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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): May 7, 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 May 7, 2018, the Company announced its financial results for the three months ended March 31, 2018.  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
   
 
 May 7, 2018
 


 

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Section 2: EX-99.1 (EX-99.1)

 
Exhibit 99.1


 
Apple Hospitality REIT Reports Results of Operations for First Quarter 2018

 
RICHMOND, Va. (May 7, 2018) – Apple Hospitality REIT, Inc. (NYSE: APLE) (the “Company” or “Apple Hospitality”) today announced results of operations for the first quarter of 2018.


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

   
Three Months Ended
 
   
March 31,
 
   
2018
   
2017
   
% Change
 
                   
Net income
 
$
42,182
   
$
34,365
     
22.7
%
Net income per share
 
$
0.18
   
$
0.15
     
20.0
%
                         
Adjusted EBITDA
 
$
100,214
   
$
99,078
     
1.1
%
Comparable Hotels Adjusted Hotel EBITDA
 
$
107,500
   
$
106,634
     
0.8
%
Comparable Hotels Adjusted Hotel EBITDA Margin
   
35.9
%
   
36.4
%
 
(50 bps)
 
Modified funds from operations (MFFO)
 
$
87,902
   
$
86,881
     
1.2
%
MFFO per share
 
$
0.38
   
$
0.39
     
(2.6
%)
                         
Average Daily Rate (ADR) (Actual)
 
$
134.32
   
$
133.39
     
0.7
%
Occupancy (Actual)
   
74.6
%
   
74.4
%
   
0.3
%
Revenue Per Available Room (RevPAR) (Actual)
 
$
100.18
   
$
99.27
     
0.9
%
                         
Comparable Hotels ADR
 
$
134.43
   
$
133.25
     
0.9
%
Comparable Hotels Occupancy
   
74.6
%
   
74.5
%
   
0.1
%
Comparable Hotels RevPAR
 
$
100.23
   
$
99.31
     
0.9
%
                         
Distributions paid
 
$
69,144
   
$
66,908
     
3.3
%
Distributions paid per share
 
$
0.30
   
$
0.30
     
-
 
                         
Total debt outstanding
 
$
1,329,202
                 
Total debt to total capitalization (2)
   
24.7
%
               

(1) Explanations of and reconciliations to net income 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 $17.57 on March 31, 2018.
 
Comparable Hotels is defined as the 241 hotels owned by the Company as of March 31, 2018. 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.

Page | 1


Justin Knight, President and Chief Executive Officer of Apple Hospitality REIT, commented, “The year is off to a solid start and performance across our portfolio was generally in line with our expectations for the first quarter. While the growth of leisure travel continued to outpace corporate travel during the quarter, we are seeing indications of increasing corporate demand in many of our markets and are optimistic those trends will strengthen throughout the year. Our highly diversified portfolio is well positioned to benefit from more favorable business travel trends which allow us to drive incremental efficiencies at the property level. We continue to be optimistic about the prospects for the year and remain confident in the fundamentals of our portfolio.”

Portfolio Activity
On February 5, 2018, Apple Hospitality 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 total purchase price of $63 million.

On May 2, 2018, the Company acquired the newly built 210-room Hampton Inn & Suites by Hilton® in Phoenix, Arizona, for a total purchase price of approximately $44 million.

In April 2018, the Company entered into a contract for the potential purchase of a planned dual-branded Hampton Inn & Suites by Hilton® and Home2 Suites by Hilton® property in Cape Canaveral, Florida, with a combined total of 224 guest rooms. The purchase price is approximately $47 million, and the hotels are anticipated to open in 2020. There are many conditions to closing, and there can be no assurance the hotels will be acquired.

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 quarter ended March 31, 2018, the Company invested approximately $18 million in capital expenditures. The Company plans to continue to reinvest in its hotels and anticipates investing an additional $50 million to $60 million in capital improvements during the remainder of 2018, which includes various scheduled renovation projects for approximately 25 to 30 properties.

Balance Sheet and Capital Markets
As of March 31, 2018, Apple Hospitality had approximately $1.3 billion of total outstanding indebtedness with a current combined weighted-average interest rate of approximately 3.7 percent for the remainder of 2018. Excluding unamortized debt issuance costs and fair value adjustments, the Company’s total outstanding indebtedness is comprised of approximately $499 million in property-level debt secured by 31 hotels and $831 million outstanding on its unsecured credit facilitiesApple Hospitality’s undrawn capacity on its unsecured credit facilities at March 31, 2018, was approximately $369 million. The Company’s total debt to total capitalization at March 31, 2018, was approximately 25 percent, which provides Apple Hospitality with financial flexibility to fund capital requirements and pursue opportunities in the marketplace.

Shareholder Distributions
Apple Hospitality paid distributions of $0.30 per common share during the three-month period ended March 31, 2018.  Based on the Company’s common share closing price of $18.07 on May 3, 2018, the annualized distribution rate of $1.20 per common share 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.


Page | 2


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
 
$198 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.

Earnings Call
The Company will host a quarterly conference call for investors and interested parties on Tuesday, May 8, 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 May 8, 2018, through 11:59 p.m. Eastern Time on May 22, 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 13678115. 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 and most diverse portfolios of upscale, select-service hotels in the United States. Apple Hospitality’s portfolio consists of 242 hotels with more than 30,700 guest rooms located in 88 markets throughout 34 states. Franchised with industry-leading brands, the Company’s portfolio comprises 117 Marriott®-branded hotels and 125 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.

Page | 3


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 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 | 4


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

   
March 31,
   
December 31,
 
   
2018
   
2017
 
   
(unaudited)
       
Assets
           
Investment in real estate, net of accumulated depreciation
           
of $775,894 and $731,284, respectively
 
$
4,829,776
   
$
4,793,159
 
Restricted cash-furniture, fixtures and other escrows
   
31,438
     
29,791
 
Due from third party managers, net
   
57,240
     
31,457
 
Other assets, net
   
54,917
     
47,931
 
Total Assets
 
$
4,973,371
   
$
4,902,338
 
     
Liabilities
               
Revolving credit facility
 
$
170,700
   
$
106,900
 
Term loans
   
656,569
     
656,279
 
Mortgage debt
   
500,189
     
459,017
 
Accounts payable and other liabilities
   
89,439
     
109,057
 
Total Liabilities
   
1,416,897
     
1,331,253
 
                 
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 230,339,578 and 229,961,548 shares, respectively
   
4,594,247
     
4,588,188
 
Accumulated other comprehensive income
   
16,070
     
9,778
 
Distributions greater than net income
   
(1,053,843
)
   
(1,026,881
)
Total Shareholders' Equity
   
3,556,474
     
3,571,085
 
                 
Total Liabilities and Shareholders' Equity
 
$
4,973,371
   
$
4,902,338
 

Note:
The Consolidated Balance Sheets and corresponding footnotes can be found in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.

Page | 5


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

   
Three Months Ended
 
   
March 31,
 
   
2018
   
2017
 
Revenues:
           
    Room
 
$
274,836
   
$
269,393
 
    Other
   
23,553
     
23,532
 
Total revenue
   
298,389
     
292,925
 
                 
Expenses:
               
    Operating
   
75,954
     
75,154
 
    Hotel administrative
   
25,102
     
24,836
 
    Sales and marketing
   
25,332
     
24,109
 
    Utilities
   
10,283
     
9,753
 
    Repair and maintenance
   
12,453
     
11,916
 
    Franchise fees
   
12,733
     
12,474
 
    Management fees
   
10,472
     
10,212
 
    Property taxes, insurance and other
   
17,229
     
16,927
 
    Ground lease
   
2,850
     
2,816
 
    General and administrative
   
6,877
     
6,754
 
    Loss on impairment of depreciable real estate assets
   
-
     
7,875
 
    Depreciation
   
44,840
     
43,767
 
Total expenses
   
244,125
     
246,593
 
                 
Operating income
   
54,264
     
46,332
 
                 
    Interest and other expense, net
   
(11,919
)
   
(11,717
)
                 
Income before income taxes
   
42,345
     
34,615
 
                 
    Income tax expense
   
(163
)
   
(250
)
                 
Net income
 
$
42,182
   
$
34,365
 
                 
Other comprehensive income:
               
    Interest rate derivatives
   
6,292
     
1,545
 
                 
Comprehensive income
 
$
48,474
   
$
35,910
 
                 
Basic and diluted net income per common share
 
$
0.18
   
$
0.15
 
                 
Weighted average common shares outstanding - basic and diluted
   
230,515
     
223,047
 

Note:
The Consolidated Statements of Operations and Comprehensive Income and corresponding footnotes can be found in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.

Page | 6


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

   
Three Months Ended
 
   
March 31,
 
   
2018
   
2017
   
% Change
 
                   
Room revenue
 
$
275,904
   
$
271,069
     
1.8
%
Other revenue
   
23,595
     
22,232
     
6.1
%
Total revenue
   
299,499
     
293,301
     
2.1
%
                         
Total operating expenses
   
191,999
     
186,667
     
2.9
%
                         
Adjusted Hotel EBITDA
 
$
107,500
   
$
106,634
     
0.8
%
Adjusted Hotel EBITDA Margin %
   
35.9
%
   
36.4
%
 
(50 bps)
 
                         
                         
ADR (Comparable Hotels)
 
$
134.43
   
$
133.25
     
0.9
%
Occupancy (Comparable Hotels)
   
74.6
%
   
74.5
%
   
0.1
%
RevPAR (Comparable Hotels)
 
$
100.23
   
$
99.31
     
0.9
%
                         
ADR (Actual)
 
$
134.32
   
$
133.39
     
0.7
%
Occupancy (Actual)
   
74.6
%
   
74.4
%
   
0.3
%
RevPAR (Actual)
 
$
100.18
   
$
99.27
     
0.9
%
                         
Reconciliation to Actual Results
                       
                         
 Total Revenue (Actual)
 
$
298,389
   
$
292,925
         
 Revenue from acquisitions prior to ownership
   
1,176
     
7,110
         
 Revenue from dispositions
   
-
     
(6,687
)
       
 Lease revenue intangible amortization
   
(66
)
   
(47
)
       
 Comparable Hotels Total Revenue
 
$
299,499
   
$
293,301
         
                         
 Adjusted Hotel EBITDA (AHEBITDA) (Actual)
 
$
107,091
   
$
105,832
         
 AHEBITDA from acquisitions prior to ownership
   
409
     
2,509
         
 AHEBITDA from dispositions
   
-
     
(1,707
)
       
 Comparable Hotels AHEBITDA
 
$
107,500
   
$
106,634
         

Note:
Comparable Hotels is defined as the 241 hotels owned by the Company as of March 31, 2018. 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 to non-GAAP financial measures is included in the following pages.

Page | 7


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

   
Three Months Ended
 
   
6/30/2016
   
9/30/2016
   
12/31/2016
   
3/31/2017
   
6/30/2017
   
9/30/2017
   
12/31/2017
   
3/31/2018
 
                                                 
Room revenue
 
$
308,198
   
$
304,166
   
$
258,363
   
$
271,069
   
$
311,222
   
$
310,330
   
$
270,356
   
$
275,904
 
Other revenue
   
24,030
     
23,196
     
23,073
     
22,232
     
24,982
     
22,483
     
23,339
     
23,595
 
Total revenue
   
332,228
     
327,362
     
281,436
     
293,301
     
336,204
     
332,813
     
293,695
     
299,499
 
                                                                 
Total operating expenses
   
193,766
     
198,697
     
181,563
     
186,667
     
201,195
     
202,155
     
190,904
     
191,999
 
                                                                 
Adjusted Hotel EBITDA
 
$
138,462
   
$
128,665
   
$
99,873
   
$
106,634
   
$
135,009
   
$
130,658
   
$
102,791
   
$
107,500
 
Adjusted Hotel EBITDA Margin %
   
41.7
%
   
39.3
%
   
35.5
%
   
36.4
%
   
40.2
%
   
39.3
%
   
35.0
%
   
35.9
%
                                                                 
                                                                 
ADR (Comparable Hotels)
 
$
137.55
   
$
136.00
   
$
128.21
   
$
133.25
   
$
138.01
   
$
138.02
   
$
130.67
   
$
134.43
 
Occupancy (Comparable Hotels)
   
81.8
%
   
80.4
%
   
72.4
%
   
74.5
%
   
81.6
%
   
80.3
%
   
73.5
%
   
74.6
%
RevPAR (Comparable Hotels)
 
$
112.57
   
$
109.31
   
$
92.85
   
$
99.31
   
$
112.59
   
$
110.89
   
$
96.08
   
$
100.23
 
                                                                 
ADR (Actual)
 
$
138.16
   
$
136.04
   
$
127.81
   
$
133.39
   
$
137.56
   
$
136.73
   
$
130.30
   
$
134.32
 
Occupancy (Actual)
   
82.2
%
   
80.2
%
   
72.4
%
   
74.4
%
   
81.5
%
   
80.0
%
   
73.5
%
   
74.6
%
RevPAR (Actual)
 
$
113.59
   
$
109.07
   
$
92.52
   
$
99.27
   
$
112.10
   
$
109.45
   
$
95.76
   
$
100.18
 
                                                                 
Reconciliation to Actual Results
                                                               
                                                                 
 Total Revenue (Actual)
 
$
257,636
   
$
276,471
   
$
282,431
   
$
292,925
   
$
331,704
   
$
324,926
   
$
289,067
   
$
298,389
 
 Revenue from acquisitions prior to ownership
   
84,637
     
59,867
     
7,294
     
7,110
     
9,091
     
10,955
     
4,826
     
1,176
 
 Revenue from dispositions
   
(9,998
)
   
(8,929
)
   
(8,242
)
   
(6,687
)
   
(4,544
)
   
(3,017
)
   
(147
)
   
-
 
 Lease revenue intangible amortization
   
(47
)
   
(47
)
   
(47
)
   
(47
)
   
(47
)
   
(51
)
   
(51
)
   
(66
)
 Comparable Hotels Total Revenue
 
$
332,228
   
$
327,362
   
$
281,436
   
$
293,301
   
$
336,204
   
$
332,813
   
$
293,695
   
$
299,499
 
                                                                 
 Adjusted Hotel EBITDA (AHEBITDA) (Actual)
 
$
105,574
   
$
106,707
   
$
99,291
   
$
105,832
   
$
132,138
   
$
125,750
   
$
101,159
   
$
107,091
 
 AHEBITDA from acquisitions prior to ownership
   
35,883
     
24,251
     
2,748
     
2,509
     
4,150
     
5,564
     
1,670
     
409
 
 AHEBITDA from dispositions
   
(2,995
)
   
(2,293
)
   
(2,166
)
   
(1,707
)
   
(1,279
)
   
(656
)
   
(38
)
   
-
 
 Comparable Hotels AHEBITDA
 
$
138,462
   
$
128,665
   
$
99,873
   
$
106,634
   
$
135,009
   
$
130,658
   
$
102,791
   
$
107,500
 

Note:
Comparable Hotels is defined as the 241 hotels owned by the Company as of March 31, 2018. 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.
Same Store Hotels Operating Metrics and Statistical Data
(Unaudited)
(in thousands except statistical data)

   
Three Months Ended
 
   
March 31,
 
   
2018
   
2017
   
% Change
 
                   
Room revenue
 
$
266,824
   
$
263,961
     
1.1
%
Other revenue
   
22,551
     
21,563
     
4.6
%
Total revenue
   
289,375
     
285,524
     
1.3
%
                         
Total operating expenses
   
185,563
     
181,548
     
2.2
%
                         
Adjusted Hotel EBITDA
 
$
103,812
   
$
103,976
     
(0.2
%)
Adjusted Hotel EBITDA Margin %
   
35.9
%
   
36.4
%
 
(50 bps)
 
                         
                         
ADR (Same Store Hotels)
 
$
134.26
   
$
132.98
     
1.0
%
Occupancy (Same Store Hotels)
   
74.8
%
   
74.7
%
   
0.1
%
RevPAR (Same Store Hotels)
 
$
100.37
   
$
99.31
     
1.1
%
                         
ADR (Actual)
 
$
134.32
   
$
133.39
     
0.7
%
Occupancy (Actual)
   
74.6
%
   
74.4
%
   
0.3
%
RevPAR (Actual)
 
$
100.18
   
$
99.27
     
0.9
%
                         
Reconciliation to Actual Results
                       
                         
 Total Revenue (Actual)
 
$
298,389
   
$
292,925
         
 Revenue from acquisitions
   
(8,948
)
   
(667
)
       
 Revenue from dispositions
   
-
     
(6,687
)
       
 Lease revenue intangible amortization
   
(66
)
   
(47
)
       
 Same Store Hotels Total Revenue
 
$
289,375
   
$
285,524
         
                         
 Adjusted Hotel EBITDA (AHEBITDA) (Actual)
 
$
107,091
   
$
105,832
         
 AHEBITDA from acquisitions
   
(3,279
)
   
(149
)
       
 AHEBITDA from dispositions
   
-
     
(1,707
)
       
 Same Store Hotels AHEBITDA
 
$
103,812
   
$
103,976
         

Note:
Same Store Hotels is defined as the 233 hotels owned by the Company as of January 1, 2017 and during the entirety of the periods being compared. This information has not been audited.

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


Page | 9


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

   
Three Months Ended
 
   
3/31/2017
   
6/30/2017
   
9/30/2017
   
12/31/2017
   
3/31/2018
 
                               
Room revenue
 
$
263,961
   
$
301,663
   
$
298,865
   
$
260,906
   
$
266,824
 
Other revenue
   
21,563
     
24,208
     
21,650
     
22,322
     
22,551
 
Total revenue
   
285,524
     
325,871
     
320,515
     
283,228
     
289,375
 
                                         
Total operating expenses
   
181,548
     
195,499
     
195,845
     
184,107
     
185,563
 
                                         
Adjusted Hotel EBITDA
 
$
103,976
   
$
130,372
   
$
124,670
   
$
99,121
   
$
103,812
 
Adjusted Hotel EBITDA Margin %
   
36.4
%
   
40.0
%
   
38.9
%
   
35.0
%
   
35.9
%
                                         
                                         
ADR (Same Store Hotels)
 
$
132.98
   
$
137.36
   
$
136.82
   
$
130.20
   
$
134.26
 
Occupancy (Same Store Hotels)
   
74.7
%
   
81.7
%
   
80.4
%
   
73.7
%
   
74.8
%
RevPAR (Same Store Hotels)
 
$
99.31
   
$
112.23
   
$
109.98
   
$
96.01
   
$
100.37
 
                                         
ADR (Actual)
 
$
133.39
   
$
137.56
   
$
136.73
   
$
130.30
   
$
134.32
 
Occupancy (Actual)
   
74.4
%
   
81.5
%
   
80.0
%
   
73.5
%
   
74.6
%
RevPAR (Actual)
 
$
99.27
   
$
112.10
   
$
109.45
   
$
95.76
   
$
100.18
 
                                         
Reconciliation to Actual Results
                                       
                                         
 Total Revenue (Actual)
 
$
292,925
   
$
331,704
   
$
324,926
   
$
289,067
   
$
298,389
 
 Revenue from acquisitions
   
(667
)
   
(1,242
)
   
(1,343
)
   
(5,641
)
   
(8,948
)
 Revenue from dispositions
   
(6,687
)
   
(4,544
)
   
(3,017
)
   
(147
)
   
-
 
 Lease revenue intangible amortization
   
(47
)
   
(47
)
   
(51
)
   
(51
)
   
(66
)
 Same Store Hotels Total Revenue
 
$
285,524
   
$
325,871
   
$
320,515
   
$
283,228
   
$
289,375
 
                                         
 Adjusted Hotel EBITDA (AHEBITDA) (Actual)
 
$
105,832
   
$
132,138
   
$
125,750
   
$
101,159
   
$
107,091
 
 AHEBITDA from acquisitions
   
(149
)
   
(487
)
   
(424
)
   
(2,000
)
   
(3,279
)
 AHEBITDA from dispositions
   
(1,707
)
   
(1,279
)
   
(656
)
   
(38
)
   
-
 
 Same Store Hotels AHEBITDA
 
$
103,976
   
$
130,372
   
$
124,670
   
$
99,121
   
$
103,812
 

Note:
Same Store Hotels is defined as the 233 hotels owned by the Company as of January 1, 2017 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.
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 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 June 30, 2016 through March 31, 2018.

   
Three Months Ended
 
   
6/30/2016
   
9/30/2016
   
12/31/2016
   
3/31/2017
   
6/30/2017
   
9/30/2017
   
12/31/2017
   
3/31/2018
 
Net income (loss)
 
$
54,718
   
$
13,694
   
$
41,554
   
$
34,365
   
$
87,606
   
$
62,824
   
$
(2,303
)
 
$
42,182
 
Depreciation
   
33,824
     
37,343
     
43,512
     
43,767
     
43,893
     
44,110
     
44,729
     
44,840
 
Amortization of favorable and unfavorable leases, net
   
119
     
132
     
161
     
165
     
168
     
165
     
165
     
206
 
Interest and other expense, net
   
9,560
     
10,156
     
11,507
     
11,717
     
11,849
     
12,024
     
11,753
     
11,919
 
Income tax (benefit) expense
   
360
     
(7
)
   
(185
)
   
250
     
259
     
203
     
135
     
163
 
EBITDA
   
98,581
     
61,318
     
96,549
     
90,264
     
143,775
     
119,326
     
54,479
     
99,310
 
Transaction and litigation costs (reimbursements)
   
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
   
817
     
843
     
940
     
939
     
938
     
917
     
906
     
904
 
Adjusted EBITDA
 
$
100,514
   
$
104,084
   
$
94,770
   
$
99,078
   
$
125,987
   
$
120,400
   
$
93,073
   
$
100,214
 
General and administrative expense
   
5,060
     
2,623
     
4,521
     
6,754
     
6,151
     
5,350
     
8,086
     
6,877
 
Adjusted Hotel EBITDA
 
$
105,574
   
$
106,707
   
$
99,291
   
$
105,832
   
$
132,138
   
$
125,750
   
$
101,159
   
$
107,091
 

Page | 11


Apple Hospitality REIT, Inc.
Reconciliation of Net Income 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 (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 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 to FFO and MFFO for the three months ended March 31, 2018 and 2017.

   
Three Months Ended March 31,
 
   
2018
   
2017
 
Net income
 
$
42,182
   
$
34,365
 
Depreciation of real estate owned
   
44,610
     
43,537
 
Loss on impairment of depreciable real estate assets
   
-
     
7,875
 
Amortization of favorable and unfavorable leases, net
   
206
     
165
 
Funds from operations
   
86,998
     
85,942
 
Non-cash straight-line ground lease expense
   
904
     
939
 
Modified funds from operations
 
$
87,902
   
$
86,881
 


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
 
$
197,500
   
$
221,100
 
Depreciation
   
183,000
     
181,000
 
Amortization of favorable and unfavorable leases, net
   
650
     
650
 
Interest and other expense, net
   
51,500
     
49,500
 
Income tax expense
   
800
     
1,200
 
EBITDA
   
433,450
     
453,450
 
Non-cash straight-line ground lease expense
   
3,550
     
3,550
 
Adjusted EBITDA
 
$
437,000
   
$
457,000
 


Page | 13


Apple Hospitality REIT, Inc.
Debt Summary
(Unaudited)
($ in thousands)
March 31, 2018

   
April 1 - December 31,
2018
   
2019
   
2020
   
2021
   
2022
   
Thereafter
   
Total
   
Fair Market Value
 
Total debt:
                                               
Maturities
 
$
9,730
   
$
204,505
   
$
453,349
   
$
97,586
   
$
109,252
   
$
454,780
   
$
1,329,202
   
$
1,326,386
 
Average interest rates
   
3.7
%
   
3.7
%
   
3.8
%
   
4.0
%
   
3.9
%
   
3.8
%
               
                                                                 
Variable rate debt:
                                                               
Maturities
 
$
-
   
$
170,700
   
$
425,000
   
$
50,000
   
$
-
   
$
185,000
   
$
830,700
   
$
832,515
 
Average interest rates (1)
   
3.2
%
   
3.2
%
   
3.2
%
   
3.3
%
   
3.4
%
   
3.4
%
               
                                                                 
Fixed rate debt:
                                                               
Maturities
 
$
9,730
   
$
33,805
   
$
28,349
   
$
47,586
   
$
109,252
   
$
269,780
   
$
498,502
   
$
493,871
 
Average interest rates
   
4.5
%
   
4.4
%
   
4.4
%
   
4.4
%
   
4.2
%
   
4.1
%
               

(1)  The average interest rate gives effect to interest rate swaps, as applicable.
 
Note:
See further information on the Company’s indebtedness in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.




Page | 14

Apple Hospitality REIT, Inc.
Comparable Hotels Operating Metrics Top 20 Markets
Three Months ended March 31
(Unaudited)

Top 20 Markets
       
Occupancy
   
ADR
   
RevPAR
   
% of Adjusted Hotel EBITDA
 
   
# of Hotels
     Q1 2018      Q1 2017    
% Change
     Q1 2018      Q1 2017    
% Change
     Q1 2018      Q1 2017    
% Change
     Q1 2018  
Top 20 Markets
                                                                               
Phoenix, AZ
   
8
     
84.5
%
   
81.9
%
   
3.1
%
 
$
163.54
   
$
162.10
     
0.9
%
 
$
138.14
   
$
132.79
     
4.0
%
   
6.4
%
Los Angeles/Long Beach, CA
   
8
     
89.1
%
   
87.5
%
   
1.8
%
 
$
165.73
   
$
160.59
     
3.2
%
 
$
147.63
   
$
140.58
     
5.0
%
   
6.4
%
San Diego, CA
   
7
     
79.9
%
   
80.3
%
   
(0.4
)%
 
$
146.71
   
$
149.53
     
(1.9
)%
 
$
117.23
   
$
120.00
     
(2.3
)%
   
5.1
%
Anaheim/Santa Ana, CA
   
6
     
84.1
%
   
85.2
%
   
(1.3
)%
 
$
147.05
   
$
147.66
     
(0.4
)%
 
$
123.66
   
$
125.77
     
(1.7
)%
   
4.2
%
Nashville, TN
   
5
     
82.0
%
   
74.0
%
   
10.7
%
 
$
159.11
   
$
162.33
     
(2.0
)%
 
$
130.44
   
$
120.17
     
8.5
%
   
3.5
%
Dallas, TX
   
9
     
72.0
%
   
75.5
%
   
(4.6
)%
 
$
124.93
   
$
121.91
     
2.5
%
 
$
89.99
   
$
92.07
     
(2.3
)%
   
3.5
%
Fort Lauderdale, FL
   
3
     
93.5
%
   
89.2
%
   
4.8
%
 
$
191.24
   
$
180.67
     
5.9
%
 
$
178.90
   
$
161.22
     
11.0
%
   
3.4
%
Richmond/Petersburg, VA
   
4
     
76.1
%
   
73.0
%
   
4.3
%
 
$
152.23
   
$
149.93
     
1.5
%
 
$
115.79
   
$
109.38
     
5.9
%
   
3.4
%
Miami/Hialeah, FL
   
3
     
94.8
%
   
88.2
%
   
7.4
%
 
$
184.94
   
$
177.14
     
4.4
%
 
$
175.34
   
$
156.31
     
12.2
%
   
3.1
%
Austin, TX
   
7
     
75.4
%
   
77.0
%
   
(2.1
)%
 
$
131.38
   
$
132.88
     
(1.1
)%
 
$
99.01
   
$
102.32
     
(3.2
)%
   
2.8
%
Seattle, WA
   
3
     
80.3
%
   
75.2
%
   
6.8
%
 
$
161.45
   
$
169.63
     
(4.8
)%
 
$
129.67
   
$
127.52
     
1.7
%
   
2.3
%
Houston, TX
   
6
     
69.4
%
   
66.8
%
   
4.0
%
 
$
126.32
   
$
124.93
     
1.1
%
 
$
87.71
   
$
83.41
     
5.2
%
   
2.2
%
Fort Worth/Arlington, TX
   
5
     
75.5
%
   
72.4
%
   
4.3
%
 
$
135.01
   
$
129.06
     
4.6
%
 
$
101.88
   
$
93.38
     
9.1
%
   
2.2
%
Chicago, IL
   
8
     
64.8
%
   
62.9
%
   
3.0
%
 
$
116.31
   
$
114.91
     
1.2
%
 
$
75.42
   
$
72.32
     
4.3
%
   
2.1
%
Orlando, FL
   
3
     
87.9
%
   
88.5
%
   
(0.6
)%
 
$
138.30
   
$
133.16
     
3.9
%
 
$
121.60
   
$
117.82
     
3.2
%
   
2.0
%
Tucson, AZ
   
3
     
87.7
%
   
88.2
%
   
(0.5
)%
 
$
127.78
   
$
120.68
     
5.9
%
 
$
112.11
   
$
106.43
     
5.3
%
   
1.7
%
Oklahoma City, OK
   
4
     
72.7
%
   
76.1
%
   
(4.5
)%
 
$
132.64
   
$
133.68
     
(0.8
)%
 
$
96.47
   
$
101.78
     
(5.2
)%
   
1.7
%
Alabama South
   
6
     
72.8
%
   
73.6
%
   
(1.1
)%
 
$
110.47
   
$
109.99
     
0.4
%
 
$
80.44
   
$
80.96
     
(0.7
)%
   
1.5
%
Idaho
   
2
     
71.1
%
   
77.2
%
   
(7.9
)%
 
$
127.86
   
$
125.42
     
1.9
%
 
$
90.96
   
$
96.84
     
(6.1
)%
   
1.4
%
Denver, CO
   
3
     
69.3
%
   
73.2
%
   
(5.4
)%
 
$
136.08
   
$
140.39
     
(3.1
)%
 
$
94.25
   
$
102.81
     
(8.3
)%
   
1.4
%
Top 20 Markets
   
103
     
78.2
%
   
77.4
%
   
1.0
%
 
$
144.10
   
$
142.29
     
1.3
%
 
$
112.62
   
$
110.09
     
2.3
%
   
60.3
%
                                                                                         
All Other Markets
   
138
     
71.3
%
   
71.9
%
   
(0.9
)%
 
$
124.83
   
$
124.37
     
0.4
%
 
$
89.03
   
$
89.46
     
(0.5
)%
   
39.7
%
                                                                                         
                                                                                         
Total Portfolio
   
241
     
74.6
%
   
74.5
%
   
0.1
%
 
$
134.43
   
$
133.25
     
0.9
%
 
$
100.23
   
$
99.31
     
0.9
%
   
100.0
%

Note:  Market categorization is based on STR designation. Top 20 markets based on Comparable Hotels Adjusted Hotel EBITDA contribution.

 
Apple Hospitality REIT, Inc.
Comparable Hotels Operating Metrics by Region
Three Months ended March 31
(Unaudited)

Region
       
Occupancy
   
ADR
   
RevPAR
   
% of Adjusted Hotel EBITDA
 
   
# of Hotels
    Q1 2018     Q1 2017    
% Change
    Q1 2018     Q1 2017    
% Change
    Q1 2018     Q1 2017    
% Change
    Q1 2018  
STR Region
                                                                               
East North Central
   
15
     
65.8
%
   
64.8
%
   
1.5
%
 
$
118.35
   
$
118.21
     
0.1
%
 
$
77.89
   
$
76.62
     
1.7
%
   
4.2
%
East South Central
   
30