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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
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FORM 8-K/A |
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AMENDMENT NO. 1 TO |
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CURRENT REPORT |
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Date of Report (Date of earliest event reported): June 2, 2011 |
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APPLE REIT TEN, INC. |
(Exact name of registrant as specified in its charter) |
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Virginia |
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333-168971 |
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27-3218228 |
(State or other jurisdiction |
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(Commission File Number) |
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(I.R.S. Employer |
of incorporation) |
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Identification Number) |
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814 East Main Street, Richmond, Virginia |
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23219 |
(Address of principal executive offices) |
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(Zip Code) |
(804) 344-8121
(Registrants
telephone number, including area code)
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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: |
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o |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Apple REIT Ten, Inc. hereby amends Item 9.01 of its Current Report on Form 8-K dated June 2, 2011 and filed (by the required date) on June 7, 2011 for the purpose of filing certain financial statements and information. In accordance with Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, this Amendment No. 1 sets forth the complete text of the item as amended.
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Item 9.01. |
Financial Statements and Exhibits. |
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(a) |
Financial statements of businesses acquired. |
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McKibbon Hotel Portfolio (8 Hotels) |
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(Knoxville, Tennessee SpringHill Suites; Gainesville, Florida Hilton Garden Inn; Richmond, Virginia SpringHill Suites; Pensacola, Florida TownePlace Suites; Mobile, Alabama Hampton Inn & Suites; Knoxville, Tennessee TownePlace Suites; Knoxville, Tennessee Homewood Suites and Gainesville, Florida Homewood Suites) |
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(Audited) |
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3 |
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4 |
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Combined Statements of Income For the Years Ended December 31, 2010 and 2009 |
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5 |
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Combined Statements of Owners (Deficit) For the Years Ended December 31, 2010 and 2009 |
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6 |
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Combined Statements of Cash Flows For the Years Ended December 31, 2010 and 2009 |
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7 |
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8 |
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(Unaudited) |
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19 |
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Combined Statements of Income For the Three Months Ended March 31, 2011 and 2010 |
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20 |
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Combined Statements of Owners (Deficit) For the Three Months Ended March 31, 2011 and 2010 |
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21 |
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Combined Statements of Cash Flows For the Three Months Ended March 31, 2011 and 2010 |
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22 |
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(b) |
Pro forma financial information. |
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The below pro forma financial information pertains to the hotels referred to in the financial statements (see (a) above) and to a separate group of recently purchased hotels. |
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Apple REIT Ten, Inc. (Unaudited) |
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Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2011 |
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23 |
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25 |
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26 |
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Notes to Pro Forma Condensed Consolidated Statement of Operations |
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29 |
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(c) |
Shell company transactions. |
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Not Applicable |
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(d) |
Exhibits. |
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None |
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2
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To the Board of
Directors
Apple REIT Ten, Inc.
We have audited the accompanying combined balance sheets of McKibbon Hotel Portfolio as of December 31, 2010 and 2009, and the related combined statements of income, owners (deficit), and cash flows for the years then ended. These combined financial statements are the responsibility of the Hotels management. Our responsibility is to express an opinion on these combined 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined 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 McKibbon Hotels Portfolio as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
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/s/ Mauldin & Jenkins, LLC |
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Atlanta, Georgia |
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June 21, 2011 |
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3
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McKIBBON HOTEL PORTFOLIO |
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DECEMBER 31, 2010 AND 2009 |
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2010 |
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2009 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
6,037,296 |
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$ |
5,406,561 |
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Accounts receivable |
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308,254 |
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195,754 |
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Inventory |
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2,349 |
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1,766 |
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Escrow deposits |
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283,923 |
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257,307 |
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Prepaid expenses |
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240,331 |
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219,047 |
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Total current assets |
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6,872,153 |
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6,080,435 |
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Other assets |
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Franchise fees, net of accumulated amortization of $99,287 and $76,727, respectively |
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239,113 |
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261,673 |
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Loan origination costs, net of accumulated amortization of $1,058,200 and $885,893, respectively |
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473,150 |
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645,457 |
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Restricted deposits |
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1,022,552 |
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773,935 |
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Other assets |
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630,496 |
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572,196 |
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2,365,311 |
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2,253,261 |
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Property and equipment |
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Land |
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6,333,323 |
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6,333,323 |
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Building and improvements |
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41,173,359 |
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41,173,359 |
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Grounds and landscaping |
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6,129,930 |
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6,127,430 |
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Furniture, fixtures and equipment |
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15,855,550 |
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15,677,980 |
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Accumulated depreciation |
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(18,667,631 |
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(15,211,894 |
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Net property and equipment |
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50,824,531 |
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54,100,198 |
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Total assets |
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$ |
60,061,995 |
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$ |
62,433,894 |
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LIABILITIES AND OWNERS (DEFICIT) |
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Current liabilities |
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Accounts payable |
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$ |
323,855 |
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$ |
467,194 |
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Accounts payable - related party |
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154,495 |
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124,154 |
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Accrued mortgage interest |
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222,584 |
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227,522 |
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Current portion of mortgage payable |
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14,438,990 |
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2,155,448 |
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Accrued payroll |
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166,932 |
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155,043 |
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Accrued expenses |
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323,746 |
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319,669 |
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Deferred revenue |
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140,279 |
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153,611 |
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Total current liabilities |
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15,770,881 |
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3,602,641 |
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Mortgage payable, less current maturities |
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53,405,216 |
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67,563,713 |
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Total liabilities |
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69,176,097 |
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71,166,354 |
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Owners (deficit) |
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(9,114,102 |
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(8,732,460 |
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Total Liabilities and Owners (Deficit) |
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$ |
60,061,995 |
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$ |
62,433,894 |
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See Notes to Combined Financial Statements.
4
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McKIBBON HOTEL PORTFOLIO |
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FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 |
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2010 |
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2009 |
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Revenues |
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Rooms |
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$ |
21,902,971 |
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$ |
20,891,139 |
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Restaurant |
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221,255 |
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235,431 |
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Other |
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288,590 |
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278,488 |
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Total revenues |
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22,412,816 |
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21,405,058 |
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Operating expenses |
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Rooms |
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3,942,685 |
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3,848,477 |
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Restaurant |
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97,766 |
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96,831 |
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Other operating departments |
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162,018 |
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173,605 |
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Hotel administration |
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2,368,633 |
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2,326,514 |
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Advertising and promotion |
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1,729,233 |
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1,624,251 |
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Utilities |
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1,153,697 |
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1,175,060 |
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Repairs and maintenance |
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839,516 |
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797,915 |
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Property taxes, insurance and other |
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1,069,529 |
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1,189,028 |
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Depreciation |
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3,901,242 |
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4,276,487 |
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Amortization |
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181,535 |
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181,533 |
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Management fees |
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672,338 |
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642,111 |
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Franchise fees |
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806,303 |
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740,374 |
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Incentive fees |
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456,277 |
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420,638 |
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State excise taxes |
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136,395 |
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118,557 |
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Ground lease |
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129,939 |
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155,904 |
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Total operating expenses |
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17,647,106 |
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17,767,285 |
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Income from operations |
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4,765,710 |
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3,637,773 |
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Financial (income) expense |
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Interest income |
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(42,749 |
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(21,790 |
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Interest expense |
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3,270,101 |
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3,413,511 |
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Total other income |
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3,227,352 |
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3,391,721 |
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Net income |
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$ |
1,538,358 |
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$ |
246,052 |
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See Notes to Combined Financial Statements.
5
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McKIBBON HOTEL PORTFOLIO |
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FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 |
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Balance, December 31, 2008 |
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$ |
(6,448,512 |
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Net income |
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246,052 |
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Distributions to owners |
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(2,530,000 |
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Balance, December 31, 2009 |
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(8,732,460 |
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Net income |
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1,538,358 |
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Contributions from owners |
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300,000 |
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Distributions to owners |
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(2,220,000 |
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Balance, December 31, 2010 |
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$ |
(9,114,102 |
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See Notes to Combined Financial Statements.
6
McKIBBON HOTEL PORTFOLIO
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COMBINED
STATEMENTS OF CASH FLOWS |
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2010 |
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2009 |
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Cash flows from operating activities |
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Net income |
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$ |
1,538,358 |
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$ |
246,052 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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3,901,242 |
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4,276,487 |
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Amortization |
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181,535 |
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181,533 |
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(Increase) decrease in assets: |
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Accounts receivable |
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(112,500 |
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118,921 |
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Prepaid expenses |
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(21,284 |
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(36,859 |
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Inventory |
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(583 |
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734 |
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Other assets |
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(58,300 |
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546,152 |
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Increase (decrease) in liabilities: |
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Accounts payable |
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(143,339 |
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(151,915 |
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Accounts payable - related party |
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30,341 |
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(12,993 |
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Accrued mortgage interest |
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(4,938 |
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21,848 |
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Accrued payroll |
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11,889 |
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(3,392 |
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Accrued expense |
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4,077 |
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(6,473 |
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Total adjustments |
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3,788,140 |
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4,934,043 |
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Net cash provided by operating activities |
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5,326,498 |
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5,180,095 |
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Cash flows from investing activities |
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Purchases of fixed assets |
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(625,575 |
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(72,810 |
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Increase in: |
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Escrow deposits |
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(26,616 |
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(72,958 |
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Restricted cash accounts |
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(248,617 |
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(270,931 |
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Net cash (used in) investing activities |
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(900,808 |
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(416,699 |
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Cash flows from financing activities |
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Principal payments on mortgage payable |
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(1,874,955 |
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(2,061,588 |
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Contributions from owners |
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300,000 |
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Distributions to owners |
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(2,220,000 |
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(2,530,000 |
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Net cash used in financing activities |
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(3,794,955 |
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(4,591,588 |
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Net increase in cash and cash equivalents |
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630,735 |
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171,808 |
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Cash and cash equivalents at beginning of year |
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5,406,561 |
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5,234,753 |
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Cash and cash equivalents at end of year |
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$ |
6,037,296 |
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$ |
5,406,561 |
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Supplemental Disclosures |
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Cash paid for interest |
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$ |
3,275,039 |
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$ |
3,391,663 |
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See Notes to Combined Financial Statements.
7
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McKIBBON HOTEL PORTFOLIO |
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NOTE 1. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
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Nature of Business: |
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The accompanying combined financial statements present the financial information of the following Hotel properties (the Hotels): |
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McKibbon Hotel Group of Gainesville, Florida #2, L.P. is a Georgia limited partnership which was formed for the purpose of developing and operating a Homewood Suites and operating the hotel under a management agreement with McKibbon Hotel Group / McKibbon Hotel Management (the Manager). The hotel is located in Gainesville, Florida. |
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McKibbon Hotel Group of Gainesville, Florida #3, LLC is a Georgia limited liability company which was formed for the purpose of developing and operating a Hilton Garden Inn and operating the hotel under a management agreement with McKibbon Hotel Group / McKibbon Hotel Management (the Manager). The hotel is located in Gainesville, Florida. |
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McKibbon Hotel Group of Knoxville, Tennessee #3, L.P. is a Georgia limited partnership which was formed for the purpose of developing and operating a TownePlace Suites by Marriott hotel and operating the hotel under a management agreement with McKibbon Hotel Group / McKibbon Hotel Management (the Manager). The hotel is located in Knoxville, Tennessee. |
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McKibbon Hotel Group of Mobile, Alabama #5, LLC is an Georgia limited liability company which was formed for the purpose of developing and operating a Hampton Inn and Suites hotel and operating the hotel under a management agreement with McKibbon Hotel Group / McKibbon Hotel Management (the Manager). The hotel is located in Mobile, Alabama. |
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MHG-TC, LLC is a Tennessee limited liability company which was formed for the purpose of developing and operating a Homewood Suites hotel and operating the hotel under a management agreement with McKibbon Hotel Group / McKibbon Hotel Management (the Manager). The hotel is located in Knoxville, Tennessee. |
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MHG-TC #2, LLC is a Tennessee limited liability company which was formed for the purpose of developing and operating a SpringHill Suites by Marriott hotel and operating the hotel under a management agreement with McKibbon Hotel Group / McKibbon Hotel Management (the Manager). The hotel is located in Knoxville, Tennessee. |
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|
|
|
|
|
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MHG of Pensacola, Florida, LLC is a Georgia limited liability company which was formed for the purpose of developing and operating a TownePlace Suites by Marriott hotel and operating the hotel under a management agreement with McKibbon Hotel Group / McKibbon Hotel Management (the Manager). The hotel is located in Pensacola, Florida. |
8
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
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|
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NOTE 1. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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|
Nature of Business (Continued): |
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||
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MHG of Richmond, Virginia, LLC is a Georgia limited liability company which was formed for the purpose of developing and operating a SpringHill Suites by Marriott hotel and operating the hotel under a management agreement with McKibbon Hotel Group / McKibbon Hotel Management (the Manager). The hotel is located in Richmond, Virginia. |
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Each of the Hotels primary operations consist of offering temporary lodging to the general public at their respective locations. |
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Significant Accounting Policies: |
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||
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Basis of Combination: |
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The accompanying financial statements of McKibbon Hotels Portfolio include the accounts of McKibbon Hotel Group of Gainesville, Florida #2, L.P., McKibbon Hotel Group of Gainesville, Florida #3, LLC, McKibbon Hotel Group of Knoxville, Tennessee #3, L.P., McKibbon Hotel Group of Mobile, Alabama #5, LLC, MHG-TC, LLC, MHG-TC #2, LLC, MHG of Pensacola, Florida, LLC, and MHG of Richmond, Virginia, LLC (collectively the Hotels). The Hotels are separate legal entities that share management and common ownership. There are no significant intercompany balances or transactions to be eliminated in combination. |
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Basis of Presentation: |
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|
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The accompanying financial statements of the Hotels have been prepared on the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America. The Hotels, included in the financial statements as the McKibbon Hotel Portfolio, represent a combined group of hotels that operate individually. Management of the Hotels selected the Hotels to be included in the combined financial statements as McKibbon Hotel Portfolio. |
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Member Assets, Liabilities and Salaries: |
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In accordance with the generally accepted method of presenting limited liability companies and partnership financial statements, the combined financial statements do not include assets and liabilities of any member, including their obligation for income taxes on their distributive shares of the net income of the limited liability companies or partnership nor any provision for income tax expense. The expenses shown in the statement of income do not include any salaries to the members. |
9
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
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|
|
|
|
|
NOTE 1. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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Significant Accounting Policies: (Continued) |
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|
||
|
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Use of Estimates: |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. |
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|
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Cash and Cash Equivalents: |
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|
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|
|
The Hotels consider all highly liquid debt instruments purchased with maturity dates of three months or less to be cash equivalents. Cash balances are federally insured up to $250,000 and the Hotels occasionally maintain balances that may exceed this amount. The Hotels have not experienced any losses in such accounts and believe they are not exposed to any significant credit risk on its cash. |
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|
|
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Restricted Deposits: |
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|
As required by some debt agreements, some of the Hotels are required to fund renewal and replacements accounts. These funds are held by the mortgage holder and may be released to fund repairs and replacement costs. |
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|||
|
|
Receivables: |
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|
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|
The Hotels report trade receivables at gross amounts due from customers. Because historical losses related to these receivables have been insignificant, management uses the direct write-off method to account for bad debts. Management analyzes delinquent receivables on a continuing basis. Once these receivables are determined to be uncollectible, they are written off through a charge against operations. |
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|
|
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Asset Impairment: |
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|
|
The Hotels review their long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to undiscounted expected cash flows. Future events could cause the Hotels to conclude that impairment indicators exist and that long-lived assets may be impaired. To date, no impairment losses have been recorded. |
10
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
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|
|
|
|
|
NOTE 1. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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Significant Accounting Policies: (Continued) |
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||
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Franchise Fees: |
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|
Franchise fees are amortized on a straight-line basis, which approximates the effective interest method, over the term of the agreement commencing on the hotel opening dates. |
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|
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Loan Origination Costs: |
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|
|
Permanent loan costs are amortized using straight-line method, which approximates the effective interest method, over the terms of the respective mortgages. |
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Property and Equipment: |
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Property and equipment are stated at cost. Interest and property taxes incurred during the construction of the facilities were capitalized and are depreciated over the life of the asset. Additions, replacements, and betterments are charged to the property accounts, while repairs and maintenance are charged to expense as incurred. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives of assets are: 39 years for buildings, 15 years for improvements and 3 to 5 years for furniture, fixtures and equipment. |
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Revenue Recognition: |
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|
|
Revenue is recognized as earned, which is generally defined as the date upon which a guest occupies a room or consummation of purchases of other hotel services. |
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|
|
|
Deferred Revenue: |
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|
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|
|
Deferred revenue consists of unearned franchise incentive fees received from the franchisor. These fees are to be taken into income ratably in a manner consistent with amortization of the franchise license. |
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|
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|
|
Sales Taxes: |
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|
|
The Hotels collect various taxes from customers and remits these amounts to applicable taxing authorities. The Hotels accounting policy is to exclude these taxes from revenues and cost of sales. |
11
|
|
|
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
|||
|
|
||
|
|||
|
|
||
NOTE 1. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) |
||
|
|
|
|
|
Significant Accounting Policies: (Continued) |
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|
Income Taxes: |
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|
|
The Hotels, with the consent of its owners, have elected to be taxed under sections of Federal income tax law, which provide that, in lieu of entity income taxes, the owners separately account for the Hotels items of income, deductions, losses and credits. As a result of this election, no income taxes have been recognized in the accompanying financial statements. |
|
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|
|
The Financial Accounting Standards Board issued new guidance on accounting for uncertainty in income taxes. The Hotels adopted this new guidance for the year ended December 31, 2009. Management evaluated the Hotels tax positions and concluded that the Hotel had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. With few exceptions, the Hotels are no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2007. |
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|
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|
|
Subsequent Events: |
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|
|
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|
|
Subsequent events have been evaluated through June 21, 2011, the date the financial statements were available to be issued. |
|
|
|
|
NOTE 2. |
ESCROW DEPOSITS |
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|
|
|
Escrow deposits at December 31, 2010 and 2009, consisted of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
Hilton Garden Inn |
|
Property tax |
|
$ |
64,284 |
|
$ |
15,683 |
|
- Gainesville, Florida |
|
Property insurance |
|
|
40,605 |
|
|
30,855 |
|
|
|
|
|
|
|
|
|
|
|
TownePlace Suites by Marriot |
|
Property tax |
|
|
34,572 |
|
|
37,787 |
|
- Knoxville, Tennessee |
|
Property insurance |
|
|
28,459 |
|
|
30,955 |
|
|
|
|
|
|
|
|
|
|
|
HomeWood Suites |
|
Property tax |
|
|
91,974 |
|
|
84,429 |
|
- Knoxville, Tennessee |
|
Property insurance |
|
|
24,029 |
|
|
57,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
283,923 |
|
$ |
257,307 |
|
|
|
|
|
|
|
|
|
|
|
12
|
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
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|
|
|
|
|
|
NOTE 3. |
MORTGAGE PAYABLE |
|
|
|
Mortgages payable at December 31, 2010 and 2009, consisted of the following: |
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Homewood Suites - Gainesville, Florida: Note with Wells Fargo Bank; matures March 2017; interest at 5.892%; secured by the hotel, escrow deposits and general intangibles. |
|
$ |
13,268,524 |
|
$ |
13,444,449 |
|
|
|
|
|
|
|
|
|
Hilton Garden Inn - Gainesville, Florida: Note with Hamilton StateBank; matures March 2012; interest at prime minus 0.5%; secured by the hotel. |
|
|
7,627,927 |
|
|
7,910,109 |
|
|
|
|
|
|
|
|
|
TownePlace Suites - Knoxville, Tennessee: Note with Berkadia Commercial Mortgage; matures November 2015; interest at 5.45%; secured by the hotel, escrow deposits and general intangibles. |
|
|
7,511,813 |
|
|
7,706,860 |
|
|
|
|
|
|
|
|
|
TownePlace Suites - Knoxville, Tennessee: Note with McKibbon Hotel Group, Inc.; subordinated 3.25% note matures April 2011; |
|
|
275,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Hampton Inn and Suites - Mobile, Alabama: Note with Wells FargoBank; matures September 2011; interest at prime minus 0.5%; secured by the hotel. |
|
|
6,169,033 |
|
|
6,548,665 |
|
|
|
|
|
|
|
|
|
Homewood Suites - Knoxville, Tennessee: Note with Wells FargoBank; matures October 2016: interest at 6.297%; secured by the hotel, escrow deposits and general intangibles. |
|
|
11,598,485 |
|
|
11,758,327 |
|
|
|
|
|
|
|
|
|
SpringHill Suites - Knoxville, Tennessee: Note with SunTrust Bank; matures April 2011: interest at LIBOR plus 2.0%; secured by the hotel. |
|
|
6,457,075 |
|
|
6,762,768 |
|
|
|
|
|
|
|
|
|
TownePlace Suites - Pensacola, Florida: Note with Regions Bank; matures November 2013; interest at LIBOR plus 2.0%; secured by the hotel. |
|
|
6,766,333 |
|
|
7,143,997 |
|
|
|
|
|
|
|
|
|
SpringHill Suites - Richmond, Virginia: Note with SunTrust Bank matures March 2012; interest at prime minus 0.75% with 4.95%/8.95% ceiling/floor; secured by the hotel. |
|
|
8,170,016 |
|
|
8,443,986 |
|
|
|
|
|
|
|
|
|
|
|
$ |
67,844,206 |
|
$ |
69,719,161 |
|
|
|
|
|
|
|
|
|
13
|
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
NOTE 3. |
MORTGAGE PAYABLE (CONTINUED) |
|
|
|
Future maturities are as follows at December 31: |
|
|
|
|
|
|
|
|
|
|
2011 |
|
$ |
14,438,990 |
|
2012 |
|
|
16,192,454 |
|
2013 |
|
|
6,622,813 |
|
2014 |
|
|
672,296 |
|
2015 |
|
|
7,072,356 |
|
Thereafter |
|
|
22,845,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
67,844,206 |
|
|
|
|
|
|
|
|
|
Total interest expense on mortgage notes payable during December 31, 2010 and 2009 was $3,270,101 and $3,413,511, respectively. |
|
|
NOTE 4. |
RESTRICTED DEPOSITS |
|
|
|
Pursuant to the loan agreements, some Hotels are required to make monthly deposits designated to fund hotel fixed assets replacements and refurbishments and such funds are held by the lender. As expenditures arise the Hotels request funds held to fund replacement and refurbishment expenses. At December 31, 2010 and 2009, consisted of the following: |
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
McKibbon Hotel Group of Gainesville, Florida #2, L.P |
|
$ |
513,189 |
|
$ |
368,057 |
|
McKibbon Hotel Group of Knoxville, Tennessee #3, L.P. |
|
|
27,377 |
|
|
55,786 |
|
MHG-TC, LLC |
|
|
481,986 |
|
|
350,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,022,552 |
|
$ |
773,935 |
|
|
|
|
|
|
|
|
|
14
|
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
NOTE 5. |
INTANGIBLE ASSETS |
|
|
|
Franchise Fees |
|
|
|
Initial franchise fees totaling $338,400 were paid to Hilton Hotels and Marriott Hotels as of December 31, 2010 and 2009. Amortization expense totaled $22,561 for the years ended December 31, 2010 and 2009. The franchise fees are amortized over the lesser of the term of the franchise agreement or fifteen years. |
|
|
|
Estimated aggregate amortization expense is as follows: |
|
|
|
|
|
2011 |
|
$ |
22,561 |
|
2012 |
|
|
22,561 |
|
2013 |
|
|
22,561 |
|
2014 |
|
|
22,561 |
|
2015 |
|
|
22,561 |
|
Thereafter |
|
|
126,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
239,113 |
|
|
|
|
|
|
|
|
|
The Hotels are subject to various franchise agreements with Hilton Hotels and Marriott Hotels, under which the Hotels agree to use the Franchisors trademark, standards of service (cleanliness, management, advertising) and construction quality and design. The agreements cover an initial term in excess of 15 years with varying renewal terms. The agreements provide for payment of franchise or royalty fees, which are calculated monthly and range from 4% to 5% of gross rental revenues. Franchise fees of $806,303 and $740,374 were paid in 2010 and 2009, respectively. |
|
|
|
Loan Costs |
|
|
|
Permanent loan costs totaling $1,531,350 have been paid for costs associated with mortgages obtained as of December 31, 2010 and 2009. Amortization expense totaled $172,306 for the years ended December 31, 2010 and 2009. |
|
|
|
Estimated aggregate amortization expense is as follows: |
|
|
|
|
|
2011 |
|
$ |
154,240 |
|
2012 |
|
|
86,779 |
|
2013 |
|
|
71,723 |
|
2014 |
|
|
59,865 |
|
2015 |
|
|
57,278 |
|
Thereafter |
|
|
43,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
473,150 |
|
|
|
|
|
|
15
|
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
NOTE 6. |
DEFINED CONTRIBUTION RETIREMENT PLAN |
|
|
|
Employees are allowed to participate in the McKibbon Brothers, Inc. 401(k) profit sharing plan. Enrollment date is in January or July following the employees first anniversary with the employer. Prior to 2009, the employer contributed $.50 for every $1.00 contributed by the participant, up to 10% of the participants compensation, from available business profits. The Hotels temporarily discontinued the matching of employee contributions from February 2009 to December 2010. Beginning January 2011, the employer will contribute $.25 for every $1.00 contributed by the participant, up to 10% of the participants compensation, from available business profits. |
|
|
NOTE 7. |
LEASE COMMITMENT |
|
|
|
McKibbon Hotel Group of Gainesville, Florida #2, L.P. leases the land for its hotel site under a non-cancelable operating lease with McKibbon Land Holdings, LLC, an entity related through common control, for a term of 50 years. |
|
|
|
McKibbon Hotel Group of Mobile, Alabama #5, LLC leases the land for its hotel site under a non-cancelable operating lease with McKibbon Brothers, Inc., an entity related through common control, for a term of 50 years. |
|
|
|
Future minimum lease payments, by year and in the aggregate, under this non-cancelable operating lease consisted of the following at December 31, 2010: |
|
|
|
|
|
2011 |
|
$ |
129,000 |
|
2012 |
|
|
129,000 |
|
2013 |
|
|
129,000 |
|
2014 |
|
|
129,000 |
|
2015 |
|
|
129,000 |
|
Therafter |
|
|
5,042,000 |
|
|
|
|
|
|
|
|
$ |
5,687,000 |
|
|
|
|
|
|
|
|
|
Rental expense under these operating leases amounted to $129,939 and $155,904 during the years ended December 31, 2010 and 2009, respectively. |
16
|
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
NOTE 8. |
RELATED PARTY TRANSACTIONS |
|
|
|
The Hotels are subject to management agreements with McKibbon Hotel Group, Inc. and McKibbon Hotel Management, Inc. which cover an initial term of twenty years with varying renewal terms. The agreements provide for monthly payments of base management fees, accounting fees, asset management fees, technical service fees, external support fees and reimbursements of miscellaneous operating expenses, all of which are included in Hotel administration expense as reflected in the statement of income. Management, accounting and asset management fees paid to McKibbon Hotel Group, Inc. during the years ended December 31, 2010 and 2009 amounted to $907,005 and $878,234, respectively. Management and technical service fees paid to McKibbon Hotel Management, Inc. during the years ended December 31, 2010 and 2009 amounted to $80,995 and $74,305, respectively. Miscellaneous operating expenses paid to other related parties amounted to $17,536 and $12,486 for the years ended December 31, 2010 and 2009, respectively. Accounts payable at December 31, 2010 and 2009 consist of $154,495 and $124,154, respectively, for services rendered, are due to McKibbon Hotel Group, Inc. or McKibbon Hotel Management, Inc., which are under common control with the Hotels. At December 31, 2010 and 2009, there were no amounts in accounts payable due to related parties other than amounts disclosed above. Included in accounts receivable at December 31, 2010 and 2009 are $1,013 and $7,711, respectively, for refunds due from related parties. |
|
|
|
During the years ended December 31, 2010 and 2009, the Hotels incurred tiered incentive management fees of $456,277 and $420,638, respectively, paid to McKibbon Hotel Group, Inc. based on excess cash flow after return on investment is determined. |
|
|
|
Under the terms of the management agreements, the hotels are required to fund reserve accounts to ensure that funds are available for general liability claims not covered by insurance for amounts less than deductible and uninsured weather claims for coastal properties in the event of a hurricane or other natural disaster. Monies are deposited to a reserve account held by McKibbon Hotel Group, Inc. and are available for withdrawal by covered properties as needed. Included in other assets as reflected in the combined balance sheets is $243,672 and $185,372 of deposits held by McKibbon Hotel Group, Inc for the years ended December 31, 2010 and 2009. |
|
|
|
As disclosed in Note 7, rental expense paid to related parties amounted to $129,939 and $155,904 during the years ended December 31, 2010 and 2009, respectively. |
|
|
|
In addition, during 2010 McKibbon Hotel Group of Knoxville, Tennessee #3, L.P. borrowed from McKibbon Hotel Group, Inc. an amount of $275,000 which was outstanding at December 31, 2010. The note is due in April 2011 with interest at a rate of 3.25%. Interest expense recognized on related party notes payable during December 31, 2010 amounted to $6,538. |
17
|
|
NOTES TO COMBINED FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
NOTE 9. |
SUBSEQUENT EVENTS |
|
|
|
The Hotels have agreed to sell the real and personal property of McKibbon Hotel Group of Gainesville, Florida #2, L.P., McKibbon Hotel Group of Gainesville, Florida #3, LLC, McKibbon Hotel Group of Knoxville, Tennessee #3, L.P., McKibbon Hotel Group of Mobile, Alabama #5, LLC, MHG-TC, LLC, MHG-TC #2, LLC, MHG of Pensacola, Florida, LLC, and MHG of Richmond, Virginia, LLC to an unrelated party. |
18
McKIBBON HOTEL PORTFOLIO
COMBINED
BALANCE SHEETS
MARCH 31, 2011 AND 2010
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|||||||
|
|
March 31, 2011 |
|
March 31, 2010 |
|
||
|
|
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,620,708 |
|
$ |
4,562,357 |
|
Accounts receivable |
|
|
394,887 |
|
|
363,380 |
|
Inventory |
|
|
4,375 |
|
|
2,600 |
|
Escrow deposits |
|
|
224,161 |
|
|
278,551 |
|
Prepaid expenses |
|
|
140,678 |
|
|
116,298 |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
5,384,809 |
|
|
5,323,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
Franchise fees, net of accumulated amortization of $104,926 and $99,287, respectively |
|
|
233,474 |
|
|
256,033 |
|
Loan origination costs, net of accumulated amortization of $1,101,275 and $1,058,200, respectively |
|
|
430,075 |
|
|
602,381 |
|
Restricted deposits |
|
|
1,091,887 |
|
|
853,597 |
|
Other assets |
|
|
630,496 |
|
|
640,764 |
|
|
|
|
|
|
|
|
|
|
|
|
2,385,932 |
|
|
2,352,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
|
|
|
|
|
Land |
|
|
6,333,323 |
|
|
6,333,323 |
|
Building and improvements |
|
|
41,173,359 |
|
|
41,173,359 |
|
Grounds and landscaping |
|
|
6,129,930 |
|
|
6,127,430 |
|
Furniture, fixtures and equipment |
|
|
16,062,596 |
|
|
15,682,101 |
|
Construction in process |
|
|
|
|
|
246,548 |
|
Accumulated depreciation |
|
|
(19,548,260 |
) |
|
(16,281,907 |
) |
|
|
|
|
|
|
|
|
Net property and equipment |
|
|
50,150,948 |
|
|
53,280,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
57,921,689 |
|
$ |
60,956,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND OWNERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
458,169 |
|
$ |
442,764 |
|
Accounts payable - related party |
|
|
156,460 |
|
|
138,088 |
|
Accrued mortgage interest |
|
|
222,263 |
|
|
209,730 |
|
Current portion of mortgage payable |
|
|
29,318,479 |
|
|
2,171,939 |
|
Accrued payroll |
|
|
99,713 |
|
|
83,026 |
|
Accrued expenses |
|
|
501,812 |
|
|
532,820 |
|
Deferred revenue |
|
|
136,943 |
|
|
150,279 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
30,893,839 |
|
|
3,728,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage payable, less current maturities |
|
|
37,962,066 |
|
|
67,002,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
68,855,905 |
|
|
70,730,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners (deficit) |
|
|
(10,934,216 |
) |
|
(9,773,905 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Owners (Deficit) |
|
$ |
57,921,689 |
|
$ |
60,956,815 |
|
|
|
|
|
|
|
|
|
19
McKIBBON HOTEL PORTFOLIO
|
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 |
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
2010 |
|
||
|
|
|
|
|
|
||
Revenues |
|
|
|
|
|
|
|
Rooms |
|
$ |
5,203,109 |
|
$ |
4,867,982 |
|
Restaurant |
|
|
64,449 |
|
|
54,617 |
|
Other |
|
|
58,077 |
|
|
52,289 |
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
5,325,635 |
|
|
4,974,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Rooms |
|
|
970,922 |
|
|
901,404 |
|
Restaurant |
|
|
32,293 |
|
|
21,997 |
|
Other operating departments |
|
|
43,764 |
|
|
39,639 |
|
Hotel administration |
|
|
666,864 |
|
|
597,517 |
|
Advertising and promotion |
|
|
439,584 |
|
|
398,470 |
|
Utilities |
|
|
271,106 |
|
|
270,098 |
|
Repairs and maintenance |
|
|
217,845 |
|
|
206,726 |
|
Property taxes, insurance and other |
|
|
273,625 |
|
|
306,184 |
|
Depreciation |
|
|
880,630 |
|
|
1,070,013 |
|
Amortization |
|
|
45,378 |
|
|
45,384 |
|
Management fees |
|
|
159,758 |
|
|
149,241 |
|
Franchise fees |
|
|
210,492 |
|
|
175,012 |
|
Incentive fees |
|
|
91,137 |
|
|
72,376 |
|
State excise taxes |
|
|
34,080 |
|
|
29,650 |
|
Ground lease |
|
|
34,071 |
|
|
32,492 |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
4,371,549 |
|
|
4,316,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
$ |
954,086 |
|
$ |
658,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial (income) expense |
|
|
|
|
|
|
|
Interest income |
|
|
(7,387 |
) |
|
(1,278 |
) |
Interest expense |
|
|
788,457 |
|
|
791,408 |
|
|
|
|
|
|
|
|
|
Total other income |
|
|
781,070 |
|
|
790,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
173,016 |
|
$ |
(131,445 |
) |
|
|
|
|
|
|
|
|
20
McKIBBON HOTEL PORTFOLIO
COMBINED
STATEMENTS OF OWNERS (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|||||||
|
|
March 31, 2011 |
|
March 31, 2010 |
|
||
|
|
|
|
|
|
||
|
|||||||
Balance, beginning |
|
$ |
(9,114,102 |
) |
$ |
(8,732,460 |
) |
Net income (loss) |
|
|
173,016 |
|
|
(131,445 |
) |
Contributions from owners |
|
|
|
|
|
300,000 |
|
Distributions to owners |
|
|
(1,993,130 |
) |
|
(1,210,000 |
) |
|
|
|
|
|
|
|
|
Balance, ending |
|
$ |
(10,934,216 |
) |
$ |
(9,773,905 |
) |
|
|
|
|
|
|
|
|
21
|
McKIBBON HOTEL PORTFOLIO |
|
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 |
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
2010 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
173,016 |
|
$ |
(131,445 |
) |
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation |
|
|
880,630 |
|
|
1,070,013 |
|
Amortization |
|
|
45,378 |
|
|
45,384 |
|
(Increase) decrease in assets: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
(86,633 |
) |
|
(167,626 |
) |
Prepaid expenses |
|
|
99,653 |
|
|
102,749 |
|
Inventory |
|
|
(2,026 |
) |
|
(834 |
) |
Other assets |
|
|
|
|
|
(68,568 |
) |
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
|
134,314 |
|
|
(24,430 |
) |
Accounts payable - related party |
|
|
1,965 |
|
|
13,934 |
|
Accrued mortgage interest |
|
|
(321 |
) |
|
(17,792 |
) |
Accrued payroll |
|
|
(67,219 |
) |
|
(72,017 |
) |
Accrued expense |
|
|
178,066 |
|
|
213,151 |
|
|
|
|
|
|
|
|
|
Total adjustments |
|
|
1,183,807 |
|
|
1,093,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
1,356,823 |
|
|
962,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Purchases of fixed assets |
|
|
(207,047 |
) |
|
(250,669 |
) |
(Increase) decrease in: |
|
|
|
|
|
|
|
Escrow deposits |
|
|
59,762 |
|
|
(21,244 |
) |
Restricted cash accounts |
|
|
(69,335 |
) |
|
(79,662 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities |
|
|
(216,620 |
) |
|
(351,575 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Principal payments on mortgage payable |
|
|
(563,661 |
) |
|
(545,148 |
) |
Contributions from owners |
|
|
|
|
|
300,000 |
|
Distributions to owners |
|
|
(1,993,130 |
) |
|
(1,210,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) financing activities |
|
|
(2,556,791 |
) |
|
(1,455,148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
|
(1,416,588 |
) |
|
(844,204 |
) |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
6,037,296 |
|
|
5,406,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
4,620,708 |
|
$ |
4,562,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures |
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
788,778 |
|
$ |
809,200 |
|
22
|
Apple REIT Ten, Inc. |
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2011 (unaudited) |
(in thousands, except share data) |
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Apple REIT Ten, Inc. gives effect to the following hotel acquisitions:
|
|
|
|
|
|
|
|
|
Franchise |
|
Location |
|
Gross Purchase |
|
Actual Acquisition Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CN Hotel Portfolio (1 Hotel): |
|
|
|
|
|
|
||
Home2 Suites |
|
Jacksonville, NC |
|
$ |
12.0 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
McKibbon Hotel Portfolio (8 Hotels): |
|
|
|
|
|
|
||
SpringHill Suites |
|
Knoxville, TN |
|
|
14.5 |
|
June 2, 2011 |
|
Hilton Garden Inn |
|
Gainesville, FL |
|
|
12.5 |
|
June 2, 2011 |
|
SpringHill Suites |
|
Richmond, VA |
|
|
11.0 |
|
June 2, 2011 |
|
TownePlace Suites |
|
Pensacola, FL |
|
|
11.5 |
|
June 2, 2011 |
|
Hampton Inn & Suites |
|
Mobile, AL |
|
|
13.0 |
|
June 2, 2011 |
|
Homewood Suites |
|
Knoxville, TN |
|
|
15.0 |
|
July 19, 2011 |
|
TownePlace Suites |
|
Knoxville, TN |
|
|
9.0 |
|
Pending |
|
Homewood Suites |
|
Gainesville, FL |
|
|
14.6 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Hawkeye Hotel Portfolio (3 Hotels): |
|
|
|
|
|
|
||
Homewood Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
|
Hampton Inn & Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
|
Hampton Inn & Suites |
|
Davenport, IA |
|
|
13.0 |
|
July 19, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
152.1 |
|
|
|
|
|
|
|
|
|
|
|
|
This Pro Forma Condensed Consolidated Balance Sheet also assumes 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 MHH Management, LLC and Schulte Hospitality Group, Inc. under separate management agreements.
Such pro forma information is based in part upon the historical Consolidated Balance Sheet of Apple REIT Ten, Inc. and the historical balance sheets of the hotel properties.
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Apple REIT Ten, Inc. is not necessarily indicative of what the actual financial position would have been assuming such transactions had been completed as of March 31, 2011 nor does it purport to represent the future financial position of Apple REIT Ten, 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.
23
Balance Sheet as of March 31, 2011 (unaudited)
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Pro forma |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties, net |
|
$ |
89,983 |
|
$ |
151,314 |
|
(A) |
$ |
241,297 |
|
Cash and cash equivalents |
|
|
120,708 |
|
|
(119,958 |
) |
(D) |
|
750 |
|
Other assets |
|
|
1,161 |
|
|
2,999 |
|
(C) |
|
4,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
211,852 |
|
$ |
34,355 |
|
|
$ |
246,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Note payable |
|
$ |
|
|
|
32,049 |
|
(C) |
$ |
32,049 |
|
Accounts payable and accrued expenses |
|
|
438 |
|
|
800 |
|
(C) |
|
1,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
438 |
|
|
32,849 |
|
|
|
33,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
215,642 |
|
|
4,930 |
|
(E) |
|
220,572 |
|
Accumulated deficit |
|
|
(2,421 |
) |
|
(3,424 |
) |
(B) |
|
(5,845 |
) |
Cumulative distributions paid |
|
|
(1,855 |
) |
|
|
|
|
|
(1,855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity |
|
|
211,414 |
|
|
1,506 |
|
|
|
212,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
211,852 |
|
$ |
34,355 |
|
|
$ |
246,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Jacksonville, NC |
|
Cedar Rapids, IA |
|
Cedar Rapids, IA |
|
Davenport, IA |
|
Knoxville, TN |
|
Gainesville, FL |
|
Richmond, VA |
|
Pensacola, FL |
|
Mobile, AL |
|
Knoxville, TN |
|
Knoxville, TN |
|
Gainesville, FL |
|
Total |
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price per contract |
|
$ |
12,000 |
|
$ |
13,000 |
|
$ |
13,000 |
|
$ |
13,000 |
|
$ |
14,500 |
|
$ |
12,500 |
|
$ |
11,000 |
|
$ |
11,500 |
|
$ |
13,000 |
|
$ |
9,000 |
|
$ |
15,000 |
|
$ |
14,550 |
|
$ |
152,050 |
|
|
Other capitalized costs (credits) incurred |
|
|
50 |
|
|
65 |
|
|
71 |
|
|
71 |
|
|
122 |
|
|
80 |
|
|
50 |
|
|
50 |
|
|
(1,475 |
) |
|
50 |
|
|
65 |
|
|
65 |
|
|
(736 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties |
|
|
12,050 |
|
|
13,065 |
|
|
13,071 |
|
|
13,071 |
|
|
14,622 |
|
|
12,580 |
|
|
11,050 |
|
|
11,550 |
|
|
11,525 |
|
|
9,050 |
|
|
15,065 |
|
|
14,615 |
|
|
151,314 |
|
(A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition fee payable to Apple Suites Realty Group (2% of purchase price per contract) |
|
|
240 |
|
|
260 |
|
|
260 |
|
|
260 |
|
|
290 |
|
|
250 |
|
|
220 |
|
|
230 |
|
|
260 |
|
|
180 |
|
|
300 |
|
|
291 |
|
|
3,041 |
|
(B) |
Other acquisition related costs |
|
|
30 |
|
|
33 |
|
|
33 |
|
|
33 |
|
|
36 |
|
|
31 |
|
|
28 |
|
|
29 |
|
|
33 |
|
|
23 |
|
|
38 |
|
|
36 |
|
|
383 |
|
(B) |
Net other assets/(liabilities) assumed |
|
|
(24 |
) |
|
(15 |
) |
|
(153 |
) |
|
(205 |
) |
|
(51 |
) |
|
(48 |
) |
|
(34 |
) |
|
(30 |
) |
|
1,467 |
|
|
(7,217 |
) |
|
(11,036 |
) |
|
(12,504 |
) |
|
(29,850 |
) |
(C) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price |
|
$ |
12,296 |
|
$ |
13,343 |
|
$ |
13,211 |
|
$ |
13,159 |
|
$ |
14,897 |
|
$ |
12,813 |
|
$ |
11,264 |
|
$ |
11,779 |
|
$ |
13,285 |
|
$ |
2,036 |
|
$ |
4,367 |
|
$ |
2,438 |
|
$ |
124,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Cash on hand at March 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(120,708 |
) |
|
Plus: Working capital requirements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(119,958 |
) |
(D) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity proceeds needed for acquisitions and working capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,930 |
|
(E) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
|
|
(C) |
Represents other assets and liabilities assumed in the acquisition of the hotel including, mortgage payable, debt service escrows, 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. |
|
|
(E) |
Represents the issuance of additional shares required to fund acquisitions. |
25
Apple REIT Ten, Inc.
Pro Forma Condensed Consolidated Statements of
Operations (unaudited)
For the year ended December 31, 2010 and three months ended March 31, 2011
(in thousands, except per share data)
The following unaudited Pro Forma Condensed Consolidated Statements of Operations of Apple REIT Ten, Inc. gives effect to the following hotel acquisition:
|
|
|
|
|
|
|
|
|
Franchise |
|
Location |
|
Gross Purchase |
|
Actual Acquisition Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hilton Garden Inn |
|
Denver, CO |
|
$ |
58.5 |
|
March 4, 2011 |
|
|
|
|
|
|
|
|
|
|
CN Hotel Portfolio (4 Hotels): |
|
|
|
|
|
|
|
|
Hampton Inn & Suites |
|
Winston-Salem, NC |
|
|
11.0 |
|
March 15, 2011 |
|
Fairfield Inn & Suites |
|
Matthews, NC |
|
|
10.0 |
|
March 25, 2011 |
|
TownePlace Suites |
|
Columbia, SC |
|
|
10.5 |
|
March 25, 2011 |
|
Home2 Suites |
|
Jacksonville, NC |
|
|
12.0 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
McKibbon Hotel Portfolio (8 Hotels): |
|
|
|
|
|
|
|
|
SpringHill Suites |
|
Knoxville, TN |
|
|
14.5 |
|
June 2, 2011 |
|
Hilton Garden Inn |
|
Gainesville, FL |
|
|
12.5 |
|
June 2, 2011 |
|
SpringHill Suites |
|
Richmond, VA |
|
|
11.0 |
|
June 2, 2011 |
|
TownePlace Suites |
|
Pensacola, FL |
|
|
11.5 |
|
June 2, 2011 |
|
Hampton Inn & Suites |
|
Mobile, AL |
|
|
13.0 |
|
June 2, 2011 |
|
Homewood Suites |
|
Knoxville, TN |
|
|
15.0 |
|
July 19, 2011 |
|
TownePlace Suites |
|
Knoxville, TN |
|
|
9.0 |
|
Pending |
|
Homewood Suites |
|
Gainesville, FL |
|
|
14.6 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Hawkeye Hotel Portfolio (3 Hotels): |
|
|
|
|
|
|
|
|
Homewood Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
|
Hampton Inn & Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
|
Hampton Inn & Suites |
|
Davenport, IA |
|
|
13.0 |
|
July 19, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
242.1 |
|
|
|
|
|
|
|
|
|
|
|
|
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 Stonebridge Realty Advisors, Inc., MHH Management, LLC, Newport Hospitality Group, Inc. and Schulte Hospitality Group, Inc. under separate management agreements.
Such pro forma information is based in part upon the historical Consolidated Statements of Operations of Apple REIT Ten, Inc. and the historical Statements of Operations of the hotel properties.
The following unaudited Pro Forma Condensed Consolidated Statements of Operations of Apple REIT Ten, Inc. are not necessarily indicative of what the actual financial results would have been assuming such transactions had been completed on the latter of January 1, 2010, or the date the hotel began operations nor do they purport to represent the future financial results of Apple REIT Ten, Inc.
The unaudited Pro Forma Condensed Consolidated Statements of Operations should be read in conjunction with, and is qualified in its entirety by the historical Statements of Operations of the acquired hotels.
26
Pro Forma Condensed Consolidated Statement of
Operations (unaudited)
For the year ended December 31, 2010
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Denver, CO |
|
CN Hotel |
|
McKibbon Hotel |
|
Hawkeye Hotel |
|
Pro forma |
|
|
Total |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
|
|
$ |
8,978 |
|
$ |
3,339 |
|
$ |
21,903 |
|
$ |
6,644 |
|
$ |
|
|
|
$ |
40,864 |
|
Other revenue |
|
|
|
|
|
2,372 |
|
|
59 |
|
|
510 |
|
|
67 |
|
|
|
|
|
|
3,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
11,350 |
|
|
3,398 |
|
|
22,413 |
|
|
6,711 |
|
|
|
|
|
|
43,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
3,798 |
|
|
1,097 |
|
|
7,925 |
|
|
1,946 |
|
|
|
|
|
|
14,766 |
|
General and administrative |
|
|
28 |
|
|
1,635 |
|
|
34 |
|
|
2,369 |
|
|
387 |
|
|
750 |
|
(B) |
|
5,203 |
|
Management and franchise fees |
|
|
|
|
|
1,003 |
|
|
494 |
|
|
1,935 |
|
|
950 |
|
|
|
|
|
|
4,382 |
|
Taxes, insurance and other |
|
|
|
|
|
374 |
|
|
234 |
|
|
1,336 |
|
|
451 |
|
|
|
|
|
|
2,395 |
|
Acquisition related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,140 |
|
(H) |
|
5,140 |
|
Depreciation of real estate owned |
|
|
|
|
|
1,325 |
|
|
463 |
|
|
4,083 |
|
|
720 |
|
|
(6,591 |
) |
(C) |
|
6,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,024 |
|
(D) |
|
|
|
Interest, net |
|
|
3 |
|
|
753 |
|
|
324 |
|
|
3,227 |
|
|
1,365 |
|
|
(3,747 |
) |
(E) |
|
1,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
31 |
|
|
8,888 |
|
|
2,646 |
|
|
20,875 |
|
|
5,819 |
|
|
1,576 |
|
|
|
39,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(31 |
) |
$ |
2,462 |
|
$ |
752 |
|
$ |
1,538 |
|
$ |
892 |
|
$ |
(1,576 |
) |
|
$ |
4,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
$ |
(3,083.50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,582 |
|
(F) |
|
19,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Pro Forma
Condensed Consolidated Statement of Operations (unaudited)
For the three months
ended March 31, 2011
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Denver, CO |
|
CN Hotel |
|
McKibbon Hotel |
|
Hawkeye Hotel |
|
Pro forma |
|
|
Total |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|||||||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
749 |
|
$ |
1,273 |
|
$ |
1,061 |
|
$ |
5,203 |
|
$ |
1,700 |
|
$ |
|
|
|
$ |
9,986 |
|
Other revenue |
|
|
144 |
|
|
381 |
|
|
19 |
|
|
123 |
|
|
17 |
|
|
|
|
|
|
684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
893 |
|
|
1,654 |
|
|
1,080 |
|
|
5,326 |
|
|
1,717 |
|
|
|
|
|
|
10,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
419 |
|
|
736 |
|
|
334 |
|
|
1,976 |
|
|
547 |
|
|
|
|
|
|
4,012 |
|
General and administrative |
|
|
597 |
|
|
142 |
|
|
68 |
|
|
667 |
|
|
124 |
|
|
100 |
|
(B) |
|
1,698 |
|
Management and franchise fees |
|
|
65 |
|
|
224 |
|
|
96 |
|
|
461 |
|
|
229 |
|
|
|
|
|
|
1,075 |
|
Taxes, insurance and other |
|
|
64 |
|
|
66 |
|
|
84 |
|
|
342 |
|
|
185 |
|
|
|
|
|
|
741 |
|
Acquisition related costs |
|
|
2,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,988 |
) |
(H) |
|
32 |
|
Depreciation of real estate owned |
|
|
214 |
|
|
225 |
|
|
135 |
|
|
926 |
|
|
246 |
|
|
(1,532 |
) |
(C) |
|
1,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,443 |
|
(D) |
|
|
|
Interest, net |
|
|
(96 |
) |
|
128 |
|
|
137 |
|
|
781 |
|
|
402 |
|
|
(878 |
) |
(E) |
|
474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
3,283 |
|
|
1,521 |
|
|
854 |
|
|
5,153 |
|
|
1,733 |
|
|
(2,855 |
) |
|
|
9,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(2,390 |
) |
$ |
133 |
|
$ |
226 |
|
$ |
173 |
|
$ |
(16 |
) |
$ |
2,855 |
|
|
$ |
981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
$ |
(0.23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
10,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,369 |
|
(F) |
|
21,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
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, 2010 for the respective period prior to acquisition by the Company. The Company was initially formed on August 13, 2010, and had no operations prior to that date. Additionally, three properties began operations subsequent to January 1, 2010, and one property remained under construction as of March 31, 2011. Therefore, these hotels had limited historical operational activity prior to their opening. The properties and their applicable status are as follows: Winston-Salem, NC Hampton Inn & Suites, opened April 2010, Cedar Rapids, IA Homewood Suites, opened August 2010, Matthews, NC Fairfield Inn & Suites, opened November 2010 and Jacksonville, NC Home2 Suites is under construction.
(B) Represents adjustments to level of administrative and other costs associated with being a public company and owning additional properties, including the advisory fee, accounting and legal expenses, net of cost savings derived from owning multiple operating properties.
(C) Represents elimination of historical depreciation and amortization expense of the acquired properties.
(D) 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 managements knowledge of the properties and the hotel industry in general.
(E) Interest expense related to prior owners debt which was not assumed has been eliminated.
(F) Represents the weighted average number of shares required to be issued to generate the purchase price of each hotel, net of any debt assumed. The calculation assumes all properties were acquired on the latter of January 1, 2010, or the dates the hotels began operations.
(G) 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.
(H) Represents costs incurred to complete acquisitions, 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, 2010 or the dates the hotels began operations.
29
|
|
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 Ten, Inc. |
|
|
|
|
|
By: |
/s/ Glade M. Knight |
|
|
|
|
|
Glade M. Knight, |
|
|
Chief Executive Officer |
|
|
|
|
|
July 20, 2011 |
30