UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2017~~

March 31, 2021

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

Commission File Number 001-37389

APPLE HOSPITALITY REIT, INC.

(Exact name of registrant as specified in its charter)

Virginia		26-1379210
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

814 East Main Street Richmond, Virginia		23219
(Address of principal executive offices)		(Zip Code)

(804) 344-8121

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, no par value		APLE		New York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ¨ ~~(Do not check if a smaller reporting company)~~☐	Smaller reporting company ☐
	Emerging growth company ☐

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

☐

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

Number of registrant’s common shares outstanding as of ~~November 1, 2017: 223,060,840~~

May 3, 2021: 223,656,264

Apple Hospitality REIT, Inc.

Form 10-Q

Index

~~Index~~

			Page Number
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements (Unaudited)		3

		Consolidated Balance Sheets – ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020	3

		Consolidated Statements of Operations and Comprehensive ~~Income - Three and nine~~Loss – three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~ 2020	4

		Consolidated Statements of Shareholders’ Equity – three months ended March 31, 2021 and 2020	5

		Consolidated Statements of Cash Flows ~~- Nine~~– three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	5	6

		Notes to Consolidated Financial Statements	6	7

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34	36

	Item 4.	Controls and Procedures	35	36

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	36	37

	Item ~~1A.~~2.	~~Risk Factors~~Unregistered Sales of Equity Securities and Use of Proceeds	36	37

	Item 6.	Exhibits	36	38

Signatures			37	39

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

Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Apple Hospitality REIT, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

	March 31,			December 31,
	2021			2020
	(unaudited)
Assets
Investment in real estate, net of accumulated depreciation and amortization of $1,275,557 and $1,235,698, respectively	$	4,712,480		$	4,732,896
Assets held for sale		5,172			5,316
Cash and cash equivalents		5,776			5,556
Restricted cash-furniture, fixtures and other escrows		30,149			28,812
Due from third party managers, net		38,766			22,137
Other assets, net		33,589			35,042
Total Assets	$	4,825,932		$	4,829,759

Liabilities
Debt, net	$	1,523,032		$	1,482,571
Finance lease liabilities		221,027			219,981
Accounts payable and other liabilities		80,108			97,860
Total Liabilities		1,824,167			1,800,412

Shareholders' Equity
Preferred stock, authorized 30,000,000 shares; NaN issued and outstanding		0			0
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 223,656,264 and 223,212,346 shares, respectively		4,493,422			4,488,419
Accumulated other comprehensive loss		(26,720	)		(42,802	)
Distributions greater than net income		(1,464,937	)		(1,416,270	)
Total Shareholders' Equity		3,001,765			3,029,347

Total Liabilities and Shareholders' Equity	$	4,825,932		$	4,829,759

September 30, December 31,
2017 2016
(unaudited)
Assets
Investment in real estate, net of accumulated depreciation of $686,787 and $557,597, respectively $ 4,742,590 $ 4,823,489
Assets held for sale 40,626 39,000
Restricted cash-furniture, fixtures and other escrows 30,299 29,425
Due from third party managers, net 52,354 31,460
Other assets, net 48,018 56,509
Total Assets $ 4,913,887 $ 4,979,883

Liabilities
Revolving credit facility $ 216,700 $ 270,000
Term loans 655,988 570,934
Mortgage debt 432,783 497,029
Accounts payable and other liabilities 104,467 124,856
Total Liabilities 1,409,938 1,462,819

Shareholders' Equity
Preferred stock, authorized 30,000,000 shares; none issued and outstanding 0 0
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 223,060,840 and 222,938,648 shares, respectively 4,455,390 4,453,205
Accumulated other comprehensive income 5,218 4,589
Distributions greater than net income (956,659 ) (940,730 )
Total Shareholders' Equity 3,503,949 3,517,064

Total Liabilities and Shareholders' Equity $ 4,913,887 $ 4,979,883

See notes to consolidated financial statements.

Index

Apple Hospitality REIT, Inc.

Consolidated Statements of Operations and Comprehensive ~~Income~~

Loss

(Unaudited)

(in thousands, except per share data)

	Three Months Ended
	March 31,
	2021			2020
Revenues:
Room	$	148,481		$	217,979
Food and beverage		2,783			11,312
Other		7,449			8,719
Total revenue		158,713			238,010

Expenses:
Hotel operating expense:
Operating		38,150			68,029
Hotel administrative		17,744			23,643
Sales and marketing		14,888			24,359
Utilities		10,560			9,190
Repair and maintenance		10,225			11,793
Franchise fees		6,919			10,257
Management fees		5,254			7,995
Total hotel operating expense		103,740			155,266
Property taxes, insurance and other		19,688			19,595
General and administrative		8,119			9,523
Loss on impairment of depreciable real estate assets		10,754			0
Depreciation and amortization		48,710			49,522
Total expense		191,011			233,906

Gain on sale of real estate		4,484			8,839

Operating income (loss)		(27,814	)		12,943

Interest and other expense, net		(18,513	)		(15,566	)

Loss before income taxes		(46,327	)		(2,623	)

Income tax expense		(108	)		(146	)

Net loss	$	(46,435	)	$	(2,769	)

Other comprehensive income (loss):
Interest rate derivatives		16,082			(42,166	)

Comprehensive loss	$	(30,353	)	$	(44,935	)

Basic and diluted net loss per common share	$	(0.21	)	$	(0.01	)

Weighted average common shares outstanding - basic and diluted		223,733			224,294

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenues:
    Room $ 302,298 $ 255,269 $ 877,974 $ 698,759
    Other 22,628 21,202 71,581 59,835
Total revenue 324,926 276,471 949,555 758,594

Expenses:
    Operating 79,975 69,082 235,474 187,370
    Hotel administrative 24,842 20,866 74,895 57,921
    Sales and marketing 25,488 21,329 75,867 59,244
    Utilities 12,036 10,543 31,982 25,862
    Repair and maintenance 12,199 10,478 36,394 29,167
    Franchise fees 13,974 11,834 40,611 32,212
    Management fees 11,315 9,205 33,072 26,189
    Property taxes, insurance and other 17,598 14,787 52,346 40,315
    Ground lease 2,831 2,615 8,486 7,587
    General and administrative 5,350 2,623 18,255 12,511
    Transaction and litigation costs (reimbursements) 0 36,452 (2,586 ) 37,861
    Loss on impairment of depreciable real estate assets 0 5,471 7,875 5,471
    Depreciation 44,110 37,343 131,770 104,651
Total expenses 249,718 252,628 744,441 626,361

Operating income 75,208 23,843 205,114 132,233

    Interest and other expense, net (12,024 ) (10,156 ) (35,590 ) (28,519 )
    Gain (loss) on sale of real estate (157 ) 0 15,983 0

Income before income taxes 63,027 13,687 185,507 103,714

    Income tax benefit (expense) (203 ) 7 (712 ) (616 )

Net income $ 62,824 $ 13,694 $ 184,795 $ 103,098

Other comprehensive income (loss):
    Interest rate derivatives 259 4,261 629 (7,934 )

Comprehensive income $ 63,083 $ 17,955 $ 185,424 $ 95,164

Basic and diluted net income per common share $ 0.28 $ 0.07 $ 0.83 $ 0.57

Weighted average common shares outstanding - basic and diluted 223,057 190,563 223,052 180,004

See notes to consolidated financial statements.

Index

Apple Hospitality REIT, Inc.

Consolidated Statements of ~~Cash Flows~~

Shareholders' Equity

Three Months Ended March 31, 2021 and 2020

(Unaudited)

(in ~~thousands)~~thousands, except per share data)

	Common Stock						Accumulated Other			Distributions
	Number of Shares			Amount			Comprehensive Income (Loss)			Greater Than Net Income			Total
Balance at December 31, 2020		223,212		$	4,488,419		$	(42,802	)	$	(1,416,270	)	$	3,029,347
Share based compensation, net		444			5,004			-			-			5,004
Equity issuance costs		-			(1	)		-			-			(1	)
Interest rate derivatives		-			-			16,082			-			16,082
Net loss		-			-			-			(46,435	)		(46,435	)
Distributions declared to shareholders ($0.01 per share)		-			-			-			(2,232	)		(2,232	)
Balance at March 31, 2021		223,656		$	4,493,422		$	(26,720	)	$	(1,464,937	)	$	3,001,765

Balance at December 31, 2019		223,863		$	4,493,763		$	(4,698	)	$	(1,198,052	)	$	3,291,013
Share based compensation, net		675			8,014			-			-			8,014
Common shares repurchased		(1,521	)		(14,336	)		-			-			(14,336	)
Interest rate derivatives		-			-			(42,166	)		-			(42,166	)
Net loss		-			-			-			(2,769	)		(2,769	)
Distributions declared to shareholders ($0.20 per share)		-			-			-			(44,952	)		(44,952	)
Balance at March 31, 2020		223,017		$	4,487,441		$	(46,864	)	$	(1,245,773	)	$	3,194,804

Nine Months Ended
September 30,
2017 2016
Cash flows from operating activities:
Net income $ 184,795 $ 103,098
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 131,770 104,651
Loss on impairment of depreciable real estate assets 7,875 5,471
Gain on sale of real estate (15,983 ) 0
Other non-cash expenses, net 5,372 4,806
Changes in operating assets and liabilities, net of amounts acquired or
assumed with acquisitions:

Increase in due from third party managers, net (20,883 ) (14,350 )
Decrease (increase) in other assets, net 8,507 (1,014 )
Increase (decrease) in accounts payable and other liabilities (20,944 ) 35,309
Net cash provided by operating activities 280,509 237,971

Cash flows from investing activities:
Cash consideration in Apple Ten merger 0 (93,590 )
Acquisition of hotel properties, net (56,794 ) (23,994 )
Deposits and other disbursements for potential acquisitions (1,810 ) 0
Capital improvements (41,370 ) (47,523 )
Decrease (increase) in capital improvement reserves (1,351 ) 2,459
Net proceeds from sale of real estate 28,374 0
Net cash used in investing activities (72,951 ) (162,648 )

Cash flows from financing activities:
Repurchases of common shares 0 (361 )
Repurchases of common shares to satisfy employee withholding requirements (432 ) (459 )
Equity issuance costs 0 (1,176 )
Distributions paid to common shareholders (200,716 ) (161,940 )
Net proceeds from (payments on) revolving credit facility (53,300 ) 187,300
Payments on extinguished credit facility 0 (111,100 )
Proceeds from term loans 85,000 150,000
Proceeds from mortgage debt 0 24,000
Payments of mortgage debt (37,219 ) (157,823 )
Financing costs (891 ) (3,764 )
Net cash used in financing activities (207,558 ) (75,323 )

Net change in cash and cash equivalents 0 0

Cash and cash equivalents, beginning of period 0 0

Cash and cash equivalents, end of period $ 0 $ 0

Supplemental cash flow information:
Interest paid $ 35,049 $ 30,192

Supplemental disclosure of noncash investing and financing activities:
    Stock consideration in Apple Ten merger (see note 2) $ 0 $ 956,086
    Accrued distribution to common shareholders $ 22,302 $ 22,325
    Mortgage debt assumed by buyer upon sale of real estate $ 27,073 $ 0

See notes to consolidated financial statements.

Index

Apple Hospitality REIT, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Three Months Ended
	March 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(46,435	)	$	(2,769	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		48,710			49,522
Loss on impairment of depreciable real estate assets		10,754			-
Gain on sale of real estate		(4,484	)		(8,839	)
Other non-cash expenses, net		2,684			1,773
Changes in operating assets and liabilities:
Decrease (increase) in due from third party managers, net		(16,628	)		4,886
Decrease in other assets, net		1,029			439
Increase (decrease) in accounts payable and other liabilities		2,256			(11,670	)
Net cash provided by (used in) operating activities		(2,114	)		33,342

Cash flows from investing activities:
Acquisition of hotel properties, net		(49,369	)		-
Capital improvements		(2,506	)		(27,022	)
Net proceeds from sale of real estate		17,587			44,387
Net cash provided by (used in) investing activities		(34,288	)		17,365

Cash flows from financing activities:
Repurchases of common shares		-			(14,336	)
Repurchases of common shares to satisfy employee withholding requirements		(1,650	)		(1,748	)
Distributions paid to common shareholders		-			(67,324	)
Equity issuance costs		(1	)		-
Net proceeds from revolving credit facility		44,100			374,100
Proceeds from term loans and senior notes		-			50,000
Proceeds from mortgage debt and other loans		-			63,400
Payments of mortgage debt and other loans		(3,018	)		(18,354	)
Financing costs		(1,472	)		(511	)
Net cash provided by financing activities		37,959			385,227

Net change in cash, cash equivalents and restricted cash		1,557			435,934

Cash, cash equivalents and restricted cash, beginning of period		34,368			34,661

Cash, cash equivalents and restricted cash, end of period	$	35,925		$	470,595

Supplemental cash flow information:
Interest paid	$	18,062		$	14,696

Supplemental disclosure of noncash investing and financing activities:
Accrued distribution to common shareholders	$	2,232		$	-

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period	$	5,556		$	-
Restricted cash-furniture, fixtures and other escrows, beginning of period		28,812			34,661
Cash, cash equivalents and restricted cash, beginning of period	$	34,368		$	34,661

Cash and cash equivalents, end of period	$	5,776		$	437,260
Restricted cash-furniture, fixtures and other escrows, end of period		30,149			33,335
Cash, cash equivalents and restricted cash, end of period	$	35,925		$	470,595

See notes to consolidated financial statements.

Index

Apple Hospitality REIT, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Organization

Apple Hospitality REIT, Inc., together with its wholly-owned subsidiaries, ~~(the~~the “Company”), is a Virginia corporation that has elected to be treated as a real estate investment trust (“REIT”) for federal income tax purposes. The Company is a self-advised REIT that invests in income-producing real estate, primarily in the lodging sector, in the United ~~States.~~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 ~~one~~1 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~~decision-making process of these entities, and therefore does not consolidate the entities. As of ~~September 30, 2017,~~March 31, 2021, the Company owned ~~237~~233 hotels with an aggregate of ~~30,188~~29,855 rooms located in 3335 states, including ~~one~~1 hotel with ~~316~~102 rooms classified as held for sale, which was sold to an unrelated party in ~~October 2017.~~April 2021. The Company’s common shares are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “APLE.”

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include all of the information required by U.S. generally accepted accounting principles ~~generally accepted in the United States~~(“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its ~~2016~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results that may be expected for the twelve month period ending December 31, ~~2017.~~

2021.

Use of Estimates

The preparation of the financial statements in conformity with ~~United States generally accepted accounting principles~~GAAP 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.

Novel Coronavirus COVID-19 Pandemic

As a result of the current novel coronavirus COVID-19 pandemic (“COVID-19”) and the impact it has had on travel and the broader economy throughout the U.S. since March 2020, the Company’s hotels have experienced significant declines in occupancy, which has had and is expected to continue to have a significant negative effect on the Company’s revenue and operating results. There remains significant uncertainty as to when operations at the hotels will return to normalized levels.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less. The fair market value of cash and cash equivalents approximates their carrying value. The Company’s cash and cash equivalents are distributed among several major banks, but the balances may at times exceed federal depository insurance limits.

Net ~~Income~~Loss Per Common Share

Basic net ~~income~~loss per common share is computed based upon the weighted average number of shares outstanding during the period. Diluted net ~~income~~loss per common share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the period. Basic and diluted net ~~income~~loss per common share were the same for each of the periods presented.

Accounting Standards Recently Adopted

Reference Rate Reform

In ~~January 2017,~~March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2017-01,~~ ~~Business Combinations~~2020-04, Reference Rate Reform (Topic ~~805), Clarifying the Definition of a Business~~848), which ~~is intended~~provides optional guidance through December 31, 2022 to ~~add guidance to assist entities with evaluating whether transactions should be accounted~~ease the potential burden in accounting for, ~~as acquisitions (or disposals)~~or recognizing the effects of, ~~assets or businesses. The standard is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this standard effective~~reference rate reform on financial reporting. In 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. Under the new standard, effective January 1, 2017, acquisitions of hotel properties (including the acquisition of three hotels during the first nine months of 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 they 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.

~~Index~~

~~Accounting Standards Recently Issued~~

~~In May 2014,~~ 2021, the FASB issued ~~ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~2021-01, Reference Rate Reform (Topic ~~606)~~848), which affects virtually all aspects of an entity’s revenue recognition. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March, April, May and December 2016, the FASB issued ASUs No. 2016-08, 2016-10, 2016-12 and 2016-20, respectively, all related to ~~Revenue from Contracts with Customers (Topic 606)~~,Scope, which further ~~clarify the application of the standard. In August 2015, the FASB issued ASU No. 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,~~ which deferred the effectiveness of ASU No. 2014-09 to annual and interim periods beginning after December 15, 2017, and permitted early application for annual reporting periods beginning after December 15, 2016. The Company plans to adopt this standard on January 1, 2018 using the modified retrospective approach. Although the Company is still evaluating this ASU, based on its assessment to date, the Company does not believe there will be a significant change to the amount or timing of the recording of revenue in its consolidated financial statements.

~~In February 2017, the FASB issued ASU No. 2017-05,~~ Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets~~, which clarifies~~clarified the scope of ~~Accounting Standards Codification (“ASC”)~~ ~~Subtopic 610-20~~the reference rate reform optional practical expedients and ~~adds~~exceptions outlined in Topic 848. The amendments in ASU Nos. 2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge

Index

effectiveness in hedging relationships that have been modified to replace a reference rate. The guidance ~~for~~in ASU Nos. 2020-04 and 2021-01 became effective upon issuance and the derecognition of nonfinancial assets, including partial sales. The standard is effective in conjunction with ASU No. 2014-09, presented above, which is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. The provisions of ~~this update must be applied at~~ the ~~same time as the adoption of ASU No. 2014-09. The Company plans to adopt this standard on January 1, 2018 using the modified retrospective approach. The adoption of this standard is~~ASUs have not ~~expected to have~~had a material impact on the Company’s consolidated financial ~~statements.~~

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting model to enable entities to better portray their risk management activities in their financial~~ statements and ~~enhance the transparency and understandability~~related disclosures as of ~~hedging activity.~~ March 31, 2021.The ~~standard simplifies the application~~provisions of hedge accounting and reduces the administrative burden of hedge documentation requirements and assessing hedge effectiveness. The standard is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. The standard requires a modified retrospective approach for all hedge relationships that exist on the date of adoption. The presentation and disclosure guidance is required only prospectively. The Company is currently evaluating when itthese updates will ~~adopt the standard. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.~~

~~2. Merger with Apple REIT Ten, Inc.~~

~~Effective September 1, 2016,~~generally affect the Company completed its previously announced merger with Apple REIT Ten, Inc. (“Apple Ten”) (the “merger”). Pursuant to the Agreement and Plan of Merger entered into on April 13, 2016, as amended on July 13, 2016 (the “Merger Agreement”), Apple Ten merged with and into a wholly-owned subsidiary of the Company (“Acquisition Sub”), at which time the separate corporate existence of Apple Ten ceased and Acquisition Sub became the surviving corporation in the merger. Acquisition Sub was formed solely for the purpose of engaging in the merger and had not conducted any prior activities. As a result of the merger, the Company acquired the business of Apple Ten, a real estate investment trust, which immediately prior to the effective time of the merger, owned 56 hotels located in 17 states with an aggregate of 7,209 rooms.

~~The Company accounted for the merger in accordance with ASC 805,~~ ~~Business Combinations. The Company was considered the acquirer for financial reporting purposes, which required,~~by allowing, among other things, ~~that~~ the ~~assets acquired and liabilities assumed from Apple Ten be recognized at their acquisition date fair values. For purpose of accounting~~following:

•

Allowing modifications of the Company’s unsecured credit facilities to replace the London Interbank Offered Rate (LIBOR) with a substitute index to be accounted for as a non-substantial modification and not be considered a debt extinguishment.

•

Allowing changes to the floating interest rate index used in the Company’s interest rate swaps to not be considered a change to the critical terms of the hedge and therefore not requiring a dedesignation of the hedging relationship.

The Company has not entered into any contract modifications yet as it directly relates to reference rate reform but anticipates having to undertake such modifications in 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 pricefuture as a majority of the Company’s ~~common shares on August 31, 2016 (the date that the merger was approved),~~unsecured credit facilities and ~~$93.6 million in cash, which was funded through borrowings on the Company’s $540 million revolving credit facility (the “revolving credit facility”). All costs (reimbursements) related~~interest rate swaps are indexed to the merger were recorded in the period incurred and are included in transaction and litigation costs (reimbursements) in the Company’s consolidated financial statements. In connection with the merger, the Company incurred approximately $37.6 million in merger costs for the nine months ended September 30, 2016, which included $32.0 million funded by the Company in January 2017 to settle the Apple Ten merger lawsuit and approximately $1.8 million in legal costs incurred to defend the lawsuit. During 2017, the Company received $12.6 million in proceeds from its director and officer insurance carriers in connection with the merger lawsuit, of which $10.0 million (received in January 2017) and $2.6 million (received in May 2017) were included as reductions in transaction and litigation costs (reimbursements) for the fourth quarter of 2016 and nine months ended September 30, 2017, respectively. Further discussion of the merger litigation is included in Note 10.

~~Index~~

Effective September 1, 2016, upon completion of the merger, the Company assumed approximately $145.7 million in mortgage debt, prior to any fair value adjustments, secured by nine properties. The Company also assumed the outstanding balance on Apple Ten’s credit facility totaling $111.1 million, which was terminated and repaid in full on September 1, 2016 with borrowings on the Company’s revolving credit facility.

As contemplated in the Merger Agreement, in connection with the completion of the merger, the advisory and related party arrangements with respect to Apple Ten and its advisors, as described in more detail in Note 7, were terminated.

The following unaudited pro forma information for the three and nine month periods ended September 30, 2017 and 2016, is presented as if the merger, effective September 1, 2016, had occurred on January 1, 2016, and is based on assumptions and estimates considered appropriate by the Company. The pro forma information is provided for illustrative purposes only and does not necessarily reflect what the operating results would have been had the merger been completed on January 1, 2016, nor is it necessarily indicative of future operating results. The pro forma information does not give effect to any cost synergies or other operating efficiencies that could result from the merger. Amounts are in thousands except per share data.

Three Months Ended September 30, Nine Months Ended September 30,
2017 (Actual) 2016 (Proforma) 2017 (Proforma) 2016 (Proforma)
Total revenue $ 324,926 $ 325,924 $ 949,555 $ 949,760
Net income $ 62,824 $ 59,960 $ 182,209 $ 176,985
Basic and diluted net income per common share $ 0.28 $ 0.27 $ 0.82 $ 0.79
Weighted average common shares outstanding - basic and diluted 223,057 223,403 223,052 223,399

For purposes of calculating these pro forma amounts, merger transaction and litigation costs (reimbursements) totaling approximately ($2.6) million for the nine months ended September 30, 2017, and approximately $36.4 million and $37.6 million for the three and nine months ended September 30, 2016, respectively, included in the Company’s consolidated statements of operations, were excluded from the pro forma amounts since these costs and reimbursements are attributable to the merger and related transactions and do not have an ongoing impact to the statements of operations.

3.LIBOR.

2. Investment in Real Estate

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

	March 31,			December 31,
	2021			2020
Land	$	725,057		$	725,512
Building and improvements		4,546,062			4,525,850
Furniture, fixtures and equipment		499,612			499,865
Finance ground lease assets		203,617			203,617
Franchise fees		13,689			13,750
		5,988,037			5,968,594
Less accumulated depreciation and amortization		(1,275,557	)		(1,235,698	)
Investment in real estate, net	$	4,712,480		$	4,732,896

September 30, December 31,
2017 2016

Land $ 711,826 $ 707,878
Building and Improvements 4,294,310 4,270,095
Furniture, Fixtures and Equipment 411,376 391,421
Franchise Fees 11,865 11,692
5,429,377 5,381,086
Less Accumulated Depreciation (686,787 ) (557,597 )
Investment in Real Estate, net $ 4,742,590 $ 4,823,489

As of ~~September 30, 2017,~~March 31, 2021, the Company owned ~~237~~233 hotels with an aggregate of ~~30,188~~29,855 rooms located in 3335 states, including ~~one~~1 hotel with ~~316~~102 rooms classified as held for sale, which was sold to an unrelated party in ~~October 2017.~~

April 2021.

The Company leases all of its hotels to its wholly-owned taxable REIT subsidiary (or a subsidiary thereof) under master hotel lease agreements.

~~Index~~

Hotel Acquisitions

The Company acquired ~~three hotels~~1 hotel during the ~~first nine~~three months ended March 31, 2021. The hotel was a newly developed 176-room Hilton Garden Inn in Madison, Wisconsin managed by Raymond and purchased for $49.6 million on February 18, 2021.

During the year ended December 31, 2020, the Company acquired 4 hotels, NaN of ~~2017.~~which were acquired during the three months ended March 31, 2020. 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

Cape Canaveral

Hampton

LBA

4/30/2020

116

24,102

Cape Canaveral

Home2 Suites

LBA

4/30/2020

108

22,602

Tempe

Hyatt House

Crestline

8/13/2020

105

26,309

Tempe

Hyatt Place

Crestline

8/13/2020

154

38,279

483

111,292

City State Brand Manager Date Acquired Rooms Gross Purchase Price (a)
Fort Worth TX Courtyard LBA 2/2/2017 124 $ 18,000
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
334 $ 56,438

~~(a)~~

~~The acquisitions of these hotel properties were accounted for as acquisitions of a group of assets,~~

Index

The Company utilized $25.0 million of its available cash and entered into a one-year note payable with costs incurred to effect the acquisitions, which were not significant, capitalized as part of the cost of the assets acquired. The gross purchase price excludes capitalized transaction costs. At the date of purchase, the purchase price for each of these properties was funded through the Company’s revolving credit facility.

~~(b)~~

~~The Hilton Garden Inn and Home2 Suites hotels in Birmingham, AL are part of an adjoining two-hotel complex located on the same site.~~

~~On July 1, 2016,~~ the ~~Company closed on~~developer secured by the ~~purchase of a newly constructed 128-room Home2 Suites hotel in Atlanta, Georgia,~~hotels for $21.7 million to fund the ~~same day the hotel opened for business, for a~~ purchase price of the Cape Canaveral, Florida hotels. The note payable bore interest, which was payable monthly, at a floating annual rate equal to the London Inter-Bank Offered Rate for a one-month term (“one-month LIBOR”) plus a margin of 2.0% for the first six months of the loan term and 3.0% for the second six months of the loan term. In July 2020, the principal amount of the note was reduced by approximately ~~$24.6 million.~~$1.1 million representing a credit from the developer for shared construction savings, and the note was repaid in full on April 12, 2021. The Company used borrowings under its revolving credit facility to purchase the ~~hotel. Additionally,~~Tempe, Arizona and Madison, Wisconsin hotels. The acquisitions of these hotel properties were accounted for as ~~described in Note 2, effective September 1, 2016,~~acquisitions of asset groups, whereby costs incurred to effect the ~~Company completed the merger with Apple Ten, which added 56 hotels, located in 17 states, with an aggregate of 7,209 rooms to the Company’s real estate portfolio. The total real estate value~~acquisitions (which were not significant) were capitalized as part of the ~~merger was estimated to be approximately $1.3 billion. The Company accounted for~~cost of the ~~purchase of these hotels in accordance with ASC 805,~~ ~~Business Combinations.~~ ~~No goodwill was recorded in connection with any of these acquisitions.~~assets acquired. For the ~~57 hotels~~1 hotel acquired during the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2021, the amount of revenue and operating ~~income (excluding merger and other acquisition related transaction costs)~~loss included in the Company’s consolidated ~~statements~~statement of operations from the date of acquisition through ~~September 30, 2016~~March 31, 2021 was approximately ~~$25.0~~$0.1 million and ~~$9.5~~$(0.5) million, respectively.

~~Hotel Contract Commitments~~

As of September 30, 2017, the Company had outstanding contracts for the potential purchase of four additional hotels for a total purchase price of approximately $146.1 million. Two of the hotels, the Salt Lake City Residence Inn and the Portland Residence Inn, which are already in operation, were acquired in October 2017. The two remaining hotels are under construction and are planned to be completed and opened for business over the next 12 months from September 30, 2017, at which time closing on these hotels is expected to occur. Although the Company is working towards acquiring the two hotels under construction, there are many conditions to closing that have not yet been satisfied and there can be no assurance that a closing on these hotels will occur under the outstanding purchase contracts. The following table summarizes the location, brand, date of purchase contract, expected number of rooms, refundable (if the seller does not meet its obligations under the contract) contract deposits paid, and gross purchase price for each of the contracts outstanding at September 30, 2017. All dollar amounts are in thousands.

Location Brand Date of Purchase Contract Rooms Refundable Deposits Gross Purchase Price
Operating (a)

Salt Lake City, UT Residence Inn 8/22/2017 136 $ 500 $ 25,500
Portland, ME Residence Inn 8/30/2017 179 1,000 55,750
Under development (b)

Phoenix, AZ Hampton 10/25/2016 210 500 44,100
Orlando, FL Home2 Suites 1/18/2017 128 3 20,736
653 $ 2,003 $ 146,086

~~(a)~~

~~Closing on these hotels occurred in October 2017.~~

~~(b)~~

As of September 30, 2017, these hotels were under construction. The table shows the expected number of rooms upon hotel completion and the expected franchise brands. Assuming all conditions to closing are met, the purchases of these hotels are expected to close over the next 12 months from September 30, 2017. If the seller meets all of the conditions to closing, the Company is obligated to specifically perform under the contract. As the property is under construction, at this time, the seller has not met all of the conditions to closing.

~~Index~~

The purchase price for each of the Salt Lake City Residence Inn and Portland Residence Inn was funded through the Company’s revolving credit facility and it is anticipated that the purchase price for the remaining outstanding contracts will be funded similarly.

~~Loss on Impairment of Depreciable Real Estate Assets~~

During the first quarter of 2017, the Company identified two properties for potential sale: the Columbus, Georgia SpringHill Suites and TownePlace Suites hotels. In April 2017, the Company entered into separate contracts with the same unrelated party 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.

During the third quarter of 2016, the Company identified two properties for potential sale: the Dallas, Texas Hilton hotel and the Chesapeake, Virginia Marriott hotel. 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. The Chesapeake, Virginia Marriott was sold in December 2016. The Dallas, Texas Hilton contract was terminated in November 2016, and, as discussed in Note 4, a new purchase and sale agreement was entered into by the Company in December 2016, and the hotel was sold in April 2017.

3. Assets Held for Sale and Dispositions

Assets Held for Sale

In ~~December 2016,~~February 2021, the Company entered into a purchase and sale agreement with an unrelated party for the sale of its ~~224-room Hilton hotel in Dallas, Texas~~Overland Park, Kansas SpringHill Suites for a gross sales price of ~~approximately $56.1 million,~~$5.3 million. Since the buyer under the contract had completed its due diligence and had made a non-refundable deposit, as ~~amended. The~~of March 31, 2021, the Company classified the hotel ~~was classified~~ as assets held for sale atin its ~~historical cost (which was less than the contract price, net of costs to sell) in the Company’s~~ consolidated balance sheet at ~~December 31, 2016. On~~its estimated fair value less cost to sell which, as described below, was based on the contracted sales price, resulting in an impairment loss during the first quarter of 2021. In April ~~20, 2017,~~2021, the Company completed the sale of the hotel. The net proceeds from the sale were used to pay down borrowings on the Company’s revolving credit facility.

Dispositions

During the three months ended March 31, 2021, the Company sold 2 hotels in 2 transactions with unrelated parties for a total combined gross sales price of approximately $18.3 million, resulting in a combined gain on sale of approximately ~~$16.0~~$4.5 million, net of transaction costs, which is included in the Company’s consolidated statement of operations for the three months ended March 31, 2021. The two hotels had a total carrying value of approximately $13.0 million at the time of sale. The following table lists the two hotels sold:

City	State	Brand	Date Sold	Rooms
Charlotte	NC	Homewood Suites	2/25/2021		118
Memphis	TN	Homewood Suites	3/16/2021		140
Total					258

During the year ended December 31, 2020, the Company sold three hotels in 3 transactions with unrelated parties for a total combined gross sales price of approximately $55.3 million, resulting in a combined gain on sale of approximately $10.9 million, which is included in the Company’s consolidated statement of operations for the ~~nine months~~year ended ~~September 30, 2017.~~December 31, 2020. The ~~hotel~~3 hotels had a total carrying value ~~totaling~~of approximately ~~$39.0~~$43.8 million at the ~~date~~time of the sale. ~~Under~~The 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.three hotels sold:

City	State	Brand	Date Sold	Rooms
Sanford	FL	SpringHill Suites	1/16/2020		105
Boise	ID	SpringHill Suites	2/27/2020		230
Tulare	CA	Hampton	12/30/2020		86
Total					421

~~In June 2017, the Company entered into a purchase and sale agreement with an unrelated party for the~~

Excluding gains on sale of ~~its 316-room Marriott hotel in Fairfax, Virginia, acquired by~~real estate, the Company in the merger with Apple Ten in September 2016, for a gross sales price of $41.5 million, as amended. The hotel was classified as held for sale at its historical cost (which was less than the contract price, net of costs to sell) in the Company’s consolidated balance sheet as of September 30, 2017. On October 5, 2017, the Company completed the sale, resulting in an estimated gain of approximately $0.3 million, which will be recognized in the fourth quarter of 2017. The estimated gain is calculated as the total sales price, net of commissions and selling costs, less the carrying value totaling approximately $40.6 million as of September 30, 2017.

~~The net proceeds from the sales were used to pay down borrowings on the Company’s revolving credit facility.~~ ~~The~~ Company’s consolidated statements of operations include operating ~~income~~loss of approximately ~~$0.2~~$(1.8) million and ~~$0.8~~$(0.1) million for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and approximately $2.4 million and $2.1 million for the nine months ended September 30, 2017 and 2016,~~2020, respectively, relating to the results of operations of the ~~two~~6 hotels noted above (the 1 hotel classified as held for sale at March 31, 2021, the 2 hotels sold in the first three months of 2021 and the 3 hotels sold in 2020) for the period of ownership. The sale of these properties does not represent a strategic shift that has, or will have, a major effect on the Company’s operations and financial results, and therefore the operating results for the period of ownership of these properties are included in income from continuing operations for the three ~~and nine~~ months ended ~~September~~March 31, 2021 and 2020. The net proceeds from the sales were used to pay down borrowings on the Company’s revolving credit facility.

Hotel Sale Contracts and Loss on Impairment of Depreciable Real Estate Assets

During the first quarter of 2021, the Company identified the Overland Park, Kansas SpringHill Suites for potential sale and, in February 2021, entered into a purchase and sale agreement with an unrelated party for the sale of the hotel for a gross sales price of $5.3 million. As a result, the Company recognized an impairment loss of approximately $1.3 million in the first quarter of 2021, to adjust the carrying value of the hotel to its estimated fair value less cost to sell, which was based on the contracted sales price, a Level 1 input under the fair value hierarchy. The Company completed the sale of the hotel in April 2021.

Index

Additionally, during the first quarter of 2021, the Company recognized impairment losses totaling approximately $9.4 million to adjust the carrying values of 4 hotel properties identified for potential sale to their estimated fair values. The fair values of these properties were based on broker opinions of value using multiple methods to determine their value, including but not limited to replacement value, discounted cash flows and the income approach based on historical and forecasted operating results of the specific properties. These valuations are Level 3 inputs under the fair value hierarchy.

4. Debt

Summary

As of March 31, 2021 and December 31, 2020, the Company’s debt consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Revolving credit facility	$	149,900	$	105,800
Term loans and senior notes, net		863,737		864,225
Mortgage debt, net		509,395		512,546
Debt, net	$	1,523,032	$	1,482,571

The aggregate amounts of principal payable under the Company’s total debt obligations as of March 31, 2021 (including the revolving credit facility, term loans, senior notes and mortgage debt), for each of the next five fiscal years and thereafter are as follows (in thousands):

2021 (April - December)	$	67,706
2022		259,731
2023		296,213
2024		338,597
2025		245,140
Thereafter		322,265
		1,529,652
Unamortized fair value adjustment of assumed debt		1,399
Unamortized debt issuance costs		(8,019	)
Total	$	1,523,032

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 for more information on the interest rate swap agreements. The Company’s total fixed-rate and variable-rate debt, after giving effect to its interest rate swaps in effect at March 31, 2021 and December 31, 2020, is set forth below. All dollar amounts are in thousands.

	March 31, 2021			Percentage			December 31, 2020			Percentage
Fixed-rate debt (1)	$	1,234,201			81	%	$	1,287,219			86	%
Variable-rate debt		295,451			19	%		201,351			14	%
Total	$	1,529,652					$	1,488,570
Weighted-average interest rate of debt		3.88	%					3.86	%

(1)

Index

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. See Note 5 for more information on the interest rate swap agreements.

Credit Facilities

Credit Facilities Amendments

In early 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to the Company’s operating results, the Company anticipated that it could potentially not be in compliance with certain covenants under each of its unsecured credit facilities, as previously amended, in future periods if the existing Covenant Waiver Period (as defined below) under such facilities was not extended. As a result, on March 1, 2021, the Company entered into amendments to each of the unsecured credit facilities (the “March 2021 amendments”).

The Company previously entered into amendments in June 2020 that suspended the testing of the Company’s existing financial maintenance covenants under the unsecured credit facilities until the date the compliance certificate is required to be delivered for the fiscal quarter ending June 30, ~~2017~~2021 (unless the Company elects an earlier date) (the “Covenant Waiver Period”), and ~~2016.~~imposed certain restrictions that apply during such testing suspension period. The March 2021 amendments extend the testing for all but two of the Company’s existing financial maintenance covenants under the unsecured credit facilities until the date the compliance certificate is required to be delivered for the fiscal quarter ending June 30, 2022 (unless the Company elects an earlier date) (the “Extended Covenant Waiver Period”). The testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio is suspended until the compliance certificate is required to be delivered for the fiscal quarter ending March 31, 2022.

The March 2021 amendments also provide for, among other restrictions, the following during the remainder of the Extended Covenant Waiver Period:

●

Mandatory prepayments of amounts outstanding under the Company’s unsecured credit facilities of net cash proceeds from certain debt and equity issuances and asset dispositions, subject to various exceptions, including an allowance of $300 million for acquiring unencumbered assets with proceeds from assets sales and a $300 million allowance for acquiring unencumbered assets funded by common equity so long as outstanding borrowings under the revolving credit facility are less than $275 million. A portion of the mandatory prepayments will be available for future borrowing under the revolving credit facility;

●

A minimum liquidity covenant of $125 million;

●

A requirement to pledge the equity interests of each direct or indirect owner of certain unencumbered property in favor of the administrative agents if average liquidity for any month is less than $200 million or the total amount outstanding under the revolving credit facility exceeds $275 million;

●

Restrictions on the Company’s and its subsidiaries’ ability to incur additional indebtedness (except for maturities beyond 2026) or prepay certain existing indebtedness, except that the Company is permitted to prepay (prior to maturity) up to $35 million of secured debt maturities in 2021;

●

Restrictions on the Company’s ability to make cash distributions (except the payment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status) and share repurchases;

~~Index~~

●

Maximum discretionary capital expenditures of $50 million;

●

Limitations on additional investments; and

~~5. Debt~~

●

An increase in the applicable interest rate under the unsecured credit facilities until the end of the Extended Covenant Waiver Period to a rate that corresponds to the highest leverage-based applicable interest rate margin plus 0.15% with respect to the unsecured credit facilities.

The amendments also modify the calculation of the existing financial covenants for the four quarters subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts to the extent the most recently ended fiscal quarter is not at least four fiscal quarters from the end of the Extended Covenant Waiver Period, and provide for a LIBOR floor under the credit agreements of 25 basis points for Eurodollar Rate Loans and 1.25% for Base Rate Loans on the revolving credit facility, and any term loans under the credit agreements that are not hedged. The March 2021 amendments also modify certain of the existing financial maintenance covenants to less restrictive levels following the Extended Covenant Waiver Period as follows (capitalized terms are defined in the credit agreements):

Index

●

Maximum Consolidated Leverage Ratio of 8.50 to 1.00 for the first two fiscal quarters, 8.00 to 1.00 for two fiscal quarters, 7.50 to 1.00 for one fiscal quarter and then a ratio of 6.50 to 1.00 thereafter;

●

Minimum Fixed Charge Coverage Ratio of 1.05 to 1.00 for the first fiscal quarter, 1.25 to 1.00 for one fiscal quarter and then a ratio of 1.50 to 1.00 thereafter;

●

Minimum Unsecured Interest Coverage Ratio of no less than 1.25 to 1.00 for one fiscal quarter, 1.50 to 1.00 for one fiscal quarter, 1.75 to 1.00 for one fiscal quarter and a ratio of 2.00 to 1.00 thereafter; and

●

Maximum Unsecured Leverage Ratio of 65% for two fiscal quarters and 60% thereafter.

Except as otherwise set forth in the amendments, the terms of the credit agreements remain in effect.As of March 31, 2021, the Company was in compliance with the applicable covenants of the credit agreements as amended.

$~~965~~850 Million Credit Facility

The Company utilizes an unsecured “$~~965~~850 million credit facility” comprised of (i) a ~~$540~~$425 million revolving credit facility with an initial maturity date of ~~May 18, 2019~~July 27, 2022 (the “Revolving Credit Facility”) and (ii) a $425 million term loan facility consisting of 2 term loans: a $200 million term loan with a maturity date of ~~May 18, 2020, consisting~~July 27, 2023, and a $225 million term loan with a maturity date of ~~three term loans, all funded during 2015~~January 31, 2024 (the “$425 million term ~~loans”~~loan facility”). 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 and the amount of the total credit facility may be increased from $965 million to $1.25 billion.~~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,~~As of March 31, 2021, the Company ~~entered into two interest rate swap agreements, which effectively fix~~had availability of $275 million under 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.revolving credit facility. 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.

$~~150~~225 Million Term Loan Facility

~~On April 8, 2016, the~~

The Company ~~entered into~~has an unsecured ~~$150~~$225 million term loan facility ~~with~~that is comprised of (i) 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 “$150 million term loans”). The Company initially borrowed $50 million under the $150~~with a maturity date of August 2, 2023, and (ii) a $175 million term loan ~~facility on April 8, 2016 and borrowed the remaining $100 million on September 30, 2016.~~with a maturity date of August 2, 2025. 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 into two interest rate swap agreements which, beginning on September 30, 2016, effectively fix the interest rate on the $50 million term loan and $100 million term loan at 2.54% and 3.13%, respectively, subject to adjustment based on the Company’s leverage ratio, through maturity. See Note 6 for more information on the interest rate swap agreements. Proceeds from the $150 million term loan facility were used to pay down outstanding borrowings on the Company’s revolving credit facility, using the increased availability to repay scheduled mortgage debt maturities through the end of the first quarter of 2017.

~~$85~~

2017 $85 Million Term Loan

Facility

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 that was funded at closing (the ~~“$85 million term loan” and, together with the $425 million term loans and the $150 million term loans, the “term loans”). Net proceeds from the~~“2017 $85 million term loan ~~were used to pay down outstanding borrowings on the Company’s revolving credit facility.~~ ~~Subject to certain conditions including covenant compliance and additional fees, the $85 million term loan may be increased to $125 million.~~ facility”). The credit agreement, as amended and restated in August 2018, 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 2017 $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%~~1.30% to ~~2.60%~~2.10%, 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”). 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 $850 million credit facility. The Company may make voluntary prepayments in whole or in part, 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 1.70% to 2.55%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. ~~In conjunction~~

$50 Million Senior Notes Facility

On March 16, 2020, the Company entered into an unsecured $50 million senior notes facility with a maturity date of March 31, 2030, consisting of senior notes totaling $50 million funded at closing (the “$50 million senior notes facility” and, collectively with the $850 million credit facility, the $225 million term loan facility, the 2017 $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,~~facility 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~~2019 $85 million term loan facility, the “unsecured credit facilities”). Net proceeds from the $50 million senior notes facility were available to provide

Index

funding for general corporate purposes. The note 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 ~~approximately 3.76%,~~any time, subject to ~~adjustment based~~certain conditions, including make-whole provisions. Interest payments on the $50 million senior notes facility are due quarterly and the interest rate, subject to certain exceptions, ranges from an annual rate of 3.60% to 4.35% depending on the Company’s leverage ratio,~~, through maturity. See Note 6 for more information on~~ as calculated under the ~~interest rate swap agreements~~.

~~Index~~

terms of the facility.

As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the details of the Company’s ~~revolving~~unsecured credit ~~facility and term loans~~facilities were as set forth below. All dollar amounts are in thousands.

			Outstanding Balance
	Interest Rate (1)	Maturity Date	March 31, 2021			December 31, 2020
Revolving credit facility (2)	LIBOR + 1.40% - 2.25%	7/27/2022	$	149,900		$	105,800

Term loans and senior notes
$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			175,000
2017 $85 million term loan	LIBOR + 1.30% - 2.10%	7/25/2024		85,000			85,000
2019 $85 million term loan	LIBOR + 1.70% - 2.55%	12/31/2029		85,000			85,000
$50 million senior notes	3.60% - 4.35%	3/31/2030		50,000			50,000
Term loans and senior notes at stated value				870,000			870,000
Unamortized debt issuance costs				(6,263	)		(5,775	)
Term loans and senior notes, net				863,737			864,225

Credit facilities, net (2)			$	1,013,637		$	970,025
Weighted-average interest rate (3)				3.69	%		3.64	%

As of September 30, 2017 As of December 31, 2016

Maturity Date Outstanding Balance Interest Rate Outstanding Balance Interest Rate
Revolving credit facility (1) 5/18/2019 $ 216,700 2.78 % (2 ) $ 270,000 2.32 % (2 )

Term loans
$425 million term loans 5/18/2020 425,000 3.01 % (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 ) 0 n/a
Total term loans at stated value 660,000 575,000
Unamortized debt issuance costs (4,012 ) (4,066 )
Total term loans 655,988 570,934

Total revolving credit facility and term loans $ 872,688 $ 840,934

(1)	~~Unamortized~~ Interest rates on all of the unsecured credit facilities are increased to 0.15% above the highest rate shown for each loan during the Extended Covenant Waiver Period.

(2)

Excludes unamortized debt issuance costs related to the revolving credit facility ~~totaled~~totaling approximately ~~$2.0~~$2.2 million and ~~$2.8~~$2.1 million as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively, ~~and~~which are included in other assets, net in the Company's consolidated balance sheets.

~~(2)~~ (3)	~~Annual variable interest~~ Interest rate atrepresents the ~~balance sheet date.~~
~~(3)~~	~~Effective~~weighted-average effective annual interest rate which includes the effect of interest rate swaps on $322.5 million of the outstanding loan balance, resulting in an annual fixed interest rate of approximately 3.10% on this portion of the debt, subject to adjustment based on the Company's leverage ratio. See Note 6 for more information on the interest rate swap agreements. Remaining portion is variable rate debt.
~~(4)~~	~~Annual fixed~~ interest rate at the balance sheet date which includes the effect of interest rate swaps in effect on $695.0 million and $745.0 million of the outstanding ~~loan balance, subject to adjustment based on the Company’s leverage ratio.~~variable-rate debt as of March 31, 2021 and December 31, 2020, respectively. See Note 65 for more information on the interest rate swap agreements. The one-month LIBOR at March 31, 2021 and December 31, 2020 was 0.11% and 0.14%, respectively.

The credit agreements governing the $965 million credit facility, the $150 million term loan facility and the $85 million term loan 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. The Company was in compliance with the applicable covenants at September 30, 2017.

Mortgage Debt

As of ~~September 30, 2017,~~March 31, 2021, the Company had approximately ~~$430.1~~$509.8 million in outstanding ~~property level~~mortgage debt secured by 2833 properties with maturity dates ranging from ~~June 2020~~May 2021 to ~~December 2026,~~May 2038. Mortgages secured by 31 of the properties carry fixed stated interest rates ranging from ~~3.55%~~3.40% to 6.25% and effective interest rates ranging from ~~3.55%~~3.40% to 4.97%. Additionally, 1 loan secured by the 2 Cape Canaveral properties acquired in April 2020 carried a variable interest rate of one-month LIBOR plus 3.00% through April 12, 2021 when the loan was repaid in full. The loans generally provide for monthly payments of principal and interest on an amortized basis and defeasance or prepayment penalties if prepaid. As a result of the effects of the COVID-19 pandemic on certain hotels, the associated lenders granted temporary deferrals of principal and interest payments during 2020, however all payments resumed as of December 31, 2020. 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 ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 for each of the Company’s mortgage debt obligations. All dollar amounts are in thousands.

Index

Location	Brand	Interest Rate (1)			Loan Assumption or Origination Date	Maturity Date	Principal Assumed or Originated		Outstanding balance as of March 31, 2021			Outstanding balance as of December 31, 2020
Cape Canaveral, FL	Hampton		(2	)	4/30/2020	(3)	$	10,852	$	10,275		$	10,275
Cape Canaveral, FL	Home2 Suites		(2	)	4/30/2020	(3)		10,852		10,275			10,275
Colorado Springs, CO	Hampton		6.25	%	9/1/2016	7/6/2021		7,923		7,275			7,317
Franklin, TN	Courtyard		6.25	%	9/1/2016	8/6/2021		14,679		13,486			13,563
Franklin, TN	Residence Inn		6.25	%	9/1/2016	8/6/2021		14,679		13,486			13,563
Grapevine, TX	Hilton Garden Inn		4.89	%	8/29/2012	9/1/2022		11,810		9,344			9,434
Collegeville/Philadelphia, PA	Courtyard		4.89	%	8/30/2012	9/1/2022		12,650		10,009			10,105
Hattiesburg, MS	Courtyard		5.00	%	3/1/2014	9/1/2022		5,732		4,684			4,729
Kirkland, WA	Courtyard		5.00	%	3/1/2014	9/1/2022		12,145		9,924			10,018
Rancho Bernardo/San Diego, CA	Courtyard		5.00	%	3/1/2014	9/1/2022		15,060		12,305			12,422
Seattle, WA	Residence Inn		4.96	%	3/1/2014	9/1/2022		28,269		23,074			23,294
Anchorage, AK	Embassy Suites		4.97	%	9/13/2012	10/1/2022		23,230		18,485			18,660
Somerset, NJ	Courtyard		4.73	%	3/1/2014	10/6/2022		8,750		7,110			7,179
Tukwila, WA	Homewood Suites		4.73	%	3/1/2014	10/6/2022		9,431		7,663			7,737
Huntsville, AL	Homewood Suites		4.12	%	3/1/2014	2/6/2023		8,306		6,675			6,742
Prattville, AL	Courtyard		4.12	%	3/1/2014	2/6/2023		6,596		5,301			5,354
San Diego, CA	Residence Inn		3.97	%	3/1/2014	3/6/2023		18,600		14,910			15,061
Miami, FL	Homewood Suites		4.02	%	3/1/2014	4/1/2023		16,677		13,403			13,537
New Orleans, LA	Homewood Suites		4.36	%	7/17/2014	8/11/2024		27,000		22,569			22,766
Westford, MA	Residence Inn		4.28	%	3/18/2015	4/11/2025		10,000		8,534			8,605
Denver, CO	Hilton Garden Inn		4.46	%	9/1/2016	6/11/2025		34,118		30,143			30,387
Oceanside, CA	Courtyard		4.28	%	9/1/2016	10/1/2025		13,655		12,534			12,605
Omaha, NE	Hilton Garden Inn		4.28	%	9/1/2016	10/1/2025		22,682		20,819			20,936
Boise, ID	Hampton		4.37	%	5/26/2016	6/11/2026		24,000		22,028			22,146
Burbank, CA	Courtyard		3.55	%	11/3/2016	12/1/2026		25,564		23,241			23,315
San Diego, CA	Courtyard		3.55	%	11/3/2016	12/1/2026		25,473		23,158			23,232
San Diego, CA	Hampton		3.55	%	11/3/2016	12/1/2026		18,963		17,240			17,295
Burbank, CA	SpringHill Suites		3.94	%	3/9/2018	4/1/2028		28,470		27,078			27,078
Santa Ana, CA	Courtyard		3.94	%	3/9/2018	4/1/2028		15,530		14,770			14,770
Richmond, VA	Courtyard		3.40	%	2/12/2020	3/11/2030		14,950		14,665			14,739
Richmond, VA	Residence Inn		3.40	%	2/12/2020	3/11/2030		14,950		14,665			14,739
Portland, ME	Residence Inn		3.43	%	3/2/2020	4/1/2030		33,500		33,500			33,500
San Jose, CA	Homewood Suites		4.22	%	12/22/2017	5/1/2038		30,000		27,124			27,392
							$	575,096		509,752			512,770
Unamortized fair value adjustment of assumed debt										1,399			1,624
Unamortized debt issuance costs										(1,756	)		(1,848	)
Total									$	509,395		$	512,546

~~Index~~

Location Brand Interest Rate (1) Loan Assumption or Origination Date Maturity Date Principal Assumed or Originated Outstanding balance as of September 30, 2017 Outstanding balance as of December 31, 2016
Irving, TX Homewood Suites 5.83 % 12/29/2010 (2 ) $ 6,052 $ 0 $ 5,072
Gainesville, FL Homewood Suites 5.89 % 9/1/2016 (2 ) 12,051 0 11,966
Duncanville, TX Hilton Garden Inn 5.88 % 10/21/2008 (2 ) 13,966 0 12,126
Dallas, TX Hilton 3.95 % 5/22/2015 (3 ) 28,000 0 27,246
San Juan Capistrano, CA Residence Inn 4.15 % 9/1/2016 6/1/2020 16,210 15,858 16,104
Colorado Springs, CO Hampton 6.25 % 9/1/2016 7/6/2021 7,923 7,787 7,883
Franklin, TN Courtyard 6.25 % 9/1/2016 8/6/2021 14,679 14,429 14,604
Franklin, TN Residence Inn 6.25 % 9/1/2016 8/6/2021 14,679 14,429 14,604
Grapevine, TX Hilton Garden Inn 4.89 % 8/29/2012 9/1/2022 11,810 10,487 10,707
Collegeville/Philadelphia, PA Courtyard 4.89 % 8/30/2012 9/1/2022 12,650 11,233 11,468
Hattiesburg, MS Courtyard 5.00 % 3/1/2014 9/1/2022 5,732 5,249 5,357
Rancho Bernardo, CA Courtyard 5.00 % 3/1/2014 9/1/2022 15,060 13,790 14,074
Kirkland, WA Courtyard 5.00 % 3/1/2014 9/1/2022 12,145 11,121 11,350
Seattle, WA Residence Inn 4.96 % 3/1/2014 9/1/2022 28,269 25,871 26,409
Anchorage, AK Embassy Suites 4.97 % 9/13/2012 10/1/2022 23,230 20,706 21,133
Somerset, NJ Courtyard 4.73 % 3/1/2014 10/6/2022 8,750 7,990 8,160
Tukwila, WA Homewood Suites 4.73 % 3/1/2014 10/6/2022 9,431 8,611 8,795
Prattville, AL Courtyard 4.12 % 3/1/2014 2/6/2023 6,596 5,989 6,123
Huntsville, AL Homewood Suites 4.12 % 3/1/2014 2/6/2023 8,306 7,541 7,711
San Diego, CA Residence Inn 3.97 % 3/1/2014 3/6/2023 18,600 16,865 17,248
Miami, FL Homewood Suites 4.02 % 3/1/2014 4/1/2023 16,677 15,138 15,479
Syracuse, NY Courtyard 4.75 % 10/16/2015 8/1/2024 (4 ) 11,199 10,706 10,905
Syracuse, NY Residence Inn 4.75 % 10/16/2015 8/1/2024 (4 ) 11,199 10,706 10,905
New Orleans, LA Homewood Suites 4.36 % 7/17/2014 8/11/2024 27,000 25,087 25,577
Westford, MA Residence Inn 4.28 % 3/18/2015 4/11/2025 10,000 9,448 9,626
Denver, CO Hilton Garden Inn 4.46 % 9/1/2016 6/11/2025 34,118 33,253 33,857
Oceanside, CA Courtyard 4.28 % 9/1/2016 10/1/2025 13,655 13,394 13,576
Omaha, NE Hilton Garden Inn 4.28 % 9/1/2016 10/1/2025 22,682 22,248 22,550
Boise, ID Hampton 4.37 % 5/26/2016 6/11/2026 24,000 23,522 23,813
Burbank, CA Courtyard 3.55 % 11/3/2016 12/1/2026 25,564 25,081 25,564
San Diego, CA Courtyard 3.55 % 11/3/2016 12/1/2026 25,473 24,992 25,473
San Diego, CA Hampton 3.55 % 11/3/2016 12/1/2026 18,963 18,605 18,963
$ 514,669 430,136 494,428
Unamortized fair value adjustment of assumed debt 4,556 5,229
Unamortized debt issuance costs (1,909 ) (2,628 )
Total $ 432,783 $ 497,029

(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~~ Interest rate is variable based on one-month LIBOR plus 3.00%. As of March 31, 2021, the interest rate was 3.11%. In July 2020, the principal amount of the note was reduced by approximately $1.1 million representing a credit from the developer for shared construction savings.

(3)	Loan was repaid in full ~~during the three months ended March 31, 2017.~~
~~(3)~~	~~Assets securing this loan were classified as held for sale as of December 31, 2016. In~~on April ~~2017, the assets securing this loan were sold, and the loan was assumed by the buyer of those assets.~~
~~(4)~~	~~Outstanding principal balance is callable by lender or prepayable by the Company on August 1, 2019.~~12, 2021.

~~Index~~

The aggregate amounts of principal payable under the Company’s total debt obligations (including mortgage debt, the revolving credit facility and term loans), for the five years subsequent to September 30, 2017 and thereafter are as follows (in thousands):

2017 (October - December) $ 2,701
2018 11,071
2019 248,408
2020 451,164
2021 95,311
Thereafter 498,181
1,306,836
Unamortized fair value adjustment of assumed debt 4,556
Unamortized debt issuance costs related to term loans and mortgage debt (5,921 )
Total $ 1,305,471

5. Fair Value of Financial Instruments

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

Debt

The Company estimates the fair value of its debt by discounting the future cash flows of each instrument at estimated market rates consistent with the maturity of a debt obligation with similar credit terms and credit characteristics, which are Level 3 inputs under the fair value hierarchy. Market rates take into consideration general market conditions and maturity. As of ~~September 30, 2017~~March 31, 2021, and December 31, ~~2016,~~2020, both the carrying value and estimated fair value of the Company’s debt were approximately ~~$1.3~~$1.5 billion. Both the

Index

carrying value and estimated fair value of the Company’s debt (as discussed above) isare net of unamortized debt issuance costs related to term loans, senior notes and mortgage debt for each specific year.

Derivative Instruments

Currently, the Company uses interest rate swaps to manage its interest rate risks on ~~variable rate~~variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the ~~one month~~one-month LIBOR. The swaps are designed to effectively fix the interest payments on ~~variable rate~~variable-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 ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~2020. All dollar amounts are in thousands.

						Fair Value Asset (Liability)
Notional Amount at March 31, 2021		Origination Date	Effective Date	Maturity Date	Swap Fixed Interest Rate	March 31, 2021			December 31, 2020
Active interest rate swaps designated as cash flow hedges at March 31, 2021:
	100,000	4/7/2016	9/30/2016	3/31/2023	1.33%	$	(2,240	)	$	(2,681	)
	75,000	5/31/2017	7/31/2017	6/30/2024	1.96%		(3,632	)		(4,639	)
	10,000	8/10/2017	8/10/2017	6/30/2024	2.01%		(502	)		(636	)
	50,000	6/1/2018	1/31/2019	6/30/2025	2.89%		(4,591	)		(5,911	)
	50,000	7/2/2019	7/5/2019	7/18/2024	1.65%		(1,932	)		(2,593	)
	50,000	8/21/2019	8/23/2019	8/18/2024	1.32%		(1,378	)		(2,036	)
	50,000	8/21/2019	8/23/2019	8/30/2024	1.32%		(1,377	)		(2,049	)
	85,000	12/31/2019	12/31/2019	12/31/2029	1.86%		(2,657	)		(8,677	)
	25,000	12/6/2018	1/31/2020	6/30/2025	2.75%		(2,149	)		(2,801	)
	50,000	12/7/2018	5/18/2020	1/31/2024	2.72%		(3,354	)		(3,967	)
	75,000	8/21/2019	5/18/2020	5/18/2025	1.27%		(1,736	)		(3,294	)
	75,000	7/31/2020	8/18/2020	8/18/2022	0.13%		33			14
	75,000	8/21/2019	5/18/2021	5/18/2026	1.30%		(1,205	)		(3,415	)
	770,000						(26,720	)		(42,685	)

Matured interest rate swap at March 31, 2021:
$	50,000	4/7/2016	9/30/2016	3/31/2021	1.09%		-			(117	)
						$	(26,720	)	$	(42,802	)

Fair Value Asset (Liability)
Hedge Type
Notional Amount at
September 30, 2017
Origination Date Maturity Date
Swap Fixed
Interest Rate

September 30,
2017

December 31,
2016

Cash flow hedge $ 212,500 5/21/2015 5/18/2020 1.58 % $ 538 $ (198 )
Cash flow hedge 110,000 7/2/2015 5/18/2020 1.62 % 166 (246 )
Cash flow hedge 50,000 4/7/2016 3/31/2021 1.09 % 1,168 1,289
Cash flow hedge 100,000 4/7/2016 3/31/2023 1.33 % 3,148 3,744
Cash flow hedge 75,000 5/31/2017 6/30/2024 1.96 % 202 0
Cash flow hedge 10,000 8/10/2017 6/30/2024 2.01 % (4 ) 0
$ 557,500 $ 5,218 $ 4,589

~~Index~~

The Company assesses, both at inception and on an ongoing basis, the effectiveness of its qualifying cash flow hedges. ~~Changes~~As of March 31, 2021, all of the 13 active interest rate swap agreements listed above were designated as cash flow hedges. The change in the fair value onof the ~~effective portion of all~~Company’s designated cash flow hedges ~~are~~is recorded to accumulated other comprehensive ~~income,~~loss, a component of shareholders’ equity in the Company’s consolidated balance sheets. ~~Changes in fair value on the ineffective portion of all designated cash flow hedges are recorded to interest and other expense, net in the Company’s consolidated statements of operations.~~

To adjust qualifying cash flow hedges to their fair value and recognize the impact of hedge accounting, the Company recorded net unrealized gains (losses) of approximately $0.3 million and $4.3 million during the three months ended September 30, 2017 and 2016, respectively, and approximately $0.6 million and $(7.9) million during the nine months ended September 30, 2017 and 2016, respectively, to other comprehensive income (loss). There was no ineffectiveness recorded on designated cash flow hedges during the three and nine months ended September 30, 2017 and 2016. 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 gains (losses) on cash flow hedges previously recorded to other comprehensive income (loss) that were reclassified to interest and other expense, net during the three months ended September 30, 2017 and 2016, include approximately $(0.4) million and $(0.9) million, respectively, and during the nine months ended September 30, 2017 and 2016, include approximately $(1.8) million and $(2.9) million, respectively. The Company estimates that approximately ~~$(0.6)~~$11.2 million of net unrealized ~~gains (losses)~~losses included in accumulated other comprehensive ~~income~~loss at ~~September 30, 2017~~March 31, 2021 will be reclassified as ~~a net~~an increase to interest and other expense, net within the next 12 months.

Index

The following table presents the effect of derivative instruments in cash flow hedging relationships in the Company’s consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2021 and 2020 (in thousands):

	Net Unrealized Gain (Loss) Recognized in Other Comprehensive Loss					Net Unrealized (Loss) Reclassified from Accumulated Other Comprehensive Loss to Interest and Other Expense, net
	Three Months Ended March 31,					Three Months Ended March 31,
	2021		2020			2021			2020
Interest rate derivatives in cash flow hedging relationships	$	13,367	$	(42,267	)	$	(2,715	)	$	(101	)

6. Related Parties

The Company has, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. There have been no changes to the contracts and relationships discussed in the ~~Company’s 2016 Annual Report on~~2020 Form 10-K. Below is a summary of the significant related party relationships in effect during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

~~Prior to the merger,~~ 2020.

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”) and~~owns 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.~~

~~Support Services to Apple Ten, A10A and ARG Prior to and After the Apple Ten Merger~~

Effective September 1, 2016, the Company completed its merger with Apple Ten. As contemplated in the Merger Agreement, in connection with the completion of the merger, the advisory and related party arrangements with respect to the Company, Apple Ten and Apple Ten’s advisors, A10A and ARG, were terminated. Prior to the merger, A10A subcontracted its obligations under the advisory agreement between A10A and Apple Ten to the Company. which receives support services from ARG.

The Company ~~provided to Apple Ten the advisory~~provides support services, ~~contemplated under the A10A advisory agreement and received an annual advisory fee and was reimbursed by Apple Ten for~~including the use of the Company’s employees and corporate office, to ARG and ~~other costs associated with~~is reimbursed by ARG for the ~~advisory agreement. Additionally,~~cost of these services. Under this cost sharing structure, amounts reimbursed to the Company ~~provided support services~~include both compensation for personnel and office related costs (including office rent, utilities, office supplies, etc.) used by ARG. The amounts reimbursed to ~~Apple Ten’s advisors, who agreed to reimburse~~ the Company ~~for its~~are based on the actual costs ~~in providing these services. Both~~of the ~~advisory fees~~services and a good faith estimate of the proportionate amount of time incurred by the Company’s employees on behalf of ARG. Total reimbursed costs ~~received~~allocated by the Company from Apple Ten were recorded as general and administrative expense by Apple Ten and reductions to general and administrative expense by the Company and, therefore, the termination of the subcontract agreement had no financial impact on the combined company after the effective time of the merger. After the merger, the Company has continued and will continue to provide support services to ARG for ~~activities unrelated to Apple Ten.~~

~~Prior to~~ the ~~merger, advisory fees earned by the Company from Apple Ten for the nine~~three months ended ~~September 30, 2016~~March 31, 2021 and 2020 totaled approximately ~~$1.6~~$0.2 million and are recorded as a reduction to general and administrative expenses in the Company’s consolidated statement of operations. Total reimbursed costs received by the Company from these entities for the nine months ended September 30, 2017 and 2016 (including Apple Ten, A10A and ARG prior to September 1, 2016 and ARG thereafter) totaled approximately $0.5 million and $2.3$0.3 million, respectively, and are recorded as a reduction to general and administrative expenses in the Company’s consolidated statements of operations. As of September 30, 2017 and December 31, 2016, total amounts due from ARG for reimbursements under the cost sharing structure totaled approximately $0.3 million and $0.2 million, respectively, and are included in other assets, net in the Company’s consolidated balance sheets.

~~Index~~

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 March 31, 2021 and December 31, 2020, total amounts due from ARG for reimbursements under the cost sharing structure totaled approximately $0.2 million and $0.3 million, respectively, and are included in other assets, net in the Company’s consolidated balance sheets.

The Company, through its wholly-owned subsidiary, Apple Air Holding, LLC, ~~(“Apple Air”)~~

~~The Company, through a wholly-owned subsidiary, Apple Air,~~ owns a Learjet used primarily for acquisition, asset management, renovation and investor and public relations purposes. 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. Effective September 1, 2016, with the completion of the merger, the Company acquired Apple Ten’s 26% equity interest in Apple Air resulting in a 100% equity ownership interest in Apple Air and the elimination of Apple Ten’s minority interest.

The aircraft is also leased to affiliates of the Company based on third party rates, which leasing activity was not significant during the reporting periods. The Company also utilizes one aircraft, owned through ~~two entities, one of which is~~an entity owned by the Company’s Executive Chairman, ~~and the other, its President and Chief Executive Officer,~~ for acquisition, asset management, renovation and investor and public relations purposes, and reimburses ~~these entities~~the entity at third party rates. Total ~~amounts~~costs incurred for the use of the aircraft during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 were ~~approximately~~less than $0.1 million ~~and $0.2 million, respectively, related to aircraft owned through these two entities~~for each respective period and are included in general and administrative expenses in the Company’s consolidated statements of operations.

7. Shareholders’ Equity

Distributions

~~The~~

Subsequent to the distribution paid in March 2020, the Company announced the suspension of its monthly distributions due to the impact of COVID-19 on its operating cash flows. Prior to the suspension of its distributions, the Company’s ~~current~~ annual distribution rate, payable monthly, iswas $1.20 per common share. For the three months ended ~~September 30, 2017 and 2016,~~March 31, 2020, the Company paid distributions of $0.30 per common share for a total of ~~$66.9 million and $57.2 million, respectively. For~~$67.3 million. The distributions paid during the ~~nine~~three months ended ~~September 30, 2017 and 2016,~~March 31, 2020 included the distribution paid in January 2020, totaling $22.4 million, that was declared in December 2019. As discussed in Note 4, as a requirement under the amendments to its unsecured credit facilities, the Company ~~paid~~is restricted in its ability to make distributions during the Extended Covenant Waiver Period, except for the payment of cash distributions of ~~$0.90~~$0.01 per common share ~~for a total~~per quarter or to the extent required to maintain REIT status. In the first quarter of ~~$200.7 million and $161.9 million, respectively. Additionally, in September 2017,~~2021, the Company ~~declared~~resumed the declaration of distributions with the declaration of a ~~monthly~~quarterly distribution of ~~$0.10~~$0.01 per common share ~~totaling $22.3 million,~~in March 2021, which was ~~recorded as a payable as of September 30, 2017 and~~ paid on April 15, 2021, resulting in ~~October 2017. As of December 31, 2016, a monthly~~

Index

an accrued distribution of ~~$0.10 per common share, totaling $22.3~~$2.2 million ~~was recorded as a payable and paid in January 2017. These accrued distributions were~~ included in accounts payable and other liabilities in the Company’s consolidated balance ~~sheets.~~

~~Equity Distribution Agreement~~

sheet at March 31, 2021.

Issuance of Shares

On ~~February 28, 2017,~~August 12, 2020, 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”), pursuant to which the Company may 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”). ~~During the nine months ended September 30, 2017,~~As of March 31, 2021, the Company had ~~no sales~~not sold any common shares under the ATM Program.

The Company plans to use the net proceeds from the sale of these shares to pay down borrowings on its revolving credit facility and, under certain circumstances, to repay proportionally amounts under each of the Company’s revolving credit facility, term loans and senior notes, subject to certain restrictions during the Extended Covenant Waiver Period pursuant to the Company’s unsecured credit facilities, as discussed further in Note 4, titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q. The Company plans to use the corresponding increased availability under the revolving credit facility for general corporate purposes which may include, among other things, acquisitions of additional properties, the repayment of other outstanding indebtedness, capital expenditures, improvement of properties in its portfolio and working capital.

Share Repurchases

In May 2020, the Company’s Board of Directors approved an extension of its existing share repurchase program, authorizing share repurchases up to an aggregate of $345 million (the “Share Repurchase Program”). The Share Repurchase Program

~~In connection with the implementation of its ATM Program, in February 2017,~~ may be suspended or terminated at any time by the Company and will end in July 2021 if not terminated ~~its existing written trading plan under the Company’s share repurchase program.~~earlier. During the first ~~nine~~three months of ~~2016,~~2020, the Company purchased, under its ~~share repurchase program,~~Share Repurchase Program approximately ~~20,000~~1.5 million of its common shares at a weighted-average market purchase price of approximately ~~$18.10~~$9.42 per common share, for an aggregate purchase price, including commissions, of approximately ~~$0.4~~$14.3 million. The shares were repurchased under a written trading plan that provided for share repurchases in open market transactions and was intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In March 2020 the Company ~~did~~terminated its written trading plan and has not ~~repurchase any common shares under its share repurchase program during the first nine months of 2017. The Company plans to continue to consider opportunistic share~~engaged in additional repurchases under the ~~$467.5 million remaining portion~~Share Repurchase Program since then. Repurchases under the Share Repurchase Program have been funded, and the Company intends to fund future purchases, with cash on hand or availability under its unsecured credit facilities subject to any applicable restrictions under the Company’s unsecured credit facilities. The timing of share repurchases and the ~~authorized $475 million share repurchase program, which~~number of common shares to be repurchased under the Share Repurchase Program will depend onupon the prevailing market conditions, regulatory requirements and other factors. ~~The program may be suspended or terminated at any time by~~Share repurchases are subject to certain restrictions during the ~~Company~~Extended Covenant Waiver Period pursuant to the amendments to the Company’s unsecured credit facilities, as discussed further in Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and ~~as a result of an extension of the program approved by the Board of Directors~~Notes thereto, appearing elsewhere in ~~May 2017, will end in July 2018 if not terminated earlier.~~

~~Index~~

9.this Quarterly Report on Form 10-Q.

8. Compensation Plans

~~In February 2017, the Compensation Committee of the Board of Directors (“Compensation Committee”) approved~~

The Company annually establishes an ~~executive~~ incentive plan ~~(“2017~~for its executive management. Under the incentive plan for 2021 (the “2021 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 ~~2017~~2021 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-year~~three-year periods). ~~The components of~~With respect to the operational performance metrics, the first half of the year, for the period of January 1 – June 30, 2021, will be based on operational performance metrics including portfolio occupancy growth, expense management, successful negotiation of amendments to each of the Company’s unsecured credit facilities and ~~shareholder return~~effective allocation of capital to drive incremental returns, with no specific target or weighting assigned to each metric. The Compensation Committee intends to review performance mid-year to determine the feasibility of reverting back to operational performance metrics for the second half of the year that are ~~equally weighted and~~more consistent with the ~~two~~Company’s historical operational performance metrics. The operational performance 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. At March 31, 2021, the range of potential aggregate payouts under the ~~2017~~2021 Incentive Plan iswas $0 - ~~$18~~$22.4 million. Based on performance through ~~September 30, 2017,~~March 31, 2021, the Company has accrued approximately ~~$4.7~~$2.9 million as a liability for potential executive bonus payments under the ~~2017~~2021 Incentive Plan, which is included in accounts payable and other liabilities in the Company’s consolidated balance sheet as of ~~September 30, 2017. Compensation expense recognized by the Company under the 2017 Incentive Plan is included~~March 31, 2021 and in general and administrative ~~expense~~expenses in the Company’s consolidated ~~statements~~statement of operations ~~and totaled approximately $1.2 million and $4.7 million~~ for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2021. Approximately 25% of target awards under the ~~2017~~2021 Incentive Plan, if any, will be paid in cash, and 75% will be issued in stock under the Company’s 2014 Omnibus Incentive Plan, approximately two-thirds of which ~~would~~will vest ~~at the end of 2017~~in December 2021 and one-third of which ~~would~~will vest atin December 2022.

Under the ~~end of 2018. During 2016 and 2015, comparable executive~~ incentive ~~plans were approved by the Compensation Committee (“2016 Incentive Plan” and “2015~~plan for 2020 (the “2020 Incentive Plan”) ~~that were effective January 1, 2016 and January 1, 2015, respectively. The~~, the Company recorded ~~a (decrease) increase of~~ approximately ~~$(0.8)~~$1.5 million ~~and $2.8 million to~~in general and administrative ~~expense related to the 2016 Incentive Plan~~expenses in ~~the Company’s~~its consolidated ~~statements~~statement of operations for the three ~~and nine~~ months ended ~~September 30, 2016, respectively, with the decrease resulting from the reduction of the previously recorded executive bonus accrual due to lower anticipated 2016 performance.~~

~~Share Based Compensation Awards~~

During the first quarters of 2017 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 unrestricted at the time of issuance, and the remaining 41,277 restricted shares will vest on December 15, 2017. 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 DecemberMarch 31, 2016, 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 recorded as a liability as of December 31, 2016, which was included in accounts payable and other liabilities in the Company’s consolidated balance sheet and the remaining $0.4 million, which is subject to vesting on December 15, 2017, will be recognized as compensation expense proportionately throughout 2017. Of the total 2015 share based compensation, approximately $1.6 million, which vested on December 31, 2016, was recognized as compensation expense proportionately throughout 2016. For2020.

During the three months ended ~~September 30, 2017 and 2016,~~March 31, 2020, the Company ~~recognized~~accrued expense associated with 2 separation agreements of approximately ~~$0.1~~$1.25 million ~~and $0.4~~each, totaling approximately $2.5 million, ~~respectively, and for~~in connection with the ~~nine months ended September 30, 2017 and 2016, the Company recognized approximately $0.3 million and $1.2 million, respectively,~~retirements of ~~share based compensation expense related to the unvested restricted share awards.~~

~~10. Legal Proceedings~~

~~Quinn v. Knight, et al.~~

~~As previously disclosed in~~ the Company’s ~~Annual Report on Form 10-K for~~former Executive Vice President and Chief Operating Officer and the ~~year ended December 31, 2016 (the “2016 Form 10-K”), on July 19, 2016, a purported shareholder of Apple Ten, now part of the Company, commenced a derivative action~~Company’s former Executive Vice President and Chief Financial Officer which amounts were paid in ~~the United States District Court for the Eastern District of Virginia. On November 2, 2016, the parties reached an agreement in principle to settle the litigation, which the Court approved by order dated March 16, 2017. In January 2017, the Company funded the settlement amount of $32 million, which~~October 2020. The accrued expense was included in ~~accounts payable~~general and other liabilities in its consolidated balance sheet as of December 31, 2016, and received $10 million of proceeds from its director and officer insurance carriers, which was included in other assets, net in its consolidated balance sheet as of December 31, 2016 and the net $22 million was included in transaction and litigation costs (reimbursements)administrative expenses in the Company’s consolidated statement of operations for the ~~year then ended. In May 2017,~~three months ended March 31, 2020.

Index

Share-Based Compensation Awards

The following table sets forth information pertaining to the share-based compensation issued under the 2020 Incentive Plan and the incentive plan for 2019 (the “2019 Incentive Plan”).

	2020 Incentive Plan			2019 Incentive Plan
Period common shares issued	First Quarter 2021			First Quarter 2020

Common shares earned under each incentive plan		555,726			665,552
Common shares surrendered on issuance date to satisfy tax withholding obligations		117,647			60,616
Common shares earned and issued under each incentive plan, net of common shares surrendered on issuance date to satisfy tax withholding obligations		438,079			604,936
Closing stock price on issuance date	$	14.03		$	13.01
Total share-based compensation earned, including the surrendered shares (in millions)	$	7.8	(1)	$	8.7	(2)
Of the total common shares earned and issued, total common shares unrestricted at time of issuance		160,216			426,553
Of the total common shares earned and issued, total common shares restricted at time of issuance		277,863			178,383

Restricted common shares vesting date	December 10, 2021			December 11, 2020
Common shares surrendered on vesting date to satisfy tax withholding requirements resulting from vesting of restricted common shares	n/a				60,066

(1)

Of the total 2020 share-based compensation, approximately $5.9 million was recorded as a liability as of December 31, 2020 and is included in accounts payable and other liabilities in the Company’s consolidated balance sheet at December 31, 2020. The remaining $1.9 million, which is subject to vesting on December 10, 2021 and excludes any restricted shares forfeited or vested prior to that date, will be recognized as share-based compensation expense proportionately throughout 2021. For the three months ended March 31, 2021, the Company recognized approximately $0.5 million of share-based compensation expense related to restricted share awards.

(2)

Of the total 2019 share-based compensation, approximately $1.2 million, which vested on December 11, 2020, was recognized as share-based compensation expense proportionately throughout 2020. For the three months ended March 31, 2020, the Company recognized approximately $0.3 million of share-based compensation expense related to restricted share awards.

Additionally, in conjunction with the appointment of 5 new officers of the Company ~~received~~on April 1, 2020, the Company issued to the new officer group a total of approximately 200,000 restricted common shares with an ~~additional $2.6~~aggregate grant date fair value of approximately $1.8 million. For each grantee, the restricted shares will vest on March 31, 2023 if the individual remains in service of the Company through the date of vesting. The expense associated with the awards will be amortized over the 3-year restriction period. For the three months ended March 31, 2021, the Company recognized approximately $0.1 million of proceeds from its director and officer insurance carriers, which was included as a reduction in transaction and litigation costs (reimbursements) in the Company’s consolidated statements of operations for the nine months ended September 30, 2017. The Company does not anticipate additional costs or reimbursementsshare-based compensation expense related to ~~this litigation.~~

~~Index~~

~~Moses, et al. v. Apple Hospitality REIT, Inc., et al.~~

~~As previously disclosed in the 2016 Form 10-K, on~~these awards.

9. Subsequent Events

On April 22, 2014, Plaintiff Susan Moses, purportedly a shareholder of Apple REIT Seven, Inc. (“Apple Seven”) and Apple REIT Eight, Inc. (“Apple Eight”), filed a class action against the Company and several individual directors on behalf of all then-existing shareholders and former shareholders of Apple Seven and Apple Eight, who purchased additional shares under the Dividend Reinvestment Plans (“DRIP”) of Apple Seven, Apple Eight and the Company between July 17, 2007 and February 12, 2014. In January 2017, the parties reached an agreement in principle to settle the litigation for $5.5 million. The settlement was preliminarily approved by the court in September 2017 and a settlement hearing has been scheduled in January 2018. The settlement amount has been included in accounts payable and other liabilities in the Company’s consolidated balance sheets as of December 31, 2016 and September 30, 2017, and in transaction and litigation costs (reimbursements) in the Company’s consolidated statement of operations for the year ended December 31, 2016. At this time, no assurance can be given that the proposed settlement will be approved, and therefore the actual loss incurred could be in excess of the amount accrued as of September 30, 2017.

~~Wilchfort, et al. v. Apple Hospitality REIT, Inc., et al.~~

On February 24, 2017, Plaintiff Marsha Wilchfort, purportedly a shareholder of Apple REIT Six, Inc. (“Apple Six”), Apple Seven and Apple Eight, filed a class action against, among others, the Company and the former individual directors of Apple Six, Apple Seven and Apple Eight, including Mr. Glade Knight, on behalf of all then-existing shareholders and former shareholders of Apple Six, Apple Seven and Apple Eight, who purchased additional shares under Apple Six’s, Apple Seven’s and Apple Eight’s DRIP between July 17, 2007 and December 2012 (in the case of Apple Six shareholders) or June 30, 2013 (in the case of Apple Seven and Apple Eight shareholders). The complaint was filed in the United States District Court for the Eastern District of New York and alleges, among other items, breach of contract under Virginia law, tortious interference and breach of implied duty of good faith and fair dealing. The complaint alleges that the prices at which Plaintiff and the purported class members purchased additional shares through the DRIPs were not indicative of the true value of the units of Apple Six, Apple Seven and Apple Eight.

The Company believes that Plaintiff’s claims are without merit and intends to defend this case vigorously. At this time, the Company cannot reasonably predict the outcome of this proceeding or provide a reasonable estimate of the possible loss or range of loss due to this proceeding, if any.

~~11. Subsequent Events~~

~~In October 2017,~~15, 2021, the Company paid approximately ~~$22.3~~$2.2 million, or ~~$0.10~~$0.01 per outstanding common share, in distributions to its common shareholders.

In ~~October 2017,~~February 2021, the Company ~~declared~~entered into a ~~regular monthly cash distribution of $0.10 per common share~~purchase and sale agreement with an unrelated party for the ~~month~~sale of ~~November 2017. The distribution is payable on November 15, 2017.~~

its 102-room Overland Park, Kansas SpringHill Suites for a gross sales price of approximately $5.3 million. On ~~October 5, 2017,~~April 30, 2021, the Company completed the sale of the ~~Fairfax, Virginia Marriott for a sale price of approximately $41.5 million.~~hotel. The ~~Company used the~~ net proceeds from the sale were used to pay down borrowings on ~~its~~the Company’s revolving credit facility. ~~See Note 4 for additional information.~~

~~On October 13, 2017, the Company closed on the purchase of an existing 179-room Residence Inn in Portland, Maine for a gross purchase price of approximately $55.8 million.~~

~~On October 20, 2017, the Company closed on the purchase of an existing 136-room Residence Inn in Salt Lake City, Utah for a gross purchase price of $25.5 million.~~

Index

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

Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are typically identified by use of ~~terms~~statements that include phrases such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “target,” “goal,” “plan,” “should,” “will,” “predict,” “potential,” “outlook,” “strategy,” and similar expressions that convey the uncertainty of future events or outcomes. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of ~~Apple Hospitality REIT, Inc. (the “Company”)~~the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Company’s forward-looking statements continues to be the adverse effect of COVID-19, including resurgences and new variants, on the Company’s business, financial performance and condition, operating results and cash flows, the real estate market and the hospitality industry specifically, and the global economy and financial markets generally. The significance, extent and duration of the continued impacts caused by the COVID-19 outbreak on the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including the scope, severity and duration of the pandemic, the extent and effectiveness of the actions taken to contain the pandemic or mitigate its impact, the speed of the vaccine roll-out, the efficacy, acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against emerging variants of COVID-19, the potential for additional hotel closures/consolidations that may be mandated or advisable, whether based on increased COVID-19 cases, new variants or other factors, the slowing or potential rollback of “reopenings” in certain states, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled “Risk Factors” in the Company’s 2020 Form 10-K as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Such additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of properties; the ability of the Company to successfully integrate pending transactions and implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions; reduced business and leisure travel due to travel-related health concerns, including the widespread outbreak of COVID-19 or an increase in COVID-19 cases or any other infectious or contagious diseases in the U.S. or abroad; adverse changes in the real estate and real estate capital markets; financing risks; ~~the outcome of current and future~~changes in interest rates; litigation ~~including any legal proceedings that have been or may be instituted against the Company or others;~~risks; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact the Company’s business, assets or classification as a ~~real estate investment trust (“REIT”).~~REIT. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved. In addition, the Company’s qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue ~~Code.~~Code of 1986, as amended. Readers should carefully review the risk factors described in the Company’s filings with the Securities and Exchange Commission (“SEC”), including but not limited to those discussed in the section titled “Risk Factors” in the ~~Company’s Annual Report on~~2020 Form ~~10-K for the year ended December 31, 2016.~~10-K. Any forward-looking statement that the Company makes speaks only as of the date of this Quarterly Report. The Company undertakes no obligation to publicly update or revise any forward-looking statements or cautionary factors, as a result of new information, future events, or otherwise, except as required by law.

The following discussion and analysis should be read in conjunction with the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the information contained in the ~~Company’s Annual Report on~~2020 Form ~~10-K for the year ended December 31, 2016.~~

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 ~~September 30, 2017,~~March 31, 2021, the Company owned ~~237~~233 hotels with an aggregate of ~~30,188~~29,855 rooms located in urban, high-end suburban and developing markets throughout 3335 states, including one hotel with ~~316~~102 rooms classified as held for sale, which was sold to an unrelated party in ~~October 2017. All~~April 2021. Substantially all of the Company’s hotels operate under Marriott or Hilton brands. The hotels are operated and managed under separate management agreements with 2216 hotel management companies, none of which are affiliated with the Company. The Company’s common shares are listed on the ~~New York Stock Exchange~~NYSE under the ticker symbol “APLE.”

~~2017 Investing~~

The Impact of COVID-19 on the Company and Hospitality Industry

Since first being reported in December 2019, COVID-19 has spread globally, including to every state in the U.S. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19.

Index

The outbreak of COVID-19 has not only specifically reduced travel, but also has had a detrimental impact on regional and global economies and financial markets. The global, national and local impact of the outbreak has rapidly evolved and many countries, including the U.S., as well as state and local governments, have reacted by instituting and reinstituting a wide variety of measures intended to control its spread, including states of emergency, mandatory quarantines, implementation of “stay at home” orders, business closures, border closings, and restrictions on travel and large gatherings, which has resulted in, and may continue to result in, cancellation of events, including sporting events, conferences and meetings. The pandemic triggered a period of material global economic slowdown and the National Bureau of Economic Research declared that the U.S. has been in a recession since February 2020. While the Company’s operating results and the overall economy in the U.S. have shown signs of a gradual recovery, the Company cannot presently determine the extent or duration of the overall operational and financial effects that COVID-19 will have on the Company, its business, the hospitality industry and the economy, or whether the recovery will continue.

The effects of the pandemic on the hotel industry are unprecedented. COVID-19 has disrupted the industry and has dramatically reduced business and leisure travel, which has had a significant adverse impact on, and management expects COVID-19 will continue to significantly adversely impact and disrupt, the Company’s business, financial performance and condition, operating results and cash flows. While the economy has shown signs of recovery as some of the initial restrictions put into place during 2020 have eased, occupancy and average daily rate (“ADR”) are still significantly below 2019 levels. Additionally, while vaccines have been developed and distribution began in December 2020 and these efforts suggest that conditions may continue to gradually improve during 2021, there can be no assurances of how quickly the vaccines will slow the spread of the virus and allow the economy to recover. The Company expects the significant decline in revenue associated with COVID-19 and the overall decline in the U.S. economy to negatively impact the Company’s revenue and operating results for an extended period of time. The Company does not expect a material improvement in results until business travel and general consumer confidence related to risks associated with the economy and COVID-19 improve and government restrictions on travel and business operations are broadly lifted.

Since the beginning of the pandemic, the Company, its management companies and its brands have taken steps to minimize costs and cash outflow to maintain a sound liquidity position. The Company has implemented cost elimination and efficiency initiatives at each of the Company’s hotels by reducing labor costs, reducing or eliminating certain amenities and reducing rates under various service contracts, enhanced its sales efforts by focusing on COVID-19-specific demand opportunities in certain markets and has strategically targeted and maximized performance based on available demand, reduced non-essential capital improvement projects planned for 2021, and entered into amendments to its unsecured credit facilities to temporarily waive the financial covenant testing for the majority of its financial maintenance covenants until June 30, 2022. Despite the cost reduction initiatives discussed above, the Company does not expect to be able to fully, or even materially, offset revenue losses from COVID-19. The extent and duration of COVID-19 effects are not currently known, and these uncertainties continue to make it difficult to predict operating results for the Company’s hotels for the near future. Therefore, while the ongoing vaccination efforts suggest that conditions may continue to gradually improve during 2021, there can be no assurances that the Company will not experience further declines in hotel revenues or earnings at its hotels or how long the effects will continue to impact the Company’s operating results.

2021 Hotel Portfolio Activities

The following discussion regarding the Company’s approach to acquisitions and dispositions reflects the Company’s historical strategy. While the Company anticipates it will continue to approach the acquisition and disposition of hotels similarly over the long term, the detrimental impact of COVID-19 to the Company and overall lodging industry has and may continue to limit the Company’s ability to effectively acquire or dispose of hotels until the industry recovers.

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-service~~rooms-focused hotels, in 2019 the Company entered into a contract to purchase a 176-room Hilton Garden Inn to be constructed in Madison, Wisconsin. Construction of the hotel was completed in February 2021 and the Company acquired ~~three newly constructed hotels~~the hotel on February 18, 2021 for ~~an aggregate~~a gross purchase price of ~~approximately $56.4~~$49.6 million, during the first nine months of 2017: a 124-room Courtyard by Marriott hotel in Fort Worth, Texas and a 104-room Hilton Garden Inn and 106-room Home2 Suites dual-branded hotel in Birmingham, Alabama. The purchase price for each of these properties was funded throughutilizing borrowings on the Company’s ~~$540 million~~ revolving credit facility (the “revolving credit facility”). In October 2017, the Company completed the purchase of two additional hotels (a 136-room Residence Inn hotel in Salt Lake City, Utah and a 179-room Residence Inn hotel in Portland, Maine) for an aggregate purchase price of approximately $81.3 million. The Company also has outstanding contracts for the potential purchase of two additional hotels that are under construction for a total purchase price of approximately $64.8 million, which are planned to be completed and opened for business over the next 12 months from September 30, 2017, at which time closing on these hotels is expected to occur.

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~~Additionally, for~~facility.

For its existing portfolio, the Company monitors each property’s profitability, market conditions and capital requirements and attempts to maximize shareholder value by disposing of properties when it believes that superior value can be provided ~~by the proceeds~~ from the sale of the property. As a result, ~~on April 20, 2017,~~during the first quarter of 2021, the Company ~~completed the~~sold two hotels for a total combined gross sales price of $18.3 million and recognized a gain on sale of ~~its 224-room Hilton hotel~~approximately $4.5 million in ~~Dallas, Texas, which was classified as held for sale~~the first quarter of 2021. Additionally, as of ~~December~~March 31, ~~2016, for approximately $56.1 million~~. ~~Also, on October 5, 2017,~~2021, the Company ~~completed~~ ~~the sale~~had an outstanding contract to sell one of its ~~316-room Marriott hotel in Fairfax, Virginia, which was classified as held for sale as of September 30. 2017,~~hotels for a gross sales price of ~~$41.5~~approximately $5.3 million,. which was completed in April 2021. The Company used the net proceeds from the sales to pay down borrowings on ~~its~~the Company’s revolving credit facility.

See Note 32 titled “Investment in Real Estate” and Note 43 titled “Assets Held for Sale and Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these transactions.

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Hotel Operations

Although hotel performance can be influenced by many factors including local competition, local and general economic conditions in the United States and the performance of individual managers assigned to each hotel, performance of the Company’s hotels as compared to other hotels within their respective local markets, in general, has met the Company’s expectations for the period owned. Over the past several quarters, the lodging industry and the Company have experienced low single-digit revenue growth. Moderate improvements in the general U.S. economy have been partially offset by increased supply in many markets. With modest revenue growth, the Company has produced stable operating results during the first nine months of 2017 on a comparable basis (as defined below) with expense increases generally offsetting revenue growth. There is no way to predict future economic conditions, and there are certain additional factors that could negatively affect the lodging industry and the Company, including but not limited to, increased hotel supply in certain markets, labor uncertainty both for the economy as a whole and the lodging industry in particular, global volatility and government fiscal policies. The Company, on a comparable basis, and industry are forecasting a low single-digit percentage increase in revenue for the full year of 2017 as compared to 2016, with this trend expected to continue into 2018. The Company’s revenue growth rate for comparable hotels in 2017 is anticipated to be lower than the growth achieved in 2016, primarily due to inconsistent demand in certain markets and increased hotel supply meeting demand growth in others, limiting the Company’s ability 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, average daily rate (“ADR”) and revenue per available room (“RevPAR”), and expenses, such as hotel operating expenses, general and administrative expenses and other expenses described below.

As of ~~September 30, 2017,~~March 31, 2021, the Company owned ~~237~~233 hotels with a total of ~~30,188~~29,855 rooms as compared to ~~236~~231 hotels with a total of ~~30,299~~29,535 rooms as of ~~September 30, 2016, however, results~~March 31, 2020. Results of operations are included only for the period of ownership for hotels acquired or disposed of during the current reporting period and prior year. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, the Company acquired ~~three~~one newly constructed ~~hotels (one~~hotel on February ~~2, 2017, and two on September 12, 2017)~~18, 2021 and sold one hotel on ~~April 20, 2017.~~February 25, 2021 and one hotel on March 16, 2021. During ~~2016,~~2020, the Company acquired ~~56 hotels in the Apple REIT Ten, Inc. (“Apple Ten”) merger effective September 1, 2016 (the “Apple Ten merger”), acquired one additional~~two newly constructed ~~hotel~~hotels on ~~July 1, 2016~~April 30, 2020 and two newly constructed hotels on August 13, 2020, and sold three hotels (one on January 16, 2020, one ~~hotel~~on February 27, 2020 and one on December ~~6, 2016.~~30, 2020). As a result, the comparability of results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 as discussed below is ~~significantly~~ impacted by these ~~transactions.~~

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transactions in addition to the impact of COVID-19 beginning in March 2020.

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 revenue per available room (“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.~~Company:

	Three Months Ended March 31,
(in thousands, except statistical data)	2021			Percent of Revenue			2020			Percent of Revenue			Percent Change
Total revenue	$	158,713			100.0	%	$	238,010			100.0	%		-33.3	%
Hotel operating expense		103,740			65.4	%		155,266			65.2	%		-33.2	%
Property taxes, insurance and other expense		19,688			12.4	%		19,595			8.2	%		0.5	%
General and administrative expense		8,119			5.1	%		9,523			4.0	%		-14.7	%

Loss on impairment of depreciable real estate assets		10,754						-					n/a
Depreciation and amortization expense		48,710						49,522						-1.6	%
Gain on sale of real estate		4,484						8,839					n/a
Interest and other expense, net		18,513						15,566						18.9	%
Income tax expense		108						146						-26.0	%

Net loss		(46,435	)					(2,769	)					n/a
Adjusted hotel EBITDA ⁽¹⁾		35,427						63,297						-44.0	%

Number of hotels owned at end of period		233						231						0.9	%
ADR	$	99.19					$	132.55						-25.2	%
Occupancy		55.5	%					60.9	%					-8.9	%
RevPAR	$	55.09					$	80.66						-31.7	%

(1)	See reconciliation of Adjusted Hotel EBITDA to net loss in “Non-GAAP Financial Measures” below.

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except statistical data) 2017 Percent of Revenue 2016 Percent of Revenue Percent Change 2017 Percent of Revenue 2016 Percent of Revenue Percent Change

Total revenue $ 324,926 100.0 % $ 276,471 100.0 % 17.5 % $ 949,555 100.0 % $ 758,594 100.0 % 25.2 %
Hotel operating expense 179,829 55.3 % 153,337 55.5 % 17.3 % 528,295 55.6 % 417,965 55.1 % 26.4 %
Property taxes, insurance and other expense 17,598 5.4 % 14,787 5.3 % 19.0 % 52,346 5.5 % 40,315 5.3 % 29.8 %
Ground lease expense 2,831 0.9 % 2,615 0.9 % 8.3 % 8,486 0.9 % 7,587 1.0 % 11.8 %
General and administrative expense 5,350 1.6 % 2,623 0.9 % 104.0 % 18,255 1.9 % 12,511 1.6 % 45.9 %

Transaction and litigation costs (reimbursements) - 36,452 n/a (2,586 ) 37,861 n/a
Loss on impairment of depreciable real estate assets - 5,471 n/a 7,875 5,471 43.9 %
Depreciation expense 44,110 37,343 18.1 % 131,770 104,651 25.9 %
Interest and other expense, net 12,024 10,156 18.4 % 35,590 28,519 24.8 %
Gain (loss) on sale of real estate (157 ) - n/a 15,983 - n/a
Income tax expense (benefit) 203 (7 ) n/a 712 616 15.6 %

Number of hotels owned at end of period 237 236 0.4 % 237 236 0.4 %
ADR $ 136.73 $ 136.04 0.5 % $ 135.97 $ 135.88 0.1 %
Occupancy 80.0 % 80.2 % -0.2 % 78.7 % 78.9 % -0.3 %
RevPAR $ 109.45 $ 109.07 0.3 % $ 106.96 $ 107.18 -0.2 %

The following table highlights the quarterly impact of COVID-19 on the Company’s ADR, Occupancy, RevPAR, net loss and adjusted hotel earnings before interest, income taxes, depreciation and amortization for real estate (“Adjusted Hotel EBITDA”) during the last five quarters (in thousands except statistical data):

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			1st Quarter
	2020			2020			2020			2020			2021
ADR	$	132.55		$	100.76		$	104.78		$	97.87		$	99.19
Occupancy		60.9	%		28.2	%		48.6	%		46.5	%		55.5	%
RevPAR	$	80.66		$	28.44		$	50.94		$	45.46		$	55.09
Net loss	$	(2,769	)	$	(78,243	)	$	(40,948	)	$	(51,247	)	$	(46,435	)
Adjusted Hotel EBITDA ⁽¹⁾	$	63,297		$	704		$	34,688		$	23,296		$	35,427

(1)	See reconciliation of Adjusted Hotel EBITDA to net loss in “Non-GAAP Financial Measures” below.

Beginning in March 2020, COVID-19 caused widespread cancellations of both business and leisure travel throughout the U.S., resulting in significant decreases in RevPAR throughout the Company’s hotel portfolio and the hospitality industry as a whole. With the overall uncertainty of the longevity of COVID-19 in the U.S. and the resulting economic decline, it is difficult to project the duration of revenue declines for the industry and Company; however, the Company currently expects declines in revenue and operating results as compared to 2019 to continue throughout the remainder of 2021 and potentially into future years. While the

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Company experienced its most significant decline in operating results during the second quarter of 2020 as compared to previous quarters, occupancy and RevPAR have since shown improvement, with average occupancy reaching 55.5% by the first quarter of 2021, resulting in the strongest operating results since the onset of the pandemic. Although the Company expects this trend to gradually continue, future revenues and operating results could be negatively impacted if, among other things, COVID-19 cases increase and state and local governments and businesses revert back to tighter mitigation restrictions or consumer sentiment deteriorates.

Comparable Hotels Operating Results

The following table reflects certain operating statistics for the Company’s ~~236~~232 hotels owned and held for use as of ~~September 30, 2017~~March 31, 2021 (“Comparable Hotels”). The Company defines metrics from Comparable Hotels as results generated by the ~~236~~232 hotels owned and held for use as of the end of the reporting ~~period. These metrics do not include~~period, and excludes the ~~results generated by the Fairfax, Virginia Marriott~~ hotel ~~which was~~ held for ~~sale as of September 30, 2017 and sold on October 5, 2017.~~sale. For the hotels acquired during the current reporting period and prior year, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership 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.

	Three Months Ended March 31,
	2021			2020			Percent Change
ADR	$	99.29		$	133.05			-25.4	%
Occupancy		55.8	%		60.9	%		-8.4	%
RevPAR	$	55.39		$	81.01			-31.6	%

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Percent Change 2017 2016 Percent Change

ADR $ 136.83 $ 134.79 1.5 % $ 135.84 $ 134.88 0.7 %
Occupancy 80.2 % 80.4 % -0.2 % 78.8 % 78.7 % 0.1 %
RevPAR $ 109.77 $ 108.32 1.3 % $ 107.10 $ 106.20 0.8 %

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Same Store Operating Results

The following table reflects certain operating statistics for the ~~Company’s 177~~227 hotels owned and held for use by the Company as of January 1, ~~2016~~2020 and during the entirety of the reporting periods being ~~compared.~~compared (“Same Store Hotels”). This information has not been audited.

	Three Months Ended March 31,
	2021			2020			Percent Change
ADR	$	99.12		$	133.05			-25.5	%
Occupancy		56.1	%		60.9	%		-7.9	%
RevPAR	$	55.61		$	81.01			-31.4	%

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Percent Change 2017 2016 Percent Change

ADR $ 138.86 $ 136.60 1.7 % $ 137.09 $ 136.09 0.7 %
Occupancy 80.2 % 80.5 % -0.4 % 79.0 % 79.0 % 0.0 %
RevPAR $ 111.42 $ 110.02 1.3 % $ 108.23 $ 107.49 0.7 %

As discussed above, hotel performance is impacted by many factors, including the economic conditions in the U.S. as well as each individual locality. COVID-19 has been negatively affecting the U.S. hotel industry since March 2020. As a result of COVID-19, the Company’s revenue and operating results declined during the three months ended March 31, 2021 compared to the three months ended March 31, 2020, which is consistent with the overall lodging industry. Compared to 2019, the Company expects declines in revenue and operating results to continue throughout the remainder of 2021, but the Company can give no assurances of the amount or period of decline due to the uncertainty regarding the duration and long-term impact of and governmental and consumer response to COVID-19.

Revenues

The Company’s principal source of revenue is hotel revenue consisting of room, food and beverage, and other related revenue. For the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company had total revenue of ~~$324.9~~$158.7 million and ~~$276.5 million, respectively. For the nine months ended September 30, 2017 and 2016, the Company had total revenue of $949.6 million and $758.6~~$238.0 million, respectively. For the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively, Comparable Hotels achieved combined average occupancy of ~~80.2%~~55.8% and ~~80.4%~~60.9%, ADR of ~~$136.83~~$99.29 and ~~$134.79~~$133.05 and RevPAR of ~~$109.77~~$55.39 and $108.32. For the nine months ended September 30, 2017 and 2016, respectively, Comparable Hotels achieved combined average occupancy of 78.8% and 78.7%, ADR of $135.84 and $134.88 and RevPAR of $107.10 and $106.20.$81.01. ADR is calculated as room revenue divided by the number of rooms sold, and RevPAR is calculated as occupancy multiplied by ADR.

Compared to the same ~~periods~~period in ~~2016,~~2020, during the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, the Company experienced ~~increases~~decreases in ADR and occupancy, resulting in ~~increases~~a decrease of ~~1.3% and 0.8%~~31.6% in RevPAR for Comparable ~~Hotels, respectively. The Company’s growth during~~Hotels. As compared to the first ~~nine months~~quarter of ~~2017 was impacted~~2019 (pre-COVID-19), Comparable Hotels RevPAR for the first quarter of 2021 decreased by 45.8% as a ~~decline~~result of reductions in rate and occupancy. During March 2020, the hotel industry and the Company began to see a significant decrease in occupancy as both mandated and voluntary restrictions on travel were implemented throughout the U.S. For Comparable Hotels, average occupancy declined to 28.2% for the second quarter 2020 before improving over subsequent quarters to 55.8% in the ~~Los Angeles market due to outsized growth~~first quarter of 2021 driven predominately by increased leisure demand over the summer months as a result of improved consumer confidence in ~~2016~~travel and the lifting of some COVID-19 mitigation restrictions, but also from a wide variety of demand generators such as government, healthcare, construction, disaster recovery, insurance, athletics, education and local and regional business-related travel. Revenue recovery in the

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first quarter of 2021 was led by leisure demand and small corporate, government and leisure based group business, with more favorable results in suburban markets. Throughout the ~~Porter Ranch gas leak. The Company anticipates that with its geographically diverse portfolio of~~hospitality industry, upscale and upper ~~midscale select-service hotels, on a comparable basis, overall RevPAR growth~~mid-scale chain scales have outperformed luxury and upper upscale and suburban locations have outperformed urban locations. Occupancy increased throughout the first quarter of 2021 and the trend continued into April, with estimated occupancy of approximately 68% for the ~~remainder of the year will approximate industry averages. Although certain markets will vary based on local supply/demand dynamics~~month. The Company expects this trend to gradually continue, however, future revenues could be negatively impacted if COVID-19 cases increase and state and local ~~market economic conditions, with continued overall room rate improvement combined with expected stable overall demand growth compared to supply growth,~~governments tighten or implement new mitigation restrictions or consumer sentiment deteriorates.

Hotel Operating Expense

The Company, its management companies and the Company, on a comparable basis, and industry are forecasting a low single-digit percentage increase in revenue for the full year of 2017 as compared to 2016, with this trend expected to continue into 2018. Markets with above average growth in the third quarter and first nine months of 2017 for the Company and industry included Richmond, Knoxville, Kansas City, St. Louis and San Diego. Markets that were below average for the Company and industry included Dallas, Austin and Philadelphia. Additionally, in the third quarter 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 ofbrands the Company’s hotels ~~incurred minor wind~~are franchised with have all aggressively worked to mitigate the costs and ~~water related damage from~~uses of cash associated with operating the ~~hurricanes,~~hotels in a low-occupancy environment and are thoughtfully working to position the ~~overall~~hotels to adapt to the changes that may occur to guest preferences in the future. The impact ~~was not material.~~

~~Hotel Operating Expense~~

has varied and will continue to vary by market and hotel. With the support of its brands and third-party management companies, the Company will continue to evaluate and implement additional measures as the situation evolves.

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~~Hotel operating expense for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, hotel operating expense~~2020 totaled ~~$179.8~~$103.7 million and ~~$153.3~~$155.3 million, respectively, or ~~55.3%~~65.4% and ~~55.5%~~65.2% of total revenue for ~~each~~the respective ~~period. For the nine months ended September 30, 2017 and 2016, respectively,~~periods. Comparatively, prior to COVID-19, hotel operating expense ~~totaled $528.3 million and $418.0 million or 55.6% and 55.1%~~was 57.8% of total revenue for ~~each respective period. Overall hotel operational expenses for~~ the ~~first nine~~three months of 2017 include the results of the 57 hotels acquired during 2016, including one hotel acquired on July 1, 2016 and 56 hotels acquired with the Apple Ten merger effective September 1, 2016, for the full period and three hotels acquiredended March 31, 2019. Included in 2017 from their respective dates of acquisition. Expenses for 2017 also include the results of one hotel sold on April 20, 2017 until the date of sale. Expenses for the first nine months of 2016 include the results of one hotel sold on December 6, 2016 and the hotel sold on April 20, 2017 for the full period, and the results of one hotel acquired on July 1, 2016 from the date of acquisition and the 56 hotels acquired in the Apple Ten merger for the month of September 2016. For the Company’s Comparable Hotels, hotel operating expense ~~as a percentage of revenue increased approximately 20 and 90 basis points, respectively,~~ for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 are an additional $1.8 million of utility costs resulting from extraordinary rate increases and fees assessed at some of the Company’s hotels in Texas as ~~compared to the same periods~~a result of winter and ice storms in ~~2016. During~~ the first nine months of 2017, the Company experienced increases in labor costs as a percentage of revenue, which was the primary cause of the increase in hotel operating expense. Although labor costs were the primary cause of the increase in hotel operating expenses in the third quarter of ~~2017, these increases did moderate as compared to the same period in 2016.~~2021. The Company ~~anticipates continued increases in labor costs due to government regulations surrounding wages, healthcare~~has worked and ~~other benefits, other wage-related initiatives and lower unemployment rates. Although operating expenses will increase as revenue increases, the Company~~ will continue to work with its management companies to ~~reduce costs as a percentage~~optimize staffing models, consolidate operations in markets with multiple properties, and adjust food and beverage offerings and other amenities, among other efficiency initiatives to mitigate the impact of revenue ~~where possible while maintaining quality~~declines on its results of operations. For example, in some markets the Company “clustered” hotels in 2020, whereby multiple properties in a market consolidated their operations to increase efficiency; the Company has reduced service and amenity offerings as allowed by the relaxation of certain brand standards; and the Company also successfully reduced rates under various service ~~levels at each property.~~

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contracts. Although certain operating costs of a hotel are more fixed in nature, such as base utility and maintenance costs, the Company has worked and will continue to work to reduce all non-essential costs including service contracts, utilities in areas not utilized and certain maintenance costs. However, the Company may continue to see ongoing cost increases related to the supplying of personal protective equipment for employees and guests as well as increased sanitation and other measures. Additionally, as is typical in an economic recovery, the Company has begun to experience increases in the cost of labor, and expects to continue to do so, as it competes with other employers for hourly wage labor as unemployment rates decrease.

Property Taxes, Insurance and Other Expense

Property taxes, insurance, and other expense for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 totaled ~~$17.6~~$19.7 million and ~~$14.8~~$19.6 million, respectively, or ~~5.4%~~12.4% and ~~5.3% of total revenue, respectively, and for Comparable Hotels, 5.4% and 5.5%~~8.2% of total revenue for ~~each~~the respective ~~period. For the nine months ended September 30, 2017 and 2016,~~periods. Prior to COVID-19, property taxes, insurance and other expense totaled ~~$52.3~~$19.6 million, ~~and $40.3 million, respectively,~~ or ~~5.5% and 5.3% of total revenue, respectively, and for Comparable Hotels, 5.5%~~6.5% of total revenue, for ~~each period. For~~ the ~~Company’s Comparable Hotels, real estate taxes increased slightly during~~period ended March 31, 2019. Although the first nine months of 2017 compared to the first nine months of 2016, with tax increases at certain locations due to the reassessment of property values by localities related to the improved economy, partially offset by decreases at other locations due to successful appeals of tax assessments. With the economy continuing to improve, the Company anticipates continued increases in property tax assessments during the remainder of 2017. The Company will continue to aggressively appeal ~~tax~~ assessments and monitor locality guidance as a result of COVID-19, it does not currently anticipate significant decreases in ~~certain jurisdictions~~property taxes in 2021 as compared to ~~attempt to minimize tax increases as warranted.~~

~~Ground Lease Expense~~

Ground lease expense for the three months ended September 30, 2017 and 2016 was $2.8 million and $2.6 million, respectively. For the nine months ended September 30, 2017 and 2016, ground lease expense was $8.5 million and $7.6 million, respectively. Ground lease expense primarily represents the expense incurred by2020. Additionally, the Company ~~to lease land for 14 of~~has faced increases in premiums on its ~~hotel properties, including four acquired in the Apple Ten merger effective September 1, 2016.~~

property insurance coverage.

General and Administrative Expense

General and administrative expense for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 was ~~$5.4~~$8.1 million and ~~$2.6~~$9.5 million, respectively, or ~~1.6%~~5.1% and ~~0.9%~~4.0% of total revenue ~~respectively. For~~for the ~~nine months ended September 30, 2017 and 2016, general and administrative expense was $18.3 million and $12.5 million, respectively, or 1.9% and 1.6% of total revenue, respectively.~~respective periods. The principal components of general and administrative expense are payroll and related benefit costs, legal fees, accounting fees and reporting expenses. In addition, during the first eight months of 2016, the Company provided to Apple Ten the advisory services contemplated under their advisory agreement, and the Company received fees and reimbursement of expenses payable under the advisory agreement from Apple Ten totaling approximately $3.5 million, which were recorded as reductions to generalGeneral and administrative ~~expenses. Effective September 1, 2016,~~expense for the three months ended March 31, 2020 included the accrual of approximately $2.5 million in separation benefits awarded in connection with the ~~completion~~retirements of the ~~Apple Ten merger,~~Company’s former Chief Operating Officer and former Chief Financial Officer on March 31, 2020. Excluding the advisory agreement was terminated and the Company no longer receives the fees and reimbursement of expenses payable under the advisory agreement from Apple Ten, which resulted in an increase in the Company’s general and administrative expenses from the prior period. Although expense for the Company in total dollars increased from the prior period, since both the advisory fees and reimbursed costs received by the Company from Apple Ten were recorded asseparation benefit accrual, general and administrative expense increased by ~~Apple Ten and as reductions~~approximately $1.1 million for the three months ended March 31, 2021 compared to ~~general and administrative expense by~~ the ~~Company, the termination of the advisory agreement had no financial impact on the combined company after the effective time of the Apple Ten merger.~~ ~~General and administrative expense also~~three months ended March 31, 2020 primarily due to increased accruals for ~~both the third quarter and first nine months of 2017~~incentive compensation related to anticipated higher operating performance in 2021 as compared to the prior year due to an increased accrual as of September 30, 2017 for the Company’s executive incentive plan related to better projected performance under the plan. In comparison, the accrual for potential executive bonus payments was reduced during the third quarter of 2016 by approximately $0.8 million, due to lower than previously anticipated 2016 performance, resulting in a decrease in executive compensation expense for the period. The increases in the third quarter and the first nine months of 2017 over the same periods of 2016 were $1.7 million and $1.0 million, respectively.

~~Transaction and Litigation Costs (Reimbursements)~~

~~During the nine months ended September 30, 2017, transaction and litigation costs (reimbursements)~~ totaled approximately $(2.6) million which primarily related to the additional proceeds received in May 2017 from the Company’s directors and officers insurance carriers in connection with the Apple Ten merger litigation, as discussed herein. Combined with the $10.0 million received in January 2017 and recorded to transaction and litigation costs (reimbursements) in the fourth quarter of 2016, total proceeds from the Company’s director and officer coverage related to the Apple Ten merger litigation were $12.6 million. ~~During the three and nine months ended September 30, 2016, transaction and litigation costs~~ (reimbursements) were approximately $36.5 million and $37.9 million, respectively. Transaction and litigation costs (reimbursements) for the nine months ended September 30, 2016 consisted primarily of costs related to the Apple Ten merger totaling approximately $37.6 million (including $32 million funded by the Company in January 2017 to settle the Apple Ten merger litigation and approximately $1.8 million in legal costs incurred to defend the litigation) and other acquisition related costs totaling approximately $0.3 million. On January 1, 2017, the Company adopted the newly issued accounting standard on business combinations that modifies the definition of a business. Under the new guidance, acquisition of hotel properties will generally be accounted for as an acquisition of a group of assets with transaction costs associated with the acquisition capitalized as part of the cost of the asset acquired instead of expensed in the period they are incurred. In accordance with this standard, the Company capitalized approximately $0.2 million in transaction costs related to the acquisition of three hotels during the nine months ended September 30, 2017.

~~Index~~

2020.

Loss on Impairment of Depreciable Real Estate Assets

Loss on impairment of depreciable real estate assets was ~~approximately $7.9~~$10.8 million for the ~~nine~~three months ended ~~September 30, 2017, and related to~~March 31, 2021, consisting of impairment losses of $1.3 million for the ~~Columbus, Georgia~~Overland Park, Kansas SpringHill Suites and ~~TownePlace Suites hotels that~~$9.4 million for four hotel properties identified by the Company ~~identified for potential sale during~~in the first quarter of 2017. For each of the three and nine months ended September 30, 2016, loss on impairment of depreciable real estate assets was approximately $5.5 million, and related to the Chesapeake, Virginia Marriott hotel that the Company identified2021 for potential ~~sale during the period.~~ sale. See Note 3 titled ~~“Investment in Real Estate”~~“Assets Held for Sale and Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these impairment losses.

Index

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020, expense was ~~$44.1~~$48.7 million and ~~$37.3~~$49.5 million, respectively. ~~For the nine months ended September 30, 2017~~Depreciation and ~~2016, depreciation expense was $131.8 million and $104.7 million, respectively. Depreciation~~amortization expense primarily represents expense of the Company’s hotel buildings and related improvements, and associated personal property (furniture, fixtures, and equipment) for ~~their~~the respective periods owned. The ~~increase~~decrease of approximately $0.8 million was primarily due to the ~~increase in the number of properties owned as a result of the Apple Ten merger effective September 1, 2016, the acquisition of three hotels in 2017 and one~~ hotel ~~in July 2016 and renovations~~dispositions completed throughout ~~2017~~2020 and ~~2016.~~

the first three months of 2021, partially offset by acquisitions and limited renovation activity.

Interest and Other Expense, net

Interest and other expense, net for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 was ~~$12.0~~$18.5 million and ~~$10.2~~$15.6 million, ~~respectively,~~respectively. Interest and other expense, net for the three months ended March 31, 2020 is net of approximately ~~$0.1~~$0.7 million ~~and $0.2 million, respectively,~~ of interest capitalized associated with renovation projects. ~~For the nine months ended September 30, 2017 and 2016,~~Additionally, interest and other expense, net ~~was $35.6~~for the three months ended March 31, 2021 and 2020 includes approximately $2.9 million and ~~$28.5~~$2.8 million, respectively, ~~and is net of approximately $0.7 million and $1.2 million~~ of interest ~~capitalized~~recorded on the Company’s finance lease liabilities.

Interest expense related to the Company’s debt instruments increased as a result of increased average borrowings in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 combined with increased interest rates on the Company’s unsecured credit facilities associated with ~~renovation projects, respectively.~~the amendments to obtain covenant waivers. The ~~increase in~~Company anticipates interest expense ~~was primarily~~to be higher for the remainder of 2021 compared to the same period of 2020 due to ~~an increase~~these increased interest rates. See Note 4 titled “Debt” in the Company’s ~~average outstanding borrowings during the first nine months of 2017 as compared to 2016 which is primarily attributable to (a) mortgage debt assumed~~Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in ~~the Apple Ten merger effective September 1, 2016 and (b) borrowings to fund (i) the cash payment portion~~this Quarterly Report on Form 10-Q, for additional discussion of the ~~Apple Ten merger, (ii) the repayment of Apple Ten’s outstanding balance on its extinguished~~Company’s amended unsecured credit facility assumed in the Apple Ten merger and (iii) the acquisition of four hotels (one in July 2016, one in February 2017 and two in September 2017); which increases were partially offset by the sale of two hotels (one in December 2016 and one in April 2017). The impact of higher debt balances and the increasing cost of variable rate debt was partially offset by a reduction in the average interest rate incurred on the Company’s total outstanding debt, resulting from the repayment of maturing fixed-rate mortgage debt with lower rate borrowings primarily from its $150 million term loan facility and new mortgage debt originations.

facilities.

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

FFO and MFFO

The Company calculates and presents FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“~~NAREIT”~~Nareit”), which defines FFO as net income (loss) (computed in accordance with ~~generally accepted accounting principles (“GAAP”))~~GAAP), excluding gains orand losses from ~~sales~~the 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~~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.

~~Index~~

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

Index

The following table reconciles the Company’s GAAP net ~~income~~loss to FFO and MFFO for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (in thousands).:

	Three Months Ended March 31,
	2021			2020
Net loss	$	(46,435	)	$	(2,769	)
Depreciation of real estate owned		47,088			47,668
Gain on sale of real estate		(4,484	)		(8,839	)
Loss on impairment of depreciable real estate assets		10,754			-
Funds from operations		6,923			36,060
Amortization of finance ground lease assets		1,617			1,602
Amortization of favorable and unfavorable operating leases, net		98			101
Non-cash straight-line operating ground lease expense		44			47
Modified funds from operations	$	8,682		$	37,810

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 62,824 $ 13,694 $ 184,795 $ 103,098
Depreciation of real estate owned 43,880 37,114 131,081 103,962
(Gain) loss on sale of real estate 157 - (15,983 ) -
Loss on impairment of depreciable real estate assets - 5,471 7,875 5,471
Amortization of favorable and unfavorable leases, net 165 132 498 513
Funds from operations 107,026 56,411 308,266 213,044
Transaction and litigation costs (reimbursements) - 36,452 (2,586 ) 37,861
Non-cash straight-line ground lease expense 917 843 2,794 2,479
Modified funds from operations $ 107,943 $ 93,706 $ 308,474 $ 253,384

EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA

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

~~The~~

In addition to EBITDA, the Company ~~considers the exclusion of~~ ~~certain additional items from~~also calculates and presents EBITDAre in accordance with standards established by Nareit, which defines EBITDAre as EBITDA, ~~useful, including:~~ ~~(i) the exclusion of~~ ~~transaction~~excluding gains and ~~litigation costs (reimbursements), gains or~~ losses from ~~sales~~the sale of ~~real estate and the loss on impairment of depreciable~~certain real estate assets ~~as these items do not represent ongoing operations~~(including gains and ~~(ii)~~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 non-cash straight-line operating ground lease expense from EBITDAre useful, as this expense does not reflect the underlying performance of the related hotels.

The Company further excludes actual corporate-level general and administrative expense for the Company from Adjusted EBITDAre (Adjusted Hotel EBITDA) to isolate property-level operational performance over which the Company’s hotel operators have direct control. The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels.

Index

The following table reconciles the Company’s GAAP net ~~income~~loss to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA by quarter for the ~~three and nine months ended September 30, 2017 and 2016~~last five quarters (in thousands).:

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			1st Quarter
	2020			2020			2020			2020			2021
Net loss	$	(2,769	)	$	(78,243	)	$	(40,948	)	$	(51,247	)	$	(46,435	)
Depreciation and amortization		49,522			49,897			50,171			50,196			48,710
Amortization of favorable and unfavorable operating leases, net		101			101			103			137			98
Interest and other expense, net		15,566			18,386			18,531			18,352			18,513
Income tax expense		146			58			61			67			108
EBITDA		62,566			(9,801	)		27,918			17,505			20,994
(Gain) loss on sale of real estate		(8,839	)		54			-			(2,069	)		(4,484	)
Loss on impairment of depreciable real estate assets		-			4,382			-			715			10,754
EBITDAre		53,727			(5,365	)		27,918			16,151			27,264
Non-cash straight-line operating ground lease expense		47			44			44			45			44
Adjusted EBITDAre		53,774			(5,321	)		27,962			16,196			27,308
General and administrative expense		9,523			6,025			6,726			7,100			8,119
Adjusted Hotel EBITDA	$	63,297		$	704		$	34,688		$	23,296		$	35,427

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 62,824 $ 13,694 $ 184,795 $ 103,098
Depreciation 44,110 37,343 131,770 104,651
Amortization of favorable and unfavorable leases, net 165 132 498 513
Interest and other expense, net 12,024 10,156 35,590 28,519
Income tax expense (benefit) 203 (7 ) 712 616
EBITDA 119,326 61,318 353,365 237,397
Transaction and litigation costs (reimbursements) - 36,452 (2,586 ) 37,861
(Gain) loss on sale of real estate 157 - (15,983 ) -
Loss on impairment of depreciable real estate assets - 5,471 7,875 5,471
Non-cash straight-line ground lease expense 917 843 2,794 2,479
Adjusted EBITDA $ 120,400 $ 104,084 $ 345,465 $ 283,208

~~Index~~

Hotels Owned

As of ~~September 30, 2017,~~March 31, 2021, the Company owned ~~237~~233 hotels with an aggregate of ~~30,188~~29,855 rooms located in ~~33 states.~~35 states, including one hotel with 102 rooms classified as held for sale, which was sold to an unrelated party in April 2021. 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		5,843
Hampton	39		4,986
Courtyard	36		4,948
Residence Inn	33		3,939
Homewood Suites	31		3,473
SpringHill Suites	13		1,705
Fairfield	11		1,300
Home2 Suites	10		1,146
TownePlace Suites	9		931
Marriott	2		619
Embassy Suites	2		316
Hyatt Place	2		281
Independent	2		263
Hyatt House	1		105
Total	233		29,855

Index

Number of Hotels and Guest Rooms by State
	Number of		Number of
State	Hotels		Rooms
Alabama		15		1,434
Alaska		2		304
Arizona		14		1,903
Arkansas		3		336
California		26		3,721
Colorado		4		567
Florida		23		2,922
Georgia		6		672
Idaho		1		186
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		405
Mississippi		2		168
Missouri		4		544
Nebraska		4		621
New Jersey		5		629
New York		4		554
North Carolina		9		973
Ohio		2		252
Oklahoma		4		545
Pennsylvania		3		391
South Carolina		5		538
Tennessee		12		1,362
Texas		31		3,755
Utah		3		393
Virginia		13		1,825
Washington		4		609
Wisconsin		1		176
Total		233		29,855

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
Homewood Suites 34 3,831
Residence Inn 32 3,696
SpringHill Suites 17 2,248
TownePlace Suites 12 1,196
Fairfield Inn 11 1,300
Home2 Suites 7 775
Marriott 3 932
Embassy Suites 2 316
Renaissance 1 205
Total 237 30,188

Number of Hotels and Guest Rooms by State
Number of Number of
State Hotels Rooms
Alabama 15 1,434
Alaska 1 169
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
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 2 257
Virginia 15 2,383
Washington 4 609
Total 237 30,188

Index

The following table summarizes the location, brand, manager, date acquired or completed and number of rooms for each of the ~~237~~233 hotels the Company owned as of ~~September 30, 2017.~~

March 31, 2021.

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

Anchorage

Embassy Suites

Stonebridge

4/30/2010

169

~~Auburn~~

Anchorage

Home2 Suites

Stonebridge

12/1/2017

135

Auburn

Hilton Garden Inn

LBA

3/1/2014

101

Birmingham

Courtyard

LBA

3/1/2014

Birmingham

Hilton Garden Inn

LBA

9/12/2017

104

Birmingham

~~Homewood~~

Home2 Suites

~~McKibbon~~

LBA

~~3/1/2014~~

9/12/2017

106

Birmingham

~~Home2~~

Homewood Suites

~~LBA~~

McKibbon

~~9/12/2017~~

3/1/2014

~~106~~

Dothan

Hilton Garden Inn

LBA

6/1/2009

104

Dothan

Residence Inn

LBA

3/1/2014

Huntsville

Hampton

LBA

9/1/2016

Huntsville

Hilton Garden Inn

LBA

3/1/2014

101

Huntsville

Home2 Suites

LBA

9/1/2016

Huntsville

Homewood Suites

LBA

3/1/2014

107

Mobile

Hampton

McKibbon

9/1/2016

101

Montgomery

Hilton Garden Inn

LBA

3/1/2014

Montgomery

Homewood Suites

LBA

3/1/2014

Prattville

Courtyard

LBA

3/1/2014

Rogers

Hampton

Raymond

8/31/2010

122

Rogers

Homewood Suites

Raymond

4/30/2010

126

Rogers

Residence Inn

Raymond

3/1/2014

~~Springdale~~

Chandler

~~Residence Inn~~

Courtyard

~~Aimbridge~~

North Central

~~3/1/2014~~

11/2/2010

150

Chandler

~~Courtyard~~

Fairfield

North Central

11/2/2010

~~150~~

110

~~Chandler~~

Phoenix

~~Fairfield Inn & Suites~~

Courtyard

North Central

11/2/2010

~~110~~

164

Phoenix

Courtyard

North Central

~~11/2/2010~~

9/1/2016

~~164~~

127

Phoenix

~~Courtyard~~

Hampton

North Central

9/1/2016

~~127~~

125

Phoenix

Hampton

North Central

~~9/1/2016~~

5/2/2018

~~125~~

210

Phoenix

Homewood Suites

North Central

9/1/2016

134

Phoenix

Residence Inn

North Central

11/2/2010

129

Scottsdale

Hilton Garden Inn

North Central

9/1/2016

122

~~Tucson~~

Tempe

Hyatt House

Crestline

8/13/2020

105

Tempe

Hyatt Place

Crestline

8/13/2020

154

Tucson

Hilton Garden Inn

Western

7/31/2008

125

Tucson

Residence Inn

Western

3/1/2014

124

Tucson

TownePlace Suites

Western

10/6/2011

124

Agoura Hills

Homewood Suites

Dimension

3/1/2014

125

Burbank

Courtyard

Huntington

8/11/2015

190

Burbank

Residence Inn

Marriott

3/1/2014

166

Burbank

SpringHill Suites

Marriott

7/13/2015

170

Clovis

Hampton

Dimension

7/31/2009

Clovis

Homewood Suites

Dimension

2/2/2010

Cypress

Courtyard

Dimension

3/1/2014

180

Cypress

Hampton

Dimension

6/29/2015

110

Oceanside

Courtyard

Marriott

9/1/2016

142

Oceanside

Residence Inn

Marriott

3/1/2014

125

Rancho Bernardo/San Diego

Courtyard

InnVentures

3/1/2014

210

Sacramento

Hilton Garden Inn

Dimension

3/1/2014

153

San Bernardino

Residence Inn

InnVentures

2/16/2011

San Diego

Courtyard

Huntington

9/1/2015

245

San Diego

Hampton

Dimension

3/1/2014

177

~~Index~~

~~City~~

~~State~~

~~Brand~~

~~Manager~~

~~Date Acquired or Completed~~

~~Rooms~~

San Diego

Hilton Garden Inn

InnVentures

3/1/2014

200

Index

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

San Diego

Residence Inn

Dimension

3/1/2014

121

San Jose

Homewood Suites

Dimension

3/1/2014

140

San Juan Capistrano

Residence Inn

Marriott

9/1/2016

130

Santa Ana

Courtyard

Dimension

5/23/2011

155

Santa Clarita

Courtyard

Dimension

9/24/2008

140

Santa Clarita

Fairfield ~~Inn~~

Dimension

10/29/2008

Santa Clarita

Hampton

Dimension

10/29/2008

128

Santa Clarita

Residence Inn

Dimension

10/29/2008

~~Tulare~~

Tustin

~~Hampton~~

Fairfield

~~InnVentures~~

Marriott

9/1/~~2014~~2016

145

Tustin

~~Fairfield~~

Residence Inn ~~& Suites~~

Marriott

9/1/2016

~~145~~

149

~~Tustin~~

Colorado Springs

~~Residence Inn~~

Hampton

~~Marriott~~

Chartwell

9/1/2016

~~149~~

101

~~Colorado Springs~~

Denver

~~Hampton~~

~~Chartwell~~

~~9/1/2016~~

~~101~~

~~Denver~~

Hilton Garden Inn

Stonebridge

9/1/2016

221

Highlands Ranch

Hilton Garden Inn

Dimension

3/1/2014

128

Highlands Ranch

Residence Inn

Dimension

3/1/2014

117

Boca Raton

Hilton Garden Inn

~~White Lodging~~

Dimension

9/1/2016

149

Cape Canaveral

~~Homewood Suites~~

Hampton

LBA

~~9/1/2016~~

4/30/2020

~~153~~

116

~~Fort Lauderdale~~

Cape Canaveral

~~Hampton~~

Homewood Suites

~~Vista Host~~

LBA

~~12/31/2008~~

9/1/2016

~~109~~

153

~~Fort Lauderdale~~

Cape Canaveral

~~Hampton~~

Home2 Suites

LBA

~~6/23/2015~~

4/30/2020

~~156~~

108

Fort Lauderdale

~~Residence Inn~~

Hampton

~~LBA~~

Dimension

~~9/1/2016~~

6/23/2015

156

~~Gainesville~~

Fort Lauderdale

Residence Inn

LBA

9/1/2016

156

Gainesville

Hilton Garden Inn

McKibbon

9/1/2016

104

Gainesville

Homewood Suites

McKibbon

9/1/2016

103

Jacksonville

Homewood Suites

McKibbon

3/1/2014

119

~~Lakeland~~

Jacksonville

~~Courtyard~~

Hyatt Place

~~LBA~~

Crestline

~~3/1/2014~~

12/7/2018

127

~~Miami~~

Lakeland

Courtyard

~~Dimension~~

LBA

3/1/2014

~~118~~

Miami

~~Hampton~~

Courtyard

~~White Lodging~~

Dimension

~~4/9/2010~~

3/1/2014

~~121~~

118

Miami

~~Homewood Suites~~

Hampton

~~Dimension~~

White Lodging

~~3/1/2014~~

4/9/2010

~~162~~

121

~~Orlando~~

Miami

~~Fairfield Inn &~~

Homewood Suites

~~Marriott~~

Dimension

3/1/~~2009~~2014

~~200~~

162

Orlando

~~SpringHill Suites~~

Fairfield

Marriott

7/1/2009

200

~~Panama City~~

Orlando

~~Hampton~~

Home2 Suites

LBA

3/~~12/2009~~19/2019

128

~~Panama City~~

Orlando

~~TownePlace~~

SpringHill Suites

~~LBA~~

Marriott

7/1/~~19/2010~~2009

~~103~~

200

~~Pensacola~~

Panama City

~~TownePlace Suites~~

Hampton

~~McKibbon~~

LBA

~~9/1/2016~~

3/12/2009

~~Sanford~~

Panama City

~~SpringHill~~

TownePlace Suites

LBA

1/~~2014~~19/2010

~~105~~

103

~~Sarasota~~

Pensacola

~~Homewood~~

TownePlace Suites

~~Hilton~~

McKibbon

9/1/~~2014~~2016

~~100~~

Tallahassee

Fairfield ~~Inn & Suites~~

LBA

9/1/2016

Tallahassee

Hilton Garden Inn

LBA

3/1/2014

Tampa

Embassy Suites

White Lodging

11/2/2010

147

~~Tampa~~

Albany

~~TownePlace Suites~~

Fairfield

~~McKibbon~~

LBA

1/~~2014~~14/2010

~~Albany~~

Atlanta/Downtown

~~Fairfield Inn & Suites~~

Hampton

~~LBA~~

McKibbon

~~1/14/2010~~

2/5/2018

119

~~Atlanta~~

Atlanta/Perimeter Dunwoody

~~Home2 Suites~~

Hampton

~~McKibbon~~

LBA

~~7/1/2016~~

6/28/2018

~~128~~

132

~~Columbus~~

Atlanta

~~SpringHill~~

Home2 Suites

~~LBA~~

McKibbon

7/1/~~2014~~2016

128

~~Columbus~~

Macon

~~TownePlace Suites~~

~~LBA~~

~~3/1/2014~~

~~Macon~~

Hilton Garden Inn

LBA

3/1/2014

101

Savannah

Hilton Garden Inn

Newport

3/1/2014

105

Cedar Rapids

Hampton

~~Schulte~~

Aimbridge

9/1/2016

103

Cedar Rapids

Homewood Suites

~~Schulte~~

Aimbridge

9/1/2016

Davenport

Hampton

~~Schulte~~

Aimbridge

9/1/2016

103

~~Index~~

~~City~~

~~State~~

~~Brand~~

~~Manager~~

~~Date Acquired or Completed~~

~~Rooms~~

Boise

Hampton

Raymond

4/30/2010

186

~~Boise~~

~~SpringHill Suites~~

~~InnVentures~~

~~3/1/2014~~

~~230~~

Des Plaines

Hilton Garden Inn

Raymond

9/1/2016

252

Hoffman Estates

Hilton Garden Inn

White Lodging

9/1/2016

184

Mettawa

Hilton Garden Inn

White Lodging

11/2/2010

170

Mettawa

Residence Inn

White Lodging

11/2/2010

130

Index

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

Rosemont

Hampton

Raymond

9/1/2016

158

Schaumburg

Hilton Garden Inn

White Lodging

11/2/2010

166

Skokie

Hampton

Raymond

9/1/2016

225

Warrenville

Hilton Garden Inn

White Lodging

11/2/2010

135

Indianapolis

SpringHill Suites

White Lodging

11/2/2010

130

Merrillville

Hilton Garden Inn

White Lodging

9/1/2016

124

Mishawaka

Residence Inn

White Lodging

11/2/2010

106

South Bend

Fairfield ~~Inn & Suites~~

White Lodging

9/1/2016

119

Overland Park

Fairfield ~~Inn & Suites~~

~~True North~~

Raymond

3/1/2014

110

Overland Park

Residence Inn

~~True North~~

Raymond

3/1/2014

120

Overland Park

SpringHill Suites

~~True North~~

Raymond

3/1/2014

102

Wichita

Courtyard

Aimbridge

3/1/2014

~~Baton Rouge~~

Lafayette

~~SpringHill Suites~~

~~Dimension~~

~~9/25/2009~~

~~119~~

~~Lafayette~~

Hilton Garden Inn

LBA

7/30/2010

153

Lafayette

SpringHill Suites

LBA

6/23/2011

103

New Orleans

Homewood Suites

Dimension

3/1/2014

166

Andover

SpringHill Suites

Marriott

11/5/2010

136

Marlborough

Residence Inn

~~True North~~

Crestline

3/1/2014

112

Westford

Hampton

~~True North~~

Crestline

3/1/2014

110

Westford

Residence Inn

~~True North~~

Crestline

3/1/2014

108

Annapolis

Hilton Garden Inn

~~White Lodging~~

Crestline

3/1/2014

126

Silver Spring

Hilton Garden Inn

~~White Lodging~~

Crestline

7/30/2010

107

~~Novi~~

Portland

Residence Inn

Crestline

10/13/2017

179

Novi

Hilton Garden Inn

White Lodging

11/2/2010

148

Maple Grove

Hilton Garden Inn

North Central

9/1/2016

~~120~~

121

Rochester

Hampton

Raymond

8/3/2009

124

~~Kansas City~~

St. Paul

Hampton

Raymond

~~8/31/2010~~

3/4/2019

~~122~~

160

Kansas City

~~Residence Inn~~

Hampton

~~True North~~

Raymond

~~3/1/2014~~

8/31/2010

~~106~~

122

~~St. Louis~~

Kansas City

~~Hampton~~

Residence Inn

Raymond

~~8/31/2010~~

3/1/2014

~~190~~

106

St. Louis

Hampton

Raymond

~~4/30/~~

8/31/2010

~~126~~

190

~~Hattiesburg~~

St. Louis

~~Courtyard~~

Hampton

~~LBA~~

Raymond

~~3/1/2014~~

4/30/2010

126

Hattiesburg

~~Residence Inn~~

Courtyard

LBA

~~12/11/2008~~

3/1/2014

~~Carolina Beach~~

Hattiesburg

~~Courtyard~~

Residence Inn

~~Crestline~~

LBA

~~3/1/2014~~

12/11/2008

~~144~~

~~Charlotte~~

Carolina Beach

~~Fairfield Inn & Suites~~

Courtyard

~~Newport~~

Crestline

3/1/~~2016~~2014

144

Charlotte

~~Homewood Suites~~

Fairfield

~~McKibbon~~

Newport

9/~~24/2008~~1/2016

~~118~~

Durham

Homewood Suites

McKibbon

12/4/2008

122

Fayetteville

Home2 Suites

LBA

2/3/2011

118

Fayetteville

Residence Inn

~~Aimbridge~~

LBA

3/1/2014

Greensboro

SpringHill Suites

Newport

3/1/2014

~~Holly Springs~~

Jacksonville

~~Hampton~~

Home2 Suites

LBA

~~11/30/2010~~

9/1/2016

~~124~~

105

~~Jacksonville~~

Wilmington

~~Home2 Suites~~

Fairfield

~~LBA~~

Crestline

3/1/~~2016~~2014

~~105~~

122

~~Wilmington~~

Winston-Salem

~~Fairfield Inn & Suites~~

Hampton

~~Crestline~~

McKibbon

9/1/~~2014~~2016

~~122~~

~~Winston-Salem~~

Omaha

Courtyard

~~McKibbon~~

Marriott

3/1/2014

~~122~~

181

~~Index~~

~~City~~

~~State~~

~~Brand~~

~~Manager~~

~~Date Acquired or Completed~~

~~Rooms~~

~~Winston-Salem~~

Omaha

Hampton

~~McKibbon~~

White Lodging

9/1/2016

139

Omaha

~~Courtyard~~

~~Marriott~~

~~3/1/2014~~

~~181~~

~~Omaha~~

~~Hampton~~

~~White Lodging~~

~~9/1/2016~~

~~139~~

~~Omaha~~

Hilton Garden Inn

White Lodging

9/1/2016

178

Omaha

Homewood Suites

White Lodging

9/1/2016

123

Cranford

Homewood Suites

Dimension

3/1/2014

108

Mahwah

Homewood Suites

Dimension

3/1/2014

110

Mount Laurel

Homewood Suites

Newport

1/11/2011

118

Somerset

Courtyard

Newport

3/1/2014

162

West Orange

Courtyard

Newport

1/11/2011

131

Islip/Ronkonkoma

Hilton Garden Inn

~~White Lodging~~

Crestline

3/1/2014

~~165~~

166

New York

~~Renaissance~~

Independent

Highgate

3/1/2014

~~205~~

208

Index

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

Syracuse

Courtyard

~~New Castle~~

Crestline

10/16/2015

102

Syracuse

Residence Inn

~~New Castle~~

Crestline

10/16/2015

Mason

Hilton Garden Inn

~~Schulte~~

Raymond

9/1/2016

110

Twinsburg

Hilton Garden Inn

~~Gateway~~

Aimbridge

10/7/2008

142

Oklahoma City

Hampton

Raymond

5/28/2010

200

Oklahoma City

Hilton Garden Inn

Raymond

9/1/2016

155

Oklahoma City

Homewood Suites

Raymond

9/1/2016

100

Oklahoma City (West)

Homewood Suites

Chartwell

9/1/2016

Collegeville/Philadelphia

Courtyard

~~White Lodging~~

Newport

11/15/2010

132

Malvern/Philadelphia

Courtyard

~~White Lodging~~

Newport

11/30/2010

127

Pittsburgh

Hampton

~~Vista Host~~

Newport

12/31/2008

132

Charleston

Home2 Suites

LBA

9/1/2016

122

Columbia

Hilton Garden Inn

Newport

3/1/2014

143

Columbia

TownePlace Suites

Newport

9/1/2016

Greenville

Residence Inn

McKibbon

3/1/2014

Hilton Head

Hilton Garden Inn

McKibbon

3/1/2014

104

Chattanooga

Homewood Suites

LBA

3/1/2014

Franklin

Courtyard

Chartwell

9/1/2016

126

Franklin

Residence Inn

Chartwell

9/1/2016

124

Jackson

Hampton

~~Vista Host~~

Newport

12/30/2008

Johnson City

Courtyard

LBA

9/25/2009

Knoxville

Homewood Suites

McKibbon

9/1/2016

103

Knoxville

SpringHill Suites

McKibbon

9/1/2016

103

Knoxville

TownePlace Suites

McKibbon

9/1/2016

Memphis

~~Homewood Suites~~

Hampton

~~Hilton~~

Crestline

~~3/1/2014~~

2/5/2018

~~140~~

144

Nashville

Hilton Garden Inn

~~Vista Host~~

Dimension

9/30/2010

194

Nashville

Home2 Suites

~~Vista Host~~

Dimension

5/31/2012

119

Nashville

TownePlace Suites

LBA

9/1/2016

101

Addison

SpringHill Suites

Marriott

3/1/2014

159

Allen

Hampton

~~Gateway~~

Aimbridge

9/26/2008

103

Allen

Hilton Garden Inn

~~Gateway~~

Aimbridge

10/31/2008

150

Arlington

Hampton

Western

12/1/2010

Austin

Courtyard

White Lodging

11/2/2010

145

Austin

Fairfield ~~Inn & Suites~~

White Lodging

11/2/2010

150

Austin

Hampton

~~Vista Host~~

Dimension

4/14/2009

124

Austin

Hilton Garden Inn

White Lodging

11/2/2010

117

~~Index~~

~~City~~

~~State~~

~~Brand~~

~~Manager~~

~~Date Acquired or Completed~~

~~Rooms~~

Austin

Homewood Suites

~~Vista Host~~

Dimension

4/14/2009

Austin/Round Rock

~~Homewood Suites~~

Hampton

~~Vista Host~~

Dimension

~~9/1/2016~~

3/6/2009

~~115~~

~~Beaumont~~

Austin/Round Rock

~~Residence Inn~~

Homewood Suites

~~Western~~

Dimension

~~10/29/2008~~

9/1/2016

~~133~~

115

Beaumont

Residence Inn

Western

10/29/2008

133

Burleson/Fort Worth

Hampton

LBA

10/7/2014

Dallas

Homewood Suites

Western

9/1/2016

130

Denton

Homewood Suites

Chartwell

9/1/2016

107

~~Duncanville~~

El Paso

Hilton Garden Inn

~~Gateway~~

Western

~~10/21/2008~~

12/19/2011

~~142~~

145

El Paso

Homewood Suites

Western

3/1/2014

114

Fort Worth

Courtyard

LBA

2/2/2017

124

Fort Worth

TownePlace Suites

Western

7/19/2010

140

Frisco

Hilton Garden Inn

Western

12/~~19/2011~~31/2008

~~145~~

102

~~El Paso~~

Grapevine

~~Homewood Suites~~

~~Western~~

~~3/1/2014~~

~~114~~

~~Fort Worth~~

~~Courtyard~~

~~LBA~~

~~2/2/2017~~

~~124~~

~~Fort Worth~~

~~TownePlace Suites~~

~~Western~~

~~7/19/2010~~

~~140~~

~~Frisco~~

Hilton Garden Inn

Western

~~12/31/2008~~

9/24/2010

~~102~~

110

~~Grapevine~~

Houston

Courtyard

LBA

9/1/2016

124

Houston

Marriott

Western

1/8/2010

206

Houston

Residence Inn

Western

3/1/2014

129

Houston

Residence Inn

Western

9/1/2016

120

Index

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

Irving

Homewood Suites

Western

12/29/2010

Lewisville

Hilton Garden Inn

~~Western~~

Aimbridge

~~9/24/2010~~

10/16/2008

~~110~~

165

~~Houston~~

San Antonio

~~Courtyard~~

TownePlace Suites

~~LBA~~

Western

3/1/~~2016~~2014

~~124~~

106

~~Houston~~

Shenandoah

~~Marriott~~

Courtyard

~~Western~~

LBA

9/1/~~8/2010~~2016

~~206~~

124

~~Houston~~

Stafford

~~Residence Inn~~

Homewood Suites

Western

3/1/2014

~~129~~

~~Houston~~

Texarkana

~~Residence Inn~~

Hampton

~~Western~~

Aimbridge

1/~~2016~~31/2011

~~120~~

~~Irving~~

Provo

~~Homewood Suites~~

Residence Inn

~~Western~~

Dimension

~~12/29/2010~~

3/1/2014

114

~~Lewisville~~

Salt Lake City

Residence Inn

Huntington

10/20/2017

136

Salt Lake City

SpringHill Suites

White Lodging

11/2/2010

143

Alexandria

Courtyard

Marriott

3/1/2014

178

Alexandria

SpringHill Suites

Marriott

3/28/2011

155

Charlottesville

Courtyard

Crestline

3/1/2014

139

Manassas

Residence Inn

Crestline

2/16/2011

107

Richmond

Independent

Crestline

10/9/2019

Richmond

Courtyard

White Lodging

12/8/2014

135

Richmond

Marriott

White Lodging

3/1/2014

413

Richmond

Residence Inn

White Lodging

12/8/2014

Richmond

SpringHill Suites

McKibbon

9/1/2016

103

Suffolk

Courtyard

Crestline

3/1/2014

Suffolk

TownePlace Suites

Crestline

3/1/2014

Virginia Beach

Courtyard

Crestline

3/1/2014

141

Virginia Beach

Courtyard

Crestline

3/1/2014

160

Kirkland

Courtyard

InnVentures

3/1/2014

150

Seattle

Residence Inn

InnVentures

3/1/2014

234

Tukwila

Homewood Suites

Dimension

3/1/2014

106

Vancouver

SpringHill Suites

InnVentures

3/1/2014

119

Madison

Hilton Garden Inn

~~Gateway~~

Raymond

~~10/16/2008~~

2/18/2021

~~165~~

176

~~Round Rock~~

Total

~~Hampton~~

~~Vista Host~~

~~3/6/2009~~

29,855

~~San Antonio~~

~~TownePlace Suites~~

~~Western~~

~~3/1/2014~~

~~106~~

~~Shenandoah~~

~~Courtyard~~

~~LBA~~

~~9/1/2016~~

~~124~~

~~Stafford~~

~~Homewood Suites~~

~~Western~~

~~3/1/2014~~

~~Texarkana~~

~~Courtyard~~

~~Aimbridge~~

~~3/1/2014~~

~~Texarkana~~

~~Hampton~~

~~Aimbridge~~

~~1/31/2011~~

~~Texarkana~~

~~TownePlace Suites~~

~~Aimbridge~~

~~3/1/2014~~

~~Provo~~

~~Residence Inn~~

~~Dimension~~

~~3/1/2014~~

~~114~~

~~Salt Lake City~~

~~SpringHill Suites~~

~~White Lodging~~

~~11/2/2010~~

~~143~~

~~Alexandria~~

~~Courtyard~~

~~Marriott~~

~~3/1/2014~~

~~178~~

~~Alexandria~~

~~SpringHill Suites~~

~~Marriott~~

~~3/28/2011~~

~~155~~

~~Bristol~~

~~Courtyard~~

~~LBA~~

~~11/7/2008~~

~~175~~

~~Charlottesville~~

~~Courtyard~~

~~Crestline~~

~~3/1/2014~~

~~139~~

~~Fairfax~~

~~Marriott~~

~~White Lodging~~

~~9/1/2016~~

~~316~~

~~Harrisonburg~~

~~Courtyard~~

~~Newport~~

~~3/1/2014~~

~~125~~

~~Manassas~~

~~Residence Inn~~

~~Crestline~~

~~2/16/2011~~

~~107~~

~~Richmond~~

~~Courtyard~~

~~White Lodging~~

~~12/8/2014~~

~~135~~

~~Richmond~~

~~Marriott~~

~~White Lodging~~

~~3/1/2014~~

~~410~~

~~Richmond~~

~~Residence Inn~~

~~White Lodging~~

~~12/8/2014~~

~~Richmond~~

~~SpringHill Suites~~

~~McKibbon~~

~~9/1/2016~~

~~103~~

~~Suffolk~~

~~Courtyard~~

~~Crestline~~

~~3/1/2014~~

~~Suffolk~~

~~TownePlace Suites~~

~~Crestline~~

~~3/1/2014~~

~~Virginia Beach~~

~~Courtyard~~

~~Crestline~~

~~3/1/2014~~

~~141~~

~~Virginia Beach~~

~~Courtyard~~

~~Crestline~~

~~3/1/2014~~

~~160~~

~~Kirkland~~

~~Courtyard~~

~~InnVentures~~

~~3/1/2014~~

~~150~~

~~Seattle~~

~~Residence Inn~~

~~InnVentures~~

~~3/1/2014~~

~~234~~

~~Tukwila~~

~~Homewood Suites~~

~~Dimension~~

~~3/1/2014~~

~~106~~

~~Vancouver~~

~~SpringHill Suites~~

~~InnVentures~~

~~3/1/2014~~

~~119~~

~~Total~~

~~30,188~~

~~Index~~

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 the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning the Company’s related party transactions.

Liquidity and Capital Resources

Capital Resources

The Company’s principal short term sources of liquidity are the operating cash ~~flow~~flows generated from the Company��s properties and availability under its revolving credit facility. Periodically, the Company may receive proceeds from strategic additional secured and unsecured debt financing, dispositions of its hotel properties (such as the sale of two hotels in the first quarter of 2021 for proceeds of approximately $18 million discussed above in “2021 Hotel Portfolio Activities”) and offerings of the Company’s common shares, including pursuant to the ATM Program (as defined below). As a result of declines in occupancy caused by COVID-19, the Company anticipates significantly reduced cash from operations until travel increases in the U.S. and therefore anticipates funding its near-term cash needs with operating cash flows generated from the Company’s properties and availability under its ~~$540~~revolving credit facility.

As of March 31, 2021, the Company had $1.5 billion of total outstanding debt consisting of $509.8 million of mortgage debt and $1.0 billion outstanding under its unsecured credit facilities, excluding unamortized debt issuance costs and fair value adjustments. As of March 31, 2021, the Company had available corporate cash on hand of approximately $5.8 million as well as unused borrowing capacity under its revolving credit facility ~~proceeds from~~of approximately $275.1 million. In the ~~strategic disposition~~near term, the impact of ~~its hotel properties and proceeds from potential offerings of~~COVID-19 on the global economy, including any sustained decline in the Company’s ~~common shares.~~

~~The revolving credit facility, which as of September 30, 2017 had unused borrowing capacity of approximately $323.3 million, is available~~performance, may make it more difficult or costly for ~~share repurchases, acquisitions, hotel renovations and development, working~~the Company to raise debt or equity capital ~~and other general corporate funding purposes, including the payment of distributions~~ to shareholders. As of September 30, 2017, the Company’s revolving credit facility had an outstanding principal balance of approximately $216.7 million with an annual variable interest rate of approximately 2.78%.

fund long-term liquidity requirements. The credit ~~agreement~~agreements governing the ~~revolving~~unsecured credit ~~facility contains~~facilities contain mandatory prepayment requirements, customary affirmative ~~covenants,~~and negative covenants and events of default. The credit ~~agreement requires~~

Index

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. ~~The~~

As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company ~~was in~~anticipated that it may not be able to maintain compliance with ~~the applicable~~certain of these covenants ~~at September 30, 2017.~~

In February 2017, the Company executed an equity distribution agreement that allows the Company to sell, from time to time, up to an aggregate of $300 million of its common shares through sales agents (the “ATM Program”). Actual sales 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 determinations by the Company of the appropriate uses of any proceeds. As of September 30, 2017, the Company had not sold any shares under the ATM Program.

in future periods. On ~~July 25, 2017,~~June 5, 2020, the Company entered into amendments to each of the unsecured credit facilities, which the Company again amended on March 1, 2021. The combined amendments suspend the testing for all but two of the Company’s existing financial maintenance covenants under the unsecured credit facilities until the date the compliance certificate is required to be delivered for the fiscal quarter ending June 30, 2022 (unless the Company elects an ~~unsecured $85~~earlier date) (the “Extended Covenant Waiver Period”), suspend the testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio until the compliance certificate is required to be delivered for the fiscal quarter ending March 31, 2022 and provide for, among other restrictions, the following during the Extended Covenant Waiver Period:

●

Mandatory prepayments of amounts outstanding under the Company’s unsecured credit facilities, of net cash proceeds from certain debt and equity issuances, and asset dispositions, subject to various exceptions, including an allowance of $300 million for acquiring unencumbered assets with proceeds from assets sales and a $300 million allowance for acquiring unencumbered assets funded by common equity so long as outstanding borrowings under the revolving credit facility are less than $275 million. A portion of the mandatory prepayments will be available for future borrowing under the revolving credit facility;

●

A minimum liquidity covenant of $125 million;

●

Maximum discretionary capital expenditures of $50 million;

●

Limitations on additional investments; and

●

The amendments also modify the calculation of the existing financial covenants for the four quarters subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts to the extent the most recently ended fiscal quarter is not at least four fiscal quarters from the end of the Extended Covenant Waiver Period, and provide for a LIBOR floor under the credit agreements of 25 basis points for Eurodollar Rate Loans and 1.25% for Base Rate Loans on the revolving credit facility, and any term ~~loan with a syndicate~~loans under the credit agreements that are not hedged. The March 2021 amendments also modify certain of ~~commercial banks, with a maturity date~~the existing financial maintenance covenants to less restrictive levels following the Extended Covenant Waiver Period as follows (capitalized terms are defined in the credit agreements):

●

Minimum Fixed Charge Coverage Ratio of 1.05 to 1.00 for the first fiscal quarter, 1.25 to 1.00 for one fiscal quarter and then a ratio of 1.50 to 1.00 thereafter;

●

Maximum Unsecured Leverage Ratio of 65% for two fiscal quarters and 60% thereafter.

Except as otherwise set forth in the amendments, the terms of ~~July 25, 2024.~~the credit agreements remain in effect. The Company ~~used~~anticipates meeting the ~~net proceeds from~~applicable covenants after the ~~$85 million term loan to pay down~~conclusion of the ~~borrowings on the Company’s revolving credit facility.~~ Extended Covenant Waiver Period, although there can be no assurances.

Index

See Note 54 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for ~~additional information related to~~a description of the ~~$85 million term loan.~~

~~As discussed below in “Subsequent Events,” in October 2017,~~Company’s debt instruments as of March 31, 2021.

On August 12, 2020, the Company entered into an equity distribution agreement pursuant to which the Company may sell, from time to time, up to an aggregate of $300 million of its common shares under an at-the-market offering program (the “ATM Program”). As of March 31, 2021, the Company had not sold any common shares under the ~~Fairfax, Virginia Marriott for a sale price of approximately $41.5 million.~~ATM Program. The Company ~~used~~plans to use the net proceeds from the sale of these shares to pay down borrowings on its revolving credit ~~facility.~~

~~Capital Uses~~

~~The Company anticipates that cash flow from operations, availability~~facility and, under ~~its~~certain circumstances, to repay proportionally amounts under each of the Company’s revolving credit facility, ~~additional borrowings~~term loans and ~~proceeds from hotel dispositions and equity offerings will be adequate~~senior notes, subject to meet its anticipated liquidity requirements, including debt service, hotel acquisitions, hotel renovations, 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~~certain restrictions during the ~~nine months ended September 30, 2017 totaled approximately $200.7 million or $0.90 per common share and were paid at a monthly rate of $0.10 per common share. For the same period,~~Extended Covenant Waiver Period pursuant to the Company’s net cash generated from operations was approximately $280.5 million, which included a payment of approximately $19.4 million, net of reimbursements received from the Company’s directors and officers insurance carriers, during the first nine months of 2017 to settle the Apple Ten merger lawsuit which isunsecured credit facilities, as discussed further in Note 104, titled ~~“Legal Proceedings”~~“Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q.

~~Index~~

The ~~Company’s current annual distribution rate, payable monthly, is $1.20 per common share. As it has done historically, due~~Company plans to ~~seasonality,~~use the corresponding increased availability under the revolving credit facility for general corporate purposes which may include, among other things, acquisitions of additional properties, the repayment of other outstanding indebtedness, capital expenditures, improvement of properties in its portfolio and working capital. The Company may also use the net proceeds to acquire another REIT or other company that invests in income producing properties.

Capital Uses

Although there can be no assurances, the Company ~~may use~~anticipates that available cash and availability under its revolving credit facility as of March 31, 2021 will be adequate to meet its near-term potential operating cash flow deficits that may result from the effect of COVID-19, debt service and capital expenditures. Though not expected, if the Company is unable to meet its near-term anticipated capital uses as currently planned, it may raise capital through disposition of assets, issuance of equity or issuance of debt, which may be more costly to the Company in the current environment.

Distributions

To maintain its REIT status, the Company is required to distribute at least 90% of its ordinary income. No distributions were paid during the three months ended March 31, 2021. For the same period, the Company’s net cash used by operations was approximately $2.1 million. As a result of COVID-19 and the impact on its business, the Company suspended its monthly distributions in March 2020. As discussed in Note 4, titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, as a requirement under the amendments to its unsecured credit facilities, the Company is restricted in its ability to make distributions during the Extended Covenant Waiver Period, except for the payment of cash distributions of $0.01 per common share per quarter or to the extent required to maintain ~~the consistency of the monthly~~REIT status. Subject to these distribution ~~rate, taking into consideration any acquisitions, dispositions, capital improvements and economic cycles. Any distribution will be subject to approval of~~restrictions, the Company’s Board of Directors, in consultation with management, will continue to monitor hotel operations and ~~there can be no assurance of the classification or duration of~~intends to adjust distributions at ~~the current annual distribution rate. The Board of Directors monitors the Company’s distribution rate relative to the performance of the hotels on an ongoing basis~~a time and ~~may make adjustments to the distribution rate as~~level determined to be prudent in relation to the Company’s other cash requirements ~~of the Company. If cash flow from operations and the revolving credit facility are not adequate~~or in order to ~~meet liquidity requirements, the Company may utilize additional financing sources~~maintain its REIT status for federal income tax purposes, subject 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 connection with the implementation of the ATM Program, in February 2017 the Company terminated its existing written trading plan~~any applicable distribution restrictions under the Company’s unsecured credit facilities. In the first quarter of 2021, the Company resumed the declaration of distributions with the declaration of a quarterly distribution of $0.01 per common share in March 2021, totaling approximately $2.2 million, which was paid on April 15, 2021.

Share Repurchases

In May 2020, the Company’s Board of Directors approved an extension of its existing share repurchase ~~program. In January 2016,~~program, authorizing share repurchases up to an aggregate of $345 million (the “Share Repurchase Program”). The Share Repurchase Program may be suspended or terminated at any time by the Company and will end in July 2021 if not terminated earlier. During the first three months of 2020, the Company purchased, under its ~~share repurchase program,~~Share Repurchase Program approximately ~~20,000~~1.5 million of its common shares at a weighted-average market purchase price of approximately ~~$18.10~~$9.42 per common share, for an aggregate purchase price, including commissions, of approximately ~~$0.4~~$14.3 million. The shares were repurchased under a written trading plan that provided for share repurchases in open market transactions and was intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In March 2020 the Company ~~did~~terminated its written trading plan under the Share Repurchase Program and has not ~~repurchase~~repurchased any shares since that time. Repurchases under the Share Repurchase Program have been funded, and the Company intends to fund any future purchases, with cash on hand or availability under its unsecured credit facilities subject to any applicable restrictions under the Company’s unsecured credit facilities. The timing of share repurchases and the number of common shares ~~under its share repurchase program during the first nine months of 2017.~~ ~~The Company plans~~ to ~~continue to consider opportunistic share repurchases~~be repurchased under the ~~$467.5 million remaining portion of the authorized $475 million share repurchase program, which~~Share Repurchase Program will depend onupon prevailing market conditions, regulatory requirements and other factors. ~~The program may be suspended or terminated at any time by~~As discussed above, share repurchases are subject to certain restrictions during the ~~Company and,~~Extended Covenant Waiver Period as a ~~result of an extension of~~condition to the ~~program approved by~~amendments to the ~~Board of Directors in May 2017, will end in July 2018 if not terminated earlier.~~

Company’s unsecured credit facilities, as discussed above.

Capital Improvements

The Company ~~has ongoing capital commitments~~is committed to ~~fund its capital improvements. To maintain~~maintaining and ~~enhance~~enhancing each property’s competitive position in its ~~market, the~~market. The Company has invested in and, subject to improved operating results, 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

Index

with respect to the hotels. As of ~~September 30, 2017,~~March 31, 2021, the Company held ~~$26.8~~approximately $26.4 million in reserve related to these properties. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, the Company invested approximately ~~$41.9~~$2.2 million in capital expenditures, and anticipates spending an additional ~~$25~~$23-28 million during the remainder of ~~2017, which includes various scheduled renovation projects for approximately 15 properties.~~2021. The Company does not currently have any existing or planned projects for new property development.

~~Hotel Contract Commitments~~

As of September 30, 2017, the Company had outstanding contracts for the potential purchase of four additional hotels for a total purchase price of approximately $146.1 million. Two of the hotels, the Salt Lake City Residence Inn and the Portland Residence Inn, which are already in operation, were acquired in October 2017. The two remaining hotels are under construction and are planned to be completed and opened for business over the next 12 months from September 30, 2017, at which time closing on these hotels is expected to occur. Although the Company is working towards acquiring these hotels, there are many conditions to closing that have not yet been satisfied and there can be no assurance that a closing on these hotels will occur under the outstanding purchase contracts. The purchase price for each of the Salt Lake City Residence Inn and Portland Residence Inn was funded through the Company’s revolving credit facility and it is anticipated that the purchase price for the remaining outstanding contracts will be funded similarly.

Cash Management Activities

As part of the cost sharing arrangements discussed in Note 76 titled “Related Parties” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, certain day-to-day transactions may result in amounts due to or from the Company and ~~Apple Realty Group, Inc. (“ARG”).~~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.

~~Index~~

~~Impact of Inflation~~

Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, limit the operators’ ability to raise room rates. Currently the Company is 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 there is 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. However, due to the effects of COVID-19, these typical seasonal patterns were disrupted in 2020 and may also be disrupted in the remainder of 2021. 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.

New Accounting Standards

See Note 1 titled “Organization and Summary of Significant Accounting Policies” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for information on the adoption of the guidance in the reference rate reform accounting standards effective in ~~the first nine months of 2017~~March 2020 and ~~the anticipated adoption of recently issued accounting standards.~~

January 2021.

Subsequent Events

~~In October 2017,~~

On April 15, 2021, the Company paid approximately ~~$22.3~~$2.2 million, or ~~$0.10~~$0.01 per outstanding common share, in distributions to its common shareholders.

~~On October 13, 2017, the Company closed on the purchase of an existing 179-room Residence Inn in Portland, Maine for a gross purchase price of approximately $55.8 million.~~

~~On October 20, 2017, the Company closed on the purchase of an existing 136-room Residence Inn in Salt Lake City, Utah for a gross purchase price of $25.5 million.~~

Index

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of ~~September 30, 2017,~~March 31, 2021, 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 ~~variable~~variable-rate debt that is not fixed by interest rate ~~term loan.~~swaps. As of ~~September 30, 2017,~~March 31, 2021, after giving effect to interest rate swaps, as described below, approximately ~~$319.2~~$295.5 million, or approximately ~~24%~~19% of the Company’s total debt outstanding, was subject to variable interest rates. Based on the Company’s ~~variable rate~~variable-rate debt outstanding as of ~~September 30, 2017,~~March 31, 2021, every 100 basis points change in interest rates will impact the Company’s annual net income by approximately ~~$3.2~~$3.0 million (subject to the LIBOR floor as discussed in Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q), 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 balance at September 30, 2017 was $0.~~

~~Index~~

As of ~~September 30, 2017,~~March 31, 2021, the Company’s ~~variable rate~~variable-rate debt consisted of its ~~$540~~unsecured credit facilities, including borrowings outstanding under its $425 million revolving credit facility and ~~six~~$870 million of term loans, ~~totaling $660 million.~~and a $20.6 million loan secured by two of its properties (the $20.6 million loan was repaid on April 12, 2021). Currently, the Company uses interest rate swaps to manage its interest rate risk on a portion of its ~~variable rate~~variable-rate debt. As of ~~September 30, 2017,~~March 31, 2021, the Company had ~~six~~13 interest rate swap agreements that effectively fix the interest payments on approximately ~~$557.5~~$695.0 million of the Company’s ~~variable rate~~variable-rate debt outstanding ~~(consisting~~with swap maturity dates ranging from August 2022 to December 2029. In addition, the Company has entered into an interest rate swap agreement which, beginning May 18, 2021, will effectively fix the interest rate on an additional $75 million 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~~one-month LIBOR.

See Note 5 titled “Fair Value of Financial Instruments” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for a description of the Company’s interest rate swaps as of March 31, 2021.

In addition to its ~~variable rate~~variable-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.~~arrangements as well as one $50 million fixed-rate senior notes facility. 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 revolving~~its unsecured credit ~~facility~~facilities at ~~September 30, 2017.~~March 31, 2021. All dollar amounts are in thousands.

	April 1 - December 31, 2021			2022			2023			2024			2025			Thereafter			Total		Fair Market Value
Total debt:
Maturities	$	67,706		$	259,731		$	296,213		$	338,597		$	245,140		$	322,265		$	1,529,652	$	1,488,025
Average interest rates⁽¹⁾		3.9	%		3.9	%		4.1	%		4.3	%		4.4	%		4.4	%

Variable-rate debt:
Maturities	$	20,551		$	149,900		$	250,000		$	310,000		$	175,000		$	85,000		$	990,451	$	965,647
Average interest rates ⁽¹⁾		3.7	%		3.8	%		4.1	%		4.5	%		5.0	%		5.6	%

Fixed-rate debt:
Maturities	$	47,155		$	109,831		$	46,213		$	28,597		$	70,140		$	237,265		$	539,201	$	522,378
Average interest rates		4.3	%		4.1	%		4.0	%		4.0	%		4.0	%		3.9	%

October 1 -
December 31, 2017
2018 2019 2020 2021 Thereafter Total Fair Market Value
Total debt:
Maturities $ 2,701 $ 11,071 $ 248,408 $ 451,164 $ 95,311 $ 498,181 $ 1,306,836 $ 1,307,025
Average interest rates 3.5 % 3.5 % 3.5 % 3.8 % 4.0 % 4.0 %

Variable rate debt:
Maturities $ - $ - $ 216,700 $ 425,000 $ 50,000 $ 185,000 $ 876,700 $ 877,783
Average interest rates (1) 3.0 % 3.0 % 3.0 % 3.1 % 3.3 % 3.4 %

Fixed rate debt:
Maturities $ 2,701 $ 11,071 $ 31,708 $ 26,164 $ 45,311 $ 313,181 $ 430,136 $ 429,242
Average interest rates 4.5 % 4.5 % 4.5 % 4.5 % 4.4 % 4.3 %

(1)	The average interest rate gives effect to interest rate swaps, as applicable.

Item 4. Controls and Procedures

Senior management, including the Chief Executive Officer, Chief Financial Officer and Chief ~~Financial~~Accounting 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, Chief Financial Officer and Chief ~~Financial~~Accounting Officer have concluded that the Company’s disclosure controls and procedures were effective as of ~~September 30, 2017.~~March 31, 2021. 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.

Index

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~There have been no material changes~~

The Company is or may be a party 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 ~~legal proceedings previously disclosed~~Company, have a material adverse effect on the Company’s consolidated financial position or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following is a summary of all share repurchases during the first quarter of 2021.

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⁾
Janaury 1 - Janaury 31, 2021		-	-			-	$	345,000
February 1 - February 28, 2021		-	-			-	$	345,000
March 1 - March 31, 2021 ⁽²⁾		117,647	$	14.03		-	$	345,000
Total		117,647				-

(1)	Represents amount outstanding under the Company's authorized $345 million share repurchase program. This program may be suspended or terminated at any time by the Company and will end in July 2021 if not terminated earlier.

(2)	Represents common shares surrendered to the Company to satisfy tax withholding obligations associated with the issuance of common shares awarded to employees.

Dividends

During the Extended Covenant Waiver Period (as defined in the Company’s ~~Annual Report~~amended unsecured credit facilities), the Company is subject to more restrictive limits on ~~Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”) except as described~~its ability to pay distributions on its common shares. See “Liquidity and Capital Resources” in ~~Note 10 titled “Legal Proceedings”~~Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, appearing in ~~the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in~~Part I this Quarterly Report on Form 10-Q ~~which information is incorporated by reference herein.~~

Index~~Item 1A. Risk Factors~~

~~For a discussion of the Company’s potential risks and uncertainties, see the section titled “Risk Factors” in the 2016 Form 10-K. There have been no material changes to the risk factors previously disclosed in the~~ ~~2016 Form 10-K~~.

Item 6. Exhibits

Exhibit Number		Description of Documents
3.1
~~3.1~~	Amended and Restated Articles of Incorporation of the Company, as amended (Incorporated by reference to Exhibit 3.1 to the Company’s ~~current~~quarterly report on Form ~~8-K~~10-Q (SEC File No. 001-37389) filed ~~May 23, 2017)~~August 6, 2018)
~~3.2~~
3.2		~~Second~~Third Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.2 to the Company’s quarterly report on Form 10-Q (SEC File No. 001-37389) filed May 18, 2020)

10.1		Third Amendment to the Credit Agreement, dated March 1, 2021, to Second Amended and Restated Credit Agreement dated as of July 27, 2018, among Apple Hospitality REIT, Inc., as borrower, certain subsidiaries of Apple Hospitality REIT, Inc., as guarantors, Bank of America, N.A., as Administrative Agent, KeyBank National Association and Wells Fargo Bank, National Association, as Co-Syndication Agents, U.S. Bank National Association, as Documentation Agent, Regions Bank as Managing Agent, the Lenders and Letter of Credit Issuers party thereto, and BofA Securities, Inc., KeyBanc Capital Markets, Wells Fargo Securities, LLC and U.S. Bank National Association, as Joint Lead Arrangers, and BofA Securities, Inc., KeyBanc Capital Markets and Wells Fargo Securities, LLC, as Joint Bookrunners (Incorporated by reference to ~~Exhibit 3.1~~exhibit 10.1 to the Company’s current report on ~~Form 8-K~~From 8-K/A (SEC File No. 001-37389) filed ~~February 18, 2016)~~March 2, 2021)

31.1		Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

31.2		Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

~~32.1~~ 31.3		Certification of the Company’s Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

32.1		Certification of the Company’s Chief Executive Officer, Chief Financial Officer and Chief ~~Financial~~Accounting Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FURNISHED HEREWITH)

101		The following materials from ~~Apple Hospitality REIT, Inc.’s~~the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017~~March 31, 2021 formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Consolidated Statements of Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and ~~(iv)~~(v) related notes to these financial statements, tagged as blocks of text and in detail (FILED HEREWITH)
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted as Inline XBRL and contained in Exhibit 101.

Index

SIGNATURES

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


Apple Hospitality REIT, Inc.

By:	/s/ Justin G. Knight		Date: ~~November~~May 6, ~~2017~~2021
	Justin G. Knight,
	~~President and~~ Chief Executive Officer (Principal Executive Officer)

By:	/s/ ~~Bryan Peery~~ Elizabeth S. Perkins		Date: ~~November~~May 6, ~~2017~~2021
	~~Bryan Peery,~~ Elizabeth S. Perkins,
	Chief Financial Officer (Principal Financial ~~and~~ Officer)

By:	/s/ Rachel S. Labrecque	Date: May 6, 2021
	Rachel S. Labrecque,
	Chief Accounting Officer (Principal Accounting Officer)

	September 30,			December 31,
	2017			2016
	(unaudited)
Assets
Investment in real estate, net of accumulated depreciation of $686,787 and $557,597, respectively	$	4,742,590		$	4,823,489
Assets held for sale		40,626			39,000
Restricted cash-furniture, fixtures and other escrows		30,299			29,425
Due from third party managers, net		52,354			31,460
Other assets, net		48,018			56,509
Total Assets	$	4,913,887		$	4,979,883

Liabilities
Revolving credit facility	$	216,700		$	270,000
Term loans		655,988			570,934
Mortgage debt		432,783			497,029
Accounts payable and other liabilities		104,467			124,856
Total Liabilities		1,409,938			1,462,819

Shareholders' Equity
Preferred stock, authorized 30,000,000 shares; none issued and outstanding		0			0
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 223,060,840 and 222,938,648 shares, respectively		4,455,390			4,453,205
Accumulated other comprehensive income		5,218			4,589
Distributions greater than net income		(956,659	)		(940,730	)
Total Shareholders' Equity		3,503,949			3,517,064

Total Liabilities and Shareholders' Equity	$	4,913,887		$	4,979,883

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Revenues:
Room	$	302,298		$	255,269		$	877,974		$	698,759
Other		22,628			21,202			71,581			59,835
Total revenue		324,926			276,471			949,555			758,594

Expenses:
Operating		79,975			69,082			235,474			187,370
Hotel administrative		24,842			20,866			74,895			57,921
Sales and marketing		25,488			21,329			75,867			59,244
Utilities		12,036			10,543			31,982			25,862
Repair and maintenance		12,199			10,478			36,394			29,167
Franchise fees		13,974			11,834			40,611			32,212
Management fees		11,315			9,205			33,072			26,189
Property taxes, insurance and other		17,598			14,787			52,346			40,315
Ground lease		2,831			2,615			8,486			7,587
General and administrative		5,350			2,623			18,255			12,511
Transaction and litigation costs (reimbursements)		0			36,452			(2,586	)		37,861
Loss on impairment of depreciable real estate assets		0			5,471			7,875			5,471
Depreciation		44,110			37,343			131,770			104,651
Total expenses		249,718			252,628			744,441			626,361

Operating income		75,208			23,843			205,114			132,233

Interest and other expense, net		(12,024	)		(10,156	)		(35,590	)		(28,519	)
Gain (loss) on sale of real estate		(157	)		0			15,983			0

Income before income taxes		63,027			13,687			185,507			103,714

Income tax benefit (expense)		(203	)		7			(712	)		(616	)

Net income	$	62,824		$	13,694		$	184,795		$	103,098

Other comprehensive income (loss):
Interest rate derivatives		259			4,261			629			(7,934	)

Comprehensive income	$	63,083		$	17,955		$	185,424		$	95,164

Basic and diluted net income per common share	$	0.28		$	0.07		$	0.83		$	0.57

Weighted average common shares outstanding - basic and diluted		223,057			190,563			223,052			180,004

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017 (Actual)		2016 (Proforma)		2017 (Proforma)		2016 (Proforma)
Total revenue	$	324,926	$	325,924	$	949,555	$	949,760
Net income	$	62,824	$	59,960	$	182,209	$	176,985
Basic and diluted net income per common share	$	0.28	$	0.27	$	0.82	$	0.79
Weighted average common shares outstanding - basic and diluted		223,057		223,403		223,052		223,399

Location	Brand	Date of Purchase Contract	Rooms		Refundable Deposits		Gross Purchase Price
Operating (a)
Salt Lake City, UT	Residence Inn	8/22/2017		136	$	500	$	25,500
Portland, ME	Residence Inn	8/30/2017		179		1,000		55,750
Under development (b)
Phoenix, AZ	Hampton	10/25/2016		210		500		44,100
Orlando, FL	Home2 Suites	1/18/2017		128		3		20,736
				653	$	2,003	$	146,086

		As of September 30, 2017								As of December 31, 2016
	Maturity Date	Outstanding Balance			Interest Rate					Outstanding Balance			Interest Rate
Revolving credit facility (1)	5/18/2019	$	216,700			2.78	%	(2	)	$	270,000			2.32	%	(2	)

Term loans
$425 million term loans	5/18/2020		425,000			3.01	%	(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	)		0			n/a
Total term loans at stated value			660,000								575,000
Unamortized debt issuance costs			(4,012	)							(4,066	)
Total term loans			655,988								570,934

Total revolving credit facility and term loans		$	872,688							$	840,934

2017 (October - December)	$	2,701
2018		11,071
2019		248,408
2020		451,164
2021		95,311
Thereafter		498,181
		1,306,836
Unamortized fair value adjustment of assumed debt		4,556
Unamortized debt issuance costs related to term loans and mortgage debt		(5,921	)
Total	$	1,305,471

								Fair Value Asset (Liability)
Hedge Type	Notional Amount at September 30, 2017		Origination Date	Maturity Date	Swap Fixed Interest Rate			September 30, 2017			December 31, 2016
Cash flow hedge	$	212,500	5/21/2015	5/18/2020		1.58	%	$	538		$	(198	)
Cash flow hedge		110,000	7/2/2015	5/18/2020		1.62	%		166			(246	)
Cash flow hedge		50,000	4/7/2016	3/31/2021		1.09	%		1,168			1,289
Cash flow hedge		100,000	4/7/2016	3/31/2023		1.33	%		3,148			3,744
Cash flow hedge		75,000	5/31/2017	6/30/2024		1.96	%		202			0
Cash flow hedge		10,000	8/10/2017	6/30/2024		2.01	%		(4	)		0
	$	557,500						$	5,218		$	4,589

	October 1 - December 31, 2017			2018			2019			2020			2021			Thereafter			Total		Fair Market Value
Total debt:
Maturities	$	2,701		$	11,071		$	248,408		$	451,164		$	95,311		$	498,181		$	1,306,836	$	1,307,025
Average interest rates		3.5	%		3.5	%		3.5	%		3.8	%		4.0	%		4.0	%

Variable rate debt:
Maturities	$	-		$	-		$	216,700		$	425,000		$	50,000		$	185,000		$	876,700	$	877,783
Average interest rates (1)		3.0	%		3.0	%		3.0	%		3.1	%		3.3	%		3.4	%

Fixed rate debt:
Maturities	$	2,701		$	11,071		$	31,708		$	26,164		$	45,311		$	313,181		$	430,136	$	429,242
Average interest rates		4.5	%		4.5	%		4.5	%		4.5	%		4.4	%		4.3	%