Toggle SGML Header (+)


Section 1: 8-K (8-K)



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


FORM 8-K 
 

 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): February 22, 2018
 
APPLE HOSPITALITY REIT, INC.
(Exact name of registrant as specified in its charter)
 
Virginia
 
001-37389
 
26-1379210
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification Number)
 
814 East Main Street, Richmond, Virginia
 
23219
(Address of principal executive offices)
 
(Zip Code)
 
(804) 344-8121
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    

 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     


Apple Hospitality REIT, Inc. (which is referred to below as the “Company”) is filing this report in accordance with Items 2.02 and 9.01 of Form 8-K.

Item 2.02.  Results of Operations and Financial Condition.

On February 22, 2018, the Company announced its financial results for the three months and year ended December 31, 2017.  A copy of the Company’s press release is furnished as Exhibit 99.1 to this current report on Form 8-K.
 
The information contained in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference into any filing made by the Company under the Exchange Act or Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.  Financial Statements and Exhibits.

(d) Exhibits

99.1
 

 


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

   
Apple Hospitality REIT, Inc.
   
By:
/s/ Justin G. Knight
 
Justin G. Knight
President and Chief Executive Officer
   
 
 February 22, 2018
 


 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

 
Exhibit 99.1
 


Apple Hospitality REIT Reports Results of Operations for Fourth Quarter and Full Year 2017

 
RICHMOND, Va. (February 22, 2018) – Apple Hospitality REIT, Inc. (NYSE: APLE) (the “Company” or “Apple Hospitality”) today announced results of operations for the fourth quarter and full year of 2017.


 Selected Statistical and Financial Data
As of and For the Three Months and Years Ended December 31
(Unaudited) (in thousands, except statistical and per share amounts)(1)
 

   
Three Months Ended
   
Years Ended
 
   
December 31,
   
December 31,
 
   
2017
   
2016
   
% Change
   
2017
   
2016
   
% Change
 
                                     
Net income (loss)
 
$
(2,303
)
 
$
41,554
     
n/a
   
$
182,492
   
$
144,652
     
26.2
%
Net income (loss) per share
 
$
(0.01
)
 
$
0.19
     
n/a
   
$
0.82
   
$
0.76
     
7.9
%
                                                 
Adjusted EBITDA
 
$
93,073
   
$
94,770
     
(1.8
%)
 
$
438,538
   
$
377,978
     
16.0
%
Comparable Hotels Adjusted Hotel EBITDA
 
$
101,386
   
$
98,642
     
2.8
%
 
$
469,089
   
$
469,646
     
(0.1
%)
Comparable Hotels Adjusted Hotel EBITDA Margin
   
34.9
%
   
35.5
%
 
(60 bps)
     
37.8
%
   
38.7
%
 
(90 bps)
 
Modified funds from operations (MFFO)
 
$
80,956
   
$
83,218
     
(2.7
%)
 
$
389,430
   
$
336,602
     
15.7
%
MFFO per share
 
$
0.36
   
$
0.37
     
(2.7
%)
 
$
1.74
   
$
1.76
     
(1.1
%)
                                                 
ADR (Actual)
 
$
130.30
   
$
127.81
     
1.9
%
 
$
134.61
   
$
133.61
     
0.7
%
Occupancy (Actual)
   
73.5
%
   
72.4
%
   
1.5
%
   
77.4
%
   
76.9
%
   
0.7
%
RevPAR (Actual)
 
$
95.76
   
$
92.52
     
3.5
%
 
$
104.13
   
$
102.80
     
1.3
%
                                                 
Comparable Hotels ADR
 
$
130.28
   
$
127.82
     
1.9
%
 
$
134.75
   
$
133.45
     
1.0
%
Comparable Hotels Occupancy
   
73.5
%
   
72.4
%
   
1.5
%
   
77.5
%
   
77.0
%
   
0.6
%
Comparable Hotels RevPAR
 
$
95.78
   
$
92.55
     
3.5
%
 
$
104.40
   
$
102.80
     
1.6
%
                                                 
Distributions paid
 
$
67,201
   
$
67,116
     
0.1
%
 
$
267,917
   
$
229,056
     
17.0
%
Distributions paid per share
 
$
0.30
   
$
0.30
     
-
   
$
1.20
   
$
1.20
     
-
 
                                                 
Total debt outstanding
 
$
1,224,335
                                         
Total debt to total capitalization (2)
   
21.4
%
                                       


(1) Explanations of and reconciliations to net income (loss) determined in accordance with generally accepted accounting principles (“GAAP”) of non-GAAP financial measures, Adjusted EBITDA, Comparable Hotels Adjusted Hotel EBITDA and MFFO, are included below.
(2) Total debt outstanding divided by total debt outstanding plus equity market capitalization based on the Company’s closing share price of $19.61 on December 31, 2017.

Comparable Hotels is defined as the 239 hotels owned by the Company as of December 31, 2017. For hotels acquired during the periods noted, 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. Results for periods prior to the Company’s ownership have not been included in the Company’s actual Consolidated Financial Statements and are included only for comparison purposes. Results included for periods prior to the Company’s ownership are based on information from the prior owner of each hotel and have not been audited or adjusted.
 
Justin Knight, President and Chief Executive Officer of Apple Hospitality REIT, commented, “The Company achieved an increase in Comparable Hotels RevPAR of 3.5 percent for the quarter and 1.6 percent for the year, due in part to increased demand in Houston and portions of Florida. Despite a low rate growth environment and ongoing wage pressure driven by low unemployment, we achieved a strong Comparable Hotels Adjusted Hotel EBITDA Margin of 37.8 percent for the year. We are pleased to have completed seven strategic hotel acquisitions in recent months, adding to our portfolio’s geographic diversity and increasing our exposure in strong business and leisure markets. Our results
Page | 1


continue to highlight the benefits of our geographically diverse portfolio of rooms-focused Marriott and Hilton branded hotels, complemented by a strong flexible balance sheet, and we are confident this strategy will continue to benefit shareholders over the long term.”
 
Transactional Activity
Acquisitions
·
On February 2, 2017, Apple Hospitality acquired the newly constructed 124-room Courtyard by Marriott®  in Fort Worth, Texas, for a gross purchase price of approximately $18 million.
·
On September 12, 2017, the Company acquired the newly constructed Hilton Garden Inn® and Home2 Suites by Hilton® hotels in Birmingham, Alabama, with a combined total of 210 rooms, for a combined gross purchase price of approximately $38 million.
·
On October 13, 2017, the Company acquired an existing 179-room Residence Inn by Marriott® in Portland, Maine, for a gross purchase price of approximately $56 million.
·
On October 20, 2017, the Company acquired an existing 136-room Residence Inn by Marriott® in the Murray suburb of Salt Lake City, Utah, for a gross purchase price of approximately $26 million.
·
On December 1, 2017, the Company acquired an existing 135-room Home2 Suites by Hilton® in Anchorage, Alaska, for a gross purchase price of approximately $24 million.
·
On February 5, 2018, the Company acquired an existing 119-room Hampton Inn & Suites by Hilton® in Atlanta, Georgia, and an existing 144-room Hampton Inn & Suites by Hilton® in Memphis, Tennessee, for a combined gross purchase price of $63 million.

Dispositions
·
On April 20, 2017, the Company completed the sale of the 224-room Hilton® in Dallas, Texas, for a gross sales price of approximately $56 million, including debt assumed by the buyer of approximately $27 million. As a result of the sale, the Company recognized a gain of approximately $16 million in the second quarter of 2017.
·
On October 5, 2017, the Company completed the sale of the 316-room Marriott® in Fairfax, Virginia, for a gross sales price of approximately $42 million. As a result of the sale, the Company recognized a gain of approximately $0.3 million in the fourth quarter of 2017.

Merger with Apple REIT Ten, Inc.
Effective September 1, 2016, Apple Hospitality completed its merger with Apple REIT Ten, Inc. (“Apple Ten”).  The merger added 56 Marriott® and Hilton® branded primarily select-service and extended-stay hotels with 7,209 guest rooms to the Company’s portfolio. As consideration in the merger, the Company issued approximately 49 million common shares and paid approximately $94 million to the Apple Ten shareholders, and assumed approximately $257 million of debt.

Capital Improvements
Apple Hospitality consistently reinvests in its hotels to maintain and enhance each property’s relevance and competitive position within its respective market. During the year ended December 31, 2017, the Company invested approximately $69 million in capital expenditures. The Company plans to continue to reinvest in its hotels and anticipates investing $70 million to $80 million in capital improvements during 2018, which includes various scheduled renovation projects for approximately 30 to 35 properties.

Balance Sheet and Capital Markets
As of December 31, 2017, Apple Hospitality had approximately $1.2 billion of total outstanding indebtedness with a current combined weighted-average interest rate of approximately 3.6 percent for 2018. Excluding unamortized debt
Page | 2


issuance costs and fair value adjustments, the Company’s total outstanding indebtedness is comprised of approximately $457 million in property-level debt secured by 29 hotels and $767 million outstanding on its unsecured credit facilitiesApple Hospitality’s undrawn capacity on its unsecured credit facilities at December 31, 2017, was approximately $433 million. The Company’s total debt to total capitalization at December 31, 2017, was approximately 21 percent, which provides Apple Hospitality with financial flexibility to fund capital requirements and pursue opportunities in the marketplace.

During the fourth quarter of 2017, the Company sold approximately 6.9 million common shares under its at-the-market offering program at a weighted-average market sales price of approximately $19.55 per common share and received aggregate gross proceeds of approximately $135.1 million and proceeds net of offering costs of approximately $132.9 million. The Company used the proceeds from the sale of these shares to pay down borrowings on its revolving credit facility, providing additional capacity for strategic growth while maintaining the Company’s strong balance sheet.

Renaissance® New York Hotel 57
The fourth quarter of 2017 includes a $38 million non-cash impairment charge related to the Company’s Renaissance® New York Hotel 57, as a result of declines in the hotel’s current and projected cash flows. The hotel has been and is expected to be impacted by a combination of:  declines in existing and forecasted hotel market conditions in New York City; new supply in the market; and the loss of retail tenants and the extended period of time and incremental costs it has taken and is anticipated to take to re-lease the available retail space.

Shareholder Distributions
Apple Hospitality paid distributions of $0.30 per common share during the three-month period ended December 31, 2017, and $1.20 per common share for the year ended December 31, 2017. Based on the Company’s common share closing price of $18.16 on February 20, 2018, the annual distribution represents an annual yield of approximately 6.6 percent. The Company’s Board of Directors, in consultation with management, will continue to regularly monitor the Company’s distribution rate relative to the performance of its hotels, capital improvement needs, varying economic cycles, acquisitions and dispositions. At its discretion, the Company’s Board of Directors may make adjustments as determined to be prudent in relation to other cash requirements of the Company.

2018 Outlook
Apple Hospitality is providing its operational and financial outlook for 2018. This outlook, which is based on management’s current view of both operating and economic fundamentals of the Company’s existing portfolio of hotels, does not take into account any unanticipated developments in its business or changes in its operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions. Comparable Hotels RevPAR Growth and Comparable Hotels Adjusted Hotel EBITDA Margin % guidance include properties acquired, as if the hotels were owned as of January 1, 2017, and exclude completed dispositions since January 1, 2017. For the full year 2018, the Company anticipates:
 
   
2018 Guidance(1)
 
   
Low-End
   
High-End
 
             
Net income
 
$197 Million
   
$221 Million
 
             
Comparable Hotels RevPAR Growth
 
0.0%
 
 
2.0%
 
             
Comparable Hotels Adjusted Hotel EBITDA Margin %
 
36.8%
 
 
37.8%
 
             
Adjusted EBITDA
 
$437 Million
   
$457 Million
 




(1)
Explanations of and reconciliations to net income guidance of Adjusted EBITDA guidance are included below.

Page | 3


Earnings Call
The Company will host a quarterly conference call for investors and interested parties on Friday, February 23, 2018, at 9:00 a.m. Eastern Time. The conference call will be accessible by telephone and the internet. To access the call, participants from within the U.S. should dial (877) 407-9039, and participants from outside the U.S. should dial (201) 689-8470. Participants may also access the call via live webcast by visiting the Investor Information section of the Company’s website at ir.applehospitalityreit.com. A replay of the call will be available from approximately 12:00 p.m. Eastern Time on February 23, 2018, through 11:59 p.m. Eastern Time on March 9, 2018. To access the replay, the domestic dial-in number is (844) 512-2921, the international dial-in number is (412) 317-6671, and the passcode is 13674824. The archive of the webcast will be available on the Company’s website for a limited time.

About Apple Hospitality REIT, Inc.
Apple Hospitality REIT, Inc. (NYSE: APLE) is a publicly traded real estate investment trust (REIT) that owns one of the largest portfolios of upscale, select-service hotels in the United States. The Company’s highly diversified portfolio consists of 241 hotels with more than 30,500 guest rooms located in 88 markets throughout 34 states. The Company’s hotels are franchised with industry leading brands, and the Company’s portfolio includes 117 Marriott® branded hotels and 124 Hilton® branded hotels. For more information, please visit www.applehospitalityreit.com.

Apple Hospitality REIT 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”); Adjusted EBITDA (“Adjusted EBITDA”); and Adjusted Hotel EBITDA (“Adjusted Hotel EBITDA”). These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss), cash flow from operations, or any other operating GAAP measure. FFO, MFFO, EBITDA, Adjusted EBITDA and Adjusted Hotel 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, Adjusted EBITDA and Adjusted Hotel EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, Adjusted EBITDA and Adjusted Hotel 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. Reconciliations of these non-GAAP financial measures to net income (loss) are provided in the following pages.

Forward-Looking Statements Disclaimer
Certain statements contained in this press release other than historical facts may be considered forward-looking statements. These forward-looking statements are predictions and generally can be identified by use of statements that include phrases such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “target,” “goal,” “plan,” “should,” “will,” “predict,” “potential,” “outlook,” “strategy,” 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 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 Apple Hospitality to effectively acquire and dispose of properties; the ability of Apple Hospitality 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 have been or may be instituted against Apple Hospitality or others; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact Apple Hospitality’s business, assets or classification as a real estate investment trust.  Although Apple Hospitality believes that the
Page | 4


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 press release 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 Apple Hospitality or any other person that the results or conditions described in such statements or the objectives and plans of Apple Hospitality will be achieved.  In addition, Apple Hospitality’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 Apple Hospitality’s financial statements and the notes thereto, as well as the risk factors described in Apple Hospitality’s filings with the Securities and Exchange Commission, including, but not limited to, in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.  Any forward-looking statement that Apple Hospitality makes speaks only as of the date of such statement. Apple Hospitality 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.

Contact:
Apple Hospitality REIT, Inc.
Kelly Clarke, Vice President, Investor Relations
(804) 727-6321
kclarke@applereit.com

For additional information or to receive press releases by email, visit www.applehospitalityreit.com.







Page | 5


Apple Hospitality REIT, Inc.
Consolidated Balance Sheets
(in thousands, except share data)

   
As of December 31,
 
   
2017
   
2016
 
             
Assets
           
Investment in real estate, net of accumulated depreciation
           
of $731,284 and $557,597, respectively
 
$
4,793,159
   
$
4,823,489
 
Assets held for sale
   
-
     
39,000
 
Restricted cash-furniture, fixtures and other escrows
   
29,791
     
29,425
 
Due from third party managers, net
   
31,457
     
31,460
 
Other assets, net
   
47,931
     
56,509
 
Total Assets
 
$
4,902,338
   
$
4,979,883
 
                 
Liabilities
               
Revolving credit facility
 
$
106,900
   
$
270,000
 
Term loans
   
656,279
     
570,934
 
Mortgage debt
   
459,017
     
497,029
 
Accounts payable and other liabilities
   
109,057
     
124,856
 
Total Liabilities
   
1,331,253
     
1,462,819
 
                 
Shareholders’ Equity
               
Preferred stock, authorized 30,000,000 shares; none issued
               
and outstanding
   
-
     
-
 
Common stock, no par value, authorized 800,000,000 shares;
               
 issued and outstanding 229,961,548 and 222,938,648 shares, respectively
   
4,588,188
     
4,453,205
 
Accumulated other comprehensive income
   
9,778
     
4,589
 
Distributions greater than net income
   
(1,026,881
)
   
(940,730
)
Total Shareholders’ Equity
   
3,571,085
     
3,517,064
 
                 
Total Liabilities and Shareholders’ Equity
 
$
4,902,338
   
$
4,979,883
 

Note:
The Consolidated Balance Sheets and corresponding footnotes can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.


Page | 6


Apple Hospitality REIT, Inc.
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)


   
Three Months Ended
   
Years Ended
 
   
December 31, (Unaudited)
   
December 31,
 
   
2017
   
2016
   
2017
   
2016
 
Revenues:
                       
    Room
 
$
266,013
   
$
257,360
   
$
1,143,987
   
$
956,119
 
    Other
   
23,054
     
25,071
     
94,635
     
84,906
 
Total revenue
   
289,067
     
282,431
     
1,238,622
     
1,041,025
 
                                 
Expenses:
                               
    Operating
   
75,282
     
75,062
     
310,756
     
262,432
 
    Hotel administrative
   
24,850
     
23,178
     
99,745
     
81,099
 
    Sales and marketing
   
25,010
     
23,419
     
100,877
     
82,663
 
    Utilities
   
9,927
     
9,723
     
41,909
     
35,585
 
    Repair and maintenance
   
12,069
     
12,082
     
48,463
     
41,249
 
    Franchise fees
   
12,319
     
12,013
     
52,930
     
44,225
 
    Management fees
   
9,650
     
9,397
     
42,722
     
35,586
 
    Property taxes, insurance and other
   
17,045
     
16,545
     
69,391
     
56,860
 
    Ground lease
   
2,827
     
2,822
     
11,313
     
10,409
 
    General and administrative
   
8,086
     
4,521
     
26,341
     
17,032
 
    Transaction and litigation costs (reimbursements)
   
-
     
(2,872
)
   
(2,586
)
   
34,989
 
    Loss on impairment of depreciable real estate assets
   
38,000
     
-
     
45,875
     
5,471
 
    Depreciation
   
44,729
     
43,512
     
176,499
     
148,163
 
Total expenses
   
279,794
     
229,402
     
1,024,235
     
855,763
 
                                 
Operating income
   
9,273
     
53,029
     
214,387
     
185,262
 
                                 
    Interest and other expense, net
   
(11,753
)
   
(11,507
)
   
(47,343
)
   
(40,026
)
    Gain (loss) on sale of real estate
   
312
     
(153
)
   
16,295
     
(153
)
                                 
Income (loss) before income taxes
   
(2,168
)
   
41,369
     
183,339
     
145,083
 
                                 
    Income tax benefit (expense)
   
(135
)
   
185
     
(847
)
   
(431
)
                                 
Net income (loss)
 
$
(2,303
)
 
$
41,554
   
$
182,492
   
$
144,652
 
                                 
Other comprehensive income:
                               
    Interest rate derivatives
   
4,560
     
14,580
     
5,189
     
6,646
 
                                 
Comprehensive income
 
$
2,257
   
$
56,134
   
$
187,681
   
$
151,298
 
                                 
Basic and diluted net income (loss) per common share
 
$
(0.01
)
 
$
0.19
   
$
0.82
   
$
0.76
 
                                 
Weighted average common shares outstanding - basic and diluted
   
224,935
     
223,177
     
223,526
     
190,856
 


Note:
The Consolidated Statements of Operations and Comprehensive Income and corresponding footnotes can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.


Page | 7


Apple Hospitality REIT, Inc.
Comparable Hotels Operating Metrics and Statistical Data
(Unaudited)
(in thousands except statistical data)

   
Three Months Ended
   
Years Ended
 
   
December 31,
   
December 31,
 
   
2017
   
2016
   
% Change
   
2017
   
2016
   
% Change
 
                                     
Room revenue
 
$
267,180
   
$
255,297
     
4.7
%
 
$
1,149,409
   
$
1,123,918
     
2.3
%
Other revenue
   
23,023
     
22,852
     
0.7
%
   
91,779
     
91,201
     
0.6
%
Total revenue
   
290,203
     
278,149
     
4.3
%
   
1,241,188
     
1,215,119
     
2.1
%
                                                 
Total operating expenses
   
188,817
     
179,507
     
5.2
%
   
772,099
     
745,473
     
3.6
%
                                                 
Adjusted Hotel EBITDA
 
$
101,386
   
$
98,642
     
2.8
%
 
$
469,089
   
$
469,646
     
(0.1
%)
Adjusted Hotel EBITDA Margin %
   
34.9
%
   
35.5
%
 
(60 bps)
     
37.8
%
   
38.7
%
 
(90 bps)
 
                                                 
                                                 
ADR (Comparable Hotels)
 
$
130.28
   
$
127.82
     
1.9
%
 
$
134.75
   
$
133.45
     
1.0
%
Occupancy (Comparable Hotels)
   
73.5
%
   
72.4
%
   
1.5
%
   
77.5
%
   
77.0
%
   
0.6
%
RevPAR (Comparable Hotels)
 
$
95.78
   
$
92.55
     
3.5
%
 
$
104.40
   
$
102.80
     
1.6
%
                                                 
ADR (Actual)
 
$
130.30
   
$
127.81
     
1.9
%
 
$
134.61
   
$
133.61
     
0.7
%
Occupancy (Actual)
   
73.5
%
   
72.4
%
   
1.5
%
   
77.4
%
   
76.9
%
   
0.7
%
RevPAR (Actual)
 
$
95.76
   
$
92.52
     
3.5
%
 
$
104.13
   
$
102.80
     
1.3
%
                                                 
Reconciliation to Actual Results
                                               
                                                 
 Total Revenue (Actual)
 
$
289,067
   
$
282,431
           
$
1,238,622
   
$
1,041,025
         
 Revenue from acquisitions prior to ownership
   
1,334
     
4,007
             
17,157
     
209,376
         
 Revenue from dispositions
   
(147
)
   
(8,242
)
           
(14,395
)
   
(35,238
)
       
 Lease revenue intangible amortization
   
(51
)
   
(47
)
           
(196
)
   
(44
)
       
 Comparable Hotels Total Revenue
 
$
290,203
   
$
278,149
           
$
1,241,188
   
$
1,215,119
         
                                                 
 Adjusted Hotel EBITDA (AHEBITDA) (Actual)
 
$
101,159
   
$
99,291
           
$
464,879
   
$
395,010
         
 AHEBITDA from acquisitions prior to ownership
   
265
     
1,517
             
7,890
     
83,822
         
 AHEBITDA from dispositions
   
(38
)
   
(2,166
)
           
(3,680
)
   
(9,186
)
       
 Comparable Hotels AHEBITDA
 
$
101,386
   
$
98,642
           
$
469,089
   
$
469,646
         

Note:
Comparable Hotels is defined as the 239 hotels owned by the Company as of December 31, 2017. For hotels acquired during the periods noted, 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. Results for periods prior to the Company’s ownership have not been included in the Company’s actual Consolidated Financial Statements and are included only for comparison purposes. Results included for periods prior to the Company’s ownership are based on information from the prior owner of each hotel and have not been audited or adjusted.

Reconciliation of net income (loss) to non-GAAP financial measures is included in the following pages.





Page | 8


Apple Hospitality REIT, Inc.
Comparable Hotels Quarterly Operating Metrics and Statistical Data
(Unaudited)
(in thousands except statistical data)

   
Three Months Ended
 
   
3/31/2016
   
6/30/2016
   
9/30/2016
   
12/31/2016
   
3/31/2017
   
6/30/2017
   
9/30/2017
   
12/31/2017
 
                                                 
Room revenue
 
$
263,303
   
$
304,499
   
$
300,819
   
$
255,297
   
$
267,744
   
$
307,545
   
$
306,940
   
$
267,180
 
Other revenue
   
21,592
     
23,793
     
22,964
     
22,852
     
21,911
     
24,672
     
22,173
     
23,023
 
Total revenue
   
284,895
     
328,292
     
323,783
     
278,149
     
289,655
     
332,217
     
329,113
     
290,203
 
                                                                 
Total operating expenses
   
177,877
     
191,483
     
196,606
     
179,507
     
184,470
     
198,887
     
199,925
     
188,817
 
                                                                 
Adjusted Hotel EBITDA
 
$
107,018
   
$
136,809
   
$
127,177
   
$
98,642
   
$
105,185
   
$
133,330
   
$
129,188
   
$
101,386
 
Adjusted Hotel EBITDA Margin %
   
37.6
%
   
41.7
%
   
39.3
%
   
35.5
%
   
36.3
%
   
40.1
%
   
39.3
%
   
34.9
%
                                                                 
                                                                 
ADR (Comparable Hotels)
 
$
132.51
   
$
137.15
   
$
135.67
   
$
127.82
   
$
132.86
   
$
137.61
   
$
137.72
   
$
130.28
 
Occupancy (Comparable Hotels)
   
73.5
%
   
81.8
%
   
80.4
%
   
72.4
%
   
74.5
%
   
81.6
%
   
80.3
%
   
73.5
%
RevPAR (Comparable Hotels)
 
$
97.42
   
$
112.20
   
$
109.06
   
$
92.55
   
$
98.95
   
$
112.24
   
$
110.64
   
$
95.78
 
                                                                 
ADR (Actual)
 
$
133.16
   
$
138.16
   
$
136.04
   
$
127.81
   
$
133.39
   
$
137.56
   
$
136.73
   
$
130.30
 
Occupancy (Actual)
   
74.1
%
   
82.2
%
   
80.2
%
   
72.4
%
   
74.4
%
   
81.5
%
   
80.0
%
   
73.5
%
RevPAR (Actual)
 
$
98.66
   
$
113.59
   
$
109.07
   
$
92.52
   
$
99.27
   
$
112.10
   
$
109.45
   
$
95.76
 
                                                                 
Reconciliation to Actual Results
                                                               
                                                                 
 Total Revenue (Actual)
 
$
224,487
   
$
257,636
   
$
276,471
   
$
282,431
   
$
292,925
   
$
331,704
   
$
324,926
   
$
289,067
 
 Revenue from acquisitions prior to ownership
   
68,380
     
80,701
     
56,288
     
4,007
     
3,464
     
5,104
     
7,255
     
1,334
 
 Revenue from dispositions
   
(8,069
)
   
(9,998
)
   
(8,929
)
   
(8,242
)
   
(6,687
)
   
(4,544
)
   
(3,017
)
   
(147
)
 Lease revenue intangible amortization
   
97
     
(47
)
   
(47
)
   
(47
)
   
(47
)
   
(47
)
   
(51
)
   
(51
)
 Comparable Hotels Total Revenue
 
$
284,895
   
$
328,292
   
$
323,783
   
$
278,149
   
$
289,655
   
$
332,217
   
$
329,113
   
$
290,203
 
                                                                 
 Adjusted Hotel EBITDA (AHEBITDA) (Actual)
 
$
83,438
   
$
105,574
   
$
106,707
   
$
99,291
   
$
105,832
   
$
132,138
   
$
125,750
   
$
101,159
 
 AHEBITDA from acquisitions prior to ownership
   
25,312
     
34,230
     
22,763
     
1,517
     
1,060
     
2,471
     
4,094
     
265
 
 AHEBITDA from dispositions
   
(1,732
)
   
(2,995
)
   
(2,293
)
   
(2,166
)
   
(1,707
)
   
(1,279
)
   
(656
)
   
(38
)
 Comparable Hotels AHEBITDA
 
$
107,018
   
$
136,809
   
$
127,177
   
$
98,642
   
$
105,185
   
$
133,330
   
$
129,188
   
$
101,386
 

Note:
Comparable Hotels is defined as the 239 hotels owned by the Company as of December 31, 2017. For hotels acquired during the periods noted, 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. Results for periods prior to the Company’s ownership have not been included in the Company’s actual Consolidated Financial Statements and are included only for comparison purposes. Results included for periods prior to the Company’s ownership are based on information from the prior owner of each hotel and have not been audited or adjusted.
 

Reconciliation of net income (loss) to non-GAAP financial measures is included in the following pages.

Page | 9


Apple Hospitality REIT, Inc.
Same Store Hotels Operating Metrics and Statistical Data
(Unaudited)
(in thousands except statistical data)

   
Three Months Ended
   
Years Ended
 
   
December 31,
   
December 31,
 
   
2017
   
2016
   
% Change
   
2017
   
2016
   
% Change
 
                                     
Room revenue
 
$
199,219
   
$
193,850
     
2.8
%
 
$
864,530
   
$
856,834
     
0.9
%
Other revenue
   
17,998
     
18,361
     
(2.0
%)
   
71,690
     
72,150
     
(0.6
%)
Total revenue
   
217,217
     
212,211
     
2.4
%
   
936,220
     
928,984
     
0.8
%
                                                 
Total operating expenses
   
142,317
     
137,389
     
3.6
%
   
586,496
     
572,601
     
2.4
%
                                                 
Adjusted Hotel EBITDA
 
$
74,900
   
$
74,822
     
0.1
%
 
$
349,724
   
$
356,383
     
(1.9
%)
Adjusted Hotel EBITDA Margin %
   
34.5
%
   
35.3
%
 
(80 bps)
     
37.4
%
   
38.4
%
 
(100 bps)
 
                                                 
                                                 
ADR (Same Store Hotels)
 
$
130.96
   
$
128.69
     
1.8
%
 
$
135.63
   
$
134.34
     
1.0
%
Occupancy (Same Store Hotels)
   
73.4
%
   
72.7
%
   
1.0
%
   
77.6
%
   
77.4
%
   
0.3
%
RevPAR (Same Store Hotels)
 
$
96.16
   
$
93.60
     
2.7
%
 
$
105.19
   
$
104.00
     
1.1
%
                                                 
ADR (Actual)
 
$
130.30
   
$
127.81
     
1.9
%
 
$
134.61
   
$
133.61
     
0.7
%
Occupancy (Actual)
   
73.5
%
   
72.4
%
   
1.5
%
   
77.4
%
   
76.9
%
   
0.7
%
RevPAR (Actual)
 
$
95.76
   
$
92.52
     
3.5
%
 
$
104.13
   
$
102.80
     
1.3
%
                                                 
Reconciliation to Actual Results
                                               
                                                 
 Total Revenue (Actual)
 
$
289,067
   
$
282,431
           
$
1,238,622
   
$
1,041,025
         
 Revenue from acquisitions
   
(71,652
)
   
(61,931
)
           
(287,811
)
   
(85,811
)
       
 Revenue from dispositions
   
(147
)
   
(8,242
)
           
(14,395
)
   
(26,186
)
       
 Lease revenue intangible amortization
   
(51
)
   
(47
)
           
(196
)
   
(44
)
       
 Same Store Hotels Total Revenue
 
$
217,217
   
$
212,211
           
$
936,220
   
$
928,984
         
                                                 
 Adjusted Hotel EBITDA (AHEBITDA) (Actual)
 
$
101,159
   
$
99,291
           
$
464,879
   
$
395,010
         
 AHEBITDA from acquisitions
   
(26,221
)
   
(22,303
)
           
(111,475
)
   
(31,793
)
       
 AHEBITDA from dispositions
   
(38
)
   
(2,166
)
           
(3,680
)
   
(6,834
)
       
 Same Store Hotels AHEBITDA
 
$
74,900
   
$
74,822
           
$
349,724
   
$
356,383
         

Note:
Same Store Hotels is defined as the 177 hotels owned by the Company as of January 1, 2016 and during the entirety of the periods being compared. This information has not been audited.

Reconciliation of net income (loss) to non-GAAP financial measures is included in the following pages.

Page | 10


Apple Hospitality REIT, Inc.
Same Store Hotels Quarterly Operating Metrics and Statistical Data
(Unaudited)
(in thousands except statistical data)

   
Three Months Ended
 
   
3/31/2016
   
6/30/2016
   
9/30/2016
   
12/31/2016
   
3/31/2017
   
6/30/2017
   
9/30/2017
   
12/31/2017
 
                                                 
Room revenue
 
$
202,285
   
$
232,836
   
$
227,863
   
$
193,850
   
$
202,007
   
$
232,485
   
$
230,819
   
$
199,219
 
Other revenue
   
17,156
     
18,737
     
17,896
     
18,361
     
17,243
     
19,380
     
17,069
     
17,998
 
Total revenue
   
219,441
     
251,573
     
245,759
     
212,211
     
219,250
     
251,865
     
247,888
     
217,217
 
                                                                 
Total operating expenses
   
137,197
     
147,679
     
150,336
     
137,389
     
140,244
     
151,866
     
152,069
     
142,317
 
                                                                 
Adjusted Hotel EBITDA
 
$
82,244
   
$
103,894
   
$
95,423
   
$
74,822
   
$
79,006
   
$
99,999
   
$
95,819
   
$
74,900
 
Adjusted Hotel EBITDA Margin %
   
37.5
%
   
41.3
%
   
38.8
%
   
35.3
%
   
36.0
%
   
39.7
%
   
38.7
%
   
34.5
%
                                                                 
                                                                 
ADR (Same Store Hotels)
 
$
133.16
   
$
138.23
   
$
136.60
   
$
128.69
   
$
133.43
   
$
138.65
   
$
138.86
   
$
130.96
 
Occupancy (Same Store Hotels)
   
74.2
%
   
82.2
%
   
80.5
%
   
72.7
%
   
74.7
%
   
81.8
%
   
80.2
%
   
73.4
%
RevPAR (Same Store Hotels)
 
$
98.75
   
$
113.66
   
$
110.02
   
$
93.60
   
$
99.70
   
$
113.45
   
$
111.42
   
$
96.16
 
                                                                 
ADR (Actual)
 
$
133.16
   
$
138.16
   
$
136.04
   
$
127.81
   
$
133.39
   
$
137.56
   
$
136.73
   
$
130.30
 
Occupancy (Actual)
   
74.1
%
   
82.2
%
   
80.2
%
   
72.4
%
   
74.4
%
   
81.5
%
   
80.0
%
   
73.5
%
RevPAR (Actual)
 
$
98.66
   
$
113.59
   
$
109.07
   
$
92.52
   
$
99.27
   
$
112.10
   
$
109.45
   
$
95.76
 
                                                                 
Reconciliation to Actual Results
                                                               
                                                                 
 Total Revenue (Actual)
 
$
224,487
   
$
257,636
   
$
276,471
   
$
282,431
   
$
292,925
   
$
331,704
   
$
324,926
   
$
289,067
 
 Revenue from acquisitions
   
-
     
-
     
(23,880
)
   
(61,931
)
   
(66,941
)
   
(75,248
)
   
(73,970
)
   
(71,652
)
 Revenue from dispositions
   
(5,143
)
   
(6,016
)
   
(6,785
)
   
(8,242
)
   
(6,687
)
   
(4,544
)
   
(3,017
)
   
(147
)
 Lease revenue intangible amortization
   
97
     
(47
)
   
(47
)
   
(47
)
   
(47
)
   
(47
)
   
(51
)
   
(51
)
 Same Store Hotels Total Revenue
 
$
219,441
   
$
251,573
   
$
245,759
   
$
212,211
   
$
219,250
   
$
251,865
   
$
247,888
   
$
217,217
 
                                                                 
 Adjusted Hotel EBITDA (AHEBITDA) (Actual)
 
$
83,438
   
$
105,574
   
$
106,707
   
$
99,291
   
$
105,832
   
$
132,138
   
$
125,750
   
$
101,159
 
 AHEBITDA from acquisitions
   
-
     
-
     
(9,490
)
   
(22,303
)
   
(25,119
)
   
(30,860
)
   
(29,275
)
   
(26,221
)
 AHEBITDA from dispositions
   
(1,194
)
   
(1,680
)
   
(1,794
)
   
(2,166
)
   
(1,707
)
   
(1,279
)
   
(656
)
   
(38
)
 Same Store Hotels AHEBITDA
 
$
82,244
   
$
103,894
   
$
95,423
   
$
74,822
   
$
79,006
   
$
99,999
   
$
95,819
   
$
74,900
 

Note:
Same Store Hotels is defined as the 177 hotels owned by the Company as of January 1, 2016 and during the entirety of the periods being compared. This information has not been audited.

Reconciliation of net income (loss) to non-GAAP financial measures is included in the following pages.

Page | 11


Apple Hospitality REIT, Inc.
Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Adjusted Hotel EBITDA
(Unaudited)
(in thousands)

EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes, 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 agreements governing the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance.
 
The Company considers the exclusion or inclusion of certain additional items from EBITDA (Adjusted EBITDA) useful, including (i) the exclusion of transaction and litigation costs (reimbursements), gains or losses from sales of real estate, and the loss on impairment of depreciable real estate assets, as these items 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 further excludes actual corporate-level general and administrative expense for the Company from Adjusted EBITDA (Adjusted Hotel EBITDA) to isolate property-level operational performance over which the Company’s hotel operators have direct control. The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels.
 
The following table reconciles the Company’s GAAP net income (loss) to EBITDA, Adjusted EBITDA and Adjusted Hotel EBITDA on a quarterly basis from March 31, 2016 through December 31, 2017.
 
   
Three Months Ended
 
   
3/31/2016
 
6/30/2016
   
9/30/2016
   
12/31/2016
 
3/31/2017
   
6/30/2017
   
9/30/2017
 
12/31/2017
 
Net income (loss)
 
$
34,686
 
$
54,718
   
$
13,694
   
$
41,554
 
$
34,365
   
$
87,606
   
$
62,824
 
$
(2,303
)
Depreciation
   
33,484
   
33,824
     
37,343
     
43,512
   
43,767
     
43,893
     
44,110
   
44,729
 
Amortization of favorable and unfavorable leases, net
   
262
   
119
     
132
     
161
   
165
     
168
     
165
   
165
 
Interest and other expense, net
   
8,803
   
9,560
     
10,156
     
11,507
   
11,717
     
11,849
     
12,024
   
11,753
 
Income tax (benefit) expense
   
263
   
360
     
(7
)
   
(185
)
 
250
     
259
     
203
   
135
 
EBITDA
   
77,498
   
98,581
     
61,318
     
96,549
   
90,264
     
143,775
     
119,326
   
54,479
 
Transaction and litigation costs (reimbursements)
   
293
   
1,116
     
36,452
     
(2,872
)
 
-
     
(2,586
)
   
-
   
-
 
(Gain) Loss on sale of real estate
   
-
   
-
     
-
     
153
   
-
     
(16,140
)
   
157
   
(312
)
Loss on impairment of depreciable real estate assets
   
-
   
-
     
5,471
     
-
   
7,875
     
-
     
-
   
38,000
 
Non-cash straight-line ground lease expense
   
819
   
817
     
843
     
940
   
939
     
938
     
917
   
906
 
Adjusted EBITDA
 
$
78,610
 
$
100,514
   
$
104,084
   
$
94,770
 
$
99,078
   
$
125,987
   
$
120,400
 
$
93,073
 
General and administrative expense
   
4,828
   
5,060
     
2,623
     
4,521
   
6,754
     
6,151
     
5,350
   
8,086
 
Adjusted Hotel EBITDA
 
$
83,438
 
$
105,574
   
$
106,707
   
$
99,291
 
$
105,832
   
$
132,138
   
$
125,750
 
$
101,159
 


Page | 12


Apple Hospitality REIT, Inc.
2018 Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(Unaudited)
(in thousands)

The guidance of net income, EBITDA and Adjusted EBITDA are forward-looking statements and are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause actual results and performance to differ materially from those expressed or implied by these forecasts. Although the Company believes the expectations reflected in the forecasts are based upon reasonable assumptions, there can be no assurance that the expectations will be achieved or that the results will not be materially different. Risks that may affect these assumptions and forecasts include, but are not limited to, the following: changes in political, economic, competitive and specific market conditions; the amount and timing of acquisitions and dispositions of hotel properties; the level of capital expenditures may change significantly, which will directly affect the level of depreciation expense, interest expense and net income; the amount and timing of debt repayments may change significantly based on market conditions, which will directly affect the level of interest expense and net income; the amount and timing of transactions involving the Company’s common stock may change based on market conditions; and other risks and uncertainties associated with the Company’s business described herein and in filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
 
The following table reconciles the Company’s GAAP net income guidance to EBITDA and Adjusted EBITDA guidance for the year ending December 31, 2018.

   
Year Ending December 31, 2018
 
   
Low-End
   
High-End
 
Net income
 
$
197,375
   
$
220,975
 
Depreciation
   
183,000
     
181,000
 
Amortization of favorable and unfavorable leases, net
   
600
     
600
 
Interest and other expense, net
   
51,500
     
49,500
 
Income tax expense
   
800
     
1,200
 
EBITDA
   
433,275
     
453,275
 
Non-cash straight-line ground lease expense
   
3,725
     
3,725
 
Adjusted EBITDA
 
$
437,000
   
$
457,000
 

Page | 13


Apple Hospitality REIT, Inc.
Reconciliation of Net Income (Loss) to FFO and MFFO
(Unaudited)
(in thousands)

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 (loss) (computed in accordance with GAAP), excluding gains or losses from sales of real estate, extraordinary items as defined by GAAP, and 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 (MFFO) for certain additional items that are not in Nareit’s definition of FFO, including: (i) the exclusion of transaction and litigation costs (reimbursements), 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.

The following table reconciles the Company’s GAAP net income (loss) to FFO and MFFO for the three months and years ended December 31, 2017 and 2016.

   
Three Months Ended December 31,
   
Years Ended December 31,
 
   
2017
   
2016
   
2017
   
2016
 
Net income (loss)
 
$
(2,303
)
 
$
41,554
   
$
182,492
   
$
144,652
 
Depreciation of real estate owned
   
44,500
     
43,282
     
175,581
     
147,244
 
(Gain) loss on sale of real estate
   
(312
)
   
153
     
(16,295
)
   
153
 
Loss on impairment of depreciable real estate assets
   
38,000
     
-
     
45,875
     
5,471
 
Amortization of favorable and unfavorable leases, net
   
165
     
161
     
663
     
674
 
Funds from operations
   
80,050
     
85,150
     
388,316
     
298,194
 
Transaction and litigation costs (reimbursements)
   
-
     
(2,872
)
   
(2,586
)
   
34,989
 
Non-cash straight-line ground lease expense
   
906
     
940
     
3,700
     
3,419
 
Modified funds from operations
 
$
80,956
   
$
83,218
   
$
389,430
   
$
336,602