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EX-31.2 - EX-31.2 - Apple Hospitality REIT, Inc.ex31-2.htm
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EX-31.1 - EX-31.1 - Apple Hospitality REIT, Inc.ex31-1.htm



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

 
FORM 10-Q
 


x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______

Commission File Number 001-37389

APPLE HOSPITALITY REIT, INC.
(Exact name of registrant as specified in its charter)
 
Virginia   26-1379210
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer
Identification No.)
     
814 East Main Street
Richmond, Virginia
  23219
(Address of principal executive offices)    (Zip Code)
 
(804) 344-8121
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer   x
 
Accelerated filer   ¨
 
Non-accelerated filer   ¨
 
Smaller reporting company   ¨
       
(Do not check if a smaller
reporting company)
   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨    No x

Number of registrant’s common shares outstanding as of May 1, 2016: 174,665,236
 
 
 

 
APPLE HOSPITALITY REIT, INC.
FORM 10-Q
INDEX
 
 
Page Number
PART I.  FINANCIAL INFORMATION
   
     
 
Item 1.
   
         
   
3
 
         
   
4
 
         
   
5
 
         
   
6
 
         
 
Item 2.
16
 
         
 
Item 3.
28
 
         
 
Item 4.
29
 
         
PART II.  OTHER INFORMATION
   
     
 
Item 1.
30  
         
  Item 1A. Risk Factors 30  
         
 
Item 2.
31  
         
 
Item 6.
32
 
         
33
 

This Form 10-Q includes references to certain trademarks or service marks.  The Courtyard by Marriott®, Fairfield Inn by Marriott®, Fairfield Inn & Suites by Marriott®, Marriott® Hotels, Renaissance® Hotels, Residence Inn by Marriott®, SpringHill Suites by Marriott® and TownePlace Suites by Marriott® trademarks are the property of Marriott International, Inc. or one of its affiliates.  The Embassy Suites by Hilton®, Hampton Inn by Hilton®, Hampton Inn & Suites by Hilton®, Hilton®, Hilton Garden Inn®, Home2 Suites by Hilton® and Homewood Suites by Hilton® trademarks are the property of Hilton Worldwide Holdings Inc. or one or more of its affiliates.  For convenience, the applicable trademark or service mark symbol has been omitted but will be deemed to be included wherever the above referenced terms are used.
 
 
 

 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
Apple Hospitality REIT, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
 
   
March 31,
   
December 31,
 
   
2016
   
2015
 
   
(unaudited)
       
Assets
           
Investment in real estate, net of accumulated depreciation
of $456,266 and $423,057, respectively
  $ 3,627,296     $ 3,641,767  
Restricted cash-furniture, fixtures and other escrows
    20,806       22,651  
Due from third party managers, net
    43,027       24,743  
Other assets, net
    31,945       33,614  
Total Assets
  $ 3,723,074     $ 3,722,775  
                 
Liabilities
               
Revolving credit facility
  $ 171,900     $ 114,800  
Term loans
    421,647       421,444  
Mortgage debt
    427,495       461,859  
Accounts payable and other liabilities
    73,426       77,614  
Total Liabilities
    1,094,468       1,075,717  
                 
Shareholders' Equity
               
Preferred stock, authorized 30,000,000 shares; none issued
and outstanding
    0       0  
Common stock, no par value, authorized 800,000,000 shares;
issued and outstanding 174,665,236 and 174,368,340 shares, respectively
    3,506,514       3,500,584  
Accumulated other comprehensive loss
    (8,751 )     (2,057 )
Distributions greater than net income
    (869,157 )     (851,469 )
Total Shareholders' Equity
    2,628,606       2,647,058  
                 
Total Liabilities and Shareholders' Equity
  $ 3,723,074     $ 3,722,775  
 
See notes to consolidated financial statements.
 
 
3

 
Apple Hospitality REIT, Inc.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
(in thousands, except per share data)
 
   
Three Months Ended
 
   
March 31,
 
   
2016
   
2015
 
Revenues:
           
Room
  $ 206,150     $ 192,013  
Other
    18,337       18,339  
Total revenue
    224,487       210,352  
                 
Expenses:
               
Operating
    56,829       54,605  
Hotel administrative
    18,198       17,156  
Sales and marketing
    18,019       17,098  
Utilities
    7,600       8,158  
Repair and maintenance
    9,084       9,169  
Franchise fees
    9,445       8,822  
Management fees
    8,037       7,505  
Property taxes, insurance and other
    12,452       11,561  
Ground lease
    2,466       2,501  
General and administrative
    4,828       5,547  
Transaction costs
    293       1,224  
Depreciation
    33,484       30,719  
Total expenses
    180,735       174,065  
                 
Operating income
    43,752       36,287  
                 
Interest and other expense, net
    (8,803 )     (7,737 )
Gain on sale of real estate
    0       15,629  
                 
Income before income taxes
    34,949       44,179  
                 
Income tax expense
    (263 )     (312 )
                 
Net income
  $ 34,686     $ 43,867  
                 
Other comprehensive income (loss):
               
Unrealized loss on interest rate derivatives
    (6,694 )     (274 )
                 
Comprehensive income
  $ 27,992     $ 43,593  
                 
Basic and diluted net income per common share
  $ 0.20     $ 0.24  
                 
Weighted average common shares outstanding - basic and diluted
    174,666       186,446  
 
See notes to consolidated financial statements.
 
 
4

 
Apple Hospitality REIT, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
   
Three Months Ended
 
   
March 31,
 
   
2016
   
2015
 
Cash flows from operating activities:
           
Net income
  $ 34,686     $ 43,867  
Adjustments to reconcile net income to cash provided
by operating activities:
               
Depreciation
    33,484       30,719  
Gain on sale of real estate
    0       (15,629 )
Other non-cash expenses, net
    1,575       2,519  
Changes in operating assets and liabilities:
               
Increase in due from third party managers, net
    (18,284 )     (16,458 )
Decrease (increase) in other assets, net
    1,120       (2,229 )
Decrease in accounts payable and other liabilities
    (1,777 )     (6,531 )
Net cash provided by operating activities
    50,804       36,258  
                 
Cash flows from investing activities:
               
Deposits and other disbursements for potential acquisitions
    (139 )     0  
Capital improvements and development costs
    (22,331 )     (18,806 )
Decrease in capital improvement reserves
    1,586       3,836  
Net proceeds from sale of real estate
    0       201,853  
Net cash provided by (used in) investing activities
    (20,884 )     186,883  
                 
Cash flows from financing activities:
               
Repurchases of common shares under share repurchase programs
    (361 )     (10,827 )
Repurchases of common shares to satisfy employee withholding requirements
    (459 )     0  
Distributions paid to common shareholders
    (52,360 )     (63,417 )
Net proceeds from (payments on) credit facility
    57,100       (91,600 )
Proceeds from mortgage debt
    0       10,000  
Payments of mortgage debt
    (33,840 )     (19,899 )
Financing costs
    0       (493 )
Net cash used in financing activities
    (29,920 )     (176,236 )
                 
Increase in cash and cash equivalents
    0       46,905  
                 
Cash and cash equivalents, beginning of period
    0       0  
                 
Cash and cash equivalents, end of period
  $ 0     $ 46,905  
                 
Supplemental cash flow information:
               
Interest paid
  $ 9,802     $ 8,063  
                 
Supplemental disclosure of noncash investing and financing activities:
               
Accrued distribution to common shareholders
  $ 17,451     $ 0  
 
See notes to consolidated financial statements.
 
 
5


Apple Hospitality REIT, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

1.  Organization and Summary of Significant Accounting Policies

Organization
  
Apple Hospitality REIT, Inc., together with its wholly owned subsidiaries (the “Company”), is a Virginia corporation that has elected to be treated as a real estate investment trust (“REIT”) for federal income tax purposes.  The Company is a self-advised REIT that invests in income-producing real estate, primarily in the lodging sector, in the United States.  The Company’s fiscal year end is December 31.  The Company has no foreign operations or assets and its operating structure includes only one reportable segment.  The consolidated financial statements include the accounts of the Company and its subsidiaries.  All intercompany accounts and transactions have been eliminated.  Although the Company has interests in potential variable interest entities through its purchase commitments, it is not the primary beneficiary as the Company does not have any elements of power in the decision making process of these entities, and therefore does not consolidate the entities.  As of March 31, 2016, the Company owned 179 hotels with an aggregate of 22,961 rooms located in 32 states.

On May 18, 2015, the Company’s common shares were listed and began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “APLE” (the “Listing”).  In connection with the Listing, effective May 18, 2015, the Company completed a 50% reverse share split.  As a result of the reverse share split, every two common shares were converted into one common share.  All common shares and per share amounts for all periods presented have been adjusted to reflect the reverse share split.  See Note 7 for additional information about the reverse share split.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations for reporting on Form 10-Q.  Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  These unaudited financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its 2015 Annual Report on Form 10-K.  Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the twelve month period ending December 31, 2016.

Use of Estimates

The preparation of the financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period presentation with no effect on previously reported net income, shareholders’ equity or cash flows.

Comprehensive Income

Comprehensive income includes net income and other comprehensive income (loss), which is comprised of unrealized losses resulting from hedging activity.
 
Net Income Per Common Share

Basic net income per common share is computed based upon the weighted average number of shares outstanding during the period.  Diluted net income per common share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the period.  There were no potential common shares with a dilutive effect for the three months ended March 31, 2016 and 2015.  As a result, basic and dilutive net income per common share were the same.
 
 
6

 
Accounting Standards Recently Issued

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets as right-of-use assets and lease liabilities, as well as making targeted changes to lessor accounting.  Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.  The standard is effective for annual periods beginning after December 15, 2018, and interim periods within those years, with early adoption permitted.  The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief.  The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those years, with early adoption permitted.  Some provisions of the standard require a retrospective transition approach.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

2.  Investment in Real Estate

The Company’s total investment in real estate consisted of the following (in thousands):

   
March 31,
   
December 31,
 
   
2016
   
2015
 
             
Land
  $ 561,630     $ 561,630  
Building and Improvements
    3,213,007       3,200,918  
Furniture, Fixtures and Equipment
    300,093       293,444  
Franchise Fees
    8,832       8,832  
      4,083,562       4,064,824  
Less Accumulated Depreciation
    (456,266 )     (423,057 )
Investment in Real Estate, net
  $ 3,627,296     $ 3,641,767  
 
There were no acquisitions during the three month periods ended March 31, 2016 and 2015.  As of March 31, 2016, the Company owned 179 hotels with an aggregate of 22,961 rooms located in 32 states.

As of March 31, 2016, the Company had outstanding contracts for the potential purchase of four additional hotels for a total purchase price of $81.1 million.  All four hotels are under construction and are planned to be completed and opened for business over the next 15 months from March 31, 2016, at which time closing on these hotels is expected to occur.  Although the Company is working towards acquiring these hotels, there are many conditions to closing that have not yet been satisfied and there can be no assurance that a closing on these hotels will occur under the outstanding purchase contracts.  The following table summarizes the location, brand, date of purchase contract, expected number of rooms, refundable (if the seller does not meet its obligations under the contract) contract deposits paid, and gross purchase price for each of the contracts outstanding at March 31, 2016.  All dollar amounts are in thousands.
 
Location (a)
 
Brand
 
Date of Purchase Contract
 
Rooms
   
Refundable Deposits
   
Gross Purchase Price
 
Atlanta, GA
 
Home2 Suites
 
5/5/2015
    128     $ 300     $ 24,600  
Birmingham, AL (b)(c)
 
Home2 Suites
 
8/28/2015
    105       3       19,219  
Birmingham, AL (b)(c)
 
Hilton Garden Inn
 
8/28/2015
    105       2       19,219  
Fort Worth, TX (b)
 
Courtyard
 
8/28/2015
    124       5       18,034  
              462     $ 310     $ 81,072  

(a)   As of March 31, 2016, these hotels were under construction.  The table shows the expected number of rooms upon hotel completion and the expected franchise brands.  Assuming all conditions to closing are met, the purchases of these hotels are expected to close over the next 15 months from March 31, 2016.
(b)   If the seller meets all of the conditions to closing, the Company is obligated to specifically perform under the contract.  As the property is under construction, at this time, the seller has not met all of the conditions to closing.
(c)   The Home2 Suites and Hilton Garden Inn hotels in Birmingham, AL are part of an adjoining two-hotel complex located on the same site.
 
 
7

 
As there can be no assurance that all conditions to closing will be satisfied, the Company includes deposits paid for hotels under contract in other assets, net in the Company’s consolidated balance sheets, and in deposits and other disbursements for potential acquisitions in the Company’s consolidated statements of cash flows.  The Company intends to use borrowings under its $965 million credit facility to purchase hotels under contract if a closing occurs.

3.  Dispositions

On February 26, 2015, the Company sold 18 hotels in a single transaction for a total sales price of $206.4 million, resulting in a gain of approximately $15.6 million, which is included in the Company’s consolidated statements of operations in the first quarter of 2015.  The 18 hotels had a total carrying value of approximately $188.3 million at the time of the sale.  Prior to the sale, on February 13, 2015, the Company extinguished a mortgage totaling approximately $4.6 million secured by one of the sold properties, and incurred expenses, including defeasance costs during the first quarter of 2015, which were recorded as a reduction to the gain on sale of real estate.  The proceeds from the sale were used primarily to repay the outstanding balance under the Company’s revolving credit facility, with the increased availability used to fund hotel acquisitions during 2015.  The Company’s consolidated statements of operations include operating income of approximately $2.0 million for the three months ended March 31, 2015 relating to results of operations for the 18 hotels for the respective period of ownership.  The sale of these properties does not represent a strategic shift that has, or will have, a major effect on the Company’s operations and financial results, and therefore the operating results for the period of ownership of these properties are included in income from continuing operations for the three months ended March 31, 2015.

4.  Debt

$965 Million Credit Facility

On May 18, 2015, the Company entered into an amendment and restatement of its unsecured $345 million credit facility, increasing the borrowing capacity to $965 million, reducing the annual interest rate and extending the maturity dates.  The unsecured $965 million credit facility is comprised of (a) a $540 million revolving credit facility with an initial maturity date of May 18, 2019 (the “revolving credit facility”), and (b) a $425 million term loan facility with a maturity date of May 18, 2020, consisting of three term loans, of which $212.5 million was funded on May 18, 2015, $110.0 million was funded on July 1, 2015, and $102.5 million was funded on August 14, 2015 (the “$425 million term loans”).  Subject to certain conditions including covenant compliance and additional fees, the revolving credit facility maturity date may be extended one year and the amount of the total credit facility may be increased from $965 million to $1.25 billion.  The Company may make voluntary prepayments in whole or in part, at any time.  Interest payments on the $965 million credit facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR (the London Inter-Bank Offered Rate for a one-month term) plus a margin ranging from 1.50% to 2.30%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement.  The Company is also required to pay quarterly an unused facility fee at an annual rate of 0.20% or 0.30% on the unused portion of the revolving credit facility, based on the amount of borrowings outstanding during the quarter.
 
As of March 31, 2016 and December 31, 2015, the details of the Company’s revolving credit facility and $425 million term loans were as follows.  All dollar amounts are in thousands.
 
       
March 31, 2016
       
December 31, 2015
   
   
Maturity date
 
Outstanding balance
    Interest rate      
Outstanding balance
    Interest rate    
Revolving credit facility (1)
 
5/18/2019
  $ 171,900       1.99 % (2)     $ 114,800       1.98 % (2)
$425 million term loans
                                         
Outstanding principal balance
 
5/18/2020
    425,000       2.82 % (3)       425,000       2.81 % (3)
Unamortized debt issuance costs
        (3,353 )                 (3,556 )          
Total term loans
        421,647                   421,444            
Total revolving credit facility and term loans
  $ 593,547                 $ 536,244            

(1)  Unamortized debt issuance costs related to the revolving credit facility totaled approximately $3.7 million and $4.0 million as of March 31, 2016 and December 31, 2015, respectively, and are included in other assets, net in the Company's consolidated balance sheets.
(2)  Annual variable interest rate at the balance sheet date.
(3)  Effective annual interest rate which includes the effect of interest rate swaps on $322.5 million of the outstanding loan balance, resulting in an annual fixed interest rate of approximately 3.10% on this portion of the debt subject to adjustment based on the Company's leverage ratio.  See Note 5 for more information on the interest rate swap agreements.  Remaining portion is variable rate debt.
 
 
8

 
The $965 million credit facility contains mandatory prepayment requirements, customary affirmative covenants, negative covenants and events of default.  The credit agreement requires that the Company comply with various covenants, which include, among others, a minimum tangible net worth, maximum debt limits, minimum interest and fixed charge coverage ratios, limits on dividend payments and share repurchases and restrictions on certain investments.  The Company was in compliance with the applicable covenants at March 31, 2016.

Mortgage Debt

As of March 31, 2016, the Company had approximately $428.6 million in outstanding property level debt secured by 34 properties, with maturity dates ranging from April 2016 to October 2032, stated interest rates ranging from 0% to 6.90% and effective interest rates ranging from 3.66% to 6.52%.  The loans generally provide for monthly payments of principal and interest on an amortized basis.  The loans are generally subject to defeasance or prepayment penalties if prepaid.  The following table sets forth the hotel properties securing each loan, the interest rate, loan assumption or origination date, maturity date, the principal amount assumed or originated, and the outstanding balance prior to any fair value adjustments or debt issuance costs as of March 31, 2016 and December 31, 2015 for each of the Company’s debt obligations.  All dollar amounts are in thousands.
 
Location
 
Brand
 
Interest Rate (1)
 
Loan Assumption or
Origination Date
 
Maturity Date
   
Principal Assumed
or Originated
   
Outstanding balance as of
March 31, 2016
   
Outstanding balance as of December 31, 2015
 
Austin, TX
 
Homewood Suites
    5.99 %    
4/14/2009
    (2)     $ 7,556     $ 0     $ 6,255  
Austin, TX
 
Hampton Inn
    5.95 %    
4/14/2009
    (2)       7,553       0       6,247  
Hilton Head, SC
 
Hilton Garden Inn
    6.29 %    
3/1/2014
    (2)       5,557       0       5,226  
Round Rock, TX
 
Hampton Inn
    5.95 %    
3/6/2009
    (2)       4,175       0       3,457  
Highlands Ranch, CO
 
Residence Inn
    5.94 %    
3/1/2014
    (2)       10,494       0       10,118  
Texarkana, TX
 
Hampton Inn & Suites
    6.90 %    
1/31/2011
    (3)       4,954       4,555       4,578  
Bristol, VA
 
Courtyard
    6.59 %    
11/7/2008
    (4)       9,767       8,701       8,747  
Virginia Beach, VA
 
Courtyard
    6.02 %    
3/1/2014
 
11/11/2016
        13,931       13,322       13,399  
Virginia Beach, VA
 
Courtyard
    6.02 %    
3/1/2014
 
11/11/2016
        16,813       16,078       16,172  
Charlottesville, VA
 
Courtyard
    6.02 %    
3/1/2014
 
11/11/2016
        14,892       14,241       14,323  
Carolina Beach, NC
 
Courtyard
    6.02 %    
3/1/2014
 
11/11/2016
        12,009       11,485       11,551  
Winston-Salem, NC
 
Courtyard
    5.94 %    
3/1/2014
 
12/8/2016
        7,458       7,185       7,220  
Lewisville, TX (5)
 
Hilton Garden Inn
    0.00 %    
10/16/2008
 
12/31/2016
        3,750       2,000       2,000  
Oceanside, CA
 
Residence Inn
    4.24 % (6)  
3/1/2014
 
1/13/2017
        15,662       15,012       15,090  
Burbank, CA
 
Residence Inn
    4.24 % (6)  
3/1/2014
 
1/13/2017
        23,493       22,518       22,635  
Savannah, GA
 
Hilton Garden Inn
    5.87 %    
3/1/2014
 
2/1/2017
        4,977       4,647       4,688  
Greenville, SC
 
Residence Inn
    6.03 %    
3/1/2014
 
2/8/2017
        6,012       5,780       5,810  
Birmingham, AL
 
Homewood Suites
    6.03 %    
3/1/2014
 
2/8/2017
        10,908       10,488       10,541  
Jacksonville, FL
 
Homewood Suites
    6.03 %    
3/1/2014
 
2/8/2017
        15,856       15,245       15,322  
Irving, TX
 
Homewood Suites
    5.83 %    
12/29/2010
 
4/11/2017
        6,052       5,213       5,260  
Duncanville, TX
 
Hilton Garden Inn
    5.88 %    
10/21/2008
 
5/11/2017
        13,966       12,333       12,401  
Grapevine, TX
 
Hilton Garden Inn
    4.89 %    
8/29/2012
 
9/1/2022
        11,810       10,917       10,986  
Collegeville/Philadelphia, PA
 
Courtyard
    4.89 %    
8/30/2012
 
9/1/2022
        12,650       11,694       11,768  
Hattiesburg, MS
 
Courtyard
    5.00 %    
3/1/2014
 
9/1/2022
        5,732       5,461       5,495  
Rancho Bernardo, CA
 
Courtyard
    5.00 %    
3/1/2014
 
9/1/2022
        15,060       14,346       14,436  
Kirkland, WA
 
Courtyard
    5.00 %    
3/1/2014
 
9/1/2022
        12,145       11,570       11,642  
Seattle, WA
 
Residence Inn
    4.96 %    
3/1/2014
 
9/1/2022
        28,269       26,922       27,091  
Anchorage, AK
 
Embassy Suites
    4.97 %    
9/13/2012
 
10/1/2022
        23,230       21,540       21,675  
Somerset, NJ
 
Courtyard
    4.73 %    
3/1/2014
 
10/6/2022
        8,750       8,323       8,376  
Tukwila, WA
 
Homewood Suites
    4.73 %    
3/1/2014
 
10/6/2022
        9,431       8,970       9,028  
Prattville, AL
 
Courtyard
    4.12 %    
3/1/2014
 
2/6/2023
        6,596       6,253       6,296  
Huntsville, AL
 
Homewood Suites
    4.12 %    
3/1/2014
 
2/6/2023
        8,306       7,874       7,928  
San Diego, CA
 
Residence Inn
    3.97 %    
3/1/2014
 
3/6/2023
        18,600       17,618       17,741  
Miami, FL
 
Homewood Suites
    4.02 %    
3/1/2014
 
4/1/2023
        16,677       15,807       15,915  
New Orleans, LA
 
Homewood Suites
    4.36 %    
7/17/2014
 
8/11/2024
        27,000       26,048       26,204  
Westford, MA
 
Residence Inn
    4.28 %    
3/18/2015
 
4/11/2025
        10,000       9,797       9,854  
Dallas, TX
 
Hilton
    3.95 %    
5/22/2015
 
6/1/2025
        28,000       27,629       27,754  
Syracuse, NY
 
Courtyard
    4.75 %    
10/16/2015
 
8/1/2024
(7)       11,199       11,095       11,158  
Syracuse, NY
 
Residence Inn
    4.75 %    
10/16/2015
 
8/1/2024
(7)       11,199       11,095       11,158  
Malvern/Philadelphia, PA
 
Courtyard
    6.50 %    
11/30/2010
 
10/1/2032
(8)       7,894       6,855       6,912  
                              $ 488,383       428,617       462,457  
Unamortized fair value adjustment of assumed debt
                                  606       1,284  
Unamortized debt issuance costs
                                      (1,728 )     (1,882 )
    Total
                                    $ 427,495     $ 461,859  
 
 
9

 

(1)   Unless otherwise noted, these rates are the rates per the loan agreement. For loans assumed, the Company adjusted the interest rates per the loan agreement to market rates and is amortizing the adjustments to interest expense over the life of the loan.
(2)   Loans were repaid in full during the three months ended March 31, 2016.
(3)   Loan was repaid in full on April 8, 2016.
(4)   Loan was repaid in full on May 2, 2016.
(5)   Unsecured loan.
(6)   The annual fixed interest rate gives effect to an interest rate swap agreement assumed by the Company with the mortgage debt.
(7)   Outstanding principal balance is callable by lender or prepayable by the Company on August 1, 2019.
(8)   Outstanding principal balance is callable by lender or prepayable by the Company beginning on October 1, 2016, and every five years thereafter until maturity, subject to certain conditions.
  
The aggregate amounts of principal payable under the Company’s total debt obligations (including mortgage debt, the revolving credit facility and $425 million term loans), for the five years subsequent to March 31, 2016 and thereafter are as follows (in thousands):

2016 (April - December)
  $ 90,655  
2017
    96,245  
2018
    6,866  
2019
    199,215  
2020
    431,888  
Thereafter
    200,648  
      1,025,517  
Unamortized fair value adjustment of assumed debt
    606  
Unamortized debt issuance costs related to term loans and mortgage debt
    (5,081 )
Total
  $ 1,021,042  

5.  Fair Value of Financial Instruments

Except as described below, the carrying value of the Company’s financial instruments approximates fair value due to the short-term nature of these financial instruments.

Debt

The Company estimates the fair value of its debt by discounting the future cash flows of each instrument at estimated market rates consistent with the maturity of a debt obligation with similar credit terms and credit characteristics, which are Level 3 inputs under the fair value hierarchy.  Market rates take into consideration general market conditions and maturity.  As of March 31, 2016 and December 31, 2015, both the carrying value and estimated fair value of the Company’s debt were approximately $1.0 billion.  Both the carrying value and estimated fair value of the Company’s debt as discussed above is net of unamortized debt issue costs related to term loans and mortgage debt for each specific year.
 
 
10


Derivative Instruments

Currently, the Company uses interest rate swaps to manage its interest rate risks on variable rate debt.  Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the one month LIBOR.  The swaps are designed to effectively fix the interest payments on variable rate debt instruments.  These instruments are recorded at fair value and are included in accounts payable and other liabilities in the Company’s consolidated balance sheets.  The fair values of the Company’s interest rate swap agreements are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts, which is considered a Level 2 measurement under the fair value hierarchy.  The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.  The following is a summary of the notional amounts, assumption or origination dates, maturity dates and fair values (liabilities) of the interest rate swap agreements outstanding as of March 31, 2016 and December 31, 2015 (in thousands):

               
Fair value
 
Hedge Type
 
Notional amount at March 31, 2016
 
Assumption or Origination Date
 
Maturity date
 
March 31, 2016
   
December 31, 2015
 
Non-designated hedge (1)
  $ 37,530  
3/1/2014
 
1/13/2017
  $ (152 )   $ (134 )
Cash flow hedge
    212,500  
5/21/2015
 
5/18/2020
    (5,649 )     (1,233 )
Cash flow hedge
    110,000  
7/2/2015
 
5/18/2020
    (3,102 )     (824 )
                  $ (8,903 )   $ (2,191 )

(1)   Effective date of the forward interest rate swap agreement was January 13, 2015, the same date the previous swap agreement matured.
 
The Company assesses, both at inception and on an ongoing basis, the effectiveness of its qualifying cash flow hedges.  For swaps designated as cash flow hedges, the changes in fair value on the effective portion are recorded to accumulated other comprehensive income (loss), a component of shareholders’ equity in the Company’s consolidated balance sheets.  Changes in fair value on the ineffective portion of all designated hedges are recorded to interest and other expense, net in the Company’s consolidated statements of operations.  For swaps not designated as cash flow hedges (including four swaps, of which two matured or terminated in the first quarter of 2015 and one terminated in the second quarter of 2015), the changes in fair value are recorded to interest and other expense, net in the Company’s consolidated statements of operations.  Other than the fair value changes associated with the terminated interest rate swap for which hedge accounting was discontinued during the first quarter of 2015 as discussed below, fair value changes for derivatives not in qualifying hedge relationships for the three months ended March 31, 2016 and 2015 were not material.

To adjust qualifying cash flow hedges to their fair value and recognize the impact of hedge accounting, the Company recorded unrealized losses of approximately $6.7 million and $0.3 million during the three months ended March 31, 2016 and 2015, respectively, to other comprehensive income (loss).  There was no ineffectiveness recorded on the designated hedges during the three months ended March 31, 2016 and 2015.  Amounts recorded to accumulated other comprehensive loss totaled approximately $8.8 million and $2.1 million as of March 31, 2016 and December 31 2015, respectively. 

Outstanding Interest Rate Swaps

In May 2015 and July 2015, the Company entered into interest rate swap agreements with a commercial bank for the same notional amounts and maturities as its $212.5 million term loan and its $110.0 million term loan (see Note 4 for more information on the term loans).  Under the terms of the $212.5 million and $110.0 million interest rate swaps, the Company pays a fixed interest rate of 1.58% and 1.62% on each respective swap, and receives a floating rate of interest equal to the one month LIBOR, which as of both March 31, 2016 and December 31, 2015 resulted in annual fixed interest rates of approximately 3.08% and 3.12% for each respective loan.  These swaps have been designated as cash flow hedges for accounting purposes.  From inception of the respective swaps through March 31, 2016, each swap was a fully effective hedge, and therefore the changes in fair value through this date were recorded in accumulated other comprehensive loss, a component of shareholder’s equity in the Company’s consolidated balance sheets.
 
 
11


Terminated Interest Rate Swap

In May 2015, the Company amended and restated its credit facility, at which time it repaid its $100 million term loan and terminated its $100 million interest rate swap.  At inception, this swap was designated as a cash flow hedge for accounting purposes, and from inception of the swap through March 2, 2015, the swap was a fully effective hedge, and therefore the changes in the fair value through this date were recorded in accumulated other comprehensive loss, a component of shareholders’ equity in the Company’s consolidated balance sheets, which totaled $0.8 million as of March 2, 2015 (including $0.3 million recorded during the first quarter of 2015).  In the first quarter of 2015, it was determined that the cash flows being hedged were no longer probable of occurring through the maturity date of the swap.  Therefore the Company discontinued hedge accounting, and the change in fair value, resulting in a loss of $0.8 million for the remainder of the first quarter of 2015, was recorded to interest and other expense, net in the Company’s consolidated statements of operations.

6.  Related Parties

The Company has, and is expected to continue to engage in, transactions with related parties.  These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties.  The Company’s independent members of the Board of Directors oversee and annually review the Company’s related party relationships (including the relationships discussed in this section) and are required to approve any significant modifications to the existing relationships, as well as any new significant related party transactions.  The Board of Directors is not required to approve each individual transaction that falls under the related party relationships.  However, under the direction of the Board of Directors, at least one member of the Company’s senior management team approves each related party transaction.  As of March 31, 2016, there have been no changes to the contracts and relationships discussed in the Company’s 2015 Annual Report on Form 10-K.  Below is a summary of the related party relationships in effect and transactions that occurred during the three months ended March 31, 2016 and 2015.  Also see Note 9 for a discussion of the potential merger with Apple REIT Ten, Inc. (“Apple Ten”).

Glade M. Knight, Executive Chairman of the Company, is currently Chairman and Chief Executive Officer of Apple Ten.  Apple Ten’s advisors, Apple Ten Advisors, Inc. (“A10A”) and Apple Realty Group, Inc., formerly known as Apple Suites Realty Group, Inc. (“ARG”), are wholly owned by Mr. Knight.  Mr. Knight is also a partner and Chief Executive Officer of Energy 11 GP, LLC, which is the general partner of Energy 11, L.P.  Justin G. Knight, the Company’s President and Chief Executive Officer, and a member of the Company’s Board of Directors, also serves as President of Apple Ten.

Subcontract Agreement with A10A

The Company has a subcontract agreement with A10A to subcontract A10A’s obligations under the advisory agreement between A10A and Apple Ten to the Company.  The Company provides to Apple Ten the advisory services contemplated under the A10A advisory agreement and receives an annual fee ranging from 0.1% to 0.25% (based on Apple Ten’s operating results) of total equity proceeds received by Apple Ten, and is reimbursed by Apple Ten for the use of the Company’s employees and corporate office and other costs associated with the advisory agreement, as described below.  Total advisory fees earned by the Company from Apple Ten for the three months ended March 31, 2016 and 2015 totaled approximately $0.6 million and $0.4 million, and are recorded as a reduction to general and administrative expenses in the Company’s consolidated statements of operations.  The increase in the first three months of 2016 was primarily due to Apple Ten reaching the top fee tier under its advisory agreement in the second quarter of 2015 due to improved results of operations of Apple Ten.

Support Services to Apple Ten, A10A and ARG

The Company provides support services to Apple Ten and its advisors, A10A and ARG, which have agreed to reimburse the Company for its costs in providing these services.  Total reimbursed costs received by the Company from these entities for the three months ended March 31, 2016 and 2015 totaled approximately $0.8 million and $0.7 million, respectively, and are recorded as a reduction to general and administrative expenses in the Company’s consolidated statements of operations.  As of March 31, 2016 and December 31, 2015, total amounts due from Apple Ten, A10A and ARG for reimbursements under the cost sharing structure totaled approximately $0.2 million and $0.3 million, respectively, and are included in other assets, net in the Company’s consolidated balance sheets.  Under this cost sharing structure, amounts reimbursed to the Company include both compensation for personnel and office related costs (including office rent, utilities, office supplies, etc.) used by each company.  The amounts reimbursed to the Company are based on a good faith estimate of the proportionate amount of time incurred by the Company’s employees on behalf of Apple Ten, A10A and ARG.  As part of the cost sharing arrangements, certain day-to-day transactions may result in amounts due to or from the Company, Apple Ten, A10A and ARG.  To efficiently manage cash disbursements, the Company, Apple Ten, A10A or ARG may make payments for any or all of the related companies.  Under the cash management process, each of the companies may advance or defer up to $1 million at any time.  Each month, any outstanding amounts are settled among the affected companies.  This process allows each company to minimize its cash on hand, which, in turn, reduces the cost of each company’s credit facility.  The amounts outstanding at any point in time are not significant to any of the companies.
 
 
12


Apple Air Holding, LLC (“Apple Air”)

The Company, through a jointly-owned subsidiary, Apple Air, owns a Learjet used primarily for acquisition, asset management, renovation and public relations purposes.  Apple Air is jointly owned by the Company (74%) and Apple Ten (26%), with Apple Ten’s ownership interest accounted for as a minority interest, which as of March 31, 2016 and December 31, 2015, totaled approximately $0.9 and $0.7 million, respectively, and is included in accounts payable and other liabilities in the Company’s consolidated balance sheets.  The aircraft is also leased to affiliates of the Company based on third party rates, which was not significant during the reporting periods.  The Company also utilizes aircraft, owned through two entities, one of which is owned by the Company’s Executive Chairman, and the other, its President and Chief Executive Officer, for acquisition, asset management, renovation and public relations purposes, and reimburses these entities at third party rates.  Total amounts incurred during the three months ended March 31, 2016 and 2015 were approximately $0.05 million in each period related to aircraft owned through these two entities and are included in general and administrative expenses in the Company’s consolidated statements of operations.

7.  Shareholders’ Equity

Distributions

For the three months ended March 31, 2016 and 2015, the Company paid distributions of $0.30 and $0.34 per common share for a total of $52.4 million and $63.4 million, respectively.  In March 2016, the Company declared a monthly distribution of $0.10 per common share, totaling $17.5 million, which was recorded as a payable as of March 31, 2016 and paid in April 2016.  As of December 31, 2015, a monthly distribution of $0.10 per common share, totaling $17.4 million, was recorded as a payable and paid in January 2016.  These accrued distributions were included in accounts payable and other liabilities in the Company’s consolidated balance sheets.

The Company’s current annual distribution rate, payable monthly, is $1.20 per common share.  On April 23, 2015, the Company’s Board of Directors, in anticipation of the Listing, reduced the annual distribution rate from $1.36 per common share to the current annual distribution rate, effective with the June 2015 distribution.

Reverse Share Split

In connection with the Listing, effective May 18, 2015, the Company completed a 50% reverse share split.  As a result of the reverse share split, every two common shares were converted into one common share, reducing the number of issued and outstanding common shares from 372.2 million to 186.1 million on the effective date.  The common shares have the same respective voting rights, preferences and relative, participating, optional or other rights, and qualifications, limitations or restrictions as set forth in the amended and restated articles of incorporation in effect immediately prior to the effective date of the reverse share split.  All common shares and per share amounts for all periods presented have been adjusted to reflect the reverse share split.

Share Repurchases

The Company’s Board of Directors has authorized a share repurchase program of up to $500 million.  On July 8, 2015, the Company established a written trading plan (“Plan”) that provided for share repurchases in open market transactions that was intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.  To be able to more effectively respond to market conditions, the Company terminated the Plan in January 2016.  Since implementation through the termination of the Plan, the Company purchased approximately 1.3 million of its common shares under the Plan, at a weighted-average market purchase price of approximately $17.62 per common share, for an aggregate purchase price of approximately $22.4 million, including the purchase of approximately 20,000 of its common shares in January 2016, at a weighted-average market purchase price of approximately $18.10 per common share for an aggregate purchase price of approximately $0.4 million.  The Company plans to continue to consider opportunistic share repurchases under the $477.6 million remaining portion of its authorized $500 million share repurchase program.  The program may be suspended or terminated at any time by the Company.  If not terminated earlier, the program will end in July 2016.

During the three months ended March 31, 2015, the Company redeemed approximately 0.6 million common shares at a price of $18.40 per common share, or a total of approximately $10.8 million under its previous share redemption program that was terminated following the April 2015 redemption.
 
 
13


8.  Compensation Plans

In May 2014, the Board of Directors adopted the Company’s 2014 Omnibus Incentive Plan (the “Omnibus Plan”), and in May 2015, the Company’s shareholders approved the Omnibus Plan.  The Omnibus Plan permits the grant of awards of stock options, stock appreciation rights, restricted stock, stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards to any employee, officer, or director of the Company or an affiliate of the Company, a consultant or adviser currently providing services to the Company or an affiliate of the Company, or any other person whose participation in the Omnibus Plan is determined by the Compensation Committee of the Board of Directors to be in the best interests of the Company.  The maximum number of the Company’s common shares available for issuance under the Omnibus Plan is 10 million.

In February 2016, the Compensation Committee of the Board of Directors (“Compensation Committee”) approved an executive incentive plan (“2016 Incentive Plan”), effective January 1, 2016, and established incentive goals for 2016.  Under the 2016 Incentive Plan, participants are eligible to receive a bonus based on the achievement of certain 2016 performance measures, consisting of operational performance metrics (including targeted Modified Funds from Operations per share, Comparable Hotels revenue per available room growth and Adjusted Hotel EBITDA Margin growth) and shareholder return metrics (including shareholder return relative to a peer group and total shareholder return).  The components of the operational performance metrics and shareholder return metrics are equally weighted and the two metrics each account for 50% of the total target incentive compensation.  The range of aggregate payouts under the 2016 Incentive Plan is $0 - $15 million.  Based on performance through March 31, 2016, the Company has accrued approximately $1.9 million as a liability for potential executive bonus payments under the 2016 Incentive Plan, which is included in accounts payable and other liabilities in the Company’s consolidated balance sheets as of March 31, 2016 and in general and administrative expense in the Company’s consolidated statements of operations for the three months ended March 31, 2016.  Approximately 25% of awards under the 2016 Incentive Plan, if any, will be paid in cash, and 75% will be issued in stock under the Omnibus Plan, two-thirds of which would vest at the end of 2016 and one-third of which would vest at the end of 2017.  During 2015, a comparable executive incentive plan was approved by the Compensation Committee (“2015 Incentive Plan”) that was effective January 1, 2015, and the Company recorded approximately $2.2 million in general and administrative expense in the Company’s consolidated statements of operations for the three months ended March 31, 2015.

Share Based Compensation Awards

During the first quarter of 2016, the Company issued 304,345 common shares earned under the 2015 Incentive Plan (net of shares surrendered to satisfy tax withholding obligations) at $19.87 per share, or approximately $6.0 million in share based compensation.  Of the total shares issued, 146,279 shares were unrestricted at the time of issuance, and the remaining 158,066 restricted shares will vest on December 31, 2016.  Of the total 2015 share based compensation, approximately $4.5 million was recorded as a liability as of December 31, 2015, which was included in accounts payable and other liabilities in the Company’s consolidated balance sheets and the remaining $1.6 million, which is subject to vesting on December 31, 2016, will be recognized as compensation expense proportionately throughout 2016.  For the three months ended March 31, 2016, the Company recognized approximately $0.4 million of share based compensation expense related to the unvested restricted share awards.

9.  Subsequent Events

In April 2016, the Company paid approximately $17.5 million, or $0.10 per outstanding common share, in distributions to its common shareholders.

In April 2016, the Company declared a regular monthly cash distribution of $0.10 per common share for the month of May 2016.  The distribution is payable on May 16, 2016.

In April 2016, the Company entered into a loan agreement with a syndicate of commercial banks, which provides for up to $150 million of unsecured term loans in two facilities, of which $100 million will mature on April 8, 2023 (“Term Loan I”) and $50 million will mature on April 8, 2021 (“Term Loan II”).  The loan agreement contains requirements and covenants similar to the Company’s unsecured $965 million credit facility.  The interest rate for the term loans will be equal to an annual rate of the one-month LIBOR plus a margin ranging from 1.80% to 2.60% for Term Loan I and 1.45% to 2.20% for Term Loan II, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement.  The Company initially borrowed $50 million under these facilities and may borrow the remaining $100 million no later than October 5, 2016.  The Company also entered into two interest rate swap agreements, which beginning on September 30, 2016 will effectively fix the interest rate on Term Loan I and Term Loan II at 3.13% and 2.54%, respectively, subject to adjustment based on the Company’s leverage ratio.  Proceeds from the term loans have been and will be used to pay down outstanding balances under the Company’s revolving credit facility with the intent to use the increased availability to repay scheduled debt maturities within the next 12 months.
 
 
14


 On April 13, 2016, the Company entered into a definitive merger agreement with Apple Ten, pursuant to which Apple Ten would merge into a wholly-owned subsidiary of the Company (the “Acquisition Sub”).  Apple Ten owns 56 hotels with 7,209 rooms.  Under the merger agreement, each outstanding Unit of Apple Ten (consisting of one common share of Apple Ten and one Series A preferred share of Apple Ten), other than those with respect to which statutory dissenters’ rights of appraisal have been properly exercised, perfected and not subsequently withdrawn under Virginia law, would be converted into the right to receive $1.00 in cash and 0.522 shares of the Company’s common shares, and each Apple Ten Series B convertible preferred share would be converted into the right to receive (i) a number of common shares of the Company equal to 12.11423 multiplied by 0.522 and (ii) an amount equal to 12.11423 multiplied by $1.00 in cash.  The current outstanding Company common shares will remain outstanding.  Also, under the merger agreement, the Company would assume all of Apple Ten’s assets and liabilities at closing, which include approximately $239 million of debt as of March 31, 2016.  The merger agreement provides Apple Ten with a 45-day “go-shop period” (expiring at 11:59 pm on May 28, 2016), during which Apple Ten and its subsidiaries and representatives may initiate, solicit, provide information and enter into discussions concerning proposals relating to alternative business combination transactions.  The merger is subject to shareholder approval by each of the companies and to other customary closing conditions.  As a result, there is no assurance that the merger will occur.
 
 
 
 
 
 
 
 
15


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements are typically identified by use of terms such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “target,” “goal,” “plan,” “should,” “will,” “predict,” “potential,” and similar expressions that convey the uncertainty of future events or outcomes.  Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Apple Hospitality REIT, Inc. (the “Company”) to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, but are not limited to, the ability of the Company and Apple REIT Ten, Inc. (“Apple Ten”) to obtain the required shareholder or other third-party approvals to consummate the proposed merger, under which Apple Ten would be merged with and into a wholly-owned subsidiary of the Company; the satisfaction or waiver of other conditions in the merger agreement governing the merger between the Company and Apple Ten; the risk that the merger or the other transactions contemplated by the merger agreement may not be completed in the time frame expected by the parties or at all; the ability of the Company to effectively acquire and dispose of properties; the ability of the Company to successfully integrate pending transactions and implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions; adverse changes in the real estate and real estate capital markets; financing risks; the outcome of current and future litigation, including any legal proceedings that may be instituted against the Company, Apple Ten and others related to the merger agreement; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact the Company’s business, assets or classification as a real estate investment trust.  Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and 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.  In addition, the Company’s qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code.  Readers should carefully review the risk factors described in the Company’s filings with the Securities and Exchange Commission (“SEC”), including but not limited to those discussed in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.  Any forward-looking statement that the Company makes speaks only as of the date of this Quarterly Report.  The Company undertakes no obligation to publicly update or revise any forward-looking statements or cautionary factors, as a result of new information, future events, or otherwise, except as required by law.

The following discussion and analysis should be read in conjunction with the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Overview

The Company is a Virginia corporation that has elected to be treated as a real estate investment trust (“REIT”) for federal income tax purposes.  The Company is self-advised and invests in income-producing real estate, primarily in the lodging sector, in the United States.  As of March 31, 2016, the Company owned 179 hotels with an aggregate of 22,961 rooms located in 32 states.  All of the Company’s hotels operate under Marriott or Hilton brands.  The hotels are operated and managed under separate management agreements with 20 hotel management companies, none of which are affiliated with the Company.

Hotel Operations

Although hotel performance can be influenced by many factors including local competition, local and general economic conditions in the United States and the performance of individual managers assigned to each hotel, performance of the Company’s hotels as compared to other hotels within their respective local markets, in general, has met the Company’s expectations for the period owned.  The hotel industry and the Company’s hotels overall continue to experience improvement in both revenues and operating income as compared to the prior year.  Although economic conditions in the United States have been generally favorable, there is no way to predict future economic conditions, and there are certain factors that could negatively affect the lodging industry and the Company, including but not limited to, increased hotel supply in certain markets, labor uncertainty both for the economy as a whole and the lodging industry in particular, global volatility and government fiscal policies.  The Company, on a comparable basis (as defined below), and industry are forecasting a low to mid-single digit percentage increase in revenue for 2016 as compared to 2015.  Based on recent revenue trends, the anticipated revenue growth rates for 2016 are lower than the growth achieved in 2015.
 
 
16


In evaluating financial condition and operating performance, the most important indicators on which the Company focuses are revenue measurements, such as average occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”), and expenses, such as hotel operating expenses, general and administrative expenses and other expenses described below.

As of March 31, 2016, the Company owned 179 hotels with 22,961 rooms as compared to 173 hotels with a total of 22,003 rooms as of March 31, 2015.  Results of operations are included only for the period of ownership for hotels acquired or disposed of during the current reporting period and prior year.  No hotels were acquired or sold during the three months ended March 31, 2016.  During 2015, the Company acquired one new and six existing hotels (between June 1, 2015 and October 31, 2015) and sold 19 hotels (18 of which were sold on February 26, 2015 and one of which was sold on June 1, 2015).  As a result, comparability of results for the three months ended March 31, 2016 and 2015 as discussed below is significantly impacted by these transactions.

The following is a summary of the results from operations of the Company’s hotels for their respective periods of ownership by the Company.

   
Three Months Ended March 31,
 
(in thousands)
 
2016
   
Percent of Revenue
   
2015
   
Percent of Revenue
   
Percent Change
 
                               
Total revenue
  $ 224,487       100.0 %   $ 210,352       100.0 %     6.7 %
Hotel operating expense
    127,212       56.7 %     122,513       58.2 %     3.8 %
Property taxes, insurance and other expense
    12,452       5.5 %     11,561       5.5 %     7.7 %
Ground lease expense
    2,466       1.1 %     2,501       1.2 %     -1.4 %
General and administrative expense
    4,828       2.2 %     5,547       2.6 %     -13.0 %
                                         
Transaction costs
    293               1,224                  
Depreciation expense
    33,484               30,719                  
Interest and other expense, net
    8,803               7,737                  
Gain on sale of real estate
    -               15,629                  
Income tax expense
    263               312                  

Comparable Operating Results

The following table reflects certain operating statistics for the Company’s 179 hotels owned as of March 31, 2016 (“Comparable Hotels”).  The Company defines metrics from Comparable Hotels as results generated by the 179 hotels owned as of the end of the reporting period.  For the hotels acquired during the current reporting period and prior year, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership, and for dispositions, results have been excluded for the Company’s period of ownership.

   
Three Months Ended March 31,
 
   
2016
   
2015
   
Percent Change
 
                   
ADR
  $ 133.16     $ 127.69       4.3 %
Occupancy
    74.1 %     74.3 %     -0.3 %
RevPAR
  $ 98.66     $ 94.90       4.0 %
 
As discussed above, hotel performance is impacted by many factors, including the economic conditions in the United States as well as each locality.  Economic indicators in the United States have generally been favorable, which continues to overall positively impact the lodging industry.  As a result, the Company’s revenue and operating income for its Comparable Hotels improved during the three months ended March 31, 2016 as compared to the same period in 2015.  The Company expects continued improvement in revenue and operating income for its Comparable Hotels for the remainder of 2016 as compared to 2015.  The Company’s hotels in general have shown results consistent with industry and brand averages for the period of ownership.
 
 
17


Revenues

The Company’s principal source of revenue is hotel revenue consisting of room and other related revenue.  For the three months ended March 31, 2016 and 2015, the Company had total revenue of $224.5 million and $210.4 million, respectively.  For the three months ended March 31, 2016 and 2015, respectively, Comparable Hotels achieved combined average occupancy of 74.1% and 74.3%, ADR of $133.16 and $127.69 and RevPAR of $98.66 and $94.90.  ADR is calculated as room revenue divided by the number of rooms sold, and RevPAR is calculated as occupancy multiplied by ADR.  During the first quarter of 2016, the Company experienced stable occupancy and an increase in ADR compared to the first quarter of 2015, signifying general economic strength.  Although certain markets will vary based on local supply/demand dynamics and local market economic conditions, with continued overall room rate improvement combined with stable overall demand and the Company’s geographically diverse portfolio of upscale and upper midscale select service hotels, the Company, on a comparable basis, and industry are forecasting a low to mid-single digit percentage increase in revenue for the full year of 2016 as compared to 2015.  During the first quarter of 2016, the Company had approximately 20 properties under renovation, with approximately 44,000 room nights out of service.  Although the renovations for the full year are anticipated to be consistent with prior years, room nights out of service in the first quarter of 2016 were higher than in the first quarter of 2015.

Hotel Operating Expense

Hotel operating expense consists of direct room operating expense, hotel administrative expense, sales and marketing expense, utilities expense, repair and maintenance expense, franchise fees and management fees.  For the three months ended March 31, 2016 and 2015, respectively, hotel operating expense totaled $127.2 million and $122.5 million or 56.7% and 58.2% of total revenue for each respective period.  Overall hotel operational expenses for the first quarter of 2016 include the results of the seven hotels acquired after March 31, 2015 for the full period, and for the first quarter of 2015 include the results of the 19 hotels sold until the respective dates of sale.  For the Company’s Comparable Hotels, operating expense as a percentage of revenue decreased approximately 100 basis points for the three months ended March 31, 2016 as compared to the same period in 2015 primarily due to the overall increase in ADR for these hotels, favorable utility costs and the relatively fixed nature of certain operating costs such as management costs, certain utility costs and minimum supply and maintenance costs, which decline as a percentage of revenue as revenue increases.  The Company has also been successful in reducing, relative to revenue increases, certain labor costs, hotel supply costs, maintenance costs and utility costs by continually monitoring and sharing utilization data across its hotels and management companies.  To date, only modest increases in labor cost have been experienced by the Company, however the Company anticipates labor costs are likely to grow at increased rates due to government regulations surrounding wages, healthcare and other benefits and other government-related initiatives, such as the “living wage” increase, which could negatively impact operating expenses in certain markets moving forward.  Additionally, labor costs could be impacted in certain markets due to lower unemployment rates.  With less qualified available labor the cost could increase.  Although operating expenses will increase as revenue increases, the Company will continue to work with its management companies to reduce costs as a percentage of revenue where possible while maintaining quality and service levels at each property.

Property Taxes, Insurance and Other Expense

Property taxes, insurance, and other expense for the three months ended March 31, 2016 and 2015 totaled $12.5 million and $11.6 million, respectively, or 5.5% of total revenue for each respective period.  For the Company’s Comparable Hotels, real estate taxes increased during the first quarter of 2016 compared to the first quarter of 2015, with tax increases at certain locations due to the reassessment of property values by localities related to the improved economy, partially offset by decreases at other locations due to successful appeals of tax assessments.  With the economy continuing to improve, the Company anticipates continued increases in property tax assessments during the remainder of 2016.  The Company will continue to appeal tax assessments in certain jurisdictions to attempt to minimize tax increases as warranted.

Ground Lease Expense

Ground lease expense for the three months ended March 31, 2016 and 2015 was $2.5 million for each respective period and primarily represents the expense incurred by the Company to lease land for ten of its hotel properties.

General and Administrative Expense

General and administrative expense for the three months ended March 31, 2016 and 2015 was $4.8 million and $5.5 million, respectively, or 2.2% and 2.6% of total revenue for each respective period.  The principal components of general and administrative expense are payroll and related benefit costs, legal fees, accounting fees and reporting expenses.  In addition, the Company provides to Apple Ten the advisory services contemplated under their advisory agreement, and the Company receives fees and reimbursement of expenses payable under the advisory agreement from Apple Ten, both of which are reductions to general and administrative expenses.  The decrease in the first quarter of 2016 compared to the first quarter of 2015 is due primarily to increased advisory fees from Apple Ten, with Apple Ten reaching the top tier of the advisory fee structure in the second quarter of 2015, as well as reduced legal costs associated with litigation.
 
 
18


Transaction Costs

Transaction costs for the three months ended March 31, 2016 and 2015 were approximately $0.3 million and $1.2 million, respectively.  Transaction costs for the three months ended March 31, 2016 consist primarily of costs related to the potential merger with Apple Ten totaling approximately $0.2 million and acquisition related costs.  Transaction costs for the three months ended March 31, 2015 consist primarily of (i) costs related to the Company’s merger with Apple REIT Seven, Inc. and Apple REIT Eight, Inc. on March 1, 2014 (“A7 and A8 mergers”) totaling approximately $0.7 million, which consisted primarily of costs to defend the A7 and A8 mergers class action lawsuit, (ii) costs related to the Board of Directors’ review and evaluation of strategic alternatives, including the listing of the Company’s common shares on the New York Stock Exchange effective May 18, 2015 totaling $0.4 million and (iii) acquisition related costs.

Depreciation Expense

Depreciation expense for the three months ended March 31, 2016 and 2015 was $33.5 million and $30.7 million, respectively.  Depreciation expense primarily represents expense of the Company’s hotel buildings and related improvements, and associated personal property (furniture, fixtures, and equipment) for their respective periods owned.  The increase was due to the increase in the number of properties owned as a result of the acquisition of seven hotels in 2015 and renovations completed throughout 2016 and 2015.

Interest and Other Expense, net

Interest and other expense, net for the three months ended March 31, 2016 and 2015 was $8.8 million and $7.7 million, respectively, and is net of approximately $0.9 million and $0.6 million of interest capitalized associated with renovation projects.  The increase in interest expense was primarily due to an increase in the Company’s average outstanding borrowings during the first quarter of 2016 as compared to the prior year’s quarter which is attributable to borrowings to fund the Company’s tender offer and share repurchase program in 2015 and the acquisition of seven hotels subsequent to March 31, 2015.  The impact of higher debt balances was partially offset by a reduction in the average interest rate incurred on the Company’s total outstanding debt.  Also, the first quarter of 2015 includes a loss of approximately $0.8 million recorded to interest and other expense, net related to the change in fair value in the Company’s interest rate swap, terminated in May 2015, that was no longer designated as a cash flow hedge during the first quarter of 2015 due to a potential change in the underlying hedged debt instrument.

Non-GAAP Financial Measures

The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its operating performance: Funds from Operations (“FFO”), Modified FFO (“MFFO”), Earnings before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), and Adjusted EBITDA (“Adjusted EBITDA”).  These non-GAAP financial measures should be considered along with, but not as alternatives to, net income, cash flow from operations or any other operating GAAP measure.  FFO, MFFO, EBITDA and Adjusted EBITDA are not necessarily indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions.  Although FFO, MFFO, EBITDA and Adjusted EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA and Adjusted EBITDA as reported by other companies that do not define such terms exactly as the Company defines such terms, the Company believes these supplemental measures are useful to investors when comparing the Company’s results between periods and with other REITs.

FFO and MFFO

The Company calculates and presents FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income (computed in accordance with generally accepted accounting principles (“GAAP”)), excluding gains or losses from sales of real estate, extraordinary items as defined by GAAP, the cumulative effect of changes in accounting principles, plus real estate related depreciation, amortization and impairments, and adjustments for unconsolidated partnerships and joint ventures.  Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations.  The Company further believes that by excluding the effects of these items, FFO is useful to investors in comparing its operating performance between periods and between REITs that report FFO using the NAREIT definition.  FFO as presented by the Company is applicable only to its common shareholders, but does not represent an amount that accrues directly to common shareholders.

The Company further adjusts FFO for certain additional items that are not in NAREIT’s definition of FFO, including: (i) the exclusion of transaction costs as these costs do not represent ongoing operations and (ii) the exclusion of non-cash straight-line ground lease expense as this expense does not reflect the underlying performance of the related hotels.  The Company presents MFFO when evaluating its performance because it believes that it provides further useful supplemental information to investors regarding its ongoing operating performance.
 
 
19


The following table reconciles the Company’s GAAP net income to FFO and MFFO for the three months ended March 31, 2016 and 2015 (in thousands).

   
Three Months Ended March 31,
 
   
2016
   
2015
 
Net income
  $ 34,686     $ 43,867  
Depreciation of real estate owned
    33,254       30,489  
Gain on sale of real estate
    -       (15,629 )
Amortization of favorable and unfavorable leases, net
    262       2,023  
Funds from operations
    68,202       60,750  
Transaction costs
    293       1,224  
Non-cash straight-line ground lease expense
    819       850  
Modified funds from operations
  $ 69,314     $ 62,824  

EBITDA and Adjusted EBITDA

EBITDA is a commonly used measure of performance in many industries and is defined as net income excluding interest, income taxes and depreciation and amortization.  The Company believes EBITDA is useful to investors because it helps the Company and its investors evaluate the ongoing operating performance of the Company by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization).  In addition, certain covenants included in the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance.

The Company considers the exclusion of certain additional items from EBITDA useful, including: (i) the exclusion of transaction costs and the gain on sale of real estate as these do not represent ongoing operations and (ii) the exclusion of non-cash straight-line ground lease expense as this expense does not reflect the underlying performance of the related hotels.

The following table reconciles the Company’s GAAP net income to EBITDA and Adjusted EBITDA for the three months ended March 31, 2016 and 2015 (in thousands).

   
Three Months Ended March 31,
 
   
2016
   
2015
 
Net income
  $ 34,686     $ 43,867  
Depreciation
    33,484       30,719  
Amortization of favorable and unfavorable leases, net
    262       2,023  
Interest and other expense, net
    8,803       7,737  
Income tax expense
    263       312  
EBITDA
    77,498       84,658  
Transaction costs
    293       1,224  
Gain on sale of real estate
    -       (15,629 )
Non-cash straight-line ground lease expense
    819       850  
Adjusted EBITDA
  $ 78,610     $ 71,103  
 
 
20


Hotels Owned
 
As of March 31, 2016, the Company owned 179 hotels with an aggregate of 22,961 rooms located in 32 states.  The following tables summarize the number of hotels and rooms by brand and by state:

Number of Hotels and Guest Rooms by Brand
 
   
Number of
   
Number of
 
Brand
 
Hotels
   
Rooms
 
Courtyard
    34       4,693  
Hilton Garden Inn
    30       3,983  
Residence Inn
    27       3,017  
Hampton Inn
    26       3,175  
Homewood Suites
    23       2,572  
SpringHill Suites
    15       2,042  
TownePlace Suites
    8       810  
Fairfield Inn
    7       845  
Marriott
    3       842  
Embassy Suites
    2       316  
Home2 Suites
    2       237  
Hilton
    1       224  
Renaissance
    1       205  
    Total
    179       22,961  
 
Number of Hotels and Guest Rooms by State
 
   
Number of
   
Number of
 
State
 
Hotels
   
Rooms
 
Alabama
    10       948  
Alaska
    1       169  
Arizona
    7       926  
Arkansas
    4       408  
California
    23       3,241  
Colorado
    2       245  
Florida
    16       1,992  
Georgia
    5       468  
Idaho
    2       416  
Illinois
    4       601  
Indiana
    2       236  
Kansas
    4       422  
Louisiana
    4       541  
Massachusetts
    4       466  
Maryland
    2       233  
Michigan
    1       148  
Minnesota
    1       124  
Mississippi
    2       168  
Missouri
    4       544  
Nebraska
    1       181  
New Jersey
    5       629  
New York
    4       549  
North Carolina
    9       1,038  
Ohio
    1       142  
Oklahoma
    1       200  
Pennsylvania
    3       391  
South Carolina
    3       325  
Tennessee
    6       702  
Texas
    28       3,452  
Utah
    2       257  
Virginia
    14       2,190  
Washington
    4       609  
    Total
    179       22,961  
 
 
21

 
The following table summarizes the location, brand, manager, date acquired or completed and number of rooms for each of the 179 hotels the Company owned as of March 31, 2016.
 
City
 
State
 
Brand
 
Manager
 
Date Acquired or Completed
 
Rooms
 
Anchorage
 
AK
 
Embassy Suites
 
Stonebridge
 
4/30/2010
    169  
Auburn
 
AL
 
Hilton Garden Inn
 
LBA
 
3/1/2014
    101  
Birmingham
 
AL
 
Courtyard
 
LBA
 
3/1/2014
    84  
Birmingham
 
AL
 
Homewood Suites
 
McKibbon
 
3/1/2014
    95  
Dothan
 
AL
 
Hilton Garden Inn
 
LBA
 
6/1/2009
    104  
Dothan
 
AL
 
Residence Inn
 
LBA
 
3/1/2014
    84  
Huntsville
 
AL
 
Hilton Garden Inn
 
LBA
 
3/1/2014
    101  
Huntsville
 
AL
 
Homewood Suites
 
LBA
 
3/1/2014
    107  
Montgomery
 
AL
 
Hilton Garden Inn
 
LBA
 
3/1/2014
    97  
Montgomery
 
AL
 
Homewood Suites
 
LBA
 
3/1/2014
    91  
Prattville
 
AL
 
Courtyard
 
LBA
 
3/1/2014
    84  
Rogers
 
AR
 
Hampton Inn
 
Raymond
 
8/31/2010
    122  
Rogers
 
AR
 
Homewood Suites
 
Raymond
 
4/30/2010
    126  
Rogers
 
AR
 
Residence Inn
 
Raymond
 
3/1/2014
    88  
Springdale
 
AR
 
Residence Inn
 
Pillar
 
3/1/2014
    72  
Chandler
 
AZ
 
Courtyard
 
North Central
 
11/2/2010
    150  
Chandler
 
AZ
 
Fairfield Inn & Suites
 
North Central
 
11/2/2010
    110  
Phoenix
 
AZ
 
Courtyard
 
North Central
 
11/2/2010
    164  
Phoenix
 
AZ
 
Residence Inn
 
North Central
 
11/2/2010
    129  
Tucson
 
AZ
 
Hilton Garden Inn
 
Western
 
7/31/2008
    125  
Tucson
 
AZ
 
Residence Inn
 
Western
 
3/1/2014
    124  
Tucson
 
AZ
 
TownePlace Suites
 
Western
 
10/6/2011
    124  
Agoura Hills
 
CA
 
Homewood Suites
 
Dimension
 
3/1/2014
    125  
Burbank
 
CA
 
Courtyard
 
Huntington
 
8/11/2015
    190  
Burbank
 
CA
 
Residence Inn
 
Marriott
 
3/1/2014
    166  
Burbank
 
CA
 
SpringHill Suites
 
Marriott
 
7/13/2015
    170  
Clovis
 
CA
 
Hampton Inn & Suites
 
Dimension
 
7/31/2009
    86  
Clovis
 
CA
 
Homewood Suites
 
Dimension
 
2/2/2010
    83  
Cypress
 
CA
 
Courtyard
 
Dimension
 
3/1/2014
    180  
Cypress
 
CA
 
Hampton Inn
 
Dimension
 
6/29/2015
    110  
Oceanside
 
CA
 
Residence Inn
 
Marriott
 
3/1/2014
    125  
Rancho Bernardo/San Diego
 
CA
 
Courtyard
 
InnVentures
 
3/1/2014
    210  
Sacramento
 
CA
 
Hilton Garden Inn
 
Dimension
 
3/1/2014
    153  
San Bernardino
 
CA
 
Residence Inn
 
InnVentures
 
2/16/2011
    95  
San Diego
 
CA
 
Courtyard
 
Huntington
 
9/1/2015
    245  
San Diego
 
CA
 
Hampton Inn
 
Dimension
 
3/1/2014
    177  
San Diego
 
CA
 
Hilton Garden Inn
 
InnVentures
 
3/1/2014
    200  
San Diego
 
CA
 
Residence Inn
 
Dimension
 
3/1/2014
    121  
San Jose
 
CA
 
Homewood Suites
 
Dimension
 
3/1/2014
    140  
Santa Ana
 
CA
 
Courtyard
 
Dimension
 
5/23/2011
    155  
Santa Clarita
 
CA
 
Courtyard
 
Dimension
 
9/24/2008
    140  
Santa Clarita
 
CA
 
Fairfield Inn
 
Dimension
 
10/29/2008
    66  
Santa Clarita
 
CA
 
Hampton Inn
 
Dimension
 
10/29/2008
    128  
Santa Clarita
 
CA
 
Residence Inn
 
Dimension
 
10/29/2008
    90  
Tulare
 
CA
 
Hampton Inn & Suites
 
InnVentures
 
3/1/2014
    86  
Highlands Ranch
 
CO
 
Hilton Garden Inn
 
Dimension
 
3/1/2014
    128  
Highlands Ranch
 
CO
 
Residence Inn
 
Dimension
 
3/1/2014
    117  
Fort Lauderdale
 
FL
 
Hampton Inn
 
Vista Host
 
12/31/2008
    109  
Fort Lauderdale
 
FL
 
Hampton Inn
 
LBA
 
6/23/2015
    156  
Jacksonville
 
FL
 
Homewood Suites
 
McKibbon
 
3/1/2014
    119  
Lakeland
 
FL
 
Courtyard
 
LBA
 
3/1/2014
    78  
Miami
 
FL
 
Courtyard
 
Dimension
 
3/1/2014
    118  
Miami
 
FL
 
Hampton Inn & Suites
 
White Lodging
 
4/9/2010
    121  
Miami
 
FL
 
Homewood Suites
 
Dimension
 
3/1/2014
    162  
Orlando
 
FL
 
Fairfield Inn & Suites
 
Marriott
 
7/1/2009
    200  
Orlando
 
FL
 
SpringHill Suites
 
Marriott
 
7/1/2009
    200  
Panama City
 
FL
 
Hampton Inn & Suites
 
LBA
 
3/12/2009
    95  
Panama City
 
FL
 
TownePlace Suites
 
LBA
 
1/19/2010
    103  
 
 
22

 
City
 
State
 
Brand
 
Manager
 
Date Acquired or Completed
 
Rooms
 
Sanford
 
FL
 
SpringHill Suites
 
LBA
 
3/1/2014
    105  
Sarasota
 
FL
 
Homewood Suites
 
Hilton
 
3/1/2014
    100  
Tallahassee
 
FL
 
Hilton Garden Inn
 
LBA
 
3/1/2014
    85  
Tampa
 
FL
 
Embassy Suites
 
White Lodging
 
11/2/2010
    147  
Tampa
 
FL
 
TownePlace Suites
 
McKibbon
 
3/1/2014
    94  
Albany
 
GA
 
Fairfield Inn & Suites
 
LBA
 
1/14/2010
    87  
Columbus
 
GA
 
SpringHill Suites
 
LBA
 
3/1/2014
    89  
Columbus
 
GA
 
TownePlace Suites
 
LBA
 
3/1/2014
    86  
Macon
 
GA
 
Hilton Garden Inn
 
LBA
 
3/1/2014
    101  
Savannah
 
GA
 
Hilton Garden Inn
 
Newport
 
3/1/2014
    105  
Boise
 
ID
 
Hampton Inn & Suites
 
Raymond
 
4/30/2010
    186  
Boise
 
ID
 
SpringHill Suites
 
InnVentures
 
3/1/2014
    230  
Mettawa
 
IL
 
Hilton Garden Inn
 
White Lodging
 
11/2/2010
    170  
Mettawa
 
IL
 
Residence Inn
 
White Lodging
 
11/2/2010
    130  
Schaumburg
 
IL
 
Hilton Garden Inn
 
White Lodging
 
11/2/2010
    166  
Warrenville
 
IL
 
Hilton Garden Inn
 
White Lodging
 
11/2/2010
    135  
Indianapolis
 
IN
 
SpringHill Suites
 
White Lodging
 
11/2/2010
    130  
Mishawaka
 
IN
 
Residence Inn
 
White Lodging
 
11/2/2010
    106  
Overland Park
 
KS
 
Fairfield Inn & Suites
 
True North
 
3/1/2014
    110  
Overland Park
 
KS
 
Residence Inn
 
True North
 
3/1/2014
    120  
Overland Park
 
KS
 
SpringHill Suites
 
True North
 
3/1/2014
    102  
Wichita
 
KS
 
Courtyard
 
Pillar
 
3/1/2014
    90  
Baton Rouge
 
LA
 
SpringHill Suites
 
Dimension
 
9/25/2009
    119  
Lafayette
 
LA
 
Hilton Garden Inn
 
LBA
 
7/30/2010
    153  
Lafayette
 
LA
 
SpringHill Suites
 
LBA
 
6/23/2011
    103  
New Orleans
 
LA
 
Homewood Suites
 
Dimension
 
3/1/2014
    166  
Andover
 
MA
 
SpringHill Suites
 
Marriott
 
11/5/2010
    136  
Marlborough
 
MA
 
Residence Inn
 
True North
 
3/1/2014
    112  
Westford
 
MA
 
Hampton Inn & Suites
 
True North
 
3/1/2014
    110  
Westford
 
MA
 
Residence Inn
 
True North
 
3/1/2014
    108  
Annapolis
 
MD
 
Hilton Garden Inn
 
White Lodging
 
3/1/2014
    126  
Silver Spring
 
MD
 
Hilton Garden Inn
 
White Lodging
 
7/30/2010
    107  
Novi
 
MI
 
Hilton Garden Inn
 
White Lodging
 
11/2/2010
    148  
Rochester
 
MN
 
Hampton Inn & Suites
 
Raymond
 
8/3/2009
    124  
Kansas City
 
MO
 
Hampton Inn
 
Raymond
 
8/31/2010
    122  
Kansas City
 
MO
 
Residence Inn
 
True North
 
3/1/2014
    106  
St. Louis
 
MO
 
Hampton Inn
 
Raymond
 
8/31/2010
    190  
St. Louis