, 322 basis points below Q3 2024.
Although rooms expenses are generally stable, we continue to see expenses outpace revenue growth, which has contributed to margin compression. The average hourly wage was up 0.4% versus last year. However, reliance on third-party labor increased in the quarter at a few select properties, reversing the trend of year-over-year declines seen in prior quarters. Additionally, repairs and maintenance, utilities, and labor expenses remain elevated. Turning to AHIP's capital program, total year-to-date FF&E spend is $6.8 million, and PIP spend is approximately $1.2 million. The 2025 full-year capital plan is estimated to include $2.4 million in PIPs and $9 million in FF&E improvements, respectively, with an estimated 80% funded through restricted cash contributed by AHIP in prior periods. PIP expenditures have been revised down from the prior estimate of $6.9 million due to the planned disposition of certain hotels.
AHIP currently has three hotel projects in design and procurement phases for future renovations. One project in South Hill, Virginia, started the renovation this week, and the project is planned to be substantially complete by the end of Q1 2026. Preliminary results for October show occupancy at 76%, ADR at $144, and RevPAR at $110, 1% above October 2024 RevPAR levels. With that update on hotel operations, I'll now turn the call over to Travis to highlight key financial and capital metrics for the quarter.
Thank you, Bruce. Good morning, everyone. On a same-store basis, revenue increased by 1.8% to $47 million in Q3 2025 compared to $46 million in Q3 2024. Normalized diluted funds from operations, or FFO, was $0.02 per unit for the quarter compared to normalized diluted FFO of $0.07 per unit in Q3 2024. As of September 30, 2025, AHIP had an unrestricted cash balance of $25.6 million compared to $27.8 million as of December 31, 2024. The reduction in cash is primarily due to net outflows from completing refinancings and debt repayment, which resulted in one property becoming unencumbered during the first quarter of 2025. At September 30, 2025, AHIP held a restricted cash balance of $24.7 million and had an additional $24 million available under the portfolio loan for capital improvements related to properties secured by that loan.
Debt to gross book value was 48.7% at September 30, 2025, a decrease of 60 basis points compared to December 31, 2024. Debt to EBITDA at September 30, 2025, was 9.1, an increase of 1.1 times compared to December 31, 2024. On June 26, 2025, our unitholders approved an amendment to the LP Agreement to provide the board with the discretion to cause the U.S. subsidiary to cease to qualify as a real estate investment trust. Such steps were completed in the third quarter, and the U.S. subsidiary no longer qualifies as a REIT. The U.S. subsidiary being treated as a taxable C Corp rather than a REIT provides AHIP with the necessary flexibility to manage its financial obligations and efficiently pursue potential alternatives for maximizing the value of AHIP's portfolio of assets, including asset sales or a series of asset sales.
I will now turn the call back to Jonathan for some closing remarks.
Thank you, Travis. We've made immense progress on the strategic plan we announced at the end of 2023, which has seen us high-grade our portfolio, address near-term obligations, and strengthen our balance sheet to ensure we are positioned to outperform while the outlook for our industry improves. In prior times of economic uncertainty, 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. With that overview of our third quarter results, we'll now open the call to questions from analysts. Operator?
Thank you. If you'd like to ask a question, please press star one one. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star one one again. I'm showing no questions at this time. I'd like to turn the call back over to Jonathan Korol for any further remarks.
Thanks again, everyone, for joining us on our call today. Look forward to speaking with you in March when we report our fourth quarter and full-year 2024 results.
Thank you for your participation. You may now disconnect. Everyone, have a great day.