Apple Hospitality REIT, Inc. - FORM 8-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

AMENDMENT NO. 1 TO
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Original Report (earliest event reported): November 2, 2010

APPLE REIT NINE, INC.

(Exact name of registrant as specified in its charter)


Virginia	000-53603	26-1379210
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification Number)


814 East Main Street, Richmond, Virginia		23219
(Address of principal executive offices)		(Zip Code)

(804) 344-8121

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Apple REIT Nine, Inc. hereby amends Item 9.01 of its Current Report on Form 8-K dated November 2, 2010 and filed (by the required date) on November 5, 2010 for the purpose of filing certain financial statements and information. In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment No. 1 sets forth the complete text of the item as amended.


Item 9.01	Financial Statements and Exhibits.


(a)	Financial statements of businesses acquired.

	White Lodging Hotels Portfolio (16 Hotels)

	(Audited)


Report of Independent Auditors		3
Combined Balance Sheets - December 31, 2009 and 2008		4
Combined Statements of Operations - Years Ended December 31, 2009 and 2008		5
Combined Statements of Members’/Partners’ Equity and Accumulated Comprehensive Loss – Years Ended December 31, 2009 and 2008		6
Combined Statements of Cash Flows - Years Ended December 31, 2009 and 2008		7
Notes to Combined Financial Statements		8

(Unaudited)

Combined Balance Sheets - September 30, 2010 and 2009		18
Combined Statements of Operations - For the Nine Months Ended September 30, 2010 and 2009		19
Combined Statements of Cash Flows - For the Nine Months Ended September 30, 2010 and 2009		20


(b)	Pro forma financial information.

	The below pro forma financial information pertains to the hotels referred to in the financial statements (see (a) above).

	Apple REIT Nine, Inc. (Unaudited)


Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2010		21
Notes to Pro Forma Condensed Consolidated Balance Sheet		23
Pro Forma Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 2010 and the Twelve Months Ended December 31, 2009		24
Notes to Pro Forma Condensed Consolidated Statements of Operations		27


(c)	Shell company transactions.

	Not Applicable.

(d)	Exhibits.

	None

REPORT OF INDEPENDENT AUDITORS

Members of the Board of Directors
Apple REIT Nine, Inc.
Richmond, Virginia

We have audited the accompanying combined balance sheets of White Lodging Hotel Entities, as defined in Note 1, as of December 31, 2009 and 2008, and the related statements of operations, statements of members’/partners’ equity and accumulated comprehensive loss, and cash flows for the years ended December 31, 2009 and 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of White Lodging Hotel Entities at December 31, 2009 and 2008 and the results of its operations and its cash flows for the years ended December 31, 2009 and 2008 in conformity with accounting principles generally accepted in the United States of America.

/s/ Crowe Horwath LLP

Oak Brook, Illinois
December 13, 2010

WHITE LODGING HOTEL ENTITIES

COMBINED BALANCE SHEETS

December 31, 2009 and 2008


	2009			2008

ASSETS
Current assets
Cash and cash equivalents	$	5,370,137		$	2,314,771
Escrow – tax and insurance		1,300,862			409,750
Accounts receivable		1,060,876			622,116
Prepaid expenses		262,426			185,732
Due from affiliated company		1,599,087			947,065

Total current assets		9,593,388			4,479,434

Property and equipment (Note 3)
Property and equipment		239,758,624			204,353,814
Accumulated depreciation		(32,153,524	)		(14,154,408	)

		207,605,100			190,199,406

Other assets
Restricted cash – escrow		1,086,391			374,672
Franchise fees, net of amortization		869,661			910,031
Deferred loan costs, net of amortization		1,542,215			1,909,124
Operating supplies		276,809			186,388
Deposits		274,271			618,567
Licenses		15,500			15,500

		4,064,847			4,014,282


	$	221,263,335		$	198,693,122


LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY
Current liabilities
Current portion of long-term debt (Note 6)	$	5,060,801		$	3,748,308
Current portion of the fair value of interest rate swap		500,000			560,057
Accounts payable		406,310			406,972
Due to affiliated company (Note 5)		333,460			8,050,732
Accrued payroll and payroll taxes		372,003			589,660
Accrued property taxes		2,151,161			946,283
Other accrued expenses		1,298,011			1,886,995

Total current liabilities		10,121,746			16,189,007

Fair value of interest rate swap (Note 8)		222,522			516,444
Long-term debt (Note 6)		190,324,101			150,999,079

Members’/partners’ equity		21,317,488			32,065,093
Accumulated comprehensive loss		(722,522	)		(1,076,501	)

Total members’/partners’ equity		20,594,966			30,988,592


	$	221,263,335		$	198,693,122

See accompanying notes to combined financial statements.

WHITE LODGING HOTEL ENTITIES

COMBINED STATEMENTS OF OPERATIONS

Years ended December 31, 2009 and 2008


	2009			2008

Revenue
Rooms	$	34,066,180		$	19,491,606
Food and beverage		2,251,718			1,143,964
Telephone		104,202			80,007
Vending, rent, and other		740,018			769,317

Total revenue		37,162,118			21,484,894

Department expense
Rooms		7,826,612			4,537,793
Food and beverage		1,637,303			996,670
Telephone		334,457			172,689
Vending, rent, and other		426,204			551,331

Total department expense		10,224,576			6,258,483


Department profit		26,937,542			15,226,411

Undistributed expenses
Administrative and general		3,683,325			2,482,295
Sales and promotion		3,342,927			1,873,871
Franchise fees		1,175,458			657,796
Utilities		2,059,100			1,249,746
Repairs and maintenance		1,571,890			1,006,669

Total undistributed expenses		11,832,700			7,270,377


House profit		15,104,842			7,956,034

Other expenses
Property tax		2,883,283			1,349,485
Property insurance		532,048			290,909


Income before management fees and other expense		11,689,511			6,315,640

Management fees		1,288,103			730,197


Income before other expense		10,401,408			5,585,443

Other (income) expense
Depreciation and amortization		18,472,740			12,820,543
Interest expense (net)		4,806,494			3,606,097
Preopening expenses		1,458,905			2,654,662
Other		(139,126	)		323,128

Total other expense		24,599,013			19,404,430


Net loss	$	(14,197,605	)	$	(13,818,987	)

See accompanying notes to combined financial statements.

WHITE LODGING HOTEL ENTITIES
COMBINED STATEMENTS OF MEMBERS’/PARTNERS’ EQUITY
AND ACCUMULATED COMPEHENSIVE LOSS
Years ended December 31, 2009 and 2008


	Members/ Partners’ Equity			Accumulated Comprehensive Loss			Total Members’/ Partners’ Equity			Compre- hensive Loss


Balances, January 1, 2008	$	38,484,680		$	—		$	38,484,680

Contributions from members		8,699,400			—			8,699,400

Distributions to members		(1,300,000	)		—			(1,300,000	)

Comprehensive loss:
Net loss		(13,818,987	)		—			(13,818,987	)	$	(13,818,987	)
Unrealized loss on hedging activities, net		—			(1,076,501	)		(1,076,501	)		(1,076,501	)


Total comprehensive loss										$	(14,895,488	)


Balances, December 31, 2008		32,065,093			(1,076,501	)		30,988,592

Contributions from members/partners		3,750,000			—			3,750,000

Distributions to members		(300,000	)		—			(300,000	)

Comprehensive loss:
Net loss		(14,197,605	)		—			(14,197,605	)	$	(14,197,605	)
Unrealized gain on hedging activities, net		—			353,979			353,979			353,979


Total comprehensive loss										$	(13,843,626	)


Balances, December 31, 2009	$	21,317,488		$	(722,522	)	$	20,594,966

See accompanying notes to combined financial statements.

WHITE LODGING HOTEL ENTITIES
COMBINED STATEMENTS OF CASH FLOWS
Years ended December 31, 2009 and 2008


	2009			2008

Cash flows from operating activities
Net loss	$	(14,197,605	)	$	(13,818,987	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation		17,999,116			12,617,222
Amortization		473,624			203,321
Increase in assets
Escrow – tax and insurance		(891,111	)		(409,750	)
Accounts receivable		(438,760	)		(569,590	)
Prepaid expenses		(80	)		(150,057	)
Due from affiliated company		(51,535	)		(416,677	)
Increase/(decrease) in liabilities
Accounts payable		(662	)		(59,704	)
Due to affiliated company		156,509			6,669
Accrued payroll and payroll taxes		(217,659	)		372,560
Accrued property taxes		1,204,878			729,979
Other accrued expenses		(589,021	)		(1,350,630	)

Net cash provided by (used in) operating activities		3,447,694			(2,845,644	)

Cash flows from investing activities
Capital expenditures for property and equipment		(35,669,369	)		(103,647,602	)
Refund for capital expenditures		152,207			—
Restricted cash		(711,719	)		(324,779	)
Franchise fees		—			(285,000	)
Operating supplies		(90,421	)		313,569
Deposits		344,296			(40,417	)

Net cash used in investing activities		(35,975,006	)		(103,984,429	)

Cash flows from financing activities
Proceeds from issuance of debt		44,363,549			98,427,232
Principal payments on debt		(3,726,034	)		(561,433	)
Due to affiliated company		(8,438,489	)		4,069,904
Deferred loan costs		(66,348	)		(890,405	)
Contributions from members/partners		3,750,000			8,699,400
Distributions to members		(300,000	)		(1,300,000	)

Net cash provided by financing activities		35,582,678			108,444,698


Net change in cash and cash equivalents		3,055,366			1,614,625

Cash and cash equivalents at beginning of year		2,314,771			700,146


Cash and cash equivalents at end of year	$	5,370,137		$	2,314,771


Supplemental disclosure of cash flow information
Cash paid during the year for interest, net of interest capitalized	$	4,847,157		$	3,553,511

See accompanying notes to combined financial statements.

WHITE LODGING HOTEL ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 2009 and 2008

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Basis of Combination: The accompanying combined financial statements include the accounts of the following group of entities (collectively “White Lodging Hotel Entities or the Company”):


	•	Fishspring, LLC which owns and operates a Springhill Suites by Marriott located in Fishers, Indiana. The hotel opened for operations on May 14, 2007.

	•	Mishares, LLC which owns and operates a Residence Inn by Marriott located in Mishawaka, Indiana. The hotel opened for operations on August 25, 2007.

	•	Whiteco Industries, Inc. which owns and operates an Embassy Suites by Hilton located in Tampa, Florida. The hotel opened for operations on December 6, 2007.

	•	Happy Valley Res, LLC which owns and operates a Courtyard by Marriott and a Residence Inn by Marriott, both of which are located in Phoenix, Arizona. The hotels opened for operations on December 28, 2007 and January 28, 2008.

	•	Mettares, LLC which owns and operates a Residence Inn by Marriott located in Mettawa, Illinois. The hotel opened for operations on May 16, 2008.

	•	Mettawhite, LLC which owns and operates a Hilton Garden Inn located in Mettawa, Illinois. The hotel opened for operations on May 22, 2008.

	•	Parmer Lane Associates III, L.P. which owns and operates a Hilton Garden Inn located in Austin, Texas. The hotel opened for operations on May 30, 2008.

	•	Etkin White Novi, LLC which owns and operates a Hilton Garden Inn located in Novi, Michigan. The hotel opened for operations on August 20, 2008.

	•	Warriwhite, LLC which owns and operates a Hilton Garden Inn located in Warrenville, Illinois. The hotel opened for operations on September 26, 2008.

	•	Schwhite, LLC which owns and operates a Hilton Garden Inn located in Schaumburg, Illinois. The hotel opened for operations on October 31, 2008.

	•	Slicspring, LLC which owns and operates a Springhill Suites by Marriott located in Salt Lake City, Utah. The hotel opened for operations on February 13, 2009.

	•	Ausnorth FFIS Hotel, LLC which owns and operates a Fairfield Inn and Suites by Marriott located in Austin, Texas. The hotel opened for operations on April 10, 2009.

	•	Ausnorth CY Hotel, LLC which owns and operates a Courtyard by Marriott located in Austin, Texas. The hotel opened for operations on July 10, 2009.

	•	Chanprice, LLC which owns and operates a Courtyard by Marriott and a Fairfield Inn and Suites by Marriott, both of which are located in Chandler, Arizona. Both hotels opened for operations on September 18, 2009.

The Company is managed by White Lodging Services, Corp., a related party as discussed in Note 5. All material intercompany accounts have been eliminated.

(Continued)

WHITE LODGING HOTEL ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 2009 and 2008

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents: Cash and cash equivalents include deposits in financial institutions and certificates of deposit with maturities of 90 days or less when acquired.

Accounts Receivable: The Company accounts for trade receivables based on the amounts billed to customers. The Company does not accrue interest on any of its trade receivables. The Company periodically reviews outstanding accounts for potential losses of receivables based on existing economic conditions and historical relationships with customers. Management has determined no allowance on the receivable accounts is necessary as of December 31, 2009 and 2008.

Depreciation: Property and equipment are carried at cost less accumulated depreciation. Depreciation is provided on the property and equipment over their estimated useful lives. The Company computes depreciation using an accelerated depreciation method.

Financial Instruments: The carrying values of accounts receivable, accounts payable, and current and long-term debt approximate fair value. The fair value of the derivative instrument is based on the amount the Company would receive or pay to terminate the agreement as of December 31, 2009 and 2008.

Revenue Recognition: Revenue is recognized as services are provided.

Franchise Fees: Franchise fees are carried at cost less accumulated amortization and are being amortized on a straight-line basis over 20 years, with the exception of one hotel entity, which is being amortized over 30 years. At December 31, 2009 and 2008, accumulated amortization was $65,940 and $25,570, respectively.

Deferred Loan Costs: Costs incurred to obtain debt financing are deferred and amortized over the life of the relating debt using the straight-line method, which approximates the effective interest method. At December 31, 2009 and 2008, accumulated amortization was $626,799 and $193,544, respectively.

Expected future amortization of franchise fees and deferred loan costs for the five years subsequent to December 31, 2009 are as follows:


2010	$	554,294
2011		550,671
2012		375,672
2013		148,469
2014		101,122

Preopening Expenses: Preopening expenses consist of wages and other period expenses incurred prior to the opening of the hotel.

Comprehensive Loss: Comprehensive loss includes both the net loss and other comprehensive income (loss). Other comprehensive income (loss) represents the change in unrealized gains and losses on hedging activities.

(Continued)

WHITE LODGING HOTEL ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 2009 and 2008

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment of Long-Lived Assets: On an ongoing basis, the Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amounts may be overstated. The Company recognizes impairment losses if the undiscounted cash flows expected to be generated by the asset are less than the carrying value of the related asset. The impairment loss adjusts the assets to fair value. As of December 31, 2009 and 2008, management believes that no impairments existed.

Adoption of New Accounting Standards: The Company adopted guidance issued by the FASB with respect to accounting for uncertainty of income taxes as of January 1, 2009. A tax position is recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The effect of adopting this new guidance had no impact.

The Company recognizes interest and penalties related to unrecognized tax benefits in interest and income tax expense, respectively. The Company has no amounts accrued for interest or penalties as of December 31, 2009. The Company is subject to examination by taxing authorities for the years 2007 through 2009. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months.

NOTE 2 - INCOME TAXES

The combined financial statements include limited liability companies, one S-corporation and one partnership entity. Under Section 7701A.2 of the Internal Revenue Code and a similar section of the state income tax law, the limited liability companies and S-corporations will be treated as a partnership for tax purposes. A partnership is not subject to income taxes. Each member or partner reports their distributive share of the Company’s profit or loss on their personal income tax return.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2009 and 2008 consisted of the following:


	2009			2008


Land	$	20,378,513		$	12,660,996
Building and building improvements		152,368,420			108,128,323
Land improvements		17,315,595			13,677,769
Furniture, fixtures, and equipment		49,696,096			36,456,289
Construction in progress		—			33,430,437


		239,758,624			204,353,814
Accumulated depreciation		(32,153,524	)		(14,154,408	)


	$	207,605,100		$	190,199,406

(Continued)

WHITE LODGING HOTEL ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 2009 and 2008

NOTE 4 - FRANCHISE AGREEMENTS

Franchise fees are computed in accordance with the terms of individual franchise agreements between the Company and Marriott International, Inc., Hilton Inns, Inc. and Promus Hotels, Inc. The agreements are for periods ranging from 20-30 years from the opening date of the hotels, with several including a 10-year renewal option. As of December 31, 2009 and 2008, franchise fees are computed between 3% to 5% and 2% to 5%, respectively, of the gross room revenues, as defined in the agreements. Additionally, as of December 31, 2009 and 2008, the agreements require marketing fees to be paid on 2% to 3.8% and 2% to 4.3%, respectively, of the gross room revenues, as defined in the agreements.

As an incentive to open additional hotels, three entities of the Company entered into a Development Incentive Program with Marriott International, Inc. whereby the entities may not be required to pay franchise fees if the conditions of the Development Agreement were met. The three entities met the conditions and, as a result, will not be required to pay franchise fees for a period of 18 to 24 months from the opening of the hotel.

During the years ended December 31, 2009 and 2008, franchise fee expense was $1,175,458 and $657,796, respectively, and marketing fee expense was $1,056,150 and $583,324, respectively.

NOTE 5 - RELATED-PARTY TRANSACTIONS

The Company has entered individual management agreements with White Lodging Services Corp., an entity related through common ownership. The agreements expire between December 31, 2026 and December 31, 2028 and have two 10-year renewal options with the exception of one agreement that does not have a renewal option. The agreements provide for base and incentive management fees. Base management fees are calculated between 3% and 3.5% of gross revenue, as defined, and incentive management fees are based upon achieving certain performance levels, as defined in the agreements. Base management fees for 2009 and 2008 were $1,280,994 and $730,179, respectively. Incentive management fees for 2009 and 2008 were $7,109 and $0, respectively.

Due from/to affiliated company at December 31, 2009 and 2008 represent the balance arising from construction related costs and intercompany transactions with White Lodging Services Corp. The Company was charged interest on these advances at the prime rate of interest. The total interest capitalized on these advances during 2009 and 2008 was $39,295 and $126,015, respectively, and the total interest expensed was $110,725 and $235,562, respectively.

Included in capitalized costs is $998,752 and $1,810,169 in development fees from White Lodging Services Corp. and other entities related to the Company through common ownership as of December 31, 2009 and 2008, respectively.

Under the terms of the management agreements, the Company, with the exception of two entities, is required to deposit into a furniture, fixtures, and equipment reserve a percentage of the gross revenues. From the opening date through the first full year of operations, the percentage is 2% and increases in 1% increments each year to a maximum of 5% for the remaining term of the management agreements.

(Continued)

WHITE LODGING HOTEL ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

Years ended December 31, 2009 and 2008

NOTE 6 - LONG-TERM DEBT

The Company had the following long-term debt obligation at December 31, 2009 and 2008:


	2009		2008


Construction loan dated October 3, 2006 in the original amount of $9,720,000 with interest-only payments at prime minus 1% until December 1, 2008, at which time the construction loan was converted to a 60-month term loan with interest at prime minus 1% (2.25% at December 31, 2009 and 2008, respectively). Principal and interest payments are due monthly upon conversion until December 1, 2013, at which time a balloon payment of approximately $8,219,000 is due. Under the loan agreement, the Company is required to maintain a minimum cash flow coverage ratio, as defined. At December 31, 2009, the Company was in compliance with the covenant. The term loan is secured by furniture, fixtures and equipment and is partially guaranteed by the members of the Company.	$	9,403,183	$	9,698,797

Construction loan dated November 1, 2006 with a total commitment amount of $8,850,000 with interest-only payments at prime minus 1% until December 19, 2008, at which time the construction loan was converted to a 36-month term loan with interest at prime, subject to a floor of 4.5% (4.5% as of December 31, 2009 and 2008, respectively). Principal and interest payments are due monthly upon conversion until December 19, 2011, at which time a balloon payment of approximately $8,004,000 is due. Under the term loan, the Company is required to maintain a minimum debt service coverage ratio, as defined. At December 31, 2009, the Company was not in compliance with the covenant, but subsequently obtained the appropriate waiver on February 22, 2010. The term loan is secured by property, furniture, fixtures, and equipment. In addition, the term loan is guaranteed by one of the members of the Company.		8,572,416		8,850,000

Construction loan dated November 22, 2006 in the original amount of $25,000,000 with interest-only payments at prime minus 1.00% until June 1, 2008, at which time the construction loan was converted to a term loan with interest at prime minus 1.00% (2.25% at December 31, 2009 and 2008, respectively). Monthly principal and interest payments are due until November 22, 2011, at which time a balloon payment of approximately $21,586,000 is due. The loan is secured by property, furniture, fixtures, and equipment. In addition, the loan is guaranteed by the members of the Company.		23,560,640		24,611,363

Real estate loan dated March 20, 2007 with a total commitment amount of $11,315,000 with interest at prime minus 1.00% (3.25% and 2.25% at December 31, 2009 and 2008, respectively). On June 22, 2009, an interest rate floor of 3.25% was set in exchange for the release of a member’s guaranty. Interest-only payments were due until October 22, 2008. Currently, monthly principal and interest payments are due until March 22, 2012, at which time a balloon payment of approximately $10,431,000 is due. The loan is secured by property, furniture, fixtures, and equipment.		10,953,429		11,240,633

(Continued)

WHITE LODGING HOTEL ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

Years ended December 31, 2009 and 2008

NOTE 6 - LONG-TERM DEBT (Continued)


	2009		2008


Construction loan dated April 25, 2007 with a total commitment amount of $17,280,000 with interest-only payments at 30 day LIBOR plus 1.75% (3.65% at December 31, 2008) until April 24, 2009. At this time, the construction loan was converted to a 36-month term loan with interest at 30 day LIBOR plus 1.75% (1.99% at December 31, 2009). Fixed principal payments of $42,666 plus additional interest are due monthly until April 24, 2012, at which time a balloon payment of approximately $15,787,000 is due. The term loan is secured by property, furniture, fixtures, and equipment. In addition, the term loan is partially guaranteed by one of the members of the Company.	$	16,938,668	$	17,280,000

Construction loan dated April 25, 2007 with a total commitment amount of $16,042,500 with interest-only payments at 30-day LIBOR plus 1.75% (3.65% at December 31, 2008) until April 24, 2009. At this time the construction loan was converted to a 36-month term loan with interest at 30-day LIBOR plus 1.75% (1.99% at December 31, 2009). Fixed principal payments of $39,611 plus additional interest are due monthly until April 24, 2012, at which time a balloon payment of approximately $14,656,000 is due. The term loan is secured by property, furniture, fixtures, and equipment. In addition, the term loan is partially guaranteed by one of the members of the Company.		15,725,613		16,042,500

Real estate loan dated September 26, 2007 with a total commitment amount of $18,459,000 at a rate of Prime minus 1% (2.25% as of December 31, 2009 and 2008, respectively). Interest-only payments were due until March 26, 2009. At this point, monthly principal and interest payments, based on an original loan balance of $16,962,131, are due until September 26, 2012, at which time a balloon payment of approximately $14,901,000 is due. The loan is secured by property, furniture, fixtures, and equipment. In addition, the loan is guaranteed by one of the members of the Company		16,524,165		14,270,622

Real estate loan dated October 3, 2007 with a total commitment amount of $15,320,000 with interest at 30-day LIBOR plus 1.75% (1.99% and 3.65% at December 31, 2009 and 2008, respectively). Interest-only payments were due through October 1, 2009. At this point, based on an original loan balance of $14,875,996, monthly fixed principal payments of $27,000 with additional interest are due until November 1, 2012, at which time a balloon payment of approximately $13,904,000 is due. The loan is secured by property, furniture, fixtures, and equipment. In addition, the loan is guaranteed by related parties of the members of the Company.		14,794,996		14,601,189

Construction loan dated October 15, 2007 with a total commitment amount of $15,192,000 with interest-only payments at 30-day LIBOR plus 1.90% (3.34% at December 31, 2008) until April 1, 2009. At this time, the construction loan was converted to a 60-month term loan with interest fixed at the 5-year U.S. Treasury Note rate plus 1.90% (3.55% at December 31, 2009) and an original loan balance of $14,358,410. Principal and interest payments are due monthly upon conversion until April 1, 2014, at which time, a balloon payment of approximately $11,718,000 is due. The term loan is secured by property, furniture, fixtures, and equipment. In addition, the term loan is partially guaranteed by one of the members of the Company.		13,984,054		12,263,959

(Continued)

WHITE LODGING HOTEL ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

Years ended December 31, 2009 and 2008

NOTE 6 - LONG-TERM DEBT (Continued)


	2009			2008


Construction loan dated November 29, 2007 with a total commitment amount of $14,000,000 and interest at a rate of Prime minus 1% (2.25% at December 31, 2009). Interest-only payments were due until June 1, 2009. At this point, with an original loan balance of $13,334,764, monthly principal and interest payments are due until December 1, 2012, at which time a balloon payment of approximately $11,930,000 is due. The loan is secured by property, furniture, fixtures, and equipment. In addition, the loan is guaranteed by the members of the Company.	$	13,103,271		$	7,801,965

Construction loan dated April 18, 2008 with a total commitment amount of $12,780,000 with interest-only payments at Prime minus .25% (3.0% at December 31, 2009) until April 1, 2010, at which time the construction loan can be converted to a 36-month term loan. The term loan has interest rate options of a variable rate of 30-day LIBOR plus 2.25% or a fixed rate of the Three Year U.S. Treasury plus 2.25% with a floor of 6.5%. The term loan will have 12 months of interest-only payments followed by 24 months of principal and interest payments until April 1, 2013, at which time a balloon payment is due. The loan is secured by property, furniture, fixtures, and equipment. In addition, the loan is partially guaranteed by a related party of the members of the Company.		11,966,750			6,434,660

Construction loan dated June 18, 2008 with a total commitment amount of $13,950,000 with interest-only payments at Prime minus .25% (3.0% at December 31, 2009) until June 1, 2010, at which time the construction loan can be converted to a 36-month term loan. The term loan has interest rate options of a variable rate of 30-day LIBOR plus 2.25% or a fixed rate of the Three Year U.S. Treasury plus 2.25% with a floor of 6.5%. The term loan will have 12 months of interest-only payments followed by 24 months of principal and interest payments until June 1, 2013, at which time a balloon payment of approximately $12,979,000 is due. The loan is secured by property, furniture, fixtures, and equipment. In addition, the loan is partially guaranteed by a related party of the members of the Company.		12,987,611			3,887,105

Construction loan effective August 2, 2008 with a total commitment amount of $28,890,000 with interest-only payments at 30-day LIBOR plus 1.9% (2.14% at December 31, 2009) until August 1, 2010, at which time the construction loan can be converted to a 60-month term loan with interest at a fixed rate of the Five Year U.S. Treasury plus 1.9%. Principal and interest payments will be due monthly upon conversion until August 1, 2015, at which time a balloon payment of approximately $24,306,000 is due. The construction loan is secured by property, furniture, fixtures, and equipment. In addition, the construction loan is guaranteed by one of the members of the Company.		26,870,106			7,764,594


		195,384,902			154,747,387
Current portion		(5,060,801	)		(3,748,308	)


	$	190,324,101		$	150,999,079

(Continued)

WHITE LODGING HOTEL ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS

Years ended December 31, 2009 and 2008

NOTE 6 - LONG-TERM DEBT (Continued)

Long-term debt maturities for the years subsequent to December 31, 2009 are as follows:


2010	$	5,060,801
2011		35,627,537
2012		85,542,105
2013		33,525,243
2014		12,817,544
Thereafter		22,811,672


	$	195,384,902

During 2009 and 2008, the Company capitalized interest of $412,731 and 1,200,217, respectively, relating to the construction of the hotels.

NOTE 7 - FINANCIAL DERIVATIVES

As a result of financing activities, the Company is exposed to changes in interest rates which may adversely affect its results of operations and financial condition. In seeking to minimize the risks and/or costs associated with such activities, the Company manages exposure to changes in interest rates through its regular operating and financing activities and, when deemed appropriate, through the use of swap agreements. On February 27, 2008, the Company entered into an interest rate swap agreement which expires on June 1, 2011. Under the agreement, the rate of interest on $18,750,000 of variable rate debt at June 1, 2008 was converted to a fixed interest rate of 5.18%. The variable rate averaged 2.25% and 3.61% for 2009 and 2008, respectively.

The Company accounts for this instrument as a cash flow hedge and considers the hedge to be highly effective. Any ineffective amounts are considered not to be significant. As a result, the Company records the derivative instrument as an asset or liability at its fair value, with any unrealized gains or losses recognized as other comprehensive income (loss) in the statement of members’/partners’ equity. In 2009 and 2008, the Company recognized an unrealized gain of $353,979 and an unrealized loss of $1,076,501, respectively, relating to the swap agreement. The net settlements on the interest rate swap ($560,057 in 2009 and $177,484 in 2008) are included in interest expense in the combined statements of operations. The Company expects to hold this swap through its term, and the fair value of the swap will reverse out of other comprehensive income with the passage of time.

Below is a summary of the interest rate swap classification on the balance sheet:


		Fair Value of Interest Rate Swap
	Balance Sheet Location	2009		2008


Interest rate swap
	Current liabilities		500,000		560,057
	Long-term liabilities		222,522		516,444


		$	722,522	$	1,076,501

The ability of the Company to realize the benefit of this arrangement is dependent upon the creditworthiness of the counterparty, which the Company expects will perform in accordance with the terms of the swap.

(Continued)

WHITE LODGING HOTEL ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS

Years ended December 31, 2009 and 2008

NOTE 8 - FAIR VALUE

The Company accounts for items requiring fair value using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs within the fair value hierarchy are defined as follows:


	Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

	Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

	Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability

The interest rate swap does not have observable market quotes. For this financial instrument, the related Company’s swap counterparty provides a periodic valuation using the difference between the fixed rate paid by the related Company and the counterparty’s interest rate forecast discounted at the swap yield curve. The model is based on observable inputs for forward interest rates and discount rates. As such, this derivative instrument is classified within Level 2 of the fair value hierarchy.


	2009			2008


Fair value of interest rate swap	$	(722,522	)	$	(1,076,501	)

NOTE 9 – OTHER COMPREHENSIVE INCOME (LOSS)

The activity relating to hedging transactions included in other comprehensive income (loss) in 2009 and 2008 is as follows:


	2009			2008


Net settlements on the interest rate swap reclassified from other comprehensive income to interest expense	$	560,057		$	177,484
Changes in fair value of the interest rate swap		(206,078	)		(1,253,485	)


Unrealized gain (loss) on hedging activities	$	353,979		$	(1,076,501	)

The amount expected to be reclassified from other comprehensive income (loss) to interest expense in 2010 is approximately $412,000.

NOTE 10 - CASH CONCENTRATION

At December 31, 2009, the Company had deposits in a financial institution of $7,143,368. Due to the Company’s participation in the Transaction Account Guarantee Program, these deposits are unlimitedly secured by the FDIC.

(Continued)

WHITE LODGING HOTEL ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS

Years ended December 31, 2009 and 2008

NOTE 11 - SUBSEQUENT EVENTS

On September 10, 2010, White Lodging Hotel Entities entered into agreements with Apple Nine Hospitality Ownership, Inc. or its affiliates for the sale of the 16 hotels. On November 2, 2010, the transaction was completed. As part of the transaction, all of the related debt and the interest rate swap were paid off. In addition, the existing management agreements were terminated and new management agreements were entered into between Apple Nine Hospitality Ownership, Inc.’s affiliate and White Lodging Services Corporation.

During the sale of the hotels, three of the entities renegotiated franchise agreement terms with Marriott International, Inc. discussed in note 4. The terms were extended from 20-year agreements with a 10-year renewal option from the opening date of the hotels to 30-year agreements with a 10-year renewal option.

The Company has evaluated subsequent events through December 13, 2010, the date the financial statements were available to be issued.

WHITE LODGING HOTEL ENTITES

COMBINED BALANCE SHEETS (UNAUDITED)

September 30, 2010 and 2009


	2010			2009

ASSETS
Current assets
Cash and cash equivalents	$	10,468,864		$	5,793,024
Escrow – tax and insurance		2,067,139			1,073,790
Accounts receivable		1,119,636			921,505
Prepaid expenses		460,807			426,372
Due from affiliated company		2,459,964			1,594,257

Total current assets		16,576,410			9,808,948

Property and equipment
Property and equipment		239,900,590			236,508,653
Accumulated depreciation		(44,408,370	)		(27,193,958	)

		195,492,220			209,314,695

Other assets
Restricted cash – escrow		2,063,323			1,125,804
Franchise fees, net of amortization		835,326			882,051
Deferred loan costs, net of amortization		1,199,455			1,662,555
Operating supplies		280,512			277,267
Deposits		186,120			452,672
Licenses		15,500			15,500

		4,580,236			4,415,849


	$	216,648,866		$	223,539,492


LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	6,091,527		$	4,842,128
Current portion of the fair value of interest rate swap		420,012			359,444
Accounts payable		533,698			695,178
Due to affiliated company		1,858,202			5,424,604
Accrued payroll and payroll taxes		882,800			915,582
Accrued property taxes		2,724,738			2,582,979
Other accrued expenses		2,350,684			1,976,329

Total current liabilities		14,861,661			16,796,244

Fair value of interest rate swap		—			420,012
Long-term debt		186,610,453			186,311,492

Members’/partners’ equity		15,596,764			20,791,200
Accumulated comprehensive loss		(420,012	)		(779,456	)

Total members’/partners’ equity		15,176,752			20,011,744


	$	216,648,866		$	223,539,492

WHITE LODGING HOTEL ENTITIES

COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)

For the nine months ended September 30, 2010 and 2009


	2010			2009

Revenue
Rooms	$	34,115,556		$	25,041,751
Food and beverage		2,162,938			1,787,486
Telephone		99,186			72,188
Vending, rent, and other		518,461			411,836

Total revenue		36,896,141			27,313,261

Department expense
Rooms		7,333,817			5,700,735
Food and beverage		1,657,554			1,348,575
Telephone		307,004			230,845
Vending, rent, and other		201,395			159,096

Total department expense		9,499,770			7,439,251


Department profit		27,396,371			19,874,010

Undistributed expenses
Administrative and general		3,543,882			2,889,265
Sales and promotion		3,240,813			2,512,275
Franchise fees		1,697,655			855,270
Utilities		1,838,174			1,543,042
Repairs and maintenance		1,322,115			1,166,366

Total undistributed expenses		11,642,639			8,966,218


House profit		15,753,732			10,907,792

Other expenses
Property tax		2,883,855			2,450,326
Property insurance		419,921			363,053


Income before management fees and other expense		12,449,956			8,094,413

Management fees		1,275,271			947,389


Income before other expense		11,174,685			7,147,024

Other (income) expense
Depreciation and amortization		12,647,402			13,373,033
Interest expense (net)		4,241,493			3,414,284
Preopening expenses		11,285			1,694,523
Other		(4,772	)		(60,923	)

Total other expense		16,895,408			18,420,917


Net loss	$	(5,720,723	)	$	(11,273,893	)

WHITE LODGING HOTEL ENTITIES

COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the nine months ended September 30, 2010 and 2009


	2010			2009

Cash flows from operating activities
Net loss	$	(5,720,723	)	$	(11,273,893	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation		12,254,846			13,039,609
Amortization		392,556			333,424
Increase in assets
Escrow – tax and insurance		(766,277	)		(664,040	)
Accounts receivable		(58,760	)		(299,389	)
Prepaid expenses		(198,381	)		(240,640	)
Due from affiliated company		(822,372	)		(1,415,781	)
Decrease in liabilities
Accounts payable		127,388			288,207
Due to affiliated company		1,042,613			909,520
Accrued payroll and payroll taxes		511,304			325,922
Accrued property taxes		573,577			1,636,696
Other accrued expenses		1,052,165			89,297

Net cash provided by operating activities		8,387,936			2,728,932

Cash flows from investing activities
Capital expenditures for property and equipment		(141,968	)		(32,841,785	)
Refund for capital expenditures		—			180,679
Restricted cash		(976,931	)		(751,134	)
Operating supplies		(3,702	)		415,427
Deposits		88,150			165,897

Net cash used in investing activities		(1,034,451	)		(32,830,916	)

Cash flows from financing activities
Proceeds from issuance of debt		1,003,192			38,882,515
Principal payments on debt		(3,686,111	)		(2,476,283	)
Due to affiliated company		443,624			(2,767,061	)
Deferred loan costs		(15,463	)		(58,934	)

Net cash provided by (used in) financing activities		(2,254,758	)		33,580,237


Net change in cash and cash equivalents		5,098,727			3,478,253

Cash and cash equivalents at beginning of year		5,370,137			2,314,771


Cash and cash equivalents at end of year	$	10,468,864		$	5,793,024


Supplemental disclosure of cash flow information
Cash paid during the year for interest, net of interest capitalized in 2009	$	4,224,716		$	3,469,490

Apple REIT Nine, Inc.
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2010 (unaudited)

The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Apple REIT Nine, Inc. gives effect to the following hotel acquisitions:


Franchise	Location	Gross Purchase Price (millions)		Actual Acquisition Date


White Lodging Hotels Portfolio (16 Hotels):
SpringHill Suites	Indianapolis, IN	$	12.8	November 2, 2010
Residence Inn	Mishawaka, IN		13.7	November 2, 2010
Courtyard	Phoenix, AZ		16.0	November 2, 2010
Reidence Inn	Phoeniz, AZ		14.0	November 2, 2010
Residence Inn	Lake Forest/Mettawa, IL		23.5	November 2, 2010
Hilton Garden Inn	Lake Forest/Mettawa, IL		30.5	November 2, 2010
Hilton Garden Inn	Austin, TX		16.0	November 2, 2010
Hilton Garden Inn	Novi, MI		16.2	November 2, 2010
Hilton Garden Inn	Warrenville, IL		22.0	November 2, 2010
Hilton Garden Inn	Schaumburg, IL		20.5	November 2, 2010
SpringHill Suites	Salt Lake City, UT		17.5	November 2, 2010
Fairfield Inn & Suites	Austin, TX		17.8	November 2, 2010
Courtyard	Austin, TX		20.0	November 2, 2010
Courtyard	Chandler, AZ		17.0	November 2, 2010
Fairfield Inn & Suites	Chandler, AZ		12.0	November 2, 2010
Embassy Suites	Tampa, FL		21.8	November 2, 2010


		$	291.3

This Pro Forma Condensed Consolidated Balance Sheet also assumes that all of the hotels had been leased to one of our wholly-owned taxable REIT subsidiaries pursuant to a master hotel lease arrangement. The hotels acquired will be managed by White Lodging Services Corporation.

Such pro forma information is based in part upon the historical Consolidated Balance Sheet of Apple REIT Nine, Inc. and the historical balance sheets of the hotel properties.

The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Apple REIT Nine, Inc. is not necessarily indicative of what the actual financial position would have been assuming such transactions had been completed as of September 30, 2010, nor does it purport to represent the future financial position of Apple REIT Nine, Inc.

The unaudited Pro Forma Condensed Consolidated Balance Sheet should be read in conjunction with, and is qualified in its entirety by, the historical balance sheets of the acquired hotels, as included in this document.

Balance Sheet as of September 30, 2010 (unaudited)
(In thousands, except share data)


	Company Historical Balance Sheet			Pro forma Adjustments			Total Pro forma


ASSETS
Investment in real estate, net	$	1,086,795		$	292,313	(A)	$	1,379,108
Cash and cash equivalents		411,473			(297,414	) (D)		114,059
Other assets, net		46,816			351	(C)		47,167

Total Assets	$	1,545,084		$	(4,750	)	$	1,540,334



LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Notes payable	$	85,852		$	—		$	85,852
Accounts payable and accrued expenses		9,730			1,951	(C)		11,681

Total Liabilities		95,582			1,951			97,533


Preferred stock, authorized 30,000,000 shares		—			—			—
Series A preferred stock, no par value, authorized 400,000,000 shares		—			—			—
Series B convertible preferred stock, no par value, authorized 480,000 shares		48			—			48
Common stock, no par value, authorized 400,000,000 shares		1,566,111			—			1,566,111
Distributions greater than net income		(116,657	)		(6,701	) (B)		(123,358	)

Total Shareholders’ Equity		1,449,502			(6,701	)		1,442,801

Total Liabilities and Shareholders’ Equity	$	1,545,084		$	(4,750	)	$	1,540,334

Notes to Pro Forma Condensed Consolidated Balance Sheet (unaudited)


(A)	The estimated total purchase price for the 16 properties that have been purchased after September 30, 2010 consists of the following. This purchase price allocation is preliminary and subject to change.


(In thousands)	Indianapolis, IN SpringHill Suites			Mishawaka, IN Residence Inn			Phoenix, AZ Courtyard			Phoeniz, AZ Reidence Inn			Lake Forest/ Mettawa, IL Residence Inn			Lake Forest/ Mettawa, IL Hilton Garden Inn			Austin, TX Hilton Garden Inn		Novi, MI Hilton Garden Inn		Warrenville, IL Hilton Garden Inn

Purchase price per contract	$	12,800		$	13,700		$	16,000		$	14,000		$	23,500		$	30,500		$	16,000	$	16,200	$	22,000
Other capitalized costs (credits) incurred		52			60			82			65			65			74			65		65		65

Investment in hotel properties		12,852			13,760			16,082			14,065			23,565			30,574			16,065		16,265		22,065

Acquisition fee payable to Apple Suites Realty Group (2% of purchase price per contract)		256			274			320			280			470			610			320		324		440
Other acquisition related costs		38			42			42			39			53			51			74		48		42
Net other assets/(liabilities) assumed		(178	)		(333	)		(84	)		(17	)		(230	)		(305	)		6		128		(155	)

Total purchase price	$	12,968		$	13,743		$	16,360		$	14,367		$	23,858		$	30,930		$	16,465	$	16,765	$	22,392


(In thousands)	Schaumburg, IL Hilton Garden Inn			Salt Lake City, UT SpringHill Suites			Austin, TX Fairfield Inn & Suites			Austin, TX Courtyard		Chandler, AZ Courtyard			Chandler, AZ Fairfield Inn & Suites			Tampa, FL Embassy Suites			Total Combined

Purchase price per contract	$	20,500		$	17,500		$	17,750		$	20,000	$	17,000		$	12,000		$	21,800		$	291,250
Other capitalized costs (credits) incurred		72			57			60			73		75			50			83			1,063

Investment in hotel properties		20,572			17,557			17,810			20,073		17,075			12,050			21,883			292,313	(A)

Acquisition fee payable to Apple Suites Realty Group (2% of purchase price per contract)		410			350			355			400		340			240			436			5,825	(B)
Other acquisition related costs		46			70			78			90		42			42			79			876	(B)
Net other assets/(liabilities) assumed		(320	)		(4	)		(10	)		22		(71	)		(38	)		(11	)		(1,600	) (C)

Total purchase price	$	20,708		$	17,973		$	18,233		$	20,585	$	17,386		$	12,294		$	22,387		$	297,414	(D)


(B)	Represents costs incurred to complete the acquisition, including, title, legal, accounting and other related costs, as well as the commission paid to Apple Suites Realty Group totaling 2% of purchase price per contract. These costs are expensed for acquisitions of existing businesses that occur on or after January 1, 2009.

(C)	Represents other assets and liabilities assumed in the acquisition of the hotel including, operational charges and credits and accrued property taxes.

(D)	Represents the reduction of cash and cash equivalents by the amount utilized to fund the acquisitions.

Apple REIT Nine, Inc.

Pro Forma Condensed Consolidated Statements of Operations (unaudited)

For the year ended December 31, 2009 and nine months ended September 30, 2010

The following unaudited Pro Forma Condensed Consolidated Statements of Operations of Apple REIT Nine, Inc. gives effect to the following hotel acquisitions:


Franchise	Location	Gross Purchase Price (millions)		Actual Acquisition Date


Marriott	Houston, TX	$	50.8	January 8, 2010
Embassy Suites	Anchorage, AK		42.0	April 30, 2010

Vista Host Hotels Portfolio (3 Hotels):
Hampton Inn	Round Rock, TX		11.5	March 6, 2009
Hampton Inn	Austin, TX		18.0	April 14, 2009
Homewood Suites	Austin, TX		17.7	April 14, 2009

Orlando, FL Hotels Portfolio (2 Hotels):
Fairfield Inn & Suites	Orlando, FL		25.8	July 1, 2009
SpringHill Suites	Orlando, FL		29.0	July 1, 2009

Raymond Hotels Portfolio (7 Hotels):
Hampton Inn & Suites	Boise, ID		22.4	April 30, 2010
Homewood Suites	Rogers, AR		10.9	April 30, 2010
Hampton Inn & Suites	St. Louis, MO		16.0	April 30, 2010
Hampton Inn & Suites	Oklahoma City, OK		32.7	May 28, 2010
Hampton Inn	Rogers, AR		9.6	August 31, 2010
Hampton Inn	St. Louis, MO		23.0	August 31, 2010
Hampton Inn	Kansas City, MO		10.1	August 31, 2010

Louisiana Hotels Portfolio (2 Hotels):
Hilton Garden Inn	Lafayette, LA		17.3	July 30, 2010
Hilton Garden Inn	West Monroe, LA		15.6	July 30, 2010

White Lodging Hotels Portfolio (16 Hotels):
SpringHill Suites	Indianapolis, IN		12.8	November 2, 2010
Residence Inn	Mishawaka, IN		13.7	November 2, 2010
Courtyard	Phoenix, AZ		16.0	November 2, 2010
Reidence Inn	Phoeniz, AZ		14.0	November 2, 2010
Residence Inn	Lake Forest/Mettawa, IL		23.5	November 2, 2010
Hilton Garden Inn	Lake Forest/Mettawa, IL		30.5	November 2, 2010
Hilton Garden Inn	Austin, TX		16.0	November 2, 2010
Hilton Garden Inn	Novi, MI		16.2	November 2, 2010
Hilton Garden Inn	Warrenville, IL		22.0	November 2, 2010
Hilton Garden Inn	Schaumburg, IL		20.5	November 2, 2010
SpringHill Suites	Salt Lake City, UT		17.5	November 2, 2010
Fairfield Inn & Suites	Austin, TX		17.8	November 2, 2010
Courtyard	Austin, TX		20.0	November 2, 2010
Courtyard	Chandler, AZ		17.0	November 2, 2010
Fairfield Inn & Suites	Chandler, AZ		12.0	November 2, 2010
Embassy Suites	Tampa, FL		21.8	November 2, 2010


	Total	$	643.7

These Pro Forma Condensed Consolidated Statements of Operations also assume all of the hotels had been leased to our wholly-owned taxable REIT subsidiaries pursuant to master hotel lease arrangements. The hotels acquired will be managed by affiliates of Intermountain Management, LLC, LBAM - Investor Group, L.L.C., Raymond Management Company, Inc., Stonebridge Realty Advisors, Inc., Texas Western Management Partners, L.P., Vista Host, Inc., White Lodging Services Corporation and Fairfield FMC, LLC and SpringHill SMC, LLC, subsidiaries of Marriott International, under separate management agreements.

Such pro forma information is based in part upon the historical Consolidated Statements of Operations of Apple REIT Nine, Inc. and the historical Statements of Operations of the hotel properties.

The following unaudited Pro Forma Condensed Consolidated Statements of Operations of Apple REIT Nine, Inc. is not necessarily indicative of what the actual financial results would have been assuming such transactions had been completed on the latter of January 1, 2009, or the date the hotel began operations nor does it purport to represent the future financial results of Apple REIT Nine, Inc.

The unaudited Pro Forma Condensed Consolidated Statements of Operations should be read in conjunction with, and are qualified in their entirety by the historical Statements of Operations of the acquired hotels.

Pro Forma Condensed Consolidated Statement of Operations (unaudited)

For the year ended December 31, 2009

(In thousands, except per share data)


	Company Historical Statement of Operations		Vista Host Hotels Portfolio (Austin FRH, LTD, FRH Braker, LTD and RR Hotel Investment, LTD) (A)		Orlando, FL Hotels Portfolio (A)			Houston, TX Marriott (A)			Anchorage, AK Embassy Suites (A)			Raymond Hotels Portfolio (A)


Revenue:
Room revenue	$	76,163	$	2,791	$	—		$	—		$	6,829		$	27,326
Other revenue		9,043		18		—			—			1,701			1,314

Total hotel revenue		85,206		2,809		—			—			8,530			28,640
Rental revenue		15,961		—		—			—			—			—

Total revenue		101,167		2,809		—			—			8,530			28,640


Expenses:
Operating expenses		46,242		915		—			—			3,483			9,862
General and administrative		4,079		194		—			7			615			5,099
Management and franchise fees		6,055		238		—			—			602			2,204
Taxes, insurance and other		6,032		167		625			464			555			1,156
Acquisition related costs		4,951		—		—			—			—			—
Depreciation of real estate owned		15,936		223		—			—			2,447			6,410

Interest, net		1,018		306		—			(2	)		1,181			5,811

Total expenses		84,313		2,043		625			469			8,883			30,542

Income tax expense		—		—		—			—			—			—


Net income (loss)	$	16,854	$	766	$	(625	)	$	(469	)	$	(353	)	$	(1,902	)


Basic and diluted earnings per common share	$	0.26


Weighted average common shares outstanding - basic and diluted		66,041


	Louisiana Hotels Portfolio (A)		White Lodging Hotels Portfolio (A)			Pro forma Adjustments			Total Pro forma


Revenue:
Room revenue	$	7,477	$	34,066		$	—		$	154,652
Other revenue		1,361		3,096			—			16,533

Total hotel revenue		8,838		37,162			—			171,185
Rental revenue		—		—			—			15,961

Total revenue		8,838		37,162			—			187,146


Expenses:
Operating expenses		2,752		17,199			—			80,453
General and administrative		1,682		3,683			750	(H)		16,109
Management and franchise fees		616		2,464			—			12,179
Taxes, insurance and other		472		4,874			(2,548	) (E)		11,797
Acquisition related costs		—		—			11,568	(G)		16,519
Depreciation of real estate owned		1,259		18,334			(28,673	) (B)		29,847
							13,911	(C)
Interest, net		1,021		4,806			(9,956	) (D)		4,185

Total expenses		7,802		51,360			(14,948	)		171,089

Income tax expense		—		—			—	(F)		—


Net income (loss)	$	1,036	$	(14,198	)		14,948		$	16,057


Basic and diluted earnings per common share									$	0.16


Weighted average common shares outstanding - basic and diluted							34,057			100,098

Pro Forma Condensed Consolidated Statement of Operations (unaudited)

For the nine months ended September 30, 2010

(In thousands, except per share data)


	Company Historical Statement of Operations		Anchorage, AK Embassy Suites (A)			Raymond Hotels Portfolio (A)			Louisiana Hotels Portfolio (A)		White Lodging Hotels Portfolio (A)			Pro forma Adjustments			Total Pro forma


Revenue:
Room revenue	$	96,373	$	1,944		$	12,083		$	4,455	$	34,116		$	—		$	148,971
Other revenue		9,512		574			661			777		2,780			—			14,304

Total hotel revenue		105,885		2,518			12,744			5,232		36,896			—			163,275
Rental revenue		15,983		—			—			—		—			—			15,983

Total revenue		121,868		2,518			12,744			5,232		36,896			—			179,258


Expenses:
Operating expenses		56,277		1,168			4,265			1,538		15,901			—			79,149
General and administrative		4,500		198			2,156			948		3,544			250	(H)		11,596
Management and franchise fees		7,540		185			977			334		2,973			—			12,009
Taxes, insurance and other		6,717		140			633			265		3,315			—			11,070
Acquisition related costs		10,126		—			—			—		—			(4,866	) (G)		5,260
Depreciation of real estate owned		20,483		812			3,349			732		12,643			(17,536	) (B)		29,353
															8,870	(C)
Interest, net		567		365			2,340			535		4,241			(5,311	) (D)		2,737

Total expenses		106,210		2,868			13,720			4,352		42,617			(18,593	)		151,174

Income tax expense		—		—			—			—		—			—	(F)		—


Net income (loss)	$	15,658	$	(350	)	$	(976	)	$	880	$	(5,721	)	$	18,593		$	28,084


Basic and diluted earnings per common share	$	0.13															$	0.21


Weighted average common shares outstanding - basic and diluted		124,054													8,097			132,151

Notes to Pro Forma Condensed Consolidated Statements of Operations (unaudited):

(A) Represents results of operations for the hotels on a pro forma basis as if the hotels were owned by the Company at January 1, 2009 for the respective period prior to acquisition by the Company. Nine properties began operations subsequent to January 1, 2009 and had limited historical operational activity prior to their opening. These properties are as follows:


	- Salt Lake City, Utah SpringHill Suites opened in February 2009
	- Oklahoma City, Oklahoma Hampton Inn & Suites opened in March 2009
	- Austin, Texas Fairfield Inn & Suites opened in April 2009
	- Orlando, Florida Fairfield Inn & Suites opened in July 2009
	- Orlando, Florida SpringHill Suites opened in July 2009
	- Austin, Texas Courtyard opened in July 2009
	- Chandler, Arizona Courtyard opened in September 2009
	- Chandler, Arizona Fairfield Inn & Suites opened in September 2009
	- Houston, Texas Marriott full service hotel opened in January 2010

(B) Represents elimination of historical depreciation and amortization expense of the acquired properties.

(C) Represents the depreciation on the hotels acquired based on the purchase price allocation to depreciable property and the dates the hotels began operation. The weighted average lives of the depreciable assets are 39 years for building and seven years for furniture, fixtures and equipment (FF&E). These estimated useful lives are based on management’s knowledge of the properties and the hotel industry in general.

(D) Interest expense related to prior owner’s debt which was not assumed has been eliminated. Interest income has been adjusted for funds used to acquire properties as of January 1, 2009, or the dates the hotels began operations.

(E) Represents preopening expenses which are the Seller’s responsibility and therefore have been eliminated.

(F) Estimated income tax expense of our wholly owned taxable REIT subsidiaries is zero based on the contractual agreement put in place between the Company and our lessees, based on a combined tax rate of 40% of taxable income. Based on the terms of the lease agreements, our taxable subsidiaries would have incurred a loss during these periods. No operating loss benefit has been recorded as realization is not certain.

(G) Represents costs incurred to complete the acquisition of existing businesses that occur on or after January 1, 2009, including, title, legal, accounting and other related costs, as well as the commission paid to Apple Suites Realty Group totaling 2% of purchase price per contract. These costs have been adjusted for hotel acquisitions on the latter of January 1, 2009, or the dates the hotels began operations.

(H) Represents adjustments to level of administrative costs associated with owning additional properties, including advisory fee, accounting and legal fees.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	Apple REIT Nine, Inc.

	By:	/s/ Glade M. Knight

		Glade M. Knight, Chief Executive Officer

		December 27, 2010

Apple Hospitality REIT, Inc. - FORM 8-K/A - December 30, 2010

Apple Hospitality REIT, Inc. Reports