Attached files
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| 8-K - Apple REIT Eight, Inc. | c66759_8-k.htm |
Exhibit 99.1
DEAR SHAREHOLDER
I am pleased to report that for the first six months of 2011, operations among the 51 hotels that comprise the Apple REIT Eight, Inc. portfolio showed signs of improvement as compared to the same period of 2010. As hotel operations continue to improve, I am optimistic that 2011 will be a good year for Apple REIT Eight and I remain confident in the long-term success of the Company.
The Apple REIT Eight portfolio of hotels, with a combined total of 5,910 guestrooms, is diversified across 19 states and represents some of the leading brands in the hotel industry. For the three-and six-month periods ending June 30, 2011, our hotels reported an average occupancy of 78 percent and 72 percent, an average daily rate (ADR) of $114 and $110, and revenue per available room (RevPAR) of $89 and $80, respectively. As compared to results for the same six-month period of 2010, the average occupancy rate was up by approximately three percent, ADR increased by approximately one percent and RevPAR was up by approximately four percent.
Funds from operations (FFO) for the second quarter of 2011 totaled $14.0 million, or $0.15 per share, up approximately six percent as compared to FFO achieved during the same period of 2010 of $13.2 million, or $0.14 per share. For the six-month period ending June 30, 2011, FFO totaled $20.7 million, or $0.22 per share, up approximately three percent as compared to results from the same period last year, excluding a $3 million one-time gain on sale of stock in the first quarter of 2010. On July 1, 2011, the Company announced that our Board of Directors had approved a decrease in the annualized distribution rate from $0.77 to $0.55 per share, due to a slower recovery in certain markets and slower than anticipated ramp up at some of our hotels. The Company lowered the annualized distribution rate in July until such time as a more significant recovery can be achieved throughout our markets. Since the time of Apple REIT Eight’s first distribution payment, we have paid approximately $278.8 million in shareholder distributions, or approximately $3.29 per share to those who have been shareholders of the Company since the initial closing. The Company sets an annualized distribution rate to provide shareholders consistency over the life of our program. We closely monitor our annualized distribution rate, taking into account varying economic cycles and capital improvements as well as current and projected hotel performance, and may make adjustments as needed, based on available cash resources.
Since Apple REIT Eight’s beginning in 2007, our team has diligently worked to protect your investment while providing you with attractive distributions. In light of recent negative media attention, during the second quarter of this year, the Company received an increase in requests for the redemption of shares through our Unit Redemption Program at the purchase price paid per Unit. As contemplated in the program, the Company redeemed those Units on a pro-rata basis, paying a total of approximately $8 million.
The Company has consistently maintained a balance sheet among the strongest in the hotel industry. The current debt level is approximately 22 percent of our total initial capitalization, which is well below industry averages. Our team is currently working to reposition a portion of this debt into a more cost effective and efficient structure. We have renegotiated and reinstated four of the five loans that had been placed with a special servicer earlier this year, with payments resumed in full. The fifth loan was renegotiated and paid off at a discount. The Company strategically defaulted on these loans in an effort to increase shareholder value and although challenging, I believe we were successful with the process, with net savings in excess of $1 million.
The Apple REIT Eight portfolio of upscale limited-service, extended-stay and full-service hotels was carefully selected based on market and brand as well as past and anticipated growth in future performance. This simple business strategy has provided stability to our program and allowed us to remain profitable even during the challenging economic down-cycle of recent history. I believe Apple REIT Eight is well-poised to benefit as market conditions continue to improve.
Chairman and Chief Executive Officer
STATEMENTS OF OPERATIONS (Unaudited)
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(In thousands except statistical data) |
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Three months |
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Three months |
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Six months |
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Six months |
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REVENUES |
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Room revenue |
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$ |
48,389 |
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$ |
46,084 |
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$ |
85,885 |
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$ |
82,639 |
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Other revenue |
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3,494 |
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3,190 |
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6,315 |
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6,038 |
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Total revenue |
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$ |
51,883 |
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$ |
49,274 |
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$ |
92,200 |
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$ |
88,677 |
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EXPENSES |
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Direct operating expense |
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$ |
12,835 |
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$ |
12,328 |
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$ |
24,099 |
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$ |
23,353 |
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Other hotel operating expenses |
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20,329 |
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19,950 |
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38,829 |
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37,973 |
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General and administrative |
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1,405 |
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1,539 |
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2,539 |
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2,736 |
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Depreciation |
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9,196 |
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8,747 |
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18,029 |
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17,399 |
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Investment income, net |
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— |
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(7 |
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— |
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(3,023 |
) |
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Interest expense, net |
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3,344 |
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2,306 |
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6,039 |
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4,439 |
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Total expenses |
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$ |
47,109 |
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$ |
44,863 |
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$ |
89,535 |
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$ |
82,877 |
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NET INCOME |
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Net income |
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$ |
4,774 |
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$ |
4,411 |
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$ |
2,665 |
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$ |
5,800 |
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Net income per share |
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$ |
0.05 |
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$ |
0.05 |
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$ |
0.03 |
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$ |
0.06 |
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FUNDS FROM OPERATIONS (A) |
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Net income |
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$ |
4,774 |
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$ |
4,411 |
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$ |
2,665 |
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$ |
5,800 |
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Depreciation of real estate owned |
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9,196 |
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8,747 |
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18,029 |
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17,399 |
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Funds from operations |
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$ |
13,970 |
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$ |
13,158 |
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$ |
20,694 |
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$ |
23,199 |
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FFO per share |
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$ |
0.15 |
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$ |
0.14 |
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$ |
0.22 |
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$ |
0.25 |
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WEIGHTED-AVERAGE SHARES OUTSTANDING |
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94,196 |
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94,069 |
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94,280 |
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93,920 |
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OPERATING STATISTICS |
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Occupancy |
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78 |
% |
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76 |
% |
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72 |
% |
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70 |
% |
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Average daily rate |
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$ |
114 |
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$ |
112 |
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$ |
110 |
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$ |
109 |
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RevPAR |
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$ |
89 |
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$ |
85 |
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$ |
80 |
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$ |
77 |
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Number of hotels |
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51 |
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51 |
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Dividends per share |
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$ |
0.19 |
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$ |
0.19 |
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$ |
0.39 |
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$ |
0.39 |
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BALANCE SHEET HIGHLIGHTS (Unaudited) |
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(In thousands) |
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June 30, 2011 |
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December 31, 2010 |
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ASSETS |
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Investment in real estate, net |
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$ |
928,906 |
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$ |
945,312 |
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Other assets |
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24,070 |
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17,174 |
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Total assets |
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$ |
952,976 |
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$ |
962,486 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Notes payable |
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$ |
223,952 |
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$ |
200,439 |
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Other liabilities |
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29,027 |
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25,478 |
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Total liabilities |
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252,979 |
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225,917 |
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Total shareholders’ equity |
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699,997 |
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736,569 |
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Total liabilities & shareholders’ equity |
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$ |
952,976 |
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$ |
962,486 |
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(A) Funds from operations (FFO) is defined as net income (computed in accordance with generally accepted accounting principles – GAAP) excluding gains and losses from sales of depreciable property, plus depreciation and amortization. The company considers FFO in evaluating property acquisitions and its operating performance and believes that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of the company’s activities in accordance with GAAP. FFO is not necessarily indicative of cash available to fund cash needs.
The financial information furnished reflects all adjustments necessary for a fair presentation of financial position at June 30, 2011 and the results of operations for the interim periods ended June 30, 2011. Such interim results are not necessarily indicative of the results that can be expected for the full year. The accompanying financial statements should be read in conjunction with the audited financial statements and related notes appearing in the Apple REIT Eight, Inc. 2010 Annual Report.
MARKET
DIVERSITY
Portfolio of hotels
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STATE / CITY |
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ALABAMA |
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Birmingham |
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ARKANSAS |
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Rogers (2), Springdale |
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CALIFORNIA |
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Burbank, Cypress,
Oceanside, Sacramento, |
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FLORIDA |
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Jacksonville, Orlando/Sanford, Tallahassee, Tampa |
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GEORGIA |
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Savannah/Port Wentworth, Savannah |
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KANSAS |
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Overland Park (3), Wichita |
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KENTUCKY |
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Bowling Green |
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MARYLAND |
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Annapolis |
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MASSACHUSETTS |
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Marlborough, Westford (2) |
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MISSOURI |
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Kansas City |
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NEW JERSEY |
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Somerset |
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NEW YORK |
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New York City |
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NORTH CAROLINA |
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Carolina Beach, Concord,
Dunn, Fayetteville, |
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OKLAHOMA |
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Tulsa/South-Bixby |
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SOUTH CAROLINA |
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Columbia, Greenville, Hilton Head |
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TENNESSEE |
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Chattanooga |
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TEXAS |
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Texarkana (2) |
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VIRGINIA |
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Charlottesville,
Harrisonburg, Norfolk/Chesapeake, |
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WASHINGTON |
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Tukwila |
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CORPORATE HEADQUARTERS |
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814 East Main Street |
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Richmond, Virginia 23219 |
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(804) 344-8121 |
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(804) 344-8129 FAX |
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www.applereiteight.com |
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INVESTOR INFORMATION |
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For additional information about the |
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company, please contact: Kelly Clarke, |
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Director of Investor Services |
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804-727-6321 or kclarke@applereit.com |
CORPORATE PROFILE
Apple REIT Eight, Inc. is a real estate investment trust (REIT) focused on the ownership of hotels that generate attractive returns for our shareholders. Our hotels operate under the Courtyard® by Marriott®, Fairfield Inn & Suites® by Marriott®, Residence Inn® by Marriott®, SpringHill Suites® by Marriott®, TownePlace Suites® by Marriott®, Marriott® Hotels & Resorts, Renaissance® Hotels, Homewood Suites by Hilton®, Hilton Garden Inn®, Hampton Inn® and Hampton Inn & Suites® brands. Our portfolio consists of 51 hotels, containing a total of 5,910 guestrooms in 19 states.
MISSION
Apple REIT Eight is a premier real estate investment company committed to providing maximum value for our shareholders.
COVER: COURTYARD, TEXARKANA, TX
This quarterly report contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include: the availability and terms of financing; changes in national, regional and local economies and business conditions; competitors within the hotel industry; the outcome of current and future litigation and regulatory proceedings or inquiries; and the ability of the company to implement its operating strategy and to manage planned growth.
In addition, the timing and amounts of distributions to common shareholders are within the discretion of the company’s board of directors. Although the company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate; therefore, there can be no assurance that such statements included in this quarterly report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the company or any other person that the results or conditions described in such statements or the objectives and plans of the company will be achieved.
“Marriott®,” “Courtyard® by Marriott®,” “SpringHill Suites® by Marriott®,” “Fairfield Inn® by Marriott®,” “Fairfield Inn & Suites® by Marriott®,” “TownePlace Suites® by Marriott®,” “Residence Inn® by Marriott®” and “Renaissance® Hotels” are each a registered trademark of Marriott International, Inc. or one of its affiliates. All references to “Marriott” mean Marriott International, Inc. and all of its affiliates and subsidiaries and their respective officers, directors, agents, employees, accountants and attorneys. Marriott is not responsible for the content of this report, whether relating to the hotel information, operating information, financial information, Marriott’s relationship with Apple REIT Eight or otherwise. Marriott was not involved in any way whether as an “issuer” or “underwriter” or otherwise in the Apple REIT Eight offering and received no proceeds from the offering. Marriott has not expressed any approval or disapproval regarding this report, and the grant by Marriott of any franchise or other rights to Apple REIT Eight shall not be construed as any expression of approval or disapproval. Marriott has not assumed and shall not have any liability in connection with this report.
“Hampton Inn®,” “Hampton Inn & Suites®,” “Hilton Garden Inn®” and “Homewood Suites by Hilton®” are each a registered trademark of Hilton Worldwide or one of its affiliates. All references to “Hilton” mean Hilton Worldwide and all of its affiliates and subsidiaries, and their respective officers, directors, agents, employees, accountants and attorneys. Hilton is not responsible for the content of this report, whether relating to hotel information, operating information, financial information, Hilton’s relationship with Apple REIT Eight, or otherwise. Hilton was not involved in any way, whether as an “issuer” or “underwriter” or otherwise, in the Apple REIT Eight offering and received no proceeds from the offering. Hilton has not expressed any approval or disapproval regarding this report, and the grant by Hilton of any franchise or other rights to Apple REIT Eight shall not be construed as any expression of approval or disapproval. Hilton has not assumed and shall not have any liability in connection with this report.
