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~~

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~~

2021: 228,354,214

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~~2021 and December 31, ~~2016~~2020	3

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

		Consolidated Statements of Shareholders’ Equity – three and nine months ended September 30, 2021 and 2020	5

		Consolidated Statements of Cash Flows ~~- Nine~~– nine months ended September 30, ~~2017~~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	21

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34	39

	Item 4.	Controls and Procedures	35	39

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	36	40

	Item ~~1A.~~6.	~~Risk Factors~~Exhibits	36	40

Signatures			~~Item 6.~~	~~Exhibits~~	36

~~Signatures~~			37	41

This Form 10-Q includes references to certain trademarks or service marks. The AC Hotels by Marriott®, Aloft Hotels®, 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)

	September 30,			December 31,
	2021			2020
	(unaudited)
Assets
Investment in real estate, net of accumulated depreciation and amortization of $1,266,122 and $1,235,698, respectively	$	4,541,424		$	4,732,896
Assets held for sale		0			5,316
Cash and cash equivalents		39,432			5,556
Restricted cash-furniture, fixtures and other escrows		34,446			28,812
Due from third party managers, net		52,322			22,137
Other assets, net		37,203			35,042
Total Assets	$	4,704,827		$	4,829,759

Liabilities
Debt, net	$	1,366,621		$	1,482,571
Finance lease liabilities		111,706			219,981
Accounts payable and other liabilities		98,386			97,860
Total Liabilities		1,576,713			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 228,354,214 and 223,212,346 shares, respectively		4,570,217			4,488,419
Accumulated other comprehensive loss		(24,650	)		(42,802	)
Distributions greater than net income		(1,417,453	)		(1,416,270	)
Total Shareholders' Equity		3,128,114			3,029,347

Total Liabilities and Shareholders' Equity	$	4,704,827		$	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						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenues:
Room	$	260,415		$	140,116		$	640,062		$	434,923
Food and beverage		6,315			2,235			14,186			14,386
Other		10,434			6,475			29,033			18,605
Total revenue		277,164			148,826			683,281			467,914

Expenses:
Hotel operating expense:
Operating		61,954			33,124			153,290			120,860
Hotel administrative		23,126			16,625			62,408			54,079
Sales and marketing		23,015			13,728			58,283			47,517
Utilities		11,410			9,967			31,322			25,465
Repair and maintenance		12,600			8,842			34,711			26,983
Franchise fees		12,274			6,603			30,058			20,516
Management fees		9,574			4,873			23,031			15,425
Total hotel operating expense		153,953			93,762			393,103			310,845
Property taxes, insurance and other		17,927			20,523			54,936			58,820
General and administrative		13,261			6,726			29,815			22,274
Loss on impairment of depreciable real estate assets		0			0			10,754			4,382
Depreciation and amortization		44,217			50,171			139,313			149,590
Total expense		229,358			171,182			627,921			545,911

Gain on sale of real estate		44			0			3,664			8,785

Operating income (loss)		47,850			(22,356	)		59,024			(69,212	)

Interest and other expense, net		(15,977	)		(18,531	)		(53,108	)		(52,483	)

Income (loss) before income taxes		31,873			(40,887	)		5,916			(121,695	)

Income tax expense		(114	)		(61	)		(309	)		(265	)

Net income (loss)	$	31,759		$	(40,948	)	$	5,607		$	(121,960	)

Other comprehensive income (loss):
Interest rate derivatives		3,426			2,739			18,152			(43,622	)

Comprehensive income (loss)	$	35,185		$	(38,209	)	$	23,759		$	(165,582	)

Basic and diluted net income (loss) per common share	$	0.14		$	(0.18	)	$	0.02		$	(0.55	)

Weighted average common shares outstanding - basic and diluted		228,436			223,293			225,664			223,620

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

(Unaudited)

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

Three Months Ended September 30, 2021 and 2020
	Common Stock					Accumulated Other			Distributions
	Number of Shares		Amount			Comprehensive Income (Loss)			Greater Than Net Income			Total

Balance at June 30, 2021		228,341	$	4,569,332		$	(28,076	)	$	(1,446,933	)	$	3,094,323
Share based compensation, net		13		915			-			-			915
Issuance of common shares, net		-		(30	)		-			-			(30	)
Interest rate derivatives		-		-			3,426			-			3,426
Net income		-		-			-			31,759			31,759
Distributions declared to shareholders ($0.01 per share)		-		-			-			(2,279	)		(2,279	)
Balance at September 30, 2021		228,354	$	4,570,217		$	(24,650	)	$	(1,417,453	)	$	3,128,114

Balance at June 30, 2020		223,224	$	4,488,034		$	(51,059	)	$	(1,324,016	)	$	3,112,959
Share based compensation, net		7		591			-			-			591
Issuance of common shares, net		-		(337	)		-			-			(337	)
Interest rate derivatives		-		-			2,739			-			2,739
Net loss		-		-			-			(40,948	)		(40,948	)
Balance at September 30, 2020		223,231	$	4,488,288		$	(48,320	)	$	(1,364,964	)	$	3,075,004

Nine Months Ended September 30, 2021 and 2020
	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		465			6,762			-			-			6,762
Issuance of common shares, net		4,677			75,036			-			-			75,036
Interest rate derivatives		-			-			18,152			-			18,152
Net income		-			-			-			5,607			5,607
Distributions declared to shareholders ($0.03 per share)		-			-			-			(6,790	)		(6,790	)
Balance at September 30, 2021		228,354		$	4,570,217		$	(24,650	)	$	(1,417,453	)	$	3,128,114

Balance at December 31, 2019		223,863		$	4,493,763		$	(4,698	)	$	(1,198,052	)	$	3,291,013
Share based compensation, net		889			9,198			-			-			9,198
Issuance of common shares, net		-			(337	)								(337	)
Common shares repurchased		(1,521	)		(14,336	)		-			-			(14,336	)
Interest rate derivatives		-			-			(43,622	)		-			(43,622	)
Net loss		-			-			-			(121,960	)		(121,960	)
Distributions declared to shareholders ($0.20 per share)		-			-			-			(44,952	)		(44,952	)
Balance at September 30, 2020		223,231		$	4,488,288		$	(48,320	)	$	(1,364,964	)	$	3,075,004

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)

	Nine Months Ended
	September 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	5,607		$	(121,960	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		139,313			149,590
Loss on impairment of depreciable real estate assets		10,754			4,382
Gain on sale of real estate		(3,664	)		(8,785	)
Other non-cash expenses, net		8,208			6,055
Changes in operating assets and liabilities:
Increase in due from third party managers, net		(30,383	)		(3,037	)
Increase in other assets, net		(755	)		(1,627	)
Increase in accounts payable and other liabilities		17,282			1,581
Net cash provided by operating activities		146,362			26,199

Cash flows from investing activities:
Acquisition of hotel properties, net		(197,228	)		(88,687	)
Refunds (payments) for potential acquisitions, net		(2,645	)		585
Capital improvements		(9,138	)		(44,383	)
Net proceeds from sale of real estate		231,008			44,385
Net cash provided by (used in) investing activities		21,997			(88,100	)

Cash flows from financing activities:
Net proceeds related to issuance of common shares		75,036			(247	)
Repurchases of common shares		-			(14,336	)
Repurchases of common shares to satisfy employee withholding requirements		(1,650	)		(1,748	)
Distributions paid to common shareholders		(4,510	)		(67,324	)
Net proceeds from (payments on) revolving credit facility		(105,800	)		78,800
Proceeds from term loans and senior notes		-			50,000
Proceeds from mortgage debt and other loans		-			81,520
Payments of mortgage debt and other loans		(66,349	)		(41,523	)
Payments of finance lease settlement		(24,000	)		-
Financing costs		(1,576	)		(2,283	)
Net cash provided by (used in) financing activities		(128,849	)		82,859

Net change in cash, cash equivalents and restricted cash		39,510			20,958

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

Cash, cash equivalents and restricted cash, end of period	$	73,878		$	55,619

Supplemental cash flow information:
Interest paid	$	49,735		$	46,737

Supplemental disclosure of noncash investing and financing activities:
Notes payable originated from acquisitions	$	56,000		$	20,551
Accrued distribution to common shareholders	$	2,279		$	-

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	$	39,432		$	27,435
Restricted cash-furniture, fixtures and other escrows, end of period		34,446			28,184
Cash, cash equivalents and restricted cash, end of period	$	73,878		$	55,619

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 “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,~~2021, the Company owned ~~237~~215 hotels with an aggregate of ~~30,188~~28,085 rooms located in ~~33 states, including one hotel with 316 rooms classified as held for sale, which was sold to an unrelated party in October 2017.~~35 states. 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~~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.

Coronavirus COVID-19 Pandemic

As a result of the 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 have had and are expected to continue to have a significant negative effect on the Company’s revenue and operating results. While occupancy has recovered significantly during the first nine months of 2021, there remains significant uncertainty as to when or if operations at the hotels will return to pre-pandemic levels.

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~~ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. In January 2021, the FASB issued 2021-01, Reference Rate Reform (Topic 848), Scope, which further clarified the scope of the reference rate reform optional practical expedients and 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 effectiveness in hedging relationships that have been modified to replace a reference rate. The guidance in ASU Nos. 2020-04 and 2021-01 became effective upon issuance and the provisions of the ASUs have not had a material impact on the Company’s

Index

consolidated financial statements and related disclosures as of September 30, 2021.The provisions of these updates will generally affect the Company by allowing, among other things, the following:

•

Modifications of the Company’s unsecured credit facilities (as defined below) 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.

•

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 future as a majority of the Company’s unsecured credit facilities and interest rate swaps are indexed to LIBOR.

Accounting Standards Recently Issued

Accounting for Certain Equity Options

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (Topics 260, 470, 718 and 815), which provides updated guidance to ~~assist entities with evaluating whether transactions should be accounted~~clarify and reduce diversity in an issuer’s accounting for ~~as acquisitions (or disposals)~~modifications or exchanges of ~~assets~~freestanding equity-classified written call options that remain equity classified after modification or ~~businesses.~~exchange. The ~~standard is~~provisions of this update are effective for annual and interim periods beginning after December 15, ~~2017 with early adoption permitted.~~2021. The ~~Company adopted this standard effective January 1, 2017 on a prospective basis. Prior to the~~ adoption of this standard, the Company’s acquisitions of hotel properties were accounted for as existing businesses, and therefore all transaction costs associated with the acquisitions, including title, legal, accounting, brokerage commissions and other related costs were expensed as incurred. 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, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, 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), 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 the scope of~~ ~~Accounting Standards Codification (“ASC”)~~ Subtopic 610-20 and adds guidance for 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 not expected to have 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 of hedging activity. The standard simplifies the application 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 it will adopt the standard. T~~he 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, 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, 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 for the transaction, the aggregate value of the merger consideration paid to Apple Ten shareholders was estimated to be approximately $1.0 billion, and was comprised of approximately $956.1 million for the issuance of approximately 48.7 million common shares of the Company valued at $19.62 per share, which was the closing price of the Company’s common shares on August 31, 2016 (the date that the merger was approved), 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 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. Investment in Real Estate

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

	September 30,			December 31,
	2021			2020
Land	$	771,639		$	725,512
Building and improvements		4,441,034			4,525,850
Furniture, fixtures and equipment		475,807			499,865
Finance ground lease assets		102,084			203,617
Franchise fees		16,982			13,750
		5,807,546			5,968,594
Less accumulated depreciation and amortization		(1,266,122	)		(1,235,698	)
Investment in real estate, net	$	4,541,424		$	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,~~2021, the Company owned ~~237~~215 hotels with an aggregate of ~~30,188~~28,085 rooms located in ~~33 states, including one hotel with 316 rooms classified as held for sale, which was sold to an unrelated party in October 2017.~~

35 states.

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~~4 hotels during the ~~first~~ nine months ~~of 2017.~~ended September 30, 2021. 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

Madison

Hilton Garden Inn

Raymond

2/18/2021

176

49,599

Portland

AC Hotels

Crestline

8/20/2021

178

66,750

Greenville

Hyatt Place

Crestline

9/1/2021

130

30,000

Portland

Aloft

Crestline

9/10/2021

157

51,150

641

197,499

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, 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,~~

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During the year ended December 31, 2020, the Company ~~closed on~~acquired 4 hotels, including 4 hotels during the nine months ended September 30, 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

The Company utilized $25.0 million of its available cash and entered into a ~~newly constructed 128-room Home2 Suites hotel in Atlanta, Georgia,~~one-year note payable with the ~~same day~~developer secured by the ~~hotel opened~~hotels for ~~business, for a~~$21.7 million to fund the 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 and used available cash to purchase the Portland, Maine and Greenville, South Carolina 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 574 hotels acquired during the nine months ended September 30, ~~2016,~~2021, the amount of revenue and operating income ~~(excluding merger and other acquisition related transaction costs)~~ included in the Company’s consolidated ~~statements~~statement of operations from the date of acquisition through September 30, ~~2016~~2021 was approximately ~~$25.0~~$5.8 million and ~~$9.5~~$0.7 million, respectively.

For the 4 hotels acquired during the nine months ended September 30, 2020, the amount of revenue and operating loss included in the Company’s consolidated statement of operations from the date of acquisition through September 30, 2020 was approximately $1.5 million and $(0.9) million, respectively.

Seattle Land Acquisition

On August 16, 2021, the Company purchased the fee interest in the land at the Seattle, Washington Residence Inn, previously held under a finance ground lease. The Company utilized $24.0 million of its available cash and entered into a one-year note payable to the seller for $56.0 million to fund the purchase price of $80.0 million. The note payable bears interest, which is payable monthly, at a fixed annual rate of 4.0%. The land purchase was accounted for as a retirement of the finance lease, with the difference of $16.6 million between the carrying amount of the net right-of-use asset of $94.5 million and the finance lease liability of $111.1 million applied as an adjustment to the carrying amount of the acquired land.

Hotel Purchase Contract Commitments

As of September 30, ~~2017,~~2021, the Company had outstanding contracts for the potential purchase of ~~four additional~~5 hotels for a total expected purchase price of approximately ~~$146.1~~$242.6 million. ~~Two of the~~Of these five hotels, ~~the Salt Lake City Residence Inn~~4 are existing and the ~~Portland Residence Inn, which are already~~Company expects to complete the purchase of these hotels in ~~operation, were acquired in October 2017. The two remaining hotels are~~the fourth quarter of 2021; and 1 hotel is under ~~construction~~development and ~~are~~is currently planned to be completed and opened for business ~~over the next 12 months from September 30, 2017,~~in 2023, at which time ~~closing on these hotels is expected~~the Company expects to ~~occur.~~complete the purchase of this hotel. Although the Company is working towards acquiring ~~the two~~these hotels, ~~under construction,~~in each case there are ~~many~~a number of conditions to closing that have not yet been satisfied and there can be no assurance that ~~a closing~~closings on these hotels will occur under the outstanding purchase contracts. If the sellers meet all of the conditions to closing, the Company is obligated to specifically perform under these 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.~~2021. All dollar amounts are in thousands.

Location	Brands	Date of Purchase Contract	Rooms		Refundable Deposits		Gross Purchase Price
Madison, WI (1)	Embassy Suites	7/27/2021		260	$	893	$	78,598
Memphis, TN	Hilton Garden Inn	8/27/2021		150		300		38,000
Fort Worth, TX	Hilton Garden Inn	9/2/2021		157		176		29,500
Fort Worth, TX	Homewood Suites	9/2/2021		112		128		21,500
Portland, OR	Hampton	9/2/2021		243		446		75,000
				922	$	1,943	$	242,598

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

Index

~~(a)~~

(1)

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

~~(b)~~

~~As of September 30, 2017, these hotels were~~

This hotel is currently under ~~construction.~~development. The table shows the expected number of rooms upon hotel completion and the expected franchise ~~brands.~~brand. Assuming all conditions to closing are met, the ~~purchases~~purchase of ~~these hotels are~~this hotel is expected to ~~close over the next 12 months from September 30, 2017.~~occur in 2023. If the seller meets all of the conditions to closing, the Company is obligated to specifically perform under the contract. As ~~the~~this property is under ~~construction,~~development, 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~~

3. Dispositions

Dispositions

During the ~~first quarter of 2017,~~nine months ended September 30, 2021, the Company ~~identified two properties for potential sale: the Columbus, Georgia SpringHill Suites and TownePlace Suites hotels. In April 2017, the Company entered into~~sold 23 hotels in 4 separate ~~contracts~~transactions with ~~the same~~ unrelated ~~party for the sale of these properties~~parties 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$234.6 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.

~~4. Assets Held for Sale and Dispositions~~

In December 2016, 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 for a gross sales price of approximately $56.1 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 at December 31, 2016. On April 20, 2017, the Company completed the sale resulting in a combined net gain on sale, after giving effect to impairment charges discussed below, of approximately ~~$16.0~~$3.7 million, net of transaction costs, which is included in the Company’s consolidated statement of operations for the nine months ended September 30, ~~2017.~~2021. The ~~hotel~~23 hotels had a total carrying value ~~totaling~~of approximately ~~$39.0~~$227.2 million at the ~~date~~time of sale. ~~Under~~The following table lists the ~~contract, at closing,~~23 hotels sold:

City	State	Brand	Date Sold	Rooms
Charlotte	NC	Homewood Suites	2/25/2021		118
Memphis	TN	Homewood Suites	3/16/2021		140
Overland Park	KS	SpringHill Suites	4/30/2021		102
Montgomery	AL	Hilton Garden Inn	7/22/2021		97
Montgomery	AL	Homewood Suites	7/22/2021		91
Rogers	AR	Residence Inn	7/22/2021		88
Phoenix	AZ	Courtyard	7/22/2021		127
Lakeland	FL	Courtyard	7/22/2021		78
Albany	GA	Fairfield	7/22/2021		87
Schaumburg	IL	Hilton Garden Inn	7/22/2021		166
Andover	MA	SpringHill Suites	7/22/2021		136
Fayetteville	NC	Residence Inn	7/22/2021		92
Greenville	SC	Residence Inn	7/22/2021		78
Jackson	TN	Hampton	7/22/2021		85
Johnson City	TN	Courtyard	7/22/2021		90
Allen	TX	Hampton	7/22/2021		103
Allen	TX	Hilton Garden Inn	7/22/2021		150
Beaumont	TX	Residence Inn	7/22/2021		133
Burleson/Fort Worth	TX	Hampton	7/22/2021		88
El Paso	TX	Hilton Garden Inn	7/22/2021		145
Irving	TX	Homewood Suites	7/22/2021		77
Richmond	VA	SpringHill Suites	7/22/2021		103
Vancouver	WA	SpringHill Suites	7/22/2021		119
Total					2,493

During 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.~~

~~In June 2017,~~year ended December 31, 2020, the Company ~~entered into~~sold 3 hotels in 3 transactions with unrelated parties for a ~~purchase and sale agreement with an unrelated party for the sale of its 316-room Marriott hotel in Fairfax, Virginia, acquired by the Company in the merger with Apple Ten in September 2016, for a~~total combined gross sales price of ~~$41.5~~approximately $55.3 million, ~~as amended. The hotel was classified as held for~~resulting in a combined gain on sale ~~at its historical cost (which was less than the contract price, net~~ of ~~costs to sell)~~approximately $10.9 million, which is included in the Company’s consolidated ~~balance sheet as~~statement of ~~September 30, 2017.~~ ~~On October 5, 2017,~~operations for the ~~Company completed the sale, resulting in an estimated gain~~year ended December 31, 2020. The three hotels had a total carrying value of approximately ~~$0.3~~$43.8 million ~~which will be recognized in~~at the ~~fourth quarter~~time of ~~2017.~~the sale. The ~~estimated gain is calculated as~~following table lists the ~~total sales price, net~~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

Excluding gains on sale of ~~commissions and selling costs, less~~real estate, 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 ~~$0.2~~$(6.8) million and ~~$0.8 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $2.4 million and $2.1~~$(6.7) million for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively, relating to the results of operations of the ~~two~~26 hotels noted above (the 23 hotels sold in the first nine 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 30, ~~2017~~2021 and ~~2016.~~2020. A portion of the net proceeds

Index

from the sales were used to pay down borrowings on the Company’s revolving credit facility and the remaining proceeds are available for general corporate purposes, including acquisitions of hotel properties.

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

During the first quarter of 2021, the Company identified 20 hotels for potential sale and, in April 2021, entered into a purchase contract with an unrelated party for the sale of the hotels for a gross sales price of $211.0 million. As a result, the Company recognized impairment losses totaling approximately $9.4 million in the first quarter of 2021, to adjust the carrying values of four of these hotels 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. The Company completed the sale of the hotels in July 2021 and used the net proceeds from the sale to pay down borrowings on the Company’s revolving credit facility and for general corporate purposes, including acquisitions of hotel properties.

Additionally, 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 contract 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 totaling 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 and used the net proceeds from the sale to pay down borrowings on the Company’s revolving credit facility.

In June 2020, the Company entered into a purchase contract with an unrelated party for the sale of its 140-room Memphis, Tennessee Homewood Suites for a gross sales price of approximately $9.0 million. As a result, the Company recognized an impairment loss of approximately $4.4 million in the second quarter of 2020, representing the difference between the carrying value of the hotel and the contracted sales price, net of estimated selling costs, which is a Level 1 input under the fair value hierarchy. The Company completed the sale of the hotel in March 2021 and used the net proceeds from the sale to pay down borrowings on the Company’s revolving credit facility.

4. Debt

Summary

As of September 30, 2021 and December 31, 2020, the Company’s debt consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Revolving credit facility	$	-	$	105,800
Term loans and senior notes, net		864,705		864,225
Mortgage debt, net		501,916		512,546
Debt, net	$	1,366,621	$	1,482,571

The aggregate amounts of principal payable under the Company’s total debt obligations as of September 30, 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 (October - December)	$	4,375
2022		165,831
2023		296,213
2024		338,597
2025		245,140
Thereafter		322,265
		1,372,421
Unamortized fair value adjustment of assumed debt		1,070
Unamortized debt issuance costs		(6,870	)
Total	$	1,366,621

The Company uses interest rate swaps to manage its interest rate risk 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

Index

and variable-rate debt, after giving effect to its interest rate swaps in effect at September 30, 2021 and December 31, 2020, is set forth below. All dollar amounts are in thousands.

	September 30, 2021			Percentage			December 31, 2020			Percentage
Fixed-rate debt (1)	$	1,322,421			96	%	$	1,287,219			86	%
Variable-rate debt		50,000			4	%		201,351			14	%
Total	$	1,372,421					$	1,488,570
Weighted-average interest rate of debt		3.47	%					3.86	%

(1)	Fixed-rate debt includes the portion of variable-rate debt where the interest payments have been effectively fixed by interest rate swaps as of the respective balance sheet date. See Note 5 for more information on the interest rate swap agreements.

Credit Facilities

Credit Facilities Amendments

As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company entered into amendments in June 2020 that suspended the testing of the Company’s existing financial maintenance covenants under the unsecured credit facilities. These amendments imposed certain restrictions regarding the Company’s investing and financing activities that were applicable during a specified waiver period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders, capital expenditures and use of proceeds from the sale of property or common shares of the Company, that applied during such testing suspension period. On March 1, 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to the Company’s future operating results, the Company entered into further amendments to each of the unsecured credit facilities (the “March 2021 amendments”) to extend the covenant waiver period for all but two of the Company’s existing financial maintenance covenants until the date that the compliance certificate was required to be delivered for the fiscal quarter ending June 30, 2022 (unless the Company elected an earlier date) (the “Extended Covenant Waiver Period”). The testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio was suspended until the compliance certificate was required to be delivered for the fiscal quarter ending March 31, 2022 (unless the Company elected an earlier date).

In addition to the modifications and restrictions imposed during the Extended Covenant Waiver Period, the amendments modified the calculation of the existing financial covenants for the first three quarterly calculations subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts based on the period beginning with the first fiscal quarter upon exiting the Extended Covenant Waiver Period through the most recently ended fiscal quarter. The March 2021 amendments also modified certain of the existing financial maintenance covenants to less restrictive levels upon exiting the Extended Covenant Waiver Period as follows (capitalized terms are defined in the credit agreements):

●

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.

In July 2021, the Company notified its lenders under its unsecured credit facilities that it had elected to exit the Extended Covenant Waiver Period effective on July 29, 2021 pursuant to the terms of each of its unsecured credit facilities. Upon exiting the Extended Covenant Waiver Period, the Company is no longer subject to the restrictions described above regarding its investing and financing activities that were applicable during the Extended Covenant Waiver Period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders, capital expenditures and use of proceeds from the sale of property or common shares of the Company. Those restrictions, including the restriction on payment of distributions to shareholders, were still in place throughout the second quarter of 2021.

As of September 30, 2021, the Company met the applicable financial maintenance covenants based on the annualized results of the six months ended September 30, 2021 at the levels required for the second fiscal quarter tested upon exiting the Extended Covenant Waiver Period. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit.

Index

~~5. Debt~~

$~~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~~if certain criteria are met at the ~~amount~~time of ~~the total credit facility may be increased from $965 million to $1.25 billion.~~extension. 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~~As of September 30, 2021, the Company had availability of $425 million ~~term loans,~~under the Company entered into two interest rate swap agreements, which effectively fix the interest rate on $322.5 million of the outstanding balance at approximately 3.10%, subject to adjustment based on the Company’s leverage ratio, through maturity. See Note 6 for more information on the interest rate swap agreements.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, each as amended, the “unsecured credit facilities”). Net proceeds from the $50 million senior notes facility were available to provide 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~~.

terms of the facility.

Index

As of September 30, ~~2017~~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	September 30, 2021			December 31, 2020
Revolving credit facility (2)	LIBOR + 1.40% - 2.25%	7/27/2022 (4)	$	-		$	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				(5,295	)		(5,775	)
Term loans and senior notes, net				864,705			864,225

Credit facilities, net (2)			$	864,705		$	970,025
Weighted-average interest rate (3)				3.07	%		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 increased to 0.15% above the highest rate shown for each loan during the Extended Covenant Waiver Period from March 1, 2021 through July 28, 2021.

(2)

Excludes unamortized debt issuance costs related to the revolving credit facility ~~totaled~~totaling approximately ~~$2.0~~$1.4 million and ~~$2.8~~$2.1 million as of September 30, ~~2017~~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 $770.0 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 September 30, 2021 and December 31, 2020, respectively. See Note 65 for more information on the interest rate swap agreements. The one-month LIBOR at September 30, 2021 and December 31, 2020 was 0.08% and 0.14%, respectively.

~~The credit agreements governing~~

(4) Subject to certain conditions including covenant compliance and additional fees, the ~~$965~~$425 million revolving credit facility maturity date may be extended up to one year, to July 27, 2023, if certain criteria are met at the ~~$150 million term loan facility and the $85 million term loan contain mandatory prepayment requirements, customary affirmative covenants, negative covenants and events~~time 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.

extension.

Mortgage Debt

As of September 30, ~~2017,~~2021, the Company had approximately ~~$430.1~~$502.4 million in outstanding ~~property level~~mortgage debt secured by 28 properties with maturity dates ranging from ~~June 2020~~August 2022 to ~~December 2026,~~May 2038, stated interest rates ranging from ~~3.55%~~3.40% to ~~6.25%~~5.00% and effective interest rates ranging from ~~3.55%~~3.40% to 4.97%. The loans generally provide for monthly payments of principal and interest on an amortized basis and defeasance or prepayment penalties if prepaid. 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~~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 September 30, 2021			Outstanding balance as of December 31, 2020
Cape Canaveral, FL	Hampton		(2	)	4/30/2020	(3)	$	10,852	$	-		$	10,275
Cape Canaveral, FL	Home2 Suites		(2	)	4/30/2020	(3)		10,852		-			10,275
Colorado Springs, CO	Hampton		6.25	%	9/1/2016	(4)		7,923		-			7,317
Franklin, TN	Courtyard		6.25	%	9/1/2016	(4)		14,679		-			13,563
Franklin, TN	Residence Inn		6.25	%	9/1/2016	(4)		14,679		-			13,563
Seattle, WA	(5)		4.00	%	8/16/2021	8/16/2022		56,000		56,000			-
Grapevine, TX	Hilton Garden Inn		4.89	%	8/29/2012	9/1/2022		11,810		9,167			9,434
Collegeville/Philadelphia, PA	Courtyard		4.89	%	8/30/2012	9/1/2022		12,650		9,818			10,105
Hattiesburg, MS	Courtyard		5.00	%	3/1/2014	9/1/2022		5,732		4,596			4,729
Kirkland, WA	Courtyard		5.00	%	3/1/2014	9/1/2022		12,145		9,737			10,018
Rancho Bernardo/San Diego, CA	Courtyard		5.00	%	3/1/2014	9/1/2022		15,060		12,074			12,422
Seattle, WA	Residence Inn		4.96	%	3/1/2014	9/1/2022		28,269		22,638			23,294
Anchorage, AK	Embassy Suites		4.97	%	9/13/2012	10/1/2022		23,230		18,139			18,660
Somerset, NJ	Courtyard		4.73	%	3/1/2014	10/6/2022		8,750		6,973			7,179
Tukwila, WA	Homewood Suites		4.73	%	3/1/2014	10/6/2022		9,431		7,516			7,737
Huntsville, AL	Homewood Suites		4.12	%	3/1/2014	2/6/2023		8,306		6,542			6,742
Prattville, AL	Courtyard		4.12	%	3/1/2014	2/6/2023		6,596		5,195			5,354
San Diego, CA	Residence Inn		3.97	%	3/1/2014	3/6/2023		18,600		14,610			15,061
Miami, FL	Homewood Suites		4.02	%	3/1/2014	4/1/2023		16,677		13,136			13,537
New Orleans, LA	Homewood Suites		4.36	%	7/17/2014	8/11/2024		27,000		22,181			22,766
Westford, MA	Residence Inn		4.28	%	3/18/2015	4/11/2025		10,000		8,393			8,605
Denver, CO	Hilton Garden Inn		4.46	%	9/1/2016	6/11/2025		34,118		29,663			30,387
Oceanside, CA	Courtyard		4.28	%	9/1/2016	10/1/2025		13,655		12,391			12,605
Omaha, NE	Hilton Garden Inn		4.28	%	9/1/2016	10/1/2025		22,682		20,581			20,936
Boise, ID	Hampton		4.37	%	5/26/2016	6/11/2026		24,000		21,799			22,146
Burbank, CA	Courtyard		3.55	%	11/3/2016	12/1/2026		25,564		22,482			23,315
San Diego, CA	Courtyard		3.55	%	11/3/2016	12/1/2026		25,473		22,402			23,232
San Diego, CA	Hampton		3.55	%	11/3/2016	12/1/2026		18,963		16,677			17,295
Burbank, CA	SpringHill Suites		3.94	%	3/9/2018	4/1/2028		28,470		26,264			27,078
Santa Ana, CA	Courtyard		3.94	%	3/9/2018	4/1/2028		15,530		14,326			14,770
Richmond, VA	Courtyard		3.40	%	2/12/2020	3/11/2030		14,950		14,521			14,739
Richmond, VA	Residence Inn		3.40	%	2/12/2020	3/11/2030		14,950		14,521			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		26,579			27,392
							$	631,096		502,421			512,770
Unamortized fair value adjustment of assumed debt										1,070			1,624
Unamortized debt issuance costs										(1,575	)		(1,848	)
Total									$	501,916		$	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 was variable based on one-month LIBOR plus 3.00%. As of April 12, 2021, the date the loan was fully repaid, 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.~~on April 12, 2021.

~~(3)~~

(4)

~~Assets securing this loan were classified as held for sale as of December 31, 2016. In April 2017, the assets securing this loan were sold, and the loan~~

Loan was ~~assumed by the buyer of those assets.~~repaid in full on June 4, 2021.

~~(4)~~

(5)

~~Outstanding principal balance is callable by lender or prepayable by~~

On August 16, 2021, the Company ~~on August 1, 2019.~~acquired the fee interest in the land at the Seattle, Washington Residence Inn, previously held under a finance ground lease, for a purchase price of $80.0 million, consisting of a $24.0 million cash payment and a one-year note payable to the seller for $56.0 million.

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~~2021, the carrying value and estimated fair value of the Company’s debt were approximately $1.4 billion and $1.3 billion, respectively. As of 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 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~~risk 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~~2021 and December 31, ~~2016.~~2020. All dollar amounts are in thousands.

							Fair Value Asset (Liability)
Notional Amount at September 30, 2021		Origination Date	Effective Date	Maturity Date	Swap Fixed Interest Rate		September 30, 2021			December 31, 2020
Active interest rate swaps designated as cash flow hedges at September 30, 2021:
	100,000	4/7/2016	9/30/2016	3/31/2023	1.33%		$	(1,690	)	$	(2,681	)
	75,000	5/31/2017	7/31/2017	6/30/2024	1.96%			(3,022	)		(4,639	)
	10,000	8/10/2017	8/10/2017	6/30/2024	2.01%			(416	)		(636	)
	50,000	6/1/2018	1/31/2019	6/30/2025	2.89%			(4,065	)		(5,911	)
	50,000	7/2/2019	7/5/2019	7/18/2024	1.65%			(1,610	)		(2,593	)
	50,000	8/21/2019	8/23/2019	8/18/2024	1.32%			(1,141	)		(2,036	)
	50,000	8/21/2019	8/23/2019	8/30/2024	1.32%			(1,143	)		(2,049	)
	85,000	12/31/2019	12/31/2019	12/31/2029	1.86%			(3,978	)		(8,677	)
	25,000	12/6/2018	1/31/2020	6/30/2025	2.75%			(1,904	)		(2,801	)
	50,000	12/7/2018	5/18/2020	1/31/2024	2.72%			(2,736	)		(3,967	)
	75,000	8/21/2019	5/18/2020	5/18/2025	1.27%			(1,536	)		(3,294	)
	75,000	7/31/2020	8/18/2020	8/18/2022	0.13%			(8	)		14
	75,000	8/21/2019	5/18/2021	5/18/2026	1.30%			(1,401	)		(3,415	)
	770,000							(24,650	)		(42,685	)
						��
Matured interest rate swap at September 30, 2021:
$	50,000	4/7/2016	9/30/2016	3/31/2021	1.09%			-			(117	)
							$	(24,650	)	$	(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 September 30, 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)~~$11.4 million of net unrealized ~~gains (losses)~~losses included in accumulated other comprehensive ~~income~~loss at September 30, ~~2017~~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 and nine months ended September 30, 2021 and 2020 (in thousands):

	Net Unrealized Gain Recognized in Other Comprehensive Income (Loss)				Net Unrealized Loss Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest and Other Expense, net
	Three Months Ended September 30,				Three Months Ended September 30,
	2021		2020		2021			2020
Interest rate derivatives in cash flow hedging relationships	$	478	$	33	$	(2,948	)	$	(2,706	)

	Net Unrealized Gain (Loss) Recognized in Other Comprehensive Income (Loss)					Net Unrealized Loss Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest and Other Expense, net
	Nine Months Ended September 30,					Nine Months Ended September 30,
	2021		2020			2021			2020
Interest rate derivatives in cash flow hedging relationships	$	9,714	$	(48,628	)	$	(8,438	)	$	(5,006	)

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 months ended September 30, ~~2017~~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 months ended September 30, ~~2016 totaled approximately $1.6 million~~2021 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)2020 totaled approximately $0.5 million and ~~$2.3~~$0.9 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 September 30, 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 months ended September 30, ~~2017~~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.

Index

7. Shareholders’ Equity

Distributions

~~The Company’s current annual distribution rate, payable monthly, is $1.20 per common share.~~

For the ~~three~~nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, the Company paid distributions of $0.02 and $0.30 per common share for a total of ~~$66.9~~$4.5 million and ~~$57.2~~$67.3 million, respectively. ~~For~~Prior to the suspension of its distributions in March 2020 due to the impact of COVID-19 on its operating cash flows, the Company’s annual distribution rate, payable monthly, was $1.20 per common share. In March and June 2021, the Company declared quarterly distributions of $0.01 per common share, which were paid in April and July, respectively, totaling $4.5 million for the nine months ended September 30, ~~2017 and 2016, the Company paid distributions of $0.90 per common share for a total of $200.7 million and $161.9 million, respectively.~~2021. Additionally, in September ~~2017,~~2021, the Company declared a ~~monthly~~quarterly distribution of ~~$0.10~~$0.01 per common share, totaling ~~$22.3~~$2.3 million, which was recorded as a payable as of September 30, ~~2017~~2021 and paid inon October ~~2017. As of December 31, 2016, a monthly~~18, 2021. This accrued distribution ~~of $0.10 per common share, totaling $22.3 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 September 30, 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~~second quarter of 2021, the Company sold approximately 4.7 million common shares under its ATM Program at a weighted-average market sales price of approximately $16.26 per common share and received aggregate gross proceeds of approximately $76.0 million and proceeds net of offering costs, which included $0.9 million of commissions, of approximately $75.1 million. The Company used the net proceeds from the sale of these shares to pay down borrowings on its revolving credit facility and for general corporate purposes, including acquisitions of hotel properties. As of September 30, ~~2017, the Company had no sales~~2021, approximately $224.0 million remained available for issuance under the ATM Program.

~~Share Repurchase Program~~

~~In connection with~~ NaN shares were sold under the ~~implementation of its~~Company’s ATM Program in ~~February 2017,~~the third quarter of 2021. The Company plans to use future net proceeds from the sale of these shares to pay down borrowings on its revolving credit facility (if any). 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. The Company may also use the net proceeds to acquire another REIT or other company that invests in income producing properties.

Share Repurchases

In May 2021, the Company’s Board of Directors approved a one-year 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 may be suspended or terminated at any time by the Company and will end in July 2022 if not terminated ~~its existing written trading plan under the Company’s share repurchase program.~~earlier or extended. During the first nine 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 applicable restrictions under the Company’s unsecured credit facilities (if any). 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 the Company and, as a result of an extension of the program approved by the Board of Directors in May 2017, will end in July 2018 if not terminated earlier.

~~Index~~

9.factors, including compliance with applicable credit facility covenants (if any).

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~~incentive compensation 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, for the period of January 1 – June 30, 2021, metrics included 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. Operational performance metrics ~~are equally weighted~~for the period of July 1 – December 31, 2021, include metrics regarding top line growth, bottom line growth, capital allocation and ~~the two~~balance sheet metrics, with no specific target or weighting assigned to each metric. The operational performance metrics 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 September 30, 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,~~2021, the Company has accrued approximately ~~$4.7~~$13.0 million as a liability for potential executive ~~bonus~~incentive compensation 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.~~2021. Compensation expense recognized by the Company under the ~~2017~~2021 Incentive Plan is included in general

Index

and administrative ~~expense~~expenses in the Company’s consolidated ~~statements~~statement of operations and totaled approximately ~~$1.2~~$7.0 million and ~~$4.7~~$13.0 million for the three and nine months ended September 30, ~~2017, respectively.~~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~~$4.0 million toin 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~~

2020.

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 December 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. For the three months ended September 30, 2017 and 2016, the Company recognized approximately $0.1 million and $0.4 million, respectively, and for the nine months ended September 30, ~~2017 and 2016,~~2020, the Company ~~recognized~~accrued expense associated with 2 separation agreements of approximately ~~$0.3~~$1.25 million ~~and $1.2~~each, totaling approximately $2.5 million, ~~respectively,~~in connection with the 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,~~nine months ended September 30, 2020.

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 and nine months ended September 30, 2021, the Company recognized approximately $0.5 million and $1.5 million, respectively, 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 and nine months ended September 30, 2020, the Company recognized approximately $0.3 million and $0.9 million, respectively, 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

Index

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 September 30, 2021 and 2020, the Company recognized approximately $0.1 million in each respective period, of ~~proceeds from its director~~share-based compensation expense related to these awards, and ~~officer insurance carriers, which was included as a reduction in transaction~~$0.4 million and ~~litigation costs (reimbursements) in the Company’s consolidated statements of operations~~$0.3 million, respectively, for the nine months ended September 30, ~~2017. The Company does not anticipate additional costs or reimbursements 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 April 22, 2014, Plaintiff Susan Moses, purportedly a shareholder of Apple REIT Seven, Inc. (“Apple Seven”)~~2021 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.~~2020.

9. Subsequent Events

On October ~~2017,~~18, 2021, the Company paid approximately ~~$22.3~~$2.3 million, or ~~$0.10~~$0.01 per outstanding common share, in distributions to its common shareholders.

~~In October 2017, the Company declared a regular monthly cash distribution of $0.10 per common share for the month of November 2017. The distribution is payable on November 15, 2017.~~

On October ~~5, 2017,~~28, 2021, the Company completed the ~~sale~~purchase of the Fairfax, Virginia Marriott for a sale price of approximately $41.5 million. The Company used the net proceeds from the sale to pay down borrowings on its 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~~150-room Hilton Garden Inn in ~~Portland, Maine~~Memphis, Tennessee for a gross purchase price of approximately ~~$55.8~~$38.0 million.

~~On October 20, 2017,~~ The Company utilized its available cash to purchase 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.~~

hotel.

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. ~~Such~~

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 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 distribution, the efficacy, acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against 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. Additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of ~~properties;~~properties and redeploy proceeds; the ability of the Company to fund capital obligations; 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,~~2021, the Company owned ~~237~~215 hotels with an aggregate of ~~30,188~~28,085 rooms located in urban, high-end suburban and developing markets throughout ~~33 states, including one hotel with 316 rooms classified as held for sale, which was sold to an unrelated party in October 2017. All~~35 states. 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 continued to evolve and many countries, including the U.S., as well as state and local governments, have reacted and continue to react with 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. While the Company’s operating results and the overall economy in the U.S. continue to show signs of 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 disrupted the industry and 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 a number of initial restrictions put into place during 2020 have eased, occupancy and average daily rate (“ADR”) during the first three quarters of 2021 were still generally below 2019 pre-pandemic levels. Additionally, while the development and distribution of vaccines have helped contribute to improved conditions over the first three quarters of 2021, there can be no assurances that the vaccines will contain the spread of the virus and its variants and allow the economy to fully recover. The Company expects the decline in revenue associated with COVID-19 and the overall influence on the U.S. economy to negatively impact the Company’s operating results for an extended period of time. While the Company has experienced significant recovery in leisure travel through the third quarter of 2021, the Company does not expect a full recovery in results until business travel improves and government restrictions on travel and business operations are lifted more broadly.

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 adjusting operations to manage total labor costs, reducing or eliminating certain amenities and reducing rates under various service contracts, enhancing 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 entering into amendments to its unsecured credit facilities that provided for the temporary waiver of financial covenant testing for the majority of its financial maintenance covenants (the Company exited the waiver period in July 2021 due to improved financial performance). Cost reduction initiatives, including those discussed above, are not expected to fully, or even materially, offset revenue losses from COVID-19. The extent and duration of COVID-19 effects continue to remain unknown, and these uncertainties continue to make it difficult to predict operating results for the Company’s hotels for the near future. While the Company has experienced continued improvement through the third quarter of 2021 and expects continued improvement, future revenues and operating results could be negatively impacted by, among other things, historical seasonal trends, an increase in COVID-19 cases, state and local governments and businesses reverting back to tighter mitigation restrictions, deterioration of consumer sentiment, labor shortages and resulting pressure on wages or significant inflationary impacts. Therefore, there can be no assurances that the Company will not experience setbacks or further declines in hotel revenues or earnings at its hotels and the Company cannot predict how long the effects will continue to impact the Company’s operating results as compared to pre-pandemic levels.

2021 Hotel Portfolio Activities

The Company continually monitors market conditions and attempts to maximize shareholder value by investing in properties that it believes provide superior value inover the long term. Consistent with this strategy and the Company’s focus on investing in ~~select-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”).~~facility. In ~~October 2017,~~2021, the Company ~~completed the~~entered into contracts to purchase ~~of two additional hotels (a 136-room Residence Inn hotel~~a 178-room AC Hotel in ~~Salt Lake City, Utah~~Portland, Maine, acquired on August 20, 2021, a 130-room Hyatt Place in Greenville, South Carolina, acquired on September 1, 2021, and a ~~179-room Residence Inn hotel~~157-room Aloft in Portland, ~~Maine)~~Maine, acquired on September 10, 2021 for an aggregate gross purchase price of ~~approximately $81.3~~$147.9 million, utilizing available cash (including a portion of the proceeds from the sale of 20 hotels in July 2021). In addition, during the second quarter of 2021 the Company entered into a contract to purchase the fee interest in the land at its Seattle, Washington Residence Inn that was previously under a ground lease. The land purchase was completed on August 16, 2021 for a purchase price of $80.0 million, consisting of a $24.0 million cash payment utilizing a portion of the proceeds from the sale of 20 hotels in July 2021 and a one-year note payable to the seller for $56.0 million. ~~The~~

As of September 30, 2021, the Company ~~also has~~had separate outstanding contracts for the potential purchase of five hotels, consisting of one hotel in Madison, Wisconsin, one hotel in Memphis, Tennessee, two ~~additional~~ hotels ~~that are under construction~~in Fort Worth, Texas and one hotel in Portland, Oregon for a total combined purchase price of approximately ~~$64.8 million, which~~$242.6 million. Four of the hotels are ~~planned~~already in operation and one is in development and scheduled to open no earlier than 2023. Closings on the four hotels already in operation are expected to occur in the fourth quarter of 2021, while closing on the remaining hotel is expected upon completion of development. 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 ~~completed and opened for business over the next 12 months from September 30, 2017, at which time closing~~no

Index

assurance that closings on these hotels ~~is expected~~will occur under the outstanding purchase contracts. The Company plans to utilize its available cash or borrowings under its unsecured credit facilities available at closing to purchase hotels under contract if closings occur.

~~Index~~

~~Additionally, for~~

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 nine months of 2021, the Company ~~completed the sale of its 224-room Hilton hotel in Dallas, Texas, which was classified as held~~sold 23 hotels for ~~sale as of December 31, 2016, for approximately $56.1 million~~. ~~Also, on October 5, 2017, the Company completed~~ ~~the sale of its 316-room Marriott hotel in Fairfax, Virginia, which was classified as held for sale as of September 30. 2017, for~~ a total combined gross sales price of ~~$41.5~~approximately $234.6 million. and recognized a net gain on sale, after giving effect to impairment charges discussed below, of approximately $3.7 million. The Company used the net proceeds from the sales to pay down borrowings on ~~its~~the Company’s revolving credit ~~facility.~~

facility, for the acquisitions of hotel properties in the second half of 2021 and for general corporate purposes.

See Note 32 titled “Investment in Real Estate” and Note 43 titled ~~“Assets Held for Sale and Dispositions”~~“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.

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,~~2021, the Company owned ~~237~~215 hotels with a total of ~~30,188~~28,085 rooms as compared to ~~236~~235 hotels with a total of ~~30,299~~30,023 rooms as of September 30, ~~2016, however, results~~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 months ended September 30, ~~2017,~~2021, the Company acquired ~~three newly constructed~~four hotels ~~(one on February 2, 2017, and two on September 12, 2017)~~ and sold ~~one hotel on April 20, 2017.~~23 hotels. During ~~2016,~~2020, the Company acquired 56four hotels ~~in the Apple REIT Ten, Inc. (“Apple Ten”) merger effective September 1, 2016 (the “Apple Ten merger”), acquired one additional newly constructed hotel on July 1, 2016~~ and sold ~~one hotel on December 6, 2016.~~three hotels. As a result, the comparability of results for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 as discussed below is ~~significantly~~ impacted by these ~~transactions.~~

~~Index~~

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 September 30,															Nine Months Ended September 30,
(in thousands, except statistical data)	2021			Percent of Revenue			2020			Percent of Revenue			Percent Change			2021			Percent of Revenue			2020			Percent of Revenue			Percent Change
Total revenue	$	277,164			100.0	%	$	148,826			100.0	%		86.2	%	$	683,281			100.0	%	$	467,914			100.0	%		46.0	%
Hotel operating expense		153,953			55.5	%		93,762			63.0	%		64.2	%		393,103			57.5	%		310,845			66.4	%		26.5	%
Property taxes, insurance and other expense		17,927			6.5	%		20,523			13.8	%		-12.6	%		54,936			8.0	%		58,820			12.6	%		-6.6	%
General and administrative expense		13,261			4.8	%		6,726			4.5	%		97.2	%		29,815			4.4	%		22,274			4.8	%		33.9	%

Loss on impairment of depreciable real estate assets		-						-					n/a				10,754						4,382						145.4	%
Depreciation and amortization expense		44,217						50,171						-11.9	%		139,313						149,590						-6.9	%
Gain on sale of real estate		44						-					n/a				3,664						8,785						-58.3	%
Interest and other expense, net		15,977						18,531						-13.8	%		53,108						52,483						1.2	%
Income tax expense		114						61						86.9	%		309						265						16.6	%

Net income (loss)		31,759						(40,948	)				n/a				5,607						(121,960	)				n/a
Adjusted hotel EBITDA ⁽¹⁾		105,423						34,688						203.9	%		235,664						98,689						138.8	%

Number of hotels owned at end of period		215						235						-8.5	%		215						235						-8.5	%
ADR	$	140.02					$	104.78						33.6	%	$	121.36					$	116.16						4.5	%
Occupancy		71.5	%					48.6	%					47.1	%		65.9	%					45.9	%					43.6	%
RevPAR	$	100.14					$	50.94						96.6	%	$	79.94					$	53.33						49.9	%

(1)	See reconciliation of Adjusted Hotel EBITDA to net income (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 %

Index

The following table highlights the quarterly impact of COVID-19 on the Company’s ADR, Occupancy, RevPAR, net income (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):

	3rd Quarter			4th Quarter			1st Quarter			2nd Quarter			3rd Quarter
	2020			2020			2021			2021			2021
ADR	$	104.78		$	97.87		$	99.19		$	120.56		$	140.02
Occupancy		48.6	%		46.5	%		55.5	%		70.7	%		71.5	%
RevPAR	$	50.94		$	45.46		$	55.09		$	85.28		$	100.14
Net income (loss)	$	(40,948	)	$	(51,247	)	$	(46,435	)	$	20,283		$	31,759
Adjusted Hotel EBITDA ⁽¹⁾	$	34,688		$	23,296		$	35,427		$	94,814		$	105,423

(1)	See reconciliation of Adjusted Hotel EBITDA to net income (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 depth and 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 into the future. While the 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. Although the Company expects continued recovery in rate and occupancy, future revenues and operating results could be negatively impacted by, among other things, historical seasonal trends, an increase in COVID-19 cases, state and local governments and businesses reverting back to tighter mitigation restrictions, deterioration of consumer sentiment or significant labor and inflationary pressures.

Comparable Hotels Operating Results

The following table reflects certain operating statistics for the Company’s ~~236~~215 hotels owned ~~and held for use~~ as of September 30, ~~2017~~2021 (“Comparable Hotels”). The Company defines metrics from Comparable Hotels as results generated by the ~~236~~215 hotels owned ~~and held for use~~ as of the end of the reporting period. ~~These metrics do not include 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.~~ 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, results have been excluded for the Company’s period of ownership.

	Three Months Ended September 30,									Nine Months Ended September 30,
	2021			2020			Percent Change			2021			2020			Percent Change
ADR	$	141.56		$	106.13			33.4	%	$	123.19		$	117.16			5.1	%
Occupancy		71.6	%		48.7	%		47.0	%		66.0	%		45.9	%		43.8	%
RevPAR	$	101.32		$	51.64			96.2	%	$	81.33		$	53.81			51.1	%

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 %

~~Index~~

Same Store Operating Results

The following table reflects certain operating statistics for the ~~Company’s 177~~207 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 September 30,									Nine Months Ended September 30,
	2021			2020			Percent Change			2021			2020			Percent Change
ADR	$	139.75		$	105.71			32.2	%	$	122.17		$	117.41			4.1	%
Occupancy		71.7	%		48.9	%		46.6	%		66.4	%		46.0	%		44.3	%
RevPAR	$	100.24		$	51.64			94.1	%	$	81.08		$	54.02			50.1	%

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. The Company’s revenue and operating results improved during the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, which is consistent with the overall lodging industry. However, as a result of COVID-19, the Company’s revenue and operating results have declined as compared to 2019 and the Company expects these declines relative to 2019 levels to continue throughout the remainder of 2021. The Company can give no assurances as to the amount or period of decline due to the uncertainty regarding the duration and long-term impact of, as well as governmental and consumer response to, COVID-19.

Index

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~~2021 and ~~2016,~~2020, the Company had total revenue of ~~$324.9~~$277.2 million and ~~$276.5~~$148.8 million, respectively. For the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, the Company had total revenue of ~~$949.6~~$683.3 million and ~~$758.6~~$467.9 million, respectively. For the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively, Comparable Hotels achieved combined average occupancy of ~~80.2%~~71.6% and ~~80.4%~~48.7%, ADR of ~~$136.83~~$141.56 and ~~$134.79~~$106.13 and RevPAR of ~~$109.77~~$101.32 and ~~$108.32.~~$51.64. For the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively, Comparable Hotels achieved combined average occupancy of ~~78.8%~~66.0% and ~~78.7%~~45.9%, ADR of ~~$135.84~~$123.19 and ~~$134.88~~$117.16 and RevPAR of ~~$107.10~~$81.33 and ~~$106.20.~~$53.81. 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,~~2021, the Company experienced increases in ADR and occupancy, resulting in ~~increases~~an increase of ~~1.3% and 0.8%~~96.2% in RevPAR for Comparable Hotels, respectively. The Company’s growth during the first nine months of 2017 was impacted by a decline in the Los Angeles market due to outsized growth in 2016 from the Porter Ranch gas leak. The Company anticipates that with its geographically diverse portfolio of upscale and upper midscale select-service hotels, on a comparable basis, overall RevPAR growth for the remainder of the year will approximate industry averages. Although certain markets will vary based on local supply/demand dynamics and local market economic conditions, with continued overall room rate improvement combined with expected stable overall demand growthHotels. As compared to supply growth, 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~~2019 (pre-COVID-19), Comparable Hotels RevPAR for the ~~Company and industry included Richmond, Knoxville, Kansas City, St. Louis and San Diego. Markets that were below average~~third quarter of 2021 decreased by 11.4% primarily as a result of reduced occupancy, as Comparable Hotels ADR decreased by only 1.0%. Occupancy for the Company’s portfolio for the month of July 2021 was approximately 76%, the highest monthly level since the onset of the pandemic. Occupancy for the month of October 2021 was approximately 73%. During March 2020, the hotel industry and the Company began to see a significant decrease in occupancy as both mandated and ~~industry included Dallas, Austin and Philadelphia. Additionally,~~voluntary restrictions on travel were implemented throughout the U.S. For Comparable Hotels, average occupancy fell below 50% for most of 2020 before improving over subsequent quarters to 71.6% in the third quarter of ~~2017, Houston~~2021 driven predominately by increased leisure demand as a result of improved consumer confidence in travel and ~~certain Florida~~the lifting of some COVID-19 mitigation restrictions, but also by increased demand from a wide variety of demand generators such as government, healthcare, automotive, construction, disaster recovery, insurance, athletics, education and local and regional business-related travel. Revenue recovery in the third quarter of 2021 was led by leisure transient and group demand, with increased demand from small corporate and government business. Suburban markets ~~experienced~~continued to see stronger demand than urban markets. Throughout the hospitality industry, upscale and upper mid-scale chain scales have outperformed luxury and upper upscale and suburban locations have outperformed urban locations. The Company expects this trend to generally continue, however, future revenues could be negatively impacted by, among other things, historical seasonal trends, an increase in ~~demand due~~COVID-19 cases, state and local governments and businesses reverting back to ~~evacuation~~tighter mitigation restrictions or deterioration of consumer sentiment.

Hotel Operating Expense

The Company, its management companies and ~~restoration efforts related to hurricanes Harvey and Irma, which led to increased RevPAR for~~ the ~~Company and industry in those markets. While certain of~~brands the Company’s hotels ~~incurred minor wind~~are franchised with all aggressively worked to mitigate the costs and ~~water related damage from~~uses of cash associated with operating the ~~hurricanes,~~hotels in the ~~overall~~low-occupancy environment experienced in 2020, have worked to maintain cost-reduction practices where feasible as the economy recovers, and are thoughtfully working to position the 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 adjustments to the hotel operating model in response to continued changes in the operating environment and guest preferences.

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~~2021 and ~~2016, respectively, hotel operating expense~~2020 totaled ~~$179.8~~$154.0 million and ~~$153.3~~$93.8 million, respectively, or ~~55.3%~~55.5% and ~~55.5%~~63.0% of total revenue for ~~each~~the respective ~~period. For~~periods. Hotel operating expense for the nine months ended September 30, ~~2017~~2021 and ~~2016, respectively, hotel operating expense~~2020 totaled ~~$528.3~~$393.1 million and ~~$418.0~~$310.8 million, respectively, or ~~55.6%~~57.5% and ~~55.1%~~66.4% of total revenue for ~~each~~the respective period. Overall hotel operational expenses for the first nine 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 acquired 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,periods. Comparatively, prior to COVID-19, hotel operating expense ~~as a percentage~~was 56.6% and 56.3%, respectively, of total revenue ~~increased approximately 20 and 90 basis points, respectively,~~ for the three and nine months ended September 30, 2017 as compared to the same periods 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 2016.2019. 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, and adjust food and beverage offerings and other amenities, among other efficiency initiatives, to mitigate the impact of revenue ~~where possible~~declines and cost pressures on its results of operations. For example, 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 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 both labor and supplies due to scarcity. As occupancy has increased throughout the nine months ended September 30, 2021, increasing staffing to meet increased demand has been challenging, and while ~~maintaining quality~~the Company’s hotels made progress in filling open positions during the third quarter of 2021, they have often done so at higher wage rates. Likewise, supply chain disruptions throughout the overall economy have driven shortages and ~~service levels at each property.~~

~~Index~~

increases in the cost of materials and supplies such as food and equipment.

Property Taxes, Insurance and Other Expense

Property taxes, insurance, and other expense for the three months ended September 30, ~~2017~~2021 and ~~2016 totaled $17.6~~2020 was $17.9 million and ~~$14.8~~$20.5 million, respectively, or ~~5.4%~~6.5% and ~~5.3% of total revenue, respectively, and for Comparable Hotels, 5.4% and 5.5%~~13.8% of total revenue for ~~each~~the respective ~~period.~~periods. For the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, property taxes, insurance, and other expense totaled ~~$52.3~~$54.9 million and ~~$40.3~~$58.8 million, respectively, or ~~5.5%~~8.0% and ~~5.3% of total revenue, respectively, and for Comparable Hotels, 5.5%~~ 12.6%

Index

of total revenue for ~~each period. For~~ the ~~Company’s Comparable Hotels, real estate~~respective periods. Prior to COVID-19, property taxes, increased slightly during 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 atinsurance and 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 appeal tax assessments in certain jurisdictions to attempt to minimize tax increases as warranted.

~~Ground Lease Expense~~

~~Ground lease~~ expense for the three ~~months ended 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~~2019 totaled $19.6 million and ~~$7.6~~$58.5 million, ~~respectively. Ground lease expense~~respectively, or 5.9% and 6.0% of total revenue for the respective periods. The decrease from 2019 and 2020 to 2021 was primarily ~~represents the expense incurred by~~due to decreases in property taxes in certain localities. Although the Company will continue to ~~lease land for 14~~aggressively appeal assessments and monitor locality guidance as a result of ~~its hotel properties, including four acquired~~COVID-19, it does not currently anticipate further significant decreases in ~~the Apple Ten merger effective September 1, 2016.~~

property taxes in 2021 as compared to 2020.

General and Administrative Expense

General and administrative expense for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 was ~~$5.4~~$13.3 million and ~~$2.6~~$6.7 million, respectively, or ~~1.6%~~4.8% and ~~0.9%~~4.5% of total revenue ~~respectively.~~for the respective periods. For the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, general and administrative expense was ~~$18.3~~$29.8 million and ~~$12.5~~$22.3 million, respectively, or ~~1.9%~~4.4% and ~~1.6%~~4.8% of total revenue ~~respectively.~~for the 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 general and administrative expenses. Effective September 1, 2016,The increases in connection with the completion of the Apple Ten merger, 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 as general and administrative expense by Apple Ten and as reductions 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 increased~~ for both the third quarter and first nine months of 2017 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~~2021 over the three 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~~2020 include increased accruals of ~~costs~~$5.5 million and $9.0 million, respectively, for incentive compensation related to ~~the Apple Ten merger totaling approximately $37.6 million (including $32 million funded~~anticipated higher shareholder return and operating performance in 2021 as compared to 2020. Additionally, general and administrative expense in 2020 was reduced by voluntary reductions in compensation by the ~~Company in January 2017 to settle~~Company’s Executive Chairman, Chief Executive Officer and non-employee directors on 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~~Board 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~~

Directors.

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 months ended September 30, ~~2017, and related to~~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~~2021 for potential sale. Loss on impairment of depreciable real estate assets was ~~approximately $5.5~~$4.4 million ~~and related to~~for the ~~Chesapeake, Virginia Marriott hotel that~~nine months ended September 30, 2020, consisting of an impairment charge for the ~~Company identified for potential sale during the period.~~ Memphis, Tennessee Homewood Suites in 2020. See Note 3 titled ~~“Investment in Real Estate”~~“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.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 was ~~$44.1~~$44.2 million and ~~$37.3~~$50.2 million, respectively. For the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, depreciation and amortization expense was ~~$131.8~~$139.3 million and ~~$104.7~~$149.6 million, respectively. Depreciation and amortization expense primarily represents expense of the Company’s hotel buildings and related improvements, and associated personal property (furniture, fixtures, and equipment) for ~~their~~the respective periods owned. The ~~increase was~~decreases were 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 nine 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~~2021 and ~~2016~~2020 was ~~$12.0~~$16.0 million and ~~$10.2~~$18.5 million, ~~respectively,~~respectively. For the nine months ended September 30, 2021 and 2020, interest and other expense, net was $53.1 million and $52.5 million, respectively. Interest and other expense, net for the nine months ended September 30, 2020 is net of approximately ~~$0.1~~$0.9 million ~~and $0.2 million, respectively,~~ of interest capitalized associated with renovation projects. Additionally, interest and other expense, net for the three months ended September 30, 2021 and 2020 includes approximately $2.1 million and $2.8 million, respectively, of interest recorded on the Company’s finance lease liabilities. For the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, interest and other expense, net ~~was $35.6~~includes approximately $7.9 million and ~~$28.5~~$8.5 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 for the three months ended September 30, 2021 decreased compared to the three months ended September 30, 2020 as a result of both lower average borrowings and lower average interest rates as the Company exited the Extended Covenant Waiver Period in July 2021. Interest expense related to the Company’s debt instruments for the nine months ended September 30, 2021 was virtually unchanged compared to the nine months ended September 30, 2020 as a result of lower average borrowings offset by 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 lower for the remainder of 2021 compared to the same period of 2020 due to ~~an increase~~reduced average borrowings on the Company’s unsecured credit facilities and lower interest rates compared to the same period of 2020 as a result of exiting the Extended Covenant Waiver Period (as discussed below under “Liquidity and Capital Resources”). 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~~Before Interest,

Index

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.

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~~2021 and ~~2016~~2020 (in thousands).:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income (loss)	$	31,759		$	(40,948	)	$	5,607		$	(121,960	)
Depreciation of real estate owned		43,028			48,307			134,880			144,019
Gain on sale of real estate		(44	)		-			(3,664	)		(8,785	)
Loss on impairment of depreciable real estate assets		-			-			10,754			4,382
Funds from operations		74,743			7,359			147,577			17,656
Amortization of finance ground lease assets		1,183			1,612			4,418			4,816
Amortization of favorable and unfavorable operating leases, net		98			103			294			305
Non-cash straight-line operating ground lease expense		41			44			128			135
Modified funds from operations	$	76,065		$	9,118		$	152,417		$	22,912

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.

Index

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 (Adjusted EBITDAre).

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.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income (loss)	$	31,759		$	(40,948	)	$	5,607		$	(121,960	)
Depreciation and amortization		44,217			50,171			139,313			149,590
Amortization of favorable and unfavorable operating leases, net		98			103			294			305
Interest and other expense, net		15,977			18,531			53,108			52,483
Income tax expense		114			61			309			265
EBITDA		92,165			27,918			198,631			80,683
Gain on sale of real estate		(44	)		-			(3,664	)		(8,785	)
Loss on impairment of depreciable real estate assets		-			-			10,754			4,382
EBITDAre		92,121			27,918			205,721			76,280
Non-cash straight-line operating ground lease expense		41			44			128			135
Adjusted EBITDAre		92,162			27,962			205,849			76,415
General and administrative expense		13,261			6,726			29,815			22,274
Adjusted Hotel EBITDA	$	105,423		$	34,688		$	235,664		$	98,689

The following table reconciles the Company’s GAAP net income (loss) to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA by quarter for the last five quarters (in thousands):

	3rd Quarter			4th Quarter			1st Quarter			2nd Quarter		3rd Quarter
	2020			2020			2021			2021		2021
Net income (loss)	$	(40,948	)	$	(51,247	)	$	(46,435	)	$	20,283	$	31,759
Depreciation and amortization		50,171			50,196			48,710			46,386		44,217
Amortization of favorable and unfavorable operating leases, net		103			137			98			98		98
Interest and other expense, net		18,531			18,352			18,513			18,618		15,977
Income tax expense		61			67			108			87		114
EBITDA		27,918			17,505			20,994			85,472		92,165
(Gain) loss on sale of real estate		-			(2,069	)		(4,484	)		864		(44	)
Loss on impairment of depreciable real estate assets		-			715			10,754			-		-
EBITDAre		27,918			16,151			27,264			86,336		92,121
Non-cash straight-line operating ground lease expense		44			45			44			43		41
Adjusted EBITDAre		27,962			16,196			27,308			86,379		92,162
General and administrative expense		6,726			7,100			8,119			8,435		13,261
Adjusted Hotel EBITDA	$	34,688		$	23,296		$	35,427		$	94,814	$	105,423

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,~~2021, the Company owned ~~237~~215 hotels with an aggregate of ~~30,188~~28,085 rooms located in 3335 states. The following tables summarize the number of hotels and rooms by brand and by state:

Number of Hotels and Guest Rooms by Brand
	Number of	Number of
Brand	Hotels	Rooms
Hilton Garden Inn	38		5,285
Hampton	36		4,710
Courtyard	33		4,653
Residence Inn	29		3,548
Homewood Suites	29		3,305
Fairfield	10		1,213
Home2 Suites	10		1,146
SpringHill Suites	9		1,245
TownePlace Suites	9		931
Hyatt Place	3		411
Marriott	2		619
Embassy Suites	2		316
Independent	2		263
AC Hotels	1		178
Aloft	1		157
Hyatt House	1		105
Total	215		28,085

Index

Number of Hotels and Guest Rooms by State
	Number of		Number of
State	Hotels		Rooms
Alabama		13		1,246
Alaska		2		304
Arizona		13		1,776
Arkansas		2		248
California		26		3,721
Colorado		4		567
Florida		22		2,844
Georgia		5		585
Idaho		1		186
Illinois		7		1,254
Indiana		4		479
Iowa		3		301
Kansas		3		320
Louisiana		3		422
Maine		3		514
Maryland		2		233
Massachusetts		3		330
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		8		881
Ohio		2		252
Oklahoma		4		545
Pennsylvania		3		391
South Carolina		5		590
Tennessee		10		1,187
Texas		25		3,059
Utah		3		393
Virginia		12		1,722
Washington		3		490
Wisconsin		1		176
Total		215		28,085

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~~215 hotels the Company owned as of September 30, ~~2017.~~

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~~

Prattville

Courtyard

LBA

3/1/2014

Rogers

Hampton

Raymond

8/31/2010

122

Rogers

Homewood Suites

Raymond

4/30/2010

126

Chandler

Courtyard

North Central

11/2/2010

150

Chandler

Fairfield

North Central

11/2/2010

110

Phoenix

Courtyard

North Central

11/2/2010

164

Phoenix

Hampton

North Central

9/1/2016

125

Phoenix

Hampton

North Central

5/2/2018

210

Phoenix

Homewood Suites

North Central

9/1/2016

134

Phoenix

Residence Inn

North Central

11/2/2010

129

Scottsdale

Hilton Garden Inn

~~LBA~~

North Central

9/1/~~2014~~2016

122

~~Montgomery~~

Tempe

~~Homewood Suites~~

Hyatt House

~~LBA~~

Crestline

~~3/1/2014~~

8/13/2020

105

~~Prattville~~

Tempe

~~Courtyard~~

Hyatt Place

~~LBA~~

Crestline

~~3/1/2014~~

8/13/2020

154

~~Rogers~~

Tucson

~~Hampton~~

~~Raymond~~

~~8/31/2010~~

~~122~~

~~Rogers~~

~~Homewood Suites~~

~~Raymond~~

~~4/30/2010~~

~~126~~

~~Rogers~~

~~Residence Inn~~

~~Raymond~~

~~3/1/2014~~

~~Springdale~~

~~Residence Inn~~

~~Aimbridge~~

~~3/1/2014~~

~~Chandler~~

~~Courtyard~~

~~North Central~~

~~11/2/2010~~

~~150~~

~~Chandler~~

~~Fairfield Inn & Suites~~

~~North Central~~

~~11/2/2010~~

~~110~~

~~Phoenix~~

~~Courtyard~~

~~North Central~~

~~11/2/2010~~

~~164~~

~~Phoenix~~

~~Courtyard~~

~~North Central~~

~~9/1/2016~~

~~127~~

~~Phoenix~~

~~Hampton~~

~~North Central~~

~~9/1/2016~~

~~125~~

~~Phoenix~~

~~Homewood Suites~~

~~North Central~~

~~9/1/2016~~

~~134~~

~~Phoenix~~

~~Residence Inn~~

~~North Central~~

~~11/2/2010~~

~~129~~

~~Scottsdale~~

Hilton Garden Inn

~~North Central~~

Western

~~9/1/2016~~

7/31/2008

~~122~~

125

Tucson

~~Hilton Garden~~

Residence Inn

Western

~~7/31/2008~~

3/1/2014

~~125~~

124

Tucson

~~Residence Inn~~

TownePlace Suites

Western

~~3/1/2014~~

10/6/2011

124

~~Tucson~~

Agoura Hills

~~TownePlace~~

Homewood Suites

~~Western~~

Dimension

~~10/6/2011~~

3/1/2014

~~124~~

125

~~Agoura Hills~~

Burbank

~~Homewood Suites~~

Courtyard

~~Dimension~~

Huntington

~~3/1/2014~~

8/11/2015

~~125~~

190

Burbank

~~Courtyard~~

Residence Inn

~~Huntington~~

Marriott

~~8/11/2015~~

3/1/2014

~~190~~

166

Burbank

~~Residence Inn~~

SpringHill Suites

Marriott

~~3/1/2014~~

7/13/2015

~~166~~

170

~~Burbank~~

Clovis

~~SpringHill Suites~~

Hampton

~~Marriott~~

Dimension

7/~~13/2015~~31/2009

~~170~~

Clovis

~~Hampton~~

Homewood Suites

Dimension

~~7/31/2009~~

2/2/2010

~~Clovis~~

Cypress

~~Homewood Suites~~

Courtyard

Dimension

~~2/2/2010~~

3/1/2014

180

Cypress

~~Courtyard~~

Hampton

Dimension

~~3/1/2014~~

6/29/2015

~~180~~

110

~~Cypress~~

Oceanside

~~Hampton~~

Courtyard

~~Dimension~~

Marriott

~~6/29/2015~~

9/1/2016

~~110~~

142

Oceanside

~~Courtyard~~

Residence Inn

Marriott

3/1/~~2016~~2014

~~142~~

125

~~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

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

Index

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

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

Courtyard

Dimension

3/1/2014

118

Miami

Hampton

White Lodging

4/9/2010

121

Miami

Homewood Suites

Dimension

3/1/2014

162

Orlando

Fairfield ~~Inn & Suites~~

Marriott

7/1/2009

200

Orlando

~~SpringHill~~

Home2 Suites

~~Marriott~~

LBA

~~7/1/2009~~

3/19/2019

~~200~~

128

~~Panama City~~

Orlando

~~Hampton~~

SpringHill Suites

~~LBA~~

Marriott

~~3/12/~~

7/1/2009

200

Panama City

~~TownePlace Suites~~

Hampton

LBA

~~1/19/2010~~

3/12/2009

~~103~~

~~Pensacola~~

Panama City

TownePlace Suites

~~McKibbon~~

LBA

1/~~2016~~19/2010

103

~~Sanford~~

Pensacola

~~SpringHill~~

TownePlace Suites

~~LBA~~

McKibbon

9/1/~~2014~~2016

~~105~~

~~Sarasota~~

Tallahassee

~~Homewood Suites~~

Fairfield

~~Hilton~~

LBA

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~~

Atlanta/Downtown

~~TownePlace Suites~~

Hampton

McKibbon

~~3/1/2014~~

2/5/2018

119

~~Albany~~

Atlanta/Perimeter Dunwoody

~~Fairfield Inn & Suites~~

Hampton

LBA

~~1/14/2010~~

6/28/2018

132

Atlanta

Home2 Suites

McKibbon

7/1/2016

128

~~Columbus~~

Macon

~~SpringHill Suites~~

~~LBA~~

~~3/1/2014~~

~~Columbus~~

~~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

Rosemont

Hampton

Raymond

9/1/2016

158

~~Schaumburg~~

Skokie

Hampton

Raymond

9/1/2016

225

Warrenville

Hilton Garden Inn

White Lodging

11/2/2010

~~166~~

135

~~Skokie~~

Indianapolis

~~Hampton~~

SpringHill Suites

~~Raymond~~

White Lodging

~~9/1/2016~~

11/2/2010

~~225~~

130

~~Warrenville~~

Merrillville

Hilton Garden Inn

White Lodging

~~11/2/2010~~

9/1/2016

~~135~~

124

~~Indianapolis~~

Mishawaka

~~SpringHill Suites~~

Residence Inn

White Lodging

11/2/2010

~~130~~

106

~~Merrillville~~

South Bend

Fairfield

White Lodging

9/1/2016

119

Index

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

Overland Park

Fairfield

Raymond

3/1/2014

110

Overland Park

Residence Inn

Raymond

3/1/2014

120

Wichita

Courtyard

Aimbridge

3/1/2014

Lafayette

Hilton Garden Inn

~~White Lodging~~

LBA

~~9/1/2016~~

7/30/2010

~~124~~

153

~~Mishawaka~~

Lafayette

~~Residence Inn~~

SpringHill Suites

~~White Lodging~~

LBA

~~11/2/2010~~

6/23/2011

~~106~~

103

~~South Bend~~

New Orleans

~~Fairfield Inn &~~

Homewood Suites

~~White Lodging~~

Dimension

3/1/~~2016~~2014

~~119~~

166

~~Overland Park~~

Marlborough

~~Fairfield~~

Residence Inn ~~& Suites~~

~~True North~~

Crestline

3/1/2014

~~110~~

112

~~Overland Park~~

Westford

~~Residence Inn~~

Hampton

~~True North~~

Crestline

3/1/2014

~~120~~

110

~~Overland Park~~

Westford

~~SpringHill Suites~~

Residence Inn

~~True North~~

Crestline

3/1/2014

~~102~~

108

~~Wichita~~

Annapolis

~~Courtyard~~

~~Aimbridge~~

~~3/1/2014~~

~~Baton Rouge~~

~~SpringHill Suites~~

~~Dimension~~

~~9/25/2009~~

~~119~~

~~Lafayette~~

Hilton Garden Inn

~~LBA~~

Crestline

~~7/30/2010~~

3/1/2014

~~153~~

126

~~Lafayette~~

Silver Spring

~~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~~

~~3/1/2014~~

~~112~~

~~Westford~~

~~Hampton~~

~~True North~~

~~3/1/2014~~

~~110~~

~~Westford~~

~~Residence Inn~~

~~True North~~

~~3/1/2014~~

~~108~~

~~Annapolis~~

Hilton Garden Inn

~~White Lodging~~

Crestline

~~3/1/2014~~

7/30/2010

~~126~~

107

~~Silver Spring~~

Portland

AC Hotels

Crestline

8/20/2021

178

Portland

Aloft

Crestline

9/10/2021

157

Portland

Residence Inn

Crestline

10/13/2017

179

Novi

Hilton Garden Inn

White Lodging

~~7/30/~~

11/2/2010

~~107~~

148

~~Novi~~

Maple Grove

Hilton Garden Inn

~~White Lodging~~

North Central

~~11/2/2010~~

9/1/2016

~~148~~

121

~~Maple Grove~~

Rochester

Hampton

Raymond

8/3/2009

124

St. Paul

Hampton

Raymond

3/4/2019

160

Kansas City

Hampton

Raymond

8/31/2010

122

Kansas City

Residence Inn

Raymond

3/1/2014

106

St. Louis

Hampton

Raymond

8/31/2010

190

St. Louis

Hampton

Raymond

4/30/2010

126

Hattiesburg

Courtyard

LBA

3/1/2014

Hattiesburg

Residence Inn

LBA

12/11/2008

Carolina Beach

Courtyard

Crestline

3/1/2014

144

Charlotte

Fairfield

Newport

9/1/2016

Durham

Homewood Suites

McKibbon

12/4/2008

122

Fayetteville

Home2 Suites

LBA

2/3/2011

118

Greensboro

SpringHill Suites

Newport

3/1/2014

Jacksonville

Home2 Suites

LBA

9/1/2016

105

Wilmington

Fairfield

Crestline

3/1/2014

122

Winston-Salem

Hampton

McKibbon

9/1/2016

Omaha

Courtyard

Marriott

3/1/2014

181

Omaha

Hampton

White Lodging

9/1/2016

139

Omaha

Hilton Garden Inn

~~North Central~~

White Lodging

9/1/2016

~~120~~

178

~~Rochester~~

Omaha

~~Hampton~~

Homewood Suites

~~Raymond~~

White Lodging

~~8/3/2009~~

9/1/2016

~~124~~

123

~~Kansas City~~

Cranford

~~Hampton~~

Homewood Suites

~~Raymond~~

Dimension

~~8/31/2010~~

3/1/2014

~~122~~

108

~~Kansas City~~

Mahwah

~~Residence Inn~~

Homewood Suites

~~True North~~

Dimension

3/1/2014

~~106~~

110

~~St. Louis~~

Mount Laurel

~~Hampton~~

Homewood Suites

~~Raymond~~

Newport

~~8/31/2010~~

1/11/2011

~~190~~

118

~~St. Louis~~

Somerset

~~Hampton~~

Courtyard

~~Raymond~~

Newport

~~4/30/2010~~

3/1/2014

~~126~~

162

~~Hattiesburg~~

West Orange

Courtyard

~~LBA~~

Newport

1/~~2014~~11/2011

131

~~Hattiesburg~~

Islip/Ronkonkoma

~~Residence Inn~~

~~LBA~~

~~12/11/2008~~

~~Carolina Beach~~

~~Courtyard~~

~~Crestline~~

~~3/1/2014~~

~~144~~

~~Charlotte~~

~~Fairfield Inn & Suites~~

~~Newport~~

~~9/1/2016~~

~~Charlotte~~

~~Homewood Suites~~

~~McKibbon~~

~~9/24/2008~~

~~118~~

~~Durham~~

~~Homewood Suites~~

~~McKibbon~~

~~12/4/2008~~

~~122~~

~~Fayetteville~~

~~Home2 Suites~~

~~LBA~~

~~2/3/2011~~

~~118~~

~~Fayetteville~~

~~Residence Inn~~

~~Aimbridge~~

~~3/1/2014~~

~~Greensboro~~

~~SpringHill Suites~~

~~Newport~~

~~3/1/2014~~

~~Holly Springs~~

~~Hampton~~

~~LBA~~

~~11/30/2010~~

~~124~~

~~Jacksonville~~

~~Home2 Suites~~

~~LBA~~

~~9/1/2016~~

~~105~~

~~Wilmington~~

~~Fairfield Inn & Suites~~

~~Crestline~~

~~3/1/2014~~

~~122~~

~~Winston-Salem~~

~~Courtyard~~

~~McKibbon~~

~~3/1/2014~~

~~122~~

~~Index~~

~~City~~

~~State~~

~~Brand~~

~~Manager~~

~~Date Acquired or Completed~~

~~Rooms~~

~~Winston-Salem~~

~~Hampton~~

~~McKibbon~~

~~9/1/2016~~

~~Omaha~~

~~Courtyard~~

~~Marriott~~

~~3/1/2014~~

~~181~~

~~Omaha~~

~~Hampton~~

~~White Lodging~~

~~9/1/2016~~

~~139~~

~~Omaha~~

Hilton Garden Inn

~~White Lodging~~

Crestline

3/1/~~2016~~2014

~~178~~

166

~~Omaha~~

New York

~~Homewood Suites~~

Independent

~~White Lodging~~

Highgate

3/1/~~2016~~2014

~~123~~

208

~~Cranford~~

Syracuse

~~Homewood Suites~~

Courtyard

~~Dimension~~

Crestline

~~3/1/2014~~

10/16/2015

~~108~~

102

~~Mahwah~~

Syracuse

~~Homewood Suites~~

Residence Inn

~~Dimension~~

Crestline

~~3/1/2014~~

10/16/2015

~~110~~

~~Mount Laurel~~

Mason

~~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~~

Raymond

9/1/~~2014~~2016

~~165~~

110

~~New York~~

Twinsburg

~~Renaissance~~

~~Highgate~~

~~3/1/2014~~

~~205~~

~~Syracuse~~

~~Courtyard~~

~~New Castle~~

~~10/16/2015~~

~~102~~

~~Syracuse~~

~~Residence Inn~~

~~New Castle~~

~~10/16/2015~~

~~Mason~~

Hilton Garden Inn

~~Schulte~~

Aimbridge

~~9/1/2016~~

10/7/2008

~~110~~

142

~~Twinsburg~~

Oklahoma City

Hampton

Raymond

5/28/2010

200

Oklahoma City

Hilton Garden Inn

~~Gateway~~

Raymond

~~10/7/2008~~

9/1/2016

~~142~~

155

Oklahoma City

~~Hampton~~

Homewood Suites

Raymond

~~5/28/2010~~

9/1/2016

~~200~~

100

Oklahoma City (West)

Homewood Suites

Chartwell

9/1/2016

Collegeville/Philadelphia

Courtyard

Newport

11/15/2010

132

Index

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

Malvern/Philadelphia

Courtyard

Newport

11/30/2010

127

Pittsburgh

Hampton

Newport

12/31/2008

132

Charleston

Home2 Suites

LBA

9/1/2016

122

Columbia

Hilton Garden Inn

~~Raymond~~

Newport

3/1/~~2016~~2014

~~155~~

143

~~Oklahoma City~~

Columbia

~~Homewood~~

TownePlace Suites

~~Raymond~~

Newport

9/1/2016

~~100~~

~~Oklahoma City (West)~~

Greenville

~~Homewood Suites~~

Hyatt Place

~~Chartwell~~

Crestline

9/1/~~2016~~2021

130

~~Collegeville/Philadelphia~~

Hilton Head

~~Courtyard~~

~~White Lodging~~

~~11/15/2010~~

~~132~~

~~Malvern/Philadelphia~~

~~Courtyard~~

~~White Lodging~~

~~11/30/2010~~

~~127~~

~~Pittsburgh~~

~~Hampton~~

~~Vista Host~~

~~12/31/2008~~

~~132~~

~~Charleston~~

~~Home2 Suites~~

~~LBA~~

~~9/1/2016~~

~~122~~

~~Columbia~~

Hilton Garden Inn

~~Newport~~

McKibbon

3/1/2014

~~143~~

104

~~Columbia~~

Chattanooga

~~TownePlace~~

Homewood Suites

~~Newport~~

LBA

3/1/~~2016~~2014

~~Greenville~~

Franklin

~~Residence Inn~~

Courtyard

~~McKibbon~~

Chartwell

9/1/~~2014~~2016

126

~~Hilton Head~~

Franklin

Residence Inn

Chartwell

9/1/2016

124

Knoxville

Homewood Suites

McKibbon

9/1/2016

103

Knoxville

SpringHill Suites

McKibbon

9/1/2016

103

Knoxville

TownePlace Suites

McKibbon

9/1/2016

Memphis

Hampton

Crestline

2/5/2018

144

Nashville

Hilton Garden Inn

~~McKibbon~~

Dimension

~~3/1/2014~~

9/30/2010

~~104~~

194

~~Chattanooga~~

Nashville

~~Homewood~~

Home2 Suites

~~LBA~~

Dimension

~~3/1/2014~~

5/31/2012

119

~~Franklin~~

Nashville

~~Courtyard~~

TownePlace Suites

~~Chartwell~~

LBA

9/1/2016

~~126~~

101

~~Franklin~~

Addison

~~Residence Inn~~

SpringHill Suites

~~Chartwell~~

Marriott

3/1/~~2016~~2014

~~124~~

159

~~Jackson~~

Arlington

Hampton

~~Vista Host~~

Western

12/~~30/2008~~1/2010

~~Johnson City~~

Austin

Courtyard

~~LBA~~

White Lodging

~~9/25/2009~~

11/2/2010

145

~~Knoxville~~

Austin

~~Homewood Suites~~

Fairfield

~~McKibbon~~

White Lodging

~~9/1/2016~~

11/2/2010

~~103~~

150

~~Knoxville~~

Austin

~~SpringHill Suites~~

Hampton

~~McKibbon~~

Dimension

~~9/1/2016~~

4/14/2009

~~103~~

124

~~Knoxville~~

Austin

~~TownePlace Suites~~

~~McKibbon~~

~~9/1/2016~~

~~Memphis~~

~~Homewood Suites~~

~~Hilton~~

~~3/1/2014~~

~~140~~

~~Nashville~~

Hilton Garden Inn

~~Vista Host~~

White Lodging

~~9/30/~~

11/2/2010

~~194~~

117

~~Nashville~~

Austin

~~Home2~~

Homewood Suites

~~Vista Host~~

Dimension

~~5/31/2012~~

4/14/2009

~~119~~

~~Nashville~~

Austin/Round Rock

~~TownePlace Suites~~

Hampton

~~LBA~~

Dimension

~~9/1/2016~~

3/6/2009

~~101~~

~~Addison~~

Austin/Round Rock

~~SpringHill~~

Homewood Suites

~~Marriott~~

Dimension

9/1/~~2014~~2016

~~159~~

115

~~Allen~~

Dallas

~~Hampton~~

Homewood Suites

~~Gateway~~

Western

9/~~26/2008~~1/2016

~~103~~

130

~~Allen~~

Denton

Homewood Suites

Chartwell

9/1/2016

107

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

~~Gateway~~

Western

~~10/~~

12/31/2008

~~150~~

102

~~Arlington~~

Grapevine

~~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~~

~~4/14/2009~~

~~124~~

~~Austin~~

Hilton Garden Inn

~~White Lodging~~

Western

~~11/2/~~

9/24/2010

~~117~~

110

~~Index~~

~~City~~

~~State~~

~~Brand~~

~~Manager~~

~~Date Acquired or Completed~~

~~Rooms~~

~~Austin~~

Houston

~~Homewood Suites~~

Courtyard

~~Vista Host~~

LBA

~~4/14/2009~~

9/1/2016

124

~~Austin/Round Rock~~

Houston

~~Homewood Suites~~

Marriott

~~Vista Host~~

Western

1/~~2016~~8/2010

~~115~~

206

~~Beaumont~~

Houston

Residence Inn

Western

~~10/29/2008~~

3/1/2014

~~133~~

129

~~Burleson/Fort Worth~~

Houston

~~Hampton~~

Residence Inn

~~LBA~~

Western

~~10/7/2014~~

9/1/2016

120

~~Dallas~~

Lewisville

~~Homewood Suites~~

~~Western~~

~~9/1/2016~~

~~130~~

~~Denton~~

~~Homewood Suites~~

~~Chartwell~~

~~9/1/2016~~

~~107~~

~~Duncanville~~

Hilton Garden Inn

~~Gateway~~

Aimbridge

10/~~21/~~16/2008

~~142~~

165

~~El Paso~~

San Antonio

TownePlace Suites

Western

3/1/2014

106

Shenandoah

Courtyard

LBA

9/1/2016

124

Stafford

Homewood Suites

Western

3/1/2014

Texarkana

Hampton

Aimbridge

1/31/2011

Provo

Residence Inn

Dimension

3/1/2014

114

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

Index

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

Richmond

Residence Inn

White Lodging

12/8/2014

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

Madison

Hilton Garden Inn

~~Western~~

Raymond

~~12/19/2011~~

2/18/2021

~~145~~

176

~~El Paso~~

Total

~~Homewood Suites~~

~~Western~~

~~3/1/2014~~

~~114~~

28,085

~~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~~

~~102~~

~~Grapevine~~

~~Hilton Garden Inn~~

~~Western~~

~~9/24/2010~~

~~110~~

~~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~~

~~Irving~~

~~Homewood Suites~~

~~Western~~

~~12/29/2010~~

~~Lewisville~~

~~Hilton Garden Inn~~

~~Gateway~~

~~10/16/2008~~

~~165~~

~~Round Rock~~

~~Hampton~~

~~Vista Host~~

~~3/6/2009~~

~~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 ~~$540 million unsecured~~ revolving credit ~~facility,~~facility. Periodically, the Company may receive proceeds from ~~the~~ strategic ~~disposition~~additional secured and unsecured debt financing, dispositions of its hotel properties ~~and~~(such as the sale of 23 hotels in the first nine months of 2021 for proceeds ~~from potential~~of approximately $235 million discussed above in “2021 Hotel Portfolio Activities”) and offerings of 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 for share repurchases, acquisitions, hotel renovations and development, working capital and other general corporate funding purposes,shares, including pursuant to the ~~payment of distributions to shareholders.~~ ATM Program (as defined below).

As of September 30, ~~2017,~~2021, the ~~Company’s~~Company had $1.4 billion of total outstanding debt consisting of $502.4 million of mortgage debt and $870.0 million outstanding under its unsecured credit facilities, excluding unamortized debt issuance costs and fair value adjustments. As of September 30, 2021, the Company had available corporate cash on hand of approximately $39.4 million as well as unused borrowing capacity under its revolving credit facility ~~had an outstanding principal balance~~ of approximately ~~$216.7 million with an annual variable interest rate~~$425 million. In the near term, the impact of ~~approximately 2.78%.~~

COVID-19 on the global economy, including any sustained decline in the Company’s performance, may make it more difficult or costly for the Company to raise debt or equity capital to 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~~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~~

As a result of COVID-19 and the ~~applicable covenants at September 30, 2017.~~

~~In February 2017,~~associated disruption to 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.

~~On July 25, 2017,~~Company’s operating results, the Company entered into anamendments in June 2020 that suspended the testing of the Company’s existing financial maintenance covenants under the unsecured ~~$85 million term loan with a syndicate~~credit facilities. These amendments imposed certain restrictions regarding its investing and financing activities including, but not limited to, limitations on the acquisition of ~~commercial banks, with a maturity date~~property, payment of ~~July 25, 2024. The Company used the net~~distributions to shareholders, capital expenditures and use of proceeds from the ~~$85 million term loan~~sale of property or common shares of the Company, that applied during such testing suspension period. On March 1, 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to ~~pay down~~ the ~~borrowings~~Company’s future operating results, the Company entered into further amendments to each of the unsecured credit facilities to extend the covenant waiver period for all but two of the Company’s existing financial maintenance covenants until the date that the compliance certificate was required to be delivered for the fiscal quarter ending June 30, 2022 (unless the Company elected an earlier date) (the “Extended Covenant Waiver Period”). The testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio was suspended until the compliance certificate was required to be delivered for the fiscal quarter ending March 31, 2022 (unless the Company elected an earlier date).

Additionally, these amendments modified the calculation of the existing financial covenants for the first three quarterly calculations subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts based on the period beginning with the first fiscal quarter upon exiting the Extended Covenant Waiver Period through the most recently ended fiscal

Index

quarter. The March 2021 amendments also modified certain of the existing financial maintenance covenants to less restrictive levels upon exiting 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 the credit agreements remain in effect.

In July 2021, the Company notified its lenders under its unsecured credit facilities that it had elected to exit the Extended Covenant Waiver Period effective on July 29, 2021. Upon exiting the Extended Covenant Waiver Period, the Company is no longer subject to the restrictions described above regarding its investing and financing activities that were applicable during the Extended Covenant Waiver Period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders, capital expenditures and use of proceeds from the sale of property or common shares of the Company. Those restrictions, including the restriction on payment of distributions to shareholders, were still in place throughout the second quarter of 2021.

The Company’s ~~revolving~~annualized results for the six months ended September 30, 2021 met the financial maintenance covenants based on the thresholds stipulated for the second fiscal quarter tested upon exiting the Extended Covenant Waiver Period as described 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 unsecured credit ~~facility.~~ facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit.

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~~a description of the Company’s debt instruments as of September 30, 2021.

On August 12, 2020, the Company entered into an equity distribution agreement pursuant to which the ~~$85~~Company may sell, from time to time, up to an aggregate of $300 million ~~term loan.~~

~~As discussed below in “Subsequent Events,” in October 2017,~~of its common shares under an at-the-market offering program (the “ATM Program”). During the second quarter of 2021, the Company sold ~~the Fairfax, Virginia Marriott for~~approximately 4.7 million common shares under its ATM Program at a ~~sale~~weighted-average market sales price of approximately ~~$41.5~~$16.26 per common share and received aggregate gross proceeds of approximately $76.0 million and proceeds net of offering costs, which included $0.9 million of commissions, of approximately $75.1 million. The Company used the net proceeds from the sale of these shares to pay down borrowings on its revolving credit ~~facility.~~

facility and for general corporate purposes, including acquisitions of hotel properties. As of September 30, 2021, approximately $224.0 million remained available for issuance under the ATM Program. No shares were sold under the Company’s ATM Program in the third quarter of 2021. The Company plans to use future net proceeds from the sale of these shares to continue to pay down borrowings on its revolving credit facility (if any). 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. The Company may also use the net proceeds to acquire another REIT or other company that invests in income producing properties.

Capital Uses

The Company anticipates that cash flow from operations, availability under its ~~revolving~~ credit ~~facility,~~facilities, additional borrowings and proceeds from hotel dispositions and equity offerings will be adequate to meet its anticipated liquidity requirements, including debt service, hotel acquisitions, hotel renovations, share repurchases, and required distributions to ~~shareholders (the~~shareholders.

Distributions

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~~generally must distribute annually at least 90% of its ~~ordinary income. Distributions~~REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order to maintain its REIT status. During the Extended Covenant Waiver Period, as a requirement under the amendments to its unsecured credit facilities, the Company was restricted in its ability to make distributions except for the payment of cash distributions of $0.01 per common share per quarter or to the extent required to maintain REIT status. In March and June 2021, the Company declared quarterly distributions of $0.01 per common share, which were paid ~~during~~in April and July, respectively, totaling $0.02 per common share and $4.5 million for the nine months ended September 30, ~~2017 totaled approximately $200.7 million or $0.90~~2021. Additionally, in September 2021, the Company declared a quarterly distribution of $0.01 per common share, ~~and~~totaling $2.3 million that was paid on October 18, 2021. As discussed above, in July 2021, the Company notified its lenders under its unsecured credit facilities that it had elected to exit the

Index

Extended Covenant Waiver Period effective on July 29, 2021. As a result, upon exiting the Extended Covenant Waiver Period, the Company is no longer subject to the restrictions on distributions that were paid at a monthly rate of $0.10 per common share. For the same period, 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,applicable during the first nine months of 2017 to settle the Apple Ten merger lawsuit which is discussed in Note 10 titled “Legal Proceedings” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q.

~~Index~~

Extended Covenant Waiver Period.

The ~~Company’s current annual distribution rate, payable monthly, is $1.20 per common share. As~~Company, as it has done historically due to seasonality, ~~the Company~~ may use its revolving credit facility to maintain the consistency of ~~the monthly distribution rate,~~distributions, taking into consideration any acquisitions, dispositions, capital improvements and economic cycles. Any distribution will be subject to approval of the Company’s Board of Directors and there can be no assurance of the classification or duration of distributions at ~~the current annual~~any particular distribution rate. The Board of Directors monitors the Company’s distribution rate relative to the performance of ~~the~~its hotels on an ongoing basis and may make adjustments to the distribution rate as determined to be prudent in relation to other cash requirements of the Company. If cash flow from operations and the revolving credit facility are not adequate to meet liquidity requirements, the Company may utilize additional financing sources to make distributions. Although the Company has relatively low levels of debt, there can be no assurances it will be successful with this strategy and may need to reduce its distributions to minimum levels required ~~levels.~~to maintain its qualification as a real estate investment trust. 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~~May 2021, the ~~implementation~~Company’s Board of ~~the ATM~~Directors approved a one-year 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 February 2017~~may be suspended or terminated at any time by the Company and will end in July 2022 if not terminated ~~its existing written trading plan under~~or extended earlier. During the ~~Company’s share repurchase program. In January 2016,~~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 applicable restrictions under the Company’s unsecured credit facilities (if any). 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 the Company and, as a result of an extension of the program approved by the Board of Directors in May 2017, will end in July 2018 if not terminated earlier.

factors, including compliance with applicable credit facility covenants (if any).

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 plans to continue to reinvest in its hotels. Under certain loan and management agreements, the Company is required to place in escrow funds for the repair, replacement and refurbishing of furniture, fixtures, and equipment, based on a percentage of gross revenues, provided that such amount may be used for the Company’s capital expenditures with respect to the hotels. As of September 30, ~~2017,~~2021, the Company held ~~$26.8~~approximately $27.5 million in reserve related to these properties. During the nine months ended September 30, ~~2017,~~2021, the Company invested approximately ~~$41.9~~$9.7 million in capital expenditures and anticipates spending an additional ~~$25~~$15-20 million during the remainder of ~~2017,~~2021, which includes ~~various~~ scheduled renovation projects for approximately 15eight properties. The Company does not currently have any existing or planned projects for new property development.

~~Hotel~~

Purchase Contract Commitments

As of September 30, ~~2017,~~2021, the Company had separate outstanding contracts for the potential purchase of ~~four additional~~five hotels, consisting of one hotel in Madison, Wisconsin, one hotel in Memphis, Tennessee, two hotels in Fort Worth, Texas and one hotel in Portland, Oregon for a total combined purchase price of approximately ~~$146.1~~$242.6 million. ~~Two~~Four of the hotels ~~the Salt Lake City Residence Inn and the Portland Residence Inn, which~~ are already in operation ~~were acquired~~and one is under development and scheduled to open no earlier than 2023. Closings on the four hotels already in ~~October 2017. The two remaining hotels~~operation are ~~under construction and are planned~~expected to ~~be completed and opened for business over~~occur in the ~~next 12 months from September 30, 2017, at which time~~fourth quarter of 2021, while closing on ~~these hotels~~the remaining hotel is expected ~~to occur.~~upon completion of development. 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~~closings on these hotels will occur under the outstanding purchase contracts. The ~~purchase price for each~~Company plans to utilize its available cash (including a portion of the ~~Salt Lake City Residence Inn and Portland Residence Inn was funded through~~proceeds from the ~~Company’s revolving~~sale of 20 hotels in July 2021) or borrowings under its unsecured credit ~~facility and it is anticipated that the~~facilities available at closing to purchase ~~price for the remaining outstanding contracts will be funded similarly.~~

hotels under contract if closings occur.

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 the first nine months of 2021 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 March 2020 and January 2021 as well as recent accounting standards updates to be adopted in the ~~first nine months of 2017 and the anticipated adoption of recently issued accounting standards.~~

future.

Subsequent Events

On October ~~2017,~~18, 2021, the Company paid approximately ~~$22.3~~$2.3 million, or ~~$0.10~~$0.01 per outstanding common share, in distributions to its common shareholders.

~~In October 2017, the Company declared a regular monthly cash distribution of $0.10 per common share for the month of November 2017. The distribution is payable on November 15, 2017.~~

hotel.

Index

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of September 30, ~~2017,~~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,~~2021, after giving effect to interest rate swaps, as described below, approximately ~~$319.2~~$50.0 million, or approximately ~~24%~~4% 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,~~2021, every 100 basis points change in interest rates will impact the Company’s annual net income by approximately ~~$3.2~~$0.5 million, all other factors remaining the same. With the exception of interest rate swap transactions, the Company has not engaged in transactions in derivative financial instruments or derivative commodity instruments. ~~The Company’s cash balance at September 30, 2017 was $0.~~

~~Index~~

As of September 30, ~~2017,~~2021, the Company’s ~~variable rate~~variable-rate debt consisted of its ~~$540~~$820 million ~~revolving credit facility and six~~of term ~~loans totaling $660 million.~~loans. Currently, the Company uses interest rate swaps to manage its interest rate risk on a portion of its ~~variable rate~~variable-rate debt. As of September 30, ~~2017,~~2021, the Company had ~~six~~13 interest rate swap agreements that effectively fix the interest payments on approximately ~~$557.5~~$770.0 million of the Company’s ~~variable rate~~variable-rate debt outstanding ~~(consisting of five term loans) through maturity.~~with swap maturity dates ranging from August 2022 to December 2029. 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 September 30, 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.~~2021. All dollar amounts are in thousands.

	October 1 - December 31, 2021			2022			2023			2024			2025			Thereafter			Total		Fair Market Value
Total debt:
Maturities	$	4,375		$	165,831		$	296,213		$	338,597		$	245,140		$	322,265		$	1,372,421	$	1,346,923
Average interest rates⁽¹⁾		3.5	%		3.4	%		3.4	%		3.7	%		3.9	%		4.0	%

Variable-rate debt:
Maturities	$	-		$	-		$	250,000		$	310,000		$	175,000		$	85,000		$	820,000	$	794,876
Average interest rates ⁽¹⁾		3.0	%		3.0	%		3.2	%		3.6	%		4.1	%		4.7	%

Fixed-rate debt:
Maturities	$	4,375		$	165,831		$	46,213		$	28,597		$	70,140		$	237,265		$	552,421	$	552,047
Average interest rates		4.1	%		4.0	%		3.9	%		3.9	%		3.8	%		3.7	%

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.~~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 in~~Company, have a material adverse effect on the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”) except as described in Note 10 titled “Legal Proceedings” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, which information is incorporated by reference herein.

~~Item 1A. Risk Factors~~

~~For a discussion~~consolidated financial position or results 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~~.

operations.

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~~(Incorporated by reference to Exhibit ~~3.1~~3.2 to the Company’s ~~current~~quarterly report on Form ~~8-K~~10-Q (SEC File No. 001-37389) filed ~~February~~May 18, ~~2016)~~2020)

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~~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 September 30, 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 6, 2017~~Nov 4, 2021
	Justin G. Knight,
	~~President and~~ Chief Executive Officer (Principal Executive Officer)

By:	/s/ ~~Bryan Peery~~ Elizabeth S. Perkins		Date: ~~November 6, 2017~~Nov 4, 2021
	~~Bryan Peery,~~ Elizabeth S. Perkins,
	Chief Financial Officer (Principal Financial ~~and~~ Officer)

By:	/s/ Rachel S. Labrecque	Date: Nov 4, 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 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	%