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| 8-K - Apple REIT Seven, Inc. | c70732_8k.htm |
Exhibit 99.1
DEAR SHAREHOLDER, Key indicators of hotel performance including occupancy, average daily rate and revenue per available room have improved across the U.S. hotel industry in 2012 and according to industry analysts the outlook for the remainder of the year is positive. The Apple REIT Seven, Inc. portfolio includes 51 Marriott®- and Hilton®-branded hotels that are strategically located in diversified markets across 18 states, and I am optimistic the Company will continue to see improvements during 2012.
I am pleased to report the Apple REIT Seven portfolio of hotels achieved revenue per available room (RevPAR) of $87 for the second quarter of 2012, an increase of two percent as compared to the same period of 2011. The average occupancy rate for the second quarter of this year was 77 percent and the average daily rate (ADR) was $114, these measures were approximately one percent and three percent ahead of comparable results from last year, respectively. For the six-month period ending June 30, 2012, RevPAR was $84, up by approximately four percent in comparison to the same period last year.
Funds from operations (FFO) for the second quarter of this year totaled $16.8 million, or $0.18 per share, and for the six-month period ending June 30, 2012, FFO was $30.9 million, or $0.34 per share. As compared to the same periods of 2011, FFO for the second quarter of this year improved by one percent and for the first six months of the year improved by approximately three percent. Over the first six months of the year, the Company paid distributions of approximately $0.385 per share. The current annualized distribution rate for the Company is $0.77 per share. Our annualized distribution rate is closely monitored, taking into account varying economic cycles and capital improvements, as well as current and projected hotel performance. Although we strive for consistency over the life of our program, we may make adjustments as needed, based
on available cash resources. For reference, since the time of the Company’s first distribution payment through July 31, 2012, we have paid approximately $5.22 per share, or $412 million, in shareholder distributions.
As always, we encourage our shareholders to know their investment and stay informed by reviewing information on our website at www.applereitseven.com, as well as our filings with the Securities and Exchange Commission, which can be found on their website at www.sec.gov.
Throughout the history of Apple REIT Seven, our team has remained focused on maximizing shareholder value through the ownership of lodging real estate. Our portfolio includes high-quality, well-branded hotels and our balance sheet is among the strongest in our industry, with a debt level of approximately 19 percent as compared to our total initial capitalization. As the hotel industry continues to see improvement, I believe the Company is well positioned for the future. I look forward to sharing our continued progress with you in upcoming shareholder communications.
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Sincerely, |
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Glade M. Knight |
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Chairman and Chief Executive Officer |
Statements of Operations (Unaudited)
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(In thousands except statistical data) |
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Three months ended |
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Three months ended |
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Six months ended |
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Six months ended |
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REVENUES |
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Room revenue |
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$ |
51,067 |
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$ |
49,633 |
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$ |
98,464 |
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$ |
94,338 |
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Other revenue |
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5,130 |
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5,279 |
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10,232 |
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10,017 |
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Total revenue |
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$ |
56,197 |
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$ |
54,912 |
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$ |
108,696 |
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$ |
104,355 |
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EXPENSES |
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Direct operating expense |
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$ |
14,717 |
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$ |
14,428 |
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$ |
28,669 |
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$ |
28,063 |
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Other hotel operating expenses |
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20,390 |
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20,013 |
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40,008 |
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38,866 |
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General and administrative |
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1,735 |
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1,395 |
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3,853 |
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2,514 |
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Depreciation |
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8,628 |
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8,784 |
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17,193 |
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17,150 |
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Interest, net |
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2,588 |
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2,547 |
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5,304 |
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4,828 |
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Total expenses |
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$ |
48,058 |
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$ |
47,167 |
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$ |
95,027 |
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$ |
91,421 |
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NET INCOME |
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Net income |
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$ |
8,139 |
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$ |
7.745 |
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$ |
13,669 |
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$ |
12,934 |
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Net income per share |
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$ |
0.09 |
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$ |
0.08 |
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$ |
0.15 |
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$ |
0.14 |
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FUNDS FROM OPERATIONS (A) |
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Net income |
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$ |
8,139 |
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$ |
7,745 |
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$ |
13,669 |
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$ |
12,934 |
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Depreciation of real estate owned |
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8,628 |
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8,784 |
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17,193 |
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17,150 |
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Funds from operations (FFO) |
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$ |
16,767 |
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$ |
16,529 |
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$ |
30,862 |
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$ |
30,084 |
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FFO per share |
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$ |
0.18 |
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$ |
0.18 |
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$ |
0.34 |
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$ |
0.33 |
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WEIGHTED-AVERAGE SHARES OUTSTANDING |
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90,886 |
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91,569 |
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90,922 |
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91,666 |
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OPERATING STATISTICS |
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Occupancy |
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77% |
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76% |
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74% |
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73% |
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Average daily rate |
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$ |
114 |
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$ |
111 |
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$ |
114 |
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$ |
111 |
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RevPAR |
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$ |
87 |
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$ |
85 |
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$ |
84 |
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$ |
81 |
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Number of hotels owned |
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51 |
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51 |
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Distributions 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, 2012 |
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December 31, 2011 |
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ASSETS |
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Investment in real estate, net |
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$ |
833,150 |
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$ |
846,377 |
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Other assets |
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23,651 |
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18,764 |
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Total assets |
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$ |
856,801 |
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$ |
865,141 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Notes payable |
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$ |
189,323 |
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$ |
174,847 |
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Other liabilities |
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12,337 |
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12,314 |
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Total liabilities |
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201,660 |
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187,161 |
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Total shareholders’ equity |
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655,141 |
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677,980 |
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Total liabilities & shareholders’ equity |
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$ |
856,801 |
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$ |
865,141 |
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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, 2012 and the results of operations for the interim period ended June 30, 2012. 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 Seven, Inc. 2011 Annual Report.
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Cover images from left to right, top to bottom: HOMEWOOD SUITES, NEW ORLEANS, LA; HILTON GARDEN INN, MACON, GA; COURTYARD, OMAHA, NE; COURTYARD, ALEXANDRIA, VA; RESIDENCE INN, DOTHAN, AL; RESIDENCE INN, HOUSTON, TX |
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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. |
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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. |
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“Marriott®,” “Courtyard® by Marriott®,” “SpringHill Suites® by Marriott®,” “Fairfield Inn® by Marriott®,” “Fairfield Inn & Suites® by Marriott®,” “TownePlace Suites® by Marriott®” and “Residence Inn® by Marriott®” 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 Seven or otherwise. Marriott was not involved in any way whether as an “issuer” or “underwriter” or otherwise in the Apple REIT Seven 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 Seven 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. |
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“Hampton Inn®,” “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 Seven, or otherwise. Hilton was not involved in any way, whether as an “issuer” or “underwriter” or otherwise, in the Apple REIT Seven 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 Seven 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. |
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CORPORATE
PROFILE Apple REIT Seven, 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® by Marriott®,
Fairfield Inn & Suites® by Marriott®, Residence
Inn® by Marriott®, SpringHill Suites® by
Marriott®, TownePlace Suites® by Marriott®,
Marriott® Hotels & Resorts, Homewood Suites by Hilton®,
Hilton Garden Inn®, and Hampton Inn® brands. Our portfolio
consists of 51 hotels with 6,426 guestrooms in 18 states. |
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Market Diversity |
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STATE/CITY |
Portfolio of hotels |
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ALABAMA |
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Auburn, Birmingham, Dothan (2), Huntsville (3), |
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ARIZONA |
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Tucson |
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CALIFORNIA |
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Agoura Hills, San Diego (4) |
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COLORADO |
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Denver/Highlands Ranch (2) |
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FLORIDA |
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Lakeland, Miami (2), Sarasota, Tallahassee |
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GEORGIA |
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Columbus (3), Macon |
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IDAHO |
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Boise |
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LOUISIANA |
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New Orleans |
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MISSISSIPPI |
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Hattiesburg, Tupelo |
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NEBRASKA |
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Omaha |
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NEW JERSEY |
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Cranford, Mahwah |
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NEW YORK |
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Islip/MacArthur Airport |
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OHIO |
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Cincinnati |
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TENNESSEE |
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Memphis |
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TEXAS |
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Addison, Brownsville, El Paso, Houston, San Antonio (2), Stafford |
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UTAH |
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Provo |
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VIRGINIA |
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Alexandria, Richmond |
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WASHINGTON |
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Seattle/Kirkland, Seattle/Lake Union, Vancouver |
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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.applereitseven.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 |
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kclarke@applereit.com |
