See Note 32 titled “Investment in Real Estate” and Note 43 titled “Dispositions”“Assets Held for Sale, Dispositions and Hotel Sale Contracts” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information concerning these transactions.
Hotel Conversion
Effective January 20, 2020, the Company converted its New York, New York Renaissance hotel to an independent boutique hotel. The Company anticipates that it will incur total conversion costs of approximately $1.0
million to complete the transition, of which approximately $0.1 million was incurred in 2019. The intent of the conversion is to provide greater long-term flexibility with the operations of the hotel. Although the Company is not able to fully estimate the near-term impact associated with the transition, it does anticipate operational disruption as the management team works to replace revenue that historically came from participation in the Renaissance brand system. With the conversion of this hotel and the October 2019 acquisition of the existing independent boutique hotel in Richmond, Virginia, mentioned above, the Company has two independent boutique hotels with a combined total of 263 rooms.
Share Repurchases
In addition to continually considering opportunities to invest in select-servicerooms-focused hotels, the Company also monitors the trading price of its common shares and may repurchaserepurchases its common shares shouldwhen it believebelieves there is an opportunity to increase shareholder value. AlthoughDuring 2019, the Company did not repurchase anypurchased approximately 0.3 million of its common shares in 2017, the Board of Directors has authorized a $475 millionunder its existing share repurchase program which at a weighted-average market purchase price of approximately $14.92 per common share for an aggregate purchase price, including commissions, of approximately $4.3 million. As of December 31, 2017 had $467.52019, approximately $359.8 million remaining.remained available for repurchases under this share repurchase program. Repurchases under the share repurchase program have been funded, and the Company intends to fund future repurchases, with availability under its credit facilities. The timing of share repurchases and the number of common shares to be repurchased under the share repurchase program will depend upon prevailing market conditions, regulatory requirements and other factors. See Note 87 titled “Shareholders’ Equity” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information concerning the share repurchase program.
Hotel Industry and Competition
The hotel industry is highly competitive. Each of the Company’s hotels competes for guests primarily with other hotels in its immediate vicinity and secondarily with other hotels or lodging facilities in its geographic market. An increase in the number of competitive hotels or other lodging facilities in a particular area could have a material adverse effect on the occupancy, ADR and RevPAR of the Company’s hotels in that area. The Company believes that brand recognition, location, price and quality (of both the hotel and the services provided) are the principal competitive factors affecting the Company’s hotels. Additionally, general economic conditions in a particular market and nationally impact the performance of the hotel industry.
Management and Franchise Agreements
Substantially all of the Company’s hotels operate under Marriott or Hilton brands, and as of December 31, 2017,2019, consisted of the following:
Number of Hotels and Guest Rooms by Brand | ||||||||
Number of | Number of | |||||||
Brand | Hotels | Rooms | ||||||
Hilton Garden Inn | 41 | 5,665 | ||||||
Hampton | 39 | 4,956 | ||||||
Courtyard | 36 | 4,948 | ||||||
Residence Inn | 33 | 3,939 | ||||||
Homewood Suites | 33 | 3,731 | ||||||
SpringHill Suites | 15 | 2,040 | ||||||
Fairfield | 11 | 1,300 | ||||||
Home2 Suites | 9 | 1,038 | ||||||
TownePlace Suites | 9 | 931 | ||||||
Marriott | 2 | 616 | ||||||
Embassy Suites | 2 | 316 | ||||||
Renaissance | 1 | 208 | * | |||||
Hyatt Place | 1 | 127 | ||||||
Independent | 1 | 55 | ||||||
Total | 233 | 29,870 | ||||||
| * | On January 20, 2020, the New York, New York Renaissance hotel became an independent boutique hotel. | |||
| Number of Hotels and Guest Rooms by Brand | ||||||||
| Number of | Number of | |||||||
| Brand | Hotels | Rooms | ||||||
| Hilton Garden Inn | 42 | 5,807 | ||||||
| Courtyard | 40 | 5,460 | ||||||
| Hampton | 36 | 4,422 | ||||||
| Residence Inn | 34 | 4,011 | ||||||
| Homewood Suites | 34 | 3,831 | ||||||
| SpringHill Suites | 17 | 2,248 | ||||||
| TownePlace Suites | 12 | 1,196 | ||||||
| Fairfield Inn | 11 | 1,300 | ||||||
| Home2 Suites | 8 | 910 | ||||||
| Marriott | 2 | 616 | ||||||
| Embassy Suites | 2 | 316 | ||||||
| Renaissance | 1 | 205 | ||||||
| Total | 239 | 30,322 | ||||||
Each of the Company’s 239233 hotels owned as of December 31, 20172019 is operated and managed under separate management agreements with 2321 hotel management companies, none of which are affiliated with the Company. The management agreements generally provide for initial terms of one to 30 years. The Company has the option to terminate the management agreements if specified performance thresholds are not satisfied. As of December 31, 2017, nearly2019, over 80% of the Company’s hotels operate under a variable management fee agreement, with an average initial term of approximately two years, which the Company believes better aligns incentives for each hotel manager to maximize each property’s performance than a base-plus-incentive management fee structure, as described below, which is more common throughout the industry. Under the variable fee structure, the management fee earned for each hotel is generally within a range of 2.5% to 3.5% of revenue,gross revenues, based on each hotel’s performance relative to other hotels owned by the Company. The performance measures are based on various financial and quality performance metrics. The Company’s remaining hotels operate under a management fee structure which generally includes the payment of base management fees and an opportunity for incentive management fees. Under this structure, base management fees are calculated as a percentage of gross revenues and the incentive management fees are calculated as a percentage of operating profit in excess of a priority return to the Company, as defined in the management agreements. In addition to the above, management fees for all of the Company’s hotels generally include accounting fees and other fees for centralized services, which are allocated among all of the hotels that receive the benefit of such services.
Fifteen of the Company’s hotels are managed by affiliates of Marriott or Hilton. The remainder of the Company’s hotels are managed by companies that are not affiliated with either Marriott, Hilton or Hilton,Hyatt, and, as a result, the branded hotels they manage were required to obtain separate franchise agreements with each respective franchisor. The franchise agreements generally provide for initial terms of approximately 10 to 30 years and generally provide for renewals subject to franchise requirements at the time of renewal. The Company pays various fees under these agreements, including the payment of royalty fees, marketing fees, reservation fees, a communications support fee, brand loyalty program fees and other similar fees based on room revenues.
The franchise and/or management agreements provide a variety of benefits for the Company, which include national advertising, publicity, and other marketing programs designed to increase brand awareness, training of personnel, continuous review of quality standards, centralized reservation systems and best practices within the industry.
Hotel Maintenance and Renovation
The Company’s hotels have an ongoing need for renovation and refurbishment. To maintain and enhance each property’s competitive position in its market, the Company has invested in and plans to continue to reinvest in its hotels. During 20172019 and 2016,2018, the Company’s capital improvements for existingits hotels were approximately $69.1$78.7 million and $63.4$71.1 million, respectively. During 2018,2020, the Company anticipates investing approximately $70$80 to $80$90 million in capital improvements, which includes various scheduled renovation projects for approximately 25 to 30 to 35 properties.
Financing
The Company’s principal daily sources of liquidity are the operating cash flow generated from the Company’s properties and availability under its revolving credit facility. Depending on market conditions, the Company also has the ability tomay enter into additional secured and unsecured debt financing and toor issue common shares under its at-the-market offering program discussed below.through equity offerings. The Company anticipates that funds from these sources will be adequate to meet its anticipated liquidity requirements, including debt service, hotel acquisitions, hotel renovations, share repurchases, and required distributions to shareholders (the Company is not required to make distributions at its current rate for REIT purposes) and share repurchases.
As of December 31, 2017,2019, the Company had approximately $457.4$1.3 billion of total outstanding debt with a combined weighted-average interest rate, including the effect of interest rate swaps, of approximately 3.59%, consisting of approximately $455.0 million in outstanding mortgage debt secured by 29 properties, with maturity dates ranging from June 2020 to January 2038 and stated interest rates ranging from 3.55% to 6.25%. Additionally, the Company had, and approximately $766.9$870.9 million in outstanding debt under its unsecured credit facilities with maturity dates ranging from May 2019July 2022 to July 2024December 2029 and effective interest rates, including the effect of interest rate swaps, ranging from 2.54%2.49% to 3.76%4.59%.
The Company’s unused borrowing capacity under its $425 million revolving credit facility as of December 31, 2017, the Company’s revolving credit facility had an outstanding principal balance of approximately $106.92019 was $374.1 million, with approximately $433.1 million in borrowing capacity. The revolving credit facilitywhich is available for acquisitions, hotel renovations, and development, share repurchases, working capital and other general corporate funding purposes, including the payment of distributions to shareholders. As discussed
above, the Company has historically maintained and plans in the future to maintain relatively low leverage as compared to the real estate industry as a whole and the lodging sector in particular. The Company’s ratio of total debt to total capitalization as of December 31, 20172019 was 21%27%. The Company may increase debt levels at any time to take advantage of investment opportunities but would plan to reduce any significant increases as appropriate with property dispositions or the issuance of equity or property dispositions to maintain its flexible balance sheet and reduce risks to investors compared to those of highly leveraged companies. The Company plans to maintain staggered maturities of its debt, utilize unsecured debt when available and fix the rate on the majority of its debt. All of these strategies reduce shareholder risk related to the Company’s financing structure. See Note 54 titled “Debt” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information regarding the Company’s debt.
The Company has a universal shelf registration statement on Form S-3 (No. 333-231021) that was automatically effective upon filing on April 25, 2019. The Company may offer an indeterminate number or amount, as the Company executed an equity distribution agreement that allowscase may be, of (1) common shares, no par value per share; (2) preferred shares, no par value per share; (3) depository shares representing the CompanyCompany’s preferred shares; (4) warrants exercisable for the Company’s common shares, preferred shares or depository shares representing preferred shares; (5) rights to sell,purchase common shares; and (6) unsecured senior or subordinate debt securities, all of which may be issued from time to time upon a delayed or continuous basis pursuant to an aggregate of $300 million of its common shares through sales agents under an at-the-market offering program (the “ATM Program”). During the fourth quarter of 2017, the Company sold approximately 6.9 million common shares under its ATM 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. The Company used the proceeds from the sale of these shares to pay down borrowings on its revolving credit facility. As of December 31, 2017, approximately $164.9 million remained available for issuanceRule 415 under the ATM program.Securities Act of 1933, as amended. Future salesofferings will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company’s common shares and opportunities for uses of any proceeds.
Distribution Policy
The Company plans to continue to pay a consistent distributiondistributions on a monthly basis, with distributions based on anticipated cash generated from operations. The Company attempts to set a rate that can be consistent over a period of time as it forecasts its cash available from operations. The Company’s annualized distribution rate was $1.20 per common share at December 31, 2017.2019. As it has done historically, due to seasonality, the Company may use its revolving credit facility to maintain the consistency of the monthly distribution rate, taking into consideration any acquisitions, dispositions, capital improvements and economic cycles. Any distribution is subject to approval of the Company’s Board of Directors and there can be no assurance of the classification or duration of distributions at the current annual distribution rate. The Board of Directors monitors the Company’s distribution rate relative to the performance of its hotels on an ongoing basis and may make adjustments to the distribution rate as determined to be prudent in relation to other cash requirements of the Company. If cash flow from operations and the revolving credit facility are not adequate to meet liquidity requirements, the Company may utilize additional financing sources to make distributions. Although the Company has relatively low levels of debt, there can be no assurance it will be successful with this strategy and may need to reduce its distributions to required levels to maintain its REIT status. If the Company were unable to extend its maturing debt in future periods or if it were to default on its debt, it may be unable to make distributions.
Insurance
The Company maintains comprehensive insurance coverage for general liability, property, business interruption, cyber threats and other risks with respect to all of its hotels. These policies offer coverage features and insured limits that the Company believes are customary for similar types of properties.properties in similar locations. However, various types of catastrophic losses, like earthquakes, hurricanes, or certain types of terrorism, may not be insurable or may not be economically insurable.
Environmental Matters
The Company’s hotels are subject to various U.S. federal, state, and local environmental, health and safety laws and regulations that address a wide variety of issues, including, but not limited to, storage tanks, air emissions from emergency generators, storm water and waste water discharges, lead-based paint, mold and mildew and waste management, and impose liability for contamination. In connection with each of the Company’s hotel acquisitions, the Company reviewed a Phase I Environmental Report and additional environmental reports and surveys, as were necessitated by the preliminary report. Based on the reports, the Company is not aware of any environmental situations requiring remediation at the Company’s properties, which have not been, or are not currently being remediated as necessary. No material remediation costs have occurred or are expected to occur. Under various laws,
owners as well as tenants and operators of real estate may be required to investigate and clean up or remove hazardous substances present at or migrating from properties they own, lease or operate and may be held liable for property damage or personal injuries that result from hazardous substances. These laws also expose the Company to the possibility that it may become liable to reimburse governments for damages and costs they incur in connection with hazardous substances.
Sustainability
In addition to being more operationally efficient, rooms-focused hotels are more environmentally efficient than full service hotels and resorts. With less open or unused space and less equipment needed for operating than full service hotels, rooms-focused hotels use less electricity, water and natural gas on a per-square-foot basis than full service or resort hotels. In addition to its overall strategy of investing in rooms-focused hotels, the Company is committed to identifying and incorporating sustainability opportunities into its investment and asset management strategies, with a focus on minimizing its environmental impact through reductions in energy and water consumption and improvements in waste management. The Company seeks to invest in proven sustainability practices when renovating its hotels and in portfolio-wide capital projects that can enhance asset value while also improving environmental performance. For example, the Company has realized cost savings and reductions in its carbon footprint through the installation of LED lighting, energy management systems, smart irrigation systems and the use of energy and water conservation guidelines at the property level. Additionally, as part of the Company’s acquisition due diligence, the Company performs sustainability assessments to identify areas of opportunity that will improve the property’s environmental performance, and when working with developers to construct new hotels, strives to implement environmentally efficient construction and building functionality.
Social Engagement
The Company is committed to strengthening its communities through charitable giving, encouraging employees to volunteer their time and talents, and participation in the many philanthropic programs important to its employees and leaders within its industry, including its brands, the American Hotel & Lodging Association® and its hotel management companies. Since forming Apple Gives, an employee-led charitable organization established in 2017 to expand the Company’s impact and further the advance of corporate philanthropic goals, employees of the Company have volunteered over 450 hours and supported over 80 non-profit organizations.
Seasonality
The hotel industry historically has been seasonal in nature. Seasonal variations in occupancy at the Company’s hotels may cause quarterly fluctuations in its revenues. Generally, occupancy rates and hotel revenues are greater in the second and third quarters than in the first and fourth quarters. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenue, the Company expects to utilize cash on hand or available financing sources to meet cash requirements.
Related Parties
The Company has, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. See Note 76 titled “Related Parties” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information concerning the Company’s related party transactions.
Employees
During 2017,2019, all employees involved in the day-to-day operation of the Company’s hotels were employed by third partythird-party management companies engaged pursuant to the hotel management agreements. At December 31, 2017,2019, the Company had 5667 employees. The employees not only provide support to the Company, but, as discussed in Note 76 titled “Related Parties” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K, certain employees also provide support services to Apple Realty Group, Inc. (“ARG”), which is wholly owned by Glade M. Knight, Executive Chairman of the Company. ARG reimburses the Company for the support services that it receives.
The address of the Company’s Internet website is www.applehospitalityreit.com. The Company makes available free of charge through its Internet website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. Information contained on the Company’s website is not incorporated by reference into this report.
The Company has identified the following significant risk factors which may affect, among other things, the Company’s business, financial position, results of operations, operating cash flow, market value, and ability to service its debt obligations and make distributions to its shareholders. You should carefully consider the risks described below and the risks disclosed by the Company in other filings with the SEC, in addition to the other information contained in this report.
Risks Related to the Company’s Business and Operations
The Company is subject to various risks which are common to the hotel industry on a national, regional and local market basis that are beyond its control and could adversely affect its business.
The success of the Company’s hotels depends largely on the hotel operators’ ability to adapt to dominant trends and risks in the hotel industry, both nationally and in individual local markets. These risks could adversely affect hotel occupancy and the rates that can be charged for hotel rooms as well as hotel operating expenses. The following is a summary of risks that may affect the hotel industry in general and as a result may affect the Company:
● | over-building of hotels in the markets in which the Company operates, resulting in an increase in supply of hotel rooms that exceeds increases in demand; |
● | competition from other hotels and lodging alternatives in the markets in which the Company operates; |
● | a downturn in the hospitality industry; |
● | dependence on business and leisure travel; |
● | increases in energy costs and other travel expenses, which may affect travel patterns and reduce business and leisure travel; |
● | reduced business and leisure travel due to geo-political uncertainty, including terrorism, travel-related health concerns, including the widespread outbreak of infectious or contagious diseases in the U.S., inclement weather conditions, including natural disasters such as hurricanes and earthquakes, and government shutdowns, airline strikes or other disruptions; |
● | reduced travel due to adverse national, regional or local economic and market conditions; |
● | seasonality of the hotel industry may cause quarterly fluctuations in operating results; |
● | changes in marketing and distribution for the hospitality industry including the cost and the ability of third-party internet and other travel intermediaries to attract and retain customers; |
● | changes in hotel room demand generators in a local market; |
● | ability of a hotel franchise to fulfill its obligations to franchisees; |
● | brand expansion; |
● | the performance of third-party managers of the Company’s hotels; |
● | increases in operating costs, including |
● | labor shortages and increases in the cost of labor due to low unemployment rates or to government regulations surrounding work rules, wage rates, health care coverage and other benefits; |
● | changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with applicable laws and regulations; |
● | business interruptions due to |
● | requirements for periodic capital reinvestment to repair and upgrade hotels; |
● | limited alternative uses for |
● | condemnation or uninsured |
Any of these factors, among others, may reduce the Company’s operating results, and the value of the properties that the Company owns. Additionally, these items, among others, may reduceowns, and the availability of capital to the Company.
Economic conditions in the United StatesU.S. and individual markets may adversely affect the Company’s business operations and financial performance.
The performance of the lodging industry has historically been highly cyclical and closely linked to the performance of the general economy both nationally and within local markets in the United States.U.S. The lodging industry is also sensitive to government, business and personal discretionary spending levels. Declines in government and corporate budgets and consumer demand due to adverse general economic conditions, risks affecting or reducing travel patterns, lower consumer confidence or adverse political conditions can lower the revenue and profitability of the Company’s hotels and therefore the net operating profits of its investments. A slowingAn economic downturn may lead to a significant decline in demand for products and services provided by the lodging industry, lower occupancy levels and significantly reduced room rates. The Company cannot predict the pace or duration of an economic cycle or the cycles of the currentlodging industry. In the event conditions in the industry deteriorate or do not continue to see sustained improvement, or there is an extended period of economic growth or new economic weakness, could have an adverse effect on the Company’s revenue and negatively affect its profitability.profitability could be adversely affected. Furthermore, even if the economy in the United StatesU.S. in general continues to improve, the Company cannot provide any assurances that demand for hotels will increase from current levels, nationally or more specifically, regionally, where the Company’s properties are located.
In addition, many of the expenses associated with the Company’s business, including certain personnel costs, interest expense, ground leases, property taxes, insurance and utilities, are relatively fixed. During a period of overall economic weakness, if the Company is unable to meaningfully decrease these costs as demand for its hotels decreases, the Company’s business operations and financial performance may be adversely affected.
The Company is affected by restrictions in, and compliance with, its franchise and license agreements.
The Company’s wholly-owned taxable REIT subsidiaries (“TRSs”) (or subsidiaries thereof) operate substantially all of theits hotels pursuant to franchise or license agreements with nationally recognized hotel brands. These franchise and license agreements contain specific standards for, and restrictions and limitations on, the operation and maintenance of the Company’s hotels in order to maintain uniformity within the franchisor system. The Company may be required to incur costs to comply with these standards and these standards could potentially conflict with the Company’s ability to create specific business plans tailored to each property and to each market. Failure to comply with these brand standards may result in termination of the applicable franchise or license agreement. In addition, as the Company’s franchise and license agreements expire, the Company may not be able to renew them on favorable terms, or at all. If the Company were to lose or was unable to renew a franchise or license agreement, the Company would be required to re-brand the hotel, which could result in a decline in the value of the hotel, the loss of marketing support and participation in guest loyalty programs, and harm to the Company’s relationship with the franchisor, impeding the Company’s ability to operate other hotels under the same brand. Additionally, the franchise and license agreements have provisions that could limit the Company’s ability to sell or finance a hotel which could further affect the Company.
Substantially all of the Company’s hotels operate under either Marriott or Hilton brands; therefore, the Company is subject to risks associated with concentrating its portfolio in only twothese brand families.
Substantially all of the Company’s hotels that the Company owned as of December 31, 2017 operate under brands owned by Marriott or Hilton. As a result, the Company’s success is dependent in part on the continued success of Marriott and Hilton and their respective brands. The Company believes that building brand value is critical to increase demand and strengthen customer loyalty. Consequently, if market recognition or the positive perception of Marriott and/or Hiltonany of these brands is reduced or compromised, the goodwill associated with the Marriott andor Hilton branded hotels in the Company’s portfolio may be adversely affected. Also, if Marriott andor Hilton alter certain policies, including their respective guest loyalty programs, this could reduce the Company’s future revenues. Furthermore, if the Company’s relationship with Marriott or Hilton were to deteriorate or terminate as a result of disputes regarding the Company’s hotels or for other reasons, Marriott and/or Hiltonthe franchisors could, under certain circumstances, terminate the Company’s current franchise
provide franchise licenses for hotels that the Company may acquire in the future. If any of the foregoing were to occur, it could have a material adverse effect on the Company.
Although substantially all of the Company’s hotels operate under the brands noted above, the Company owns and may from time to time acquire independent hotels or hotels affiliated with other brands, and/or may choose to operate hotels independently of a brand if the Company believes that these properties will operate most effectively as independent hotels. However, without the support and recognition of a large established brand, the capability of these independent or less recognized branded hotels to market the hotel, maintain guest loyalty, attract new guests, and operate in a cost-effective manner may be difficult, which could adversely affect the Company’s overall operating results.
Competition in the markets where the Company owns hotels may adversely affect the Company’s results of operations.
The hotel industry is highly competitive. Each of the Company’s hotels competes for guests primarily with other hotels in its immediate vicinity and secondarily with other hotels in its geographic market. The Company also competes with numerous owners and operators of vacation ownership resorts, as well as alternative lodging companies, such as HomeAwayincluding third-party providers of short-term rental properties and Airbnb, which operate websites that market available furnished, privately-owned residential properties, including homes and condominiums,serviced apartments that can be rented on a nightly, weekly or monthly basis. An increase in the number of competitive hotels, vacation ownership resorts and alternative lodging arrangements in a particular area could have a material adverse effect on the occupancy, ADR and RevPAR of the Company’s hotels in that area.
The Company is dependent on third-party hotel managers to operate its hotels and could be adversely affected if such managersmanagement companies do not manage the hotels successfully.
To maintain its status as a REIT, the Company is not permitted to operate any of its hotels. As a result, the Company has entered into management agreements with third-party managers to operate its hotels. For this reason, the Company’s ability to direct and control how its hotels are operated is less than if the Company were able to manage its hotels directly. Under the terms of the hotel management agreements, the Company’s ability to participate in operating decisions regarding its hotels is limited to certain matters, and it does not have the authority to require any hotel to be operated in a particular manner (for instance, setting room rates). The Company does not supervise any of the hotel managers or their respective personnel on a day-to-day basis. The Company cannot be assured that the hotel managers will manage its hotels in a manner that is consistent with their respective obligations under the applicable management agreement or the Company’s obligations under its hotel franchise agreements. The Company could be materially and adversely affected if any of its third-party managers fail to effectively manage revenues and expenses, provide quality services and amenities, or otherwise fail to manage its hotels in its best interest, and may be financially responsible for the actions and inactions of the managers. In certain situations, based on the terms of the applicable management agreement, the Company or manager may terminate the agreement. In the event that any of the Company’s management agreement. However,agreements are terminated, the Company can provide no assurancesassurance that it could identify a replacement manager, that the franchisor will consent to the replacement manager in a timely manner, or at all, or that the replacement manager will manage the hotel successfully. A failure by the Company’s hotel managers to successfully manage its hotels could lead to an increase in its operating expenses, ora decrease in its revenues, or both.
The growthgrowing use of non-franchisor lodging distribution channels could adversely affect the Company’s business and profitability.
Although a majority of rooms sold are sold through the hotel franchisors’ distribution channels, a growing number of the Company’s hotel rooms are sold through other channels or intermediaries. Rooms sold through non-franchisors’ channels are generally less profitable (after associated fees) than rooms sold through franchisors’ channels. Although the Company’s franchisors may have established agreements with many of these alternative channels or intermediaries that limit transaction fees for hotels, there can be no assurance that the Company’s franchisors will be able to renegotiate such agreements upon their expiration with terms as favorable as the provisions that exist today. Moreover, alternative channels or intermediaries may employ aggressive marketing strategies,
including expending significant resources for online and television advertising campaigns to drive consumers to their websites. As a result, consumers may develop brand loyalties to the intermediaries’ offered brands, websites and reservations systems rather than to those of the Company’s franchisors. If this happens, the Company’s business and profitability may be significantly negatively impacted.
Renovations and capital improvements may reduce the Company’s profitability.
The Company has ongoing needs for hotel renovations and capital improvements, including maintenance requirements and updates to brand standards under all of its hotel franchise and management agreements and certain loan agreements to maintain the hotels.agreements. In addition, from time to time the Company will need to make renovations and capital improvements to comply with applicable laws and regulations, to remain competitive with other hotels and to maintain the economic value of its hotels. As properties increase in age, the frequency and cost of renovations needed to maintain appealing facilities for hotel guests may increase. The Company may also may need to make significant capital improvements to hotels that it acquires. Additionally, increases in the costs of imported goods and materials due to changes in tariffs or other applicable international regulations could have the effect of increasing renovation costs for the Company. Occupancy and ADR are often affected by the maintenanceduring periods of renovations and capital improvements at a hotel, especially inif the event that the
Certain hotels are subject to ground leases that may affect the Company’s ability to use the hotel or restrict its ability to sell the hotel.
As of December 31, 2017, 142019, 13 of the Company’s hotels were subject to ground leases. Accordingly, the Company effectively only owns a long-term leasehold interest in these hotels. If the Company is found to be in breach of a ground lease, it could lose the right to use the hotel. In addition, unless the Company can purchase a fee interest in the underlying land or renew the terms of these leases before their expiration, as to which no assurance can be given, the Company will lose its right to operate these properties and its interest in the property, including any investment that it made in the property. The Company’s ability to exercise any extension options relating to its ground leases is subject to the condition that the Company is not in default under the terms of the ground lease at the time that it exercises such options, and the Company can provide no assurances that it will be able to exercise any available options at such time. If the Company were to lose the right to use a hotel due to a breach or non-renewal of a ground lease, it would be unable to derive income from such hotel. Finally, the Company may not be permitted to sell or finance a hotel subject to a ground lease without the consent of the lessor.
The Company may not be able to complete hotel dispositions when and as anticipated.
The Company continually monitors the profitability of its hotels, market conditions, and capital requirements and attempts to maximize shareholder value by timely disposal of its hotels. Real estate investments are, in general, relatively difficult to sell due to, among other factors, the size of the required investment and the volatility in availability of adequate financing for a potential buyer. This illiquidity will tend to limit the Company’s ability to promptly vary its portfolio in response to changes in economic or other conditions. Additionally, factors specific to an individual property, such as its specific market and operating performance, restrictions in franchise and management agreements, debt secured by the property, a ground lease, or capital expenditure needs may further increase the difficulty in selling a property. Therefore, the Company cannot predict whether it will be able to sell any hotels for the price or on the terms set by the Company, or whether any price or other terms offered by a prospective purchaser would be acceptable to the Company. In addition, provisions of the Internal Revenue Code of 1986, as amended (the “Code”) relating to REITs have certain limits on the Company’s ability to sell hotels.
Real estate impairment losses may adversely affect the Company’s financial condition and results of operations.
As a result of changes in an individual hotel’s operating results or to the Company’s planned hold period for a hotel, the Company may be required to record an impairment loss for a property. The Company analyzes its hotel properties individually for indicators of impairment throughout the year. The Company records an impairment lossesloss on a hotel property if indicators of impairment are present, and the sum of the undiscounted cash flows estimated to be generated by the respective property over its estimated remaining useful life, based on historical and industry data, is less than the property’s carrying amount. Indicators of impairment include, but are not limited to, a property with
current or potential losses from operations, when it becomes more likely than not that a property will be sold before the end of its previously estimated useful life or when events, trends, contingencies or changes in circumstances indicate that a triggering event has occurred and an asset’s carrying value may not be recoverable.
The Company’s failure to identify and complete accretive acquisitions may adversely affect the profitability of the Company.
The Company’s business strategy includes identifying and completing accretive hotel acquisitions. The Company competes with other investors who are engaged in the acquisition of hotels, and these competitors may affect the supply/supply and demand dynamics and, accordingly, increase the price the Company must pay for hotels it seeks to acquire, andor these competitors may succeed in acquiring those hotels. Any delay or failure on the Company’s part to identify, negotiate, finance on favorable terms, consummate and integrate such acquisitions could materially impede the Company’s growth. The Company may also incur costs that it cannot recover if it abandons a potential acquisition. IfAlso, if the Company does not reinvest proceeds received from hotel dispositions into new properties in a timely itmanner, the Company’s profitability could result in lower income.be negatively impacted. The Company’s profitability may also suffer because future acquisitions of hotels may not yield the returns the Company expects and the integration of such acquisitions may cause disruptions indisrupt the Company’s business and to management or may take longer than projected.
The Company’s inability to obtain financing on favorable terms or pay amounts due on its financing may adversely affect the Company’s operating results.
Although the Company anticipates maintaining relatively low levels of debt, it may periodically use financing to acquire properties, perform renovations to its properties, or make shareholder distributions or share repurchases in periods of fluctuating income from its properties. The credit markets have historically been volatile and subject to increased regulation, in recent years, and as a result, the Company may not be able to obtain debt financing to meet its cash requirements, including refinancing any scheduled debt maturities, which may adversely affect its ability to execute its business strategy. If the Company refinances debt, such refinancing may not be in the same amount or on terms as favorable as the terms of the existing debt being refinanced. If the Company is unable to refinance its debt, it may be forced to dispose of hotels or issue equity at inopportune times or on disadvantageous terms, which could result in higher costs of capital.
The Company is also subject to risks associated with increases in interest rates with respect to the Company’s floating ratevariable-rate debt which could reduce cash from operations. In addition, the Company has used interest rate swaps to manage its interest rate risks on a portion of its variable ratevariable-rate debt, and in the future, it may use hedging arrangements, such as interest rate swaps to manage its exposure to interest rate volatility. The Company’s actual hedging decisions are determined in light of the facts and circumstances existing at the time of the hedge. There is no assurance that the Company’s hedging strategy will achieve its objectives, and the Company may be subject to costs, such as transaction fees or breakage costs, if it terminates these hedging arrangements.
Replacement of LIBOR as the reference interest rate under the Company’s variable-rate debt and hedging arrangements could have a material adverse effect on the business, financial condition and results of operations of the Company.
The Company’s variable-rate debt and hedging arrangements use the London Inter-Bank Offered Rate (“LIBOR”) as the reference rate. LIBOR is expected to be phased out after 2021, and accordingly, the Company expects a transition from LIBOR to another reference rate in the near term. The Secured Overnight Financing Rate (“SOFR”), which is published by the New York Federal Reserve and is based on transactions in the more robust U.S. Treasury repurchase market, has been proposed as the alternative to LIBOR for use in derivatives and other financial contracts that use LIBOR as a reference rate. The transition from LIBOR to SOFR or any other replacement rate adopted is likely to cause uncertainty due to a mismatch in the LIBOR maturities and the terms of SOFR. Additionally, there is some possibility that LIBOR continues to be published, but that the quantity of loans used to calculate LIBOR diminishes significantly enough to reduce the appropriateness of the rate as a reference rate. In the event that LIBOR is discontinued, the interest rate for the Company’s variable-rate debt and the swap rate for its interest rate swaps following such event will be based on an alternative reference rate as specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect the Company’s ability to borrow or maintain already outstanding borrowings or outstanding swaps, but the alternative reference rate could be higher and more volatile than LIBOR prior to its discontinuance. The Company can provide
no assurance regarding the future of LIBOR and when the Company’s variable-rate debt and interest rate swaps will transition from LIBOR as a reference rate to SOFR or another replacement reference rate. The transition from LIBOR, or any changes or reforms to the determination of LIBOR, could have an adverse impact on the Company’s interest rates on its current or future indebtedness, as well as its variable-rate hedging arrangements, which could have a material adverse effect on the business, financial condition and results of operations of the Company.
Compliance with financial and other covenants in the Company’s existing or future debt agreements may reduce operational flexibility and create default risk.
The Company’s existing indebtedness, whether secured by mortgages on certain properties or unsecured, contains, and indebtedness that the Company may enter into in the future likely will contain, customary covenants that may restrict the Company’s operations and limit its ability to enter into future indebtedness. In addition, the Company’s ability to borrow under its unsecured credit facilities is subject to compliance with its financial and other covenants, including, among others,
a minimum tangible net worth, maximum debt limits, minimum interest and fixed charge coverage ratiosIf the Company defaults on its secured debt, lenders canmay take possession of the property or properties securing such debt.
Technology is used in operations, and any material failure, inadequacy, interruption or security failure of that technology from cyber-attacks or other events could harm the Company’s business.
The Company, and its hotel managers and franchisors rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personal identifyingpersonally identifiable information, reservations, billing and operating data. Some of the information technology is purchased from third party vendors, on whom the systems depend. The Company and its hotel managers and franchisors rely on commercially available and internally developed systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential operator and other customer information, such as individuallypersonally identifiable information, including information relating to financial accounts. AlthoughA number of hotels, hotel management companies, and brands have been subject to successful cyber-attacks, including those seeking guest credit card information. Moreover, the risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, nation-state affiliated actors and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. It is possible that the safety and security measures taken by the Company and its hotel managers and franchisors have taken steps necessary to protect the security of their information systems and the data maintained in those systems, it is
Security breaches, includingwhether through physical or electronic break-ins, cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attacks by hackers and similar breaches,attachments to emails, social engineering or phishing schemes, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. Any failure to maintain proper function, security and availability of information systems could interrupt operations, damage reputation,the reputations of the Company, the Company’s hotel managers or franchisors, and subject the Company to liability claims or regulatory penalties andthat may not be fully covered by insurance, all of which could have a material adverse effect on the business, financial condition and results of operations of the Company.
Potential losses not covered by insurance may adversely affect the Company’s financial condition.
The Company maintains comprehensive insurance coverage for general liability, property, business interruption and other risks with respect to all of its hotels. These policies offer coverage features and insured limits that the Company believes are customary for similar types of properties. There are no assurances that coverage will be available or at reasonable rates in the future. Also, various types of catastrophic losses, like earthquakes, hurricanes, or certain types of terrorism, may not be insurable or may not be economically insurable.insurable for all or certain locations. Even when insurable, these policies may have high deductibles and/or high premiums. Additionally, although the Company may be insured for a particular loss, the Company is not insured against the impact a catastrophic event may have on the hospitality industry as a whole. There also can be risks such as certain environmental hazards that may be deemed to fall outside of the coverage. In the event of a substantial loss, the Company’s insurance coverage may not be sufficient to cover the full current market value or replacement cost of its lost investment. Should an uninsured loss or a loss in excess of insured limits occur, the Company could lose all or a portion of the capital it has invested in a hotel, as well as the anticipated future revenue from the hotel. In that event, the Company might nevertheless remain obligated for any mortgage debt or other financial obligations related to the hotel. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also prevent the Company from using insurance proceeds to replace or renovate a hotel after it has been damaged or destroyed. The Company also may encounter challenges with an insurance provider regarding whether it will pay a particular claim that the Company believes to be covered under itsthe relevant policy. Under those circumstances, the insurance proceeds the Company receives might be inadequate to restore its economic position in the damaged or destroyed hotel, whichhotel. Additionally, as a result of substantial claims, insurance carriers may reduce insured limits and/or increase premiums, if insurance coverage is provided at all, in the future. Any of these or similar events could have a material adverse effect on the Company’s financial condition and results of operations.
The Company faces possible risks associated with the physical effects of, and laws and regulations related to, climate change.
The Company is subject to the risks associated with the physical effects of climate change, which could include more frequent or severe storms, droughts, hurricanes and flooding, any of which could have a material adverse effect on the Company’s properties, operations and business.
To the extent climate change causes changes in weather patterns,The Company could incur significant, material costs related to government regulation and litigation with respect to environmental matters, which could have a material adverse effect on the Company.
The Company’s hotels are subject to various U.S. federal, state and local environmental laws that impose liability for contamination. Under these laws, governmental entities have the authority to require the Company, as the current owner of a hotel, to perform or pay for the clean-up of contamination (including hazardous substances, asbestos and asbestos-containing materials, waste, petroleum products or mold) at, on, under or emanating from the hotel and to pay for natural resource damages arising from such contamination. Such laws often impose liability without regard to whether the owner or operator or other responsible party knew of, or caused such contamination, and the liability may be joint and several. Because these laws also impose liability on persons who owned or operated a property at the time it became contaminated, it is possible the Company could incur cleanup costs or other environmental liabilities even after it sells or no longer operates hotels. Contamination at, on, under or emanating from the Company’s hotels also may expose it to liability to private parties for the costs of remediation, personal
injury and/or property damage. In addition, environmental laws may create liens on contaminated sites in favor of the
In addition, the Company’s hotels are subject to various U.S. federal, state, and local environmental, health and safety laws and regulations that address a wide variety of issues, including, but not limited to, storage tanks, air emissions from emergency generators, storm water and wastewater discharges, lead-based paint, mold and mildew, and waste management. Some of the Company’s hotels routinely handle and use hazardous or regulated substances and wastes as part of their operations, which substances and wastes are subject to regulation (e.g., swimming pool chemicals and cleaning supplies). The Company’s hotels incur costs to comply with these environmental, health and safety laws and regulations, and could be subject to fines and penalties for non-compliance with applicable requirements.
Liabilities and costs associated with environmental contamination at, on, under or emanating from the hotel’s properties, defending against claims related to alleged or actual environmental issues, or complying with environmental, health and safety laws and regulations could be material and could materially and adversely affect the Company. The Company can make no assurances that changes in current laws or regulations or future laws or regulations will not impose additional or new material environmental liabilities or that the current environmental condition of its hotels will not be affected by its operations, the condition of the properties in the vicinity of its hotels, or by third parties unrelated to the Company. The discovery of material environmental liabilities at its properties could subject the Company to unanticipated significant costs, which could significantly reduce or eliminate its profitability.
The Company may incur significant costs complying with various regulatory requirements, which could materially and adversely affect the Company.
The Company and its hotels are subject to various U.S. federal, state and local regulatory requirements. These requirements are wide rangingwide-ranging and include among others, state and local fire and life safety requirements, federal laws such as the Americans with Disabilities Act of 1990 and the Accessibility Guidelines promulgated thereunder and the Sarbanes-Oxley Act of 2002. LiabilityLiabilities and costs associated with complying with these requirements are and could be material. If the Company fails to comply with these various requirements, it could incur governmental fines or private damage awards. In addition, existing requirements could change, and future requirements might require the Company to make significant unanticipated expenditures, which could materiallyhave material and adversely affect the Company.
In addition, as a result of its activities, whichthese significant regulations, the Company could become subject to regulatory investigations and lawsuits. Regulatory investigations and lawsuits could result in significant costs to respond and costs of fines or settlements, or changes in the Company’s business practices, any of which could have a material adverse effect on the financial condition, results of operations, liquidity and capital resources, and cash flows of the Company.
Risks Related to the Company’s Organization and Structure
The Company’s ownership limitations may restrict or prevent certain acquisitions and transfers of its shares.
In order for the Company to maintain its qualification as a REIT under the Code, not more than 50% in value of its outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year following the Company’s first year (the “5/50 Test”). Additionally, at least 100 persons must beneficially own the Company’s shares during at least 335 days of each taxable year (the “100 Shareholder Test”). The Company’s amended and restated articles of incorporation (the “Charter”), with certain exceptions, authorizes the Company’s Board of Directors to take the actions that are necessary and desirable to preserve its qualification as a REIT. In addition to the 5/50 Test and the 100 Shareholder
Test, the Company’s amended and restated articles of incorporation provideCharter provides that no person or entity may directly or indirectly, beneficially or constructively, own more than 9.8% of the aggregate of its outstanding common shares or 9.8% of the aggregate of the outstanding preferred shares of any class or series (“share ownership limits”). The Company’s Board of Directors may, in its sole discretion, grant an exemption to the share ownership limits, subject to certain conditions and the receipt by the Board of Directors of certain representations and undertakings. In addition, the Board of Directors may change the share ownership limits. The share ownership limits contained in the amended and restated articles of incorporationCharter key off the ownership at any time by any “person,” which term includes entities, and take into account direct and indirect ownership as determined under various ownership attribution rules in the Code. The share ownership limits also might delay or prevent a transaction or a change in the Company’s control that might involve a premium price for the Company’s common shares or otherwise be in the best interests of its shareholders.
The Company’s amended and restated articlesissuance of incorporation allowpreferred shares may adversely affect the Boardvoting power or ownership interest of Directorsthe holders of common shares or limit the ability of a third party to issue up to 30 million “blank check” preferred shares.
The Company’s amended and restated articles of incorporation allowCharter allows the Board of Directors to issue up to 30 million “blank check” preferred shares, without action by shareholders. Preferred shares may be issued on terms determined by the Board of Directors, and may have rights, privileges and preferences superior to those of common shares. Without limiting the foregoing, (i) such preferred shares could have liquidation rights that are senior to the liquidation preference applicable to common shares, (ii) such preferred shares could have voting or conversion rights, which could adversely affect the voting power of the holders of common shares, and (iii) the ownership interest of holders of common shares will be diluted following the issuance of any such preferred shares. In addition, the issuance of blank check preferred shares could have the effect of discouraging, delaying or preventing a change of control of the Company.
Provisions of the Company’s amended and restated articles of incorporation and second amended and restated bylaws could inhibit changes in control.
Provisions in the Company’s amended and restated articles of incorporation and second amended and restated bylaws may make it difficult for another company to acquire it and for shareholders to receive any related takeover premium for its common shares. These provisions include, among other things, a staggered Board of Directors in which the Board of Directors is divided into three classes, with one class elected each year to serve a three-year term, and the absence of cumulative voting in the election of directors. The Company intends to submit a proposal to the Company’s shareholders at the 2018 annual meeting of shareholders to further amend the Company’s amended and restated articles of incorporation to, among other things, destagger the Board of Directors and provide that all directors serve a one-year term. In addition, pursuantPursuant to the Company’s second amended and restated bylaws, directors are elected by the plurality of votes cast and entitled to vote in the election of directors. However, the Company’s corporate governance guidelines require that if an incumbent director fails to receive at least a majority of the votes cast, such director will tender his or her resignation from the Board of Directors. The Nominating and Corporate Governance Committee of the Board of Directors will consider, and determine whether to accept, such resignation. Additionally, the second amended and restated bylaws of the Company have various advance notice provisions that require shareholders to meet certain requirements and deadlines for proposals at an annual meeting of shareholders. These advance notice provisions may have the effect of delaying, deferring or preventing a transaction or a change in control of the Company that might involve a premium to the price of the Company’s common shares or otherwise be in the shareholders’ best interests.
The Company’s Executive Chairman has interests that may conflict with the interests of the Company.
Glade M. Knight, the Company’s Executive Chairman, is and will be a principal in other real estate investment transactions or programs that may compete with the Company, and he is and may be a principal in other business ventures. Mr. Knight’s management and economic interests in these other transactions or programs may conflict with the interests of the Company.
The Company’s executive officers provide services to other companies that may detract from the time devoted to the Company.
The Company’s executive officers and other employees of the Company may devote time to other companies which have been or may be organized by Mr. Knight in the future. Neither Mr. Knight nor any of the other executive officers is required to devote a fixed amount of time and attention to the Company’s business affairs as opposed to the other companies, which could detract from time devoted to the Company.
The Company depends on key personnel.
The Company depends on the services of its senior management team to manage the Company’s day-to-day operations and to execute its business strategy. To the extent that any of them departs, the Company could incur severance or other costs. The loss of the services from any of the members of the Company’s management team, and
its inability to find suitable replacements on a timely basis, could disrupt the Company’s business and have an adverse effect on the market price of the Company’s common shares.
The Company may change its operational policies, investment guidelines and its investment and growth strategies without shareholder consent, which may subject it to different and more significant risks in the future, which could materially and adversely affect the Company.
The Board of Directors determines the Company’s operational policies, investment guidelines and its investment and growth strategies, subject to the restrictions on certain transactions as set forth in the second amended and restated bylaws. The Board of Directors may make changes to, or approve transactions that deviate from, those policies, guidelines and strategies without a vote of, or notice to, shareholders. This could result in the Company conducting operational matters, making investments or pursuing investment or growth strategies that are different than those contemplated in this Annual Report on Form 10-K. Under any of these circumstances, the Company may expose itself to different and more significant risks in the future, which could materially and adversely affect the Company.
Risks Related to the Ownership of the Company’s Common Shares
The market price and trading volume of the Company’s common shares may fluctuate widely and there can be no assurance thatcould decline substantially in the market for its common shares will provide shareholders with adequate liquidity.
The Company’s common shares are listed on the NYSE under the ticker symbol “APLE.” The market price and trading volume of the Company’s common shares may fluctuate widely, depending on many factors, some of which may be beyond the Company’s control, including:
● | actual versus anticipated differences in the Company’s operating results, liquidity, or financial condition; |
● | changes in actual and/or estimated financial performance; |
● | publication of research reports about the Company, its hotels or the lodging or overall real estate industry; |
● | failure to meet analysts’ revenue or earnings estimates; |
● | the extent of institutional investors’ interest in the Company and their decision to buy or sell the Company’s common shares; |
● | issuances of common shares or other securities by the Company; |
● | the passage of legislation or other regulatory developments that may adversely affect the Company or its industry; |
● | the reputation of REITs and real estate investments generally, and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income instruments; |
● | changes in market interest rates compared to the Company’s distribution yield on its common shares; |
● | additions and departures of key personnel; |
● | announcements by franchisors, operators or REITs and other owners in the hospitality industry; |
● | the performance and market valuations of similar companies; |
● | strategic actions by the Company or its competitors, such as acquisitions or dispositions; |
● | fluctuations in the stock price and operating results of the Company’s competitors; |
● | speculation in the press or investment community; |
● | changes in accounting principles; |
● | changes in capital costs; |
● | terrorist acts; |
● | general market and economic conditions, including factors unrelated to the Company’s operating performance; and |
● | the realization of any of the other risk factors presented in this Annual Report on Form 10-K. |
Stock markets in general have historically experienced volatility that has often been unrelated to the operating performance of a particular company. Thesecompany or industry. Similar broad market fluctuations may adversely affect the trading price and volume of the Company’s common shares.
The Company may change its distribution policy or may not have funds available to make distributions to shareholders.
The Board of Directors will continue to evaluate the Company’s distribution policy in conjunction with the impact of the economy on its operations, actual and projected financial condition and results of operations, capital expenditure requirements and other factors, including those discussed in this Annual Report on Form 10-K. While the Company intends to make monthly distributions to shareholders, there can be no assurance that the Company will be ablecontinue to make distributions at any particular time or rate, or at all. Further, there is no assurance that a distribution rate achieved for a particular period will be maintained in the future. The Company evaluates the distribution rate on an ongoing basis and may make changes at any time if the Company believes the rate is not appropriate based on REIT taxable income, limitations under financing arrangements, or other cash needs. A reduction in the Company’s distribution rate could have a material adverse effect on the market price of the Company’s common shares.
While the Company generally seeks to make distributions from its operating cash flows, distributions may be made (although there is no obligation to do so) in certain circumstances, in part, from financing proceeds or other sources. While distributions made from such sources would result in the shareholder receiving cash, the consequences to the shareholders would differ from a distribution made from the Company’s operating cash flows. For example, if debt financing is the source of a distribution, that financing would not be available for other opportunities and would have to be repaid.
Future offerings or the perception that future offerings could occur may adversely affect the market price of the Company’s common shares and future offerings may be dilutive to existing shareholders.
The Company has in the past and may in the future issue additional common shares to raise capital necessaryshares. Proceeds from any issuance may be used to finance hotel acquisitions, fund capital expenditures, pay down outstanding borrowings on its revolving credit facility, refinance debt, or for other corporate purposes. A large volume of sales of the Company’s common shares could decrease the market price of the Company’s common shares and could impair the Company’s ability to raise additional capital through the sale of equity securities in the future. Even ifAlso, a substantial number of sales of common shares are not affected, the mere perception of the possibility of these salesa substantial sale of common shares could depress the market price of the Company’s common shares and have a negative effect on the Company’s ability to raise capital in the future. In addition, anticipated downward pressure on the price of the Company’s common shares due to actual or anticipated sales of common shares could cause some institutions or individuals to engage in short sales of the common shares, which may itself cause the price of the common shares to decline. Because the Company’s decision to issue equity securities in any future offering will depend on market conditions and other factors beyond its control, the Company cannot predict or estimate the amount, timing or nature of its future offerings. Therefore, the Company’s shareholders bear the risk of itsthe Company’s future offerings reducing the market price of its common shares and diluting theirshareholders equity interests in the Company.
Tax-Related Risks and Risks Related to the Company’s Status as a REIT
Qualifying as a REIT involves highly technical and complex provisions of the Code and failure of the Company to qualify as a REIT would have adverse consequences to the Company and its shareholders.
The Company’s qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize the Company’s REIT qualification. Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for the
If the Company does not qualify as a REIT or if the Company fails to remain qualified as a REIT, the Company will be subject to U.S. federal income tax and potentially state and local taxes, which would reduce the Company’s earnings and the amount of cash available for distribution to its shareholders.
If the Company failed to qualify as a REIT in any taxable year and any available relief provisions did not apply, the Company would be subject to U.S. federal and state corporate income tax including any applicable alternative minimum tax for taxable years beginning before December 31, 2017, on its taxable income at regular corporate rates, and dividends paid to its shareholders would not be deductible by itthe Company in computing its taxable income. Unless the Company was entitled to statutory relief under certain Code provisions, the Company also would be disqualified from taxation as a REIT for the four taxable years following the year in which it failed to qualify as a REIT.
Any determination that the Company does not qualify as a REIT would have a material adverse effect on the Company’s results of operations and could materially reduce the market price of its common shares. The Company’s additional tax liability could be substantial and would reduce its net earnings available for investment, debt service or distributions to shareholders. Furthermore, the Company would no longer be required to make any distributions to shareholders as a condition to REIT qualification and all of its distributions to shareholders would be taxable as ordinary C corporation dividends to the extent of its current and accumulated earnings and profits. The Company’s failure to qualify as a REIT also could cause an event of default under loan documents governing its debt.
Even if the Company qualifies as a REIT, it may face other tax liabilities that reduce its cash flow.
Even if the Company qualifies for taxation as a REIT, it may be subject to certain U.S. federal, state and local taxes, including payroll taxes, taxes on any undistributed income, taxes on income from some activities conducted as a result of a foreclosure, a 100% excise tax on any transactions with a TRS that are not conducted on an arm’s-length basis, and state or local income, franchise, property and transfer taxes. Moreover, if the Company has net income from the sale of properties that are “dealer” properties (a “prohibited transaction” under the Code), that income will be subject to a 100% tax. The Company could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain its qualification as a REIT. In addition, the Company’s TRSs will be subject to U.S. federal, state and local corporate income taxes on their net taxable income, if any. Any of these taxes would decrease cash available for other uses, such as the payment of the Company’s debt obligations and distributions to shareholders.
The Company may incur adverse tax consequences if Apple REIT Seven,Ten, Inc. (“Apple Seven”), Apple REIT Eight, Inc. (“Apple Eight”) or Apple Ten (collectively, the “merged companies”Ten”) failed to qualify as a REIT for U.S. federal income tax purposes or if the Apple Seven and Apple Eight mergers, and the Apple Ten merger (collectively, the “mergers”) failed to qualify as a tax free reorganization under the Code.
On March 1, 2014, Apple Seven and Apple Eight merged into acquisition subsidiaries of the Company and ceased their separate corporate existences, and, on September 1, 2016, Apple Ten merged into an acquisition subsidiary of the Company and ceased its separate corporate existence.existence (the “merger” or “Apple Ten merger”). If any of the merged companiesApple Ten failed to qualify as a REIT for any of theirits taxable years ending on or before the date of their respective mergers, each of the merged companies, as the case may be,Apple Ten merger, Apple Ten would be liable for (and the Company would be obligated to pay) U.S. federal income tax on its taxable income for such years at regular corporate rates and, assuming the mergersApple Ten merger qualified as reorganizationsa reorganization within the meaning of Section 368(a) of the Code,
● | the Company would be subject to tax on the built-in gain on each asset of |
● | the Company would succeed to any earnings and profits accumulated by |
● | if |
If there is an adjustment to any of the merged companies’Apple Ten’s taxable income or dividends paiddividends-paid deductions, the Company could elect to use the deficiency dividend procedure in order to maintain that merged company’sApple Ten’s REIT status. That deficiency dividend procedure could require the Company to make significant distributions to its shareholders and to pay significant interest to the IRS.
Moreover, and irrespective of whether each of the merged companiesApple Ten qualified as a REIT, if anyApple Ten were to incur tax liabilities as a result of the failure of the mergersmerger to qualify as a reorganization within the meaning of Section 368(a) of the Code, those tax liabilities would be transferred to the Company as a result of the mergers. Any of the merged companies’merger. Apple Ten’s failure (before or at the date of the respective mergers)merger) to qualify as a REIT and/or a failure of the mergersmerger to qualify as reorganizationsa reorganization within the meaning of Section 368(a) of the Code could impair the Company’s ability after the mergersmerger to expand its business and raise capital, and could materially adversely affect the value of the Company’s common shares.
REIT distribution requirements could adversely affect the Company’s ability to execute its business plan or cause it to increase debt levels or issue additional equity during unfavorable market conditions.
The Company generally must distribute annually at least 90% of its REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal corporate income tax not to apply to earnings that it distributes. To the extent that the Company satisfies this distribution requirement but distributes less than 100% of its taxable income, the Company will be subject to U.S. federal corporate income tax on its undistributed taxable income. In addition, the Company will be subject to a 4% nondeductible excise tax if the actual amount that the Company pays out to its shareholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. If there is an adjustment to any of the Company’s taxable income or dividends paiddividends-paid deductions, the Company could elect to use the deficiency dividend procedure in order to maintain the Company’s REIT status. That deficiency dividend procedure could require the Company to make significant distributions to its shareholders and to pay significant interest to the IRS.
From time to time, the Company may generate taxable income greater than its income for financial reporting purposes prepared in accordance with accounting principles generally accepted in the United States of AmericaU.S. (“GAAP”). In addition, differences in timing between the recognition of taxable income and the actual receipt of cash may occur. As a result, the Company may find it difficult or impossible to meet distribution requirements in certain circumstances. In particular, where the Company experiences differences in timing between the recognition of taxable income and the actual receipt of cash, the requirement to distribute a substantial portion of its taxable income could cause it to: (1) sell assets in adverseunfavorable market conditions; (2) incur debt or issue additional equity on unfavorabledisadvantageous terms; (3) distribute amounts that would otherwise be invested in future acquisitions or capital expenditures or used for the repayment of debt; or (4) make a taxable distribution of its common shares as part of a distribution in which shareholders may elect to receive the Company’s common shares or (subject to a limit measured as a percentage of the total distribution) cash, in order to comply with REIT requirements. These alternatives could increase the Company’s costs or dilute its equity. In addition, because the REIT distribution requirement prevents the Company from retaining earnings, the Company generally will be required to refinance debt at its maturity with additional debt or equity. Thus, compliance with the REIT requirements may hinder the Company’s ability to grow, which could adversely affect the market price of its common shares.
The Company may in the future choose to pay dividends in the form of common shares, in which case shareholders may be required to pay income taxes in excess of the cash dividends they receive.
The Company may seek in the future to distribute taxable dividends that are payable in cash and common shares, at the election of each shareholder. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of the Company’s current and accumulated earnings and profits for U.S. federal income tax purposes.purposes, however, generally a shareholder will receive a taxable income deduction for 20% of all ordinary dividends received from a REIT. As a result, shareholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. If a U.S. shareholder sells the common shares that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of common shares at the time of the sale. In addition, in such case, a U.S. shareholder could have a capital loss with respect to the common shares sold that could not be used to offset such dividend income. Furthermore, with respect to certain non-U.S. shareholders, the Company may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common shares. In addition, such a taxable share dividend could be viewed as equivalent to a reduction in the Company’s cash distributions, and that factor, as well as the possibility that a significant number of the Company’s shareholders could determine to sell the common shares in order to pay taxes owed on dividends, may put downward pressure on the market price of the Company’s common shares.
If the Company’s leases are not respected as true leases for U.S. federal income tax purposes, the Company would likely fail to qualify as a REIT.
To qualify as a REIT, the Company must satisfy two gross income tests, pursuant to which specified percentages of the Company’s gross income must be passive income, such as rent. For the rent paid pursuant to the hotel leases with the Company’s TRSs, which the Company currently expects will continue to constitute substantially
If any of the hotel management companies that the Company’s TRSs engage do not qualify as “eligible independent contractors,” or if the Company’s hotels are not “qualified lodging facilities,” the Company would likely fail to qualify as a REIT.
Rent paid by a lessee that is a “related party tenant” of the Company generally will not be qualifying income for purposes of the two gross income tests applicable to REITs. An exception is provided, however, for leases of “qualified lodging facilities” to a TRS so long as the hotels are managed by an “eligible independent contractor” and certain other requirements are satisfied. The Company intends to continue to take advantage of this exception. TheA “qualified lodging facility” is a hotel, motel, or other establishment more than one-half of the dwelling units in which are used on a transient basis, including customary amenities and facilities, provided that no wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. Although the Company leasesintends to monitor future acquisitions and expects to continue to leaseimprovements of hotels, the REIT provisions of the Code provide only limited guidance for making determinations under the requirements for “qualified lodging facilities,” and there can be no assurance that these requirements will be satisfied in all or substantially all of its hotels tocases.
In addition, the Company’s TRS lessees and to engagehave engaged hotel management companies that are intended to qualify as “eligible independent contractors.” Among other requirements, in order to qualify as an eligible“eligible independent contractor,” the hotel management company must not own, directly or through its shareholders, more than 35% of the Company’s outstanding shares, and no person or group of persons can own more than 35% of the Company’s outstanding shares and the shares (or ownership interest) of the hotel management company (taking into account certain ownership attribution rules). The ownership attribution rules that apply for purposes of these 35% thresholds are complex, and monitoring actual and constructive ownership of the Company’s shares by the hotel management companies and their owners may not be practical. Accordingly, there can be no assurance that these ownership levels will not be exceeded.
The Company’s ownership of TRSs is limited, and the Company’s transactions with its TRSs will cause it to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.
A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% (20% for tax years beginning after December 31, 2017)20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the rules applicable to TRSs limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions, including the leases, between the TRS and the REIT that are not conducted on an arm’s-length basis.
The Company’s TRSs will pay U.S. federal, state and local income taxes on their net taxable income, and their after-tax net income will be available for distribution to the REIT, but is not required to be distributed. The Company believes that the aggregate value of the stock and securities of its TRSs has been and will continue to be less than 25% (20% for tax years beginning after December 31, 2017) of the value of its total assets (including the stock and securities of its TRSs). Furthermore, the Company has monitored and will continue to monitor the value of its respective investments in its TRSs for the purpose of ensuring compliance with the ownership limitations applicable to TRSs. In addition, the Company will continue to scrutinize all of its transactions with its TRSs to ensure that they are entered into on arm’s-length terms to avoid incurring the 100% excise tax. There can be no assurance, however, that the Company will be able to comply with the rules regarding TRSs or to avoid application of the 100% excise tax. The most significant transactions between the Company and its TRSs are the hotel leases from the Company to its TRSs. While the Company believes its leases have customary terms and reflect normal business practices and that the rents paid thereto reflect market terms, there can be no assurance that the IRS will agree.
Complying with REIT requirements may force the Company to forgo and/or liquidate otherwise attractive investment opportunities.
To qualify as a REIT, the Company must continually satisfy tests concerning, among other things, the sources of its income, the nature and diversification of its assets, the amount it distributes to its shareholders and the ownership of its common shares. In order to meet these tests, the Company may be required to liquidate from its portfolio, or contribute to a TRS, otherwise attractive investments in order to maintain its qualification as a REIT. These actions could have the effect of reducing the Company’s income and amounts available for distribution to its shareholders. In addition, the Company may be required to make distributions to shareholders at disadvantageous times or when the Company does not have funds readily available for distribution, and may be unable to pursue investments that would otherwise be advantageous to it in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder the Company’s ability to make, and, in certain cases, maintain ownership of, certain attractive investments.
The Company’s inability to deduct for tax purposes compensation paid to its executives could require it to increase its distributions to shareholders in order to maintain its REIT status or to avoid entity-level taxes.
The IRS, the United StatesU.S. Treasury Department and Congress frequently review U.S. federal income tax legislation, regulations and other guidance. At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended or modified. The Company cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be adopted.adopted or modified. Any legislative action may prospectively or retroactively modify the Company’s tax treatment and, therefore, may adversely affect taxation of the Company or the Company’s shareholders. In particular,The Company urges shareholders and prospective shareholders to consult with their tax advisors with respect to the Act, which was signed into lawstatus of legislative, regulatory or administrative developments and proposals and their potential effect on December 22, 2017an investment in the Company’s shares. Although REITs generally receive certain tax advantages compared to entities taxed as C corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and which generally takes effectit could become more advantageous for taxable years beginning on or after January 1, 2018, makes many significant changesa company that invests in real estate to theelect to be treated as a C corporation for U.S. federal income tax laws that will impact the taxation of individuals and corporations (both regular C corporations as well as, to a lesser extent, corporations that have elected to be taxed as REITs). These changes will impact the Company and the Company’s shareholders in various ways, although, based on the Company’s initial assessment, the impact of these changes are not expected to be material. To date, the IRS has issued only limited guidance with respect to certain of the new provisions, and there are numerous interpretive issues that will require guidance. It is highly likely that technical correction legislation will be needed to clarify certain aspects of the new law and give proper effect to Congressional intent. There can be no assurance, however, that technical clarifications or changes needed to prevent unintended or unforeseen tax consequences will be enacted by Congress in the near future.purposes.
None.
As of December 31, 2017,2019, the Company owned 239233 hotels with an aggregate of 30,32229,870 rooms located in 34 states. Allstates, including one hotel with 105 rooms classified as held for sale, which was sold to an unrelated party in January 2020. Substantially all of the Company’s hotels operate under Marriott or Hilton brands. The hotels are operated and managed under separate management agreements with 2321 hotel management companies, none of which are affiliated with the Company. The following tables summarize the number of hotels and rooms by brand and state:
| Number of Hotels and Guest Rooms by Brand | ||||||||
| Number of | Number of | |||||||
| Brand | Hotels | Rooms | ||||||
| Hilton Garden Inn | 42 | 5,807 | ||||||
| Courtyard | 40 | 5,460 | ||||||
| Hampton | 36 | 4,422 | ||||||
| Residence Inn | 34 | 4,011 | ||||||
| Homewood Suites | 34 | 3,831 | ||||||
| SpringHill Suites | 17 | 2,248 | ||||||
| TownePlace Suites | 12 | 1,196 | ||||||
| Fairfield Inn | 11 | 1,300 | ||||||
| Home2 Suites | 8 | 910 | ||||||
| Marriott | 2 | 616 | ||||||
| Embassy Suites | 2 | 316 | ||||||
| Renaissance | 1 | 205 | ||||||
| Total | 239 | 30,322 | ||||||
| Number of Hotels and Guest Rooms by State | ||||||||
| Number of | Number of | |||||||
| State | Hotels | Rooms | ||||||
| Alabama | 15 | 1,434 | ||||||
| Alaska | 2 | 304 | ||||||
| Arizona | 11 | 1,434 | ||||||
| Arkansas | 4 | 408 | ||||||
| California | 27 | 3,807 | ||||||
| Colorado | 4 | 567 | ||||||
| Florida | 23 | 2,851 | ||||||
| Georgia | 6 | 596 | ||||||
| Idaho | 2 | 416 | ||||||
| Illinois | 8 | 1,420 | ||||||
| Indiana | 4 | 479 | ||||||
| Iowa | 3 | 301 | ||||||
| Kansas | 4 | 422 | ||||||
| Louisiana | 4 | 541 | ||||||
| Maine | 1 | 179 | ||||||
| Maryland | 2 | 233 | ||||||
| Massachusetts | 4 | 466 | ||||||
| Michigan | 1 | 148 | ||||||
| Minnesota | 2 | 244 | ||||||
| Mississippi | 2 | 168 | ||||||
| Missouri | 4 | 544 | ||||||
| Nebraska | 4 | 621 | ||||||
| New Jersey | 5 | 629 | ||||||
| New York | 4 | 550 | ||||||
| North Carolina | 12 | 1,337 | ||||||
| Ohio | 2 | 252 | ||||||
| Oklahoma | 4 | 545 | ||||||
| Pennsylvania | 3 | 391 | ||||||
| South Carolina | 5 | 538 | ||||||
| Tennessee | 12 | 1,356 | ||||||
| Texas | 34 | 4,072 | ||||||
| Utah | 3 | 393 | ||||||
| Virginia | 14 | 2,067 | ||||||
| Washington | 4 | 609 | ||||||
| Total | 239 | 30,322 | ||||||
Number of Hotels and Guest Rooms by Brand | ||||||||
Number of | Number of | |||||||
Brand | Hotels | Rooms | ||||||
Hilton Garden Inn | 41 | 5,665 | ||||||
Hampton | 39 | 4,956 | ||||||
Courtyard | 36 | 4,948 | ||||||
Residence Inn | 33 | 3,939 | ||||||
Homewood Suites | 33 | 3,731 | ||||||
SpringHill Suites | 15 | 2,040 | ||||||
Fairfield | 11 | 1,300 | ||||||
Home2 Suites | 9 | 1,038 | ||||||
TownePlace Suites | 9 | 931 | ||||||
Marriott | 2 | 616 | ||||||
Embassy Suites | 2 | 316 | ||||||
Renaissance | 1 | 208 | * | |||||
Hyatt Place | 1 | 127 | ||||||
Independent | 1 | 55 | ||||||
Total | 233 | 29,870 | ||||||
| * | On January 20, 2020, the New York, New York Renaissance hotel became an independent boutique hotel. | |||
Number of Hotels and Guest Rooms by State | ||||||||
Number of | Number of | |||||||
State | Hotels | Rooms | ||||||
Alabama | 15 | 1,434 | ||||||
Alaska | 2 | 304 | ||||||
Arizona | 12 | 1,644 | ||||||
Arkansas | 3 | 336 | ||||||
California | 27 | 3,807 | ||||||
Colorado | 4 | 567 | ||||||
Florida | 22 | 2,803 | ||||||
Georgia | 6 | 672 | ||||||
Idaho | 2 | 416 | ||||||
Illinois | 8 | 1,420 | ||||||
Indiana | 4 | 479 | ||||||
Iowa | 3 | 301 | ||||||
Kansas | 4 | 422 | ||||||
Louisiana | 3 | 422 | ||||||
Maine | 1 | 179 | ||||||
Maryland | 2 | 233 | ||||||
Massachusetts | 4 | 466 | ||||||
Michigan | 1 | 148 | ||||||
Minnesota | 3 | 404 | ||||||
Mississippi | 2 | 168 | ||||||
Missouri | 4 | 544 | ||||||
Nebraska | 4 | 621 | ||||||
New Jersey | 5 | 629 | ||||||
New York | 4 | 553 | ||||||
North Carolina | 10 | 1,091 | ||||||
Ohio | 2 | 252 | ||||||
Oklahoma | 4 | 545 | ||||||
Pennsylvania | 3 | 391 | ||||||
South Carolina | 5 | 538 | ||||||
Tennessee | 13 | 1,502 | ||||||
Texas | 31 | 3,755 | ||||||
Utah | 3 | 393 | ||||||
Virginia | 13 | 1,822 | ||||||
Washington | 4 | 609 | ||||||
Total | 233 | 29,870 | ||||||
The following table is a list of the 239233 hotels the Company owned as of December 31, 2017.2019. As noted below, 1413 of the Company’s hotels are subject to ground leases and 29 of its hotels are encumbered by mortgage notes.
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
| Anchorage | AK | Embassy Suites | Stonebridge | 4/30/2010 | 169 | (2) | |||||||
| Anchorage | AK | Home2 Suites | Stonebridge | 12/1/2017 | 135 | ||||||||
| Auburn | AL | Hilton Garden Inn | LBA | 3/1/2014 | 101 | ||||||||
| Birmingham | AL | Courtyard | LBA | 3/1/2014 | 84 | ||||||||
| Birmingham | AL | Hilton Garden Inn | LBA | 9/12/2017 | 104 | ||||||||
| Birmingham | AL | Home2 Suites | LBA | 9/12/2017 | 106 | ||||||||
| Birmingham | AL | Homewood Suites | McKibbon | 3/1/2014 | 95 | ||||||||
| Dothan | AL | Hilton Garden Inn | LBA | 6/1/2009 | 104 | ||||||||
| Dothan | AL | Residence Inn | LBA | 3/1/2014 | 84 | ||||||||
| Huntsville | AL | Hampton | LBA | 9/1/2016 | 98 | ||||||||
| Huntsville | AL | Hilton Garden Inn | LBA | 3/1/2014 | 101 | ||||||||
| Huntsville | AL | Home2 Suites | LBA | 9/1/2016 | 77 | ||||||||
| Huntsville | AL | Homewood Suites | LBA | 3/1/2014 | 107 | (2) | |||||||
| Mobile | AL | Hampton | McKibbon | 9/1/2016 | 101 | (1) | |||||||
| Montgomery | AL | Hilton Garden Inn | LBA | 3/1/2014 | 97 | ||||||||
| Montgomery | AL | Homewood Suites | LBA | 3/1/2014 | 91 | ||||||||
| Prattville | AL | Courtyard | LBA | 3/1/2014 | 84 | (2) | |||||||
| Rogers | AR | Hampton | Raymond | 8/31/2010 | 122 | ||||||||
| Rogers | AR | Homewood Suites | Raymond | 4/30/2010 | 126 | ||||||||
| Rogers | AR | Residence Inn | Raymond | 3/1/2014 | 88 | ||||||||
| Springdale | AR | Residence Inn | Aimbridge | 3/1/2014 | 72 | ||||||||
| Chandler | AZ | Courtyard | North Central | 11/2/2010 | 150 | ||||||||
| Chandler | AZ | Fairfield Inn & Suites | North Central | 11/2/2010 | 110 | ||||||||
| Phoenix | AZ | Courtyard | North Central | 11/2/2010 | 164 | ||||||||
| Phoenix | AZ | Courtyard | North Central | 9/1/2016 | 127 | ||||||||
| Phoenix | AZ | Hampton | North Central | 9/1/2016 | 125 | (1) | |||||||
| Phoenix | AZ | Homewood Suites | North Central | 9/1/2016 | 134 | (1) | |||||||
| Phoenix | AZ | Residence Inn | North Central | 11/2/2010 | 129 | ||||||||
| Scottsdale | AZ | Hilton Garden Inn | North Central | 9/1/2016 | 122 | ||||||||
| Tucson | AZ | Hilton Garden Inn | Western | 7/31/2008 | 125 | ||||||||
| Tucson | AZ | Residence Inn | Western | 3/1/2014 | 124 | ||||||||
| Tucson | AZ | TownePlace Suites | Western | 10/6/2011 | 124 | ||||||||
| Agoura Hills | CA | Homewood Suites | Dimension | 3/1/2014 | 125 | ||||||||
| Burbank | CA | Courtyard | Huntington | 8/11/2015 | 190 | (2) | |||||||
| Burbank | CA | Residence Inn | Marriott | 3/1/2014 | 166 | ||||||||
| Burbank | CA | SpringHill Suites | Marriott | 7/13/2015 | 170 | ||||||||
| Clovis | CA | Hampton | Dimension | 7/31/2009 | 86 | ||||||||
| Clovis | CA | Homewood Suites | Dimension | 2/2/2010 | 83 | ||||||||
| Cypress | CA | Courtyard | Dimension | 3/1/2014 | 180 | ||||||||
| Cypress | CA | Hampton | Dimension | 6/29/2015 | 110 | ||||||||
| Oceanside | CA | Courtyard | Marriott | 9/1/2016 | 142 | (2) | |||||||
| Oceanside | CA | Residence Inn | Marriott | 3/1/2014 | 125 | ||||||||
| Rancho Bernardo/San Diego | CA | Courtyard | InnVentures | 3/1/2014 | 210 | (2) | |||||||
| Sacramento | CA | Hilton Garden Inn | Dimension | 3/1/2014 | 153 | ||||||||
| San Bernardino | CA | Residence Inn | InnVentures | 2/16/2011 | 95 | ||||||||
| San Diego | CA | Courtyard | Huntington | 9/1/2015 | 245 | (2) | |||||||
| San Diego | CA | Hampton | Dimension | 3/1/2014 | 177 | (2) | |||||||
| San Diego | CA | Hilton Garden Inn | InnVentures | 3/1/2014 | 200 | ||||||||
| San Diego | CA | Residence Inn | Dimension | 3/1/2014 | 121 | (2) | |||||||
| San Jose | CA | Homewood Suites | Dimension | 3/1/2014 | 140 | (2) | |||||||
| San Juan Capistrano | CA | Residence Inn | Marriott | 9/1/2016 | 130 | (1)(2) | |||||||
| Santa Ana | CA | Courtyard | Dimension | 5/23/2011 | 155 | ||||||||
| Santa Clarita | CA | Courtyard | Dimension | 9/24/2008 | 140 | ||||||||
| Santa Clarita | CA | Fairfield Inn | Dimension | 10/29/2008 | 66 | ||||||||
City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
Anchorage | AK | Embassy Suites | Stonebridge | 4/30/2010 | 169 | (1) | |||||||
Anchorage | AK | Home2 Suites | Stonebridge | 12/1/2017 | 135 | ||||||||
Auburn | AL | Hilton Garden Inn | LBA | 3/1/2014 | 101 | ||||||||
Birmingham | AL | Courtyard | LBA | 3/1/2014 | 84 | ||||||||
Birmingham | AL | Hilton Garden Inn | LBA | 9/12/2017 | 104 | ||||||||
Birmingham | AL | Home2 Suites | LBA | 9/12/2017 | 106 | ||||||||
Birmingham | AL | Homewood Suites | McKibbon | 3/1/2014 | 95 | ||||||||
Dothan | AL | Hilton Garden Inn | LBA | 6/1/2009 | 104 | ||||||||
Dothan | AL | Residence Inn | LBA | 3/1/2014 | 84 | ||||||||
Huntsville | AL | Hampton | LBA | 9/1/2016 | 98 | ||||||||
Huntsville | AL | Hilton Garden Inn | LBA | 3/1/2014 | 101 | ||||||||
Huntsville | AL | Home2 Suites | LBA | 9/1/2016 | 77 | ||||||||
Huntsville | AL | Homewood Suites | LBA | 3/1/2014 | 107 | (1) | |||||||
Mobile | AL | Hampton | McKibbon | 9/1/2016 | 101 | (2) | |||||||
Montgomery | AL | Hilton Garden Inn | LBA | 3/1/2014 | 97 | ||||||||
Montgomery | AL | Homewood Suites | LBA | 3/1/2014 | 91 | ||||||||
Prattville | AL | Courtyard | LBA | 3/1/2014 | 84 | (1) | |||||||
Rogers | AR | Hampton | Raymond | 8/31/2010 | 122 | ||||||||
Rogers | AR | Homewood Suites | Raymond | 4/30/2010 | 126 | ||||||||
Rogers | AR | Residence Inn | Raymond | 3/1/2014 | 88 | ||||||||
Chandler | AZ | Courtyard | North Central | 11/2/2010 | 150 | ||||||||
Chandler | AZ | Fairfield | North Central | 11/2/2010 | 110 | ||||||||
Phoenix | AZ | Courtyard | North Central | 11/2/2010 | 164 | ||||||||
Phoenix | AZ | Courtyard | North Central | 9/1/2016 | 127 | ||||||||
Phoenix | AZ | Hampton | North Central | 9/1/2016 | 125 | (2) | |||||||
Phoenix | AZ | Hampton | North Central | 5/2/2018 | 210 | ||||||||
Phoenix | AZ | Homewood Suites | North Central | 9/1/2016 | 134 | (2) | |||||||
Phoenix | AZ | Residence Inn | North Central | 11/2/2010 | 129 | ||||||||
Scottsdale | AZ | Hilton Garden Inn | North Central | 9/1/2016 | 122 | ||||||||
Tucson | AZ | Hilton Garden Inn | Western | 7/31/2008 | 125 | ||||||||
Tucson | AZ | Residence Inn | Western | 3/1/2014 | 124 | ||||||||
Tucson | AZ | TownePlace Suites | Western | 10/6/2011 | 124 | ||||||||
Agoura Hills | CA | Homewood Suites | Dimension | 3/1/2014 | 125 | ||||||||
Burbank | CA | Courtyard | Huntington | 8/11/2015 | 190 | (1) | |||||||
Burbank | CA | Residence Inn | Marriott | 3/1/2014 | 166 | ||||||||
Burbank | CA | SpringHill Suites | Marriott | 7/13/2015 | 170 | (1) | |||||||
Clovis | CA | Hampton | Dimension | 7/31/2009 | 86 | ||||||||
Clovis | CA | Homewood Suites | Dimension | 2/2/2010 | 83 | ||||||||
Cypress | CA | Courtyard | Dimension | 3/1/2014 | 180 | ||||||||
Cypress | CA | Hampton | Dimension | 6/29/2015 | 110 | ||||||||
Oceanside | CA | Courtyard | Marriott | 9/1/2016 | 142 | (1) | |||||||
Oceanside | CA | Residence Inn | Marriott | 3/1/2014 | 125 | ||||||||
Rancho Bernardo/San Diego | CA | Courtyard | InnVentures | 3/1/2014 | 210 | (1) | |||||||
Sacramento | CA | Hilton Garden Inn | Dimension | 3/1/2014 | 153 | ||||||||
San Bernardino | CA | Residence Inn | InnVentures | 2/16/2011 | 95 | ||||||||
San Diego | CA | Courtyard | Huntington | 9/1/2015 | 245 | (1) | |||||||
San Diego | CA | Hampton | Dimension | 3/1/2014 | 177 | (1) | |||||||
San Diego | CA | Hilton Garden Inn | InnVentures | 3/1/2014 | 200 | ||||||||
San Diego | CA | Residence Inn | Dimension | 3/1/2014 | 121 | (1) | |||||||
San Jose | CA | Homewood Suites | Dimension | 3/1/2014 | 140 | (1) | |||||||
San Juan Capistrano | CA | Residence Inn | Marriott | 9/1/2016 | 130 | (1)(2) | |||||||
Santa Ana | CA | Courtyard | Dimension | 5/23/2011 | 155 | (1) | |||||||
Santa Clarita | CA | Courtyard | Dimension | 9/24/2008 | 140 | ||||||||
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
| Santa Clarita | CA | Hampton | Dimension | 10/29/2008 | 128 | ||||||||
| Santa Clarita | CA | Residence Inn | Dimension | 10/29/2008 | 90 | ||||||||
| Tulare | CA | Hampton | InnVentures | 3/1/2014 | 86 | ||||||||
| Tustin | CA | Fairfield Inn & Suites | Marriott | 9/1/2016 | 145 | ||||||||
| Tustin | CA | Residence Inn | Marriott | 9/1/2016 | 149 | ||||||||
| Colorado Springs | CO | Hampton | Chartwell | 9/1/2016 | 101 | (2) | |||||||
| Denver | CO | Hilton Garden Inn | Stonebridge | 9/1/2016 | 221 | (2) | |||||||
| Highlands Ranch | CO | Hilton Garden Inn | Dimension | 3/1/2014 | 128 | ||||||||
| Highlands Ranch | CO | Residence Inn | Dimension | 3/1/2014 | 117 | ||||||||
| Boca Raton | FL | Hilton Garden Inn | White Lodging | 9/1/2016 | 149 | ||||||||
| Cape Canaveral | FL | Homewood Suites | LBA | 9/1/2016 | 153 | ||||||||
| Fort Lauderdale | FL | Hampton | Vista Host | 12/31/2008 | 109 | ||||||||
| Fort Lauderdale | FL | Hampton | LBA | 6/23/2015 | 156 | ||||||||
| Fort Lauderdale | FL | Residence Inn | LBA | 9/1/2016 | 156 | ||||||||
| Gainesville | FL | Hilton Garden Inn | McKibbon | 9/1/2016 | 104 | ||||||||
| Gainesville | FL | Homewood Suites | McKibbon | 9/1/2016 | 103 | ||||||||
| Jacksonville | FL | Homewood Suites | McKibbon | 3/1/2014 | 119 | ||||||||
| Lakeland | FL | Courtyard | LBA | 3/1/2014 | 78 | ||||||||
| Miami | FL | Courtyard | Dimension | 3/1/2014 | 118 | (1) | |||||||
| Miami | FL | Hampton | White Lodging | 4/9/2010 | 121 | ||||||||
| Miami | FL | Homewood Suites | Dimension | 3/1/2014 | 162 | (2) | |||||||
| Orlando | FL | Fairfield Inn & Suites | Marriott | 7/1/2009 | 200 | ||||||||
| Orlando | FL | SpringHill Suites | Marriott | 7/1/2009 | 200 | ||||||||
| Panama City | FL | Hampton | LBA | 3/12/2009 | 95 | ||||||||
| Panama City | FL | TownePlace Suites | LBA | 1/19/2010 | 103 | ||||||||
| Pensacola | FL | TownePlace Suites | McKibbon | 9/1/2016 | 97 | ||||||||
| Sanford | FL | SpringHill Suites | LBA | 3/1/2014 | 105 | ||||||||
| Sarasota | FL | Homewood Suites | Hilton | 3/1/2014 | 100 | ||||||||
| Tallahassee | FL | Fairfield Inn & Suites | LBA | 9/1/2016 | 97 | ||||||||
| Tallahassee | FL | Hilton Garden Inn | LBA | 3/1/2014 | 85 | (1) | |||||||
| Tampa | FL | Embassy Suites | White Lodging | 11/2/2010 | 147 | ||||||||
| Tampa | FL | TownePlace Suites | McKibbon | 3/1/2014 | 94 | ||||||||
| Albany | GA | Fairfield Inn & Suites | LBA | 1/14/2010 | 87 | ||||||||
| Atlanta | GA | Home2 Suites | McKibbon | 7/1/2016 | 128 | ||||||||
| Columbus | GA | SpringHill Suites | LBA | 3/1/2014 | 89 | ||||||||
| Columbus | GA | TownePlace Suites | LBA | 3/1/2014 | 86 | (1) | |||||||
| Macon | GA | Hilton Garden Inn | LBA | 3/1/2014 | 101 | (1) | |||||||
| Savannah | GA | Hilton Garden Inn | Newport | 3/1/2014 | 105 | (1) | |||||||
| Cedar Rapids | IA | Hampton | Schulte | 9/1/2016 | 103 | ||||||||
| Cedar Rapids | IA | Homewood Suites | Schulte | 9/1/2016 | 95 | ||||||||
| Davenport | IA | Hampton | Schulte | 9/1/2016 | 103 | ||||||||
| Boise | ID | Hampton | Raymond | 4/30/2010 | 186 | (2) | |||||||
| Boise | ID | SpringHill Suites | InnVentures | 3/1/2014 | 230 | ||||||||
| Des Plaines | IL | Hilton Garden Inn | Raymond | 9/1/2016 | 252 | ||||||||
| Hoffman Estates | IL | Hilton Garden Inn | White Lodging | 9/1/2016 | 184 | ||||||||
| Mettawa | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 170 | ||||||||
| Mettawa | IL | Residence Inn | White Lodging | 11/2/2010 | 130 | ||||||||
| Rosemont | IL | Hampton | Raymond | 9/1/2016 | 158 | ||||||||
| Schaumburg | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 166 | ||||||||
| Skokie | IL | Hampton | Raymond | 9/1/2016 | 225 | ||||||||
| Warrenville | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 135 | ||||||||
| Indianapolis | IN | SpringHill Suites | White Lodging | 11/2/2010 | 130 | ||||||||
| Merrillville | IN | Hilton Garden Inn | White Lodging | 9/1/2016 | 124 | ||||||||
| Mishawaka | IN | Residence Inn | White Lodging | 11/2/2010 | 106 | ||||||||
| South Bend | IN | Fairfield Inn & Suites | White Lodging | 9/1/2016 | 119 | ||||||||
| Overland Park | KS | Fairfield Inn & Suites | True North | 3/1/2014 | 110 | ||||||||
| Overland Park | KS | Residence Inn | True North | 3/1/2014 | 120 | ||||||||
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
Santa Clarita | CA | Fairfield | Dimension | 10/29/2008 | 66 | ||||||||
Santa Clarita | CA | Hampton | Dimension | 10/29/2008 | 128 | ||||||||
Santa Clarita | CA | Residence Inn | Dimension | 10/29/2008 | 90 | ||||||||
Tulare | CA | Hampton | InnVentures | 3/1/2014 | 86 | ||||||||
Tustin | CA | Fairfield | Marriott | 9/1/2016 | 145 | ||||||||
Tustin | CA | Residence Inn | Marriott | 9/1/2016 | 149 | ||||||||
Colorado Springs | CO | Hampton | Chartwell | 9/1/2016 | 101 | (1) | |||||||
Denver | CO | Hilton Garden Inn | Stonebridge | 9/1/2016 | 221 | (1) | |||||||
Highlands Ranch | CO | Hilton Garden Inn | Dimension | 3/1/2014 | 128 | ||||||||
Highlands Ranch | CO | Residence Inn | Dimension | 3/1/2014 | 117 | ||||||||
Boca Raton | FL | Hilton Garden Inn | White Lodging | 9/1/2016 | 149 | ||||||||
Cape Canaveral | FL | Homewood Suites | LBA | 9/1/2016 | 153 | ||||||||
Fort Lauderdale | FL | Hampton | LBA | 6/23/2015 | 156 | ||||||||
Fort Lauderdale | FL | Residence Inn | LBA | 9/1/2016 | 156 | ||||||||
Gainesville | FL | Hilton Garden Inn | McKibbon | 9/1/2016 | 104 | ||||||||
Gainesville | FL | Homewood Suites | McKibbon | 9/1/2016 | 103 | ||||||||
Jacksonville | FL | Homewood Suites | McKibbon | 3/1/2014 | 119 | ||||||||
Jacksonville | FL | Hyatt Place | LBA | 12/7/2018 | 127 | ||||||||
Lakeland | FL | Courtyard | LBA | 3/1/2014 | 78 | ||||||||
Miami | FL | Courtyard | Dimension | 3/1/2014 | 118 | (2) | |||||||
Miami | FL | Hampton | White Lodging | 4/9/2010 | 121 | ||||||||
Miami | FL | Homewood Suites | Dimension | 3/1/2014 | 162 | (1) | |||||||
Orlando | FL | Fairfield | Marriott | 7/1/2009 | 200 | ||||||||
Orlando | FL | Home2 Suites | LBA | 3/19/2019 | 128 | ||||||||
Orlando | FL | SpringHill Suites | Marriott | 7/1/2009 | 200 | ||||||||
Panama City | FL | Hampton | LBA | 3/12/2009 | 95 | ||||||||
Panama City | FL | TownePlace Suites | LBA | 1/19/2010 | 103 | ||||||||
Pensacola | FL | TownePlace Suites | McKibbon | 9/1/2016 | 97 | ||||||||
Sanford | FL | SpringHill Suites | LBA | 3/1/2014 | 105 | (3) | |||||||
Tallahassee | FL | Fairfield | LBA | 9/1/2016 | 97 | ||||||||
Tallahassee | FL | Hilton Garden Inn | LBA | 3/1/2014 | 85 | (2) | |||||||
Tampa | FL | Embassy Suites | White Lodging | 11/2/2010 | 147 | ||||||||
Albany | GA | Fairfield | LBA | 1/14/2010 | 87 | ||||||||
Atlanta/Downtown | GA | Hampton | McKibbon | 2/5/2018 | 119 | ||||||||
Atlanta/Perimeter Dunwoody | GA | Hampton | LBA | 6/28/2018 | 132 | ||||||||
Atlanta | GA | Home2 Suites | McKibbon | 7/1/2016 | 128 | ||||||||
Macon | GA | Hilton Garden Inn | LBA | 3/1/2014 | 101 | (2) | |||||||
Savannah | GA | Hilton Garden Inn | Newport | 3/1/2014 | 105 | (2) | |||||||
Cedar Rapids | IA | Hampton | Aimbridge | 9/1/2016 | 103 | (4) | |||||||
Cedar Rapids | IA | Homewood Suites | Aimbridge | 9/1/2016 | 95 | (4) | |||||||
Davenport | IA | Hampton | Aimbridge | 9/1/2016 | 103 | (4) | |||||||
Boise | ID | Hampton | Raymond | 4/30/2010 | 186 | (1) | |||||||
Boise | ID | SpringHill Suites | InnVentures | 3/1/2014 | 230 | ||||||||
Des Plaines | IL | Hilton Garden Inn | Raymond | 9/1/2016 | 252 | ||||||||
Hoffman Estates | IL | Hilton Garden Inn | White Lodging | 9/1/2016 | 184 | ||||||||
Mettawa | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 170 | ||||||||
Mettawa | IL | Residence Inn | White Lodging | 11/2/2010 | 130 | ||||||||
Rosemont | IL | Hampton | Raymond | 9/1/2016 | 158 | ||||||||
Schaumburg | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 166 | ||||||||
Skokie | IL | Hampton | Raymond | 9/1/2016 | 225 | ||||||||
Warrenville | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 135 | ||||||||
Indianapolis | IN | SpringHill Suites | White Lodging | 11/2/2010 | 130 | ||||||||
Merrillville | IN | Hilton Garden Inn | White Lodging | 9/1/2016 | 124 | ||||||||
Mishawaka | IN | Residence Inn | White Lodging | 11/2/2010 | 106 | ||||||||
South Bend | IN | Fairfield | White Lodging | 9/1/2016 | 119 | ||||||||
Overland Park | KS | Fairfield | True North | 3/1/2014 | 110 | ||||||||
Overland Park | KS | Residence Inn | True North | 3/1/2014 | 120 | ||||||||
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
| Overland Park | KS | SpringHill Suites | True North | 3/1/2014 | 102 | ||||||||
| Wichita | KS | Courtyard | Aimbridge | 3/1/2014 | 90 | ||||||||
| Baton Rouge | LA | SpringHill Suites | Dimension | 9/25/2009 | 119 | ||||||||
| Lafayette | LA | Hilton Garden Inn | LBA | 7/30/2010 | 153 | (1) | |||||||
| Lafayette | LA | SpringHill Suites | LBA | 6/23/2011 | 103 | ||||||||
| New Orleans | LA | Homewood Suites | Dimension | 3/1/2014 | 166 | (2) | |||||||
| Andover | MA | SpringHill Suites | Marriott | 11/5/2010 | 136 | ||||||||
| Marlborough | MA | Residence Inn | True North | 3/1/2014 | 112 | ||||||||
| Westford | MA | Hampton | True North | 3/1/2014 | 110 | ||||||||
| Westford | MA | Residence Inn | True North | 3/1/2014 | 108 | (2) | |||||||
| Annapolis | MD | Hilton Garden Inn | White Lodging | 3/1/2014 | 126 | ||||||||
| Silver Spring | MD | Hilton Garden Inn | White Lodging | 7/30/2010 | 107 | ||||||||
| Portland | ME | Residence Inn | Pyramid | 10/13/2017 | 179 | ||||||||
| Novi | MI | Hilton Garden Inn | White Lodging | 11/2/2010 | 148 | ||||||||
| Maple Grove | MN | Hilton Garden Inn | North Central | 9/1/2016 | 120 | ||||||||
| Rochester | MN | Hampton | Raymond | 8/3/2009 | 124 | ||||||||
| Kansas City | MO | Hampton | Raymond | 8/31/2010 | 122 | ||||||||
| Kansas City | MO | Residence Inn | True North | 3/1/2014 | 106 | ||||||||
| St. Louis | MO | Hampton | Raymond | 8/31/2010 | 190 | ||||||||
| St. Louis | MO | Hampton | Raymond | 4/30/2010 | 126 | ||||||||
| Hattiesburg | MS | Courtyard | LBA | 3/1/2014 | 84 | (2) | |||||||
| Hattiesburg | MS | Residence Inn | LBA | 12/11/2008 | 84 | ||||||||
| Carolina Beach | NC | Courtyard | Crestline | 3/1/2014 | 144 | ||||||||
| Charlotte | NC | Fairfield Inn & Suites | Newport | 9/1/2016 | 94 | ||||||||
| Charlotte | NC | Homewood Suites | McKibbon | 9/24/2008 | 118 | ||||||||
| Durham | NC | Homewood Suites | McKibbon | 12/4/2008 | 122 | ||||||||
| Fayetteville | NC | Home2 Suites | LBA | 2/3/2011 | 118 | ||||||||
| Fayetteville | NC | Residence Inn | Aimbridge | 3/1/2014 | 92 | ||||||||
| Greensboro | NC | SpringHill Suites | Newport | 3/1/2014 | 82 | ||||||||
| Holly Springs | NC | Hampton | LBA | 11/30/2010 | 124 | ||||||||
| Jacksonville | NC | Home2 Suites | LBA | 9/1/2016 | 105 | ||||||||
| Wilmington | NC | Fairfield Inn & Suites | Crestline | 3/1/2014 | 122 | ||||||||
| Winston-Salem | NC | Courtyard | McKibbon | 3/1/2014 | 122 | ||||||||
| Winston-Salem | NC | Hampton | McKibbon | 9/1/2016 | 94 | ||||||||
| Omaha | NE | Courtyard | Marriott | 3/1/2014 | 181 | ||||||||
| Omaha | NE | Hampton | White Lodging | 9/1/2016 | 139 | ||||||||
| Omaha | NE | Hilton Garden Inn | White Lodging | 9/1/2016 | 178 | (2) | |||||||
| Omaha | NE | Homewood Suites | White Lodging | 9/1/2016 | 123 | ||||||||
| Cranford | NJ | Homewood Suites | Dimension | 3/1/2014 | 108 | ||||||||
| Mahwah | NJ | Homewood Suites | Dimension | 3/1/2014 | 110 | ||||||||
| Mount Laurel | NJ | Homewood Suites | Newport | 1/11/2011 | 118 | ||||||||
| Somerset | NJ | Courtyard | Newport | 3/1/2014 | 162 | (1)(2) | |||||||
| West Orange | NJ | Courtyard | Newport | 1/11/2011 | 131 | ||||||||
| Islip/Ronkonkoma | NY | Hilton Garden Inn | White Lodging | 3/1/2014 | 165 | ||||||||
| New York | NY | Renaissance | Highgate | 3/1/2014 | 205 | (1) | |||||||
| Syracuse | NY | Courtyard | New Castle | 10/16/2015 | 102 | (2) | |||||||
| Syracuse | NY | Residence Inn | New Castle | 10/16/2015 | 78 | (2) | |||||||
| Mason | OH | Hilton Garden Inn | Schulte | 9/1/2016 | 110 | ||||||||
| Twinsburg | OH | Hilton Garden Inn | Gateway | 10/7/2008 | 142 | ||||||||
| Oklahoma City | OK | Hampton | Raymond | 5/28/2010 | 200 | ||||||||
| Oklahoma City | OK | Hilton Garden Inn | Raymond | 9/1/2016 | 155 | ||||||||
| Oklahoma City | OK | Homewood Suites | Raymond | 9/1/2016 | 100 | ||||||||
| Oklahoma City (West) | OK | Homewood Suites | Chartwell | 9/1/2016 | 90 | ||||||||
| Collegeville/Philadelphia | PA | Courtyard | White Lodging | 11/15/2010 | 132 | (2) | |||||||
| Malvern/Philadelphia | PA | Courtyard | White Lodging | 11/30/2010 | 127 | ||||||||
| Pittsburgh | PA | Hampton | Vista Host | 12/31/2008 | 132 | ||||||||
| Charleston | SC | Home2 Suites | LBA | 9/1/2016 | 122 | ||||||||
| Columbia | SC | Hilton Garden Inn | Newport | 3/1/2014 | 143 | ||||||||
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
Overland Park | KS | SpringHill Suites | True North | 3/1/2014 | 102 | ||||||||
Wichita | KS | Courtyard | Aimbridge | 3/1/2014 | 90 | ||||||||
Lafayette | LA | Hilton Garden Inn | LBA | 7/30/2010 | 153 | (2) | |||||||
Lafayette | LA | SpringHill Suites | LBA | 6/23/2011 | 103 | ||||||||
New Orleans | LA | Homewood Suites | Dimension | 3/1/2014 | 166 | (1) | |||||||
Andover | MA | SpringHill Suites | Marriott | 11/5/2010 | 136 | ||||||||
Marlborough | MA | Residence Inn | True North | 3/1/2014 | 112 | ||||||||
Westford | MA | Hampton | True North | 3/1/2014 | 110 | ||||||||
Westford | MA | Residence Inn | True North | 3/1/2014 | 108 | (1) | |||||||
Annapolis | MD | Hilton Garden Inn | Crestline | 3/1/2014 | 126 | (4) | |||||||
Silver Spring | MD | Hilton Garden Inn | White Lodging | 7/30/2010 | 107 | ||||||||
Portland | ME | Residence Inn | Pyramid | 10/13/2017 | 179 | ||||||||
Novi | MI | Hilton Garden Inn | White Lodging | 11/2/2010 | 148 | ||||||||
Maple Grove | MN | Hilton Garden Inn | North Central | 9/1/2016 | 120 | ||||||||
Rochester | MN | Hampton | Raymond | 8/3/2009 | 124 | ||||||||
St. Paul | MN | Hampton | Vista Host | 3/4/2019 | 160 | ||||||||
Kansas City | MO | Hampton | Raymond | 8/31/2010 | 122 | ||||||||
Kansas City | MO | Residence Inn | True North | 3/1/2014 | 106 | ||||||||
St. Louis | MO | Hampton | Raymond | 8/31/2010 | 190 | ||||||||
St. Louis | MO | Hampton | Raymond | 4/30/2010 | 126 | ||||||||
Hattiesburg | MS | Courtyard | LBA | 3/1/2014 | 84 | (1) | |||||||
Hattiesburg | MS | Residence Inn | LBA | 12/11/2008 | 84 | ||||||||
Carolina Beach | NC | Courtyard | Crestline | 3/1/2014 | 144 | ||||||||
Charlotte | NC | Fairfield | Newport | 9/1/2016 | 94 | ||||||||
Charlotte | NC | Homewood Suites | McKibbon | 9/24/2008 | 118 | ||||||||
Durham | NC | Homewood Suites | McKibbon | 12/4/2008 | 122 | ||||||||
Fayetteville | NC | Home2 Suites | LBA | 2/3/2011 | 118 | ||||||||
Fayetteville | NC | Residence Inn | LBA | 3/1/2014 | 92 | ||||||||
Greensboro | NC | SpringHill Suites | Newport | 3/1/2014 | 82 | ||||||||
Jacksonville | NC | Home2 Suites | LBA | 9/1/2016 | 105 | ||||||||
Wilmington | NC | Fairfield | Crestline | 3/1/2014 | 122 | ||||||||
Winston-Salem | NC | Hampton | McKibbon | 9/1/2016 | 94 | ||||||||
Omaha | NE | Courtyard | Marriott | 3/1/2014 | 181 | ||||||||
Omaha | NE | Hampton | White Lodging | 9/1/2016 | 139 | ||||||||
Omaha | NE | Hilton Garden Inn | White Lodging | 9/1/2016 | 178 | (1) | |||||||
Omaha | NE | Homewood Suites | White Lodging | 9/1/2016 | 123 | ||||||||
Cranford | NJ | Homewood Suites | Dimension | 3/1/2014 | 108 | ||||||||
Mahwah | NJ | Homewood Suites | Dimension | 3/1/2014 | 110 | ||||||||
Mount Laurel | NJ | Homewood Suites | Newport | 1/11/2011 | 118 | ||||||||
Somerset | NJ | Courtyard | Newport | 3/1/2014 | 162 | (1)(2) | |||||||
West Orange | NJ | Courtyard | Newport | 1/11/2011 | 131 | ||||||||
Islip/Ronkonkoma | NY | Hilton Garden Inn | Crestline | 3/1/2014 | 165 | (4) | |||||||
New York | NY | Renaissance | Highgate | 3/1/2014 | 208 | (2)(5) | |||||||
Syracuse | NY | Courtyard | Crestline | 10/16/2015 | 102 | (4) | |||||||
Syracuse | NY | Residence Inn | Crestline | 10/16/2015 | 78 | (4) | |||||||
Mason | OH | Hilton Garden Inn | Raymond | 9/1/2016 | 110 | (4) | |||||||
Twinsburg | OH | Hilton Garden Inn | Interstate | 10/7/2008 | 142 | ||||||||
Oklahoma City | OK | Hampton | Raymond | 5/28/2010 | 200 | ||||||||
Oklahoma City | OK | Hilton Garden Inn | Raymond | 9/1/2016 | 155 | ||||||||
Oklahoma City | OK | Homewood Suites | Raymond | 9/1/2016 | 100 | ||||||||
Oklahoma City (West) | OK | Homewood Suites | Chartwell | 9/1/2016 | 90 | ||||||||
Collegeville/Philadelphia | PA | Courtyard | White Lodging | 11/15/2010 | 132 | (1) | |||||||
Malvern/Philadelphia | PA | Courtyard | White Lodging | 11/30/2010 | 127 | ||||||||
Pittsburgh | PA | Hampton | Newport | 12/31/2008 | 132 | (4) | |||||||
Charleston | SC | Home2 Suites | LBA | 9/1/2016 | 122 | ||||||||
Columbia | SC | Hilton Garden Inn | Newport | 3/1/2014 | 143 | ||||||||
Columbia | SC | TownePlace Suites | Newport | 9/1/2016 | 91 | ||||||||
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
| Columbia | SC | TownePlace Suites | Newport | 9/1/2016 | 91 | ||||||||
| Greenville | SC | Residence Inn | McKibbon | 3/1/2014 | 78 | ||||||||
| Hilton Head | SC | Hilton Garden Inn | McKibbon | 3/1/2014 | 104 | ||||||||
| Chattanooga | TN | Homewood Suites | LBA | 3/1/2014 | 76 | ||||||||
| Franklin | TN | Courtyard | Chartwell | 9/1/2016 | 126 | (2) | |||||||
| Franklin | TN | Residence Inn | Chartwell | 9/1/2016 | 124 | (2) | |||||||
| Jackson | TN | Hampton | Vista Host | 12/30/2008 | 83 | ||||||||
| Johnson City | TN | Courtyard | LBA | 9/25/2009 | 90 | ||||||||
| Knoxville | TN | Homewood Suites | McKibbon | 9/1/2016 | 103 | ||||||||
| Knoxville | TN | SpringHill Suites | McKibbon | 9/1/2016 | 103 | ||||||||
| Knoxville | TN | TownePlace Suites | McKibbon | 9/1/2016 | 97 | ||||||||
| Memphis | TN | Homewood Suites | Hilton | 3/1/2014 | 140 | ||||||||
| Nashville | TN | Hilton Garden Inn | Vista Host | 9/30/2010 | 194 | ||||||||
| Nashville | TN | Home2 Suites | Vista Host | 5/31/2012 | 119 | ||||||||
| Nashville | TN | TownePlace Suites | LBA | 9/1/2016 | 101 | ||||||||
| Addison | TX | SpringHill Suites | Marriott | 3/1/2014 | 159 | ||||||||
| Allen | TX | Hampton | Gateway | 9/26/2008 | 103 | ||||||||
| Allen | TX | Hilton Garden Inn | Gateway | 10/31/2008 | 150 | ||||||||
| Arlington | TX | Hampton | Western | 12/1/2010 | 98 | ||||||||
| Austin | TX | Courtyard | White Lodging | 11/2/2010 | 145 | ||||||||
| Austin | TX | Fairfield Inn & Suites | White Lodging | 11/2/2010 | 150 | ||||||||
| Austin | TX | Hampton | Vista Host | 4/14/2009 | 124 | ||||||||
| Austin | TX | Hilton Garden Inn | White Lodging | 11/2/2010 | 117 | ||||||||
| Austin | TX | Homewood Suites | Vista Host | 4/14/2009 | 97 | ||||||||
| Austin/Round Rock | TX | Homewood Suites | Vista Host | 9/1/2016 | 115 | ||||||||
| Beaumont | TX | Residence Inn | Western | 10/29/2008 | 133 | ||||||||
| Burleson/Fort Worth | TX | Hampton | LBA | 10/7/2014 | 88 | ||||||||
| Dallas | TX | Homewood Suites | Western | 9/1/2016 | 130 | ||||||||
| Denton | TX | Homewood Suites | Chartwell | 9/1/2016 | 107 | ||||||||
| Duncanville | TX | Hilton Garden Inn | Gateway | 10/21/2008 | 142 | ||||||||
| El Paso | TX | Hilton Garden Inn | Western | 12/19/2011 | 145 | ||||||||
| El Paso | TX | Homewood Suites | Western | 3/1/2014 | 114 | ||||||||
| Fort Worth | TX | Courtyard | LBA | 2/2/2017 | 124 | ||||||||
| Fort Worth | TX | TownePlace Suites | Western | 7/19/2010 | 140 | ||||||||
| Frisco | TX | Hilton Garden Inn | Western | 12/31/2008 | 102 | ||||||||
| Grapevine | TX | Hilton Garden Inn | Western | 9/24/2010 | 110 | (2) | |||||||
| Houston | TX | Courtyard | LBA | 9/1/2016 | 124 | ||||||||
| Houston | TX | Marriott | Western | 1/8/2010 | 206 | ||||||||
| Houston | TX | Residence Inn | Western | 3/1/2014 | 129 | ||||||||
| Houston | TX | Residence Inn | Western | 9/1/2016 | 120 | ||||||||
| Irving | TX | Homewood Suites | Western | 12/29/2010 | 77 | ||||||||
| Lewisville | TX | Hilton Garden Inn | Gateway | 10/16/2008 | 165 | ||||||||
| Round Rock | TX | Hampton | Vista Host | 3/6/2009 | 94 | ||||||||
| San Antonio | TX | TownePlace Suites | Western | 3/1/2014 | 106 | ||||||||
| Shenandoah | TX | Courtyard | LBA | 9/1/2016 | 124 | ||||||||
| Stafford | TX | Homewood Suites | Western | 3/1/2014 | 78 | ||||||||
| Texarkana | TX | Courtyard | Aimbridge | 3/1/2014 | 90 | ||||||||
| Texarkana | TX | Hampton | Aimbridge | 1/31/2011 | 81 | ||||||||
| Texarkana | TX | TownePlace Suites | Aimbridge | 3/1/2014 | 85 | ||||||||
| Provo | UT | Residence Inn | Dimension | 3/1/2014 | 114 | ||||||||
| Salt Lake City | UT | Residence Inn | Huntington | 10/20/2017 | 136 | ||||||||
| Salt Lake City | UT | SpringHill Suites | White Lodging | 11/2/2010 | 143 | ||||||||
| Alexandria | VA | Courtyard | Marriott | 3/1/2014 | 178 | ||||||||
| Alexandria | VA | SpringHill Suites | Marriott | 3/28/2011 | 155 | ||||||||
| Bristol | VA | Courtyard | LBA | 11/7/2008 | 175 | ||||||||
| Charlottesville | VA | Courtyard | Crestline | 3/1/2014 | 139 | ||||||||
| Harrisonburg | VA | Courtyard | Newport | 3/1/2014 | 125 | ||||||||
| Manassas | VA | Residence Inn | Crestline | 2/16/2011 | 107 | ||||||||
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
Greenville | SC | Residence Inn | McKibbon | 3/1/2014 | 78 | ||||||||
Hilton Head | SC | Hilton Garden Inn | McKibbon | 3/1/2014 | 104 | ||||||||
Chattanooga | TN | Homewood Suites | LBA | 3/1/2014 | 76 | ||||||||
Franklin | TN | Courtyard | Chartwell | 9/1/2016 | 126 | (1) | |||||||
Franklin | TN | Residence Inn | Chartwell | 9/1/2016 | 124 | (1) | |||||||
Jackson | TN | Hampton | Vista Host | 12/30/2008 | 85 | ||||||||
Johnson City | TN | Courtyard | LBA | 9/25/2009 | 90 | ||||||||
Knoxville | TN | Homewood Suites | McKibbon | 9/1/2016 | 103 | ||||||||
Knoxville | TN | SpringHill Suites | McKibbon | 9/1/2016 | 103 | ||||||||
Knoxville | TN | TownePlace Suites | McKibbon | 9/1/2016 | 97 | ||||||||
Memphis | TN | Hampton | Crestline | 2/5/2018 | 144 | ||||||||
Memphis | TN | Homewood Suites | Hilton | 3/1/2014 | 140 | ||||||||
Nashville | TN | Hilton Garden Inn | Vista Host | 9/30/2010 | 194 | ||||||||
Nashville | TN | Home2 Suites | Vista Host | 5/31/2012 | 119 | ||||||||
Nashville | TN | TownePlace Suites | LBA | 9/1/2016 | 101 | ||||||||
Addison | TX | SpringHill Suites | Marriott | 3/1/2014 | 159 | ||||||||
Allen | TX | Hampton | Interstate | 9/26/2008 | 103 | ||||||||
Allen | TX | Hilton Garden Inn | Interstate | 10/31/2008 | 150 | ||||||||
Arlington | TX | Hampton | Western | 12/1/2010 | 98 | ||||||||
Austin | TX | Courtyard | White Lodging | 11/2/2010 | 145 | ||||||||
Austin | TX | Fairfield | White Lodging | 11/2/2010 | 150 | ||||||||
Austin | TX | Hampton | Vista Host | 4/14/2009 | 124 | ||||||||
Austin | TX | Hilton Garden Inn | White Lodging | 11/2/2010 | 117 | ||||||||
Austin | TX | Homewood Suites | Vista Host | 4/14/2009 | 97 | ||||||||
Austin/Round Rock | TX | Homewood Suites | Vista Host | 9/1/2016 | 115 | ||||||||
Beaumont | TX | Residence Inn | Western | 10/29/2008 | 133 | ||||||||
Burleson/Fort Worth | TX | Hampton | LBA | 10/7/2014 | 88 | ||||||||
Dallas | TX | Homewood Suites | Western | 9/1/2016 | 130 | ||||||||
Denton | TX | Homewood Suites | Chartwell | 9/1/2016 | 107 | ||||||||
El Paso | TX | Hilton Garden Inn | Western | 12/19/2011 | 145 | ||||||||
El Paso | TX | Homewood Suites | Western | 3/1/2014 | 114 | ||||||||
Fort Worth | TX | Courtyard | LBA | 2/2/2017 | 124 | ||||||||
Fort Worth | TX | TownePlace Suites | Western | 7/19/2010 | 140 | ||||||||
Frisco | TX | Hilton Garden Inn | Western | 12/31/2008 | 102 | ||||||||
Grapevine | TX | Hilton Garden Inn | Western | 9/24/2010 | 110 | (1) | |||||||
Houston | TX | Courtyard | LBA | 9/1/2016 | 124 | ||||||||
Houston | TX | Marriott | Western | 1/8/2010 | 206 | ||||||||
Houston | TX | Residence Inn | Western | 3/1/2014 | 129 | ||||||||
Houston | TX | Residence Inn | Western | 9/1/2016 | 120 | ||||||||
Irving | TX | Homewood Suites | Western | 12/29/2010 | 77 | ||||||||
Lewisville | TX | Hilton Garden Inn | Interstate | 10/16/2008 | 165 | ||||||||
Round Rock | TX | Hampton | Vista Host | 3/6/2009 | 94 | ||||||||
San Antonio | TX | TownePlace Suites | Western | 3/1/2014 | 106 | ||||||||
Shenandoah | TX | Courtyard | LBA | 9/1/2016 | 124 | ||||||||
Stafford | TX | Homewood Suites | Western | 3/1/2014 | 78 | ||||||||
Texarkana | TX | Hampton | Aimbridge | 1/31/2011 | 81 | ||||||||
Provo | UT | Residence Inn | Dimension | 3/1/2014 | 114 | ||||||||
Salt Lake City | UT | Residence Inn | Huntington | 10/20/2017 | 136 | ||||||||
Salt Lake City | UT | SpringHill Suites | White Lodging | 11/2/2010 | 143 | ||||||||
Alexandria | VA | Courtyard | Marriott | 3/1/2014 | 178 | ||||||||
Alexandria | VA | SpringHill Suites | Marriott | 3/28/2011 | 155 | ||||||||
Charlottesville | VA | Courtyard | Crestline | 3/1/2014 | 139 | ||||||||
Manassas | VA | Residence Inn | Crestline | 2/16/2011 | 107 | ||||||||
Richmond | VA | Independent | Crestline | 10/9/2019 | 55 | ||||||||
Richmond | VA | Courtyard | White Lodging | 12/8/2014 | 135 | ||||||||
Richmond | VA | Marriott | White Lodging | 3/1/2014 | 410 | (2) | |||||||
Richmond | VA | Residence Inn | White Lodging | 12/8/2014 | 75 | ||||||||
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
| Richmond | VA | Courtyard | White Lodging | 12/8/2014 | 135 | ||||||||
| Richmond | VA | Marriott | White Lodging | 3/1/2014 | 410 | (1) | |||||||
| Richmond | VA | Residence Inn | White Lodging | 12/8/2014 | 75 | ||||||||
| Richmond | VA | SpringHill Suites | McKibbon | 9/1/2016 | 103 | ||||||||
| Suffolk | VA | Courtyard | Crestline | 3/1/2014 | 92 | ||||||||
| Suffolk | VA | TownePlace Suites | Crestline | 3/1/2014 | 72 | ||||||||
| Virginia Beach | VA | Courtyard | Crestline | 3/1/2014 | 141 | ||||||||
| Virginia Beach | VA | Courtyard | Crestline | 3/1/2014 | 160 | ||||||||
| Kirkland | WA | Courtyard | InnVentures | 3/1/2014 | 150 | (2) | |||||||
| Seattle | WA | Residence Inn | InnVentures | 3/1/2014 | 234 | (1)(2) | |||||||
| Tukwila | WA | Homewood Suites | Dimension | 3/1/2014 | 106 | (2) | |||||||
| Vancouver | WA | SpringHill Suites | InnVentures | 3/1/2014 | 119 | ||||||||
| Total | 30,322 |
| City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||
Richmond | VA | SpringHill Suites | McKibbon | 9/1/2016 | 103 | ||||||||
Suffolk | VA | Courtyard | Crestline | 3/1/2014 | 92 | ||||||||
Suffolk | VA | TownePlace Suites | Crestline | 3/1/2014 | 72 | ||||||||
Virginia Beach | VA | Courtyard | Crestline | 3/1/2014 | 141 | ||||||||
Virginia Beach | VA | Courtyard | Crestline | 3/1/2014 | 160 | ||||||||
Kirkland | WA | Courtyard | InnVentures | 3/1/2014 | 150 | (1) | |||||||
Seattle | WA | Residence Inn | InnVentures | 3/1/2014 | 234 | (1)(2) | |||||||
Tukwila | WA | Homewood Suites | Dimension | 3/1/2014 | 106 | (1) | |||||||
Vancouver | WA | SpringHill Suites | InnVentures | 3/1/2014 | 119 | ||||||||
Total | 29,870 | ||||||||||||
(1) | Hotel is encumbered by mortgage. |
(2) | Hotel is subject to ground lease. |
(3) | Hotel is |
(4) | Manager noted was effective January 1, 2020. |
(5) | Became an independent boutique hotel on January 20, 2020. |
The Company’s investment in real estate at December 31, 2017,2019, consisted of the following (in thousands):
| Land | $ | 720,465 | ||
| Building and Improvements | 4,362,929 | |||
| Furniture, Fixtures and Equipment | 428,734 | |||
| Franchise Fees | 12,315 | |||
| 5,524,443 | ||||
| Less Accumulated Depreciation | (731,284 | ) | ||
| Investment in Real Estate, net | $ | 4,793,159 |
Land | $ | 724,054 | ||
Building and Improvements | 4,458,383 | |||
Furniture, Fixtures and Equipment | 486,386 | |||
Finance Ground Lease Assets | 197,617 | |||
Franchise Fees | 13,727 | |||
| 5,880,167 | ||||
Less Accumulated Depreciation and Amortization | (1,054,429 | ) | ||
Investment in Real Estate, net | $ | 4,825,738 |
For additional information about the Company’s properties, refer to Schedule III – Real Estate and Accumulated Depreciation and Amortization included at the end of Part IV, appearing elsewhere in this Annual Report on Form 10-K.
The Company is or may be a discussionparty to various legal proceedings that arise in the ordinary course of business. The Company is not currently involved in any litigation nor, to management’s knowledge, is any litigation threatened against the Company where the outcome would, in management’s judgment based on information currently available to the Company, have a material adverse effect on the Company’s legal proceedings, refer to Note 14 titled “Legal Proceedings” in Part II, Item 8,consolidated financial position or results of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K, which information is incorporated by reference herein.operations.
Not Applicable.
PART II
Item 5. | Market For Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
Market Information
On May 18, 2015, the Company’s common shares were listed and began trading on the NYSE under the ticker symbol “APLE” (the “Listing”). Prior to that time, there was no public market for the Company’s common shares. As of December 31, 20172019 and February 16, 2018,14, 2020, the last reported closing price per share for the Company’s common shares as reported on the NYSE was $19.61$16.25 and $18.37,$15.21, respectively. The following table sets forth the high and low sales prices per share of the Company’s common shares as reported on the NYSE and distributions declared per common share for each quarterly period indicated:
| 2017 | High | Low | Distributions(1) | |||||||||
| First Quarter | $ | 20.68 | $ | 18.45 | $ | 0.30 | ||||||
| Second Quarter | $ | 19.60 | $ | 18.26 | $ | 0.30 | ||||||
| Third Quarter | $ | 19.07 | $ | 17.49 | $ | 0.30 | ||||||
| Fourth Quarter | $ | 20.15 | $ | 18.66 | $ | 0.30 | ||||||
| 2016 | High | Low | Distributions(1) | |||||||||
| First Quarter | $ | 20.53 | $ | 16.35 | $ | 0.30 | ||||||
| Second Quarter | $ | 19.78 | $ | 17.71 | $ | 0.30 | ||||||
| Third Quarter | $ | 20.65 | $ | 18.11 | $ | 0.30 | ||||||
| Fourth Quarter | $ | 20.00 | $ | 17.32 | $ | 0.30 | ||||||
Share Return Performance
The following graph compares the cumulative total shareholder return of the Company’s common shares to the cumulative total returns of the Standard and Poor’s 500 Stock Index (“S&P 500 Index”) and the SNL USU.S. REIT Hotel Index for the period from May 18, 2015, the date of the Company’s Listing, to December 31, 2017.2019. The SNL USU.S. REIT Hotel Index is comprised of publicly traded REITs which focus on investments in hotel properties. The graph assumes an initial investment of $100 in the Company’s common shares and in each of the indices, and also assumes the reinvestment of dividends.
| Value of Initial Investment at | ||||||||||||||||||||||||||||
| Name | 05/18/15 | 06/30/15 | 12/31/15 | 06/30/16 | 12/31/16 | 06/30/17 | 12/31/17 | |||||||||||||||||||||
| Apple Hospitality REIT, Inc. | $ | 100.00 | $ | 105.95 | $ | 115.73 | $ | 112.53 | $ | 123.34 | $ | 119.17 | $ | 128.27 | ||||||||||||||
| S&P 500 Index | $ | 100.00 | $ | 97.14 | $ | 97.29 | $ | 101.02 | $ | 108.92 | $ | 119.10 | $ | 132.70 | ||||||||||||||
| SNL U.S. REIT Hotel Index | $ | 100.00 | $ | 96.87 | $ | 81.94 | $ | 84.35 | $ | 101.55 | $ | 101.12 | $ | 107.92 | ||||||||||||||
Value of Initial Investment at | ||||||||||||||||||||||||
Name | 05/18/15 | 12/31/15 | 12/31/16 | 12/31/17 | 12/31/18 | 12/31/19 | ||||||||||||||||||
Apple Hospitality REIT, Inc. | $ | 100.00 | $ | 115.73 | $ | 123.34 | $ | 128.27 | $ | 99.81 | $ | 122.64 | ||||||||||||
S&P 500 Index | $ | 100.00 | $ | 97.29 | $ | 108.92 | $ | 132.70 | $ | 126.88 | $ | 166.84 | ||||||||||||
SNL U.S. REIT Hotel Index | $ | 100.00 | $ | 81.94 | $ | 101.55 | $ | 107.92 | $ | 93.39 | $ | 108.24 | ||||||||||||
This performance graph shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such filing. The performance graph is not indicative of future investment performance. The Company does not make or endorse any predictions as to future share price performance.
Shareholder Information
As of February 16, 2018,14, 2020, the Company had approximately 8070 holders of record of its common shares and there were approximately 230224 million common shares outstanding. Because many of the Company’s common shares are
held by brokers and other institutions on behalf of shareholders, the Company believes there are substantially more beneficial holders of its common shares than record holders. In order to comply with certain requirements related to the Company’s qualification as a REIT, the Company’s amended and restated articles of incorporationCharter provides that, subject to certain exceptions, no person or entity (other than a person or entity who has been granted an exemption) may directly or indirectly, beneficially or constructively, own more than 9.8% of the aggregate of its outstanding common shares or 9.8% of the aggregate of the outstanding preferred shares of any class or series.
Distribution Information
To maintain its REIT status, the Company is required to distribute at least 90% of its ordinary income. For the years ended December 31, 20172019 and 2016,2018, the Company paid distributions of $1.20 per common share, for a total of approximately $267.9$268.7 million and $229.1$275.9 million, respectively. The Company’s current annual distribution rate, payable monthly, is $1.20 per common share. Although the Company intends to continue paying distributions on a monthly basis, the amount and timing of distributions to shareholders are within the discretion of the Company’s Board of Directors and there can be no assurance of the classification or duration of distributions at the current annual distribution rate. The amount and frequency of future distributions will depend on certain items, including but not limited to, the Company’s results of operations, cash flow from operations, economic conditions, working capital requirements, cash requirements to fund investing and financing activities, and capital expenditure requirements, including improvements to and expansions of properties, as well as the distribution requirements under federal income tax provisions for qualification as a REIT. The Company’s $965 million credit facility limits distributions to 95% of funds from operations annually unless the Company is required to distribute more to meet REIT requirements. As it has done historically, due to seasonality, the Company may use its $540 million revolving credit facility to maintain the consistency of the monthly distribution rate, taking into consideration any acquisitions, dispositions, capital improvements and economic cycles.
Share Repurchases
In May 2019, the Company’s Board of Directors authorizedapproved an extension of its existing share repurchase program to repurchase(the “Share Repurchase Program”), authorizing share repurchases up to $475 millionan aggregate of its common shares, which program will end in July 2018, if not terminated earlier.$360 million. The programShare Repurchase Program may be suspended or terminated at any time by the Company. As part of the implementation of the program, theCompany and will end in July 2020 if not terminated earlier. The Company has utilizeda written trading plans, with the plans providingplan that provides for share repurchases in open market transactions. Since inceptiontransactions that is intended to comply with Rule 10b5-1 under the Securities Exchange Act of the share repurchase program in July 2015 through December 31, 2017,1934, as amended. During 2019, the Company has purchased approximately 1.70.3 million of its common shares under its Share Repurchase Program at a weighted-average market purchase price of approximately $14.92 per common share for an aggregate purchase price, including commissions, of approximately $4.3 million and, in 2018, the Company purchased approximately 6.6 million of its common shares at a weighted-average market purchase price of approximately $17.64$15.87 per common share for an aggregate purchase price, including commissions, of approximately $29.9$104.3 million. As of December 31, 2019, approximately $359.8 million including the purchase of approximately 0.4 million of its common shares in 2016, at a weighted-average market purchase price of approximately $17.72 per common shareremained available for an aggregate purchase price of approximately $7.9 million.repurchases under this Share Repurchase Program. Repurchases under the program wereShare Repurchase Program have been funded, and the Company intends to fund future repurchases, with availability under its revolving credit facility. In connection withfacilities. The timing of share repurchases and the implementationnumber of the ATM Program, in February 2017 the Company terminated its then existing written trading plancommon shares to be repurchased under the Company’s share repurchase program and made no repurchases of its common shares in 2017. The Company plans to continue to consider opportunistic share repurchases under the $467.5 million remaining portion of the authorized $475 million share repurchase program, whichShare Repurchase Program will depend upon prevailing market conditions, regulatory requirements and other factors.
Additionally, during 20172019 and 2016,2018, certain of the Company’s employees surrendered common shares to satisfy their tax withholding obligations associated with the vesting of common shares issued under the 2014 Omnibus Incentive Plan (the “Omnibus Plan”) as described in Note 98 titled “Compensation Plans” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K.
The following is a summary of all share repurchases during the fourth quarter of 2017.
| Issuer Purchases of Equity Securities | ||||||||||||||||
| (a) | (b) | (c) | (d) | |||||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (1) | ||||||||||||
| October 1 - October 31, 2017 | - | - | - | $ | 467,500 | |||||||||||
| November 1 - November 30, 2017 | - | - | - | $ | 467,500 | |||||||||||
December 1 - December 31, 2017 (2) | 13,129 | $ | 19.85 | - | $ | 467,500 | ||||||||||
| Total | 13,129 | - | ||||||||||||||
Issuer Purchases of Equity Securities | ||||||||||||||||
(a) | (b) | (c) | (d) | |||||||||||||
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (1) | ||||||||||||
October 1 - October 31, 2019 | - | - | - | $ | 359,800 | |||||||||||
November 1 - November 30, 2019 | - | - | - | $ | 359,800 | |||||||||||
December 1 - December 31, 2019 (2) | 5,502 | $ | 15.77 | - | $ | 359,800 | ||||||||||
Total | 5,502 | - | ||||||||||||||
(1) | Represents amount outstanding under the |
(2) | Consists of common shares surrendered to the Company to satisfy tax withholding obligations associated with the vesting of restricted common shares. |
Equity Compensation Plans
The Company’s Board of Directors adopted and the Company’s shareholders approved the Omnibus Plan, which provides for the issuance of up to 10 million common shares, subject to adjustments, to employees, officers, and directors of the Company or affiliates of the Company, consultants or advisers currently providing services to the Company or affiliates of the Company, and any other person whose participation in the Omnibus Plan is determined by the Compensation Committee to be in the best interests of the Company. The Company’s Board of Directors previously adopted and the Company’s shareholders approved the non-employee directors’ stock option plan (the “Directors’ Plan”) to provide incentives to attract and retain directors. In May 2015, the DirectorsDirectors’ Plan was terminated effective upon the Listing, and no further grants can be made under the Directors’ Plan, provided however, that the termination did not affect any outstanding director option awards previously issued under the Directors’ Plan. The following is a summary of securities issued under the Company’s equity compensation plans as of December 31, 2017:
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) | ||||||||||
| Equity compensation plans approved by security holders | 478,978 | $ | 21.05 | 11,079,676 | ||||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total equity compensation plans | 478,978 | $ | 21.05 | 11,079,676 | ||||||||
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (2) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) (3) | ||||||||||
Equity compensation plans approved by security holders | 297,333 | $ | 21.81 | 8,992,653 | ||||||||
Equity compensation plans not approved by security holders | - | - | - | |||||||||
Total equity compensation plans | 297,333 | $ | 21.81 | 8,992,653 | ||||||||
(1) | Represents |
(2) | The weighted-average exercise price of outstanding options relates solely to stock options, which are the only currently outstanding exercisable security. |
(3) | Does not include remaining shares registered under the Directors’ Plan, as |
Item 6. | Selected Financial Data |
The following table sets forth selected financial data for the five years ended December 31, 2017.2019. Certain information in the table has been derived from the Company’s audited financial statements and notes thereto. This data should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K.
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands except per share and statistical data) | 2017 | 2016 (a) | 2015 | 2014 (b) | 2013 | |||||||||||||||
| Revenues: | ||||||||||||||||||||
| Room | $ | 1,143,987 | $ | 956,119 | $ | 821,733 | $ | 735,882 | $ | 353,338 | ||||||||||
| Other | 94,635 | 84,906 | 76,581 | 68,014 | 34,653 | |||||||||||||||
| Total revenue | 1,238,622 | 1,041,025 | 898,314 | 803,896 | 387,991 | |||||||||||||||
| Expenses and other income: | ||||||||||||||||||||
| Hotel operating expense | 697,402 | 582,839 | 507,081 | 455,895 | 220,214 | |||||||||||||||
| Property taxes, insurance and other expense | 69,391 | 56,860 | 46,023 | 40,046 | 20,556 | |||||||||||||||
| Ground lease expense | 11,313 | 10,409 | 9,996 | 8,341 | 302 | |||||||||||||||
| General and administrative expense | 26,341 | 17,032 | 19,552 | 20,914 | 6,169 | |||||||||||||||
| Transaction and litigation costs (reimbursements) | (2,586 | ) | 34,989 | 7,181 | 5,142 | 3,179 | ||||||||||||||
| Loss on impairment of depreciable real estate assets | 45,875 | 5,471 | 45,000 | 10,988 | - | |||||||||||||||
| Depreciation expense | 176,499 | 148,163 | 127,449 | 113,112 | 54,827 | |||||||||||||||
| Series B convertible preferred share expense | - | - | - | 117,133 | - | |||||||||||||||
| Interest and other expense, net | 47,343 | 40,026 | 33,132 | 23,523 | 8,446 | |||||||||||||||
| Investment income from note receivable | - | - | - | - | (9,040 | ) | ||||||||||||||
| (Gain) loss on sale of real estate | (16,295 | ) | 153 | (15,286 | ) | - | - | |||||||||||||
| Income tax expense | 847 | 431 | 898 | 1,969 | 1,422 | |||||||||||||||
| Total expenses and other income | 1,056,130 | 896,373 | 781,026 | 797,063 | 306,075 | |||||||||||||||
| Income from continuing operations | 182,492 | 144,652 | 117,288 | 6,833 | 81,916 | |||||||||||||||
| Income from discontinued operations, net of tax | - | - | - | - | 33,306 | |||||||||||||||
| Net income | $ | 182,492 | $ | 144,652 | $ | 117,288 | $ | 6,833 | $ | 115,222 | ||||||||||
| Per Share: | ||||||||||||||||||||
| Income from continuing operations per common share | $ | 0.82 | $ | 0.76 | $ | 0.65 | $ | 0.04 | $ | 0.90 | ||||||||||
| Income from discontinued operations per common share | - | - | - | - | 0.36 | |||||||||||||||
| Net income per common share | $ | 0.82 | $ | 0.76 | $ | 0.65 | $ | 0.04 | $ | 1.26 | ||||||||||
| Distributions declared per common share (c) | $ | 1.20 | $ | 1.20 | $ | 1.37 | $ | 1.39 | $ | 1.66 | ||||||||||
| Weighted-average common shares outstanding - basic and diluted | 223,526 | 190,856 | 180,261 | 171,489 | 91,308 | |||||||||||||||
| Balance Sheet Data (at end of period): | ||||||||||||||||||||
| Cash and cash equivalents | $ | - | $ | - | $ | - | $ | - | $ | 18,102 | ||||||||||
| Investment in real estate, net | $ | 4,793,159 | $ | 4,823,489 | $ | 3,641,767 | $ | 3,492,821 | $ | 1,443,498 | ||||||||||
| Assets held for sale | $ | - | $ | 39,000 | $ | - | $ | 195,588 | $ | - | ||||||||||
| Total assets | $ | 4,902,338 | $ | 4,979,883 | $ | 3,722,775 | $ | 3,776,805 | $ | 1,489,926 | ||||||||||
| Total debt | $ | 1,222,196 | $ | 1,337,963 | $ | 998,103 | $ | 706,626 | $ | 161,196 | ||||||||||
| Shareholders’ equity | $ | 3,571,085 | $ | 3,517,064 | $ | 2,647,058 | $ | 3,014,624 | $ | 1,311,811 | ||||||||||
| Net book value per share | $ | 15.53 | $ | 15.78 | $ | 15.18 | $ | 16.13 | $ | 14.35 | ||||||||||
| Other Data: | ||||||||||||||||||||
| Cash Flow From (Used In): | ||||||||||||||||||||
| Operating activities | $ | 384,741 | $ | 332,034 | $ | 281,052 | $ | 252,187 | $ | 137,446 | ||||||||||
| Investing activities | $ | (159,292 | ) | $ | (169,837 | ) | $ | (82,285 | ) | $ | (58,404 | ) | $ | 25,446 | ||||||
| Financing activities | $ | (225,449 | ) | $ | (162,197 | ) | $ | (198,767 | ) | $ | (211,885 | ) | $ | (153,817 | ) | |||||
| Number of hotels owned at end of period | 239 | 235 | 179 | 191 | 89 | |||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
(in thousands except per share and statistical data) | 2019 | 2018 | 2017 | 2016 (1) | 2015 | |||||||||||||||
Revenues: | ||||||||||||||||||||
Room | $ | 1,167,203 | $ | 1,172,331 | $ | 1,143,987 | $ | 956,119 | $ | 821,733 | ||||||||||
Food and beverage | 59,815 | 62,600 | 66,030 | 59,558 | 54,710 | |||||||||||||||
Other | 39,579 | 35,624 | 28,605 | 25,348 | 21,871 | |||||||||||||||
Total revenue | 1,266,597 | 1,270,555 | 1,238,622 | 1,041,025 | 898,314 | |||||||||||||||
Expenses and other income: | ||||||||||||||||||||
Hotel operating expense | 724,416 | 715,934 | 697,402 | 582,839 | 507,081 | |||||||||||||||
Property taxes, insurance and other expense | 75,840 | 74,640 | 69,391 | 56,860 | 46,023 | |||||||||||||||
Operating ground lease expense (2) | 1,658 | 11,364 | 11,313 | 10,409 | 9,996 | |||||||||||||||
General and administrative expense | 36,210 | 24,294 | 26,341 | 17,032 | 19,552 | |||||||||||||||
Loss on impairment of depreciable real estate assets | 6,467 | 3,135 | 45,875 | 5,471 | 45,000 | |||||||||||||||
Depreciation and amortization expense (2) | 193,240 | 183,482 | 176,499 | 148,163 | 127,449 | |||||||||||||||
Transaction and litigation costs (reimbursements) | - | - | (2,586 | ) | 34,989 | 7,181 | ||||||||||||||
(Gain) loss on sale of real estate | (5,021 | ) | (152 | ) | (16,295 | ) | 153 | (15,286 | ) | |||||||||||
Interest and other expense, net (2) | 61,191 | 51,185 | 47,343 | 40,026 | 33,132 | |||||||||||||||
Income tax expense | 679 | 587 | 847 | 431 | 898 | |||||||||||||||
Total expenses and other income | 1,094,680 | 1,064,469 | 1,056,130 | 896,373 | 781,026 | |||||||||||||||
Net income | $ | 171,917 | $ | 206,086 | $ | 182,492 | $ | 144,652 | $ | 117,288 | ||||||||||
Per Share: | ||||||||||||||||||||
Net income per common share | $ | 0.77 | $ | 0.90 | $ | 0.82 | $ | 0.76 | $ | 0.65 | ||||||||||
Distributions declared per common share (3) | $ | 1.20 | $ | 1.20 | $ | 1.20 | $ | 1.20 | $ | 1.37 | ||||||||||
Weighted-average common shares outstanding - basic and diluted | 223,910 | 229,659 | 223,526 | 190,856 | 180,261 | |||||||||||||||
Balance Sheet Data (at end of period): | ||||||||||||||||||||
Investment in real estate, net (2) | $ | 4,825,738 | $ | 4,816,410 | $ | 4,793,159 | $ | 4,823,489 | $ | 3,641,767 | ||||||||||
Assets held for sale | $ | 12,093 | $ | - | $ | - | $ | 39,000 | $ | - | ||||||||||
Total assets (2) | $ | 4,942,411 | $ | 4,928,672 | $ | 4,902,338 | $ | 4,979,883 | $ | 3,722,775 | ||||||||||
Debt, net | $ | 1,320,407 | $ | 1,412,242 | $ | 1,222,196 | $ | 1,337,963 | $ | 998,103 | ||||||||||
Finance lease liabilities (2) | $ | 216,627 | $ | - | $ | - | $ | - | $ | - | ||||||||||
Shareholders' equity | $ | 3,291,013 | $ | 3,409,010 | $ | 3,571,085 | $ | 3,517,064 | $ | 2,647,058 | ||||||||||
Net book value per share | $ | 14.70 | $ | 15.22 | $ | 15.53 | $ | 15.78 | $ | 15.18 | ||||||||||
Other Data: | ||||||||||||||||||||
Cash Flow From (Used In): | ||||||||||||||||||||
Operating activities | $ | 381,674 | $ | 404,812 | $ | 384,071 | $ | 331,171 | $ | 279,628 | ||||||||||
Investing activities | $ | (14,324 | ) | $ | (210,160 | ) | $ | (158,256 | ) | $ | (162,200 | ) | $ | (90,736 | ) | |||||
Financing activities | $ | (366,321 | ) | $ | (190,811 | ) | $ | (225,449 | ) | $ | (162,197 | ) | $ | (198,767 | ) | |||||
Number of hotels owned at end of period | 233 | 241 | 239 | 235 | 179 | |||||||||||||||
(1) | Effective September 1, 2016, the Company completed the merger with Apple |
(2) | Effective January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), electing to recognize and measure its leases prospectively at the beginning of the period of adoption through a cumulative-effect adjustment to shareholders’ equity without restating the presentation of periods prior to the effective date. Under the new lease accounting standard, the Company classified four ground leases as finance leases that were previously classified as operating leases in accordance with the previous accounting standard. In 2019, the Company recognized approximately $4.5 million of amortization expense and approximately $8.2 million of interest expense associated with these four finance leases. Results prior to January 1, 2019 were not restated and therefore, for the years ended December 31, 2018, 2017, 2016 and 2015, the Company recognized approximately $9.5 million, $9.5 million, $8.9 million and $8.6 million, respectively, of operating ground lease expense associated with these four ground leases. See Note 1 titled “Organization and Summary of Significant Accounting Policies” and Note 10 titled “Lease Commitments” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form |
(3) | |
2015 distributions include a distribution of $0.10 per common share that was declared in December 2015 and paid in January 2016. For all other periods presented, distributions per common share declared equaled distributions paid. |
The following discussion and analysis should be read in conjunction with Item 8, the Consolidated Financial Statements and Notes thereto, the introduction of Part I regarding “Forward-Looking Statements,” and Item 1A, “Risk Factors” appearing elsewhere in this Annual Report on Form 10-K.
Overview
The Company is a Virginia corporation that has elected to be treated as a REIT for federal income tax purposes. The Company is self-advised and invests in income-producing real estate, primarily in the lodging sector, in the United States.U.S. As of December 31, 2017,2019, the Company owned 239233 hotels with an aggregate of 30,32229,870 rooms located in urban, high-end suburban and developing markets throughout 34 states. Allstates, including one hotel with 105 rooms classified as held for sale, which was sold to an unrelated party in January 2020. Substantially all of the Company’s hotels operate under Marriott or Hilton brands. The hotels are operated and managed under separate management agreements with 2321 hotel management companies, none of which are affiliated with the Company. The Company’s common shares are listed on the NYSE under the ticker symbol “APLE.”
Recent Hotel Portfolio Activities
The Company continually monitors market conditions and attempts to maximize shareholder value by investing in properties that it believes provide superior value inover the long term. Consistent with this strategy and the Company’s focus on investing in select-servicerooms-focused hotels, the Company acquired sixthree hotels for an aggregate purchase price of approximately $161.8$59.3 million during 2017:2019: a new 124-room Courtyard in Fort Worth, Texas, a new 104-room Hilton Garden Inn and 106-room Home2 Suites on the same site in Birmingham, Alabama, a 179-room Residence Inn in Portland, Maine, a 136-room Residence Inn in Salt Lake City, Utah and a 135-room Home2 Suites in Anchorage, Alaska. In February 2018, the Company completed the purchase of two additional hotels (a 119-room160-room existing Hampton Inn & Suites in Atlanta, GeorgiaSt. Paul, Minnesota, a 128-room newly constructed Home2 Suites in Orlando, Florida and a 144-room Hampton Inn & Suites55-room existing independent boutique hotel in Memphis, Tennessee) for an aggregate purchase priceRichmond, Virginia. Although the independent boutique hotel is not affiliated with a brand, the Company plans to reposition the hotel to operate consistently with its rooms-focused hotels. Also, as of $63.0 million. TheDecember 31, 2019, the Company also hashad outstanding contracts for the potential purchase of two additionalsix hotels that are under construction for a total expected purchase price of approximately $64.8$208.8 million, all of which are under development and are planned to be completed and opened for business during 2018,over the next five to 18 months from December 31, 2019, at which time closingclosings on these hotels isare expected to occur. In each case, there are a number of conditions to closing that have not yet been satisfied and there can be no assurance that closings on these hotels will occur under the outstanding purchase contracts. The Company utilized its revolving credit facility to fund the 2017 and 2018completed acquisitions and plans to utilize the revolvingits credit facilityfacilities available at closing for any additional acquisitions that are completed in 2018.
For its existing portfolio, the Company monitors each of its properties’property’s profitability, market conditions and capital requirements and attempts to maximize shareholder value by disposing of properties when it believes that the proceedssuperior value can be provided from the sale of the property can be reinvested into opportunities that have more growth potential.property. As a result, on April 20, 2017,in 2019, the Company completedsold a total of 11 hotels for a total combined gross sales price of approximately $121.7 million. In January 2020, the saleCompany sold one of its 224-room Hilton hotel in Dallas, Texas,hotels for a gross sales price of $13.0 million and, as of January 31, 2020, the Company had an outstanding contract to sell one of its hotels for a gross sales price of approximately $56.1 million. Also, on October 5, 2017,$32.0 million. Although the Company completedis working towards the sale of its 316-room Marriottthe hotel under contract, there are a number of conditions to closing that have not yet been satisfied and there can be no assurance that a closing on this hotel will occur under the outstanding sale contract. If the closing occurs, this sale is expected to be completed in Fairfax, Virginia, for a gross sales pricethe first quarter of approximately $41.5 million.2020. The Company used the net proceeds from the sales were or will be used to pay down borrowings on itsthe Company’s revolving credit facility.
See Note 32 titled “Investment in Real Estate” and Note 43 titled “Dispositions”“Assets Held for Sale, Dispositions and Hotel Sale Contracts” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information concerning these transactions.
Effective September 1, 2016,January 20, 2020, the Company completedconverted its merger with Apple Ten, and, as a resultNew York, New York Renaissance hotel to an independent boutique hotel. The Company anticipates that it will incur total conversion costs of approximately $1.0 million to complete the transition, of which approximately $0.1 million was incurred in 2019. The intent of the merger, acquiredconversion is to provide greater long-term flexibility with the businessoperations of Apple Ten,the hotel. Although the Company is not able to fully estimate the near-term impact associated with the transition, it does anticipate operational disruption as the management team works to replace revenue that historically came from participation in the Renaissance brand system. With the conversion of this hotel and the October 2019 acquisition of the existing independent boutique hotel
in Richmond, Virginia, mentioned above, the Company has two independent boutique hotels with a REIT which, immediatelycombined total of 263 rooms.
New Lease Accounting Standard
On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), electing to recognize and measure its leases prospectively at the beginning of the period of adoption through a cumulative-effect adjustment to shareholders’ equity, without restating the presentation of periods prior to the merger, owned 56 Marriott and Hilton branded primarily select-service and extended-stay hotels locatedeffective date (the “new lease accounting standard”). Under the new lease accounting standard, beginning in 17 states with an aggregate of 7,209 rooms, and assumed all of Apple Ten’s assets and liabilities at closing. For purpose of accounting for the transaction, the aggregate value of the merger consideration paid to Apple Ten shareholders was estimated to be approximately $1.0 billion, and was comprised of approximately $956.1 million for the issuance of approximately 48.7 million common shares of the Company valued at $19.62 per share, which was the closing price2019, four of the Company’s common shares on August 31, 2016 (the dateground leases that were previously accounted for as operating leases are accounted for as finance leases. For these finance leases, effective January 1, 2019, the merger was approved),Company recognizes amortization expense, included in depreciation and $93.6 millionamortization expense, and interest expense, included in cash, which was funded through borrowings oninterest and other expense, net, instead of operating ground lease expense, in the Company’s revolving credit facility. Upon completionconsolidated statements of operations. Results prior to January 1, 2019 have not been restated. As a result, the comparability of operating ground lease expense, depreciation and amortization expense, and interest and other expense, net for the years ended December 31, 2019, 2018 and 2017 as noted below are affected by the implementation of the merger, the advisory and related party arrangements with respect to the Company, Apple Ten and Apple Ten’s advisors were terminated.new lease accounting standard. See Note 21 titled “Merger with Apple REIT Ten, Inc.”“Organization and Summary of Significant Accounting Policies” and Note 10 titled “Lease Commitments” in Part II, Item 8, of the Consolidated Financial Statements and
Hotel Operations
Although hotel performance can be influenced by many factors including local competition, local and general economic conditions in the United StatesU.S. and the performance of individual managers assigned to each hotel, performance of the Company’s hotels as compared to other hotels within their respective local markets, in general, has met the Company’s expectations for the period owned. Over the past several quarters, the lodging industry and the Company have experienced low single digit revenue growth. Moderateyears, improvements in the general U.S. economy, which have broadly increased demand for hotels, have been partially offset by increased lodging supply in many markets. With modest revenueflat growth in RevPAR and increased labor costs, the Company hasCompany’s Comparable Hotels produced stableslightly lower operating results during 2017 on a comparable basis (as defined below) with expense increases generally offsetting revenue growth.2019 as compared to 2018. There is no way to predict future economic conditions, and there continue to be additional factors that could negatively affect the lodging industry and the Company, including but not limited to, continued increased hotel supply in certain markets, labor uncertainty both for the economy as a whole and the lodging industry in particular, global volatility, and government fiscal policies.policies, travel-related health concerns, political changes and economic concerns in the U.S. The Company on a comparable basis,is forecasting flat to slightly negative RevPAR growth and industry are forecasting a low single digit percentage increase in revenuelower operating results for 2018its Comparable Hotels for 2020 as compared to 2017. The low2019, which reflects modest expectations for demand growth, is primarily dueconsistent with modest growth expectations for the U.S. economy, relatively consistent anticipated hotel supply growth, unfavorable comparisons caused by outsized demand in 2019 related to inconsistent demandnatural disaster recovery efforts in certain markets and increased hotel supply meeting demand growth in others, limitingthe transition of the Company’s abilityfull service hotel in New York, New York from the Renaissance brand to increase rates.
In evaluating financial condition and operating performance, the most important indicators on which the Company focuses are revenue measurements, such as average occupancy, ADR and RevPAR, and expenses, such as hotel operating expenses, general and administrative expenses and other expenses described below.
The following is a summary of the results from operations of the Company’s hotels for their respective periods of ownership by the Company.
| Years Ended December 31, | ||||||||||||||||||||||||||||||||
| (in thousands, except statistical data) | 2017 | Percent of Revenue | 2016 | Percent of Revenue | Change 2016 to 2017 | 2015 | Percent of Revenue | Change 2015 to 2016 | ||||||||||||||||||||||||
| Total revenue | $ | 1,238,622 | 100.0 | % | $ | 1,041,025 | 100.0 | % | 19.0 | % | $ | 898,314 | 100.0 | % | 15.9 | % | ||||||||||||||||
| Hotel operating expense | 697,402 | 56.3 | % | 582,839 | 56.0 | % | 19.7 | % | 507,081 | 56.4 | % | 14.9 | % | |||||||||||||||||||
| Property taxes, insurance and other expense | 69,391 | 5.6 | % | 56,860 | 5.5 | % | 22.0 | % | 46,023 | 5.1 | % | 23.5 | % | |||||||||||||||||||
| Ground lease expense | 11,313 | 0.9 | % | 10,409 | 1.0 | % | 8.7 | % | 9,996 | 1.1 | % | 4.1 | % | |||||||||||||||||||
| General and administrative expense | 26,341 | 2.1 | % | 17,032 | 1.6 | % | 54.7 | % | 19,552 | 2.2 | % | -12.9 | % | |||||||||||||||||||
| Transaction and litigation costs (reimbursements) | (2,586 | ) | 34,989 | n/a | 7,181 | n/a | ||||||||||||||||||||||||||
| Loss on impairment of depreciable real estate assets | 45,875 | 5,471 | n/a | 45,000 | n/a | |||||||||||||||||||||||||||
| Depreciation expense | 176,499 | 148,163 | 19.1 | % | 127,449 | 16.3 | % | |||||||||||||||||||||||||
| Interest and other expense, net | 47,343 | 40,026 | 18.3 | % | 33,132 | 20.8 | % | |||||||||||||||||||||||||
| Gain (loss) on sale of real estate | 16,295 | (153 | ) | n/a | 15,286 | n/a | ||||||||||||||||||||||||||
| Income tax expense | 847 | 431 | 96.5 | % | 898 | -52.0 | % | |||||||||||||||||||||||||
| Number of hotels owned at end of period | 239 | 235 | 1.7 | % | 179 | 31.3 | % | |||||||||||||||||||||||||
| ADR | $ | 134.61 | $ | 133.61 | 0.7 | % | $ | 129.38 | 3.3 | % | ||||||||||||||||||||||
| Occupancy | 77.4 | % | 76.9 | % | 0.7 | % | 76.9 | % | - | |||||||||||||||||||||||
| RevPAR | $ | 104.13 | $ | 102.80 | 1.3 | % | $ | 99.46 | 3.4 | % | ||||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||||||||||
(in thousands, except statistical data) | 2019 | Percent of Revenue | 2018 | Percent of Revenue | Change 2018 to 2019 | 2017 | Percent of Revenue | Change 2017 to 2018 | ||||||||||||||||||||||||
Total revenue | $ | 1,266,597 | 100.0 | % | $ | 1,270,555 | 100.0 | % | -0.3 | % | $ | 1,238,622 | 100.0 | % | 2.6 | % | ||||||||||||||||
Hotel operating expense | 724,416 | 57.2 | % | 715,934 | 56.3 | % | 1.2 | % | 697,402 | 56.3 | % | 2.7 | % | |||||||||||||||||||
Property taxes, insurance and other expense | 75,840 | 6.0 | % | 74,640 | 5.9 | % | 1.6 | % | 69,391 | 5.6 | % | 7.6 | % | |||||||||||||||||||
Operating ground lease expense(1) | 1,658 | 0.1 | % | 11,364 | 0.9 | % | -85.4 | % | 11,313 | 0.9 | % | 0.5 | % | |||||||||||||||||||
General and administrative expense | 36,210 | 2.9 | % | 24,294 | 1.9 | % | 49.0 | % | 26,341 | 2.1 | % | -7.8 | % | |||||||||||||||||||
Loss on impairment of depreciable real estate assets | 6,467 | 3,135 | n/a | 45,875 | n/a | |||||||||||||||||||||||||||
Depreciation and amortization expense(1) | 193,240 | 183,482 | 5.3 | % | 176,499 | 4.0 | % | |||||||||||||||||||||||||
Transaction and litigation costs (reimbursements) | - | - | n/a | (2,586 | ) | n/a | ||||||||||||||||||||||||||
Gain on sale of real estate | 5,021 | 152 | n/a | 16,295 | n/a | |||||||||||||||||||||||||||
Interest and other expense, net(1) | 61,191 | 51,185 | 19.5 | % | 47,343 | 8.1 | % | |||||||||||||||||||||||||
Income tax expense | 679 | 587 | 15.7 | % | 847 | -30.7 | % | |||||||||||||||||||||||||
Number of hotels owned at end of period | 233 | 241 | -3.3 | % | 239 | 0.8 | % | |||||||||||||||||||||||||
ADR | $ | 137.30 | $ | 136.04 | 0.9 | % | $ | 134.61 | 1.1 | % | ||||||||||||||||||||||
Occupancy | 77.0 | % | 76.9 | % | 0.1 | % | 77.4 | % | -0.6 | % | ||||||||||||||||||||||
RevPAR | $ | 105.72 | $ | 104.66 | 1.0 | % | $ | 104.13 | 0.5 | % | ||||||||||||||||||||||
(1) | As discussed above, effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), electing to recognize and measure its leases prospectively at the beginning of the period of adoption through a cumulative-effect adjustment to shareholders’ equity without restating the presentation of periods prior to the effective date. Under the new lease accounting standard, the Company classified four ground leases as finance leases that were previously classified as operating leases in accordance with the previous accounting standard. In 2019, the Company recognized approximately $4.5 million of amortization expense and approximately $8.2 million of interest expense associated with these four finance leases. Results prior to January 1, 2019 were not restated and therefore, for the years ended December 31, 2018 and 2017, the Company recognized approximately $9.5 million each year of operating ground lease expense associated with these four ground leases. See Note 1 titled “Organization and Summary of Significant Accounting Policies” and Note 10 titled “Lease Commitments” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information on the adoption of the new lease accounting standard. |
Comparable Hotels Operating Results
The following table reflects certain operating statistics for the Company’s 239232 hotels owned and held for use as of December 31, 2017 (“Comparable Hotels”).2019. The Company defines metrics from Comparable Hotels as results generated by the 239232 hotels owned and held for use as of the end of the reporting period. For the hotels acquired during the reporting periods shown, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership using information provided by the properties’ prior owners at the time of acquisition and not adjusted by the Company. This information has not been audited, either for the periods owned or prior to ownership by the Company. For dispositions and assets held for sale, results have been excluded for the Company’s period of ownership.
Years Ended December 31, | ||||||||||||||||||||
2019 | 2018 | Change 2018 to 2019 | 2017 | Change 2017 to 2018 | ||||||||||||||||
ADR | $ | 137.70 | $ | 137.43 | 0.2 | % | $ | 136.44 | 0.7 | % | ||||||||||
Occupancy | 77.1 | % | 77.2 | % | -0.1 | % | 77.8 | % | -0.8 | % | ||||||||||
RevPAR | $ | 106.12 | $ | 106.07 | - | $ | 106.13 | -0.1 | % | |||||||||||
| Years Ended December 31, | ||||||||||||||||||||
| 2017 | 2016 | Change 2016 to 2017 | 2015 | Change 2015 to 2016 | ||||||||||||||||
| ADR | $ | 134.75 | $ | 133.45 | 1.0 | % | $ | 130.02 | 2.6 | % | ||||||||||
| Occupancy | 77.5 | % | 77.0 | % | 0.6 | % | 77.0 | % | - | |||||||||||
| RevPAR | $ | 104.40 | $ | 102.80 | 1.6 | % | $ | 100.12 | 2.7 | % | ||||||||||
Same Store Operating Results
The following table reflects certain operating statistics for the 170218 hotels owned and held for use by the Company as of January 1, 20152017 and during the entirety of the reporting periods being compared (“Same Store Hotels”). This information has not been audited.
| Years Ended December 31, | ||||||||||||||||||||
| 2017 | 2016 | Change 2016 to 2017 | 2015 | Change 2015 to 2016 | ||||||||||||||||
| ADR | $ | 134.35 | $ | 132.76 | 1.2 | % | $ | 129.40 | 2.6 | % | ||||||||||
| Occupancy | 77.3 | % | 77.2 | % | 0.1 | % | 77.2 | % | - | |||||||||||
| RevPAR | $ | 103.88 | $ | 102.50 | 1.3 | % | $ | 99.84 | 2.7 | % | ||||||||||
| Years Ended December 31, | ||||||||||||||||||||
2019 | 2018 | Change 2018 to 2019 | 2017 | Change 2017 to 2018 | ||||||||||||||||
ADR | $ | 136.93 | $ | 136.86 | 0.1 | % | $ | 135.94 | 0.7 | % | ||||||||||
Occupancy | 77.2 | % | 77.4 | % | -0.3 | % | 78.0 | % | -0.8 | % | ||||||||||
RevPAR | $ | 105.73 | $ | 105.88 | -0.1 | % | $ | 105.98 | -0.1 | % | ||||||||||
As discussed above, hotel performance is impacted by many factors, including the economic conditions in the United StatesU.S. as well as each individual locality. Economic indicators in the United StatesU.S. have generally been favorable, which has been partially offset by increased lodging supply in many of the Company’s markets. As a result, the Company’s revenue and operating results for its Comparable Hotels and Same Store Hotels experienced modest growth inwere generally unchanged from 2017 as compared to 2016 and 2015.2019. The Company expects continued modest improvement in revenue and operating resultsits RevPAR growth for its Comparable Hotels in 2018 as2020 to be flat to slightly negative compared to 2017.its performance in 2019. The Company’s hotels in general have shown results consistent with to slightly favorable as compared to industry, brand and brand averageschain scale averages. From 2017 to 2019, the Company’s results were impacted by recovery and restoration efforts from natural disasters affecting several markets. In 2017, the Company experienced an increase in demand as a result of the restoration and recovery efforts in Houston and Austin, Texas and in many of its Florida markets resulting from hurricanes Harvey and Irma. In 2018, the Company’s hotels located in eastern North Carolina, southern Alabama and the Florida Panhandle were affected by hurricanes Florence and Michael, including the closure of the Company’s two hotels in the Panama City, Florida area. During 2019, the Company experienced increases in demand for markets affected by hurricanes Florence and Michael and also experienced an increase in demand in Anchorage, Alaska resulting from recovery and restoration efforts related to the late 2018 earthquake in the area.
Results of Operations
A discussion regarding the Company’s results of operations for the periodyear ended December 31, 2019 compared to the year ended December 31, 2018 is presented below. A discussion regarding the results of ownership.
As of December 31, 2017,2019, the Company owned 239233 hotels with a total of 30,32229,870 rooms as compared to 235241 hotels with a total of 30,07330,812 rooms as of December 31, 2016.2018. Results of operations are included only for the period of ownership for hotels acquired or disposed of during 2017 and 2016.all periods presented. During 2017,2019, the Company acquired threeone newly constructed hotels (onehotel on February 2, 2017March 19, 2019 and two on September 12, 2017) and three existing hotels (one on October 13, 2017,March 4, 2019 and one on October 20, 20179, 2019), and sold 11 hotels (nine on March 28, 2019, one on December 19, 2019 and one on December 1, 2017), and sold two hotels (one on April 20, 2017 and one on October 5, 2017)30, 2019). During 2016, 2018, the Company acquired 56 hotels in the Apple Ten merger effective September 1, 2016, acquired one additional newly constructed hotel on July 1, 2016May 2, 2018 and four existing hotels (two on February 5, 2018, one on June 28, 2018 and one on December 7, 2018), and sold three hotels (two on July 13, 2018 and one hotel on December 6, 2016.November 29, 2018). As a result, the comparability of results for the years ended December 31, 20172019 and 20162018 as discussed below is significantly impacted by these transactions.
Revenues
The Company’s principal source of revenue is hotel revenue consisting of room, food and beverage, and other related revenue. For each of the years ended December 31, 2019 and 2018, the Company had total revenue of $1.3 billion. For the years ended December 31, 20172019 and 2016, the Company had total revenue of $1.2 billion and $1.0
During 2017,2019, the CompanyCompany’s Comparable Hotels experienced modest increasesa slight increase in bothADR and a slight decrease in occupancy and ADR as compared to 2016, resulting in a 1.6% increase in2018, leaving RevPAR for Comparable Hotels.Hotels virtually unchanged. Overall, because of its geographic diversity, the Company’sCompany���s Comparable Hotels’ RevPAR growthchange for 20172019 was generally consistent to slightly favorable as compared to industry, brand and chain scale averages. As a result of the recovery and restoration efforts in line with industry/brand averages. Duringcertain markets that began during the fourth quarter of 2017,2018, the Company’s Comparable Hotels’ RevPAR decreased 0.9% in the fourth quarter of 2019 as compared to the same period of 2018. The Company, for the full year of 2019, experienced increased 3.5%. revenue due to demand in the Florida Panhandle, southern Alabama, eastern North Carolina and Anchorage, Alaska resulting from recovery and restoration efforts related to hurricanes Florence and Michael and the 2018 earthquake in Anchorage, Alaska. Markets and areas with above average growth in 20172019 for both the Company and industry included Richmond,Birmingham, Alabama, Norfolk, Virginia, Houston, Texas, Knoxville, Tennessee, Kansas City, Missouri, San Diego, CaliforniaPhoenix and Tampa, Florida.Tucson, Arizona, Portland, Maine and Sacramento, California. Markets that were below average for both the Company and industry included Dallas,central and southern Florida, Boston, Massachusetts, Houston, Texas, Austin, TexasOklahoma City, Oklahoma and Charlotte, North Carolina. In the second half of 2017, Houston and certain Florida markets experienced an increase in demand due to evacuation and restoration efforts related to hurricanes Harvey and Irma, which led to increased RevPAR for the Company and industry in those markets. While certain of the Company’s hotels incurred minor wind and water related damage from the hurricanes, the overall impact was not material. The Company’s growth during 2017 was also impacted by a decline in the Los Angeles, California market due to outsized growth in 2016 from the Porter Ranch gas leak.
Hotel Operating Expense
Hotel operating expense consists of direct room operating expense, hotel administrative expense, sales and marketing expense, utilities expense, repair and maintenance expense, franchise fees and management fees. For the years ended December 31, 20172019 and 2016,2018, respectively, hotel operating expense totaled $697.4$724.4 million and $582.8$715.9 million or 56.3%57.2% and 56.0%56.3% of total revenue for each respective period. Overall hotel operational expenses for 2017 includeyear, which is consistent with the results of the six hotels acquiredincreases in 2017 from their respective dates of acquisition and the results of two hotels sold during the year until their respective dates of sale, as well as the results of the 56 hotels acquired in the Apple Ten merger on September 1, 2016 and one hotel acquired on July 1, 2016 for the full year. Expenses for 2016 include the results of the 57 hotels acquired from their respective dates of acquisition and one hotel sold until the date of sale. For the Company’s Comparable Hotels hotel operating expense as a percentage of revenue increased approximately 90 basis points for the year ended December 31, 2017 as compared to the year ended December 31, 2016. During 2017, the Company experienced increasessame period. Increases in labor costs as a percentage of revenue which wasduring 2019 as compared to 2018 were the primary cause of the increase in hotel operating expense.expense, which were slightly offset by decreases in utility costs. The Company anticipates continued increases in labor costs due to government regulations surrounding wages, healthcare and other benefits, other wage-related initiatives and lower unemployment rates. Although operating expenses will increase as revenue increases, theThe Company will continue to work with its management companies to reduce or mitigate costs as a percentage of revenue where possible while maintaining quality and service levels at each property.
Property Taxes, Insurance and Other Expense
Property taxes, insurance and other expense for the years ended December 31, 20172019 and 20162018 totaled $69.4$75.8 million and $56.9$74.6 million, respectively, or 5.6%6.0% and 5.5%5.9% of total revenue for each respective period, and foryear, which is consistent with Comparable Hotels 5.6%expense as a percentage of total revenue for each year.the same period. For the Company’s Comparable Hotels, real estate taxes increased slightly in 20172019 compared to 2016,2018, with tax increases at certain locations due to the reassessment of property values by localities related to the improved economy, partially offset by decreases at other locations due to successful appeals of tax assessments. With the economy continuing to improve, the Company anticipates continued increases in property tax assessments in 2018.2020. The Company will continue to appeal tax assessments in certain jurisdictions to attempt to minimize tax increases as warranted.
Operating Ground Lease Expense
Operating ground lease expense for the years ended December 31, 20172019 and 20162018 was $11.3$1.7 million and $10.4$11.4 million, respectively. GroundOperating ground lease expense in 2019 primarily represents the expense incurred by the Company to lease land for 14nine of its hotel properties. Operating ground lease expense in 2018 primarily represents the expense incurred by the Company to lease land for 13 of its hotel properties, includingwhich included approximately $9.5 million of expense related to four hotels acquired inground leases that were previously classified as operating leases that are classified as finance leases under the Apple Ten mergernew lease accounting standard effective SeptemberJanuary 1, 2016.
General and Administrative Expense
General and administrative expense for the years ended December 31, 20172019 and 20162018 was $26.3$36.2 million and $17.0$24.3 million, respectively, or 2.1%2.9% and 1.6%1.9% of total revenue for each respective period.year. The principal components
associated with personnel changes involving the Company’s senior management and improved performance under the Company’s incentive plans which resulted in increased compensation expense.
Based on the Company’s performance inLoss on Impairment of Depreciable Real Estate Assets
Loss on impairment of depreciable real estate assets was approximately $45.9$6.5 million and $5.5$3.1 million for the years ended December 31, 20172019 and 2016,2018, respectively, and consisted of impairment charges related to the following impairment charges: (a) $38.0 million forpotential sales of the New York, New York Renaissance hotelWinston-Salem, North Carolina Courtyard recorded in the fourth quarter of 2017, as a result of declines in the hotel’s current2019 and projected cash flows, (b) $7.9 million for the Columbus, Georgia SpringHill Suites and TownePlace Suites hotels and the Springdale, Arkansas Residence Inn recorded duringin 2018, all of which were subsequently sold by the first quarter of 2017, that the Company identified for potential sale, which resulted in a change in the anticipated hold period in these assets, and (c) $5.5 million for the Chesapeake, Virginia Marriott hotel recorded during the third quarter of 2016, resulting from a change in the anticipated hold period for this asset, which was later sold in December 2016.Company. See Note 32 titled “Investment in Real Estate” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information concerning these impairment losses.
Depreciation and Amortization Expense
Depreciation and amortization expense for the years ended December 31, 20172019 and 20162018 was $176.5$193.2 million and $148.2$183.5 million, respectively. Depreciation and amortization expense primarily represents expense of the Company’s hotel buildings and related improvements, and associated personal property (furniture, fixtures, and equipment) for their respective periods owned. The increase was primarily due to the increase in the number of properties owned as a result of the
Interest and Other Expense, net
Interest and other expense, net for the years ended December 31, 20172019 and 20162018 was $47.3$61.2 million and $40.0$51.2 million, respectively, and is net of approximately $1.3 million and $1.6$1.0 million, respectively, of interest capitalized associated with renovation projects, respectively. The increase inprojects. Additionally, interest and other expense, was primarily due to an increase innet for the year ended December 31, 2019 includes approximately $8.2 million of interest recorded on the Company’s four finance lease liabilities in accordance with the new lease accounting standard. Interest expense related to the Company’s debt increased as a result of increased average outstanding borrowings during 2017in 2019 as compared to 2016 which is primarily attributable to (a) mortgage debt assumed in the Apple Ten merger effective September 1, 20162018 resulting from acquisitions and (b) borrowings to fund (i) the cash payment portion of the Apple Ten merger, (ii)share repurchases, partially offset by the repayment of Apple Ten’s outstanding balance on its extinguished credit facility assumed in the merger and (iii) the acquisition of seven hotels (six in 2017 and one on July 1, 2016), which increases were partially offset byborrowings with proceeds from dispositions, while the sale of three hotels (one in December 2016, one in April 2017 and one in October 2017) and issuance of common shares in the fourth quarter of 2017 under the Company’s ATM Program. Although during 2017 variableaverage effective interest rates increased in the United States with one-month LIBOR (the London Inter-Bank Offered Rate for a one-month term) increasingrate remained relatively stable from 0.77% at December 31, 2016 to 1.56% at December 31, 2017, the Company was able to offset the increases by hedging a portion of its variable rate debt and entering into fixed rate mortgages, achieving comparable effective borrowing rates for 2016 and 2017. While approximately 83%2018 through 2019. Approximately 98% of the Company’s outstanding debt was effectively fixed ratefixed-rate debt at December 31, 2017, the Company does expect2019 based on outstanding interest costs to increase in 2018 due to increased rates for its remaining variable rate debt.
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 beforeBefore Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”), and Adjusted EBITDAEBITDAre (“Adjusted EBITDA”EBITDAre”). These non-GAAP financial measures should be considered along with, but not as alternatives to, net income, cash flow from operations or any other operating GAAP measure. FFO, MFFO, EBITDA, EBITDAre and Adjusted EBITDA
EBITDAre 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, EBITDAre and Adjusted EBITDA,EBITDAre, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, EBITDAre and Adjusted EBITDAEBITDAre as reported by other companies that do not define such terms exactly as the Company defines such terms, the Company believes these supplemental measures are useful to investors when comparing the Company’s results between periods and with other REITs.
FFO and MFFO
The Company calculates and presents FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), which defines FFO as net income (computed in accordance with GAAP), excluding gains orand losses from salesthe sale of certain real estate assets (including gains and losses from change in control), 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.affiliates. 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 calculates MFFO by further adjustsadjusting FFO for certain additional items that are(i) the exclusion of amortization of finance ground lease assets, amortization of favorable and unfavorable operating leases, net and non-cash straight-line operating ground lease expense, as these expenses do not in Nareit’s definitionreflect the underlying performance of FFO, including: (i)the related hotels, and (ii) the exclusion of transaction and litigation costs (reimbursements), as these costs (reimbursements) 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.operations. 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 years ended December 31, 2017, 20162019, 2018 and 20152017 (in thousands).
| Years Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Net income | $ | 182,492 | $ | 144,652 | $ | 117,288 | ||||||
| Depreciation of real estate owned | 175,581 | 147,244 | 126,530 | |||||||||
| (Gain) loss on sale of real estate | (16,295 | ) | 153 | (15,286 | ) | |||||||
| Loss on impairment of depreciable real estate assets | 45,875 | 5,471 | 45,000 | |||||||||
| Amortization of favorable and unfavorable leases, net | 663 | 674 | 2,422 | |||||||||
| Funds from operations | 388,316 | 298,194 | 275,954 | |||||||||
| Transaction and litigation costs (reimbursements) | (2,586 | ) | 34,989 | 7,181 | ||||||||
| Non-cash straight-line ground lease expense | 3,700 | 3,419 | 3,347 | |||||||||
| Modified funds from operations | $ | 389,430 | $ | 336,602 | $ | 286,482 | ||||||
Years Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net income | $ | 171,917 | $ | 206,086 | $ | 182,492 | ||||||
Depreciation of real estate owned | 187,729 | 182,527 | 175,581 | |||||||||
Gain on sale of real estate | (5,021 | ) | (152 | ) | (16,295 | ) | ||||||
Loss on impairment of depreciable real estate assets | 6,467 | 3,135 | 45,875 | |||||||||
Funds from operations | 361,092 | 391,596 | 387,653 | |||||||||
Amortization of finance ground lease assets | 4,517 | - | - | |||||||||
Amortization of favorable and unfavorable operating leases, net | 124 | 647 | 663 | |||||||||
Non-cash straight-line operating ground lease expense | 188 | 3,542 | 3,700 | |||||||||
Transaction and litigation costs (reimbursements) | - | - | (2,586 | ) | ||||||||
Modified funds from operations | $ | 365,921 | $ | 395,785 | $ | 389,430 | ||||||
EBITDA, EBITDAre and Adjusted EBITDA
EBITDA is a commonly used measure of performance in many industries and is defined as net income 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.
In addition to EBITDA, the Company also calculates and presents EBITDAre in accordance with standards established by Nareit, which defines EBITDAre as EBITDA, excluding gains and losses from the sale of certain real estate assets (including gains and losses from change in control), plus real estate related impairments, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. The Company presents EBITDAre because
it believes that it provides further useful information to investors in comparing its operating performance between periods and between REITs that report EBITDAre using the Nareit definition.
The Company also considers the exclusion of
certain additional items fromThe following table reconciles the Company’s GAAP net income to EBITDA, EBITDAre and Adjusted EBITDAEBITDAre for the years ended December 31, 2017, 20162019, 2018 and 20152017 (in thousands).
| Years Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Net income | $ | 182,492 | $ | 144,652 | $ | 117,288 | ||||||
| Depreciation | 176,499 | 148,163 | 127,449 | |||||||||
| Amortization of favorable and unfavorable leases, net | 663 | 674 | 2,422 | |||||||||
| Interest and other expense, net | 47,343 | 40,026 | 33,132 | |||||||||
| Income tax expense | 847 | 431 | 898 | |||||||||
| EBITDA | 407,844 | 333,946 | 281,189 | |||||||||
| Transaction and litigation costs (reimbursements) | (2,586 | ) | 34,989 | 7,181 | ||||||||
| (Gain) loss on sale of real estate | (16,295 | ) | 153 | (15,286 | ) | |||||||
| Loss on impairment of depreciable real estate assets | 45,875 | 5,471 | 45,000 | |||||||||
| Non-cash straight-line ground lease expense | 3,700 | 3,419 | 3,347 | |||||||||
| Adjusted EBITDA | $ | 438,538 | $ | 377,978 | $ | 321,431 | ||||||
Years Ended December 31, | ||||||||||||
2019 | 2018(1) | 2017(1) | ||||||||||
Net income | $ | 171,917 | $ | 206,086 | $ | 182,492 | ||||||
Depreciation and amortization | 193,240 | 183,482 | 176,499 | |||||||||
Amortization of favorable and unfavorable operating leases, net | 124 | 647 | 663 | |||||||||
Interest and other expense, net | 61,191 | 51,185 | 47,343 | |||||||||
Income tax expense | 679 | 587 | 847 | |||||||||
EBITDA | 427,151 | 441,987 | 407,844 | |||||||||
Gain on sale of real estate | (5,021 | ) | (152 | ) | (16,295 | ) | ||||||
Loss on impairment of depreciable real estate assets | 6,467 | 3,135 | 45,875 | |||||||||
EBITDAre | 428,597 | 444,970 | 437,424 | |||||||||
Non-cash straight-line operating ground lease expense | 188 | 3,542 | 3,700 | |||||||||
Transaction and litigation costs (reimbursements) | - | - | (2,586 | ) | ||||||||
Adjusted EBITDAre | $ | 428,785 | $ | 448,512 | $ | 438,538 | ||||||
(1) | EBITDA, EBITDAre and Adjusted EBITDAre for the years ended December 31, 2018 and 2017 include approximately $5.7 million and $5.5 million, respectively, of lease payments recorded to operating ground lease expense related to four of the Company’s ground leases that were classified as operating leases prior to 2019. Under the new lease accounting standard, effective January 1, 2019, these four ground leases are classified as finance leases, for which the Company recognizes amortization expense and interest expense in the Company’s consolidated statements of operations (which are both excluded from EBITDA, EBITDAre and Adjusted EBITDAre calculations), instead of operating ground lease expense. |
Hotels Owned
As of December 31, 2017,2019, the Company owned 239233 hotels with an aggregate of 30,32229,870 rooms located in 34 states.states, including one hotel with 105 rooms classified as held for sale, which was sold to an unrelated party in January 2020. The following tables summarize the number of hotels and rooms by brand and by state:
| Number of Hotels and Guest Rooms by Brand | ||||||||
| Number of | Number of | |||||||
| Brand | Hotels | Rooms | ||||||
| Hilton Garden Inn | 42 | 5,807 | ||||||
| Courtyard | 40 | 5,460 | ||||||
| Hampton | 36 | 4,422 | ||||||
| Residence Inn | 34 | 4,011 | ||||||
| Homewood Suites | 34 | 3,831 | ||||||
| SpringHill Suites | 17 | 2,248 | ||||||
| TownePlace Suites | 12 | 1,196 | ||||||
| Fairfield Inn | 11 | 1,300 | ||||||
| Home2 Suites | 8 | 910 | ||||||
| Marriott | 2 | 616 | ||||||
| Embassy Suites | 2 | 316 | ||||||
| Renaissance | 1 | 205 | ||||||
| Total | 239 | 30,322 | ||||||
| Number of Hotels and Guest Rooms by State | ||||||||
| Number of | Number of | |||||||
| State | Hotels | Rooms | ||||||
| Alabama | 15 | 1,434 | ||||||
| Alaska | 2 | 304 | ||||||
| Arizona | 11 | 1,434 | ||||||
| Arkansas | 4 | 408 | ||||||
| California | 27 | 3,807 | ||||||
| Colorado | 4 | 567 | ||||||
| Florida | 23 | 2,851 | ||||||
| Georgia | 6 | 596 | ||||||
| Idaho | 2 | 416 | ||||||
| Illinois | 8 | 1,420 | ||||||
| Indiana | 4 | 479 | ||||||
| Iowa | 3 | 301 | ||||||
| Kansas | 4 | 422 | ||||||
| Louisiana | 4 | 541 | ||||||
| Maine | 1 | 179 | ||||||
| Maryland | 2 | 233 | ||||||
| Massachusetts | 4 | 466 | ||||||
| Michigan | 1 | 148 | ||||||
| Minnesota | 2 | 244 | ||||||
| Mississippi | 2 | 168 | ||||||
| Missouri | 4 | 544 | ||||||
| Nebraska | 4 | 621 | ||||||
| New Jersey | 5 | 629 | ||||||
| New York | 4 | 550 | ||||||
| North Carolina | 12 | 1,337 | ||||||
| Ohio | 2 | 252 | ||||||
| Oklahoma | 4 | 545 | ||||||
| Pennsylvania | 3 | 391 | ||||||
| South Carolina | 5 | 538 | ||||||
| Tennessee | 12 | 1,356 | ||||||
| Texas | 34 | 4,072 | ||||||
| Utah | 3 | 393 | ||||||
| Virginia | 14 | 2,067 | ||||||
| Washington | 4 | 609 | ||||||
| Total | 239 | 30,322 | ||||||
Number of Hotels and Guest Rooms by Brand | ||||||||
Number of | Number of | |||||||
Brand | Hotels | Rooms | ||||||
Hilton Garden Inn | 41 | 5,665 | ||||||
Hampton | 39 | 4,956 | ||||||
Courtyard | 36 | 4,948 | ||||||
Residence Inn | 33 | 3,939 | ||||||
Homewood Suites | 33 | 3,731 | ||||||
SpringHill Suites | 15 | 2,040 | ||||||
Fairfield | 11 | 1,300 | ||||||
Home2 Suites | 9 | 1,038 | ||||||
TownePlace Suites | 9 | 931 | ||||||
Marriott | 2 | 616 | ||||||
Embassy Suites | 2 | 316 | ||||||
Renaissance | 1 | 208 | * | |||||
Hyatt Place | 1 | 127 | ||||||
Independent | 1 | 55 | ||||||
Total | 233 | 29,870 | ||||||
| * | On January 20, 2020, the New York, New York Renaissance hotel became an independent boutique hotel. | |||
Number of Hotels and Guest Rooms by State | ||||||||
Number of | Number of | |||||||
State | Hotels | Rooms | ||||||
Alabama | 15 | 1,434 | ||||||
Alaska | 2 | 304 | ||||||
Arizona | 12 | 1,644 | ||||||
Arkansas | 3 | 336 | ||||||
California | 27 | 3,807 | ||||||
Colorado | 4 | 567 | ||||||
Florida | 22 | 2,803 | ||||||
Georgia | 6 | 672 | ||||||
Idaho | 2 | 416 | ||||||
Illinois | 8 | 1,420 | ||||||
Indiana | 4 | 479 | ||||||
Iowa | 3 | 301 | ||||||
Kansas | 4 | 422 | ||||||
Louisiana | 3 | 422 | ||||||
Maine | 1 | 179 | ||||||
Maryland | 2 | 233 | ||||||
Massachusetts | 4 | 466 | ||||||
Michigan | 1 | 148 | ||||||
Minnesota | 3 | 404 | ||||||
Mississippi | 2 | 168 | ||||||
Missouri | 4 | 544 | ||||||
Nebraska | 4 | 621 | ||||||
New Jersey | 5 | 629 | ||||||
New York | 4 | 553 | ||||||
North Carolina | 10 | 1,091 | ||||||
Ohio | 2 | 252 | ||||||
Oklahoma | 4 | 545 | ||||||
Pennsylvania | 3 | 391 | ||||||
South Carolina | 5 | 538 | ||||||
Tennessee | 13 | 1,502 | ||||||
Texas | 31 | 3,755 | ||||||
Utah | 3 | 393 | ||||||
Virginia | 13 | 1,822 | ||||||
Washington | 4 | 609 | ||||||
Total | 233 | 29,870 | ||||||
Refer to Part I, Item 2, of this Annual Report on Form 10-K for a table summarizing the location, brand, manager, date acquired or completed and number of rooms for each of the 239233 hotels the Company owned as of December 31, 2017.
Related Parties
The Company has, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. See Note 76 titled “Related Parties” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information concerning the Company’s related party transactions.
Liquidity and Capital Resources
Contractual Commitments
The following is a summary of the Company’s significant contractual obligations as of December 31, 20172019 (in thousands):
| Amount of Commitments Expiring per Period | ||||||||||||||||||||
| Total | 1 Year | 2-3 Years | 4-5 Years | Over 5 Years | ||||||||||||||||
| Property Purchase Commitments | $ | 127,836 | $ | 127,836 | $ | - | $ | - | $ | - | ||||||||||
| Debt (including interest of $196.6 million) | 1,420,903 | 56,783 | 665,416 | 247,656 | 451,048 | |||||||||||||||
| Ground Leases | 361,572 | 6,318 | 13,372 | 14,074 | 327,808 | |||||||||||||||
| $ | 1,910,311 | $ | 190,937 | $ | 678,788 | $ | 261,730 | $ | 778,856 | |||||||||||
Amount of Commitments Expiring per Period | ||||||||||||||||||||
Total | 1 Year | 2-3 Years | 4-5 Years | Over 5 Years | ||||||||||||||||
Property Purchase Commitments | $ | 208,817 | $ | 110,045 | $ | 98,772 | $ | - | $ | - | ||||||||||
Debt (including interest of $229.1 million) | 1,554,924 | 76,615 | 297,520 | 687,749 | 493,040 | |||||||||||||||
Finance Leases | 516,360 | 9,541 | 19,385 | 21,365 | 466,069 | |||||||||||||||
Operating Leases | 37,119 | 1,252 | 1,880 | 1,540 | 32,447 | |||||||||||||||
| $ | 2,317,220 | $ | 197,453 | $ | 417,557 | $ | 710,654 | $ | 991,556 | |||||||||||
Capital Resources
The Company’s principal daily sources of liquidity are the operating cash flow generated from the Company’s properties and availability under its revolving credit facility. Periodically, the Company may receive proceeds from strategic dispositions of certain hotels, entering into additional secured and unsecured debt financing, dispositionsor issuing common shares through equity offerings.
As of December 31, 2019, the Company had approximately $1.3 billion of total outstanding debt consisting of $455.0 million of mortgage debt and $870.9 million outstanding under its hotel propertiescredit facilities, which include its $850 million credit facility, its $225 million term loan facility and offerings oftwo $85 million term loan facilities (together, the Company’s common shares.
The credit agreementagreements governing the revolving credit facility containsfacilities contain mandatory prepayment requirements, customary affirmative covenants, negative covenants and events of default. The credit agreement requiresagreements require that the Company comply with various covenants, which include, among others, a minimum tangible net worth, maximum debt limits, minimum interest and fixed charge coverage ratios limits on dividend payments and share repurchases and restrictions on certain investments. The Company was in compliance with the applicable covenants at December 31, 20172019 and anticipates being in compliance during 2018.
See Note 54 titled “Debt” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for a description of the Company’s debt instruments as of December 31, 2019 and a summary of the financial and restrictive covenants as defined in the credit agreement andagreements.
The Company has a descriptionuniversal shelf registration statement on Form S-3 (No. 333-231021) that was automatically effective upon filing on April 25, 2019. The Company may offer an indeterminate number or amount, as the case may be, of (1) common shares, no par value per share; (2) preferred shares, no par value per share; (3) depository shares representing the Company’s otherpreferred shares; (4) warrants exercisable for the Company’s common shares, preferred
shares or depository shares representing preferred shares; (5) rights to purchase common shares; and (6) unsecured senior or subordinate debt instruments.
As discussed in Note 3, “Assets Held for Sale, Dispositions and Hotel Sale Contracts” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K, as of December 31, 2019, the Company had outstanding contracts to sell two of its hotels for a combined gross sales price of approximately $45.0 million. The Company completed the sale of one of these hotels in January 2020 for $13.0 million, and if the closing occurs on the sale of the other hotel, it is expected to be completed in the first quarter of 2020. The net proceeds from the sales were or will be used to pay down borrowings on the Company’s revolving credit facility.
Capital Uses
The Company anticipates that cash flow from operations, availability under its revolving credit facility,facilities, additional borrowings and proceeds from hotel dispositions and equity offerings will be adequate to meet its anticipated liquidity requirements, including debt service, hotel acquisitions, hotel renovations, share repurchases, and required distributions to shareholders (the Company is not required to make distributions at its current rate for REIT purposes) and share repurchases.
Distributions
To maintain its REIT status the Company is required to distribute at least 90% of its ordinary income. Distributions paid duringfor each of the yearthree years ended December 31, 2017 totaled approximately $267.9 million or2019 were $1.20 per common share and were paid at a monthly rate of $0.10 per common share.share for a total of approximately $268.7 million, $275.9 million and $267.9 million, respectively. For the same period,periods, the Company’s net cash generated from operations was approximately $384.7$381.7 million, which included a payment of approximately $19.4$404.8 million net of reimbursements received from the Company’s directors and officers insurance carriers, during 2017 to settle the Apple Ten merger litigation which is discussed in Note 14 titled “Legal Proceedings” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K. Distributions paid during the year ended December 31, 2016 totaled $229.1$384.1 million, or $1.20 per common share and net cash from operations was approximately $332.0 million. Distributions paid during the year ended December 31, 2015 totaled $229.1 million or $1.27 per common share and net cash from operations was approximately $281.1 million.
The Company’s current annual distribution rate, payable monthly, is $1.20 per common share. As it has done historically, due to seasonality, the Company may use its revolving credit facility to maintain the consistency of the monthly distribution rate, taking into consideration any acquisitions, dispositions, capital improvements and economic cycles. Any distribution will be subject to approval of the Company’s Board of Directors and there can be no assurance of the classification or duration of distributions at the current annual distribution rate. The Board of Directors monitors the Company’s distribution rate relative to the performance of theits hotels on an ongoing basis and may make adjustments to the distribution rate as determined to be prudent in relation to other cash requirements of the Company. If cash flow from operations and the revolving credit facility are not adequate to meet liquidity requirements, the Company may utilize additional financing sources to make distributions. Although the Company has relatively low levels of debt, there can be no assurances it will be successful with this strategy and may need to reduce its distributions to required levels. If the Company were unable to extend its maturing debt in future periods or if it were to default on its debt, it may be unable to make distributions.
Share Repurchases
In May 2019, the Company’s Board of Directors authorizedapproved an extension of its existing Share Repurchase Program, authorizing share repurchase program to repurchaserepurchases up to $475 millionan aggregate of its common shares, which program will end in July 2018, if not terminated earlier.$360 million. The programShare Repurchase Program may be suspended or terminated at any time by the Company. In connection with the implementation of the ATM Program,Company and will end in February 2017July 2020 if not terminated earlier. During 2019, the Company terminatedpurchased approximately 0.3 million of its then existing written trading plancommon shares under the Company’sits Share Repurchase Program at a weighted-average market purchase price of approximately $14.92 per common share, repurchase program. Since inceptionfor an aggregate purchase price, including commissions, of the share repurchase programapproximately $4.3 million and, in July 2015 through December 31, 2017,2018, the Company has purchased approximately 1.76.6 million of its common shares at a weighted-average market purchase price of approximately $17.64$15.87 per common share for an aggregate purchase price, including commissions, of approximately $29.9 million, including the purchase of approximately 0.4 million of its common shares in 2016, at a weighted-average market purchase price of approximately $17.72 per common share for an aggregate purchase price of approximately $7.9 million and approximately 1.2 million of its common shares in 2015, at a weighted-average market purchase price of approximately $17.61 per common share for an aggregate purchase price of approximately $22.0$104.3 million. Repurchases under the program were funded with availability under the revolving credit facility. The Company did not repurchase any common shares under its share repurchase programShare Repurchase Program during 2017. As of December 31, 2019, approximately $359.8 million remained available for repurchases under this Share Repurchase Program. Repurchases under the Share Repurchase Program have been funded, and the Company intends to fund future repurchases, with availability under its credit facilities. The Company plans to continue to consider opportunistictiming of share repurchases and the number of common shares to be repurchased under the $467.5 million remaining portion of the authorized $475 million share repurchase program, whichShare Repurchase Program will depend upon prevailing market conditions, regulatory requirements and other factors.
Capital Improvements
The Company has ongoing capital commitments to fund its capital improvements. To maintain and enhance each property’s competitive position in its market, the Company has invested in and plans to continue to reinvest in its hotels. Under certain loan and management agreements, the Company is required to place in escrow funds for the repair, replacement and refurbishing of furniture, fixtures, and equipment, based on a percentage of gross revenues, provided that such amount may be used for the Company’s capital expenditures with respect to the hotels. As of December 31, 2017,2019, the Company held approximately $26.4$30.9 million in reserve related to these properties. During 2017,2019, the Company invested approximately $69.1$78.7 million in capital expenditures and anticipates spending approximately $70$80 to $80$90 million during 2018,2020, which includes various scheduled renovation projects for approximately 3025 to 3530 properties. The Company does not currently have any existing or planned projects for development.
Hotel Purchase Contract Commitments
As of December 31, 2017,2019, the Company had outstanding contracts for the potential purchase of foursix hotels for a total expected purchase price of $127.8 million. Two of the hotels, the Atlanta Hampton Inn & Suites and the Memphis Hampton Inn & Suites, both ofapproximately $208.8 million, which are in operation, were acquired in February 2018 for a gross purchase price of $63.0 million. The two remaining hotels are under constructiondevelopment and are planned to be completed and opened for business during 2018,over the next five to 18 months from December 31, 2019, at which time closingclosings on these hotels isare expected to occur. Although the Company is working towards acquiring the twothese hotels, under construction,in each case there are manya number of conditions to closing that have not yet been satisfied and there can be no assurance that a closingclosings on these hotels will occur under the outstanding purchase contracts. The purchase price for the Atlanta Hampton Inn & Suites and the Memphis Hampton Inn & Suites was funded through the Company’s revolving credit facility and itIt is anticipated that the purchase price for the remainingsix hotels will be funded similarly.
Lease Commitments
Under the terms of the Company’s ground leases, certain minimum lease payments are subject to change based on criteria specified in the lease. Minimum lease payments may be estimated if the change date occurs and the new minimum lease payments are not yet determinable. During 2019, the Company estimated a required increase in lease payments under one of its finance ground leases, resulting in an increase in the finance ground lease right-of-use (“ROU”) asset and liability at the anticipated date of the change. The amount of the increase and the effective date of the change are subject to agreement with the lessor and could increase in the future. As of December 31, 2019, the Company and the lessor had not reached an agreement on the increase in future lease payments and, as a result, the projected future lease payments and impact on the lease ROU asset and liability is uncertain. See Note 10 titled “Lease Commitments” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K, for additional information.
Cash Management Activities
As part of the cost sharing arrangements discussed in Note 76 titled “Related Parties” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under the cash management process, each company may advance or defer up to $1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies.
Management and Franchise Agreements
Each of the Company’s 239233 hotels owned as of December 31, 20172019 is operated and managed under separate management agreements with 2321 hotel management companies, none of which are affiliated with the Company. SixteenFifteen of the Company’s hotels are managed by affiliates of Marriott or Hilton. The remainder of the Company’s hotels are managed by companies that are not affiliated with either Marriott, Hilton or Hilton,Hyatt, and as a result, the branded hotels they manage were required to obtain separate franchise agreements with each respectivethe applicable franchisor. See Note 109 titled “Management and Franchise Agreements” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for additional information pertaining to the management and franchise agreements, including a listing of the Company’s hotel management companies. For the
years ended December 31, 2017, 20162019, 2018 and 2015,2017, the Company incurred approximately $43.8 million, $43.9 million and $42.7 million, $35.6 million
Impact of Inflation
The Company relies on the performance of its hotels and the ability of its hotel operators to increase revenue to keep pace with inflation. Hotel operators, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitiveinflation on the Company’s operating expenses. However, recent competitive pressures have and may however,continue to limit the operators’ ability to raise room rates. Currentlyrates and, as a result, the Company ismay not experiencing any material impact from inflation.
Business Interruption
Being in the real estate industry, the Company is exposed to natural disasters on both a local and national scale. Although management believes it has adequate insurance to cover this exposure, there can be no assurance that such events will not have a material adverse effect on the Company’s financial position or results of operations.
Seasonality
The hotel industry historically has been seasonal in nature. Seasonal variations in occupancy at the Company’s hotels may cause quarterly fluctuations in its revenues. Generally, occupancy rates and hotel revenues are greater in the second and third quarters than in the first and fourth quarters. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenue, the Company expects to utilize cash on hand or available financing sources to meet cash requirements.
Critical Accounting Policies
The following contains a discussion of what the Company believes to be its critical accounting policies. These items should be read to gain a further understanding of the principles used to prepare the Company’s financial statements. These principles include application of judgment; therefore, changes in judgments may have a significant impact on the Company’s reported results of operations and financial condition.
Investment Policy
Upon acquisition of real estate properties, the Company estimates the fair value of acquired tangible assets (consisting of land, buildings and improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities, including in-place leases, and assumed debt based on the evaluation of information and estimates available at that date. Fair values for these assets are not directly observable and estimates are based on comparables and other information which is subjective in nature. The Company has not assigned any value to management contracts and franchise agreements as such contracts are generally at current market rates based on the remaining terms of the contracts and any other value attributable to these contracts is not considered material. Prior to January 1, 2017, the Company’s acquisitionsAcquisitions of hotel properties were accounted for as acquisitions of existing businesses, and therefore all transaction costs associated with the acquisitions, including title, legal, accounting, brokerage commissions and other related costs, were expensed as incurred. Beginning January 1, 2017, acquisitions of hotel properties have been and willare generally be accounted for as acquisitions of a group of assets, with costs incurred to effect an acquisition, including title, legal, accounting, brokerage commissions and other related costs, being capitalized as part of the cost of the assets acquired, instead of accounted for separately as expenses in the period that they are incurred.
Capitalization Policy
The Company considers expenditures to be capital in nature based on the following criteria: (1) for a single asset, the cost must be at least $500, including all normal and necessary costs to place the asset in service, and the useful life must be at least one year; (2) for group purchases of 10 or more identical assets, the unit cost for each asset must be at least $50, including all normal and necessary costs to place the asset in service, and the useful life must be at least one year; and (3) for major repairs to a single asset, the repair must be at least $2,500 and the useful life of the asset must be substantially extended.
Impairment Losses Policy
The Company records impairment losses on hotel properties used in operations if indicators of impairment are present, and the sum of the undiscounted cash flows estimated to be generated by the respective properties over their estimated remaining useful life, based on historical and industry data, is less than the properties’ carrying amount. Indicators of impairment include a property with current or potential losses from operations, when it becomes more likely than not that a property will be sold before the end of its previously estimated useful life or when events, trends, contingencies or changes in circumstances indicate that a triggering event has occurred and an asset’s carrying value may not be recoverable. The Company monitors its properties on an ongoing basis by analytically reviewing financial performance and considers each property individually for purposes of reviewing for indicators of impairment. As many indicators of impairment are subjective, such as general economic and market declines, the Company also prepares an annual recoverability analysis for each of its properties to assist with its evaluation of impairment indicators. The analysis compares each property’s net book value to each property’s estimated operating income using current operating results for each stabilized property and projected stabilized operating results based on the property’s market for properties that recently opened, were recently renovated or experienced other short-term business disruption. The Company’s planned initial hold period for each property is generally 39 years. If events or circumstances change, such as the Company’s intended hold period for a property or if the operating performance of a property declines substantially for an extended period of time, the Company’s carrying value for a particular property may not be recoverable, and an impairment loss will be recorded. Impairment losses are measured as the difference between the asset’s fair value and its carrying value. The Company’s ongoing analyses and annual recoverability analyses have not identified any impairment losses other than the losses on impairment of one property recorded in 2019, three properties recorded in 2018 and three properties recorded in 2017 one property recorded in 2016 and one property recorded in 2015 totaling approximately $45.9$6.5 million, $5.5$3.1 million and $45.0$45.9 million, respectively, as discussed herein under “Results of Operations” and in Note 32 titled “Investment in Real Estate” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K.
New Accounting Standards
See Note 1 titled “Organization and Summary of Significant Accounting Policies” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K for information on the adoption of the new lease accounting standards in 2017standard on January 1, 2019 and the anticipated adoption of recently issued accounting standards.
Subsequent Events
In both January 20182020 and February 2018,2020, the Company paid approximately $23.0$22.4 million, or $0.10 per outstanding common share, in distributions to its common shareholders.
In February 2018,2020, the Company declared a regular monthly cash distribution of $0.10 per common share for the month of March 2018.2020. The distribution is payable on March 15, 2018.
In January 2020, the Company closed oncompleted the purchasesale of an existing 119-room Hampton Inn &its 105-room Sanford, Florida SpringHill Suites in Atlanta, Georgia and an existing 144-room Hampton Inn & Suites in Memphis, Tennessee for a gross purchasesales price of $63.0$13.0 million. The net proceeds from the sale were used to pay down borrowings on the Company’s revolving credit facility.
As of December 31, 2017,2019, the Company’s financial instruments were not exposed to significant market risk due to foreign currency exchange risk, commodity price risk or equity price risk. However, the Company is exposed to interest rate risk due to possible changes in short term interest rates as it invests its cash or borrows on its revolving credit facility and due to the portion of its variablevariable-rate term debt that is not fixed by interest rate term loans.swaps. As of December 31, 2017,2019, after giving effect to interest rate swaps, as described below, approximately $209.4$28.4 million, or approximately 17%2% of the Company’s total debt outstanding, was subject to variable interest rates. Based on the Company’s variable ratevariable-rate debt outstanding as of December 31, 2017,2019, every 100 basis points change in interest rates will impact the Company’s annual net income by approximately $2.1$0.3 million, all other factors remaining the same. With the exception of interest rate swap transactions, the Company has not engaged in transactions in derivative financial instruments or derivative commodity instruments. The Company’s cash balanceand cash equivalents at December 31, 2017 was $0.
31, 2019 were $0. As of December 31, 2017,2019, the Company had two interest rate swaps due to mature in the first half of 2020 and three interest rate swaps that will become effective during the same period, resulting in a net decrease in the notional amount of $172.5 million, which will result in a corresponding increase in the amount of the Company’s variablevariable-rate debt that is not fixed by interest rate swaps.
As of December 31, 2019, the Company’s variable-rate debt consisted of its $540credit facilities, including borrowings outstanding under its $425 million revolving credit facility and six$820 million of term loans totaling $660 million.loans. Currently, the Company uses interest rate swaps to manage its interest rate risk on a portion of its variable ratevariable-rate debt. As of December 31, 2017,2019, the Company had six11 interest rate swap agreements that effectively fix the interest payments on approximately $557.5$842.5 million of the Company’s variablevariable-rate debt outstanding with maturity dates ranging from May 2020 (representing two swaps with a total notional amount of $322.5 million) to December 2029. In addition, the Company has entered into a total of four interest rate debt (consistingswap agreements which, beginning January 31, 2020, May 18, 2020 and May 18, 2021, will effectively fix the interest rate on $25 million, $125 million and $75 million, respectively, of five term loans) through maturity.its variable-rate debt. Under the terms of all of the Company’s interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the one-month LIBOR.
In addition to its variable ratevariable-rate debt and interest rate swaps discussed above, the Company has assumed or originated fixed interest rate mortgages payable to lenders under permanent financing arrangements. The following table summarizes the annual maturities and average interest rates of the Company’s mortgage debt the six term loans and borrowings outstanding under the $540 million revolvingits credit facilityfacilities at December 31, 2017.2019. All dollar amounts are in thousands.
| 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | Fair Market Value | |||||||||||||||||||||||||
| Total debt: | ||||||||||||||||||||||||||||||||
| Maturities | $ | 11,964 | $ | 139,622 | $ | 452,223 | $ | 96,415 | $ | 108,034 | $ | 416,077 | $ | 1,224,335 | $ | 1,221,312 | ||||||||||||||||
| Average interest rates | 3.6 | % | 3.6 | % | 3.8 | % | 4.0 | % | 3.9 | % | 3.8 | % | ||||||||||||||||||||
| Variable rate debt: | ||||||||||||||||||||||||||||||||
| Maturities | $ | - | $ | 106,900 | $ | 425,000 | $ | 50,000 | $ | - | $ | 185,000 | $ | 766,900 | $ | 768,745 | ||||||||||||||||
| Average interest rates (1) | 3.1 | % | 3.1 | % | 3.2 | % | 3.3 | % | 3.4 | % | 3.4 | % | ||||||||||||||||||||
| Fixed rate debt: | ||||||||||||||||||||||||||||||||
| Maturities | $ | 11,964 | $ | 32,722 | $ | 27,223 | $ | 46,415 | $ | 108,034 | $ | 231,077 | $ | 457,435 | $ | 452,567 | ||||||||||||||||
| Average interest rates | 4.5 | % | 4.5 | % | 4.5 | % | 4.4 | % | 4.2 | % | 4.1 | % | ||||||||||||||||||||
2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | Fair Market Value | |||||||||||||||||||||||||
Total debt: | ||||||||||||||||||||||||||||||||
Maturities | $ | 28,349 | $ | 47,586 | $ | 160,152 | $ | 295,615 | $ | 337,981 | $ | 456,184 | $ | 1,325,867 | $ | 1,333,638 | ||||||||||||||||
Average interest rates (1) | 3.6 | % | 3.6 | % | 3.5 | % | 3.5 | % | 3.6 | % | 3.8 | % | ||||||||||||||||||||
Variable-rate debt: | ||||||||||||||||||||||||||||||||
Maturities | $ | - | $ | - | $ | 50,900 | $ | 250,000 | $ | 310,000 | $ | 260,000 | $ | 870,900 | $ | 870,719 | ||||||||||||||||
Average interest rates (1) | 3.2 | % | 3.2 | % | 3.2 | % | 3.3 | % | 3.4 | % | 3.5 | % | ||||||||||||||||||||
Fixed-rate debt: | ||||||||||||||||||||||||||||||||
Maturities | $ | 28,349 | $ | 47,586 | $ | 109,252 | $ | 45,615 | $ | 27,981 | $ | 196,184 | $ | 454,967 | $ | 462,919 | ||||||||||||||||
Average interest rates | 4.4 | % | 4.4 | % | 4.2 | % | 4.1 | % | 4.1 | % | 4.0 | % | ||||||||||||||||||||
(1) | The average interest rate gives effect to interest rate swaps, as applicable. |
Report of Management
on Internal Control over Financial Reporting
February 22, 2018
24, 2020
To the Shareholders
Apple Hospitality REIT, Inc.
Management of Apple Hospitality REIT, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
The Company’s internal control over financial reporting is supported by written policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of the Company’s annual consolidated financial statements, management has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls.
Based on this assessment, management has concluded that as of December 31, 2017,2019, the Company’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements included in this report, has issued an attestation report on the Company’s internal control over financial reporting, a copy of which appears on the next page of this annual report.
/s/ Justin G. Knight | /s/ Bryan Peery | |
Justin G. Knight, President and | Bryan Peery, Chief Financial Officer | |
Chief Executive Officer (Principal Executive Officer) | (Principal Financial and Principal Accounting Officer) |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Hospitality REIT, Inc.
Opinion on Internal Control overOver Financial Reporting
We have audited Apple Hospitality REIT, Inc.’s internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Apple Hospitality REIT, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20172019 and 2016,2018, the related consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017,2019, and the related notes and the financial statement schedule listed in the Index at Item 15(2) and our report dated February 22, 201824, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Richmond, Virginia
February 22, 2018
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Hospitality REIT, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Apple Hospitality REIT, Inc. (the Company) as of December 31, 20172019 and 2016,2018, the related consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017,2019, and the related notes and the financial statement schedule listed in the Index at Item 15(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20172019 and 2016,2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 201824, 2020 expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No. 2016-02, Leases (Topic 842), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Investments in Real Estate – Indicators of impairment | ||
Description of the Matter | As of December 31, 2019, the Company had investments in real estate, net of accumulated depreciation and amortization of $4.8 billion. As more fully described in Notes 1 and 2 to the consolidated financial statements, the Company records impairment losses on hotel properties used in operations if indicators of impairment are present, and the sum of the undiscounted cash flows estimated to be generated by the respective properties over their estimated remaining useful life, based on historical and industry data, is less than the properties’ carrying amounts. Many indicators of impairment, such as a change in the intended holding period of the property, are subjective and the Company also prepares an annual recoverability analysis assuming estimated cash flows for each of its properties to assist with its evaluation of impairment indicators. Auditing management’s analysis is complex due to the highly judgmental nature of identifying indicators of impairment as well as a change in a property’s intended hold period. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s review for indicators of impairment, including changes in the intended hold period. For example, we tested controls over management’s review of the recoverability analysis and significant assumptions described above. Our testing of the Company’s indicators of impairment included, among others, testing the recoverability analysis. For example, we tested estimated cash flows by comparing them to historical operating results by property and current industry, market, and economic trends. In addition, we considered the hold period necessary for the property’s carrying value to be recovered via undiscounted cash flows. We held discussions with management about the current status of potential transactions and management’s judgments to understand the probability of future events that could affect the holding period and other cash flow assumptions for the properties. We searched for and evaluated information that corroborated or contradicted the Company’s assumptions. |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2007.
Richmond, Virginia
February 22, 2018
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 | ||||
As of December 31, | ||||||||
2019 | 2018 | |||||||
Assets | ||||||||
Investment in real estate, net of accumulated depreciation and amortization of $1,054,429 and $909,893, respectively | $ | 4,825,738 | $ | 4,816,410 | ||||
Assets held for sale | 12,093 | - | ||||||
Restricted cash-furniture, fixtures and other escrows | 34,661 | 33,632 | ||||||
Due from third party managers, net | 26,926 | 29,091 | ||||||
Other assets, net | 42,993 | 49,539 | ||||||
Total Assets | $ | 4,942,411 | $ | 4,928,672 | ||||
Liabilities | ||||||||
Debt, net | $ | 1,320,407 | $ | 1,412,242 | ||||
Finance lease liabilities | 216,627 | - | ||||||
Accounts payable and other liabilities | 114,364 | 107,420 | ||||||
Total Liabilities | 1,651,398 | 1,519,662 | ||||||
Shareholders’ Equity | ||||||||
Preferred stock, authorized 30,000,000 shares; NaN issued and outstanding | - | - | ||||||
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 223,862,913 and 223,997,348 shares, respectively | 4,493,763 | 4,495,073 | ||||||
Accumulated other comprehensive income (loss) | (4,698 | ) | 10,006 | |||||
Distributions greater than net income | (1,198,052 | ) | (1,096,069 | ) | ||||
Total Shareholders’ Equity | 3,291,013 | 3,409,010 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 4,942,411 | $ | 4,928,672 | ||||
See notes to consolidated financial statements.
Apple Hospitality REIT, Inc.
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)
| Years Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Revenues: | ||||||||||||
| Room | $ | 1,143,987 | $ | 956,119 | $ | 821,733 | ||||||
| Other | 94,635 | 84,906 | 76,581 | |||||||||
| Total revenue | 1,238,622 | 1,041,025 | 898,314 | |||||||||
| Expenses: | ||||||||||||
| Operating | 310,756 | 262,432 | 227,915 | |||||||||
| Hotel administrative | 99,745 | 81,099 | 69,526 | |||||||||
| Sales and marketing | 100,877 | 82,663 | 71,009 | |||||||||
| Utilities | 41,909 | 35,585 | 32,668 | |||||||||
| Repair and maintenance | 48,463 | 41,249 | 36,886 | |||||||||
| Franchise fees | 52,930 | 44,225 | 38,003 | |||||||||
| Management fees | 42,722 | 35,586 | 31,074 | |||||||||
| Property taxes, insurance and other | 69,391 | 56,860 | 46,023 | |||||||||
| Ground lease | 11,313 | 10,409 | 9,996 | |||||||||
| General and administrative | 26,341 | 17,032 | 19,552 | |||||||||
| Transaction and litigation costs (reimbursements) | (2,586 | ) | 34,989 | 7,181 | ||||||||
| Loss on impairment of depreciable real estate assets | 45,875 | 5,471 | 45,000 | |||||||||
| Depreciation | 176,499 | 148,163 | 127,449 | |||||||||
| Total expenses | 1,024,235 | 855,763 | 762,282 | |||||||||
| Operating income | 214,387 | 185,262 | 136,032 | |||||||||
| Interest and other expense, net | (47,343 | ) | (40,026 | ) | (33,132 | ) | ||||||
| Gain (loss) on sale of real estate | 16,295 | (153 | ) | 15,286 | ||||||||
| Income before income taxes | 183,339 | 145,083 | 118,186 | |||||||||
| Income tax expense | (847 | ) | (431 | ) | (898 | ) | ||||||
| Net income | $ | 182,492 | $ | 144,652 | $ | 117,288 | ||||||
| Other comprehensive income (loss): | ||||||||||||
| Interest rate derivatives | 5,189 | 6,646 | (1,546 | ) | ||||||||
| Comprehensive income | $ | 187,681 | $ | 151,298 | $ | 115,742 | ||||||
| Basic and diluted net income per common share | $ | 0.82 | $ | 0.76 | $ | 0.65 | ||||||
| Weighted average common shares outstanding - basic and diluted | 223,526 | 190,856 | 180,261 | |||||||||
Years Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Revenues: | ||||||||||||
Room | $ | 1,167,203 | $ | 1,172,331 | $ | 1,143,987 | ||||||
Food and beverage | 59,815 | 62,600 | 66,030 | |||||||||
Other | 39,579 | 35,624 | 28,605 | |||||||||
Total revenue | 1,266,597 | 1,270,555 | 1,238,622 | |||||||||
Expenses: | ||||||||||||
Hotel operating expense: | ||||||||||||
Operating | 312,449 | 315,363 | 310,756 | |||||||||
Hotel administrative | 103,895 | 102,019 | 99,745 | |||||||||
Sales and marketing | 116,089 | 105,834 | 100,877 | |||||||||
Utilities | 40,598 | 42,474 | 41,909 | |||||||||
Repair and maintenance | 52,695 | 51,813 | 48,463 | |||||||||
Franchise fees | 54,862 | 54,494 | 52,930 | |||||||||
Management fees | 43,828 | 43,937 | 42,722 | |||||||||
Total hotel operating expense | 724,416 | 715,934 | 697,402 | |||||||||
Property taxes, insurance and other | 75,840 | 74,640 | 69,391 | |||||||||
Operating ground lease | 1,658 | 11,364 | 11,313 | |||||||||
General and administrative | 36,210 | 24,294 | 26,341 | |||||||||
Loss on impairment of depreciable real estate assets | 6,467 | 3,135 | 45,875 | |||||||||
Depreciation and amortization | 193,240 | 183,482 | 176,499 | |||||||||
Transaction and litigation costs (reimbursements) | - | - | (2,586 | ) | ||||||||
Total expense | 1,037,831 | 1,012,849 | 1,024,235 | |||||||||
Gain on sale of real estate | 5,021 | 152 | 16,295 | |||||||||
Operating income | 233,787 | 257,858 | 230,682 | |||||||||
Interest and other expense, net | (61,191 | ) | (51,185 | ) | (47,343 | ) | ||||||
Income before income taxes | 172,596 | 206,673 | 183,339 | |||||||||
Income tax expense | (679 | ) | (587 | ) | (847 | ) | ||||||
Net income | $ | 171,917 | $ | 206,086 | $ | 182,492 | ||||||
Other comprehensive income (loss): | ||||||||||||
Interest rate derivatives | (14,704 | ) | 228 | 5,189 | ||||||||
Comprehensive income | $ | 157,213 | $ | 206,314 | $ | 187,681 | ||||||
Basic and diluted net income per common share | $ | 0.77 | $ | 0.90 | $ | 0.82 | ||||||
Weighted average common shares outstanding - basic and diluted | 223,910 | 229,659 | 223,526 | |||||||||
See notes to consolidated financial statements.
Apple Hospitality REIT, Inc.
Consolidated Statements of Shareholders’ Equity
(in thousands, except per share data)
| Common Stock | Accumulated Other Comprehensive Income (Loss) | Distributions Greater Than Net Income | ||||||||||||||||||
| Number of Shares | Amount | Total | ||||||||||||||||||
| Balance at December 31, 2014 | 186,910 | $ | 3,737,328 | $ | (511 | ) | $ | (722,193 | ) | $ | 3,014,624 | |||||||||
| Share based compensation and rounding of fractional shares for 50% reverse share split | 44 | 823 | - | - | 823 | |||||||||||||||
| Common shares repurchased | (12,586 | ) | (237,567 | ) | - | - | (237,567 | ) | ||||||||||||
| Interest rate derivatives | - | - | (1,546 | ) | - | (1,546 | ) | |||||||||||||
| Net income | - | - | - | 117,288 | 117,288 | |||||||||||||||
| Distributions declared and paid to shareholders ($1.27 per share) | - | - | - | (229,127 | ) | (229,127 | ) | |||||||||||||
| Distribution declared and payable to shareholders ($0.10 per share) | - | - | - | (17,437 | ) | (17,437 | ) | |||||||||||||
| Balance at December 31, 2015 | 174,368 | 3,500,584 | (2,057 | ) | (851,469 | ) | 2,647,058 | |||||||||||||
| Share based compensation, net | 284 | 5,611 | - | - | 5,611 | |||||||||||||||
| Issuance of common shares, net | 48,730 | 954,879 | - | - | 954,879 | |||||||||||||||
| Common shares repurchased | (443 | ) | (7,869 | ) | - | - | (7,869 | ) | ||||||||||||
| Interest rate derivatives | - | - | 6,646 | - | 6,646 | |||||||||||||||
| Net income | - | - | - | 144,652 | 144,652 | |||||||||||||||
| Distributions declared to shareholders ($1.20 per share) | - | - | - | (233,913 | ) | (233,913 | ) | |||||||||||||
| Balance at December 31, 2016 | 222,939 | 4,453,205 | 4,589 | (940,730 | ) | 3,517,064 | ||||||||||||||
| Share based compensation, net | 115 | 2,178 | - | - | 2,178 | |||||||||||||||
| Issuance of common shares, net | 6,908 | 132,805 | - | - | 132,805 | |||||||||||||||
| Interest rate derivatives | - | - | 5,189 | - | 5,189 | |||||||||||||||
| Net income | - | - | - | 182,492 | 182,492 | |||||||||||||||
| Distributions declared to shareholders ($1.20 per share) | - | - | - | (268,643 | ) | (268,643 | ) | |||||||||||||
| Balance at December 31, 2017 | 229,962 | $ | 4,588,188 | $ | 9,778 | $ | (1,026,881 | ) | $ | 3,571,085 | ||||||||||
| Common Stock | Accumulated Other | Distributions | ||||||||||||||||||
Number of Shares | Amount | Comprehensive Income (Loss) | Greater Than Net Income | Total | ||||||||||||||||
Balance at December 31, 2016 | 222,939 | $ | 4,453,205 | $ | 4,589 | $ | (940,730 | ) | $ | 3,517,064 | ||||||||||
Share based compensation, net | 115 | 2,178 | - | - | 2,178 | |||||||||||||||
Issuance of common shares, net | 6,908 | 132,805 | - | - | 132,805 | |||||||||||||||
Interest rate derivatives | - | - | 5,189 | - | 5,189 | |||||||||||||||
Net income | - | - | - | 182,492 | 182,492 | |||||||||||||||
Distributions declared to shareholders ($1.20 per share) | - | - | - | (268,643 | ) | (268,643 | ) | |||||||||||||
Balance at December 31, 2017 | 229,962 | 4,588,188 | 9,778 | (1,026,881 | ) | 3,571,085 | ||||||||||||||
Share based compensation, net(1) | 362 | 6,512 | - | - | 6,512 | |||||||||||||||
Issuance of common shares, net | 243 | 4,677 | - | - | 4,677 | |||||||||||||||
Common shares repurchased | (6,570 | ) | (104,304 | ) | - | - | (104,304 | ) | ||||||||||||
Interest rate derivatives | - | - | 228 | - | 228 | |||||||||||||||
Net income | - | - | - | 206,086 | 206,086 | |||||||||||||||
Distributions declared to shareholders ($1.20 per share) | - | - | - | (275,274 | ) | (275,274 | ) | |||||||||||||
Balance at December 31, 2018 | 223,997 | 4,495,073 | 10,006 | (1,096,069 | ) | 3,409,010 | ||||||||||||||
Cumulative effect of the adoption of ASU 2016-02 related to leases | - | - | - | (5,201 | ) | (5,201 | ) | |||||||||||||
Share based compensation, net(1) | 156 | 3,025 | - | - | 3,025 | |||||||||||||||
Common shares repurchased | (290 | ) | (4,335 | ) | - | - | (4,335 | ) | ||||||||||||
Interest rate derivatives | - | - | (14,704 | ) | - | (14,704 | ) | |||||||||||||
Net income | - | - | - | 171,917 | 171,917 | |||||||||||||||
Distributions declared to shareholders ($1.20 per share) | - | - | - | (268,699 | ) | (268,699 | ) | |||||||||||||
Balance at December 31, 2019 | 223,863 | $ | 4,493,763 | $ | (4,698 | ) | $ | (1,198,052 | ) | $ | 3,291,013 | |||||||||
(1) | Number of shares does not include deferred share units issued under the Company’s Non-Employee Director Deferral Program, however, dollar amount includes the value at issuance. |
See notes to consolidated financial statements.
Apple Hospitality REIT, Inc.
Consolidated Statements of Cash Flows
(in thousands)
| Years Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 182,492 | $ | 144,652 | $ | 117,288 | ||||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||
| Depreciation | 176,499 | 148,163 | 127,449 | |||||||||
| Loss on impairment of depreciable real estate assets | 45,875 | 5,471 | 45,000 | |||||||||
| (Gain) loss on sale of real estate | (16,295 | ) | 153 | (15,286 | ) | |||||||
| Other non-cash expenses, net | 7,120 | 6,747 | 6,015 | |||||||||
| Changes in operating assets and liabilities, net of amounts acquired or assumed with acquisitions: | ||||||||||||
| Decrease (increase) in due from third party managers, net | 17 | 5,164 | (1,827 | ) | ||||||||
| Decrease (increase) in other assets, net | 11,905 | (9,912 | ) | (644 | ) | |||||||
| Increase (decrease) in accounts payable and other liabilities | (22,872 | ) | 31,596 | 3,057 | ||||||||
| Net cash provided by operating activities | 384,741 | 332,034 | 281,052 | |||||||||
| Cash flows from investing activities: | ||||||||||||
| Cash consideration in Apple Ten merger | - | (93,590 | ) | - | ||||||||
| Acquisition of hotel properties, net | (162,903 | ) | (23,994 | ) | (233,078 | ) | ||||||
| Deposits and other disbursements for potential acquisitions | (1,359 | ) | (510 | ) | (563 | ) | ||||||
| Capital improvements and development costs | (63,305 | ) | (65,128 | ) | (62,260 | ) | ||||||
| Decrease (increase) in capital improvement reserves | (1,036 | ) | 3,625 | 8,451 | ||||||||
| Net proceeds from sale of real estate | 69,311 | 9,760 | 205,165 | |||||||||
| Net cash used in investing activities | (159,292 | ) | (169,837 | ) | (82,285 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Net proceeds (disbursements) related to issuance of common shares | 132,993 | (1,207 | ) | - | ||||||||
| Repurchases of common shares | - | (7,869 | ) | (237,567 | ) | |||||||
| Repurchases of common shares to satisfy employee withholding requirements | (692 | ) | (1,459 | ) | - | |||||||
| Distributions paid to common shareholders | (267,917 | ) | (229,056 | ) | (229,127 | ) | ||||||
| Net proceeds from (payments on) revolving credit facility | (163,100 | ) | 155,200 | 23,200 | ||||||||
| Payments on extinguished credit facility | - | (111,100 | ) | - | ||||||||
| Proceeds from term loans | 85,000 | 150,000 | 425,000 | |||||||||
| Repayment of term loan | - | - | (100,000 | ) | ||||||||
| Proceeds from mortgage debt | 30,000 | 94,000 | 38,000 | |||||||||
| Payments of mortgage debt | (39,920 | ) | (207,694 | ) | (111,218 | ) | ||||||
| Financing costs | (1,813 | ) | (3,012 | ) | (7,055 | ) | ||||||
| Net cash used in financing activities | (225,449 | ) | (162,197 | ) | (198,767 | ) | ||||||
| Net change in cash and cash equivalents | - | - | - | |||||||||
| Cash and cash equivalents, beginning of period | - | - | - | |||||||||
| Cash and cash equivalents, end of period | $ | - | $ | - | $ | - | ||||||
| Supplemental cash flow information: | ||||||||||||
| Interest paid | $ | 46,885 | $ | 41,884 | $ | 35,019 | ||||||
| Income taxes paid | $ | 877 | $ | 1,104 | $ | 1,021 | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||||||
| Stock consideration in Apple Ten merger (see note 2) | $ | - | $ | 956,086 | $ | - | ||||||
| Mortgage debt assumed in acquisition of hotel properties | $ | - | $ | - | $ | 22,399 | ||||||
| Mortgage debt assumed by buyer upon sale of real estate | $ | 27,073 | $ | - | $ | - | ||||||
| Accrued distribution to common shareholders | $ | 23,020 | $ | 22,294 | $ | 17,437 | ||||||
Years Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 171,917 | $ | 206,086 | $ | 182,492 | ||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 193,240 | 183,482 | 176,499 | |||||||||
Loss on impairment of depreciable real estate assets | 6,467 | 3,135 | 45,875 | |||||||||
Gain on sale of real estate | (5,021 | ) | (152 | ) | (16,295 | ) | ||||||
Other non-cash expenses, net | 4,520 | 7,972 | 7,120 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Decrease in due from third party managers, net | 2,221 | 2,027 | 17 | |||||||||
(Increase) decrease in other assets, net | (821 | ) | (772 | ) | 11,235 | |||||||
Increase (decrease) in accounts payable and other liabilities | �� | 9,151 | 3,034 | (22,872 | ) | |||||||
Net cash provided by operating activities | 381,674 | 404,812 | 384,071 | |||||||||
Cash flows from investing activities: | ||||||||||||
Acquisition of hotel properties, net | (59,424 | ) | (150,746 | ) | (162,903 | ) | ||||||
Deposits and other disbursements for potential acquisitions | (1,229 | ) | (537 | ) | (1,359 | ) | ||||||
Capital improvements | (74,896 | ) | (74,293 | ) | (63,305 | ) | ||||||
Net proceeds from sale of real estate | 121,225 | 15,416 | 69,311 | |||||||||
Net cash used in investing activities | (14,324 | ) | (210,160 | ) | (158,256 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Net proceeds related to issuance of common shares | - | 4,677 | 132,993 | |||||||||
Repurchases of common shares | (4,335 | ) | (104,304 | ) | - | |||||||
Repurchases of common shares to satisfy employee withholding requirements | (577 | ) | (1,525 | ) | (692 | ) | ||||||
Distributions paid to common shareholders | (268,672 | ) | (275,892 | ) | (267,917 | ) | ||||||
Net (payments on) proceeds from existing revolving credit facility | (217,900 | ) | 268,800 | - | ||||||||
Net payments on extinguished revolving credit facility | - | (106,900 | ) | (163,100 | ) | |||||||
Proceeds from term loans | 160,000 | 575,000 | 85,000 | |||||||||
Repayment of term loans | - | (575,000 | ) | - | ||||||||
Proceeds from mortgage debt | - | 44,000 | 30,000 | |||||||||
Payments of mortgage debt | (33,806 | ) | (12,663 | ) | (39,920 | ) | ||||||
Financing costs | (1,031 | ) | (7,004 | ) | (1,813 | ) | ||||||
Net cash used in financing activities | (366,321 | ) | (190,811 | ) | (225,449 | ) | ||||||
Net change in cash, cash equivalents and restricted cash | 1,029 | 3,841 | 366 | |||||||||
Cash, cash equivalents and restricted cash, beginning of period | 33,632 | 29,791 | 29,425 | |||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 34,661 | $ | 33,632 | $ | 29,791 | ||||||
Supplemental cash flow information: | ||||||||||||
Interest paid | $ | 59,877 | $ | 50,312 | $ | 46,885 | ||||||
Income taxes paid | $ | 790 | $ | 887 | $ | 877 | ||||||
Supplemental disclosure of noncash investing and financing activities: | ||||||||||||
Accrued distribution to common shareholders | $ | 22,386 | $ | 22,400 | $ | 23,020 | ||||||
Mortgage debt assumed by buyer upon sale of real estate | $ | - | $ | - | $ | 27,073 | ||||||
Reconciliation of cash, cash equivalents and restricted cash: | ||||||||||||
Cash and cash equivalents, beginning of period | $ | - | $ | - | $ | - | ||||||
Restricted cash-furniture, fixtures and other escrows, beginning of period | 33,632 | 29,791 | 29,425 | |||||||||
Cash, cash equivalents and restricted cash, beginning of period | $ | 33,632 | $ | 29,791 | $ | 29,425 | ||||||
Cash and cash equivalents, end of period | $ | - | $ | - | $ | - | ||||||
Restricted cash-furniture, fixtures and other escrows, end of period | 34,661 | 33,632 | 29,791 | |||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 34,661 | $ | 33,632 | $ | 29,791 | ||||||
See notes to consolidated financial statements.
Apple Hospitality REIT, Inc.
Notes to Consolidated Financial Statements
Note 1
Organization and Summary of Significant Accounting Policies
Organization
Apple Hospitality REIT, Inc., formed in November 2007 as a Virginia corporation, together with its wholly-owned subsidiaries (the “Company”), is a self-advised real estate investment trust (“REIT”) that invests in income-producing real estate, primarily in the lodging sector, in the United States.States (“U.S.”). The Company’s fiscal year end is December 31. The Company has no foreign operations or assets and its operating structure includes only one1 reportable segment. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. Although the Company has interests in potential variable interest entities through its purchase commitments, it is not the primary beneficiary as the Company does not have any elements of power in the decision making process of these entities, and therefore does not consolidate the entities. As of December 31, 2017,2019, the Company owned 239233 hotels with an aggregate of 30,32229,870 rooms located in 34 states.states, including 1 hotel with 105 rooms classified as held for sale, which was sold to an unrelated party in January 2020. All information related to the number of rooms included in these notes to the consolidated financial statements and Schedule III - Real Estate and Accumulated Depreciation and Amortization listed in the Index at Item 15(2) has not been audited. The Company’s common shares are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “APLE.”
The Company has elected to be treated as a REIT for federal income tax purposes. The Company has a wholly-owned taxable REIT subsidiary (or subsidiaries thereof) (collectively, the “Lessee”), which leases all of the Company’s hotels.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. The fair market value of cash and cash equivalents approximates their carrying value. Cash balances may at times exceed federal depository insurance limits.
Restricted Cash
Restricted cash includes reserves for debt service, real estate taxes, and insurance, and reserves for furniture, fixtures, and equipment replacements of up to 5% of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions. The fair market value of restricted cash approximates its carrying value.
Investment in Real Estate and Related Depreciation
Real estate is stated at cost, net of depreciation.depreciation and amortization. Repair and maintenance costs are expensed as incurred while significant improvements, renovations, and replacements are capitalized. As further discussed in Note 10, finance ground lease assets are capitalized at the estimated present value of the remaining minimum lease payments under the leases. Depreciation isand amortization are computed using the straight-line method over the average estimated useful lives of the assets, which are generally 39 years for buildings, the remaining life of the lease for finance ground leases (which in some instances may include renewal options), 10 to 20 years for franchise fees, 10 years for major improvements and three to seven years for furniture and equipment.
The Company considers expenditures to be capital in nature based on the following criteria: (1) for a single asset, the cost must be at least $500, including all normal and necessary costs to place the asset in service, and the useful life must be at least one year; (2) for group purchases of 10 or more identical assets, the unit cost for each asset must be at least $50, including all normal and necessary costs to place the asset in service, and the useful life must be at least one year; and (3) for major repairs to a single asset, the repair must be at least $2,500 and the useful life of the asset must be substantially extended.
Upon acquisition of real estate properties, the Company estimates the fair value of acquired tangible assets (consisting of land, buildings and improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities, including in-place leases, and assumed debt based on the evaluation of information and estimates
The Company records impairment losses on hotel properties used in operations if indicators of impairment are present, and the sum of the undiscounted cash flows estimated to be generated by the respective properties over their estimated remaining useful life, based on historical and industry data, is less than the properties’ carrying amount. Indicators of impairment include a property with current or potential losses from operations, when it becomes more likely than not that a property will be sold before the end of its previously estimated useful life or when events, trends, contingencies or changes in circumstances indicate that a triggering event has occurred and an asset’s carrying value may not be recoverable. The Company monitors its properties on an ongoing basis by analytically reviewing financial performance and considers each property individually for purposes of reviewing for indicators of impairment. As many indicators of impairment are subjective, such as general economic and market declines, the Company also prepares an annual recoverability analysis for each of its properties to assist with its evaluation of impairment indicators. The analysis compares each property’s net book value to each property’s estimated operating income using current operating results for each stabilized property and projected stabilized operating results based on the property’s market for properties that recently opened, were recently renovated or experienced other short-term business disruption. The Company’s planned initial hold period for each property is generally 39 years. If events or circumstances change, such as the Company’s intended hold period for a property or if the operating performance of a property declines substantially for an extended period of time, the Company’s carrying value for a particular property may not be recoverable, and an impairment loss will be recorded. Impairment losses are measured as the difference between the asset’s fair value and its carrying value. The Company’s ongoing analyses and annual recoverability analyses have not identified any impairment losses other than the losses on impairment of three1 property recorded in 2019, 3 properties recorded in 2018 and 3 properties recorded in 2017 one property recorded in 2016 and one property recorded in 2015 totaling approximately $45.9$6.5 million, $5.5$3.1 million and $45.0$45.9 million, respectively, as discussed in Note 3.
Assets Held for Sale
The Company classifies assets as held for sale when a binding agreement to sell the property has been signed under which the buyer has committed a significant amount of nonrefundable cash, no significant contingencies exist which could prevent the transaction from being completed in a timely manner, and the sale is expected to close within one year. If these criteria are met, the Company will cease recording depreciation and amortization and will record an impairment charge if the fair value less costs to sell is less than the carrying amount of the disposal group. The Company will generally classify the impairment charge, together with the related operating results, as continuing operations in the Company’s consolidated statements of operations and classify the assets and related liabilities as held for sale in the Company’s consolidated balance sheets. If the Company’s plan of sale changes and the Company subsequently decides not to sell a property that is classified as held for sale, the property will be reclassified as held and used in the period the change occurs. As of December 31, 2017, the Company did not have any assets classified as held for sale. As of December 31, 2016,2019, the Company had one hotel classified as held for sale, which was sold to an unrelated party in April 2017,January 2020, discussed further in Notes 3Note 3. As of December 31, 2018, the Company did not have any assets classified as held for sale.
Revenue Recognition
Revenues consist of amounts derived from hotel operations, including room sales, food and 4.
an agreed-upon rate and length of stay. Food and beverage revenue is recognized at the time the food or beverage is purchased by and provided to the customer. Other operating revenue is recognized at the time when the goods or services are provided to the customer or when the performance obligation is satisfied. Payment is due at the time that goods or services are rendered or billed. For room revenue, payment is typically due and paid in full at the end of the stay with some customers prepaying for their rooms prior to the stay. Payments received from a customer prior to arrival are recorded as earned, which is generally definedan advance deposit and are recognized as revenue at the date upon which a guest occupies a room or utilizes the hotel’s services.
Comprehensive Income
Comprehensive income includes net income and other comprehensive income, (loss), which is comprised of unrealized gains (losses) and other adjustmentsor losses resulting from hedging activity.
Net Income Per Common Share
Basic net income per common share is computed based upon the weighted average number of shares outstanding during the year. Diluted net income per common share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the year. Basic and dilutive net income per common share were the same for each of the years presented.
Income Taxes
The Company is operated as, and has elected to be taxed as, a REIT under Sections 856 to 860 of the Internal Revenue Code.Code of 1986, as amended. Earnings and profits, which will determine the taxability of distributions to shareholders, will differ from income reported for financial reporting purposes primarily due to the differences for federal income tax purposes in the carrying value (basis) of the investment in properties and estimated useful lives used to compute depreciation, transaction and litigation costs (reimbursements), straight-line operating ground lease expense, amortization of favorable and unfavorable leases, amortization and interest expense versus lease payments related to finance ground leases, loss on impairment of depreciable real estate assets and gain (loss) on sale of real estate assets. The characterization of 2019 paid distributions of $1.20 per share for tax purposes was 78% ordinary income and 22% return of capital, 2018 paid distributions of $1.20 per share for tax purposes was 84% ordinary income and 16% return of capital, and 2017 paid distributions of $1.20 per share for tax purposes was 94% ordinary income and 6% return of capital. The characterization of 2016 paid distributions of $1.20 per share for tax purposes was 76% ordinary income and 24% return of capital. The characterization of 2015 paid distributions of $1.27 per share for tax purposes was 72% ordinary income, 15% return of capital, 8% unrecaptured Section 1250 gain and 5% long-term capital gain.
The Lessee, as a taxable REIT subsidiary of the Company, is subject to federal and state income taxes. Due to historical cumulative operating losses, the taxable REIT subsidiary did not incur federal income tax for the three years ended December 31, 20172019 and recorded a valuation allowance against the entire deferred asset for all periods presented. The total net operating loss carry forward for federal income tax purposes was approximately $101 million as of December 31, 2019, $94 million as of December 31, 2018, and $95 million as of December 31, 2017, $94 million as of December 31, 2016 and $100 million as of December 31, 2015.2017. The net operating losses expire beginning in 2028. There are no material differences between the book and tax cost basis of the Company’s assets and liabilities, except for the carrying value (basis) of the investment in properties. The Company’s income tax expense as shown in the consolidated statements of operations primarily includes franchise and income taxes at the state jurisdiction level, which do not have any associated material deferred taxes.
As of December 31, 2017,2019, the tax years that remain subject to examination by major tax jurisdictions generally include 2014-2017.
Sales and Marketing Costs
Sales and marketing costs are expensed when incurred. These costs represent the expense for franchise advertising and reservation systems under the terms of the hotel management and franchise agreements and general and administrative expenses that are directly attributable to advertising and promotion.
Use of Estimates
The preparation of the financial statements in conformity with United StatesU.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Accounting Standards Recently Adopted
Leases
In January 2017,February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations2016-02, Leases (Topic 805), Clarifying the Definition of a Business842), which is intendedreplaces Leases (Topic 840), and along with subsequent amendments, provides the principles for the recognition, measurement, presentation and disclosure of leases for both parties to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard is effective for annuala contract (i.e. lessees and interim periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this standard effective January 1, 2017 on a prospective basis. Prior to the adoption of this standard, the Company’s acquisitions of hotel properties were accounted for as existing businesses, and therefore all transaction costs associated with the acquisitions, including title, legal, accounting, brokerage commissions and other related costs were expensed as incurred.lessors). Under the new standard, effective January 1, 2017, acquisitions of hotel properties (including the acquisition of six hotels in 2017, as discussed in Note 3) will generally be accounted for as acquisitions of a group of assets, with costs incurred to effect an acquisition being capitalized as part of the cost of the assets acquired, instead of accounted for separately as expenses in the period that theylessees are incurred. Asset acquisitions now require the Company to complete its allocation of the purchase price at the time of the acquisition as the measurement period applicable to business combinations does not apply to asset acquisitions.
At adoption of the Company’s current operating lease payments, and expects to record right of usenew standard, the Company recorded right-of-use assets and lease liabilities for theseits ground leases and certain applicable operating leases (including hotel equipment leases and office space leases) measured at the estimated present value of the remaining minimum lease payments under the leases. NaN of the Company’s ground leases that were previously classified as operating leases under Topic 840 are classified as financing leases under Topic 842. For these finance leases, effective January 1, 2019, the Company recognizes amortization expense, included in depreciation and amortization expense, and interest expense, included in interest and other expense, net, instead of operating ground lease expense, in the Company’s consolidated statements of operations. While the total expense recognized over the life of a lease is unchanged, the timing of expense recognition for these finance leases results in higher expense recognition during the earlier years of the lease and lower expense during the later years of the lease. In addition to recording operating and financing right-of-use assets and lease liabilities, the Company also reclassified at adoption of the new standard.standard its intangible assets for below market leases and intangible liabilities for above market leases, as well as its accrued straight-line lease liabilities for its operating leases, to the beginning right-of-use assets. The Company derecognized its accrued straight-line lease liabilities related to its finance leases, which are included in the cumulative-effect adjustment noted above. The Company is also a lessor in certain retail lease agreements related to its real estate, however, it does not anticipate anythere was no material change to the accounting for these leasing arrangements. The Company is still evaluating the impact this standard will have on its consolidated financial statements and relatedSee Note 10 for additional disclosures and other than the inclusion of right-of-use assets and related lease liabilities inpertaining to the Company’s consolidated balance sheet, such effects have not yet been determined.
Accounting Standards Recently Issued
Fair Value Measurement
In August 2016,2018, the FASB issued ASU No. 2016-15, Statement of Cash Flows2018-13, Fair Value Measurement (Topic 230)820), Classification of Certain Cash Receipts and Cash PaymentsDisclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which is intendedremoves, modifies and adds fair value disclosure requirements, including a new requirement to reduce diversity in practice in how certain transactionsdisclose the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements. Certain disclosures are classified in the statement of cash flows. Therequired to be applied retrospectively and others applied prospectively. This standard is effective for annual and interim reporting periods beginning after December 15, 20172019, with early adoption permitted. The standard requires a retrospective transition approach where practicable. The Company adopted this standard as of January 1, 20182020, and it is not expected to have a material impactbased on the Company’s consolidated financial statements.
Note 14.
| Purchase Price Allocation | ||||
| Assets: | ||||
| Land | $ | 150,780 | ||
| Building and improvements | 1,066,379 | |||
| Furniture, fixtures and equipment | 75,345 | |||
| Franchise fees | 2,917 | |||
| Investment in real estate | 1,295,421 | |||
| Restricted cash, due from third party managers and other assets | 33,579 | |||
| Total assets | 1,329,000 | |||
| Liabilities: | ||||
| Credit facility | 111,100 | |||
| Mortgage debt | 151,885 | |||
| Accounts payable and other liabilities | 16,339 | |||
| Total liabilities | 279,324 | |||
| Fair value estimate of net assets acquired (total consideration paid) | $ | 1,049,676 | ||
| Year Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| Total revenue | $ | 1,238,622 | $ | 1,232,191 | ||||
| Net income | $ | 179,906 | $ | 210,311 | ||||
| Basic and diluted net income per common share | $ | 0.80 | $ | 0.94 | ||||
| Weighted average common shares outstanding - basic and diluted | 223,526 | 223,343 | ||||||
Investment in Real Estate
The Company’s investment in real estate consisted of the following (in thousands):
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Land | $ | 720,465 | $ | 707,878 | ||||
| Building and Improvements | 4,362,929 | 4,270,095 | ||||||
| Furniture, Fixtures and Equipment | 428,734 | 391,421 | ||||||
| Franchise Fees | 12,315 | 11,692 | ||||||
| 5,524,443 | 5,381,086 | |||||||
| Less Accumulated Depreciation | (731,284 | ) | (557,597 | ) | ||||
| Investment in Real Estate, net | $ | 4,793,159 | $ | 4,823,489 | ||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
Land | $ | 724,054 | $ | 737,822 | ||||
Building and Improvements | 4,458,383 | 4,503,728 | ||||||
Furniture, Fixtures and Equipment | 486,386 | 471,399 | ||||||
Finance Ground Lease Assets | 197,617 | - | ||||||
Franchise Fees | 13,727 | 13,354 | ||||||
| 5,880,167 | 5,726,303 | |||||||
Less Accumulated Depreciation and Amortization | (1,054,429 | ) | (909,893 | ) | ||||
Investment in Real Estate, net | $ | 4,825,738 | $ | 4,816,410 | ||||
Effective January 1, 2019, the Company adopted ASU No. 2016-02. Leases (Topic 842), as amended, and, as a result, recorded finance ground lease assets for 4 of its ground leases, which are included in investment in real estate, net. See Note 10 for more information regarding the Company’s finance ground lease assets.
As of December 31, 2017,2019, the Company owned 239233 hotels with an aggregate of 30,32229,870 rooms located in 34 states.
The Company leases all of its hotels to its wholly-owned taxable REIT subsidiary (or a subsidiary thereof) under master hotel lease agreements.
2019 and 20162018 Acquisitions
During 2017,2019, the Company acquired six3 hotels. The following table sets forth the location, brand, manager, date acquired, number of rooms and gross purchase price, excluding transaction costs, for each hotel acquired during 2017.hotel. All dollar amounts are in thousands.
City | State | Brand | Manager | Date Acquired | Rooms | Gross Purchase Price | ||||||||||
St. Paul | MN | Hampton | Vista Host | 3/4/2019 | 160 | $ | 31,680 | |||||||||
Orlando | FL | Home2 Suites | LBA | 3/19/2019 | 128 | 20,736 | ||||||||||
Richmond | VA | Independent | Crestline | 10/9/2019 | 55 | 6,875 | ||||||||||
| 343 | $ | 59,291 | ||||||||||||||
During 2018, the Company acquired 5 hotels. The following table sets forth the location, brand, manager, date acquired, number of rooms and gross purchase price, excluding transaction costs, for each hotel. All dollar amounts are in thousands.
City | State | Brand | Manager | Date Acquired | Rooms | Gross Purchase Price | ||||||||||
Atlanta/Downtown | GA | Hampton | McKibbon | 2/5/2018 | 119 | $ | 24,000 | |||||||||
Memphis | TN | Hampton | Crestline | 2/5/2018 | 144 | 39,000 | ||||||||||
Phoenix | AZ | Hampton | North Central | 5/2/2018 | 210 | 44,300 | ||||||||||
Atlanta/Perimeter Dunwoody | GA | Hampton | LBA | 6/28/2018 | 132 | 29,500 | ||||||||||
Jacksonville | FL | Hyatt Place | LBA | 12/7/2018 | 127 | 15,400 | ||||||||||
| 732 | $ | 152,200 | ||||||||||||||
The Company used borrowings under its revolving credit facility to purchase each of these hotels. The acquisitions of these hotel properties were accounted for as an acquisition of a group of assets, with costs incurred to
| City | State | Brand | Manager | Date Acquired | Rooms | Gross Purchase Price (a) | ||||||||||
| Fort Worth | TX | Courtyard | LBA | 2/2/2017 | 124 | $ | 18,034 | |||||||||
| Birmingham (b) | AL | Hilton Garden Inn | LBA | 9/12/2017 | 104 | 19,162 | ||||||||||
| Birmingham (b) | AL | Home2 Suites | LBA | 9/12/2017 | 106 | 19,276 | ||||||||||
| Portland | ME | Residence Inn | Pyramid | 10/13/2017 | 179 | 55,750 | ||||||||||
| Salt Lake City | UT | Residence Inn | Huntington | 10/20/2017 | 136 | 25,500 | ||||||||||
| Anchorage | AK | Home2 Suites | Stonebridge | 12/1/2017 | 135 | 24,048 | ||||||||||
| 784 | $ | 161,770 | ||||||||||||||
effect the acquisition, which were not significant, capitalized as part of the cost of the assets acquired. | |
Loss on Impairment of Depreciable Real Estate Assets
During the years ended December 31, 2017, 20162019, 2018 and 2015,2017, the Company recorded impairment losses totaling approximately $45.9$6.5 million, $5.5$3.1 million and $45.0$45.9 million.
During the third quarter of 2019, the Company identified the Winston-Salem, North Carolina Courtyard for potential sale and, in August 2019, entered into a purchase and sale agreement with an unrelated party (which was subsequently amended) for the sale of the hotel for a gross sales price of approximately $6.7 million. As a result, the Company recognized an impairment loss of approximately $6.5 million in the third quarter of 2019, to adjust the carrying value of the hotel to its estimated fair value less costs to sell, which was based on the contracted sales price, a Level 1 input under the fair value hierarchy. As further discussed in Note 3, the Company completed the sale of the hotel in December 2019.
During the second quarter of 2018, the Company recognized impairment losses of approximately $3.1 million related to 3 hotels that were identified for potential sale: the Columbus, Georgia SpringHill Suites and TownePlace Suites (the “2 Columbus hotels”) and the Springdale, Arkansas Residence Inn. The impairment losses consisted of (i) approximately $0.5 million to adjust the carrying values of the two Columbus hotels the Company sold in July 2018 to their estimated fair values less costs to sell, which were based on the May 2018 contracted sales prices, Level 1 inputs under the fair value hierarchy, and (ii) approximately $2.6 million to adjust the carrying value of the Springdale, Arkansas Residence Inn the Company sold in November 2018 to its estimated fair value, which was based on the offers received at that time, net of estimated selling costs, a Level 2 input under the fair value hierarchy. See Note 3 for additional information concerning these dispositions.
The 2 Columbus hotels were previously identified for potential sale during the first quarter of 2017, at which time the Company recognized an impairment loss of approximately $7.9 million to adjust the carrying values of these properties to their estimated fair values, which were based on the then contracted sales prices, which were terminated in May 2017, net of estimated selling costs, a Level 1 input under the fair value hierarchy.
During the fourth quartersquarter of 2017, and 2015, upon finalizing its 2018 property level budgets for the following years and in 2017, experiencing delays and increased costs in leasing the property’s retail rental space, the Company identified indicators of impairment at its Renaissance hotel in New York, New York, due to declines in the current and forecasted cash flows from the property. In each instance, theThe Company performed a test of recoverability and determined that the carrying value of the hotel exceeded its estimated undiscounted future cash flows. The shortfallsshortfall in estimated cash flows werewas triggered by a combination of (a) declines in existing and forecasted hotel market conditions in New York, (b) new supply in the market and (c) 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. In addition, during 2015, the cost of transitioning to a new management company and increases in real estate taxes impacted the shortfall.tenants. Upon concluding that the carrying cost exceeded the estimated undiscounted future cash flows, the Company adjusted the carrying value of the hotel (approximately $40 million and $86 million as of December 31, 2017 and 2015, respectively)2017) to its estimated fair market value (approximately $2 million and $41 million as of December 31, 2017 and 2015, respectively)2017), resulting in an impairment lossesloss of approximately $38.0 million in 2017 and $45.0 million in 2015.million. The Company engaged a third party to assist with the analysis of the fair market values.value. The fair market values
Note 3
Assets Held for potential sale: the Columbus, Georgia SpringHill SuitesSale, Dispositions and TownePlace Suites hotels. In April 2017, the Company entered into separate contracts with the same unrelated partyHotel Sale Contracts
Assets Held for the sale of these properties for a total combined gross sales price of approximately $10.0 million. Due to the change in the anticipated hold period for each of these hotels, the Company reviewed the estimated undiscounted cash flows generated by each property (including its sale price, net of estimated selling costs) and determined that, for each hotel, the undiscounted cash flows were less than its carrying value; therefore the Company recognized an impairment loss of approximately $7.9 million in the first quarter of 2017 to adjust the bases of these properties to their estimated fair values, which were based on the contracted sale price, net of estimated selling costs, a Level 1 input under the fair value hierarchy. In May 2017, both of these contracts were terminated.
In October 2016, the Company entered into separate contracts for the sale of these properties. Due to the change in the anticipated hold period for each of these hotels, the Company reviewed the estimated undiscounted cash flows generated by each property (including its sale price, net of commissions and other selling costs) and determined that the Chesapeake, Virginia Marriott’s estimated undiscounted cash flows were less than its carrying value; therefore the Company recognized an impairment loss of approximately $5.5 million in the third quarter of 2016 to adjust the basis of this property to its estimated fair value, which was based on the original contracted sale price, net of broker commissions and other estimated selling costs, a Level 1 input under the fair value hierarchy. As further discussed in Note 4, the Chesapeake, Virginia Marriott was sold in December 2016 and the Dallas, Texas Hilton was sold in April 2017.
2019 Dispositions
During the year ended December 31, 2019, the Company sold 11 hotels in 3 transactions with unrelated parties for a total combined gross sales price of approximately $121.7 million, resulting in a combined gain on sale of approximately $16.0$5.6 million, which is included in the Company’s consolidated statement of operations for the year ended December 31, 2017.2019. The hotel11 hotels had a total carrying value totalingof approximately $39.0$115.1 million at the datetime of the sale. UnderThe following table lists the contract, at closing, the mortgage loan secured by the Dallas, Texas Hilton hotel was assumed by the buyer with the buyer receiving a credit for the amount assumed, which was approximately $27.1 million at the date of sale.
City | State | Brand | Date Sold | Rooms | ||||||
Sarasota | FL | Homewood Suites | 3/28/2019 | 100 | ||||||
Tampa | FL | TownePlace Suites | 3/28/2019 | 94 | ||||||
Baton Rouge | LA | SpringHill Suites | 3/28/2019 | 119 | ||||||
Holly Springs | NC | Hampton | 3/28/2019 | 124 | ||||||
Duncanville | TX | Hilton Garden Inn | 3/28/2019 | 142 | ||||||
Texarkana | TX | Courtyard | 3/28/2019 | 90 | ||||||
Texarkana | TX | TownePlace Suites | 3/28/2019 | 85 | ||||||
Bristol | VA | Courtyard | 3/28/2019 | 175 | ||||||
Harrisonburg | VA | Courtyard | 3/28/2019 | 125 | ||||||
Winston-Salem | NC | Courtyard | 12/19/2019 | 122 | ||||||
Fort Lauderdale | FL | Hampton | 12/30/2019 | 109 | ||||||
Total | 1,285 | |||||||||
2018 Dispositions
During the year ended December 31, 2017. The hotel had a carrying value totaling approximately $40.6 million at the date of sale.
City | State | Brand | Date Sold | Rooms | ||||||
Columbus | GA | SpringHill Suites | 7/13/2018 | 89 | ||||||
Columbus | GA | TownePlace Suites | 7/13/2018 | 86 | ||||||
Springdale | AR | Residence Inn | 11/29/2018 | 72 | ||||||
Total | 247 | |||||||||
2017 Dispositions
During the year ended December 31, 2015,2017, the Company sold 19 properties2 hotels in two separate2 transactions with unrelated parties for a total combined gross sales price of approximately $208.5$97.6 million (which includes the assumption of a mortgage loan of $27.1 million by the buyer of the Dallas Hilton), resulting in a combined gain on sale of
approximately $15.3$16.3 million, which is included in the Company’s consolidated statement of operations for the year ended December 31, 2015.
City | State | Brand | Date Sold | Rooms | ||||||
Dallas | TX | Hilton | 4/20/2017 | 224 | ||||||
Fairfax | VA | Marriott | 10/5/2017 | 316 | ||||||
Total | 540 | |||||||||
Excluding gains on sale of real estate, the Company’s consolidated statements of operations include operating income (loss) of approximately $2.4$(2.9) million, $(1.4)$5.1 million and $4.7$4.0 million for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively, relating to the results of operations of the 2217 hotels noted above (the one hotel classified as held for sale at December 31, 2019 and sold in January 2020, the 11 hotels sold duringin 2019, the three years ended December 31, 2017, as noted above,hotels sold in 2018 and the two hotels sold in 2017) for the period of ownership.
Hotel Sale Contracts
In December 2019, the Company entered into a purchase and sale agreement with an unrelated party for the sale of its 230-room Boise, Idaho SpringHill Suites for a gross sales price of $32.0 million. Although the Company is working towards the sale of this hotel, there are a number of conditions to closing that have not yet been satisfied and there can be no assurance that a closing on this hotel will occur under the outstanding purchase and sale agreement. If the closing occurs, this sale is expected to be completed in the first quarter of 2020 and the Company expects to recognize a gain upon completion of the sale. The net proceeds from the sale will be used to pay down borrowings on the Company’s revolving credit facility.
Note 4
Debt
Summary
As of December 31, 2019 and 2018, the Company’s debt consisted of the following (in thousands):
December 31, | December 31, 2018 | |||||||
Revolving credit facility | $ | 50,900 | $ | 268,800 | ||||
Term loans, net | 813,934 | 653,382 | ||||||
Mortgage debt, net | 455,573 | 490,060 | ||||||
Debt, net | $ | 1,320,407 | $ | 1,412,242 | ||||
The aggregate amounts of principal payable under the Company’s total debt obligations as of December 31, 2019 (including the revolving credit facility, term loans and mortgage debt), for the five years subsequent to December 31, 2019 and thereafter are as follows (in thousands):
2020 | $ | 28,349 | ||
2021 | 47,586 | |||
2022 | 160,152 | |||
2023 | 295,615 | |||
2024 | 337,981 | |||
Thereafter | 456,184 | |||
| 1,325,867 | ||||
Unamortized fair value adjustment of assumed debt | 2,526 | |||
Unamortized debt issuance costs related to term loans and mortgage debt | (7,986 | ) | ||
Total | $ | 1,320,407 |
The Company uses interest rate swaps to manage its interest rate risks on a portion of its variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the London Inter-Bank Offered Rate for a one-month term (“one-month LIBOR”). The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. See Note 5
December 31, | Percentage | December 31, 2018 | Percentage | |||||||||||||
Fixed-rate debt (1) | $ | 1,297,467 | 98 | % | $ | 1,046,273 | 74 | % | ||||||||
Variable-rate debt | 28,400 | 2 | % | 371,300 | 26 | % | ||||||||||
Total | $ | 1,325,867 | $ | 1,417,573 | ||||||||||||
Weighted-average interest rate of debt | 3.59 | % | 3.74 | % | ||||||||||||
(1) | Fixed-rate debt includes the portion of variable-rate debt where the interest payments have been effectively fixed by interest rate swaps as of the respective balance sheet date. Due to interest rate swaps expiring in May 2020, partially offset by other interest rate swaps becoming effective during the first half of 2020, $172.5 million of fixed-rate debt as of December 31, 2019 will become variable-rate debt in May 2020. See Note 5 for more information on the interest rate swap agreements. |
Credit Facilities
$965850 Million Credit Facility
Prior to the listingCompany’s refinancing of the Company’s common shares on the NYSE (the “Listing”),facility in July 2018, the Company amended and restated its $345 million credit facility with a syndicate of commercial banks, increasing the borrowing capacity to $965 million, reducing the annual interest rate and extending the maturity dates. Theutilized an unsecured “$965 million credit facility” is comprised of (i) a $540 million revolving credit facility with an initiala maturity date of May 18, 2019 and (ii) a $425 million term loan facility with a maturity date of May 18, 2020, consisting of three3 term loans, all funded during 20152015. On July 27, 2018, the Company entered into an amendment and restatement of its $965 million credit facility, which was repaid at closing, reducing the borrowing capacity to $850 million, reducing the annual interest rate and extending the maturity dates (the “$850 million credit facility”). The $850 million credit facility is comprised of (i) a $425 million revolving credit facility with an initial maturity date of July 27, 2022 and (ii) a $425 million term loan facility consisting of 2 term loans: a $200 million term loan with a maturity date of July 27, 2023, and a $225 million term loan with a maturity date of January 31, 2024, both funded at closing (the “$425 million term loans”loan facility”). At closing, the Company repaid the $425 million outstanding under the term loans of the $965 million credit facility with the proceeds from the $425 million term loan facility under the $850 million credit facility and borrowed approximately $196 million under the $425 million revolving credit facility to repay the outstanding balance of the extinguished $540 million revolving credit facility and to pay closing costs. Subject to certain conditions including covenant compliance and additional fees, the $425 million revolving credit facility maturity date may be extended up to one year. The Company may make voluntary prepayments in whole or in part, at any time. Interest payments on the $965$850 million credit facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR (the London Inter-Bank Offered Rate for a one-month term) plus a margin ranging from 1.50%1.35% to 2.30%2.25%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. In conjunction with the $425 million term loans, the Company entered into two interest rate swap agreements, which effectively fix the interest rate on $322.5 million of the outstanding balance at approximately 3.10%, subject to adjustment based on the Company’s leverage ratio, through maturity. See Note 6 for more information on the interest rate swap agreements. The Company is also required to pay quarterly an unused facility fee at an annual rate of 0.20% or 0.30%0.25% on the unused portion of the $425 million revolving credit facility, based on the amount of borrowings outstanding during the quarter.
$150225 Million Term Loan Facility
Prior to the Company’s refinancing of the facility in August 2018, the Company entered intoutilized an unsecured $150 million term loan facility with a syndicate of commercial banks (the “$150 million term loan facility”), consisting of a term loan of up to $50 million that will mature on April 8, 2021 (the “$50 million term loan”) and a term loan of up to $100 million that will mature on April 8, 2023 (the “$100 million term loan,” and collectively with the $50 million term loan the “$150with a maturity date of April 8, 2021 and a $100 million term loans”). Theloan with a maturity date of April 8, 2023, both funded during 2016. On August 2, 2018, the Company initially borrowed $50 million under theentered into an amendment and restatement of its $150 million term loan facility, on April 8, 2016which was repaid at closing, increasing the borrowing capacity to $225 million, reducing the annual interest rate and borrowedextending the maturity dates (the “$225 million term loan facility”). The $225 million term loan facility is comprised of (i) a $50 million term loan with a maturity date of August 2, 2023, which was funded at closing, and (ii) a $175 million term loan with a maturity date of August 2, 2025, of which $100 million was funded at closing and the remaining $100$75 million was funded on September 30, 2016.January 29, 2019. The credit agreement contains requirements and covenants similar to the Company’s $965$850 million credit facility. The Company may make voluntary prepayments in whole or in part, at any time, subject to certain conditions. Interest payments on the $150$225 million term loan facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR plus a
margin ranging from 1.45%1.35% to 2.20% for the $50 million term loan and 1.80% to 2.60% for the $100 million term loan,2.50%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. The Company also entered
2017 $85 Million Term Loan
On July 25, 2017, the Company entered into an unsecured $85 million term loan with a syndicate of commercial banks,facility with a maturity date of July 25, 2024, consisting of 1 term loan funded at closing (the “$85“2017 $85 million term loan” and, together with the $425 million term loans and the $150 million term loans, the “term loans”loan facility”). Net proceeds from the 2017 $85 million term loan facility were used to pay down outstandingborrowings on the Company’s revolving credit facility. Although no material terms were changed, the credit agreement was amended and restated in August 2018 as a result of the refinancings noted above. The amended and restated credit agreement contains requirements and covenants similar to the Company’s $850 million credit facility. The Company may make voluntary prepayments in whole or in part, at any time. Interest payments on the 2017 $85 million term loan facility are due monthly. In July 2019, the Company entered into an amendment of the $85 million term loan to reduce the interest rate from 1.80% - 2.60% to 1.30% - 2.10%, plus the annual rate of the one-month LIBOR, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement, for the remainder of the term.
2019 $85 Million Term Loan Facility
On December 31, 2019, the Company entered into an unsecured $85 million term loan facility with a maturity date of December 31, 2029, consisting of 1 term loan funded at closing (the “2019 $85 million term loan facility” and, together with the $850 million credit facility, the $225 million term loan facility and the 2017 $85 million term loan facility, the “credit facilities”). Net proceeds from the 2019 $85 million term loan facility were used to pay down borrowings on the Company’s revolving credit facility. The credit agreement contains requirements and covenants similar to the Company’s $965$850 million credit facility. The Company may make voluntary prepayments in whole or in part, at any time, subject to certain conditions. Interest payments on the 2019 $85 million term loan facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR plus a margin ranging from 1.80%1.70% to 2.60%2.55%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. In conjunction with the $85 million term loan, the Company entered into two interest rate swap agreements (one in May 2017 with a notional amount of $75 million, effective July 31, 2017, and the other in August 2017 with a notional amount of $10 million, effective August 10, 2017), which effectively fix the interest rate on the $85 million term loan at approximately 3.76%, subject to adjustment based on the Company’s leverage ratio, through maturity. See Note 6 for more information on the interest rate swap agreements.
As of December 31, 20172019 and 2016,2018, the details of the Company’s revolving credit facility and term loansfacilities were as set forth below. All dollar amounts are in thousands.
| As of December 31, 2017 | As of December 31, 2016 | |||||||||||||||||||
| Maturity Date | Outstanding Balance | Interest Rate | Outstanding Balance | Interest Rate | ||||||||||||||||
| Revolving credit facility (1) | 5/18/2019 | $ | 106,900 | 3.11 | % | (2) | $ | 270,000 | 2.32 | % | (2) | |||||||||
| Term loans | ||||||||||||||||||||
| $425 million term loans | 5/18/2020 | 425,000 | 3.09 | % | (3) | 425,000 | 2.90 | % | (3) | |||||||||||
| $50 million term loan | 4/8/2021 | 50,000 | 2.54 | % | (4) | 50,000 | 2.54 | % | (4) | |||||||||||
| $100 million term loan | 4/8/2023 | 100,000 | 3.13 | % | (4) | 100,000 | 3.13 | % | (4) | |||||||||||
| $85 million term loan | 7/25/2024 | 85,000 | 3.76 | % | (4) | - | n/a | |||||||||||||
| Total term loans at stated value | 660,000 | 575,000 | ||||||||||||||||||
| Unamortized debt issuance costs | (3,721 | ) | (4,066 | ) | ||||||||||||||||
| Total term loans | 656,279 | 570,934 | ||||||||||||||||||
| Total revolving credit facility and term loans | $ | 763,179 | $ | 840,934 | ||||||||||||||||
Outstanding Balance | |||||||||||
Interest Rate | Maturity Date | December 31, | December 31, 2018 | ||||||||
Revolving credit facility (1) | LIBOR + 1.40% - 2.25% | 7/27/2022 | $ | 50,900 | $ | 268,800 | |||||
Term loans | |||||||||||
$200 million term loan | LIBOR + 1.35% - 2.20% | 7/27/2023 | 200,000 | 200,000 | |||||||
$225 million term loan | LIBOR + 1.35% - 2.20% | 1/31/2024 | 225,000 | 225,000 | |||||||
$50 million term loan | LIBOR + 1.35% - 2.20% | 8/2/2023 | 50,000 | 50,000 | |||||||
$175 million term loan | LIBOR + 1.65% - 2.50% | 8/2/2025 | 175,000 | 100,000 | |||||||
2017 $85 million term loan | LIBOR + 1.30% - 2.10% (2) | 7/25/2024 | 85,000 | 85,000 | |||||||
2019 $85 million term loan | LIBOR + 1.70% - 2.55% | 12/31/2029 | 85,000 | - | |||||||
Term loans at stated value | 820,000 | 660,000 | |||||||||
Unamortized debt issuance costs | (6,066 | ) | (6,618 | ) | |||||||
Term loans, net | 813,934 | 653,382 | |||||||||
Revolving credit facility and term loans, net (1) | $ | 864,834 | $ | 922,182 | |||||||
Weighted-average interest rate (3) | 3.14 | % | 3.37 | % | |||||||
(1) | Excludes unamortized debt issuance costs related to the revolving credit facility |
(2) | |
The $85 million | |
(3) | Interest rate represents the weighted-average effective annual interest rate at the balance sheet date which includes the effect of interest rate swaps in effect on $842.5 million and $557.5 million of the outstanding |
The credit agreements governing the $965 million credit facility, the $150 million term loan facility and the $85 million term loanfacilities contain mandatory prepayment requirements, customary affirmative covenants, negative covenants and events of default. The credit agreements require that the Company comply with various covenants, which include, among others, a minimum tangible net worth, maximum debt limits, minimum interest and fixed charge coverage ratios limits on dividend payments and share repurchases and restrictions on certain investments.
● | A ratio of Consolidated Total Indebtedness to Consolidated EBITDA of not more than |
● | A ratio of Consolidated Secured Indebtedness to Consolidated Total Assets of not more than 45%; |
● | A minimum Consolidated Tangible Net Worth of approximately |
● | A ratio of Adjusted Consolidated EBITDA to Consolidated Fixed Charges of not less than 1.50 to 1.00 for the trailing four full quarters; |
● | A ratio of Unencumbered Adjusted NOI to Consolidated Implied Interest Expense for Consolidated Unsecured Indebtedness of not less than 2.00 to 1.00 for the trailing four full quarters; |
● | A ratio of Consolidated Unsecured Indebtedness to Unencumbered Asset Value of not more than 60% (subject to a higher level in certain circumstances); and |
● | A ratio of Consolidated Secured Recourse Indebtedness to Consolidated Total Assets of not more than 10% |
The Company was in compliance with the applicable covenants at December 31, 2017.
Mortgage Debt
As of December 31, 2017,2019, the Company had approximately $457.4$455.0 million in outstanding mortgage debt secured by 29 properties, with maturity dates ranging from June 2020 to January 2038, stated interest rates ranging from 3.55% to 6.25% and effective interest rates ranging from 3.55% to 4.97%. The loans generally provide for monthly payments of principal and interest on an amortized basis and defeasance or prepayment penalties if prepaid. The following table sets forth the hotel properties securing each loan, the interest rate, loan assumption or origination date, maturity date, the principal amount assumed or originated, and the outstanding balance prior to any fair value adjustments or debt issuance costs as of December 31, 20172019 and 20162018 for each of the Company’s debt obligations. All dollar amounts are in thousands.
| Location | Brand | Interest Rate (1) | Loan Assumption or Origination Date | Maturity Date | Principal Assumed or Originated | Outstanding balance as of December 31, 2017 | Outstanding balance as of December 31, 2016 | |||||||||||||||||
| Irving, TX | Homewood Suites | 5.83 | % | 12/29/2010 | (2) | $ | 6,052 | $ | - | $ | 5,072 | |||||||||||||
| Gainesville, FL | Homewood Suites | 5.89 | % | 9/1/2016 | (2) | 12,051 | - | 11,966 | ||||||||||||||||
| Duncanville, TX | Hilton Garden Inn | 5.88 | % | 10/21/2008 | (2) | 13,966 | - | 12,126 | ||||||||||||||||
| Dallas, TX | Hilton | 3.95 | % | 5/22/2015 | (3) | 28,000 | - | 27,246 | ||||||||||||||||
| San Juan Capistrano, CA | Residence Inn | 4.15 | % | 9/1/2016 | 6/1/2020 | 16,210 | 15,774 | 16,104 | ||||||||||||||||
| Colorado Springs, CO | Hampton | 6.25 | % | 9/1/2016 | 7/6/2021 | 7,923 | 7,754 | 7,883 | ||||||||||||||||
| Franklin, TN | Courtyard | 6.25 | % | 9/1/2016 | 8/6/2021 | 14,679 | 14,368 | 14,604 | ||||||||||||||||
| Franklin, TN | Residence Inn | 6.25 | % | 9/1/2016 | 8/6/2021 | 14,679 | 14,368 | 14,604 | ||||||||||||||||
| Grapevine, TX | Hilton Garden Inn | 4.89 | % | 8/29/2012 | 9/1/2022 | 11,810 | 10,412 | 10,707 | ||||||||||||||||
| Collegeville/Philadelphia, PA | Courtyard | 4.89 | % | 8/30/2012 | 9/1/2022 | 12,650 | 11,152 | 11,468 | ||||||||||||||||
| Hattiesburg, MS | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 5,732 | 5,212 | 5,357 | ||||||||||||||||
| Rancho Bernardo/San Diego, CA | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 15,060 | 13,692 | 14,074 | ||||||||||||||||
| Kirkland, WA | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 12,145 | 11,042 | 11,350 | ||||||||||||||||
| Seattle, WA | Residence Inn | 4.96 | % | 3/1/2014 | 9/1/2022 | 28,269 | 25,687 | 26,409 | ||||||||||||||||
| Anchorage, AK | Embassy Suites | 4.97 | % | 9/13/2012 | 10/1/2022 | 23,230 | 20,560 | 21,133 | ||||||||||||||||
| Somerset, NJ | Courtyard | 4.73 | % | 3/1/2014 | 10/6/2022 | 8,750 | 7,932 | 8,160 | ||||||||||||||||
| Tukwila, WA | Homewood Suites | 4.73 | % | 3/1/2014 | 10/6/2022 | 9,431 | 8,549 | 8,795 | ||||||||||||||||
| Prattville, AL | Courtyard | 4.12 | % | 3/1/2014 | 2/6/2023 | 6,596 | 5,943 | 6,123 | ||||||||||||||||
Location | Brand | Interest Rate (1) | Loan Assumption or Origination Date | Maturity Date | Principal Assumed or Originated | Outstanding balance as of December 31, 2019 | Outstanding balance as of December 31, 2018 | ||||||||||||||||
Syracuse, NY | Courtyard | 4.75 | % | 10/16/2015 | (2) | $ | 11,199 | $ | - | $ | 10,357 | ||||||||||||
Syracuse, NY | Residence Inn | 4.75 | % | 10/16/2015 | (2) | 11,199 | - | 10,357 | |||||||||||||||
San Juan Capistrano, CA | Residence Inn | 4.15 | % | 9/1/2016 | 6/1/2020 | 16,210 | 15,073 | 15,431 | |||||||||||||||
Colorado Springs, CO | Hampton | 6.25 | % | 9/1/2016 | 7/6/2021 | 7,923 | 7,471 | 7,617 | |||||||||||||||
Franklin, TN | Courtyard | 6.25 | % | 9/1/2016 | 8/6/2021 | 14,679 | 13,847 | 14,115 | |||||||||||||||
Franklin, TN | Residence Inn | 6.25 | % | 9/1/2016 | 8/6/2021 | 14,679 | 13,847 | 14,115 | |||||||||||||||
Grapevine, TX | Hilton Garden Inn | 4.89 | % | 8/29/2012 | 9/1/2022 | 11,810 | 9,775 | 10,101 | |||||||||||||||
Collegeville/Philadelphia, PA | Courtyard | 4.89 | % | 8/30/2012 | 9/1/2022 | 12,650 | 10,471 | 10,820 | |||||||||||||||
Hattiesburg, MS | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 5,732 | 4,897 | 5,058 | |||||||||||||||
Rancho Bernardo/San Diego, CA | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 15,060 | 12,866 | 13,289 | |||||||||||||||
Kirkland, WA | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 12,145 | 10,376 | 10,717 | |||||||||||||||
Seattle, WA | Residence Inn | 4.96 | % | 3/1/2014 | 9/1/2022 | 28,269 | 24,130 | 24,928 | |||||||||||||||
Anchorage, AK | Embassy Suites | 4.97 | % | 9/13/2012 | 10/1/2022 | 23,230 | 19,324 | 19,957 | |||||||||||||||
Somerset, NJ | Courtyard | 4.73 | % | 3/1/2014 | 10/6/2022 | 8,750 | 7,441 | 7,692 | |||||||||||||||
Tukwila, WA | Homewood Suites | 4.73 | % | 3/1/2014 | 10/6/2022 | 9,431 | 8,020 | 8,291 | |||||||||||||||
Prattville, AL | Courtyard | 4.12 | % | 3/1/2014 | 2/6/2023 | 6,596 | 5,558 | 5,754 | |||||||||||||||
Huntsville, AL | Homewood Suites | 4.12 | % | 3/1/2014 | 2/6/2023 | 8,306 | 6,999 | 7,246 | |||||||||||||||
| Location | Brand | Interest Rate (1) | Loan Assumption or Origination Date | Maturity Date | Principal Assumed or Originated | Outstanding balance as of December 31, 2017 | Outstanding balance as of December 31, 2016 | |||||||||||||||||
| Huntsville, AL | Homewood Suites | 4.12 | % | 3/1/2014 | 2/6/2023 | $ | 8,306 | $ | 7,483 | $ | 7,711 | |||||||||||||
| San Diego, CA | Residence Inn | 3.97 | % | 3/1/2014 | 3/6/2023 | 18,600 | 16,733 | 17,248 | ||||||||||||||||
| Miami, FL | Homewood Suites | 4.02 | % | 3/1/2014 | 4/1/2023 | 16,677 | 15,022 | 15,479 | ||||||||||||||||
| Syracuse, NY | Courtyard | 4.75 | % | 10/16/2015 | 8/1/2024 | (4) | 11,199 | 10,637 | 10,905 | |||||||||||||||
| Syracuse, NY | Residence Inn | 4.75 | % | 10/16/2015 | 8/1/2024 | (4) | 11,199 | 10,637 | 10,905 | |||||||||||||||
| New Orleans, LA | Homewood Suites | 4.36 | % | 7/17/2014 | 8/11/2024 | 27,000 | 24,919 | 25,577 | ||||||||||||||||
| Westford, MA | Residence Inn | 4.28 | % | 3/18/2015 | 4/11/2025 | 10,000 | 9,386 | 9,626 | ||||||||||||||||
| Denver, CO | Hilton Garden Inn | 4.46 | % | 9/1/2016 | 6/11/2025 | 34,118 | 33,046 | 33,857 | ||||||||||||||||
| Oceanside, CA | Courtyard | 4.28 | % | 9/1/2016 | 10/1/2025 | 13,655 | 13,332 | 13,576 | ||||||||||||||||
| Omaha, NE | Hilton Garden Inn | 4.28 | % | 9/1/2016 | 10/1/2025 | 22,682 | 22,145 | 22,550 | ||||||||||||||||
| Boise, ID | Hampton | 4.37 | % | 5/26/2016 | 6/11/2026 | 24,000 | 23,422 | 23,813 | ||||||||||||||||
| Burbank, CA | Courtyard | 3.55 | % | 11/3/2016 | 12/1/2026 | 25,564 | 24,917 | 25,564 | ||||||||||||||||
| San Diego, CA | Courtyard | 3.55 | % | 11/3/2016 | 12/1/2026 | 25,473 | 24,828 | 25,473 | ||||||||||||||||
| San Diego, CA | Hampton | 3.55 | % | 11/3/2016 | 12/1/2026 | 18,963 | 18,483 | �� | 18,963 | |||||||||||||||
| San Jose, CA | Homewood Suites | 4.22 | % | 12/22/2017 | 1/1/2038 | 30,000 | 30,000 | - | ||||||||||||||||
| $ | 544,669 | 457,435 | 494,428 | |||||||||||||||||||||
| Unamortized fair value adjustment of assumed debt | 4,330 | 5,229 | ||||||||||||||||||||||
| Unamortized debt issuance costs | (2,748 | ) | (2,628 | ) | ||||||||||||||||||||
| Total | $ | 459,017 | $ | 497,029 | ||||||||||||||||||||
| Location | Brand | Interest Rate (1) | Loan Assumption or Origination Date | Maturity Date | Principal Assumed or Originated | Outstanding balance as of December 31, 2019 | Outstanding balance as of December 31, 2018 | ||||||||||||||||
San Diego, CA | Residence Inn | 3.97 | % | 3/1/2014 | 3/6/2023 | $ | 18,600 | $ | 15,640 | $ | 16,198 | ||||||||||||
Miami, FL | Homewood Suites | 4.02 | % | 3/1/2014 | 4/1/2023 | - | 16,677 | 14,051 | 14,547 | ||||||||||||||
New Orleans, LA | Homewood Suites | 4.36 | % | 7/17/2014 | 8/11/2024 | 27,000 | 23,513 | 24,232 | |||||||||||||||
Westford, MA | Residence Inn | 4.28 | % | 3/18/2015 | 4/11/2025 | 10,000 | 8,876 | 9,137 | |||||||||||||||
Denver, CO | Hilton Garden Inn | 4.46 | % | 9/1/2016 | 6/11/2025 | 34,118 | 31,311 | 32,198 | |||||||||||||||
Oceanside, CA | Courtyard | 4.28 | % | 9/1/2016 | 10/1/2025 | 13,655 | 12,812 | 13,077 | |||||||||||||||
Omaha, NE | Hilton Garden Inn | 4.28 | % | 9/1/2016 | 10/1/2025 | 22,682 | 21,280 | 21,722 | |||||||||||||||
Boise, ID | Hampton | 4.37 | % | 5/26/2016 | 6/11/2026 | 24,000 | 22,588 | 23,015 | |||||||||||||||
Burbank, CA | Courtyard | 3.55 | % | 11/3/2016 | 12/1/2026 | 25,564 | 23,552 | 24,247 | |||||||||||||||
San Diego, CA | Courtyard | 3.55 | % | 11/3/2016 | 12/1/2026 | 25,473 | 23,468 | 24,161 | |||||||||||||||
San Diego, CA | Hampton | 3.55 | % | 11/3/2016 | 12/1/2026 | 18,963 | 17,471 | 17,986 | |||||||||||||||
Burbank, CA | SpringHill Suites | 3.94 | % | 3/9/2018 | 4/1/2028 | 28,470 | 27,317 | 28,018 | |||||||||||||||
Santa Ana, CA | Courtyard | 3.94 | % | 3/9/2018 | 4/1/2028 | 15,530 | 14,901 | 15,283 | |||||||||||||||
San Jose, CA | Homewood Suites | 4.22 | % | 12/22/2017 | 1/1/2038 | 30,000 | 28,092 | 29,107 | |||||||||||||||
| $ | 528,600 | 454,967 | 488,773 | ||||||||||||||||||||
Unamortized fair value adjustment of assumed debt | 2,526 | 3,428 | |||||||||||||||||||||
Unamortized debt issuance costs | (1,920 | ) | (2,141 | ) | |||||||||||||||||||
Total | $ | 455,573 | $ | 490,060 | |||||||||||||||||||
(1) | Interest rates are the rates per the loan agreement. For loans assumed, the Company adjusted the interest rates per the loan agreement to market rates and is amortizing the adjustments to interest expense over the life of the loan. |
(2) | Loans were repaid in full |
| 2018 | $ | 11,964 | ||
| 2019 | 139,622 | |||
| 2020 | 452,223 | |||
| 2021 | 96,415 | |||
| 2022 | 108,034 | |||
| Thereafter | 416,077 | |||
| 1,224,335 | ||||
| Unamortized fair value adjustment of assumed debt | 4,330 | |||
| Unamortized debt issuance costs related to term loans and mortgage debt | (6,469 | ) | ||
| Total | $ | 1,222,196 |
The total fair value, net premium adjustment for all of the Company’s debt assumptions (including the assumption of above (premium) market rate mortgages assumed in the Apple Ten merger) is being amortized as a reduction to interest expense over the remaining term of the respective mortgages using a method approximating the effective interest rate method, and totaled approximately $0.9 million $2.3 million and $3.2 million for each of the three years ended December 31, 2017, 2016 and 2015, respectively.
Debt issuance costs related to the assumption or origination of debt are amortized over the period to maturity of the applicable debt instrument, as an addition to interest expense. Amortization of such costsexpense, and totaled approximately $2.8 million $2.9 million and $2.4 million for each of the three years ended December 31, 2017, 2016 and 2015, respectively.
The Company’s interest expense in 2017, 20162019, 2018 and 20152017 is net of interest capitalized in conjunction with hotel renovations totaling approximately $1.3 million, $1.6$1.0 million and $1.5$1.3 million, respectively.
Note 6
Fair Value of Financial Instruments
Except as described below, the carrying value of the Company’s financial instruments approximates fair value due to the short-term nature of these financial instruments.
Debt
The Company estimates the fair value of its debt by discounting the future cash flows of each instrument at estimated market rates consistent with the maturity of a debt obligation with similar credit terms and credit characteristics, which are Level 3 inputs under the fair value hierarchy. Market rates take into consideration general market conditions and maturity. As of December 31, 2017,2019, both the carrying value and estimated fair value of the Company’s debt were approximately $1.2$1.3 billion. As of December 31, 2016,2018, both the carrying value and estimated fair value of the Company’s debt were approximately $1.3$1.4 billion. Both the carrying value and estimated fair value of the Company’s debt (as discussed above) is net of unamortized debt issuance costs related to term loans and mortgage debt for each specific year.
Currently, the Company uses interest rate swaps to manage its interest rate risks on variable ratevariable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the one monthone-month LIBOR. The swaps are designed to effectively fix the interest payments on variable ratevariable-rate debt instruments. These swap instruments are recorded at fair value and, if in an asset position, are included in other assets, net, and, if in a liability position, are included in accounts payable and other liabilities in the Company’s consolidated balance sheets. The fair values of the Company’s interest rate swap agreements are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts, which is considered a Level 2 measurement under the fair value hierarchy. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The following table sets forth information for each of the Company’s interest rate swap agreements outstanding as of December 31, 20172019 and 2016.2018. All dollar amounts are in thousands.
Notional Amount at December 31, 2017 | Fair Value Asset (Liability) | ||||||||||||||||||
| Hedge Type | Origination Date | Maturity Date | Swap Fixed Interest Rate | December 31, 2017 | December 31, 2016 | ||||||||||||||
| Cash flow hedge | $ | 212,500 | 5/21/2015 | 5/18/2020 | 1.58 | % | $ | 2,033 | $ | (198 | ) | ||||||||
| Cash flow hedge | 110,000 | 7/2/2015 | 5/18/2020 | 1.62 | % | 951 | (246 | ) | |||||||||||
| Cash flow hedge | 50,000 | 4/7/2016 | 3/31/2021 | 1.09 | % | 1,544 | 1,289 | ||||||||||||
| Cash flow hedge | 100,000 | 4/7/2016 | 3/31/2023 | 1.33 | % | 4,098 | 3,744 | ||||||||||||
| Cash flow hedge | 75,000 | 5/31/2017 | 6/30/2024 | 1.96 | % | 1,043 | - | ||||||||||||
| Cash flow hedge | 10,000 | 8/10/2017 | 6/30/2024 | 2.01 | % | 109 | - | ||||||||||||
| $ | 557,500 | $ | 9,778 | $ | 4,589 | ||||||||||||||
Notional Amount at December 31, 2019 | Fair Value Asset (Liability) | ||||||||||||||||||||
Hedge Type | Origination Date | Effective Date | Maturity Date | Swap Fixed Interest Rate | December 31, | December 31, 2018 | |||||||||||||||
Cash flow hedge | $ | 212,500 | 5/19/2015 | 5/21/2015 | 5/18/2020 | 1.58 | % | $ | 78 | $ | 2,744 | ||||||||||
Cash flow hedge | 110,000 | 7/2/2015 | 7/2/2015 | 5/18/2020 | 1.62 | % | 24 | 1,361 | |||||||||||||
Cash flow hedge | 50,000 | 4/7/2016 | 9/30/2016 | 3/31/2021 | 1.09 | % | 317 | 1,519 | |||||||||||||
Cash flow hedge | 100,000 | 4/7/2016 | 9/30/2016 | 3/31/2023 | 1.33 | % | 707 | 4,477 | |||||||||||||
Cash flow hedge | 75,000 | 5/31/2017 | 7/31/2017 | 6/30/2024 | 1.96 | % | (1,286 | ) | 1,905 | ||||||||||||
Cash flow hedge | 10,000 | 8/10/2017 | 8/10/2017 | 6/30/2024 | 2.01 | % | (185 | ) | 226 | ||||||||||||
Cash flow hedge | 50,000 | 6/1/2018 | 1/31/2019 | 6/30/2025 | 2.89 | % | (3,407 | ) | (1,276 | ) | |||||||||||
Cash flow hedge | 50,000 | 7/2/2019 | 7/5/2019 | 7/18/2024 | 1.65 | % | (193 | ) | - | ||||||||||||
Cash flow hedge | 50,000 | 8/21/2019 | 8/23/2019 | 8/18/2024 | 1.32 | % | 595 | - | |||||||||||||
Cash flow hedge | 50,000 | 8/21/2019 | 8/23/2019 | 8/30/2024 | 1.32 | % | 603 | - | |||||||||||||
Cash flow hedge | 85,000 | 12/31/2019 | 12/31/2019 | 12/31/2029 | 1.86 | % | (842 | ) | - | ||||||||||||
Cash flow hedge | 25,000 | 12/6/2018 | 1/31/2020 | 6/30/2025 | 2.75 | % | (1,501 | ) | (379 | ) | |||||||||||
Cash flow hedge | 50,000 | 12/7/2018 | 5/18/2020 | 1/31/2024 | 2.72 | % | (2,139 | ) | (571 | ) | |||||||||||
Cash flow hedge | 75,000 | 8/21/2019 | 5/18/2020 | 5/18/2025 | 1.27 | % | 1,222 | - | |||||||||||||
Cash flow hedge | 75,000 | 8/21/2019 | 5/18/2021 | 5/18/2026 | 1.30 | % | 1,309 | - | |||||||||||||
| $ | 1,067,500 | $ | (4,698 | ) | $ | 10,006 | |||||||||||||||
The Company assesses, both at inception and on an ongoing basis, the effectiveness of its qualifying cash flow hedges.
Amounts reported in accumulated other comprehensive income (loss) will be reclassified to interest and other expense, net as interest payments are made or received on the Company’s variable-rate derivatives. Net unrealized losses on cash flow hedges previously recorded to accumulated other comprehensive income (loss) that were reclassified to interest and other expense, net during the years ended December 31, 2017, 2016 and 2015, were approximately $(2.2) million, $(4.0) million and $(2.1) million, respectively. The Company estimates that approximately $1.1$0.7 million of net unrealized gainslosses included in accumulated other comprehensive incomeloss at December 31, 20172019 will be reclassified as a net decreasean increase to interest and other expense, net within the next 12 months. Also, during
The following tables present the yeareffect of derivative instruments in cash flow hedging relationships in the Company’s consolidated statements of operations and comprehensive income for the years ended December 31, 2015, the Company reclassified $(0.8) million of unrealized losses from accumulated other comprehensive income (loss) to net income which was associated with the termination of a swap agreement.
Net Unrealized Gain (Loss) Recognized in Other Comprehensive Income (Loss) | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Interest rate derivatives in cash flow hedging relationships | $ | (11,035 | ) | $ | 2,608 | $ | 3,021 | |||||
Net Unrealized Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest and Other Expense, net | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Interest rate derivatives in cash flow hedging relationships | $ | 3,669 | $ | 2,380 | $ | (2,168 | ) | |||||
Note 7
Related Parties
The Company has, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. The Company’s independent members of the Board of Directors oversee and annually review the Company’s related party relationships (including the relationships discussed in this section) and are required to approve any significant modifications to the existing relationships, as well as any new significant related party transactions. The Board of Directors is not required to approve each individual transaction that falls under the related party relationships. However, under the direction of the Board of Directors, at least one member of the Company’s senior management team approves each related party transaction. Below is a summary of the significant related party relationships in effect and transactions that occurred during each of the three years in the period ended December 31, 2017.
Glade M. Knight, Executive Chairman of the Company, was Chairman and Chief Executive Officer of Apple Ten. Apple Ten’s advisors, Apple Ten Advisors, Inc. (“A10A”) andowns Apple Realty Group, Inc. (“ARG”), are wholly owned by Mr. Knight.which receives support services from the Company and reimburses the Company for the cost of these services as discussed below. Mr. Knight is also currently a partner and Chief Executive Officer of Energy 11 GP, LLC and Energy Resources 12 GP, LLC, which are the respective general partners of Energy 11, L.P. and Energy Resources 12, L.P. Justin G. Knight, the Company’s President and Chief Executive Officer, and a member, each of the Company’s Board of Directors, also served as President of Apple Ten prior to the merger. Mr. Glade M. Knight is the only member of the Company’s Board of Directors that was also on the Board of Directors of Apple Ten. As part of the Apple Ten merger transaction, the officers and Executive Chairman of the Company received a combined 3.1 million common shares of the Company and $6.0 million in exchange for their ownership interests in Apple Ten, including amounts assigned to others.
The Company provided to Apple Ten the advisoryprovides support services, contemplated under the A10A advisory agreement and received an annual advisory fee, and was reimbursed by Apple Ten forincluding the use of the Company’s employees and corporate office, to ARG and other costs associated with the advisory agreement. Advisory fees earnedis reimbursed by the Company from Apple Ten totaled approximately $1.6 millionARG for the eight months ended August 31, 2016 and $2.5 million for the year ended December 31, 2015, and are recorded as a reduction to general and administrative expenses in the Company’s consolidated statementscost of operations. Prior to the merger, the Company provided support services to Apple Ten and its advisors, A10A and ARG, which agreed to reimburse the Company
As part of the cost sharing arrangement, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under this cash management process, each company may advance or defer up to $1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies. As of December 31, 20172019 and 2016,2018, total amounts due from ARG for reimbursements under the cost sharing structure totaled approximately $0.3$0.5 million and $0.2$0.4 million, respectively, and are included in other assets, net in the Company’s consolidated balance sheets. Prior to the Apple Ten merger, Apple Ten, A10A and ARG (for activities both related and unrelated to Apple Ten) were part of the cost sharing structure and participated in this cash management process.
The Company, through aits wholly-owned subsidiary, Apple Air Holding, LLC, (“Apple Air”), owns a Learjet used primarily for acquisition, asset management, renovation and public relations purposes. The aircraft is also leased to affiliates of the Company based on third partythird-party rates, which leasing activity was not significant during the reporting periods. Prior to the merger, Apple Air was jointly owned by the Company (74%) and Apple Ten (26%), with Apple Ten’s ownership interest accounted for as a minority interest. Apple Ten’s portion of Apple Air’s loss was approximately $0.2 million for the eight months ended August 31, 2016 and $0.3 million for the year ended December 31, 2015, and was recorded as a reduction to general and administrative expenses in the Company’s consolidated statements of operations. Effective September 1, 2016, with the completion of the merger, the Company acquired Apple Ten’s 26% equity interest in Apple Air for a total allocated purchase price of approximately $0.7 million, which approximated the fair market value at the time of acquisition based on third party market comparisons, resulting in a 100% equity ownership interest in Apple Air and the elimination of Apple Ten’s minority interest.
Chairman, and the other, by its President and Chief Executive Officer, for acquisition, asset management, renovation and public relations purposes, and reimburses these entities at third partythird-party rates. Total costs incurred for the use of these aircraft during 2017, 20162019, 2018 and 20152017 were approximately $0.1 million, $0.2 million and $0.2 million in each respective year, and are included in general and administrative expenses in the Company’s consolidated statements of operations.
Note 8
Shareholders’ Equity
Distributions
The Company’s current annual distribution rate, payable monthly, is $1.20 per common share. On April 23, 2015, the Company’s Board of Directors, in anticipationFor each of the Listing, reduced the annual distribution rate from $1.36 per common share to the current annual distribution rate, effective with the June 2015 distribution. For thethree years ended December 31, 2017, 2016 and 2015,2019, the Company paid distributions of $1.20 $1.20 and $1.27 per common share for a total of approximately $267.9$268.7 million, $229.1$275.9 million and $229.1$267.9 million, respectively. Additionally, in December 2017,2019, the Company declared a monthly distribution of $0.10 per common share, totaling $23.0$22.4 million, which was recorded as a payable as of December 31, 20172019 and paid in January 2018.2020. As of December 31, 2016,2018, a monthly distribution of $0.10 per common share, totaling $22.3$22.4 million, was recorded as a payable and paid in January 2017.2019. These accrued distributions were included in accounts payable and other liabilities in the Company’s consolidated balance sheets.
Issuance of Shares
On February 28, 2017, the Company entered into an equity distribution agreement with Robert W. Baird & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Canaccord Genuity Inc., FBR Capital Markets & Co., Jefferies LLC, KeyBanc Capital Markets Inc. and Scotia Capital (USA) Inc. (collectively, the “Sales Agents”),which was terminated effective April 11, 2019, pursuant to which the Company maycould sell, from time to time, up to an aggregate of $300 million of its common shares through the Sales Agents under an at-the-market offering program (the “ATM Program”). DuringFrom inception of the ATM Program in February 2017 through its termination date in April 2019, the Company sold approximately 7.2 million common shares at a weighted-average market sales price of approximately $19.56 per common share and received aggregate gross proceeds of approximately $139.8 million before commission and issuance costs, including the sale of approximately 0.2 million common shares during the first quarter of 2018 at a weighted-average market sales price of approximately $19.73 per common share and receipt of aggregate gross proceeds of approximately $4.8 million before commissions and issuance costs, and approximately 6.9 million common shares in the fourth quarter of 2017 the Company sold approximately 6.9 million common shares under its ATM Program at a weighted-average market sales price of approximately $19.55 per common share and receivedreceipt of aggregate gross proceeds of approximately $135.1 million before commissions and issuance costs. The Company did 0t sell any shares under the ATM Program in 2019. The Company used the proceeds from the sale of these shares to pay down borrowings on its revolving credit facility. As of December 31, 2017, approximately $164.9 million remained available for issuance under the ATM program.
Share Repurchases
In May 2019, the Company’s Board of Directors authorizedapproved an extension of its existing share repurchase program to repurchase(the “Share Repurchase Program”), authorizing share repurchases up to $475 millionan aggregate of its common shares, which program will end in July 2018, if not terminated earlier.$360 million. The programShare Repurchase Program may be suspended or terminated at any time by the Company. In connection with the implementation of the ATM Program,Company and will end in February 2017 theJuly 2020 if not terminated earlier. The Company terminated its then existinghas a written trading plan that provides for share repurchases in open market transactions that is intended to comply with Rule 10b5-1 under the Company’s share repurchase program. Since inceptionSecurities Exchange Act of the share repurchase program in July 2015 through December 31, 2017,1934, as amended. During 2019 and 2018, the Company has purchased under its Share Repurchase Program approximately 1.70.3 million and 6.6 million of its common shares at a weighted-average market purchase price of approximately $17.64$14.92 and $15.87 per common share for an aggregate purchase price, including commissions, of approximately $29.9 million, including the purchase of approximately 0.4 million of its common shares in 2016, at a weighted-average market purchase price of approximately $17.72 per common share for an aggregate purchase price of approximately $7.9$4.3 million and approximately 1.2$104.3 million, of its common shares in 2015, at a weighted-average market purchase price of approximately $17.61 per common share for an aggregate purchase price of approximately $22.0 million. Repurchases under the program were funded with availability under its revolving credit facility.respectively. The Company did not repurchase any common shares under its share repurchase programShare Repurchase Program during 2017. The Company plans to continue to consider opportunistic shareAs of December 31, 2019, approximately $359.8 million remained available for repurchases under this Share Repurchase Program. Repurchases under the $467.5 million remaining portion of the authorized $475 million share repurchase program, which will depend upon prevailing market conditionsShare Repurchase Program have been funded, and other factors.
Preferred Shares
NaN preferred shares of the Company are issued and outstanding. The Company’s amended and restated articles of incorporation authorize issuance of up to 30 million preferred shares. The Company believes that the
preferred shares available for issuance in the future gives the Company the ability to respond to future developments and allows preferred shares to be issued without the expense and delay of a special shareholders’ meeting. At present, the Company has no specific financing or acquisition plans involving the issuance of preferred shares and the Company does not propose to fix the characteristics of any series of preferred shares in anticipation of issuing preferred shares. The Company cannot now predict whether or to what extent, if any, preferred shares will be used or if so used what the characteristics of a particular series may be. A series of preferred shares could be given rights that are superior to rights of holders of common shares and a series having preferential distribution rights could limit common share distributions and reduce the amount holders of common shares would otherwise receive on dissolution. Unless otherwise required by applicable law or regulation, the preferred shares would be issuable without further authorization by holders of the common shares and on such terms and for such consideration as may be determined by the Board of Directors. The preferred shares could be issued in one or more series having varying voting rights, redemption and conversion features, distribution (including liquidating distribution) rights and preferences, and other rights, including rights of approval of specified transactions. The voting rights and rights to distributions of the holders of common shares will be subject to the priority rights of the holders of any subsequently-issued preferred shares.
Note 9
Compensation Plans
In May 2014, the Board of Directors adopted the Company’s 2014 Omnibus Incentive Plan (the “Omnibus Plan”), and in May 2015, the Company’s shareholders approved the Omnibus Plan. The Omnibus Plan permits the grant of awards of stock options, stock appreciation rights, restricted stock, stock units, deferred stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards to any employee, officer, or director of the Company or an affiliate of the Company, a consultant or adviser currently providing services to the Company or an affiliate of the Company, or any other person whose participation in the Omnibus Plan is determined by the Compensation Committee of the Board of Directors (the “Compensation Committee”) to be in the best interests of the Company. The maximum number of the Company’s common shares available for issuance under the Omnibus Plan is 10 million. As of December 31, 2017,2019, there were approximately 9.49.0 million common shares not reserved and available for issuance under the Omnibus Plan.
Each year, the Company establishes an incentive plan for its executive management, which is approved by the Compensation Committee ofCommittee. Under the Board of Directors (“Compensation Committee”) approved an executive incentive plan (“2017for 2019 (the “2019 Incentive Plan”), effective January 1, 2017, and established incentive goals for 2017. Under the 2017 Incentive Plan, participants are eligible to receive a bonus based on the achievement of certain 20172019 performance measures, consisting of operational performance metrics (including targeted Modified Funds from Operations per share, Comparable Hotels revenue per available room growth and Adjusted Hotel EBITDA Margin growth) and shareholder return metrics (including shareholder return relative to a peer group and total shareholder return over one-year, two-year and two-yearthree-year periods). The components of the operational performance metrics and shareholder return metrics are equally weighted and the two metrics each account for 50% of the total target incentive compensation. The shareholder return metrics are weighted 75% for relative shareholder return metrics and 25% for total shareholder return metrics, and account for 50% of the total target incentive compensation. As of December 31, 2019, the range of potential aggregate payouts under the 20172019 Incentive Plan was $0 - $18$16 million. Based on performance during 2017,2019, the Company has accrued approximately $8.4$10.6 million as a liability for executive bonus payments under the 20172019 Incentive Plan, which is included in accounts payable and other liabilities in the Company’s consolidated balance sheet as of December 31, 20172019 and in general and administrative expenses in the Company’s consolidated statement of operations for the year ended December 31, 2017.2019. Additionally, approximately $1.2 million, which is subject to vesting on December 14, 2018,11, 2020, will be recognized proportionally throughout 2018.2020. Assuming the portion subject to vesting in 20182020 vests for all eligible participants, approximately 25%20% of awards under the 20172019 Incentive Plan will be paid in cash and 75%80% will be issued in stock under the Company’s 2014 Omnibus Incentive Plan in the first quarter of 2018,2020, approximately two-thirds70% of which will be unrestricted and one-third30% of which will be restricted and is subject to vesting on December 14, 2018.
Under the incentive plans were approved by the Compensation Committee (“2016 Incentive Plan” and “2015plan for 2018 (the “2018 Incentive Plan”) that were effective January 1, 2016 and January 1, 2015, respectively. The, the Company accrued approximately $2.8$4.3 million, including $1.9$2.4 million in share basedshare-based compensation as noted below, as a liability for executive bonus payments, under the 2016 Incentive Plan, which was included in
a liability for executive bonus payments, under the 2015 Incentive Plan, which was included in general and administrative expenses in the Company’s consolidated statement of operations for the year ended December 31, 2015.
In December 2019, in connection with the first quartersresignation of 2017the Company’s Executive Vice President and 2016, the Company issued 101,305 and 304,345 common shares earned under the 2016 and 2015 Incentive Plans (net of 19,667 and 11,787 common shares surrendered to satisfy tax withholding obligations) at $19.10 and $19.87 per share, or approximately $2.3 million and $6.3 million in share based compensation, including the surrendered shares, respectively. Of the total shares issued under the 2016 Incentive Plan, 60,028 shares were unrestrictedChief Financial Officer at the time, the Company entered into a separation and general release agreement, pursuant to which the Company accrued a one-time separation payment of issuance,approximately $1.6 million, which was paid in January 2020, and a 2019 incentive payment of approximately $0.6 million which is expected to be paid in cash in March 2020. Both of these payments were included in accounts payable and other liabilities in the remaining 41,277 restricted shares vested on December 15, 2017,Company’s consolidated balance sheet as of which 13,129 common shares were surrendered to satisfy tax withholding obligations. Of the total shares issued under the 2015 Incentive Plan, 146,279 shares were unrestricted at the time of issuance, and the remaining 158,066 restricted shares vested on December 31, 2016,2019 and in general and administrative expenses in the Company’s consolidated statements of which 50,044 common shares were surrendered to satisfy tax withholding obligations. Of the total 2016 share based compensation, approximately $1.9 million was recognized as share based compensation expense duringoperations for the year ended December 31, 2016 and included in the liability recorded as of December 31, 2016, and the remaining $0.4 million, which vested on December 15, 2017, was recognized as share based compensation expense during2019.
During the year ended December 31, 2017. Of2019, the total 2015 share based compensation, approximately $4.7Company incurred a one-time separation payment of $0.5 million in connection with the retirement of the Company’s former Executive Vice President and Chief Legal Officer which, pursuant to the separation and general release agreement executed in March 2019, was recorded as compensation expense duringpaid in April 2019 and was included in general and administrative expenses in the Company’s consolidated statement of operations for the year ended December 31, 2015,2019.
Share-Based Compensation Awards
The following table sets forth information pertaining to the share-based compensation issued under the 2018 Incentive Plan, the 2017 Incentive Plan and the remaining $1.6 million, which vested on December 31,incentive plan for 2016 was recognized as share based(the “2016 Incentive Plan”):
2018 Incentive Plan | 2017 Incentive Plan | 2016 Incentive Plan | |||||||||||||
Period common shares issued | First Quarter 2019 | First Quarter 2018 | First Quarter 2017 | ||||||||||||
Common shares earned under each incentive plan | 156,926 | 415,866 | 120,972 | ||||||||||||
Common shares surrendered on issuance date to satisfy tax withholding obligations | 24,999 | 48,533 | 19,667 | ||||||||||||
Common shares earned and issued under each incentive plan, net of common shares surrendered on issuance date to satisfy tax withholding obligations | 131,927 | 367,333 | 101,305 | ||||||||||||
Closing stock price on issuance date | $ | 16.49 | $ | 16.92 | $ | 19.10 | |||||||||
Total share-based compensation earned, including the surrendered shares (in millions) | $ | 2.6 | (1) | $ | 7.0 | (2) | $ | 2.3 | (3) | ||||||
Of the total common shares earned and issued, total common shares unrestricted at time of issuance | 105,345 | 223,421 | 60,028 | ||||||||||||
Of the total common shares earned and issued, total common shares restricted at time of issuance | 26,582 | 143,912 | 41,277 | ||||||||||||
Restricted common shares vesting date | December 13, 2019 | December 14, 2018 | December 15, 2017 | ||||||||||||
Common shares surrendered on vesting date to satisfy tax withholding requirements resulting from vesting of restricted common shares | 5,502 | 41,389 | 13,129 | ||||||||||||
| (1) | Of the total 2018 share-based compensation, approximately $2.4 million was recognized as share-based compensation expense during the year ended December 31, 2018, and included in accounts payable and other liabilities in the Company’s consolidated balance sheet as of December 31, 2018, and the remaining $0.2 million, which vested on December 13, 2019 and excludes any restricted shares forfeited or vested prior to that date, was recognized as share-based compensation expense during the year ended December 31, 2019. |
| (2) | Of the total 2017 share-based compensation, approximately $5.8 million was recognized as share-based compensation expense during the year ended December 31, 2017, and the remaining $1.2 million, which vested on December 14, 2018, was recognized as share-based compensation expense during the year ended December 31, 2018. |
| (3) | Of the total 2016 share-based compensation, approximately $0.4 million, which vested on December 15, 2017, was recognized as share-based compensation expense during the year ended December 31, 2017. |
Non-Employee Director Deferral Program
In 2018, the Board of Directors adopted the Non-Employee Director Deferral Program (the “Director Deferral Program”) under the Omnibus Plan for the purpose of providing non-employee members of the Board the opportunity to elect to defer receipt of all or a portion of the annual retainer payable to them for their service on the Board, including amounts payable in both cash and fully vested shares of the Company’s common shares, in the form of deferred cash fees (“DCFs”) and/or deferred stock units (“DSUs”). DCFs and DSUs that are issued to the Company’s non-employee directors are fully vested and non-forfeitable on the grant date. The grant date fair values of DCFs are equal to the dollar value of the deferred fee on the grant date, while the grant date fair values of DSUs are equal to the fair market value of the Company’s common shares on the grant date. DCFs are settled for cash and DSUs are settled for shares of the Company’s common stock, which are deliverable upon either: i) termination of the director’s service from the Board, ii) a date previously elected by the director, or iii) the earlier of the two dates, as determined by the director at the time he or she makes the election. The deferred amounts will also be paid if prior to the date specified by the director, the Company experiences a change in control or upon death of the director. During the years ended December 31, 2016.
Note 10
Management and Franchise Agreements
Each of the Company’s 239233 hotels owned as of December 31, 20172019 is operated and managed under a separate management agreement with one of the following management companies or one of their affiliates, none of which are affiliated with the Company:
Manager | Number of Hotels | |||
LBAM-Investor Group, LLC (“LBA”) | 42 | |||
White Lodging Services Corporation (“White Lodging”) | ||||
Dimension Development Two, LLC (“Dimension”) | ||||
MHH Management, LLC (“McKibbon”) | ||||
| 17 | ||||
Texas Western Management Partners, LP (“Western”) | 17 | |||
Raymond Management Company, Inc. (“ | 15 | |||
Crestline Hotels & Resorts, LLC (“Crestline”) | 14 | |||
Marriott International, Inc. (“ | 14 | |||
North Central Hospitality, LLC (“North Central”) | 10 | |||
Newport Hospitality Group, Inc. (“Newport”) | 9 | |||
InnVentures IVI, LP (“ | ||||
| 8 | ||||
Vista Host, Inc. (“ | 8 | |||
True North Hotel Group, Inc. (“True North”) | 7 | |||
Aimbridge Hospitality, LLC (“Aimbridge”) | ||||
| 5 | ||||
Chartwell Hospitality, | 5 | |||
Interstate Gateway Management LLC (“ | 4 | |||
Huntington Hotel Group, LP (“Huntington”) | 3 | |||
Stonebridge Realty Advisors, Inc. (“Stonebridge”) | 3 | |||
Highgate Hotels, L.P. (“Highgate”) | 1 | |||
Hilton Worldwide Holdings Inc. (“ | 1 | |||
Pyramid Advisors Limited Partnership (“Pyramid”) | ||||
Total | 233 | |||
(1) | Aimbridge and Interstate merged in the fourth quarter of 2019, however, they continue to operate the Company’s hotels separately. |
The management agreements generally provide for initial terms of one to 30 years. The Company has the option to terminate the management agreements if specified performance thresholds are not satisfied. As of December 31, 2017, nearly2019, over 80% of the Company’s hotels operate under a variable management fee structure,agreement, with an average initial term of approximately two years, which the Company believes better aligns incentives for each hotel manager to maximize each property’s performance than a base-plus-incentive management fee structure, as described below, which is more common throughout the industry. Under the variable fee structure, the management fee earned for each hotel is generally within a range of 2.5% to 3.5% of revenuegross revenues, based on each hotel’s performance relative to other hotels owned by the Company. The performance measures are based on various financial and quality performance metrics. The Company’s remaining hotels operate under a management fee structure which generally includes the payment of base management fees and an opportunity for incentive management fees. Under this structure, base management fees are calculated as a percentage of gross revenues and the incentive management fees are calculated as a percentage of operating profit in excess of a priority return to the Company, as defined in the management agreements. In addition to the above, management fees for all of the Company’s hotels generally include accounting fees and other fees for centralized services, which are allocated among all of the hotels that receive the benefit of such services. For the years ended December 31, 2017, 20162019, 2018 and 2015,2017, the Company incurred approximately $43.8 million, $43.9 million and $42.7 million, $35.6 million and $31.1 millionrespectively, in management fees, respectively.
NaN of the Company’s hotels are managed by affiliates of Marriott or Hilton. The remainder of the Company’s hotels are managed by companies that are not affiliated with either Marriott, Hilton or Hilton,Hyatt, and as a result, the branded hotels they manage were required to obtain separate franchise agreements with each respective franchisor. The franchise agreements generally provide for initial terms of approximately 10 to 30 years and generally provide for renewals subject to franchise requirements at the time of renewal. The Company pays various fees under these agreements, including the payment of royalty fees, marketing fees, reservation fees, a communications support fee, brand loyalty program fees and other similar fees based on room revenues. For the years ended December 31, 2017, 20162019, 2018 and 2015,2017, the Company incurred approximately $52.9$54.9 million, $44.2$54.5 million and $38.0$52.9 million, respectively, in franchise royalty fees.
Note 11
Lease Commitments
The Company hasis the lessee on certain ground leases, relatinghotel equipment leases and office space leases. As of December 31, 2019, the Company had 13 hotels subject to 14ground leases and 3 parking lot ground leases with remaining terms ranging from approximately four to 86 years, excluding renewal options. Certain of its hotelsground leases have options to extend beyond the initial lease term by periods ranging from five to 120 years.
Adoption of the New Lease Accounting Standard
The Company adopted ASU No. 2016-02, Leases (Topic 842), as discussed further in Note 1 in the section titled “Accounting Standards Recently Adopted”, effective January 1, 2019, which requires leases with durations greater than twelve months to be recognized on the balance sheet as right-of-use (“ROU”) assets and threelease liabilities. Prior year financial statements were not restated under the new standard.
Under the new standard, the Company’s leases are classified as operating or finance leases. For leases with terms greater than 12 months, at inception of the lease the Company recognizes a ROU asset and lease liability at the estimated present value of the minimum lease payments over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Many of the Company’s leases include rental escalation clauses (including fixed scheduled rent increases) and renewal options that are factored into the determination of lease payments when appropriate and the present value of the remaining lease payments is adjusted accordingly. The Company utilizes interest rates implicit in the lease if determinable or, if not, it estimates its incremental borrowing rate from information available at lease commencement, to determine the present value of the lease payments. At transition to the new standard, the Company used information available at that time to determine the incremental borrowing rates on its existing leases at January 1, 2019 based on estimates of rates the Company would pay for senior collateralized loans with terms similar to each lease.
Operating Leases
NaN of the Company’s hotel and parking lot ground leases as well as certain applicable hotel equipment leases and office space leases are classified as operating leases, for which the Company recorded ROU assets and lease liabilities at adoption of the new standard. The ROU assets are included in other assets, net and the lease liabilities are included in accounts payable and other liabilities in the Company’s consolidated balance sheet. In addition, at adoption of the new standard, the Company reclassified its intangible assets for below market ground leases and intangible liabilities for above market ground leases related to these leases from other assets, net and accounts payable and other liabilities in the Company’s consolidated balance sheet, respectively, as well as accrued straight-line lease liabilities related to these leases from accounts payable and other liabilities in the Company’s consolidated balance sheet to the beginning ROU assets. Lease expense is recognized on a straight-line basis over the term of the respective lease and the value of each lease intangible is amortized over the term of the respective lease. Costs related to operating ground leases are included in operating ground lease expense, while costs related to hotel equipment leases are included in hotel operating expense and property taxes, insurance and other expense, and costs related to office space leases are included in general and administrative expense in the Company’s consolidated statements of operations.
Finance Leases
NaN of the Company’s hotel ground leases are classified as finance leases, for which the Company recorded ROU assets and lease liabilities at adoption of the new standard. The ROU assets are recorded as finance ground lease assets within investment in real estate, net and the lease liabilities are recorded as finance lease liabilities in the Company’s consolidated balance sheet. In addition, at adoption of the new standard, the Company reclassified its intangible assets for below market ground leases and intangible liabilities for above market ground leases related to these leases from other assets, net and accounts payable and other liabilities in the Company’s consolidated balance sheet, respectively, to the beginning ROU assets. At adoption of the new standard, the Company recorded a cumulative-effect adjustment totaling approximately $5.2 million, which included the derecognition of accrued straight-line lease liabilities related to the finance leases, to distributions greater than net income, a component of shareholders’ equity in the Company’s consolidated balance sheet. The ROU asset and value of each lease intangible is amortized over the term of the respective lease. Costs related to finance ground leases are included in depreciation and amortization expense and interest and other expense, net in the Company’s consolidated statement of operations.
Under the terms of the Company’s ground leases, certain minimum lease payments are subject to change based on criteria specified in the lease. Changes in minimum lease payments that are not fixed scheduled increases are reflected in the ROU asset and lease liability when the payments become fixed and determinable based on the actual criteria defined in the lease. Minimum lease payments may be estimated if the change date occurs and the new minimum lease payments are not yet determinable. During 2019, the Company, based on additional information, estimated a required increase in lease payments under 1 of its finance ground leases. AtThe estimated increase is reflected in the finance ground lease ROU asset and liability at the anticipated effective date of the change. The increase and effective date are subject to agreement with the lessor and could increase in the future. The total increase in the lease ROU asset and liability was estimated based on available information and was approximately $53 million.
Lease Position as of December 31, 2019
The following table sets forth the lease-related assets and liabilities included in the Company’s consolidated balance sheet as of December 31, 2019. All dollar amounts are in thousands.
Consolidated Balance Sheet Classification | December 31, 2019 | ||||
Assets | |||||
Operating lease assets, net | Other assets, net | $ | 28,311 | ||
Finance ground lease assets, net (1) | Investment in real estate, net | 193,184 | |||
Total lease assets | $ | 221,495 | |||
Liabilities | |||||
Operating lease liabilities | Accounts payable and other liabilities | $ | 12,130 | ||
Finance lease liabilities | Finance lease liabilities | 216,627 | |||
Total lease liabilities | $ | 228,757 | |||
Weighted-average remaining lease term | |||||
Operating leases | 37 years | ||||
Finance leases | 31 years | ||||
Weighted-average discount rate | |||||
Operating leases | 5.45% | ||||
Finance leases | 5.26% | ||||
(1) | Finance ground lease assets are net of accumulated amortization of approximately $4.4 million as of December 31, 2019. |
Lease Costs for the Year Ended December 31, 2019
The following table sets forth the lease costs related to the Company’s operating and finance ground leases included in the Company’s consolidated statement of operations for the year ended December 31, 2019 (in thousands):
Consolidated Statement of Operations Classification | Year Ended December 31, 2019 | ||||
Operating lease costs (1) | Operating ground lease expense | �� | $ | 1,658 | |
Finance lease costs: | |||||
Amortization of lease assets | Depreciation and amortization expense | 4,517 | |||
Interest on lease liabilities | Interest and other expense, net | 8,241 | |||
Total lease costs | $ | 14,416 | |||
(1) | Represents costs related to ground leases, including variable lease costs. Excludes costs related to hotel equipment leases, which are included in hotel operating expense and property taxes, insurance and other expense, and costs related to office space leases, which are included in general and administrative expense in the Company’s consolidated statement of operations. These costs are not significant for disclosure. |
Undiscounted Cash Flows
The following table reconciles the undiscounted cash flows for each of the next five years and total of the remaining years to the operating lease liabilities and finance lease liabilities included in the Company’s consolidated balance sheet as of December 31, 2019 (in thousands):
Operating leases | Finance leases | |||||||
2020 | $ | 1,252 | $ | 9,541 | ||||
2021 | 1,028 | 9,618 | ||||||
2022 | 852 | 9,767 | ||||||
2023 | 777 | 10,116 | ||||||
2024 | 763 | 11,249 | ||||||
Thereafter | 32,447 | 466,069 | ||||||
Total minimum lease payments | 37,119 | 516,360 | ||||||
Less: amount of lease payments representing interest | 24,989 | 299,733 | ||||||
Present value of lease liabilities | $ | 12,130 | $ | 216,627 | ||||
Supplemental Cash Flow Information
The following table sets forth supplemental cash flow information related to the Company’s operating and finance leases for the year ended December 31, 2019 (in thousands):
Year Ended December 31, 2019 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows for operating leases | $ | 1,344 | ||
Operating cash flows for finance leases | 6,989 | |||
Information for Periods Prior to the Adoption of the New Lease Accounting Standard
Prior to the adoption of Topic 842, the Company’s leases were classified as operating leases. The Company recorded, at the time of acquisition, the Company recorded initial intangible assets for twelve of theseground leases assumed that were below market leases, (including three leases relating to four hotels assumed as part of the Apple Ten merger, effective September 1, 2016), which at December 31, 2017 and 2016 totaled approximately $27.3$26.2 million, and $28.4 million, respectively, and are included in other assets, net in the Company’s consolidated balance sheets. The Company recordedand initial intangible liabilities for three of theseground leases assumed that were above market leases, which as of December 31, 2017 and 2016 totaled approximately $6.2$6.0 million, and $6.5 million, respectively, and are included in accounts payable and other liabilities, in the Company’s consolidated balance sheets.sheet as of December 31, 2018. The value of each lease intangible iswas amortized over the term of the respective lease andwith the amortization is included in operating ground lease expense in the Company’s consolidated statements of operations, resulting in a net increase of approximately $0.8 million $0.7 million and $0.7 million to operating ground lease expense for each of the years ended December 31, 2017, 20162018 and 2015.
| Total | ||||
| 2018 | $ | 6,318 | ||
| 2019 | 6,600 | |||
| 2020 | 6,772 | |||
| 2021 | 6,957 | |||
| 2022 | 7,117 | |||
| Thereafter | 327,808 | |||
| Total | $ | 361,572 | ||
Note 12
Industry Segments
The Company owns hotel properties throughout the United StatesU.S. that generate rental, food and beverage, and other property relatedproperty-related income. The Company separately evaluates the performance of each of its hotel properties. However, because each of the hotels has similar economic characteristics, facilities, and services, and each hotel is not individually significant, the properties have been aggregated into a single reportable segment. All segment disclosures are included in or can be derived from the Company’s consolidated financial statements.
Note 13
Hotel Purchase Contract Commitments
As of December 31, 2017,2019, the Company had outstanding contracts for the potential purchase of four6 hotels for a total expected purchase price of $127.8 million. Two of the hotels, the Atlanta Hampton Inn & Suites and the Memphis Hampton Inn & Suites, both ofapproximately $208.8 million, which are already in operation, were acquired in February 2018. The two remaining hotels are under constructiondevelopment and are planned to be completed and opened for business during 2018,over the next five to 18 months from December 31, 2019, at which time closingclosings on these hotels isare expected to occur. Although the Company is working towards acquiring the twothese hotels, under construction,in each case there are manya number of conditions to closing that have not yet been satisfied and there can be no assurance that a closingclosings on these hotels will occur under the outstanding purchase contracts. The following table summarizes the location, brand, date of purchase contract, expected number of rooms, refundable (if the seller does not meet its obligations under the contract) contract deposits paid, and gross purchase price for each of the contracts outstanding at December 31, 2017.2019. All dollar amounts are in thousands.
Location (1) | Brands | Date of Purchase Contract | Rooms | Refundable Deposits | Gross Purchase Price | |||||||||||
Cape Canaveral, FL (2) | Hampton and Home2 Suites | 4/11/2018 | 224 | $ | 3 | $ | 46,704 | |||||||||
Tempe, AZ (3) | Hyatt House and Hyatt Place | 6/13/2018 | 254 | 720 | 63,341 | |||||||||||
Denver, CO | Courtyard | 4/5/2019 | 182 | 586 | 49,140 | |||||||||||
Madison, WI | Hilton Garden Inn | 7/9/2019 | 176 | 283 | 49,632 | |||||||||||
| 836 | $ | 1,592 | $ | 208,817 | ||||||||||||
| Location | Brand | Date of Purchase Contract | Rooms | Refundable Deposits | Gross Purchase Price | |||||||||||
Operating | ||||||||||||||||
| Atlanta, GA | Hampton | 12/22/2017 | 119 | $ | (a | ) | $ | (a | ) | |||||||
| Memphis, TN | Hampton | 12/22/2017 | 144 | (a | ) | (a | ) | |||||||||
Under development (b) | ||||||||||||||||
| Phoenix, AZ | Hampton | 10/25/2016 | 210 | 500 | 44,100 | |||||||||||
| Orlando, FL | Home2 Suites | 1/18/2017 | 128 | 3 | 20,736 | |||||||||||
| 601 | $ | 1,503 | $ | 127,836 | ||||||||||||
(1) | These |
(2) | These hotels are part of an adjoining combined 224-room, dual-branded complex that will be located on the same site. |
(3) | These hotels are part of an adjoining combined 254-room, dual-branded complex that will be located on the same site. |
The Company plans to utilize its credit facilities available at closing to purchase price for the Atlanta Hampton Inn & Suiteshotels under contract if closings occur.
Note 13
Transaction and the Memphis Hampton Inn & Suites was funded throughLitigation Costs (Reimbursements)
During 2017, transaction and litigation costs (reimbursements) totaled $(2.6) million which primarily related to additional proceeds received in May 2017 from the Company’s revolving credit facilitydirectors and it is anticipatedofficers insurance carriers in connection with a legal settlement that the purchase price for the remaining hotels will be funded similarly.
Note 15
Quarterly Financial Data (Unaudited)
The following is a summary of quarterly results of operations for the years ended December 31, 20172019 and 20162018 (in thousands, except per share data):
| 2017 | ||||||||||||||||
| First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
| Total revenue | $ | 292,925 | $ | 331,704 | $ | 324,926 | $ | 289,067 | ||||||||
| Net income (loss) | $ | 34,365 | $ | 87,606 | $ | 62,824 | $ | (2,303 | ) | |||||||
| Comprehensive income | $ | 35,910 | $ | 86,431 | $ | 63,083 | $ | 2,257 | ||||||||
| Basic and diluted net income (loss) per common share | $ | 0.15 | $ | 0.39 | $ | 0.28 | $ | (0.01 | ) | |||||||
| 2016 | ||||||||||||||||
| First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
| Total revenue | $ | 224,487 | $ | 257,636 | $ | 276,471 | $ | 282,431 | ||||||||
| Net income | $ | 34,686 | $ | 54,718 | $ | 13,694 | $ | 41,554 | ||||||||
| Comprehensive income | $ | 27,992 | $ | 49,217 | $ | 17,955 | $ | 56,134 | ||||||||
| Basic and diluted net income per common share | $ | 0.20 | $ | 0.31 | $ | 0.07 | $ | 0.19 | ||||||||
2019 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Total revenue | $ | 303,787 | $ | 341,117 | $ | 331,722 | $ | 289,971 | ||||||||
Net income | $ | 38,151 | $ | 62,090 | $ | 46,223 | $ | 25,453 | ||||||||
Comprehensive income | $ | 32,107 | $ | 51,970 | $ | 42,030 | $ | 31,106 | ||||||||
Basic and diluted net income per common share | $ | 0.17 | $ | 0.28 | $ | 0.21 | $ | 0.11 | ||||||||
2018 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Total revenue | $ | 298,389 | $ | 344,714 | $ | 332,197 | $ | 295,255 | ||||||||
Net income | $ | 42,182 | $ | 67,630 | $ | 62,122 | $ | 34,152 | ||||||||
Comprehensive income | $ | 48,474 | $ | 69,370 | $ | 63,779 | $ | 24,691 | ||||||||
Basic and diluted net income per common share(1) | $ | 0.18 | $ | 0.29 | $ | 0.27 | $ | 0.15 | ||||||||
(1) | Net income per common share for the four quarters of 2018 are non-additive in comparison to net income per common share for the year ended December 31, 2018 due to the equity repurchased in the first and fourth quarters of 2018 under the Share Repurchase Program. |
Note 17
Subsequent Events
In both January 20182020 and February 2018,2020, the Company paid approximately $23.0$22.4 million, or $0.10 per outstanding common share, in distributions to its common shareholders.
In February 2018,2020, the Company declared a regular monthly cash distribution of $0.10 per common share for the month of March 2018.2020. The distribution is payable on March 15, 2018.
In January 2020, the Company closed oncompleted the purchasesale of an existing 119-room Hampton Inn &its 105-room Sanford, Florida SpringHill Suites in Atlanta, Georgia and an existing 144-room Hampton Inn & Suites in Memphis, Tennessee for a gross purchasesales price of $63.0$13.0 million.
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
Senior management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2017.2019. There have been no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
See Item 8 for the Report of Management on Internal Control over Financial Reporting and the Company’s Independent Registered Public Accounting Firm’s attestation report regarding internal control over financial reporting, which are incorporated herein by reference.
None.
PART III
The information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K will be set forth in the Company’s definitive proxy statement for its 20182020 Annual Meeting of Shareholders (the “2018“2020 Proxy Statement”). For the limited purpose of providing the information necessary to comply with this Item 10, the 20182020 Proxy Statement is incorporated herein by this reference.
The information required by Items 402 and 407(e)(4) and (e)(5) of Regulation S-K will be set forth in the Company’s 20182020 Proxy Statement. For the limited purpose of providing the information necessary to comply with this Item 11, the 20182020 Proxy Statement is incorporated herein by this reference.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
The information required by Items 201(d) and 403 of Regulation S-K will be set forth in the Company’s 20182020 Proxy Statement. For the limited purpose of providing the information necessary to comply with this Item 12, the 20182020 Proxy Statement is incorporated herein by this reference.
The information required by Items 404 and 407(a) of Regulation S-K will be set forth in the Company’s 20182020 Proxy Statement. For the limited purpose of providing the information necessary to comply with this Item 13, the 20182020 Proxy Statement is incorporated herein by this reference.
The information required by Item 9(e) of Schedule 14A will be set forth in the Company’s 20182020 Proxy Statement. For the limited purpose of providing the information necessary to comply with this Item 14, the 20182020 Proxy Statement is incorporated herein by this reference.
PART IV
1. Financial Statements of Apple Hospitality REIT, Inc.
Report of Management on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm—Ernst & Young LLP
Report of Independent Registered Public Accounting Firm—Ernst & Young LLP
Consolidated Balance Sheets as of December 31, 20172019 and 2016
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2017, 20162019, 2018 and 2015
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2017, 20162019, 2018 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 20162019, 2018 and 2015
Notes to Consolidated Financial Statements
These financial statements are set forth in Item 8 of this report and are hereby incorporated by reference.
2. Financial Statement Schedules
Schedule III—Real Estate and Accumulated Depreciation and Amortization (Included at the end of this Part IV of this report.)
Financial statement schedules not listed are either omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
3. Exhibit Listing
3.2 | |
4.1 | |
10.1* | |
10.2* | |
10.3* | |
Exhibit Number | Description of Documents |
10.4* | |
10.5 | |
10.6* | |
10.7* | |
10.8* | |
10.9 | |
21.1 | |
23.1 | |
31.1 | |
31.2 | |
32.1 | |
101 | The following materials from |
104 | The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in iXBRL and contained in Exhibit 101. |
*
Denotes Management Contract or Compensation Plan.None.
SCHEDULE III
Subsequently Capitalized | |||||||||||||||||||||||||||||||||||||||
| Initial Cost | Bldg. Imp. & FF&E | Total Gross Cost (2) | |||||||||||||||||||||||||||||||||||||
| City | State | Description | Encumbrances | Land (1) | Bldg./ FF&E /Other | Acc. Deprec. | Date of Construction | Date Acquired | Depreciable Life | # of Rooms | |||||||||||||||||||||||||||||
| Anchorage | AK | Embassy Suites | $ | 20,560 | $ | 2,955 | $ | 39,053 | $ | 4,103 | $ | 46,111 | $ | (10,911 | ) | 2008 | Apr-10 | 3 - 39 yrs. | 169 | ||||||||||||||||||||
| Anchorage | AK | Home2 Suites | - | 2,683 | 21,606 | - | - | 24,289 | (64 | ) | 2015 | Dec-17 | 3 - 39 yrs. | 135 | |||||||||||||||||||||||||
| Auburn | AL | Hilton Garden Inn | - | 1,580 | 9,659 | 223 | 11,462 | (1,585 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 101 | ||||||||||||||||||||||||||
| Birmingham | AL | Courtyard | - | 2,310 | 6,425 | 1,142 | 9,877 | (1,015 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 84 | ||||||||||||||||||||||||||
| Birmingham | AL | Hilton Garden Inn | - | 3,425 | 15,853 | - | 19,278 | (204 | ) | 2017 | Sep-17 | 3 - 39 yrs. | 104 | ||||||||||||||||||||||||||
| Birmingham | AL | Home2 Suites | - | 3,491 | 15,901 | - | 19,392 | (196 | ) | 2017 | Sep-17 | 3 - 39 yrs. | 106 | ||||||||||||||||||||||||||
| Birmingham | AL | Homewood Suites | - | 1,010 | 12,981 | 1,730 | 15,721 | (2,101 | ) | 2005 | Mar-14 | 3 - 39 yrs. | 95 | ||||||||||||||||||||||||||
| Dothan | AL | Hilton Garden Inn | - | 1,037 | 10,581 | 182 | 11,800 | (3,359 | ) | 2009 | Jun-09 | 3 - 39 yrs. | 104 | ||||||||||||||||||||||||||
| Dothan | AL | Residence Inn | - | 970 | 13,185 | 822 | 14,977 | (1,608 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 84 | ||||||||||||||||||||||||||
| Huntsville | AL | Hampton | - | 550 | 11,962 | 7 | 12,519 | (555 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 98 | ||||||||||||||||||||||||||
| Huntsville | AL | Hilton Garden Inn | - | 890 | 11,227 | 268 | 12,385 | (1,623 | ) | 2005 | Mar-14 | 3 - 39 yrs. | 101 | ||||||||||||||||||||||||||
| Huntsville | AL | Home2 Suites | - | 490 | 10,840 | 5 | 11,335 | (497 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 77 | ||||||||||||||||||||||||||
| Huntsville | AL | Homewood Suites | 7,483 | 210 | 15,654 | 1,782 | 17,646 | (2,285 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 107 | ||||||||||||||||||||||||||
| Mobile | AL | Hampton | - | - | 11,452 | 231 | 11,683 | (531 | ) | 2006 | Sep-16 | 3 - 39 yrs. | 101 | ||||||||||||||||||||||||||
| Montgomery | AL | Hilton Garden Inn | - | 2,640 | 12,315 | 285 | 15,240 | (1,858 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 97 | ||||||||||||||||||||||||||
| Montgomery | AL | Homewood Suites | - | 1,760 | 10,818 | 296 | 12,874 | (1,854 | ) | 2004 | Mar-14 | 3 - 39 yrs. | 91 | ||||||||||||||||||||||||||
| Prattville | AL | Courtyard | 5,943 | 2,050 | 9,101 | 922 | 12,073 | (1,490 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 84 | ||||||||||||||||||||||||||
| Rogers | AR | Hampton | - | 961 | 8,483 | 875 | 10,319 | (2,571 | ) | 1998 | Aug-10 | 3 - 39 yrs. | 122 | ||||||||||||||||||||||||||
| Rogers | AR | Homewood Suites | - | 1,375 | 9,514 | 2,226 | 13,115 | (3,791 | ) | 2006 | Apr-10 | 3 - 39 yrs. | 126 | ||||||||||||||||||||||||||
| Rogers | AR | Residence Inn | - | 1,130 | 12,417 | 332 | 13,879 | (1,831 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 88 | ||||||||||||||||||||||||||
| Springdale | AR | Residence Inn | - | 330 | 8,651 | 315 | 9,296 | (1,080 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 72 | ||||||||||||||||||||||||||
| Chandler | AZ | Courtyard | - | 1,061 | 16,008 | 1,540 | 18,609 | (4,171 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 150 | ||||||||||||||||||||||||||
| Chandler | AZ | Fairfield Inn & Suites | - | 778 | 11,272 | 978 | 13,028 | (2,849 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 110 | ||||||||||||||||||||||||||
| Phoenix | AZ | Courtyard | - | 1,413 | 14,669 | 2,174 | 18,256 | (4,570 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 164 | ||||||||||||||||||||||||||
| Phoenix | AZ | Courtyard | - | 1,730 | 17,401 | 95 | 19,226 | (795 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 127 | ||||||||||||||||||||||||||
| Phoenix | AZ | Hampton | - | - | 15,209 | 137 | 15,346 | (739 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 125 | ||||||||||||||||||||||||||
| Phoenix | AZ | Homewood Suites | - | - | 18,907 | 79 | 18,986 | (950 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 134 | ||||||||||||||||||||||||||
| Phoenix | AZ | Residence Inn | - | 1,111 | 12,953 | 1,616 | 15,680 | (3,779 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 129 | ||||||||||||||||||||||||||
| Scottsdale | AZ | Hilton Garden Inn | - | 6,000 | 26,861 | 237 | 33,098 | (1,087 | ) | 2005 | Sep-16 | 3 - 39 yrs. | 122 | ||||||||||||||||||||||||||
| Tucson | AZ | Hilton Garden Inn | - | 1,005 | 17,925 | 1,829 | 20,759 | (5,756 | ) | 2008 | Jul-08 | 3 - 39 yrs. | 125 | ||||||||||||||||||||||||||
| Tucson | AZ | Residence Inn | - | 2,080 | 12,424 | 1,494 | 15,998 | (1,766 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Tucson | AZ | TownePlace Suites | - | 992 | 14,543 | 109 | 15,644 | (3,230 | ) | 2011 | Oct-11 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Agoura Hills | CA | Homewood Suites | - | 3,430 | 21,290 | 2,179 | 26,899 | (3,302 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 125 | ||||||||||||||||||||||||||
| Burbank | CA | Courtyard | 24,917 | 12,916 | 41,218 | 422 | 54,556 | (3,297 | ) | 2002 | Aug-15 | 3 - 39 yrs. | 190 | ||||||||||||||||||||||||||
| Burbank | CA | Residence Inn | - | 32,270 | 41,559 | 2,406 | 76,235 | (5,606 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 166 | ||||||||||||||||||||||||||
| Burbank | CA | SpringHill Suites | - | 10,734 | 49,181 | 38 | 59,953 | (3,844 | ) | 2015 | Jul-15 | 3 - 39 yrs. | 170 | ||||||||||||||||||||||||||
| Clovis | CA | Hampton | - | 1,287 | 9,888 | 865 | 12,040 | (2,903 | ) | 2009 | Jul-09 | 3 - 39 yrs. | 86 | ||||||||||||||||||||||||||
| Clovis | CA | Homewood Suites | - | 1,500 | 10,970 | 96 | 12,566 | (3,042 | ) | 2010 | Feb-10 | 3 - 39 yrs. | 83 | ||||||||||||||||||||||||||
| Cypress | CA | Courtyard | - | 4,410 | 35,033 | 685 | 40,128 | (4,825 | ) | 1988 | Mar-14 | 3 - 39 yrs. | 180 | ||||||||||||||||||||||||||
| Cypress | CA | Hampton | - | 3,209 | 16,749 | 1,965 | 21,923 | (1,583 | ) | 2006 | Jun-15 | 3 - 39 yrs. | 110 | ||||||||||||||||||||||||||
| Oceanside | CA | Courtyard | 13,332 | 3,080 | 25,769 | 146 | 28,995 | (1,047 | ) | 2011 | Sep-16 | 3 - 39 yrs. | 142 | ||||||||||||||||||||||||||
| Oceanside | CA | Residence Inn | - | 7,790 | 24,048 | 1,649 | 33,487 | (3,294 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 125 | ||||||||||||||||||||||||||
| Rancho Bernardo/San Diego | CA | Courtyard | 13,692 | 16,380 | 28,952 | 480 | 45,812 | (4,113 | ) | 1987 | Mar-14 | 3 - 39 yrs. | 210 | ||||||||||||||||||||||||||
| Sacramento | CA | Hilton Garden Inn | - | 5,920 | 21,515 | 3,216 | 30,651 | (3,454 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 153 | ||||||||||||||||||||||||||
| San Bernardino | CA | Residence Inn | - | 1,490 | 13,662 | 1,708 | 16,860 | (3,659 | ) | 2006 | Feb-11 | 3 - 39 yrs. | 95 | ||||||||||||||||||||||||||
| San Diego | CA | Courtyard | 24,828 | 11,268 | 44,851 | 583 | 56,702 | (3,620 | ) | 2002 | Sep-15 | 3 - 39 yrs. | 245 | ||||||||||||||||||||||||||
| San Diego | CA | Hampton | 18,483 | 13,570 | 36,644 | 2,657 | 52,871 | (4,750 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 177 | ||||||||||||||||||||||||||
| San Diego | CA | Hilton Garden Inn | - | 8,020 | 29,151 | 358 | 37,529 | (4,022 | ) | 2004 | Mar-14 | 3 - 39 yrs. | 200 | ||||||||||||||||||||||||||
| San Diego | CA | Residence Inn | 16,733 | 22,400 | 20,640 | 309 | 43,349 | (3,239 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 121 | ||||||||||||||||||||||||||
| San Jose | CA | Homewood Suites | 30,000 | 12,860 | 28,084 | 4,980 | 45,924 | (5,530 | ) | 1991 | Mar-14 | 3 - 39 yrs. | 140 | ||||||||||||||||||||||||||
| San Juan Capistrano | CA | Residence Inn | 15,774 | - | 32,292 | 44 | 32,336 | (1,384 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 130 | ||||||||||||||||||||||||||
| Santa Ana | CA | Courtyard | - | 3,082 | 21,051 | 147 | 24,280 | (4,886 | ) | 2011 | May-11 | 3 - 39 yrs. | 155 | ||||||||||||||||||||||||||
| Santa Clarita | CA | Courtyard | - | 4,568 | 18,721 | 2,246 | 25,535 | (6,560 | ) | 2007 | Sep-08 | 3 - 39 yrs. | 140 | ||||||||||||||||||||||||||
| Santa Clarita | CA | Fairfield Inn | - | 1,864 | 7,753 | 1,834 | 11,451 | (3,088 | ) | 1997 | Oct-08 | 3 - 39 yrs. | 66 | ||||||||||||||||||||||||||
| Santa Clarita | CA | Hampton | - | 1,812 | 15,761 | 1,999 | 19,572 | (5,977 | ) | 1988 | Oct-08 | 3 - 39 yrs. | 128 | ||||||||||||||||||||||||||
| Santa Clarita | CA | Residence Inn | - | 2,539 | 14,493 | 3,917 | 20,949 | (6,153 | ) | 1997 | Oct-08 | 3 - 39 yrs. | 90 | ||||||||||||||||||||||||||
| Tulare | CA | Hampton | - | 400 | 9,194 | 1,061 | 10,655 | (1,437 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 86 | ||||||||||||||||||||||||||
| Tustin | CA | Fairfield Inn & Suites | - | 7,700 | 26,580 | 68 | 34,348 | (1,132 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 145 | ||||||||||||||||||||||||||
| Tustin | CA | Residence Inn | - | 11,680 | 33,645 | 70 | 45,395 | (1,477 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 149 | ||||||||||||||||||||||||||
| Colorado Springs | CO | Hampton | 7,754 | 1,780 | 15,860 | 29 | 17,669 | (740 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 101 | ||||||||||||||||||||||||||
| Denver | CO | Hilton Garden Inn | 33,046 | 9,940 | 57,595 | 131 | 67,666 | (2,618 | ) | 2007 | Sep-16 | 3 - 39 yrs. | 221 | ||||||||||||||||||||||||||
| Highlands Ranch | CO | Hilton Garden Inn | - | 5,480 | 20,465 | 246 | 26,191 | (2,654 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 128 | ||||||||||||||||||||||||||
| Highlands Ranch | CO | Residence Inn | - | 5,350 | 19,167 | 2,814 | 27,331 | (3,286 | ) | 1996 | Mar-14 | 3 - 39 yrs. | 117 | ||||||||||||||||||||||||||
| Boca Raton | FL | Hilton Garden Inn | - | 7,220 | 22,177 | 344 | 29,741 | (1,012 | ) | 2002 | Sep-16 | 3 - 39 yrs. | 149 | ||||||||||||||||||||||||||
| Cape Canaveral | FL | Homewood Suites | - | 2,780 | 23,967 | 32 | 26,779 | (1,219 | ) | 2016 | Sep-16 | 3 - 39 yrs. | 153 | ||||||||||||||||||||||||||
| Fort Lauderdale | FL | Hampton | - | 2,235 | 17,590 | 2,880 | 22,705 | (5,810 | ) | 2001 | Dec-08 | 3 - 39 yrs. | 109 | ||||||||||||||||||||||||||
| Fort Lauderdale | FL | Hampton | - | 1,793 | 21,357 | 4,405 | 27,555 | (2,424 | ) | 2002 | Jun-15 | 3 - 39 yrs. | 156 | ||||||||||||||||||||||||||
| Fort Lauderdale | FL | Residence Inn | - | 5,760 | 26,727 | - | 32,487 | (1,227 | ) | 2014 | Sep-16 | 3 - 39 yrs. | 156 | ||||||||||||||||||||||||||
| Gainesville | FL | Hilton Garden Inn | - | 1,300 | 17,322 | 109 | 18,731 | (758 | ) | 2007 | Sep-16 | 3 - 39 yrs. | 104 | ||||||||||||||||||||||||||
| Gainesville | FL | Homewood Suites | - | 1,740 | 16,329 | 51 | 18,120 | (772 | ) | 2005 | Sep-16 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| Jacksonville | FL | Homewood Suites | - | 9,480 | 21,247 | 1,914 | 32,641 | (3,749 | ) | 2005 | Mar-14 | 3 - 39 yrs. | 119 | ||||||||||||||||||||||||||
| Lakeland | FL | Courtyard | - | 3,740 | 10,813 | 1,305 | 15,858 | (1,653 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 78 | ||||||||||||||||||||||||||
| Miami | FL | Courtyard | - | - | 31,488 | 1,569 | 33,057 | (4,004 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 118 | ||||||||||||||||||||||||||
| Miami | FL | Hampton | - | 1,972 | 9,987 | 2,711 | 14,670 | (4,413 | ) | 2000 | Apr-10 | 3 - 39 yrs. | 121 | ||||||||||||||||||||||||||
| Miami | FL | Homewood Suites | 15,022 | 18,820 | 25,375 | 3,435 | 47,630 | (4,552 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 162 | ||||||||||||||||||||||||||
Real Estate and Accumulated Depreciation - (continued)
As of December 31, 2017
(dollars in thousands)
Subsequently | ||||||||||||||||||||||||||||||||||||||||
Initial Cost | Capitalized |
| ||||||||||||||||||||||||||||||||||||||
City | State | Description | Encumbrances | Land (1) | Bldg./ FF&E / Other | Bldg. Imp. & FF&E | Total Gross Cost (2) | Acc. Deprec. | Date of Construction | Date Acquired | Depreciable Life | # of Rooms | ||||||||||||||||||||||||||||
Anchorage | AK | Embassy Suites | $ | 19,324 | $ | 2,955 | $ | 39,053 | $ | 4,383 | $ | 46,391 | $ | (13,936 | ) | 2008 | Apr-10 | 3 - 39 yrs. | 169 | |||||||||||||||||||||
Anchorage | AK | Home2 Suites | - | 2,683 | 21,606 | 25 | 24,314 | (1,629 | ) | 2015 | Dec-17 | 3 - 39 yrs. | 135 | |||||||||||||||||||||||||||
Auburn | AL | Hilton Garden Inn | - | 1,580 | 9,659 | 578 | 11,817 | (2,505 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 101 | |||||||||||||||||||||||||||
Birmingham | AL | Courtyard | - | 2,310 | 6,425 | 1,353 | 10,088 | (1,756 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 84 | |||||||||||||||||||||||||||
Birmingham | AL | Hilton Garden Inn | - | 3,425 | 15,555 | 10 | 18,990 | (1,417 | ) | 2017 | Sep-17 | 3 - 39 yrs. | 104 | |||||||||||||||||||||||||||
Birmingham | AL | Home2 Suites | - | 3,491 | 15,603 | 9 | 19,103 | (1,360 | ) | 2017 | Sep-17 | 3 - 39 yrs. | 106 | |||||||||||||||||||||||||||
Birmingham | AL | Homewood Suites | - | 1,010 | 12,981 | 1,872 | 15,863 | (3,291 | ) | 2005 | Mar-14 | 3 - 39 yrs. | 95 | |||||||||||||||||||||||||||
Dothan | AL | Hilton Garden Inn | - | 1,037 | 10,581 | 1,575 | 13,193 | (4,131 | ) | 2009 | Jun-09 | 3 - 39 yrs. | 104 | |||||||||||||||||||||||||||
Dothan | AL | Residence Inn | - | 970 | 13,185 | 1,003 | 15,158 | (2,683 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 84 | |||||||||||||||||||||||||||
Huntsville | AL | Hampton | - | 550 | 11,962 | 78 | 12,590 | (1,408 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 98 | |||||||||||||||||||||||||||
Huntsville | AL | Hilton Garden Inn | - | 890 | 11,227 | 502 | 12,619 | (2,570 | ) | 2005 | Mar-14 | 3 - 39 yrs. | 101 | |||||||||||||||||||||||||||
Huntsville | AL | Home2 Suites | - | 490 | 10,840 | 72 | 11,402 | (1,259 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 77 | |||||||||||||||||||||||||||
Huntsville | AL | Homewood Suites | 6,999 | 210 | 15,654 | 1,971 | 17,835 | (3,703 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 107 | |||||||||||||||||||||||||||
Mobile | AL | Hampton | - | - | 11,452 | 364 | 11,816 | (1,385 | ) | 2006 | Sep-16 | 3 - 39 yrs. | 101 | |||||||||||||||||||||||||||
Montgomery | AL | Hilton Garden Inn | - | 2,640 | 12,315 | 422 | 15,377 | (2,888 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 97 | |||||||||||||||||||||||||||
Montgomery | AL | Homewood Suites | - | 1,760 | 10,818 | 482 | 13,060 | (2,835 | ) | 2004 | Mar-14 | 3 - 39 yrs. | 91 | |||||||||||||||||||||||||||
Prattville | AL | Courtyard | 5,558 | 2,050 | 9,101 | 1,022 | 12,173 | (2,275 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 84 | |||||||||||||||||||||||||||
Rogers | AR | Hampton | - | 911 | 8,483 | 2,058 | 11,452 | (3,224 | ) | 1998 | Aug-10 | 3 - 39 yrs. | 122 | |||||||||||||||||||||||||||
Rogers | AR | Homewood Suites | - | 1,375 | 9,514 | 2,382 | 13,271 | (4,780 | ) | 2006 | Apr-10 | 3 - 39 yrs. | 126 | |||||||||||||||||||||||||||
Rogers | AR | Residence Inn | - | 1,130 | 12,417 | 501 | 14,048 | (2,848 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 88 | |||||||||||||||||||||||||||
Chandler | AZ | Courtyard | - | 1,061 | 16,008 | 1,646 | 18,715 | (5,401 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 150 | |||||||||||||||||||||||||||
Chandler | AZ | Fairfield | - | 778 | 11,272 | 1,085 | 13,135 | (3,695 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 110 | |||||||||||||||||||||||||||
Phoenix | AZ | Courtyard | - | 1,413 | 14,669 | 2,434 | 18,516 | (5,806 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 164 | |||||||||||||||||||||||||||
Phoenix | AZ | Courtyard | - | 1,730 | 17,401 | 266 | 19,397 | (2,046 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 127 | |||||||||||||||||||||||||||
Phoenix | AZ | Hampton | - | - | 15,209 | 382 | 15,591 | (1,898 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 125 | |||||||||||||||||||||||||||
Phoenix | AZ | Hampton | - | 3,406 | 41,174 | 11 | 44,591 | (2,423 | ) | 2018 | May-18 | 3 - 39 yrs. | 210 | |||||||||||||||||||||||||||
Phoenix | AZ | Homewood Suites | - | - | 18,907 | 234 | 19,141 | (2,415 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 134 | |||||||||||||||||||||||||||
Phoenix | AZ | Residence Inn | - | 1,111 | 12,953 | 1,851 | 15,915 | (4,852 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 129 | |||||||||||||||||||||||||||
Scottsdale | AZ | Hilton Garden Inn | - | 6,000 | 26,861 | 395 | 33,256 | (2,794 | ) | 2005 | Sep-16 | 3 - 39 yrs. | 122 | |||||||||||||||||||||||||||
Tucson | AZ | Hilton Garden Inn | - | 1,005 | 17,925 | 2,075 | 21,005 | (7,173 | ) | 2008 | Jul-08 | 3 - 39 yrs. | 125 | |||||||||||||||||||||||||||
Tucson | AZ | Residence Inn | - | 2,080 | 12,424 | 1,715 | 16,219 | (3,059 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
Tucson | AZ | TownePlace Suites | - | 992 | 14,543 | 260 | 15,795 | (4,093 | ) | 2011 | Oct-11 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
Agoura Hills | CA | Homewood Suites | - | 3,430 | 21,290 | 2,390 | 27,110 | (5,113 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 125 | |||||||||||||||||||||||||||
Burbank | CA | Courtyard | 23,552 | 12,916 | 41,218 | 733 | 54,867 | (6,144 | ) | 2002 | Aug-15 | 3 - 39 yrs. | 190 | |||||||||||||||||||||||||||
Burbank | CA | Residence Inn | - | 32,270 | 41,559 | 2,853 | 76,682 | (8,683 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 166 | |||||||||||||||||||||||||||
Burbank | CA | SpringHill Suites | 27,317 | 10,734 | 49,181 | 102 | 60,017 | (6,935 | ) | 2015 | Jul-15 | 3 - 39 yrs. | 170 | |||||||||||||||||||||||||||
Clovis | CA | Hampton | - | 1,287 | 9,888 | 1,221 | 12,396 | (3,699 | ) | 2009 | Jul-09 | 3 - 39 yrs. | 86 | |||||||||||||||||||||||||||
Clovis | CA | Homewood Suites | - | 1,500 | 10,970 | 1,756 | 14,226 | (3,855 | ) | 2010 | Feb-10 | 3 - 39 yrs. | 83 | |||||||||||||||||||||||||||
Cypress | CA | Courtyard | - | 4,410 | 35,033 | 1,404 | 40,847 | (7,550 | ) | 1988 | Mar-14 | 3 - 39 yrs. | 180 | |||||||||||||||||||||||||||
Cypress | CA | Hampton | - | 3,209 | 16,749 | 2,294 | 22,252 | (3,162 | ) | 2006 | Jun-15 | 3 - 39 yrs. | 110 | |||||||||||||||||||||||||||
Oceanside | CA | Courtyard | 12,812 | 3,080 | 25,769 | 1,250 | 30,099 | (2,709 | ) | 2011 | Sep-16 | 3 - 39 yrs. | 142 | |||||||||||||||||||||||||||
Oceanside | CA | Residence Inn | - | 7,790 | 24,048 | 2,204 | 34,042 | (5,197 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 125 | |||||||||||||||||||||||||||
Rancho Bernardo/San Diego | CA | Courtyard | 12,866 | 16,380 | 28,952 | 840 | 46,172 | (6,391 | ) | 1987 | Mar-14 | 3 - 39 yrs. | 210 | |||||||||||||||||||||||||||
Sacramento | CA | Hilton Garden Inn | - | 5,920 | 21,515 | 3,871 | 31,306 | (5,679 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 153 | |||||||||||||||||||||||||||
San Bernardino | CA | Residence Inn | - | 1,490 | 13,662 | 1,857 | 17,009 | (4,766 | ) | 2006 | Feb-11 | 3 - 39 yrs. | 95 | |||||||||||||||||||||||||||
San Diego | CA | Courtyard | 23,468 | 11,268 | 44,851 | 1,001 | 57,120 | (6,873 | ) | 2002 | Sep-15 | 3 - 39 yrs. | 245 | |||||||||||||||||||||||||||
San Diego | CA | Hampton | 17,471 | 13,570 | 36,644 | 3,117 | 53,331 | (7,579 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 177 | |||||||||||||||||||||||||||
San Diego | CA | Hilton Garden Inn | - | 8,020 | 29,151 | 668 | 37,839 | (6,234 | ) | 2004 | Mar-14 | 3 - 39 yrs. | 200 | |||||||||||||||||||||||||||
San Diego | CA | Residence Inn | 15,640 | 22,400 | 20,640 | 481 | 43,521 | (5,019 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 121 | |||||||||||||||||||||||||||
San Jose | CA | Homewood Suites | 28,092 | 12,860 | 28,084 | 5,205 | 46,149 | (8,461 | ) | 1991 | Mar-14 | 3 - 39 yrs. | 140 | |||||||||||||||||||||||||||
San Juan Capistrano | CA | Residence Inn | 15,073 | - | (6) | 32,292 | 128 | 32,420 | (3,472 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 130 | ||||||||||||||||||||||||||
Santa Ana | CA | Courtyard | 14,901 | 3,082 | 21,051 | 1,718 | 25,851 | (6,105 | ) | 2011 | May-11 | 3 - 39 yrs. | 155 | |||||||||||||||||||||||||||
Santa Clarita | CA | Courtyard | - | 4,568 | 18,721 | 2,616 | 25,905 | (8,073 | ) | 2007 | Sep-08 | 3 - 39 yrs. | 140 | |||||||||||||||||||||||||||
Santa Clarita | CA | Fairfield | - | 1,864 | 7,753 | 1,964 | 11,581 | (3,869 | ) | 1997 | Oct-08 | 3 - 39 yrs. | 66 | |||||||||||||||||||||||||||
Santa Clarita | CA | Hampton | - | 1,812 | 15,761 | 6,300 | 23,873 | (7,467 | ) | 1988 | Oct-08 | 3 - 39 yrs. | 128 | |||||||||||||||||||||||||||
Santa Clarita | CA | Residence Inn | - | 2,539 | 14,493 | 4,219 | 21,251 | (7,697 | ) | 1997 | Oct-08 | 3 - 39 yrs. | 90 | |||||||||||||||||||||||||||
Tulare | CA | Hampton | - | 400 | 9,194 | 1,168 | 10,762 | (2,316 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 86 | |||||||||||||||||||||||||||
Tustin | CA | Fairfield | - | 7,700 | 26,580 | 156 | 34,436 | (2,860 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 145 | |||||||||||||||||||||||||||
Tustin | CA | Residence Inn | - | 11,680 | 33,645 | 174 | 45,499 | (3,720 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 149 | |||||||||||||||||||||||||||
Colorado Springs | CO | Hampton | 7,471 | 1,780 | 15,860 | 234 | 17,874 | (1,887 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 101 | |||||||||||||||||||||||||||
Denver | CO | Hilton Garden Inn | 31,311 | 9,940 | 57,595 | 700 | 68,235 | (6,635 | ) | 2007 | Sep-16 | 3 - 39 yrs. | 221 | |||||||||||||||||||||||||||
Highlands Ranch | CO | Hilton Garden Inn | - | 5,480 | 20,465 | 459 | 26,404 | (4,105 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 128 | |||||||||||||||||||||||||||
Highlands Ranch | CO | Residence Inn | - | 5,350 | 19,167 | 3,412 | 27,929 | (5,412 | ) | 1996 | Mar-14 | 3 - 39 yrs. | 117 | |||||||||||||||||||||||||||
Boca Raton | FL | Hilton Garden Inn | - | 7,220 | 22,177 | 537 | 29,934 | (2,599 | ) | 2002 | Sep-16 | 3 - 39 yrs. | 149 | |||||||||||||||||||||||||||
Cape Canaveral | FL | Homewood Suites | - | 2,780 | 23,967 | 43 | 26,790 | (3,052 | ) | 2016 | Sep-16 | 3 - 39 yrs. | 153 | |||||||||||||||||||||||||||
Fort Lauderdale | FL | Hampton | - | 1,793 | 21,357 | 4,996 | 28,146 | (4,866 | ) | 2002 | Jun-15 | 3 - 39 yrs. | 156 | |||||||||||||||||||||||||||
Fort Lauderdale | FL | Residence Inn | - | 5,760 | 26,727 | 83 | 32,570 | (3,089 | ) | 2014 | Sep-16 | 3 - 39 yrs. | 156 | |||||||||||||||||||||||||||
Gainesville | FL | Hilton Garden Inn | - | 1,300 | 17,322 | 443 | 19,065 | (1,967 | ) | 2007 | Sep-16 | 3 - 39 yrs. | 104 | |||||||||||||||||||||||||||
Gainesville | FL | Homewood Suites | - | 1,740 | 16,329 | 365 | 18,434 | (1,997 | ) | 2005 | Sep-16 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
Jacksonville | FL | Homewood Suites | - | 9,480 | 21,247 | 2,450 | 33,177 | (5,812 | ) | 2005 | Mar-14 | 3 - 39 yrs. | 119 | |||||||||||||||||||||||||||
Jacksonville | FL | Hyatt Place | - | 2,013 | 13,533 | 180 | 15,726 | (569 | ) | 2009 | Dec-18 | 3 - 39 yrs. | 127 | |||||||||||||||||||||||||||
Lakeland | FL | Courtyard | - | 3,740 | 10,813 | 1,400 | 15,953 | (2,642 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 78 | |||||||||||||||||||||||||||
Miami | FL | Courtyard | - | - | 31,488 | 1,832 | 33,320 | (6,268 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 118 | |||||||||||||||||||||||||||
Subsequently Capitalized | |||||||||||||||||||||||||||||||||||||||
| Initial Cost | Bldg. Imp. & FF&E | Total Gross Cost (2) | |||||||||||||||||||||||||||||||||||||
| City | State | Description | Encumbrances | Land (1) | Bldg./ FF&E /Other | Acc. Deprec. | Date of Construction | Date Acquired | Depreciable Life | # of Rooms | |||||||||||||||||||||||||||||
| Orlando | FL | Fairfield Inn & Suites | $ | - | $ | 3,140 | $ | 22,580 | $ | 695 | $ | 26,415 | $ | (6,619 | ) | 2009 | Jul-09 | 3 - 39 yrs. | 200 | ||||||||||||||||||||
| Orlando | FL | SpringHill Suites | - | 3,141 | 25,779 | 2,286 | 31,206 | (7,566 | ) | 2009 | Jul-09 | 3 - 39 yrs. | 200 | ||||||||||||||||||||||||||
| Panama City | FL | Hampton | - | 1,605 | 9,995 | 984 | 12,584 | (3,142 | ) | 2009 | Mar-09 | 3 - 39 yrs. | 95 | ||||||||||||||||||||||||||
| Panama City | FL | TownePlace Suites | - | 908 | 9,549 | 254 | 10,711 | (2,728 | ) | 2010 | Jan-10 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| Pensacola | FL | TownePlace Suites | - | 1,770 | 12,562 | 51 | 14,383 | (567 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 97 | ||||||||||||||||||||||||||
| Sanford | FL | SpringHill Suites | - | 1,050 | 12,830 | 1,453 | 15,333 | (2,327 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 105 | ||||||||||||||||||||||||||
| Sarasota | FL | Homewood Suites | - | 480 | 14,120 | 486 | 15,086 | (2,279 | ) | 2005 | Mar-14 | 3 - 39 yrs. | 100 | ||||||||||||||||||||||||||
| Tallahassee | FL | Fairfield Inn & Suites | - | 960 | 11,734 | 29 | 12,723 | (493 | ) | 2011 | Sep-16 | 3 - 39 yrs. | 97 | ||||||||||||||||||||||||||
| Tallahassee | FL | Hilton Garden Inn | - | - | 10,938 | 233 | 11,171 | (1,560 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 85 | ||||||||||||||||||||||||||
| Tampa | FL | Embassy Suites | - | 1,824 | 20,034 | 2,980 | 24,838 | (5,636 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 147 | ||||||||||||||||||||||||||
| Tampa | FL | TownePlace Suites | - | 1,430 | 9,015 | 371 | 10,816 | (1,659 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 94 | ||||||||||||||||||||||||||
| Albany | GA | Fairfield Inn & Suites | - | 899 | 7,263 | 147 | 8,309 | (2,137 | ) | 2010 | Jan-10 | 3 - 39 yrs. | 87 | ||||||||||||||||||||||||||
| Atlanta | GA | Home2 Suites | - | 740 | 23,819 | - | 24,559 | (1,228 | ) | 2016 | Jul-16 | 3 - 39 yrs. | 128 | ||||||||||||||||||||||||||
| Columbus | GA | SpringHill Suites | - | 1,270 | 10,060 | (4,700 | ) | (3) | 6,630 | (1,113 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 89 | ||||||||||||||||||||||||
| Columbus (4) | GA | TownePlace Suites | - | - | 7,467 | (1,493 | ) | (3) | 5,974 | (1,174 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 86 | ||||||||||||||||||||||||
| Macon | GA | Hilton Garden Inn | - | - | 15,043 | 332 | 15,375 | (2,051 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 101 | ||||||||||||||||||||||||||
| Savannah | GA | Hilton Garden Inn | - | - | 14,716 | 900 | 15,616 | (1,819 | ) | 2004 | Mar-14 | 3 - 39 yrs. | 105 | ||||||||||||||||||||||||||
| Cedar Rapids | IA | Hampton | - | 1,590 | 11,364 | 55 | 13,009 | (594 | ) | 2009 | Sep-16 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| Cedar Rapids | IA | Homewood Suites | - | 1,770 | 13,116 | 18 | 14,904 | (539 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 95 | ||||||||||||||||||||||||||
| Davenport | IA | Hampton | - | 400 | 16,915 | 65 | 17,380 | (782 | ) | 2007 | Sep-16 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| Boise | ID | Hampton | 23,422 | 1,335 | 21,114 | 2,598 | 25,047 | (6,503 | ) | 2007 | Apr-10 | 3 - 39 yrs. | 186 | ||||||||||||||||||||||||||
| Boise | ID | SpringHill Suites | - | 2,120 | 24,112 | 3,966 | 30,198 | (4,242 | ) | 1992 | Mar-14 | 3 - 39 yrs. | 230 | ||||||||||||||||||||||||||
| Des Plaines | IL | Hilton Garden Inn | - | 10,000 | 38,186 | 315 | 48,501 | (1,612 | ) | 2005 | Sep-16 | 3 - 39 yrs. | 252 | ||||||||||||||||||||||||||
| Hoffman Estates | IL | Hilton Garden Inn | - | 1,770 | 14,373 | 357 | 16,500 | (695 | ) | 2000 | Sep-16 | 3 - 39 yrs. | 184 | ||||||||||||||||||||||||||
| Mettawa | IL | Hilton Garden Inn | - | 2,246 | 28,328 | 2,376 | 32,950 | (6,790 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 170 | ||||||||||||||||||||||||||
| Mettawa | IL | Residence Inn | - | 1,722 | 21,843 | 1,578 | 25,143 | (5,243 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 130 | ||||||||||||||||||||||||||
| Rosemont | IL | Hampton | - | 3,410 | 23,594 | 3 | 27,007 | (1,144 | ) | 2015 | Sep-16 | 3 - 39 yrs. | 158 | ||||||||||||||||||||||||||
| Schaumburg | IL | Hilton Garden Inn | - | 1,450 | 19,122 | 2,223 | 22,795 | (5,235 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 166 | ||||||||||||||||||||||||||
| Skokie | IL | Hampton | - | 2,650 | 31,284 | 1,019 | 34,953 | (1,345 | ) | 2000 | Sep-16 | 3 - 39 yrs. | 225 | ||||||||||||||||||||||||||
| Warrenville | IL | Hilton Garden Inn | - | 1,171 | 20,894 | 2,144 | 24,209 | (5,126 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 135 | ||||||||||||||||||||||||||
| Indianapolis | IN | SpringHill Suites | - | 1,310 | 11,542 | 1,787 | 14,639 | (3,182 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 130 | ||||||||||||||||||||||||||
| Merrillville | IN | Hilton Garden Inn | - | 1,860 | 17,755 | 443 | 20,058 | (810 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Mishawaka | IN | Residence Inn | - | 898 | 12,862 | 1,411 | 15,171 | (3,234 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 106 | ||||||||||||||||||||||||||
| South Bend | IN | Fairfield Inn & Suites | - | 2,090 | 23,361 | 122 | 25,573 | (924 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 119 | ||||||||||||||||||||||||||
| Overland Park | KS | Fairfield Inn & Suites | - | 1,230 | 11,713 | 102 | 13,045 | (1,449 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 110 | ||||||||||||||||||||||||||
| Overland Park | KS | Residence Inn | - | 1,790 | 20,633 | 2,377 | 24,800 | (3,497 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 120 | ||||||||||||||||||||||||||
| Overland Park | KS | SpringHill Suites | - | 1,060 | 8,263 | 353 | 9,676 | (1,776 | ) | 1998 | Mar-14 | 3 - 39 yrs. | 102 | ||||||||||||||||||||||||||
| Wichita | KS | Courtyard | - | 1,940 | 9,739 | 897 | 12,576 | (1,990 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 90 | ||||||||||||||||||||||||||
| Baton Rouge | LA | SpringHill Suites | - | 1,280 | 13,870 | (3,464 | ) | (3) | 11,686 | (3,713 | ) | 2009 | Sep-09 | 3 - 39 yrs. | 119 | ||||||||||||||||||||||||
| Lafayette | LA | Hilton Garden Inn | - | - | 17,898 | 2,621 | 20,519 | (5,689 | ) | 2006 | Jul-10 | 3 - 39 yrs. | 153 | ||||||||||||||||||||||||||
| Lafayette | LA | SpringHill Suites | - | 709 | 9,400 | 97 | 10,206 | (2,339 | ) | 2011 | Jun-11 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| New Orleans | LA | Homewood Suites | 24,919 | 4,150 | 52,258 | 4,083 | 60,491 | (7,274 | ) | 2002 | Mar-14 | 3 - 39 yrs. | 166 | ||||||||||||||||||||||||||
| Andover | MA | SpringHill Suites | - | 702 | 5,799 | 2,411 | 8,912 | (2,768 | ) | 2001 | Nov-10 | 3 - 39 yrs. | 136 | ||||||||||||||||||||||||||
| Marlborough | MA | Residence Inn | - | 3,480 | 17,341 | 1,612 | 22,433 | (2,729 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 112 | ||||||||||||||||||||||||||
| Westford | MA | Hampton | - | 3,410 | 16,320 | 1,313 | 21,043 | (2,349 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 110 | ||||||||||||||||||||||||||
| Westford | MA | Residence Inn | 9,386 | 1,760 | 20,791 | 360 | 22,911 | (2,575 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 108 | ||||||||||||||||||||||||||
| Annapolis | MD | Hilton Garden Inn | - | 4,350 | 13,974 | 1,716 | 20,040 | (2,285 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 126 | ||||||||||||||||||||||||||
| Silver Spring | MD | Hilton Garden Inn | - | 1,361 | 16,094 | 420 | 17,875 | (4,156 | ) | 2010 | Jul-10 | 3 - 39 yrs. | 107 | ||||||||||||||||||||||||||
| Portland | ME | Residence Inn | - | 4,440 | 51,534 | 71 | 56,045 | (385 | ) | 2009 | Oct-17 | 3 - 39 yrs. | 179 | ||||||||||||||||||||||||||
| Novi | MI | Hilton Garden Inn | - | 1,213 | 15,052 | 1,874 | 18,139 | (4,161 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 148 | ||||||||||||||||||||||||||
| Maple Grove | MN | Hilton Garden Inn | - | 1,560 | 13,717 | 183 | 15,460 | (635 | ) | 2003 | Sep-16 | 3 - 39 yrs. | 120 | ||||||||||||||||||||||||||
| Rochester | MN | Hampton | - | 916 | 13,225 | 785 | 14,926 | (4,099 | ) | 2009 | Aug-09 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Kansas City | MO | Hampton | - | 727 | 9,363 | 1,143 | 11,233 | (2,812 | ) | 1999 | Aug-10 | 3 - 39 yrs. | 122 | ||||||||||||||||||||||||||
| Kansas City | MO | Residence Inn | - | 2,000 | 20,818 | 1,832 | 24,650 | (2,636 | ) | 2002 | Mar-14 | 3 - 39 yrs. | 106 | ||||||||||||||||||||||||||
| St. Louis | MO | Hampton | - | 1,758 | 20,954 | 5,992 | 28,704 | (6,507 | ) | 2003 | Aug-10 | 3 - 39 yrs. | 190 | ||||||||||||||||||||||||||
| St. Louis | MO | Hampton | - | 758 | 15,287 | 1,934 | 17,979 | (4,518 | ) | 2006 | Apr-10 | 3 - 39 yrs. | 126 | ||||||||||||||||||||||||||
| Hattiesburg | MS | Courtyard | 5,212 | 1,390 | 11,324 | 1,113 | 13,827 | (1,492 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 84 | ||||||||||||||||||||||||||
| Hattiesburg | MS | Residence Inn | - | 906 | 9,151 | 956 | 11,013 | (3,010 | ) | 2008 | Dec-08 | 3 - 39 yrs. | 84 | ||||||||||||||||||||||||||
| Carolina Beach | NC | Courtyard | - | 7,490 | 31,588 | 2,445 | 41,523 | (3,802 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 144 | ||||||||||||||||||||||||||
| Charlotte | NC | Fairfield Inn & Suites | - | 1,030 | 11,111 | 83 | 12,224 | (476 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 94 | ||||||||||||||||||||||||||
| Charlotte | NC | Homewood Suites | - | 1,031 | 4,937 | 6,435 | 12,403 | (5,712 | ) | 1990 | Sep-08 | 3 - 39 yrs. | 118 | ||||||||||||||||||||||||||
| Durham | NC | Homewood Suites | - | 1,232 | 18,343 | 4,763 | 24,338 | (7,331 | ) | 1999 | Dec-08 | 3 - 39 yrs. | 122 | ||||||||||||||||||||||||||
| Fayetteville | NC | Home2 Suites | - | 746 | 10,563 | 44 | 11,353 | (2,933 | ) | 2011 | Feb-11 | 3 - 39 yrs. | 118 | ||||||||||||||||||||||||||
| Fayetteville | NC | Residence Inn | - | 3,530 | 19,799 | 198 | 23,527 | (2,786 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 92 | ||||||||||||||||||||||||||
| Greensboro | NC | SpringHill Suites | - | 1,850 | 10,157 | 344 | 12,351 | (1,522 | ) | 2004 | Mar-14 | 3 - 39 yrs. | 82 | ||||||||||||||||||||||||||
| Holly Springs | NC | Hampton | - | 1,620 | 13,260 | 208 | 15,088 | (3,605 | ) | 2010 | Nov-10 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Jacksonville | NC | Home2 Suites | - | 910 | 12,527 | 44 | 13,481 | (565 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 105 | ||||||||||||||||||||||||||
| Wilmington | NC | Fairfield Inn & Suites | - | 1,310 | 13,034 | 694 | 15,038 | (1,640 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 122 | ||||||||||||||||||||||||||
| Winston-Salem | NC | Courtyard | - | 3,860 | 11,585 | 175 | 15,620 | (1,917 | ) | 1998 | Mar-14 | 3 - 39 yrs. | 122 | ||||||||||||||||||||||||||
| Winston-Salem | NC | Hampton | - | 2,170 | 14,268 | 7 | 16,445 | (552 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 94 | ||||||||||||||||||||||||||
| Omaha | NE | Courtyard | - | 6,700 | 36,829 | 3,159 | 46,688 | (4,449 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 181 | ||||||||||||||||||||||||||
| Omaha | NE | Hampton | - | 1,710 | 22,636 | 88 | 24,434 | (1,013 | ) | 2007 | Sep-16 | 3 - 39 yrs. | 139 | ||||||||||||||||||||||||||
| Omaha | NE | Hilton Garden Inn | 22,145 | 1,620 | 35,962 | 186 | 37,768 | (1,538 | ) | 2001 | Sep-16 | 3 - 39 yrs. | 178 | ||||||||||||||||||||||||||
| Omaha | NE | Homewood Suites | - | 1,890 | 22,014 | 21 | 23,925 | (1,068 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 123 | ||||||||||||||||||||||||||
| Cranford | NJ | Homewood Suites | - | 4,550 | 23,828 | 3,631 | 32,009 | (3,951 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 108 | ||||||||||||||||||||||||||
SCHEDULE III
Real Estate and Accumulated Depreciation and Amortization - (continued)
As of December 31, 2017
(dollars in thousands)
| Subsequently | ||||||||||||||||||||||||||||||||||||||||
| Initial Cost | Capitalized | |||||||||||||||||||||||||||||||||||||||
| City | State | Description | Encumbrances | Land (1) | Bldg./ FF&E / Other | Bldg. Imp. & FF&E | Total Gross Cost (2) | Acc. Deprec. | Date of Construction | Date Acquired | Depreciable Life | # of Rooms | ||||||||||||||||||||||||||||
Miami | FL | Hampton | $ | - | $ | 1,972 | $ | 9,987 | $ | 6,363 | $ | 18,322 | $ | (5,775 | ) | 2000 | Apr-10 | 3 - 39 yrs. | 121 | |||||||||||||||||||||
Miami | FL | Homewood Suites | 14,051 | 18,820 | 25,375 | 4,073 | 48,268 | (7,077 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 162 | |||||||||||||||||||||||||||
Orlando | FL | Fairfield | - | 3,140 | 22,580 | 2,836 | 28,556 | (8,259 | ) | 2009 | Jul-09 | 3 - 39 yrs. | 200 | |||||||||||||||||||||||||||
Orlando | FL | Home2 Suites | - | 2,731 | 18,062 | 50 | 20,843 | (610 | ) | 2019 | Mar-19 | 3 - 39 yrs. | 128 | |||||||||||||||||||||||||||
Orlando | FL | SpringHill Suites | - | 3,141 | 25,779 | 2,711 | 31,631 | (9,514 | ) | 2009 | Jul-09 | 3 - 39 yrs. | 200 | |||||||||||||||||||||||||||
Panama City | FL | Hampton | - | 1,605 | 9,995 | 1,276 | 12,876 | (3,975 | ) | 2009 | Mar-09 | 3 - 39 yrs. | 95 | |||||||||||||||||||||||||||
Panama City | FL | TownePlace Suites | - | 908 | 9,549 | 424 | 10,881 | (3,279 | ) | 2010 | Jan-10 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
Pensacola | FL | TownePlace Suites | - | 1,770 | 12,562 | 263 | 14,595 | (1,471 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 97 | |||||||||||||||||||||||||||
Tallahassee | FL | Fairfield | - | 960 | 11,734 | 144 | 12,838 | (1,250 | ) | 2011 | Sep-16 | 3 - 39 yrs. | 97 | |||||||||||||||||||||||||||
Tallahassee | FL | Hilton Garden Inn | - | - | 10,938 | 374 | 11,312 | (2,438 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 85 | |||||||||||||||||||||||||||
Tampa | FL | Embassy Suites | - | 1,824 | 20,034 | 3,288 | 25,146 | (7,408 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 147 | |||||||||||||||||||||||||||
Albany | GA | Fairfield | - | 899 | 7,263 | 174 | 8,336 | (2,519 | ) | 2010 | Jan-10 | 3 - 39 yrs. | 87 | |||||||||||||||||||||||||||
Atlanta / Downtown | GA | Hampton | - | 7,861 | 16,374 | 3,725 | 27,960 | (1,265 | ) | 1999 | Feb-18 | 3 - 39 yrs. | 119 | |||||||||||||||||||||||||||
Atlanta / Perimeter Dunwoody | GA | Hampton | - | 3,228 | 26,498 | 29 | 29,755 | (1,403 | ) | 2016 | Jun-18 | 3 - 39 yrs. | 132 | |||||||||||||||||||||||||||
Atlanta | GA | Home2 Suites | - | 740 | 23,122 | 936 | 24,798 | (2,883 | ) | 2016 | Jul-16 | 3 - 39 yrs. | 128 | |||||||||||||||||||||||||||
Macon | GA | Hilton Garden Inn | - | - | 15,043 | 579 | 15,622 | (3,212 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 101 | |||||||||||||||||||||||||||
Savannah | GA | Hilton Garden Inn | - | - | 14,716 | 2,148 | 16,864 | (3,249 | ) | 2004 | Mar-14 | 3 - 39 yrs. | 105 | |||||||||||||||||||||||||||
Cedar Rapids | IA | Hampton | - | 1,590 | 11,364 | 192 | 13,146 | (1,514 | ) | 2009 | Sep-16 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
Cedar Rapids | IA | Homewood Suites | - | 1,770 | 13,116 | 1,992 | 16,878 | (1,662 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 95 | |||||||||||||||||||||||||||
Davenport | IA | Hampton | - | 400 | 16,915 | 721 | 18,036 | (2,041 | ) | 2007 | Sep-16 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
Boise | ID | Hampton | 22,588 | 1,335 | 21,114 | 3,040 | 25,489 | (8,188 | ) | 2007 | Apr-10 | 3 - 39 yrs. | 186 | |||||||||||||||||||||||||||
Boise | ID | SpringHill Suites | - | 2,120 | 24,112 | 4,376 | 30,608 | (6,711 | ) | 1992 | Mar-14 | 3 - 39 yrs. | 230 | |||||||||||||||||||||||||||
Des Plaines | IL | Hilton Garden Inn | - | 10,000 | 38,186 | 577 | 48,763 | (4,124 | ) | 2005 | Sep-16 | 3 - 39 yrs. | 252 | |||||||||||||||||||||||||||
Hoffman Estates | IL | Hilton Garden Inn | - | 1,770 | 14,373 | 776 | 16,919 | (1,885 | ) | 2000 | Sep-16 | 3 - 39 yrs. | 184 | |||||||||||||||||||||||||||
Mettawa | IL | Hilton Garden Inn | - | 2,246 | 28,328 | 2,731 | 33,305 | (8,904 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 170 | |||||||||||||||||||||||||||
Mettawa | IL | Residence Inn | - | 1,722 | 21,843 | 1,846 | 25,411 | (6,762 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 130 | |||||||||||||||||||||||||||
Rosemont | IL | Hampton | - | 3,410 | 23,594 | 41 | 27,045 | (2,866 | ) | 2015 | Sep-16 | 3 - 39 yrs. | 158 | |||||||||||||||||||||||||||
Schaumburg | IL | Hilton Garden Inn | - | 1,450 | 19,122 | 2,671 | 23,243 | (6,808 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 166 | |||||||||||||||||||||||||||
Skokie | IL | Hampton | - | 2,650 | 31,284 | 2,389 | 36,323 | (3,539 | ) | 2000 | Sep-16 | 3 - 39 yrs. | 225 | |||||||||||||||||||||||||||
Warrenville | IL | Hilton Garden Inn | - | 1,171 | 20,894 | 2,670 | 24,735 | (6,817 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 135 | |||||||||||||||||||||||||||
Indianapolis | IN | SpringHill Suites | - | 1,310 | 11,542 | 2,076 | 14,928 | (4,237 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 130 | |||||||||||||||||||||||||||
Merrillville | IN | Hilton Garden Inn | - | 1,860 | 17,755 | 642 | 20,257 | (2,136 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
Mishawaka | IN | Residence Inn | - | 898 | 12,862 | 1,500 | 15,260 | (4,280 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 106 | |||||||||||||||||||||||||||
South Bend | IN | Fairfield | - | 2,090 | 23,361 | 1,342 | 26,793 | (2,509 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 119 | |||||||||||||||||||||||||||
Overland Park | KS | Fairfield | - | 1,230 | 11,713 | 1,467 | 14,410 | (2,438 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 110 | |||||||||||||||||||||||||||
Overland Park | KS | Residence Inn | - | 1,790 | 20,633 | 2,844 | 25,267 | (5,678 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 120 | |||||||||||||||||||||||||||
Overland Park | KS | SpringHill Suites | - | 1,060 | 8,263 | 659 | 9,982 | (2,787 | ) | 1998 | Mar-14 | 3 - 39 yrs. | 102 | |||||||||||||||||||||||||||
Wichita | KS | Courtyard | - | 1,940 | 9,739 | 1,115 | 12,794 | (3,046 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 90 | |||||||||||||||||||||||||||
Lafayette | LA | Hilton Garden Inn | - | - | 17,898 | 3,251 | 21,149 | (7,157 | ) | 2006 | Jul-10 | 3 - 39 yrs. | 153 | |||||||||||||||||||||||||||
Lafayette | LA | SpringHill Suites | - | 709 | 9,400 | 184 | 10,293 | (2,870 | ) | 2011 | Jun-11 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
New Orleans | LA | Homewood Suites | 23,513 | 4,150 | 52,258 | 5,022 | 61,430 | (11,269 | ) | 2002 | Mar-14 | 3 - 39 yrs. | 166 | |||||||||||||||||||||||||||
Andover | MA | SpringHill Suites | - | 702 | 5,799 | 2,694 | 9,195 | (3,532 | ) | 2001 | Nov-10 | 3 - 39 yrs. | 136 | |||||||||||||||||||||||||||
Marlborough | MA | Residence Inn | - | 3,480 | 17,341 | 1,889 | 22,710 | (4,250 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 112 | |||||||||||||||||||||||||||
Westford | MA | Hampton | - | 3,410 | 16,320 | 1,591 | 21,321 | (3,619 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 110 | |||||||||||||||||||||||||||
Westford | MA | Residence Inn | 8,876 | 1,760 | 20,791 | 4,343 | 26,894 | (4,480 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 108 | |||||||||||||||||||||||||||
Annapolis | MD | Hilton Garden Inn | - | 4,350 | 13,974 | 1,923 | 20,247 | (3,708 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 126 | |||||||||||||||||||||||||||
Silver Spring | MD | Hilton Garden Inn | - | 1,361 | 16,094 | 1,101 | 18,556 | (5,070 | ) | 2010 | Jul-10 | 3 - 39 yrs. | 107 | |||||||||||||||||||||||||||
Portland | ME | Residence Inn | - | 4,440 | 51,534 | 635 | 56,609 | (3,587 | ) | 2009 | Oct-17 | 3 - 39 yrs. | 179 | |||||||||||||||||||||||||||
Novi | MI | Hilton Garden Inn | - | 1,213 | 15,052 | 2,240 | 18,505 | (5,473 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 148 | |||||||||||||||||||||||||||
Maple Grove | MN | Hilton Garden Inn | - | 1,560 | 13,717 | 1,773 | 17,050 | (1,666 | ) | 2003 | Sep-16 | 3 - 39 yrs. | 120 | |||||||||||||||||||||||||||
Rochester | MN | Hampton | - | 916 | 13,225 | 2,406 | 16,547 | (5,149 | ) | 2009 | Aug-09 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
St. Paul | MN | Hampton | - | 2,523 | 29,365 | 2 | 31,890 | (832 | ) | 2016 | Mar-19 | 3 - 39 yrs. | 160 | |||||||||||||||||||||||||||
Kansas City | MO | Hampton | - | 727 | 9,363 | 1,572 | 11,662 | (3,671 | ) | 1999 | Aug-10 | 3 - 39 yrs. | 122 | |||||||||||||||||||||||||||
Kansas City | MO | Residence Inn | - | 2,000 | 20,818 | 3,498 | 26,316 | (4,802 | ) | 2002 | Mar-14 | 3 - 39 yrs. | 106 | |||||||||||||||||||||||||||
St. Louis | MO | Hampton | - | 1,758 | 20,954 | 9,329 | 32,041 | (9,345 | ) | 2003 | Aug-10 | 3 - 39 yrs. | 190 | |||||||||||||||||||||||||||
St. Louis | MO | Hampton | - | 758 | 15,287 | 2,100 | 18,145 | (5,717 | ) | 2006 | Apr-10 | 3 - 39 yrs. | 126 | |||||||||||||||||||||||||||
Hattiesburg | MS | Courtyard | 4,897 | 1,390 | 11,324 | 1,292 | 14,006 | (2,477 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 84 | |||||||||||||||||||||||||||
Hattiesburg | MS | Residence Inn | - | 906 | 9,151 | 1,055 | 11,112 | (3,730 | ) | 2008 | Dec-08 | 3 - 39 yrs. | 84 | |||||||||||||||||||||||||||
Carolina Beach | NC | Courtyard | - | 7,490 | 31,588 | 4,050 | 43,128 | (6,656 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 144 | |||||||||||||||||||||||||||
Charlotte | NC | Fairfield | - | 1,030 | 11,111 | 1,180 | 13,321 | (1,381 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 94 | |||||||||||||||||||||||||||
Charlotte | NC | Homewood Suites | - | 1,031 | 4,937 | 7,088 | 13,056 | (7,189 | ) | 1990 | Sep-08 | 3 - 39 yrs. | 118 | |||||||||||||||||||||||||||
Durham | NC | Homewood Suites | - | 1,232 | 18,343 | 5,039 | 24,614 | (9,205 | ) | 1999 | Dec-08 | 3 - 39 yrs. | 122 | |||||||||||||||||||||||||||
Fayetteville | NC | Home2 Suites | - | 746 | 10,563 | 1,196 | 12,505 | (3,634 | ) | 2011 | Feb-11 | 3 - 39 yrs. | 118 | |||||||||||||||||||||||||||
Fayetteville | NC | Residence Inn | - | 3,530 | 19,799 | 923 | 24,252 | (4,377 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 92 | |||||||||||||||||||||||||||
Greensboro | NC | SpringHill Suites | - | 1,850 | 10,157 | 478 | 12,485 | (2,370 | ) | 2004 | Mar-14 | 3 - 39 yrs. | 82 | |||||||||||||||||||||||||||
Jacksonville | NC | Home2 Suites | - | 910 | 12,527 | 165 | 13,602 | (1,447 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 105 | |||||||||||||||||||||||||||
Wilmington | NC | Fairfield | - | 1,310 | 13,034 | 1,199 | 15,543 | (2,784 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 122 | |||||||||||||||||||||||||||
Winston-Salem | NC | Hampton | - | 2,170 | 14,268 | 533 | 16,971 | (1,407 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 94 | |||||||||||||||||||||||||||
Omaha | NE | Courtyard | - | 6,700 | 36,829 | 5,916 | 49,445 | (7,978 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 181 | |||||||||||||||||||||||||||
Omaha | NE | Hampton | - | 1,710 | 22,636 | 300 | 24,646 | (2,592 | ) | 2007 | Sep-16 | 3 - 39 yrs. | 139 | |||||||||||||||||||||||||||
Omaha | NE | Hilton Garden Inn | 21,280 | 1,620 | 35,962 | 645 | 38,227 | (3,967 | ) | 2001 | Sep-16 | 3 - 39 yrs. | 178 | |||||||||||||||||||||||||||
Omaha | NE | Homewood Suites | - | 1,890 | 22,014 | 163 | 24,067 | (2,710 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 123 | |||||||||||||||||||||||||||
Cranford | NJ | Homewood Suites | - | 4,550 | 23,828 | 3,941 | 32,319 | (6,229 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 108 | |||||||||||||||||||||||||||
Subsequently Capitalized | |||||||||||||||||||||||||||||||||||||||
| Initial Cost | Bldg. Imp. & FF&E | Total Gross Cost (2) | |||||||||||||||||||||||||||||||||||||
| City | State | Description | Encumbrances | Land (1) | Bldg./ FF&E /Other | Acc. Deprec. | Date of Construction | Date Acquired | Depreciable Life | # of Rooms | |||||||||||||||||||||||||||||
| Mahwah | NJ | Homewood Suites | $ | - | $ | 3,220 | $ | 22,742 | $ | 3,981 | $ | 29,943 | $ | (3,543 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 110 | ||||||||||||||||||||
| Mount Laurel | NJ | Homewood Suites | - | 1,589 | 13,476 | 2,063 | 17,128 | (4,084 | ) | 2006 | Jan-11 | 3 - 39 yrs. | 118 | ||||||||||||||||||||||||||
| Somerset | NJ | Courtyard | 7,932 | - | 27,133 | 2,351 | 29,484 | (4,742 | ) | 2002 | Mar-14 | 3 - 25 yrs. | 162 | ||||||||||||||||||||||||||
| West Orange | NJ | Courtyard | - | 2,054 | 19,513 | 2,294 | 23,861 | (5,063 | ) | 2005 | Jan-11 | 3 - 39 yrs. | 131 | ||||||||||||||||||||||||||
| Islip/Ronkonkoma | NY | Hilton Garden Inn | - | 6,510 | 28,718 | 837 | 36,065 | (3,740 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 165 | ||||||||||||||||||||||||||
| New York | NY | Renaissance | - | - | 102,832 | (74,659 | ) | (3) | 28,173 | (11,824 | ) | 1916 | Mar-14 | 3 - 32 yrs. | 205 | ||||||||||||||||||||||||
| Syracuse | NY | Courtyard | 10,637 | 812 | 23,278 | 27 | 24,117 | (1,694 | ) | 2013 | Oct-15 | 3 - 39 yrs. | 102 | ||||||||||||||||||||||||||
| Syracuse | NY | Residence Inn | 10,637 | 621 | 17,589 | 29 | 18,239 | (1,333 | ) | 2013 | Oct-15 | 3 - 39 yrs. | 78 | ||||||||||||||||||||||||||
| Mason | OH | Hilton Garden Inn | - | 1,120 | 16,770 | 1,027 | 18,917 | (835 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 110 | ||||||||||||||||||||||||||
| Twinsburg | OH | Hilton Garden Inn | - | 1,419 | 16,614 | 3,165 | 21,198 | (6,632 | ) | 1999 | Oct-08 | 3 - 39 yrs. | 142 | ||||||||||||||||||||||||||
| Oklahoma City | OK | Hampton | - | 1,430 | 31,327 | 1,395 | 34,152 | (7,798 | ) | 2009 | May-10 | 3 - 39 yrs. | 200 | ||||||||||||||||||||||||||
| Oklahoma City | OK | Hilton Garden Inn | - | 1,270 | 32,700 | 15 | 33,985 | (1,406 | ) | 2014 | Sep-16 | 3 - 39 yrs. | 155 | ||||||||||||||||||||||||||
| Oklahoma City | OK | Homewood Suites | - | 760 | 20,056 | 7 | 20,823 | (900 | ) | 2014 | Sep-16 | 3 - 39 yrs. | 100 | ||||||||||||||||||||||||||
| Oklahoma City (West) | OK | Homewood Suites | - | 1,280 | 13,340 | 35 | 14,655 | (737 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 90 | ||||||||||||||||||||||||||
| Collegeville/Philadelphia | PA | Courtyard | 11,152 | 2,115 | 17,953 | 2,341 | 22,409 | (5,014 | ) | 2005 | Nov-10 | 3 - 39 yrs. | 132 | ||||||||||||||||||||||||||
| Malvern/Philadelphia | PA | Courtyard | - | 996 | 20,374 | 1,869 | 23,239 | (5,202 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 127 | ||||||||||||||||||||||||||
| Pittsburgh | PA | Hampton | - | 2,503 | 18,537 | 4,474 | 25,514 | (6,445 | ) | 1991 | Dec-08 | 3 - 39 yrs. | 132 | ||||||||||||||||||||||||||
| Charleston | SC | Home2 Suites | - | 3,250 | 16,778 | 93 | 20,121 | (711 | ) | 2011 | Sep-16 | 3 - 39 yrs. | 122 | ||||||||||||||||||||||||||
| Columbia | SC | Hilton Garden Inn | - | 3,540 | 16,399 | 346 | 20,285 | (2,603 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 143 | ||||||||||||||||||||||||||
| Columbia | SC | TownePlace Suites | - | 1,330 | 10,839 | 933 | 13,102 | (550 | ) | 2009 | Sep-16 | 3 - 39 yrs. | 91 | ||||||||||||||||||||||||||
| Greenville | SC | Residence Inn | - | 900 | 9,778 | 305 | 10,983 | (1,553 | ) | 1998 | Mar-14 | 3 - 39 yrs. | 78 | ||||||||||||||||||||||||||
| Hilton Head | SC | Hilton Garden Inn | - | 3,600 | 11,386 | 1,163 | 16,149 | (1,521 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 104 | ||||||||||||||||||||||||||
| Chattanooga | TN | Homewood Suites | - | 1,410 | 9,361 | 2,617 | 13,388 | (1,866 | ) | 1997 | Mar-14 | 3 - 39 yrs. | 76 | ||||||||||||||||||||||||||
| Franklin | TN | Courtyard | 14,368 | 2,510 | 31,341 | 20 | 33,871 | (1,318 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 126 | ||||||||||||||||||||||||||
| Franklin | TN | Residence Inn | 14,368 | 2,970 | 29,208 | 1,253 | 33,431 | (1,331 | ) | 2009 | Sep-16 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Jackson | TN | Hampton | - | 692 | 12,281 | 770 | 13,743 | (3,678 | ) | 2007 | Dec-08 | 3 - 39 yrs. | 83 | ||||||||||||||||||||||||||
| Johnson City | TN | Courtyard | - | 1,105 | 8,632 | 193 | 9,930 | (2,662 | ) | 2009 | Sep-09 | 3 - 39 yrs. | 90 | ||||||||||||||||||||||||||
| Knoxville | TN | Homewood Suites | - | 2,160 | 14,704 | 57 | 16,921 | (715 | ) | 2005 | Sep-16 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| Knoxville | TN | SpringHill Suites | - | 1,840 | 12,441 | 68 | 14,349 | (594 | ) | 2006 | Sep-16 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| Knoxville | TN | TownePlace Suites | - | 1,190 | 7,920 | 1,323 | 10,433 | (506 | ) | 2003 | Sep-16 | 3 - 39 yrs. | 97 | ||||||||||||||||||||||||||
| Memphis | TN | Homewood Suites | - | 1,930 | 13,028 | 2,989 | 17,947 | (2,947 | ) | 1989 | Mar-14 | 3 - 39 yrs. | 140 | ||||||||||||||||||||||||||
| Nashville | TN | Hilton Garden Inn | - | 2,754 | 39,997 | 3,823 | 46,574 | (9,917 | ) | 2009 | Sep-10 | 3 - 39 yrs. | 194 | ||||||||||||||||||||||||||
| Nashville | TN | Home2 Suites | - | 1,153 | 15,206 | 170 | 16,529 | (3,181 | ) | 2012 | May-12 | 3 - 39 yrs. | 119 | ||||||||||||||||||||||||||
| Nashville | TN | TownePlace Suites | - | 7,390 | 13,929 | 16 | 21,335 | (590 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 101 | ||||||||||||||||||||||||||
| Addison | TX | SpringHill Suites | - | 1,210 | 19,700 | 368 | 21,278 | (2,941 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 159 | ||||||||||||||||||||||||||
| Allen | TX | Hampton | - | 1,442 | 11,456 | 1,581 | 14,479 | (4,626 | ) | 2006 | Sep-08 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| Allen | TX | Hilton Garden Inn | - | 2,130 | 16,731 | 3,934 | 22,795 | (7,464 | ) | 2002 | Oct-08 | 3 - 39 yrs. | 150 | ||||||||||||||||||||||||||
| Arlington | TX | Hampton | - | 1,217 | 8,738 | 979 | 10,934 | (2,440 | ) | 2007 | Dec-10 | 3 - 39 yrs. | 98 | ||||||||||||||||||||||||||
| Austin | TX | Courtyard | - | 1,579 | 18,487 | 385 | 20,451 | (4,513 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 145 | ||||||||||||||||||||||||||
| Austin | TX | Fairfield Inn & Suites | - | 1,306 | 16,504 | 248 | 18,058 | (4,005 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 150 | ||||||||||||||||||||||||||
| Austin | TX | Hampton | - | 1,459 | 17,184 | 2,188 | 20,831 | (5,946 | ) | 1996 | Apr-09 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Austin | TX | Hilton Garden Inn | - | 1,614 | 14,451 | 1,729 | 17,794 | (3,964 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 117 | ||||||||||||||||||||||||||
| Austin | TX | Homewood Suites | - | 1,898 | 16,462 | 2,748 | 21,108 | (6,068 | ) | 1997 | Apr-09 | 3 - 39 yrs. | 97 | ||||||||||||||||||||||||||
| Austin/Round Rock | TX | Homewood Suites | - | 2,180 | 25,644 | 40 | 27,864 | (1,011 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 115 | ||||||||||||||||||||||||||
| Beaumont | TX | Residence Inn | - | 1,177 | 16,180 | 1,449 | 18,806 | (5,492 | ) | 2008 | Oct-08 | 3 - 39 yrs. | 133 | ||||||||||||||||||||||||||
| Burleson/Fort Worth | TX | Hampton | - | 557 | 6,601 | 1,297 | 8,455 | (1,068 | ) | 2008 | Oct-14 | 3 - 39 yrs. | 88 | ||||||||||||||||||||||||||
| Dallas | TX | Homewood Suites | - | 4,920 | 29,427 | 35 | 34,382 | (1,275 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 130 | ||||||||||||||||||||||||||
| Denton | TX | Homewood Suites | - | 990 | 14,895 | 117 | 16,002 | (793 | ) | 2009 | Sep-16 | 3 - 39 yrs. | 107 | ||||||||||||||||||||||||||
| Duncanville | TX | Hilton Garden Inn | - | 2,378 | 15,935 | 2,836 | 21,149 | (6,983 | ) | 2005 | Oct-08 | 3 - 39 yrs. | 142 | ||||||||||||||||||||||||||
| El Paso | TX | Hilton Garden Inn | - | 1,244 | 18,300 | 146 | 19,690 | (4,159 | ) | 2011 | Dec-11 | 3 - 39 yrs. | 145 | ||||||||||||||||||||||||||
| El Paso | TX | Homewood Suites | - | 2,800 | 16,657 | 1,719 | 21,176 | (2,245 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 114 | ||||||||||||||||||||||||||
| Fort Worth | TX | Courtyard | - | 2,313 | 15,825 | 92 | 18,230 | (568 | ) | 2017 | Feb-17 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Fort Worth | TX | TownePlace Suites | - | 2,104 | 16,311 | 235 | 18,650 | (4,124 | ) | 2010 | Jul-10 | 3 - 39 yrs. | 140 | ||||||||||||||||||||||||||
| Frisco | TX | Hilton Garden Inn | - | 2,507 | 12,981 | 1,454 | 16,942 | (4,260 | ) | 2008 | Dec-08 | 3 - 39 yrs. | 102 | ||||||||||||||||||||||||||
| Grapevine | TX | Hilton Garden Inn | 10,412 | 1,522 | 15,543 | 280 | 17,345 | (4,004 | ) | 2009 | Sep-10 | 3 - 39 yrs. | 110 | ||||||||||||||||||||||||||
| Houston | TX | Courtyard | - | 2,080 | 21,836 | - | 23,916 | (1,003 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Houston | TX | Marriott | - | 4,143 | 46,623 | 311 | 51,077 | (12,428 | ) | 2010 | Jan-10 | 3 - 39 yrs. | 206 | ||||||||||||||||||||||||||
| Houston | TX | Residence Inn | - | 12,070 | 19,769 | 359 | 32,198 | (3,214 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 129 | ||||||||||||||||||||||||||
| Houston | TX | Residence Inn | - | 2,070 | 11,186 | 17 | 13,273 | (578 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 120 | ||||||||||||||||||||||||||
| Irving | TX | Homewood Suites | - | 705 | 9,610 | 1,391 | 11,706 | (3,046 | ) | 2006 | Dec-10 | 3 - 39 yrs. | 77 | ||||||||||||||||||||||||||
| Lewisville | TX | Hilton Garden Inn | - | 3,361 | 23,919 | 2,240 | 29,520 | (8,833 | ) | 2007 | Oct-08 | 3 - 39 yrs. | 165 | ||||||||||||||||||||||||||
| Round Rock | TX | Hampton | - | 865 | 10,999 | 1,539 | 13,403 | (3,991 | ) | 2001 | Mar-09 | 3 - 39 yrs. | 94 | ||||||||||||||||||||||||||
| San Antonio | TX | TownePlace Suites | - | 2,220 | 9,610 | 1,067 | 12,897 | (1,597 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 106 | ||||||||||||||||||||||||||
| Shenandoah | TX | Courtyard | - | 3,350 | 17,256 | - | 20,606 | (811 | ) | 2014 | Sep-16 | 3 - 39 yrs. | 124 | ||||||||||||||||||||||||||
| Stafford | TX | Homewood Suites | - | 1,880 | 10,969 | 247 | 13,096 | (1,922 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 78 | ||||||||||||||||||||||||||
| Texarkana | TX | Courtyard | - | 590 | 7,208 | 639 | 8,437 | (1,153 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 90 | ||||||||||||||||||||||||||
| Texarkana | TX | Hampton | - | 636 | 8,723 | 1,144 | 10,503 | (2,547 | ) | 2004 | Jan-11 | 3 - 39 yrs. | 81 | ||||||||||||||||||||||||||
| Texarkana | TX | TownePlace Suites | - | 430 | 6,571 | (2,198 | ) | (3) | 4,803 | (842 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 85 | ||||||||||||||||||||||||
| Provo | UT | Residence Inn | - | 1,150 | 18,277 | 2,127 | 21,554 | (2,757 | ) | 1996 | Mar-14 | 3 - 39 yrs. | 114 | ||||||||||||||||||||||||||
| Salt Lake City | UT | Residence Inn | - | 1,515 | 24,214 | - | 25,729 | (196 | ) | 2014 | Oct-17 | 3 - 39 yrs. | 136 | ||||||||||||||||||||||||||
| Salt Lake City | UT | SpringHill Suites | - | 1,092 | 16,465 | 1,169 | 18,726 | (3,997 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 143 | ||||||||||||||||||||||||||
| Alexandria | VA | Courtyard | - | 6,860 | 19,681 | 3,559 | 30,100 | (3,477 | ) | 1987 | Mar-14 | 3 - 39 yrs. | 178 | ||||||||||||||||||||||||||
| Alexandria | VA | SpringHill Suites | - | 5,968 | - | 18,991 | 24,959 | (5,243 | ) | 2011 | Mar-09 | 3 - 39 yrs. | 155 | ||||||||||||||||||||||||||
| Bristol | VA | Courtyard | - | 1,723 | 19,162 | 1,846 | 22,731 | (6,824 | ) | 2004 | Nov-08 | 3 - 39 yrs. | 175 | ||||||||||||||||||||||||||
| Charlottesville | VA | Courtyard | - | 21,130 | 27,737 | 389 | 49,256 | (3,733 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 139 | ||||||||||||||||||||||||||
SCHEDULE III
Real Estate and Accumulated Depreciation and Amortization - (continued)
As of December 31, 2017
(dollars in thousands)
| Subsequently | ||||||||||||||||||||||||||||||||||||||||
| Initial Cost | Capitalized | |||||||||||||||||||||||||||||||||||||||
| City | State | Description | Encumbrances | Land (1) | Bldg./ FF&E / Other | Bldg. Imp. & FF&E | Total Gross Cost (2) | Acc. Deprec. | Date of Construction | Date Acquired | Depreciable Life | # of Rooms | ||||||||||||||||||||||||||||
Mahwah | NJ | Homewood Suites | $ | - | $ | 3,220 | $ | 22,742 | $ | 4,289 | $ | 30,251 | $ | (5,918 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 110 | |||||||||||||||||||||
Mount Laurel | NJ | Homewood Suites | - | 1,589 | 13,476 | 4,138 | 19,203 | (5,236 | ) | 2006 | Jan-11 | 3 - 39 yrs. | 118 | |||||||||||||||||||||||||||
Somerset | NJ | Courtyard | 7,441 | - | 27,133 | 3,510 | 30,643 | (7,986 | ) | 2002 | Mar-14 | 3 - 25 yrs. | 162 | |||||||||||||||||||||||||||
West Orange | NJ | Courtyard | - | 2,054 | 19,513 | 3,375 | 24,942 | (6,502 | ) | 2005 | Jan-11 | 3 - 39 yrs. | 131 | |||||||||||||||||||||||||||
Islip/Ronkonkoma | NY | Hilton Garden Inn | - | 6,510 | 28,718 | 3,270 | 38,498 | (5,937 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 165 | |||||||||||||||||||||||||||
New York | NY | Renaissance (4) | - | - | (6) | 102,832 | (72,966 | ) | (3) | 29,866 | (14,694 | ) | 1916 | Mar-14 | 3 - 32 yrs. | 208 | ||||||||||||||||||||||||
Syracuse | NY | Courtyard | - | 812 | 23,278 | 87 | 24,177 | (3,222 | ) | 2013 | Oct-15 | 3 - 39 yrs. | 102 | |||||||||||||||||||||||||||
Syracuse | NY | Residence Inn | - | 621 | 17,589 | 79 | 18,289 | (2,536 | ) | 2013 | Oct-15 | 3 - 39 yrs. | 78 | |||||||||||||||||||||||||||
Mason | OH | Hilton Garden Inn | - | 1,120 | 16,770 | 1,125 | 19,015 | (2,171 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 110 | |||||||||||||||||||||||||||
Twinsburg | OH | Hilton Garden Inn | - | 1,419 | 16,614 | 3,833 | 21,866 | (8,046 | ) | 1999 | Oct-08 | 3 - 39 yrs. | 142 | |||||||||||||||||||||||||||
Oklahoma City | OK | Hampton | - | 1,430 | 31,327 | 2,190 | 34,947 | (9,972 | ) | 2009 | May-10 | 3 - 39 yrs. | 200 | |||||||||||||||||||||||||||
Oklahoma City | OK | Hilton Garden Inn | - | 1,270 | 32,700 | 140 | 34,110 | (3,525 | ) | 2014 | Sep-16 | 3 - 39 yrs. | 155 | |||||||||||||||||||||||||||
Oklahoma City | OK | Homewood Suites | - | 760 | 20,056 | 11 | 20,827 | (2,251 | ) | 2014 | Sep-16 | 3 - 39 yrs. | 100 | |||||||||||||||||||||||||||
Oklahoma City (West) | OK | Homewood Suites | - | 1,280 | 13,340 | 374 | 14,994 | (1,885 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 90 | |||||||||||||||||||||||||||
Collegeville/Philadelphia | PA | Courtyard | 10,471 | 2,115 | 17,953 | 3,856 | 23,924 | (6,419 | ) | 2005 | Nov-10 | 3 - 39 yrs. | 132 | |||||||||||||||||||||||||||
Malvern/Philadelphia | PA | Courtyard | - | 996 | 20,374 | 2,123 | 23,493 | (6,656 | ) | 2007 | Nov-10 | 3 - 39 yrs. | 127 | |||||||||||||||||||||||||||
Pittsburgh | PA | Hampton | - | 2,503 | 18,537 | 4,922 | 25,962 | (8,327 | ) | 1991 | Dec-08 | 3 - 39 yrs. | 132 | |||||||||||||||||||||||||||
Charleston | SC | Home2 Suites | - | 3,250 | 16,778 | 1,135 | 21,163 | (1,845 | ) | 2011 | Sep-16 | 3 - 39 yrs. | 122 | |||||||||||||||||||||||||||
Columbia | SC | Hilton Garden Inn | - | 3,540 | 16,399 | 735 | 20,674 | (4,089 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 143 | |||||||||||||||||||||||||||
Columbia | SC | TownePlace Suites | - | 1,330 | 10,839 | 1,180 | 13,349 | (1,498 | ) | 2009 | Sep-16 | 3 - 39 yrs. | 91 | |||||||||||||||||||||||||||
Greenville | SC | Residence Inn | - | 900 | 9,778 | 500 | 11,178 | (2,445 | ) | 1998 | Mar-14 | 3 - 39 yrs. | 78 | |||||||||||||||||||||||||||
Hilton Head | SC | Hilton Garden Inn | - | 3,600 | 11,386 | 2,329 | 17,315 | (2,856 | ) | 2001 | Mar-14 | 3 - 39 yrs. | 104 | |||||||||||||||||||||||||||
Chattanooga | TN | Homewood Suites | - | 1,410 | 9,361 | 2,853 | 13,624 | (3,183 | ) | 1997 | Mar-14 | 3 - 39 yrs. | 76 | |||||||||||||||||||||||||||
Franklin | TN | Courtyard | 13,847 | 2,510 | 31,341 | 619 | 34,470 | (3,352 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 126 | |||||||||||||||||||||||||||
Franklin | TN | Residence Inn | 13,847 | 2,970 | 29,208 | 1,464 | 33,642 | (3,402 | ) | 2009 | Sep-16 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
Jackson | TN | Hampton | - | 692 | 12,281 | 1,401 | 14,374 | (4,642 | ) | 2007 | Dec-08 | 3 - 39 yrs. | 85 | |||||||||||||||||||||||||||
Johnson City | TN | Courtyard | - | 1,105 | 8,632 | 262 | 9,999 | (3,132 | ) | 2009 | Sep-09 | 3 - 39 yrs. | 90 | |||||||||||||||||||||||||||
Knoxville | TN | Homewood Suites | - | 2,160 | 14,704 | 203 | 17,067 | (1,834 | ) | 2005 | Sep-16 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
Knoxville | TN | SpringHill Suites | - | 1,840 | 12,441 | 231 | 14,512 | (1,536 | ) | 2006 | Sep-16 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
Knoxville | TN | TownePlace Suites | - | 1,190 | 7,920 | 1,457 | 10,567 | (1,417 | ) | 2003 | Sep-16 | 3 - 39 yrs. | 97 | |||||||||||||||||||||||||||
Memphis | TN | Hampton | - | 2,449 | 37,097 | 4,398 | 43,944 | (2,578 | ) | 2000 | Feb-18 | 3 - 39 yrs. | 144 | |||||||||||||||||||||||||||
Memphis | TN | Homewood Suites | - | 1,930 | 13,028 | 3,264 | 18,222 | (4,578 | ) | 1989 | Mar-14 | 3 - 39 yrs. | 140 | |||||||||||||||||||||||||||
Nashville | TN | Hilton Garden Inn | - | 2,754 | 39,997 | 4,031 | 46,782 | (13,038 | ) | 2009 | Sep-10 | 3 - 39 yrs. | 194 | |||||||||||||||||||||||||||
Nashville | TN | Home2 Suites | - | 1,153 | 15,206 | 742 | 17,101 | (4,239 | ) | 2012 | May-12 | 3 - 39 yrs. | 119 | |||||||||||||||||||||||||||
Nashville | TN | TownePlace Suites | - | 7,390 | 13,929 | 393 | 21,712 | (1,513 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 101 | |||||||||||||||||||||||||||
Addison | TX | SpringHill Suites | - | 1,210 | 19,700 | 2,945 | 23,855 | (4,859 | ) | 2003 | Mar-14 | 3 - 39 yrs. | 159 | |||||||||||||||||||||||||||
Allen | TX | Hampton | - | 1,442 | 11,456 | 1,714 | 14,612 | (5,459 | ) | 2006 | Sep-08 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
Allen | TX | Hilton Garden Inn | - | 2,130 | 16,731 | 5,364 | 24,225 | (9,201 | ) | 2002 | Oct-08 | 3 - 39 yrs. | 150 | |||||||||||||||||||||||||||
Arlington | TX | Hampton | - | 1,217 | 8,738 | 1,596 | 11,551 | (3,295 | ) | 2007 | Dec-10 | 3 - 39 yrs. | 98 | |||||||||||||||||||||||||||
Austin | TX | Courtyard | - | 1,579 | 18,487 | 1,971 | 22,037 | (5,630 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 145 | |||||||||||||||||||||||||||
Austin | TX | Fairfield | - | 1,306 | 16,504 | 1,916 | 19,726 | (5,170 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 150 | |||||||||||||||||||||||||||
Austin | TX | Hampton | - | 1,459 | 17,184 | 5,415 | 24,058 | (7,466 | ) | 1996 | Apr-09 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
Austin | TX | Hilton Garden Inn | - | 1,614 | 14,451 | 2,161 | 18,226 | (5,201 | ) | 2008 | Nov-10 | 3 - 39 yrs. | 117 | |||||||||||||||||||||||||||
Austin | TX | Homewood Suites | - | 1,898 | 16,462 | 4,883 | 23,243 | (7,362 | ) | 1997 | Apr-09 | 3 - 39 yrs. | 97 | |||||||||||||||||||||||||||
Austin/Round Rock | TX | Homewood Suites | - | 2,180 | 25,644 | 174 | 27,998 | (2,562 | ) | 2010 | Sep-16 | 3 - 39 yrs. | 115 | |||||||||||||||||||||||||||
Beaumont | TX | Residence Inn | - | 1,177 | 16,180 | 1,605 | 18,962 | (6,666 | ) | 2008 | Oct-08 | 3 - 39 yrs. | 133 | |||||||||||||||||||||||||||
Burleson/Fort Worth | TX | Hampton | - | 557 | 6,601 | 1,539 | 8,697 | (1,849 | ) | 2008 | Oct-14 | 3 - 39 yrs. | 88 | |||||||||||||||||||||||||||
Dallas | TX | Homewood Suites | - | 4,920 | 29,427 | 203 | 34,550 | (3,235 | ) | 2013 | Sep-16 | 3 - 39 yrs. | 130 | |||||||||||||||||||||||||||
Denton | TX | Homewood Suites | - | 990 | 14,895 | 260 | 16,145 | (2,017 | ) | 2009 | Sep-16 | 3 - 39 yrs. | 107 | |||||||||||||||||||||||||||
El Paso | TX | Hilton Garden Inn | - | 1,244 | 18,300 | 419 | 19,963 | (5,333 | ) | 2011 | Dec-11 | 3 - 39 yrs. | 145 | |||||||||||||||||||||||||||
El Paso | TX | Homewood Suites | - | 2,800 | 16,657 | 1,940 | 21,397 | (3,826 | ) | 2008 | Mar-14 | 3 - 39 yrs. | 114 | |||||||||||||||||||||||||||
Fort Worth | TX | Courtyard | - | 2,313 | 15,825 | 110 | 18,248 | (1,811 | ) | 2017 | Feb-17 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
Fort Worth | TX | TownePlace Suites | - | 2,104 | 16,311 | 1,560 | 19,975 | (5,165 | ) | 2010 | Jul-10 | 3 - 39 yrs. | 140 | |||||||||||||||||||||||||||
Frisco | TX | Hilton Garden Inn | - | 2,507 | 12,981 | 1,559 | 17,047 | (5,328 | ) | 2008 | Dec-08 | 3 - 39 yrs. | 102 | |||||||||||||||||||||||||||
Grapevine | TX | Hilton Garden Inn | 9,775 | 1,522 | 15,543 | 1,967 | 19,032 | (5,089 | ) | 2009 | Sep-10 | 3 - 39 yrs. | 110 | |||||||||||||||||||||||||||
Houston | TX | Courtyard | - | 2,080 | 21,836 | 96 | 24,012 | (2,531 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
Houston | TX | Marriott | - | 4,143 | 46,623 | 918 | 51,684 | (14,872 | ) | 2010 | Jan-10 | 3 - 39 yrs. | 206 | |||||||||||||||||||||||||||
Houston | TX | Residence Inn | - | 12,070 | 19,769 | 767 | 32,606 | (4,950 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 129 | |||||||||||||||||||||||||||
Houston | TX | Residence Inn | - | 2,070 | 11,186 | 226 | 13,482 | (1,473 | ) | 2012 | Sep-16 | 3 - 39 yrs. | 120 | |||||||||||||||||||||||||||
Irving | TX | Homewood Suites | - | 705 | 9,610 | 1,564 | 11,879 | (3,788 | ) | 2006 | Dec-10 | 3 - 39 yrs. | 77 | |||||||||||||||||||||||||||
Lewisville | TX | Hilton Garden Inn | - | 3,361 | 23,919 | 2,743 | 30,023 | (10,476 | ) | 2007 | Oct-08 | 3 - 39 yrs. | 165 | |||||||||||||||||||||||||||
Round Rock | TX | Hampton | - | 865 | 10,999 | 4,175 | 16,039 | (5,029 | ) | 2001 | Mar-09 | 3 - 39 yrs. | 94 | |||||||||||||||||||||||||||
San Antonio | TX | TownePlace Suites | - | 2,220 | 9,610 | 1,165 | 12,995 | (2,540 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 106 | |||||||||||||||||||||||||||
Shenandoah | TX | Courtyard | - | 3,350 | 17,256 | 81 | 20,687 | (2,034 | ) | 2014 | Sep-16 | 3 - 39 yrs. | 124 | |||||||||||||||||||||||||||
Stafford | TX | Homewood Suites | - | 1,880 | 10,969 | 410 | 13,259 | (2,940 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 78 | |||||||||||||||||||||||||||
Texarkana | TX | Hampton | - | 636 | 8,723 | 1,354 | 10,713 | (3,219 | ) | 2004 | Jan-11 | 3 - 39 yrs. | 81 | |||||||||||||||||||||||||||
Provo | UT | Residence Inn | - | 1,150 | 18,277 | 3,252 | 22,679 | (4,578 | ) | 1996 | Mar-14 | 3 - 39 yrs. | 114 | |||||||||||||||||||||||||||
Salt Lake City | UT | Residence Inn | - | 1,515 | 24,214 | 241 | 25,970 | (1,798 | ) | 2014 | Oct-17 | 3 - 39 yrs. | 136 | |||||||||||||||||||||||||||
Salt Lake City | UT | SpringHill Suites | - | 1,092 | 16,465 | 1,765 | 19,322 | (5,288 | ) | 2009 | Nov-10 | 3 - 39 yrs. | 143 | |||||||||||||||||||||||||||
Alexandria | VA | Courtyard | - | 6,860 | 19,681 | 3,849 | 30,390 | (5,620 | ) | 1987 | Mar-14 | 3 - 39 yrs. | 178 | |||||||||||||||||||||||||||
Alexandria | VA | SpringHill Suites | - | 5,968 | - | 20,268 | 26,236 | (6,261 | ) | 2011 | Mar-09 | 3 - 39 yrs. | 155 | |||||||||||||||||||||||||||
Charlottesville | VA | Courtyard | - | 21,130 | 27,737 | 1,799 | 50,666 | (5,812 | ) | 2000 | Mar-14 | 3 - 39 yrs. | 139 | |||||||||||||||||||||||||||
Manassas | VA | Residence Inn | - | 1,395 | 14,962 | 1,905 | 18,262 | (5,058 | ) | 2006 | Feb-11 | 3 - 39 yrs. | 107 | |||||||||||||||||||||||||||
Subsequently Capitalized | |||||||||||||||||||||||||||||||||||||||
| Initial Cost | Bldg. Imp. & FF&E | Total Gross Cost (2) | |||||||||||||||||||||||||||||||||||||
| City | State | Description | Encumbrances | Land (1) | Bldg./ FF&E /Other | Acc. Deprec. | Date of Construction | Date Acquired | Depreciable Life | # of Rooms | |||||||||||||||||||||||||||||
| Harrisonburg | VA | Courtyard | $ | - | $ | 2,480 | $ | 12,757 | $ | 383 | $ | 15,620 | $ | (1,808 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 125 | ||||||||||||||||||||
| Manassas | VA | Residence Inn | - | 1,395 | 14,962 | 1,661 | - | 18,018 | (3,900 | ) | 2006 | Feb-11 | 3 - 39 yrs. | 107 | |||||||||||||||||||||||||
| Richmond | VA | Courtyard | - | 2,003 | - | 22,972 | 24,975 | (2,725 | ) | 2014 | Jul-12 | 3 - 39 yrs. | 135 | ||||||||||||||||||||||||||
| Richmond | VA | Marriott | - | - | 83,698 | 5,731 | 89,429 | (12,254 | ) | 1984 | Mar-14 | 3 - 39 yrs. | 410 | ||||||||||||||||||||||||||
| Richmond | VA | Residence Inn | - | 1,113 | - | 12,717 | 13,830 | (1,511 | ) | 2014 | Jul-12 | 3 - 39 yrs. | 75 | ||||||||||||||||||||||||||
| Richmond | VA | SpringHill Suites | - | 1,930 | 10,726 | 54 | 12,710 | (589 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 103 | ||||||||||||||||||||||||||
| Suffolk | VA | Courtyard | - | 940 | 5,186 | 1,247 | 7,373 | (1,105 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 92 | ||||||||||||||||||||||||||
| Suffolk | VA | TownePlace Suites | - | 710 | 5,241 | 634 | 6,585 | (937 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 72 | ||||||||||||||||||||||||||
| Virginia Beach | VA | Courtyard | - | 10,580 | 29,140 | 1,782 | 41,502 | (3,579 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 141 | ||||||||||||||||||||||||||
| Virginia Beach | VA | Courtyard | - | 12,000 | 40,556 | 3,602 | 56,158 | (5,086 | ) | 2002 | Mar-14 | 3 - 39 yrs. | 160 | ||||||||||||||||||||||||||
| Kirkland | WA | Courtyard | 11,042 | 18,950 | 25,028 | 271 | 44,249 | (3,691 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 150 | ||||||||||||||||||||||||||
| Seattle | WA | Residence Inn | 25,687 | - | 92,786 | 4,593 | 97,379 | (13,353 | ) | 1991 | Mar-14 | 3 - 35 yrs. | 234 | ||||||||||||||||||||||||||
| Tukwila | WA | Homewood Suites | 8,549 | 8,130 | 16,659 | 4,410 | 29,199 | (2,939 | ) | 1992 | Mar-14 | 3 - 39 yrs. | 106 | ||||||||||||||||||||||||||
| Vancouver | WA | SpringHill Suites | - | 3,010 | 16,162 | 1,473 | 20,645 | (2,438 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 119 | ||||||||||||||||||||||||||
| Richmond | VA | Corporate Office | - | 682 | 3,723 | 561 | 4,966 | (1,375 | ) | 1893 | May-13 | 3 - 39 yrs. | N/A | ||||||||||||||||||||||||||
| $ | 457,435 | $ | 720,465 | $ | 4,552,869 | $ | 251,109 | $ | 5,524,443 | $ | (731,284 | ) | 30,322 | ||||||||||||||||||||||||||
Real estate owned: | 2017 | 2016 | 2015 | |||||||||
| Balance as of January 1 | $ | 5,381,086 | $ | 4,064,824 | $ | 3,789,380 | ||||||
| Acquisitions | 162,734 | 1,319,986 | 255,636 | |||||||||
| Improvements and Development Costs | 69,081 | 63,364 | 59,565 | |||||||||
| Dispositions | (42,583 | ) | (11,951 | ) | (2,238 | ) | ||||||
| Assets Held for Sale (4) | - | (49,666 | ) | 7,481 | ||||||||
| Impairment of Depreciable Assets | (45,875 | ) | (5,471 | ) | (45,000 | ) | ||||||
| Balance at December 31 | $ | 5,524,443 | $ | 5,381,086 | $ | 4,064,824 | ||||||
Accumulated depreciation: | 2017 | 2016 | 2015 | |||||||||
| Balance as of January 1 | $ | (557,597 | ) | $ | (423,057 | ) | $ | (296,559 | ) | |||
| Depreciation Expense | (175,581 | ) | (147,244 | ) | (126,530 | ) | ||||||
| Accumulated Depreciation on Dispositions | 1,894 | 2,038 | 257 | |||||||||
| Assets Held for Sale (4) | - | 10,666 | (225 | ) | ||||||||
| Balance at December 31 | $ | (731,284 | ) | $ | (557,597 | ) | $ | (423,057 | ) | |||
SCHEDULE III
Real Estate and Accumulated Depreciation and Amortization - (continued)
As of December 31, 2019
(dollars in thousands)
| Subsequently | ||||||||||||||||||||||||||||||||||||||||
| Initial Cost | Capitalized | |||||||||||||||||||||||||||||||||||||||
| City | State | Description | Encumbrances | Land (1) | Bldg./ FF&E / Other | Bldg. Imp. & FF&E | Total Gross Cost (2) | Acc. Deprec. | Date of Construction | Date Acquired | Depreciable Life | # of Rooms | ||||||||||||||||||||||||||||
Richmond | VA | Courtyard | $ | - | $ | 2,003 | $ | - | $ | 23,130 | $ | 25,133 | $ | (4,531 | ) | 2014 | Jul-12 | 3 - 39 yrs. | 135 | |||||||||||||||||||||
Richmond | VA | Independent | - | 584 | 6,386 | 25 | 6,995 | (46 | ) | 1988 | Oct-19 | 3 - 39 yrs. | 55 | |||||||||||||||||||||||||||
Richmond | VA | Marriott | - | - | (6) | 83,698 | 14,695 | 98,393 | (19,467 | ) | 1984 | Mar-14 | 3 - 39 yrs. | 410 | ||||||||||||||||||||||||||
Richmond | VA | Residence Inn | - | 1,113 | - | 12,774 | 13,887 | (2,500 | ) | 2014 | Jul-12 | 3 - 39 yrs. | 75 | |||||||||||||||||||||||||||
Richmond | VA | SpringHill Suites | - | 1,930 | 10,726 | 122 | 12,778 | (1,489 | ) | 2008 | Sep-16 | 3 - 39 yrs. | 103 | |||||||||||||||||||||||||||
Suffolk | VA | Courtyard | - | 940 | 5,186 | 1,346 | 7,472 | (1,821 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 92 | |||||||||||||||||||||||||||
Suffolk | VA | TownePlace Suites | - | 710 | 5,241 | 756 | 6,707 | (1,520 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 72 | |||||||||||||||||||||||||||
Virginia Beach | VA | Courtyard | - | 10,580 | 29,140 | 3,611 | 43,331 | (6,248 | ) | 1999 | Mar-14 | 3 - 39 yrs. | 141 | |||||||||||||||||||||||||||
Virginia Beach | VA | Courtyard | - | 12,000 | 40,556 | 4,016 | 56,572 | (8,443 | ) | 2002 | Mar-14 | 3 - 39 yrs. | 160 | |||||||||||||||||||||||||||
Kirkland | WA | Courtyard | 10,376 | 18,950 | 25,028 | 606 | 44,584 | (5,710 | ) | 2006 | Mar-14 | 3 - 39 yrs. | 150 | |||||||||||||||||||||||||||
Seattle | WA | Residence Inn | 24,130 | - | (6) | 92,786 | 5,241 | 98,027 | (20,872 | ) | 1991 | Mar-14 | 3 - 35 yrs. | 234 | ||||||||||||||||||||||||||
Tukwila | WA | Homewood Suites | 8,020 | 8,130 | 16,659 | 4,549 | 29,338 | (5,262 | ) | 1992 | Mar-14 | 3 - 39 yrs. | 106 | |||||||||||||||||||||||||||
Vancouver | WA | SpringHill Suites | - | 3,010 | 16,162 | 1,601 | 20,773 | (3,867 | ) | 2007 | Mar-14 | 3 - 39 yrs. | 119 | |||||||||||||||||||||||||||
Richmond | VA | Corporate Office | - | 682 | 3,723 | 992 | 5,397 | (2,054 | ) | 1893 | May-13 | 3 - 39 yrs. | N/A | |||||||||||||||||||||||||||
| $ | 454,967 | $ | 724,054 | $ | 4,559,984 | $ | 398,512 | $ | 5,682,550 | $ | (1,049,996 | ) | 29,765 | |||||||||||||||||||||||||||
Investment in Real Estate: | 2019 | 2018 | 2017 | |||||||||
Balance as of January 1 | $ | 5,726,303 | $ | 5,524,443 | $ | 5,381,086 | ||||||
Acquisitions | 59,652 | 153,034 | 162,734 | |||||||||
Improvements | 78,679 | 71,058 | 69,081 | |||||||||
Dispositions | (159,685 | ) | (19,097 | ) | (42,583 | ) | ||||||
Assets Held for Sale (5) | (15,932 | ) | - | - | ||||||||
Impairment of Depreciable Assets | (6,467 | ) | (3,135 | ) | (45,875 | ) | ||||||
Total Gross Cost as of December 31 | 5,682,550 | 5,726,303 | 5,524,443 | |||||||||
Finance Ground Lease Assets as of December 31 (6) | 197,617 | - | - | |||||||||
Total Investment in Real Estate | $ | 5,880,167 | $ | 5,726,303 | $ | 5,524,443 | ||||||
Accumulated Depreciation and Amortization: | 2019 | 2018 | 2017 | |||||||||
Accumulated Depreciation as of January 1 | $ | (909,893 | ) | $ | (731,284 | ) | $ | (557,597 | ) | |||
Depreciation Expense | (187,729 | ) | (182,527 | ) | (175,581 | ) | ||||||
Accumulated Depreciation on Dispositions | 43,787 | 3,918 | 1,894 | |||||||||
Assets Held for Sale (5) | 3,839 | - | - | |||||||||
Accumulated Depreciation as of December 31 | (1,049,996 | ) | (909,893 | ) | (731,284 | ) | ||||||
Accumulated Amortization of Finance Leases as of December 31 (6) | (4,433 | ) | - | - | ||||||||
Accumulated Depreciation and Amortization as of December 31 | $ | (1,054,429 | ) | $ | (909,893 | ) | $ | (731,284 | ) | |||
(1) | Land is owned fee simple unless cost is $0, which means the property is subject to a ground lease. |
(2) | The aggregate cost for federal income tax purposes is approximately |
(3) | Amount includes a reduction in cost due to recognition of an impairment loss. |
(4) | On January 20, 2020, the New York, New York Renaissance hotel became an independent boutique hotel. |
(5) | As of December 31, |
(6) | Effective January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) and, as a result, recorded finance ground lease assets for 4 of its ground leases, which are included in investment in real estate and accumulated depreciation and amortization as of December 31, |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Apple Hospitality REIT, Inc. | |||||
By: | /s/ Justin G. Knight | Date: February | |||
Justin G. Knight, President and Chief Executive Officer (Principal Executive Officer) | |||||
By: | |||||
/s/ Bryan Peery | Date: February | ||||
Bryan Peery, | |||||
Chief Financial Officer (Principal Financial and Principal Accounting Officer) | |||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
By: | /s/ Glade M. Knight | |||
Date: February | ||||
Glade M. Knight, Executive Chairman and Director | ||||
By: | /s/ Justin G. Knight | Date: February | ||
Justin G. Knight, President and Chief Executive Officer and Director (Principal Executive Officer) | ||||
By: | /s/ Bryan Peery | Date: February 24, 2020 | ||
Bryan Peery, | ||||
Chief Financial Officer (Principal Financial and Principal Accounting Officer) | ||||
By: | /s/ Glenn W. Bunting, Jr. | Date: February 24, 2020 | ||
Glenn W. Bunting, Jr., Director | ||||
By: | /s/ Jon A. Fosheim | Date: February 24, 2020 | ||
Jon A. Fosheim, Director | ||||
By: | /s/ | Date: February | ||
Kristian M. Gathright, Director | ||||
By: | /s/ | Date: February | ||
Blythe J. McGarvie, Director | ||||
By: | /s/ | Date: February | ||
Daryl A. | ||||
By: | ||||
/s/ L. Hugh Redd | Date: February | |||
L. Hugh Redd, Director | ||||