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 March 31, 20202021
☐ | 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 every Interactive Data File required to be submitted 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 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,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | 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 May 15, 2020: 223,216,628
EXPLANATORY NOTE
As previously disclosed in the Current Report on Form 8-K filed by Apple Hospitality REIT, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”) on May 6, 2020, the Company relied on the SEC’s Order Under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies, dated March 25, 2020 (Release No. 34-88465), to delay the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Form 10-Q”) due to circumstances related to COVID-19. The need to address the immediate and evolving impacts of COVID-19 on the Company’s business and operations, including impacts on the operations at each of its hotel properties, increased the demands on the Company’s employees at a time when “stay at home” orders, including in Virginia, where the Company’s headquarters is located, impacted normal working patterns. This slowed the Company’s normal quarterly close and financial reporting processes related to its Form 10-Q. 3, 2021: 223,656,264
Apple Hospitality REIT, Inc.
Form 10-Q
Index
| Page Number | ||||
PART I. FINANCIAL INFORMATION | |||||
Item 1. | 3 | ||||
Consolidated Balance Sheets – March 31, |
| ||||
Consolidated Statements of Operations and Comprehensive |
| ||||
Consolidated Statements of Shareholders’ Equity – |
| ||||
Consolidated Statements of Cash Flows – | 6 | ||||
7 | |||||
| |||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
| |||
Item 3. | 36 | ||||
Item 4. |
| ||||
PART II. OTHER INFORMATION | |||||
Item 1. |
| ||||
| |||||
Item 2. |
| ||||
Item 6. |
| ||||
|
This Form 10-Q includes references to certain trademarks or service marks. The Courtyard by Marriott®, Fairfield 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®, Hampton Inn & 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.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Apple Hospitality REIT, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
March 31, | December 31, |
| March 31, |
|
| December 31, |
| |||||||||
2020 | 2019 |
| 2021 |
|
| 2020 |
| |||||||||
(unaudited) |
| (unaudited) |
|
|
|
|
| |||||||||
Assets |
|
|
|
|
|
|
|
| ||||||||
Investment in real estate, net of accumulated depreciation and amortization of $1,096,718 and $1,054,429, respectively | $ | 4,776,695 | $ | 4,825,738 | ||||||||||||
Investment in real estate, net of accumulated depreciation and amortization of $1,275,557 and $1,235,698, respectively |
| $ | 4,712,480 |
|
| $ | 4,732,896 |
| ||||||||
Assets held for sale | - | 12,093 |
|
| 5,172 |
|
|
| 5,316 |
| ||||||
Cash and cash equivalents | 437,260 | - |
|
| 5,776 |
|
|
| 5,556 |
| ||||||
Restricted cash-furniture, fixtures and other escrows | 33,335 | 34,661 |
|
| 30,149 |
|
|
| 28,812 |
| ||||||
Due from third party managers, net | 22,040 | 26,926 |
|
| 38,766 |
|
|
| 22,137 |
| ||||||
Other assets, net | 37,040 | 42,993 |
|
| 33,589 |
|
|
| 35,042 |
| ||||||
Total Assets | $ | 5,306,370 | $ | 4,942,411 |
| $ | 4,825,932 |
|
| $ | 4,829,759 |
| ||||
|
|
|
|
|
|
|
| |||||||||
Liabilities |
|
|
|
|
|
|
|
| ||||||||
Debt, net | $ | 1,789,281 | $ | 1,320,407 |
| $ | 1,523,032 |
|
| $ | 1,482,571 |
| ||||
Finance lease liabilities | 217,180 | 216,627 |
|
| 221,027 |
|
|
| 219,981 |
| ||||||
Accounts payable and other liabilities | 105,105 | 114,364 |
|
| 80,108 |
|
|
| 97,860 |
| ||||||
Total Liabilities | 2,111,566 | 1,651,398 |
|
| 1,824,167 |
|
|
| 1,800,412 |
| ||||||
|
|
|
|
|
|
|
| |||||||||
Shareholders' Equity |
|
|
|
|
|
|
|
| ||||||||
Preferred stock, authorized 30,000,000 shares; NaN issued and outstanding | - | - |
|
| 0 |
|
|
| 0 |
| ||||||
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 223,017,081 and 223,862,913 shares, respectively | 4,487,441 | 4,493,763 | ||||||||||||||
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 223,656,264 and 223,212,346 shares, respectively |
|
| 4,493,422 |
|
|
| 4,488,419 |
| ||||||||
Accumulated other comprehensive loss | (46,864 | ) | (4,698 | ) |
|
| (26,720 | ) |
|
| (42,802 | ) | ||||
Distributions greater than net income | (1,245,773 | ) | (1,198,052 | ) |
|
| (1,464,937 | ) |
|
| (1,416,270 | ) | ||||
Total Shareholders' Equity | 3,194,804 | 3,291,013 |
|
| 3,001,765 |
|
|
| 3,029,347 |
| ||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities and Shareholders' Equity | $ | 5,306,370 | $ | 4,942,411 |
| $ | 4,825,932 |
|
| $ | 4,829,759 |
|
See notes to consolidated financial statements.
3
Apple Hospitality REIT, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)Loss
(Unaudited)
(in thousands, except per share data)
Three Months Ended |
| Three Months Ended |
| |||||||||||||
March 31, |
| March 31, |
| |||||||||||||
2020 | 2019 |
| 2021 |
|
| 2020 |
| |||||||||
Revenues: |
|
|
|
|
|
|
|
| ||||||||
Room | $ | 217,979 | $ | 279,470 |
| $ | 148,481 |
|
| $ | 217,979 |
| ||||
Food and beverage | 11,312 | 15,015 |
|
| 2,783 |
|
|
| 11,312 |
| ||||||
Other | 8,719 | 9,302 |
|
| 7,449 |
|
|
| 8,719 |
| ||||||
Total revenue | 238,010 | 303,787 |
|
| 158,713 |
|
|
| 238,010 |
| ||||||
|
|
|
|
|
|
|
| |||||||||
Expenses: |
|
|
|
|
|
|
|
| ||||||||
Hotel operating expense: |
|
|
|
|
|
|
|
| ||||||||
Operating | 68,029 | 75,580 |
|
| 38,150 |
|
|
| 68,029 |
| ||||||
Hotel administrative | 23,643 | 25,630 |
|
| 17,744 |
|
|
| 23,643 |
| ||||||
Sales and marketing | 24,359 | 27,694 |
|
| 14,888 |
|
|
| 24,359 |
| ||||||
Utilities | 9,190 | 9,939 |
|
| 10,560 |
|
|
| 9,190 |
| ||||||
Repair and maintenance | 11,793 | 12,866 |
|
| 10,225 |
|
|
| 11,793 |
| ||||||
Franchise fees | 10,257 | 13,111 |
|
| 6,919 |
|
|
| 10,257 |
| ||||||
Management fees | 7,995 | 10,629 |
|
| 5,254 |
|
|
| 7,995 |
| ||||||
Total hotel operating expense | 155,266 | 175,449 |
|
| 103,740 |
|
|
| 155,266 |
| ||||||
Property taxes, insurance and other | 19,595 | 19,613 |
|
| 19,688 |
|
|
| 19,595 |
| ||||||
General and administrative | 9,523 | 8,137 |
|
| 8,119 |
|
|
| 9,523 |
| ||||||
Loss on impairment of depreciable real estate assets |
|
| 10,754 |
|
|
| 0 |
| ||||||||
Depreciation and amortization | 49,522 | 47,950 |
|
| 48,710 |
|
|
| 49,522 |
| ||||||
Total expense | 233,906 | 251,149 |
|
| 191,011 |
|
|
| 233,906 |
| ||||||
|
|
|
|
|
|
|
| |||||||||
Gain on sale of real estate | 8,839 | 1,213 |
|
| 4,484 |
|
|
| 8,839 |
| ||||||
|
|
|
|
|
|
|
| |||||||||
Operating income | 12,943 | 53,851 | ||||||||||||||
Operating income (loss) |
|
| (27,814 | ) |
|
| 12,943 |
| ||||||||
|
|
|
|
|
|
|
| |||||||||
Interest and other expense, net | (15,566 | ) | (15,494 | ) |
|
| (18,513 | ) |
|
| (15,566 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) before income taxes | (2,623 | ) | 38,357 | |||||||||||||
Loss before income taxes |
|
| (46,327 | ) |
|
| (2,623 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income tax expense | (146 | ) | (206 | ) |
|
| (108 | ) |
|
| (146 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) | $ | (2,769 | ) | $ | 38,151 | |||||||||||
Net loss |
| $ | (46,435 | ) |
| $ | (2,769 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Other comprehensive loss: | ||||||||||||||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
| ||||||||
Interest rate derivatives | (42,166 | ) | (6,044 | ) |
|
| 16,082 |
|
|
| (42,166 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Comprehensive income (loss) | $ | (44,935 | ) | $ | 32,107 | |||||||||||
Comprehensive loss |
| $ | (30,353 | ) |
| $ | (44,935 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Basic and diluted net income (loss) per common share | $ | (0.01 | ) | $ | 0.17 | |||||||||||
Basic and diluted net loss per common share |
| $ | (0.21 | ) |
| $ | (0.01 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares outstanding - basic and diluted | 224,294 | 223,932 |
|
| 223,733 |
|
|
| 224,294 |
|
See notes to consolidated financial statements.
4
Apple Hospitality REIT, Inc.
Consolidated Statements of Shareholders' Equity
Three Months Ended March 31, 20202021 and 20192020
(Unaudited)
(in thousands, except per share data)
Common Stock | Accumulated Other Comprehensive Income (Loss) | Distributions Greater Than Net Income |
| Common Stock |
|
| Accumulated Other |
|
| Distributions |
|
|
|
|
| |||||||||||||||||||||||||
Number of Shares | Amount | Total |
| Number of Shares |
|
| Amount |
|
| Comprehensive Income (Loss) |
|
| Greater Than Net Income |
|
| Total |
| |||||||||||||||||||||||
Balance at December 31, 2020 |
|
| 223,212 |
|
| $ | 4,488,419 |
|
| $ | (42,802 | ) |
| $ | (1,416,270 | ) |
| $ | 3,029,347 |
| ||||||||||||||||||||
Share based compensation, net |
|
| 444 |
|
|
| 5,004 |
|
|
| - |
|
|
| - |
|
|
| 5,004 |
| ||||||||||||||||||||
Equity issuance costs |
|
| - |
|
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| (1 | ) | ||||||||||||||||||||
Interest rate derivatives |
|
| - |
|
|
| - |
|
|
| 16,082 |
|
|
| - |
|
|
| 16,082 |
| ||||||||||||||||||||
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (46,435 | ) |
|
| (46,435 | ) | ||||||||||||||||||||
Distributions declared to shareholders ($0.01 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,232 | ) |
|
| (2,232 | ) | ||||||||||||||||||||
Balance at March 31, 2021 |
|
| 223,656 |
|
| $ | 4,493,422 |
|
| $ | (26,720 | ) |
| $ | (1,464,937 | ) |
| $ | 3,001,765 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balance at December 31, 2019 | 223,863 | $ | 4,493,763 | $ | (4,698 | ) | $ | (1,198,052 | ) | $ | 3,291,013 |
|
| 223,863 |
|
| $ | 4,493,763 |
|
| $ | (4,698 | ) |
| $ | (1,198,052 | ) |
| $ | 3,291,013 |
| |||||||||
Share based compensation, net | 675 | 8,014 | - | - | 8,014 |
|
| 675 |
|
|
| 8,014 |
|
|
| - |
|
|
| - |
|
|
| 8,014 |
| |||||||||||||||
Common shares repurchased | (1,521 | ) | (14,336 | ) | - | - | (14,336 | ) |
|
| (1,521 | ) |
|
| (14,336 | ) |
|
| - |
|
|
| - |
|
|
| (14,336 | ) | ||||||||||||
Interest rate derivatives | - | - | (42,166 | ) | - | (42,166 | ) |
|
| - |
|
|
| - |
|
|
| (42,166 | ) |
|
| - |
|
|
| (42,166 | ) | |||||||||||||
Net loss | - | - | - | (2,769 | ) | (2,769 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,769 | ) |
|
| (2,769 | ) | |||||||||||||
Distributions declared to shareholders ($0.20 per share) | - | - | - | (44,952 | ) | (44,952 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (44,952 | ) |
|
| (44,952 | ) | |||||||||||||
Balance at March 31, 2020 | 223,017 | $ | 4,487,441 | $ | (46,864 | ) | $ | (1,245,773 | ) | $ | 3,194,804 |
|
| 223,017 |
|
| $ | 4,487,441 |
|
| $ | (46,864 | ) |
| $ | (1,245,773 | ) |
| $ | 3,194,804 |
| |||||||||
Balance at December 31, 2018 | 223,997 | $ | 4,495,073 | $ | 10,006 | $ | (1,096,069 | ) | $ | 3,409,010 | ||||||||||||||||||||||||||||||
Cumulative effect of the adoption of ASU 2016-02 related to leases | - | - | - | (5,201 | ) | (5,201 | ) | |||||||||||||||||||||||||||||||||
Share based compensation, net | 145 | 2,385 | - | - | 2,385 | |||||||||||||||||||||||||||||||||||
Common shares repurchased | (274 | ) | (4,096 | ) | - | - | (4,096 | ) | ||||||||||||||||||||||||||||||||
Interest rate derivatives | - | - | (6,044 | ) | - | (6,044 | ) | |||||||||||||||||||||||||||||||||
Net income | - | - | - | 38,151 | 38,151 | |||||||||||||||||||||||||||||||||||
Distributions declared to shareholders ($0.30 per share) | - | - | - | (67,178 | ) | (67,178 | ) | |||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | 223,868 | $ | 4,493,362 | $ | 3,962 | $ | (1,130,297 | ) | $ | 3,367,027 |
See notes to consolidated financial statements.
5
Apple Hospitality REIT, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended |
| Three Months Ended |
| |||||||||||||
March 31, |
| March 31, |
| |||||||||||||
2020 | 2019 |
| 2021 |
|
| 2020 |
| |||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
| ||||||||
Net income (loss) | $ | (2,769 | ) | $ | 38,151 | |||||||||||
Adjustments to reconcile net income (loss) to cash provided by operating activities: | ||||||||||||||||
Net loss |
| $ | (46,435 | ) |
| $ | (2,769 | ) | ||||||||
Adjustments to reconcile net loss to cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization | 49,522 | 47,950 |
|
| 48,710 |
|
|
| 49,522 |
| ||||||
Loss on impairment of depreciable real estate assets |
|
| 10,754 |
|
|
| - |
| ||||||||
Gain on sale of real estate | (8,839 | ) | (1,213 | ) |
|
| (4,484 | ) |
|
| (8,839 | ) | ||||
Other non-cash expenses, net | 1,773 | 1,186 |
|
| 2,684 |
|
|
| 1,773 |
| ||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
| ||||||||
Decrease (increase) in due from third party managers, net | 4,886 | (22,251 | ) |
|
| (16,628 | ) |
|
| 4,886 |
| |||||
Decrease (increase) in other assets, net | 439 | (2,345 | ) | |||||||||||||
Decrease in accounts payable and other liabilities | (11,670 | ) | (5,235 | ) | ||||||||||||
Net cash provided by operating activities | 33,342 | 56,243 | ||||||||||||||
Decrease in other assets, net |
|
| 1,029 |
|
|
| 439 |
| ||||||||
Increase (decrease) in accounts payable and other liabilities |
|
| 2,256 |
|
|
| (11,670 | ) | ||||||||
Net cash provided by (used in) operating activities |
|
| (2,114 | ) |
|
| 33,342 |
| ||||||||
|
|
|
|
|
|
|
| |||||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
| ||||||||
Acquisition of hotel properties, net | - | (52,576 | ) |
|
| (49,369 | ) |
|
| - |
| |||||
Deposits and other disbursements for potential acquisitions | - | (360 | ) | |||||||||||||
Capital improvements | (27,022 | ) | (21,223 | ) |
|
| (2,506 | ) |
|
| (27,022 | ) | ||||
Net proceeds from sale of real estate | 44,387 | 95,143 |
|
| 17,587 |
|
|
| 44,387 |
| ||||||
Net cash provided by investing activities | 17,365 | 20,984 | ||||||||||||||
Net cash provided by (used in) investing activities |
|
| (34,288 | ) |
|
| 17,365 |
| ||||||||
|
|
|
|
|
|
|
| |||||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
| ||||||||
Repurchases of common shares | (14,336 | ) | (4,096 | ) |
|
| - |
|
|
| (14,336 | ) | ||||
Repurchases of common shares to satisfy employee withholding requirements | (1,748 | ) | (491 | ) |
|
| (1,650 | ) |
|
| (1,748 | ) | ||||
Distributions paid to common shareholders | (67,324 | ) | (67,188 | ) |
|
| - |
|
|
| (67,324 | ) | ||||
Net proceeds from (payments on) revolving credit facility | 374,100 | (78,400 | ) | |||||||||||||
Equity issuance costs |
|
| (1 | ) |
|
| - |
| ||||||||
Net proceeds from revolving credit facility |
|
| 44,100 |
|
|
| 374,100 |
| ||||||||
Proceeds from term loans and senior notes | 50,000 | 75,000 |
|
| - |
|
|
| 50,000 |
| ||||||
Proceeds from mortgage debt | 63,400 | - | ||||||||||||||
Payments of mortgage debt | (18,354 | ) | (3,415 | ) | ||||||||||||
Proceeds from mortgage debt and other loans |
|
| - |
|
|
| 63,400 |
| ||||||||
Payments of mortgage debt and other loans |
|
| (3,018 | ) |
|
| (18,354 | ) | ||||||||
Financing costs | (511 | ) | - |
|
| (1,472 | ) |
|
| (511 | ) | |||||
Net cash provided by (used in) financing activities | 385,227 | (78,590 | ) | |||||||||||||
Net cash provided by financing activities |
|
| 37,959 |
|
|
| 385,227 |
| ||||||||
|
|
|
|
|
|
|
| |||||||||
Net change in cash, cash equivalents and restricted cash | 435,934 | (1,363 | ) |
|
| 1,557 |
|
|
| 435,934 |
| |||||
|
|
|
|
|
|
|
| |||||||||
Cash, cash equivalents and restricted cash, beginning of period | 34,661 | 33,632 |
|
| 34,368 |
|
|
| 34,661 |
| ||||||
|
|
|
|
|
|
|
| |||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 470,595 | $ | 32,269 |
| $ | 35,925 |
|
| $ | 470,595 |
| ||||
|
|
|
|
|
|
|
| |||||||||
Supplemental cash flow information: |
|
|
|
|
|
|
|
| ||||||||
Interest paid | $ | 14,696 | $ | 15,409 |
| $ | 18,062 |
|
| $ | 14,696 |
| ||||
|
|
|
|
|
|
|
| |||||||||
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
|
|
|
| ||||||||
Accrued distribution to common shareholders | $ | - | $ | 22,384 |
| $ | 2,232 |
|
| $ | - |
| ||||
|
|
|
|
|
|
|
| |||||||||
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
| ||||||||
Cash and cash equivalents, beginning of period | $ | - | $ | - |
| $ | 5,556 |
|
| $ | - |
| ||||
Restricted cash-furniture, fixtures and other escrows, beginning of period | 34,661 | 33,632 |
|
| 28,812 |
|
|
| 34,661 |
| ||||||
Cash, cash equivalents and restricted cash, beginning of period | $ | 34,661 | $ | 33,632 |
| $ | 34,368 |
|
| $ | 34,661 |
| ||||
|
|
|
|
|
|
|
| |||||||||
Cash and cash equivalents, end of period | $ | 437,260 | $ | - |
| $ | 5,776 |
|
| $ | 437,260 |
| ||||
Restricted cash-furniture, fixtures and other escrows, end of period | 33,335 | 32,269 |
|
| 30,149 |
|
|
| 33,335 |
| ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 470,595 | $ | 32,269 |
| $ | 35,925 |
|
| $ | 470,595 |
|
See notes to consolidated financial statements.
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, (thethe “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 (“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 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 makingdecision-making process of these entities, and therefore does not consolidate the entities. As of March 31, 2020,2021, the Company owned 231233 hotels with an aggregate of 29,53529,855 rooms located in 34 states.35 states, including 1 hotel with 102 rooms classified as held for sale, which was sold to an unrelated party in April 2021. The Company’s common shares are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “APLE.”
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include all of the information required by U.S. generally accepted accounting principles (“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 Annual Report on Form 10-K for the year ended December 31, 20192020 (the “2019“2020 Form 10-K”). Operating results for the three months ended March 31, 20202021 are not necessarily indicative of the results that may be expected for the twelve month period ending December 31, 2020.2021.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Novel Coronavirus COVID-19 Pandemic
As a result of the current novel coronavirus COVID-19 pandemic (“COVID-19”) and the impact it has had on travel and the broader economy throughout the U.S., since March 2020, the Company’s hotels have experienced significant declines in occupancy, which has had and is expected to continue to have a significant negative effect on the Company’s revenue and operating results. There remains significant uncertainty as to when operations at the hotels will return to normalized levels. As of May 15, 2020, each of the Company’s hotels were open and receiving reservations. The Company has intentionally consolidated operations for 38 hotels in market clusters to maximize operational efficiencies.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original maturities of three months or less. The fair market value of cash and cash equivalents approximates their carrying value. The Company’s cash and cash equivalents are distributed among several major banks, but the balances may at times exceed federal depository insurance limits.
Investment in Real Estate
The Company monitors its properties on an ongoing basis by analytically reviewing financial performance and considers each property individually for purposes of reviewing for indicators of impairment. Due to the impact of COVID-19 on the Company’s operating results, the Company considered this event as a potential indicator of impairment and, as a result, the Company performed a recoverability analysis for each of its properties consistent with its annual process. The analysis compared each property’s net book value to its estimated operating income, based on assumptions and estimates about the property’s future revenues, expenses, capital expenditures and recovery from disruption resulting from COVID-19. If events or circumstances change, such as the Company’s intended hold period for a property or if the operating performance of a property remains at current levels or declines substantially for an extended period of time, the Company’s carrying value for a particular property may not be recoverable, and an impairment loss will be recorded. Impairment losses are measured as the difference between the asset’s fair value and its carrying value. The Company’s recoverability analyses did not identify any impairment losses for the three months ended March 31, 2020 and 2019.
Net IncomeLoss Per Common Share
Basic net incomeloss per common share is computed based upon the weighted average number of shares outstanding during the period. Diluted net incomeloss 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 incomeloss per common share were the same for each of the periods presented.
Reclassifications
Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period presentation with no effect on previously reported net income or shareholders’ equity.
Accounting Standards Recently Adopted
Reference Rate Reform
In August 2018,March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds fair value disclosure requirements, including a new requirement to disclose the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements. Certain disclosures are required to be applied retrospectively and others applied prospectively. The Company adopted this standard as of January 1, 2020, and the adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance through December 31, 2022 to 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 No.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
7
effectiveness in hedging relationships that have been modified to replace a reference rate. The guidance in ASU No.Nos. 2020-04 and 2021-01 became effective upon issuance and the provisions of the ASU didASUs have not havehad a material impact on the Company’s consolidated financial statements and related disclosures as of March 31, 2020.2021.The provisions of these updates will generally affect the Company by allowing, among other things, the following:
• | Allowing modifications of the Company’s unsecured credit facilities to replace the London Interbank Offered Rate (LIBOR) with a substitute index to be accounted for as a non-substantial modification and not be considered a debt extinguishment. |
• | Allowing changes to the floating interest rate index used in the Company’s interest rate swaps to not be considered a change to the critical terms of the hedge and therefore not requiring a dedesignation of the hedging relationship. |
The Company has not entered into any contract modifications yet as it directly relates to reference rate reform but anticipates having to undertake such modifications in the future as a majority of the Company’s unsecured credit facilities and interest rate swaps are indexed to LIBOR.
2. Investment in Real Estate
The Company’s investment in real estate consisted of the following (in thousands):
March 31, | December 31, | |||||||
2020 | 2019 | |||||||
Land | $ | 721,934 | $ | 724,054 | ||||
Building and Improvements | 4,450,646 | 4,458,383 | ||||||
Furniture, Fixtures and Equipment | 489,465 | 486,386 | ||||||
Finance Ground Lease Assets | 197,617 | 197,617 | ||||||
Franchise Fees | 13,751 | 13,727 | ||||||
5,873,413 | 5,880,167 | |||||||
Less Accumulated Depreciation and Amortization | (1,096,718 | ) | (1,054,429 | ) | ||||
Investment in Real Estate, net | $ | 4,776,695 | $ | 4,825,738 |
|
| March 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Land |
| $ | 725,057 |
|
| $ | 725,512 |
|
Building and improvements |
|
| 4,546,062 |
|
|
| 4,525,850 |
|
Furniture, fixtures and equipment |
|
| 499,612 |
|
|
| 499,865 |
|
Finance ground lease assets |
|
| 203,617 |
|
|
| 203,617 |
|
Franchise fees |
|
| 13,689 |
|
|
| 13,750 |
|
|
|
| 5,988,037 |
|
|
| 5,968,594 |
|
Less accumulated depreciation and amortization |
|
| (1,275,557 | ) |
|
| (1,235,698 | ) |
Investment in real estate, net |
| $ | 4,712,480 |
|
| $ | 4,732,896 |
|
As of March 31, 2020,2021, the Company owned 231233 hotels with an aggregate of 29,53529,855 rooms located in 34 states.
35 states, including 1 hotel with 102 rooms classified as held for sale, which was sold to an unrelated party in April 2021.
The Company leases all of its hotels to its wholly-owned taxable REIT subsidiary (or a subsidiary thereof) under master hotel lease agreements.
Hotel Acquisitions
There were 0 acquisitionsThe Company acquired 1 hotel during the three months ended March 31, 2020. 2021. The hotel was a newly developed 176-room Hilton Garden Inn in Madison, Wisconsin managed by Raymond and purchased for $49.6 million on February 18, 2021.
During the year ended December 31, 2019,2020, the Company acquired 34 hotels, including 2 hotelsNaN of which were acquired during the three months ended March 31, 2019.2020. 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 | ||||||||||
St. Paul | MN | Hampton | Vista Host | 3/4/2019 | 160 | $ | 31,680 | |||||||||
Orlando | FL | Home2 Suites | LBA | 3/19/2019 | 128 | 20,736 | ||||||||||
Richmond | VA | Independent | Crestline | 10/9/2019 | 55 | 6,875 | ||||||||||
343 | $ | 59,291 |
City |
| State |
| Brand |
| Manager |
| Date Acquired |
| Rooms |
|
| Gross Purchase Price |
| ||
Cape Canaveral |
| FL |
| Hampton |
| LBA |
| 4/30/2020 |
|
| 116 |
|
| $ | 24,102 |
|
Cape Canaveral |
| FL |
| Home2 Suites |
| LBA |
| 4/30/2020 |
|
| 108 |
|
|
| 22,602 |
|
Tempe |
| AZ |
| Hyatt House |
| Crestline |
| 8/13/2020 |
|
| 105 |
|
|
| 26,309 |
|
Tempe |
| AZ |
| Hyatt Place |
| Crestline |
| 8/13/2020 |
|
| 154 |
|
|
| 38,279 |
|
|
|
|
|
|
|
|
|
|
|
| 483 |
|
| $ | 111,292 |
|
8
The Company used borrowings under its revolving credit facility to purchase each of these hotels. The acquisitions of these hotel properties were accounted for as an acquisition of a group of assets, with costs incurred to effect the acquisition, which were not significant, capitalized as part of the cost of the assets acquired. For the two hotels acquired during the three months ended March 31, 2019, the amount of revenue and operating income included in the Company’s consolidated statement of operations from the date of acquisition through March 31, 2019 was approximately $0.7 million and $0.1 million, respectively.Index
Hotel Purchase Contract Commitments
As of March 31, 2020, the Company had outstanding contracts, all of which were entered into prior to 2020, for the potential purchase of 6 hotels for a total expected purchase price of approximately $208.8 million. NaN of the hotels, the newly developed Hampton Inn & Suites and Home2 Suites in Cape Canaveral, Florida, were acquired in April 2020. Also, subsequent to March 31, 2020, the Company exercised its right to terminate the contract to purchase the Courtyard hotel in Denver, Colorado and the refundable deposit of approximately $0.6 million was repaid to the Company. The 3 remaining hotels are under development and are planned to be completed and opened for business over the next five to 15 months from March 31, 2020, at which time closings on these hotels are expected to occur. Although the Company is working towards acquiring these hotels, in each case there are a number of conditions to closing that have not yet been satisfied and there can be no assurance that closings on these hotels will occur under the outstanding purchase contracts. If the sellers meet all of the conditions to closing, the Company is obligated to specifically perform under these contracts. As the properties are under development, at this time, the sellers have not met all of the conditions to closing. 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 March 31, 2020 that have not been terminated. All dollar amounts are in thousands.
Location | Brands | Date of Purchase Contract | Rooms | Refundable Deposits | Gross Purchase Price | |||||||||||
Cape Canaveral, FL (1) | Hampton and Home2 Suites | 4/11/2018 | 224 | $ | 3 | $ | 46,704 | |||||||||
Tempe, AZ (2)(3) | Hyatt House and Hyatt Place | 6/13/2018 | 254 | 720 | 63,341 | |||||||||||
Madison, WI (2) | Hilton Garden Inn | 7/9/2019 | 176 | 283 | 49,632 | |||||||||||
654 | $ | 1,006 | $ | 159,677 |
|
|
|
The Company utilized $25.0 million of its available cash and entered into a one-year note payable with the developer secured by the hotels for $21.7 million to fund the purchase price of the Cape Canaveral, Florida hotels. The note payable bearsbore interest, which iswas 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 $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 plans to utilizeused borrowings under its available cash at closingrevolving credit facility to purchase the remaining hotels under contract if closings occur.
Tempe, Arizona and Madison, Wisconsin hotels. The acquisitions of these hotel properties were accounted for as acquisitions of asset groups, whereby costs incurred to effect the acquisitions (which were not significant) were capitalized as part of the cost of the assets acquired. For the 1 hotel acquired during the three months ended March 31, 2021, the amount of revenue and operating loss included in the Company’s consolidated statement of operations from the date of acquisition through March 31, 2021 was approximately $0.1 million and $(0.5) million, respectively.
3. Assets Held for Sale and Dispositions
Assets Held for Sale
In February 2021, the Company entered into a purchase and sale agreement with an unrelated party for the sale of its Overland Park, Kansas SpringHill Suites for a gross sales price of $5.3 million. Since the buyer under the contract had completed its due diligence and had made a non-refundable deposit, as of March 31, 2021, the Company classified the hotel as assets held for sale in its consolidated balance sheet at its estimated fair value less cost to sell which, as described below, was based on the contracted sales price, resulting in an impairment loss during the first quarter of 2021. In April 2021, the Company completed the sale of the hotel. The net proceeds from the sale were used to pay down borrowings on the Company’s revolving credit facility.
Dispositions
During the three months ended March 31, 2020,2021, the Company sold 2 hotels in 2 transactions with unrelated parties for a total combined gross sales price of approximately $45.0$18.3 million, resulting in a combined gain on sale of approximately $8.8$4.5 million, net of transaction costs, which is included in the Company’s consolidated statement of operations for the three months ended March 31, 2020.2021. The two hotels had a total carrying value of approximately $35.7$13.0 million at the time of sale. The following table lists the two hotels sold:
City | State | Brand | Date Sold | Rooms | ||||||
|
|
|
| 118 | ||||||
|
|
|
| 140 | ||||||
Total | 258 |
During the year ended December 31, 2019,2020, the Company sold 11three hotels in 3 transactions with unrelated parties for a total combined gross sales price of approximately $121.7$55.3 million, resulting in a combined gain on sale of approximately $5.6$10.9 million, which is included in the Company’s consolidated statement of operations for the year ended December 31, 2019.2020. The 113 hotels had a total carrying value of approximately $115.1$43.8 million at the time of the sale. The following table lists the 11three hotels sold:
City | State | Brand | Date Sold | Rooms | ||||||||||||
| FL |
|
| |||||||||||||
|
|
|
| |||||||||||||
|
| SpringHill Suites |
| 105 | ||||||||||||
|
| SpringHill Suites | 2/27/2020 | 230 | ||||||||||||
Tulare | CA | Hampton |
| 86 | ||||||||||||
|
|
|
| |||||||||||||
|
|
|
| |||||||||||||
|
|
|
| |||||||||||||
|
|
|
| |||||||||||||
|
|
|
| |||||||||||||
|
|
|
| |||||||||||||
|
|
|
| |||||||||||||
Total | 421 |
Excluding gains on sale of real estate, the Company’s consolidated statements of operations include operating incomeloss of approximately $0.1$(1.8) million and $2.6$(0.1) million for the three months ended March 31, 20202021 and 2019,2020, respectively, relating to the results of operations of the 136 hotels noted above (the two1 hotel classified as held for sale at March 31, 2021, the 2 hotels sold in the first three months of 20202021 and the 113 hotels sold in 2019)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 months ended March 31, 20202021 and 2019.2020. The net proceeds from the sales were used to pay down borrowings on the Company’s revolving credit facility.
Hotel Sale Contracts and Loss on Impairment of Depreciable Real Estate Assets
During the first quarter of 2021, the Company identified the Overland Park, Kansas SpringHill Suites for potential sale and, in February 2021, entered into a purchase and sale agreement with an unrelated party for the sale of the hotel for a gross sales price of $5.3 million. As a result, the Company recognized an impairment loss of approximately $1.3 million in the first quarter of 2021, to adjust the carrying value of the hotel to its estimated fair value less cost to sell, which was based on the contracted sales price, a Level 1 input under the fair value hierarchy. The Company completed the sale of the hotel in April 2021.
9
Additionally, during the first quarter of 2021, the Company recognized impairment losses totaling approximately $9.4 million to adjust the carrying values of 4 hotel properties identified for potential sale to their estimated fair values. The fair values of these properties were based on broker opinions of value using multiple methods to determine their value, including but not limited to replacement value, discounted cash flows and the income approach based on historical and forecasted operating results of the specific properties. These valuations are Level 3 inputs under the fair value hierarchy.
4. Debt
Summary
As of March 31, 2020,2021 and December 31, 2019,2020, the Company’s debt consisted of the following (in thousands):
March 31, | December 31, |
| March 31, 2021 |
|
| December 31, 2020 |
| |||||||||
Revolving credit facility | $ | 425,000 | $ | 50,900 |
| $ | 149,900 |
|
| $ | 105,800 |
| ||||
Term loans and senior notes, net | 864,084 | 813,934 |
|
| 863,737 |
|
|
| 864,225 |
| ||||||
Mortgage debt, net | 500,197 | 455,573 |
|
| 509,395 |
|
|
| 512,546 |
| ||||||
Debt, net | $ | 1,789,281 | $ | 1,320,407 |
| $ | 1,523,032 |
|
| $ | 1,482,571 |
|
The aggregate amounts of principal payable under the Company’s total debt obligations as of March 31, 20202021 (including the revolving credit facility, term loans, senior notes and mortgage debt), for each of the next five fiscal years subsequent to March 31, 2020 and thereafter are as follows (in thousands):
2020 (April - December) | $ | 10,431 | ||||||
2021 | 48,185 | |||||||
2021 (April - December) |
| $ | 67,706 |
| ||||
2022 | 534,872 |
|
| 259,731 |
| |||
2023 | 296,256 |
|
| 296,213 |
| |||
2024 | 338,643 |
|
| 338,597 |
| |||
2025 |
|
| 245,140 |
| ||||
Thereafter | 566,626 |
|
| 322,265 |
| |||
1,795,013 |
|
| 1,529,652 |
| ||||
Unamortized fair value adjustment of assumed debt | 2,300 |
|
| 1,399 |
| |||
Unamortized debt issuance costs | (8,032 | ) |
|
| (8,019 | ) | ||
Total | $ | 1,789,281 |
| $ | 1,523,032 |
|
The Company uses interest rate swaps to manage its interest rate risks on a portion of its variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the London Inter-Bank Offered Rate for a one-month LIBOR.term (“one-month LIBOR”). The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. See Note 5 for more information on the interest rate swap agreements. The Company’s total fixed-rate and variable-rate debt, after giving effect to its interest rate swaps in effect at March 31, 20202021 and December 31, 2019,2020, is set forth below. All dollar amounts are in thousands.
March 31, | Percentage | December 31, | Percentage | |||||||||||||
Fixed-rate debt (1) | $ | 1,417,513 | 79 | % | $ | 1,297,467 | 98 | % | ||||||||
Variable-rate debt | 377,500 | 21 | % | 28,400 | 2 | % | ||||||||||
Total | $ | 1,795,013 | $ | 1,325,867 | ||||||||||||
Weighted-average interest rate of debt (2) | 3.35 | % | 3.59 | % |
|
| March 31, 2021 |
|
| Percentage |
|
| December 31, 2020 |
|
| Percentage |
| ||||
Fixed-rate debt (1) |
| $ | 1,234,201 |
|
|
| 81 | % |
| $ | 1,287,219 |
|
|
| 86 | % |
Variable-rate debt |
|
| 295,451 |
|
|
| 19 | % |
|
| 201,351 |
|
|
| 14 | % |
Total |
| $ | 1,529,652 |
|
|
|
|
|
| $ | 1,488,570 |
|
|
|
|
|
Weighted-average interest rate of debt |
|
| 3.88 | % |
|
|
|
|
|
| 3.86 | % |
|
|
|
|
(1) |
10
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. | |
|
|
Credit Facilities
Credit Facilities Amendments
In early 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to the Company’s operating results, the Company anticipated that it could potentially not be in compliance with certain covenants under each of its unsecured credit facilities, as previously amended, in future periods if the existing Covenant Waiver Period (as defined below) under such facilities was not extended. As a result, on March 1, 2021, the Company entered into amendments to each of the unsecured credit facilities (the “March 2021 amendments”).
The Company previously entered into amendments in June 2020 that suspended the testing of the Company’s existing financial maintenance covenants under the unsecured credit facilities until the date the compliance certificate is required to be delivered for the fiscal quarter ending June 30, 2021 (unless the Company elects an earlier date) (the “Covenant Waiver Period”), and imposed certain restrictions that apply during such testing suspension period. The March 2021 amendments extend the testing for all but two of the Company’s existing financial maintenance covenants under the unsecured credit facilities until the date the compliance certificate is required to be delivered for the fiscal quarter ending June 30, 2022 (unless the Company elects an earlier date) (the “Extended Covenant Waiver Period”). The testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio is suspended until the compliance certificate is required to be delivered for the fiscal quarter ending March 31, 2022.
The March 2021 amendments also provide for, among other restrictions, the following during the remainder of the Extended Covenant Waiver Period:
● | Mandatory prepayments of amounts outstanding under the Company’s unsecured credit facilities of net cash proceeds from certain debt and equity issuances and asset dispositions, subject to |
● | A minimum liquidity covenant of $125 million; |
● | A requirement to |
● | Restrictions on the Company’s and its subsidiaries’ ability to incur additional indebtedness (except for maturities beyond 2026) or prepay certain existing indebtedness, except that the Company is permitted to prepay (prior to maturity) up to $35 million of secured debt maturities in 2021; |
● | Restrictions on the Company’s ability to make cash distributions (except the payment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status) and share repurchases; |
● | Maximum discretionary capital expenditures of $50 million; |
● | Limitations on additional investments; and |
● | An increase in the applicable interest |
The amendments also modify the calculation of the existing financial covenants for the four quarters subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts to the extent the most recently ended fiscal quarter is not at least four fiscal quarters from the end of the Extended Covenant Waiver Period, and provide for a LIBOR floor under the credit agreements of 25 basis points for Eurodollar Rate Loans and 1.25% for Base Rate Loans on the revolving credit facility, and any term loans under the credit agreements that are not hedged. The March 2021 amendments also modify certain of the existing financial maintenance covenants to less restrictive levels following the Extended Covenant Waiver Period as follows (capitalized terms are defined in the credit agreements):
● | 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. |
Credit Facilities
Except as otherwise set forth in the amendments, the terms of the credit agreements remain in effect.As of March 31, 2021, the Company was in compliance with the applicable covenants of the credit agreements as amended.
$850 Million Credit Facility
The Company utilizes an unsecured “$850 million credit facility” comprised of (i) a $425 million revolving credit facility with an initial maturity date of 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 July 27, 2023, and a $225 million term loan with a maturity date of January 31, 2024 (the “$425 million term 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. The Company may make voluntary prepayments in whole or in part, at any time. Interest payments on the $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 plus a margin ranging from 1.35% to 2.25%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. As of March 31, 2021, the Company had availability of $275 million under the revolving credit facility. The Company is also required to pay quarterly an unused facility fee at an annual rate of 0.20% or 0.25% on the unused portion of the $425 million revolving credit facility, based on the amount of borrowings outstanding during the quarter. In response to the disruption to the operations of the Company’s hotels and to the financial markets and broader economy caused by COVID-19, the Company borrowed its entire availability under its revolving credit facility in March 2020 and, at March 31, 2020, had an outstanding balance of $425.0 million and 0 remaining availability under its credit facilities.
$225 Million Term Loan Facility
The Company has an unsecured $225 million term loan facility that is comprised of (i) a $50 million term loan with a maturity date of August 2, 2023, which was funded on August 2, 2018, and (ii) a $175 million term loan with a maturity date of August 2, 2025, of which $100 million was funded on August 2, 2018 and the remaining $75 million was funded on January 29, 2019.2025. 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, at any time, subject to certain conditions. Interest payments on the $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 1.35% to 2.50%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement.
2017 $85 Million Term Loan Facility
On July 25, 2017, the Company entered into an unsecured $85 million term loan facility with a maturity date of July 25, 2024, consisting of 1 term loan that was funded at closing (the “2017 $85 million term loan facility”). The credit agreement, as amended and restated in August 2018, contains requirements and covenants similar to the Company’s $850 million credit facility. The Company may make voluntary prepayments in whole or in part, at any time, subject to certain conditions. Interest payments on the 2017 $85 million term loan facility are due monthly. In July 2019, the Company entered into an amendment of the $85 million term loan to reducemonthly, 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% - 2.60%1.30% to 1.30% - 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.
$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 facility and the 2019 $85 million term loan facility, the “credit“unsecured credit facilities”). Net proceeds from the $50 million senior notes facility arewere available to provide
12
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 any time, subject to 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, as calculated under the terms of Consolidated Total Indebtedness to Consolidated EBITDA as defined in the agreement.
facility.
As of March 31, 2020,2021 and December 31, 2019,2020, the details of the Company’s unsecured credit facilities were as set forth below. All dollar amounts are in thousands.
Outstanding Balance | ||||||||||||
Interest Rate | Maturity Date | March 31, | December 31, | |||||||||
Revolving credit facility (1) | LIBOR + 1.40% - 2.25% | 7/27/2022 | $ | 425,000 | $ | 50,900 | ||||||
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 | - | ||||||||
Term loans and senior notes at stated value | 870,000 | 820,000 | ||||||||||
Unamortized debt issuance costs | (5,916 | ) | (6,066 | ) | ||||||||
Term loans and senior notes, net | 864,084 | 813,934 | ||||||||||
Credit facilities, net (1) | $ | 1,289,084 | $ | 864,834 | ||||||||
Weighted-average interest rate (2) | 2.97 | % | 3.14 | % |
|
|
|
|
|
| Outstanding Balance |
| |||||
|
| Interest Rate (1) |
| Maturity Date |
| March 31, 2021 |
|
| December 31, 2020 |
| ||
Revolving credit facility (2) |
| LIBOR + 1.40% - 2.25% |
| 7/27/2022 |
| $ | 149,900 |
|
| $ | 105,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans and senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
$200 million term loan |
| LIBOR + 1.35% - 2.20% |
| 7/27/2023 |
|
| 200,000 |
|
|
| 200,000 |
|
$225 million term loan |
| LIBOR + 1.35% - 2.20% |
| 1/31/2024 |
|
| 225,000 |
|
|
| 225,000 |
|
$50 million term loan |
| LIBOR + 1.35% - 2.20% |
| 8/2/2023 |
|
| 50,000 |
|
|
| 50,000 |
|
$175 million term loan |
| LIBOR + 1.65% - 2.50% |
| 8/2/2025 |
|
| 175,000 |
|
|
| 175,000 |
|
2017 $85 million term loan |
| LIBOR + 1.30% - 2.10% |
| 7/25/2024 |
|
| 85,000 |
|
|
| 85,000 |
|
2019 $85 million term loan |
| LIBOR + 1.70% - 2.55% |
| 12/31/2029 |
|
| 85,000 |
|
|
| 85,000 |
|
$50 million senior notes |
| 3.60% - 4.35% |
| 3/31/2030 |
|
| 50,000 |
|
|
| 50,000 |
|
Term loans and senior notes at stated value |
|
|
|
|
|
| 870,000 |
|
|
| 870,000 |
|
Unamortized debt issuance costs |
|
|
|
|
|
| (6,263 | ) |
|
| (5,775 | ) |
Term loans and senior notes, net |
|
|
|
|
|
| 863,737 |
|
|
| 864,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facilities, net (2) |
|
|
|
|
| $ | 1,013,637 |
|
| $ | 970,025 |
|
Weighted-average interest rate (3) |
|
|
|
|
|
| 3.69 | % |
|
| 3.64 | % |
(1) | Interest rates on all of the unsecured credit facilities are increased to 0.15% above the highest rate shown for each loan during the Extended Covenant Waiver Period. |
(2) | Excludes unamortized debt issuance costs related to the revolving credit facility totaling approximately |
| Interest rate represents the weighted-average effective annual interest rate at the balance sheet date which includes the effect of interest rate swaps in effect on |
The credit agreements governing the credit facilities contain mandatory prepayment requirements, customary affirmative and negative covenants and events of default. The credit agreements require that the Company comply with various covenants, which include, among others, a minimum tangible net worth, maximum debt limits, minimum interest and fixed charge coverage ratios and restrictions on certain investments. The Company was in compliance with the applicable covenants at March 31, 2020. As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company anticipates that it may not be in compliance with certain of these covenants in future periods. In April 2020, the Company notified the lenders under its credit facilities of the anticipated non-compliance with certain covenants and anticipates entering into amendments to each of the credit facilities that will provide for waivers of each of the covenants for four quarters beginning with the quarter ending June 30, 2020. The terms of the amendments are expected to include minimum liquidity requirements and restrictions on the amount of the Company’s distributions, capital expenditures, share repurchases and acquisitions among other items during the covenant relief period. Additionally, the Company anticipates the amendments to require that the interest rate under its credit facilities increase, during the covenant relief period, to the highest interest rate margin under each of the credit agreements which would range from 75-80 basis points of an increase above current margins depending on the agreement. Although the Company anticipates completing these amendments, there are many conditions to closing, including but not limited to finalizing the terms of the amendments and completing the amendments themselves, and there can be no assurances that the Company will be able to complete the amendments with the noted terms or at all. If the amendments are not entered into, as currently anticipated, and the Company does not meet the covenant requirements in future periods, the Company will be in default under each credit facility, which may result in a potential acceleration of amounts due under each credit facility, which would have a material adverse effect on the Company if it is unable to obtain alternative sources of capital to repay such amounts.
Mortgage Debt
As of March 31, 2020,2021, the Company had approximately $500.0$509.8 million in outstanding mortgage debt secured by 3133 properties with maturity dates ranging from JulyMay 2021 to January 2038,May 2038. Mortgages secured by 31 of the properties carry fixed stated interest rates ranging from 3.40% to 6.25% and effective interest rates ranging from 3.40% to 4.97%. Additionally, 1 loan secured by the 2 Cape Canaveral properties acquired in April 2020 carried a variable interest rate of one-month LIBOR plus 3.00% through April 12, 2021 when the loan was repaid in full. The loans generally provide for monthly payments of principal and interest on an amortized basis and defeasance or prepayment penalties if prepaid. As a result of the effects of the COVID-19 pandemic on certain hotels, the associated lenders granted temporary deferrals of principal and interest payments during 2020, however all payments resumed as of December 31, 2020. The following table sets forth the hotel properties securing each loan, the interest rate, loan assumption or origination date, maturity date, the principal amount assumed or originated, and the outstanding balance prior to any fair value adjustments or debt issuance costs as of March 31, 20202021 and December 31, 20192020 for each of the Company’s mortgage debt obligations. All dollar amounts are in thousands.
13
Location | Brand | Interest Rate (1) | Loan Assumption or Origination Date | Maturity Date | Principal Assumed or Originated | Outstanding balance as of March 31, | Outstanding balance as of December 31, | |||||||||||||||||
San Juan Capistrano, CA | Residence Inn | 4.15 | % | 9/1/2016 | (2) | $ | 16,210 | $ | - | $ | 15,073 | |||||||||||||
Colorado Springs, CO | Hampton | 6.25 | % | 9/1/2016 | 7/6/2021 | 7,923 | 7,433 | 7,471 | ||||||||||||||||
Franklin, TN | Courtyard | 6.25 | % | 9/1/2016 | 8/6/2021 | 14,679 | 13,776 | 13,847 | ||||||||||||||||
Franklin, TN | Residence Inn | 6.25 | % | 9/1/2016 | 8/6/2021 | 14,679 | 13,776 | 13,847 | ||||||||||||||||
Grapevine, TX | Hilton Garden Inn | 4.89 | % | 8/29/2012 | 9/1/2022 | 11,810 | 9,691 | 9,775 | ||||||||||||||||
Collegeville/Philadelphia, PA | Courtyard | 4.89 | % | 8/30/2012 | 9/1/2022 | 12,650 | 10,381 | 10,471 | ||||||||||||||||
Hattiesburg, MS | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 5,732 | 4,856 | 4,897 | ||||||||||||||||
Rancho Bernardo/San Diego, CA | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 15,060 | 12,756 | 12,866 | ||||||||||||||||
Kirkland, WA | Courtyard | 5.00 | % | 3/1/2014 | 9/1/2022 | 12,145 | 10,287 | 10,376 | ||||||||||||||||
Seattle, WA | Residence Inn | 4.96 | % | 3/1/2014 | 9/1/2022 | 28,269 | 23,923 | 24,130 | ||||||||||||||||
Anchorage, AK | Embassy Suites | 4.97 | % | 9/13/2012 | 10/1/2022 | 23,230 | 19,160 | 19,324 | ||||||||||||||||
Somerset, NJ | Courtyard | 4.73 | % | 3/1/2014 | 10/6/2022 | 8,750 | 7,376 | 7,441 | ||||||||||||||||
Tukwila, WA | Homewood Suites | 4.73 | % | 3/1/2014 | 10/6/2022 | 9,431 | 7,950 | 8,020 | ||||||||||||||||
Prattville, AL | Courtyard | 4.12 | % | 3/1/2014 | 2/6/2023 | 6,596 | 5,507 | 5,558 | ||||||||||||||||
Huntsville, AL | Homewood Suites | 4.12 | % | 3/1/2014 | 2/6/2023 | 8,306 | 6,935 | 6,999 | ||||||||||||||||
San Diego, CA | Residence Inn | 3.97 | % | 3/1/2014 | 3/6/2023 | 18,600 | 15,496 | 15,640 | ||||||||||||||||
Miami, FL | Homewood Suites | 4.02 | % | 3/1/2014 | 4/1/2023 | 16,677 | 13,924 | 14,051 | ||||||||||||||||
New Orleans, LA | Homewood Suites | 4.36 | % | 7/17/2014 | 8/11/2024 | 27,000 | 23,328 | 23,513 | ||||||||||||||||
Westford, MA | Residence Inn | 4.28 | % | 3/18/2015 | 4/11/2025 | 10,000 | 8,809 | 8,876 | ||||||||||||||||
Denver, CO | Hilton Garden Inn | 4.46 | % | 9/1/2016 | 6/11/2025 | 34,118 | 31,082 | 31,311 | ||||||||||||||||
Oceanside, CA | Courtyard | 4.28 | % | 9/1/2016 | 10/1/2025 | 13,655 | 12,743 | 12,812 | ||||||||||||||||
Omaha, NE | Hilton Garden Inn | 4.28 | % | 9/1/2016 | 10/1/2025 | 22,682 | 21,167 | 21,280 | ||||||||||||||||
Boise, ID | Hampton | 4.37 | % | 5/26/2016 | 6/11/2026 | 24,000 | 22,478 | 22,588 | ||||||||||||||||
Burbank, CA | Courtyard | 3.55 | % | 11/3/2016 | 12/1/2026 | 25,564 | 23,375 | 23,552 | ||||||||||||||||
San Diego, CA | Courtyard | 3.55 | % | 11/3/2016 | 12/1/2026 | 25,473 | 23,292 | 23,468 | ||||||||||||||||
San Diego, CA | Hampton | 3.55 | % | 11/3/2016 | 12/1/2026 | 18,963 | 17,339 | 17,471 | ||||||||||||||||
Burbank, CA | SpringHill Suites | 3.94 | % | 3/9/2018 | 4/1/2028 | 28,470 | 27,138 | 27,317 | ||||||||||||||||
Santa Ana, CA | Courtyard | 3.94 | % | 3/9/2018 | 4/1/2028 | 15,530 | 14,803 | 14,901 | ||||||||||||||||
Richmond, VA | Courtyard | 3.40 | % | 2/12/2020 | 3/11/2030 | 14,950 | 14,950 | - | ||||||||||||||||
Richmond, VA | Residence Inn | 3.40 | % | 2/12/2020 | 3/11/2030 | 14,950 | 14,950 | - | ||||||||||||||||
Portland, ME | Residence Inn | 3.43 | % | 3/2/2020 | 4/1/2030 | 33,500 | 33,500 | - | ||||||||||||||||
San Jose, CA | Homewood Suites | 4.22 | % | 12/22/2017 | 1/1/2038 | 30,000 | 27,832 | 28,092 | ||||||||||||||||
$ | 569,602 | 500,013 | 454,967 | |||||||||||||||||||||
Unamortized fair value adjustment of assumed debt | 2,300 | 2,526 | ||||||||||||||||||||||
Unamortized debt issuance costs | (2,116 | ) | (1,920 | ) | ||||||||||||||||||||
Total | $ | 500,197 | $ | 455,573 |
Location |
| Brand |
| Interest Rate (1) |
|
| Loan Assumption or Origination Date |
| Maturity Date |
| Principal Assumed or Originated |
|
| Outstanding balance as of March 31, 2021 |
|
| Outstanding balance as of December 31, 2020 |
| ||||
Cape Canaveral, FL |
| Hampton |
|
| (2 | ) |
| 4/30/2020 |
| (3) |
| $ | 10,852 |
|
| $ | 10,275 |
|
| $ | 10,275 |
|
Cape Canaveral, FL |
| Home2 Suites |
|
| (2 | ) |
| 4/30/2020 |
| (3) |
|
| 10,852 |
|
|
| 10,275 |
|
|
| 10,275 |
|
Colorado Springs, CO |
| Hampton |
|
| 6.25 | % |
| 9/1/2016 |
| 7/6/2021 |
|
| 7,923 |
|
|
| 7,275 |
|
|
| 7,317 |
|
Franklin, TN |
| Courtyard |
|
| 6.25 | % |
| 9/1/2016 |
| 8/6/2021 |
|
| 14,679 |
|
|
| 13,486 |
|
|
| 13,563 |
|
Franklin, TN |
| Residence Inn |
|
| 6.25 | % |
| 9/1/2016 |
| 8/6/2021 |
|
| 14,679 |
|
|
| 13,486 |
|
|
| 13,563 |
|
Grapevine, TX |
| Hilton Garden Inn |
|
| 4.89 | % |
| 8/29/2012 |
| 9/1/2022 |
|
| 11,810 |
|
|
| 9,344 |
|
|
| 9,434 |
|
Collegeville/Philadelphia, PA |
| Courtyard |
|
| 4.89 | % |
| 8/30/2012 |
| 9/1/2022 |
|
| 12,650 |
|
|
| 10,009 |
|
|
| 10,105 |
|
Hattiesburg, MS |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| 9/1/2022 |
|
| 5,732 |
|
|
| 4,684 |
|
|
| 4,729 |
|
Kirkland, WA |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| 9/1/2022 |
|
| 12,145 |
|
|
| 9,924 |
|
|
| 10,018 |
|
Rancho Bernardo/San Diego, CA |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| 9/1/2022 |
|
| 15,060 |
|
|
| 12,305 |
|
|
| 12,422 |
|
Seattle, WA |
| Residence Inn |
|
| 4.96 | % |
| 3/1/2014 |
| 9/1/2022 |
|
| 28,269 |
|
|
| 23,074 |
|
|
| 23,294 |
|
Anchorage, AK |
| Embassy Suites |
|
| 4.97 | % |
| 9/13/2012 |
| 10/1/2022 |
|
| 23,230 |
|
|
| 18,485 |
|
|
| 18,660 |
|
Somerset, NJ |
| Courtyard |
|
| 4.73 | % |
| 3/1/2014 |
| 10/6/2022 |
|
| 8,750 |
|
|
| 7,110 |
|
|
| 7,179 |
|
Tukwila, WA |
| Homewood Suites |
|
| 4.73 | % |
| 3/1/2014 |
| 10/6/2022 |
|
| 9,431 |
|
|
| 7,663 |
|
|
| 7,737 |
|
Huntsville, AL |
| Homewood Suites |
|
| 4.12 | % |
| 3/1/2014 |
| 2/6/2023 |
|
| 8,306 |
|
|
| 6,675 |
|
|
| 6,742 |
|
Prattville, AL |
| Courtyard |
|
| 4.12 | % |
| 3/1/2014 |
| 2/6/2023 |
|
| 6,596 |
|
|
| 5,301 |
|
|
| 5,354 |
|
San Diego, CA |
| Residence Inn |
|
| 3.97 | % |
| 3/1/2014 |
| 3/6/2023 |
|
| 18,600 |
|
|
| 14,910 |
|
|
| 15,061 |
|
Miami, FL |
| Homewood Suites |
|
| 4.02 | % |
| 3/1/2014 |
| 4/1/2023 |
|
| 16,677 |
|
|
| 13,403 |
|
|
| 13,537 |
|
New Orleans, LA |
| Homewood Suites |
|
| 4.36 | % |
| 7/17/2014 |
| 8/11/2024 |
|
| 27,000 |
|
|
| 22,569 |
|
|
| 22,766 |
|
Westford, MA |
| Residence Inn |
|
| 4.28 | % |
| 3/18/2015 |
| 4/11/2025 |
|
| 10,000 |
|
|
| 8,534 |
|
|
| 8,605 |
|
Denver, CO |
| Hilton Garden Inn |
|
| 4.46 | % |
| 9/1/2016 |
| 6/11/2025 |
|
| 34,118 |
|
|
| 30,143 |
|
|
| 30,387 |
|
Oceanside, CA |
| Courtyard |
|
| 4.28 | % |
| 9/1/2016 |
| 10/1/2025 |
|
| 13,655 |
|
|
| 12,534 |
|
|
| 12,605 |
|
Omaha, NE |
| Hilton Garden Inn |
|
| 4.28 | % |
| 9/1/2016 |
| 10/1/2025 |
|
| 22,682 |
|
|
| 20,819 |
|
|
| 20,936 |
|
Boise, ID |
| Hampton |
|
| 4.37 | % |
| 5/26/2016 |
| 6/11/2026 |
|
| 24,000 |
|
|
| 22,028 |
|
|
| 22,146 |
|
Burbank, CA |
| Courtyard |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 25,564 |
|
|
| 23,241 |
|
|
| 23,315 |
|
San Diego, CA |
| Courtyard |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 25,473 |
|
|
| 23,158 |
|
|
| 23,232 |
|
San Diego, CA |
| Hampton |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 18,963 |
|
|
| 17,240 |
|
|
| 17,295 |
|
Burbank, CA |
| SpringHill Suites |
|
| 3.94 | % |
| 3/9/2018 |
| 4/1/2028 |
|
| 28,470 |
|
|
| 27,078 |
|
|
| 27,078 |
|
Santa Ana, CA |
| Courtyard |
|
| 3.94 | % |
| 3/9/2018 |
| 4/1/2028 |
|
| 15,530 |
|
|
| 14,770 |
|
|
| 14,770 |
|
Richmond, VA |
| Courtyard |
|
| 3.40 | % |
| 2/12/2020 |
| 3/11/2030 |
|
| 14,950 |
|
|
| 14,665 |
|
|
| 14,739 |
|
Richmond, VA |
| Residence Inn |
|
| 3.40 | % |
| 2/12/2020 |
| 3/11/2030 |
|
| 14,950 |
|
|
| 14,665 |
|
|
| 14,739 |
|
Portland, ME |
| Residence Inn |
|
| 3.43 | % |
| 3/2/2020 |
| 4/1/2030 |
|
| 33,500 |
|
|
| 33,500 |
|
|
| 33,500 |
|
San Jose, CA |
| Homewood Suites |
|
| 4.22 | % |
| 12/22/2017 |
| 5/1/2038 |
|
| 30,000 |
|
|
| 27,124 |
|
|
| 27,392 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 575,096 |
|
|
| 509,752 |
|
|
| 512,770 |
|
Unamortized fair value adjustment of assumed debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,399 |
|
|
| 1,624 |
|
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,756 | ) |
|
| (1,848 | ) |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 509,395 |
|
| $ | 512,546 |
|
(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) | Interest rate is variable based on one-month LIBOR plus 3.00%. As of March 31, 2021, the interest rate was 3.11%. In July 2020, the principal amount of the note was reduced by approximately $1.1 million representing a credit from the developer for shared construction savings. |
(3) | Loan was repaid in full |
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 March 31, 2020, the carrying value2021, and estimated fair value of the Company’s debt were approximately $1.8 billion and $1.6 billion, respectively. As of December 31, 2019,2020, both the carrying value and estimated fair value of the Company’s debt were approximately $1.3$1.5 billion. Both the
14
carrying value and estimated fair value of the Company’s debt (as discussed above) isare net of unamortized debt issuance costs related to term loans, senior notes and mortgage debt for each specific year.
Derivative Instruments
Currently, the Company uses interest rate swaps to manage its interest rate risks on variable-rate 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 LIBOR. The swaps are designed to effectively fix the interest payments on 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 March 31, 20202021 and December 31, 2019.2020. All dollar amounts are in thousands.
Notional Amount at March 31, 2020 | Fair Value Asset (Liability) | ||||||||||||||||||
Origination Date | Effective Date | Maturity Date | Swap Fixed Interest Rate | March 31, 2020 | December 31, | ||||||||||||||
Interest rate swaps designated as cash flow hedges at March 31, 2020: | |||||||||||||||||||
$ | 212,500 | 5/19/2015 | 5/21/2015 | 5/18/2020 | 1.58 | % | $ | (240 | ) | $ | 78 | ||||||||
50,000 | 4/7/2016 | 9/30/2016 | 3/31/2021 | 1.09 | % | (370 | ) | 317 | |||||||||||
100,000 | 4/7/2016 | 9/30/2016 | 3/31/2023 | 1.33 | % | (3,077 | ) | 707 | |||||||||||
75,000 | 5/31/2017 | 7/31/2017 | 6/30/2024 | 1.96 | % | (5,085 | ) | (1,286 | ) | ||||||||||
10,000 | 8/10/2017 | 8/10/2017 | 6/30/2024 | 2.01 | % | (697 | ) | (185 | ) | ||||||||||
50,000 | 6/1/2018 | 1/31/2019 | 6/30/2025 | 2.89 | % | (6,506 | ) | (3,407 | ) | ||||||||||
50,000 | 7/2/2019 | 7/5/2019 | 7/18/2024 | 1.65 | % | (2,777 | ) | (193 | ) | ||||||||||
50,000 | 8/21/2019 | 8/23/2019 | 8/18/2024 | 1.32 | % | (2,092 | ) | 595 | |||||||||||
50,000 | 8/21/2019 | 8/23/2019 | 8/30/2024 | 1.32 | % | (2,094 | ) | 603 | |||||||||||
85,000 | 12/31/2019 | 12/31/2019 | 12/31/2029 | 1.86 | % | (10,170 | ) | (842 | ) | ||||||||||
25,000 | 12/6/2018 | 1/31/2020 | 6/30/2025 | 2.75 | % | (3,072 | ) | (1,501 | ) | ||||||||||
50,000 | 12/7/2018 | 5/18/2020 | 1/31/2024 | 2.72 | % | (4,481 | ) | (2,139 | ) | ||||||||||
75,000 | 8/21/2019 | 5/18/2020 | 5/18/2025 | 1.27 | % | (3,242 | ) | 1,222 | |||||||||||
75,000 | 8/21/2019 | 5/18/2021 | 5/18/2026 | 1.30 | % | (2,961 | ) | 1,309 | |||||||||||
957,500 | (46,864 | ) | (4,722 | ) | |||||||||||||||
Interest rate swaps not designated as hedges at March 31, 2020: | |||||||||||||||||||
110,000 | 7/2/2015 | 7/2/2015 | 5/18/2020 | 1.62 | % | (130 | ) | 24 | |||||||||||
$ | 1,067,500 | $ | (46,994 | ) | $ | (4,698 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Asset (Liability) |
| |||||
Notional Amount at March 31, 2021 |
|
| Origination Date |
| Effective Date |
| Maturity Date |
| Swap Fixed Interest Rate |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Active interest rate swaps designated as cash flow hedges at March 31, 2021: |
|
|
|
|
|
|
|
|
| |||||||||||
| 100,000 |
|
| 4/7/2016 |
| 9/30/2016 |
| 3/31/2023 |
| 1.33% |
|
| $ | (2,240 | ) |
| $ | (2,681 | ) | |
| 75,000 |
|
| 5/31/2017 |
| 7/31/2017 |
| 6/30/2024 |
| 1.96% |
|
|
| (3,632 | ) |
|
| (4,639 | ) | |
| 10,000 |
|
| 8/10/2017 |
| 8/10/2017 |
| 6/30/2024 |
| 2.01% |
|
|
| (502 | ) |
|
| (636 | ) | |
| 50,000 |
|
| 6/1/2018 |
| 1/31/2019 |
| 6/30/2025 |
| 2.89% |
|
|
| (4,591 | ) |
|
| (5,911 | ) | |
| 50,000 |
|
| 7/2/2019 |
| 7/5/2019 |
| 7/18/2024 |
| 1.65% |
|
|
| (1,932 | ) |
|
| (2,593 | ) | |
| 50,000 |
|
| 8/21/2019 |
| 8/23/2019 |
| 8/18/2024 |
| 1.32% |
|
|
| (1,378 | ) |
|
| (2,036 | ) | |
| 50,000 |
|
| 8/21/2019 |
| 8/23/2019 |
| 8/30/2024 |
| 1.32% |
|
|
| (1,377 | ) |
|
| (2,049 | ) | |
| 85,000 |
|
| 12/31/2019 |
| 12/31/2019 |
| 12/31/2029 |
| 1.86% |
|
|
| (2,657 | ) |
|
| (8,677 | ) | |
| 25,000 |
|
| 12/6/2018 |
| 1/31/2020 |
| 6/30/2025 |
| 2.75% |
|
|
| (2,149 | ) |
|
| (2,801 | ) | |
| 50,000 |
|
| 12/7/2018 |
| 5/18/2020 |
| 1/31/2024 |
| 2.72% |
|
|
| (3,354 | ) |
|
| (3,967 | ) | |
| 75,000 |
|
| 8/21/2019 |
| 5/18/2020 |
| 5/18/2025 |
| 1.27% |
|
|
| (1,736 | ) |
|
| (3,294 | ) | |
| 75,000 |
|
| 7/31/2020 |
| 8/18/2020 |
| 8/18/2022 |
| 0.13% |
|
|
| 33 |
|
|
| 14 |
| |
| 75,000 |
|
| 8/21/2019 |
| 5/18/2021 |
| 5/18/2026 |
| 1.30% |
|
|
| (1,205 | ) |
|
| (3,415 | ) | |
| 770,000 |
|
|
|
|
|
|
|
|
|
|
|
|
| (26,720 | ) |
|
| (42,685 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matured interest rate swap at March 31, 2021: |
|
|
|
|
|
|
|
|
| |||||||||||
$ | 50,000 |
|
| 4/7/2016 |
| 9/30/2016 |
| 3/31/2021 |
| 1.09% |
|
|
| - |
|
|
| (117 | ) | |
|
|
|
|
|
| $ | (26,720 | ) |
| $ | (42,802 | ) |
The Company assesses, both at inception and on an ongoing basis, the effectiveness of its qualifying cash flow hedges. For the three months endedAs of March 31, 2020,2021, all of the 13 active interest rate swap agreements listed above with the exception of the $110 million agreement, were designated as cash flow hedges. The Company discontinued hedge accounting on the $110 million interest rate swap agreement during the three months ended March 31, 2020 due to a change in the forecasted interest payments being hedged. As a result, the unrealized loss incurred during the three months ended March 31, 2020 of $0.2 million was recorded to interest and other expense, net in the Company’s statement of operations. The change in the fair value of the Company’s designated cash flow hedges is recorded to accumulated other comprehensive income (loss),loss, a component of shareholders’ equity in the Company’s consolidated balance sheets. Amounts reported in accumulated other comprehensive income (loss)loss will be reclassified to interest and other expense, net as interest payments are made or received on the Company’s variable-rate derivatives. The Company estimates that approximately $9.5$11.2 million of net unrealized losses included in accumulated other comprehensive loss at March 31, 20202021 will be reclassified as an increase to interest and other expense, net within the next 12 months.
15
The following table presents the effect of derivative instruments in cash flow hedging relationships in the Company’s consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 20202021 and 20192020 (in thousands):
Net Unrealized Loss Recognized in Other Comprehensive Income (Loss) | Net Unrealized Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest and Other Expense, net | |||||||||||||||
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Interest rate derivatives in cash flow hedging relationships | $ | (42,267 | ) | $ | (4,770 | ) | $ | (101 | ) | $ | 1,274 |
|
| Net Unrealized Gain (Loss) Recognized in Other Comprehensive Loss |
|
| Net Unrealized (Loss) Reclassified from Accumulated Other Comprehensive Loss to Interest and Other Expense, net |
| ||||||||||
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Interest rate derivatives in cash flow hedging relationships |
| $ | 13,367 |
|
| $ | (42,267 | ) |
| $ | (2,715 | ) |
| $ | (101 | ) |
6. Related Parties
The Company has, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. There have been no changes to the contracts and relationships discussed in the 20192020 Form 10-K. Below is a summary of the significant related party relationships in effect during the three months ended March 31, 20202021 and 2019.
2020.
Glade M. Knight, Executive Chairman of the Company, owns Apple Realty Group, Inc. (“ARG”), 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., each of which receivereceives support services from ARG.
The Company provides support services, including the use of the Company’s employees and corporate office, to ARG and is reimbursed by ARG for the cost of these services. Under this cost sharing structure, amounts reimbursed to the Company include both compensation for personnel and office related costs (including office rent, utilities, office supplies, etc.) used by ARG. The amounts reimbursed to the Company are based on the actual costs of the 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 allocated by the Company to ARG for the three months ended March 31, 20202021 and 20192020 totaled approximately $0.2 million and $0.3 million, for each respective period,respectively, and are recorded as a reduction to general and administrative expenses in the Company’s consolidated statements of operations.
As part of the cost sharing arrangement, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under this cash management process, each company may advance or defer up to $1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies. As of March 31, 2020,2021 and December 31, 2019,2020, total amounts due from ARG for reimbursements under the cost sharing structure totaled approximately $0.3$0.2 million and $0.5$0.3 million, respectively, and are included in other assets, net in the Company’s consolidated balance sheets.
The Company, through aits wholly-owned subsidiary, Apple Air Holding, LLC, owns a Learjet used primarily for acquisition, asset management, renovation and investor and public relations purposes. 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 isan entity owned by the Company’s Executive Chairman, and the other, by its Chief Executive Officer, for acquisition, asset management, renovation and investor and public relations purposes, and reimburses these entitiesthe entity at third party rates. Total costs incurred for the use of thesethe aircraft during the three months ended March 31, 20202021 and 20192020 were less than $0.1 million for each respective period and are included in general and administrative expenses in the Company’s consolidated statements of operations.
7. Shareholders’ Equity
Distributions
Subsequent to the distribution paid in March 2020, the Company announced the suspension of its monthly distributions due to the impact of COVID-19 on its operating cash flows. Prior to the suspension of its distributions, the Company’s annual distribution rate, payable monthly, was $1.20 per common share. For the three months ended March 31, 2020, and 2019, the Company paid distributions of $0.30 per common share for a total of $67.3 million and $67.2 million, respectively.million. The distributions paid during the three months ended March 31, 2020 includeincluded the distribution paid in January 2020, totaling $22.4 million, that was declared in December 2019,2019. As discussed in Note 4, as a requirement under the amendments to its unsecured credit facilities, the Company is restricted in its ability to make distributions during the Extended Covenant Waiver Period, except for the payment of cash distributions of $0.01 per common share per quarter or to the extent required to maintain REIT status. In the first quarter of 2021, the Company resumed the declaration of distributions with the declaration of a quarterly distribution of $0.01 per common share in March 2021, which was paid on April 15, 2021, resulting in
16
an accrued distribution of $2.2 million included in accounts payable and other liabilities in the Company’s consolidated balance sheet at DecemberMarch 31, 2019.2021.
Issuance of Shares
On August 12, 2020, the Company entered into an equity distribution agreement pursuant to which the Company may sell, from time to time, up to an aggregate of $300 million of its common shares under an at-the-market offering program (the “ATM Program”). As of March 31, 2021, the Company had not sold any common shares under the ATM Program. The Company plans to use the net proceeds from the sale of these shares to pay down borrowings on its revolving credit facility and, under certain circumstances, to repay proportionally amounts under each of the Company’s revolving credit facility, term loans and senior notes, subject to certain restrictions during the Extended Covenant Waiver Period pursuant to the Company’s unsecured credit facilities, as discussed further in Note 4, titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q. The Company plans to use the corresponding increased availability under the revolving credit facility for general corporate purposes which may include, among other things, acquisitions of additional properties, the repayment of other outstanding indebtedness, capital expenditures, improvement of properties in its portfolio and working capital.
Share Repurchases
In May 2020, the Company’s Board of Directors approved an extension of its existing share repurchase program, (the “Share Repurchase Program”), authorizing share repurchases up to an aggregate of $345 million.million (the “Share Repurchase Program”). The Share Repurchase Program may be suspended or terminated at any time by the Company and will end in July 2021 if not terminated earlier. During the first three months of 2020, and 2019, the Company purchased, under its Share Repurchase Program approximately 1.5 million and 0.3 million of its common shares respectively, at a weighted-average market purchase price of approximately $9.42 and $14.93 per common share, respectively, for an aggregate purchase price, including commissions, of approximately $14.3 million and $4.1 million, respectively.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 terminated its written trading plan and has not engaged in additional repurchases under the Share Repurchase Program since then. Repurchases under the Share Repurchase Program have been funded, and the Company intends to fund future repurchases,purchases, with cash on hand or availability under its unsecured credit facilities subject to any applicable restrictions under the Company’s unsecured credit facilities. AsThe timing of March 31, 2020, approximately $345.4 million remained available for purchaseshare repurchases and the number of common shares to be repurchased under the Share Repurchase Program. In March 2020Program will depend upon the Company terminated its written trading plan.
prevailing market conditions, regulatory requirements and other factors. Share repurchases are subject to certain restrictions during the Extended Covenant Waiver Period pursuant to the amendments to the Company’s unsecured credit facilities, as discussed further in Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q.
8. Compensation Plans
The Company annually establishes an incentive plan for its executive management. Under the incentive plan for 20202021 (the “2020“2021 Incentive Plan”), participants are eligible to receive a bonus based on the achievement of certain 20202021 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 three-year periods). With respect to the operational performance metrics, the first half of the year, for the period of January 1 – June 30, 2021, will be based on operational performance metrics including portfolio occupancy growth, expense management, successful negotiation of amendments to each of the Company’s unsecured credit facilities and effective allocation of capital to drive incremental returns, with no specific target or weighting assigned to each metric. The Compensation Committee intends to review performance mid-year to determine the feasibility of reverting back to operational performance metrics for the second half of the year that are more consistent with the Company’s historical operational performance metrics. The operational performance metrics are equally weighted and account for 50% of the total target incentive compensation. The shareholder return metrics are weighted 75% for relative shareholder return metrics and 25% for total shareholder return metrics, and account for 50% of the total target incentive compensation. At March 31, 2020,2021, the range of potential aggregate payouts under the 20202021 Incentive Plan was $0 - $13.9$22.4 million. The range of payout under the 2020 Incentive Plan reflects a voluntary reduction of $0 - $5.2 million of the potential payout to the Company’s Chief Executive Officer in response to the expected decline in the Company’s operating results due to COVID-19. Based on performance through March 31, 2020,2021, the Company has accrued approximately $1.5$2.9 million as a liability for potential executive bonus payments under the 20202021 Incentive Plan, which is included in accounts payable and other liabilities in the Company’s consolidated balance sheet as of March 31, 20202021 and in general and administrative expenses in the Company’s consolidated statement of operations for the three months ended March 31, 2020.2021. Approximately 25% of target awards under the 20202021 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 will vest in December 20202021 and one-third of which will vest in December 2021. 2022.
Under the incentive plan for 20192020 (the “2019“2020 Incentive Plan”), the Company recorded approximately $2.2$1.5 million in general and administrative expenses in its consolidated statement of operations for the three months ended March 31, 2019.
2020.
During the three months ended March 31, 2020, the Company accrued expense associated with 2 separation agreements of approximately $1.25 million each, totaling approximately $2.5 million, in connection with the retirements of the Company’s former Executive Vice President and Chief Operating Officer and the Company’s former Executive Vice President and Chief Financial Officer which pursuant to the separation and general release agreements executed and amendedamounts were paid in March 2020, will be paid at a mutually agreed-upon date inOctober 2020. The accrued expense was included in accounts payable and other liabilities in the Company’s consolidated balance sheet as of March 31, 2020 and in general and administrative expenses in the Company’s consolidated statement of operations for the three months ended March 31, 2020.
17
During the three months ended March 31, 2019, the Company incurred a one-time separation payment of $0.5 million in connection with the retirement of the Company’s Executive Vice President and Chief Legal Officer which, pursuant to the separation and general release agreement executed in March 2019, was paid in April 2019 and was included in general and administrative expenses in the Company’s consolidated statement of operations for the three months ended March 31, 2019.Index
Share-Based Compensation Awards
The following table sets forth information pertaining to the share-based compensation issued under the 20192020 Incentive Plan and the incentive plan for 20182019 (the “2018“2019 Incentive Plan”).
2019 Incentive Plan | 2018 Incentive Plan | |||||||||
Period common shares issued | First Quarter 2020 | First Quarter 2019 | ||||||||
Common shares earned under each incentive plan | 665,552 | 156,926 | ||||||||
Common shares surrendered on issuance date to satisfy tax withholding obligations | 60,616 | 24,999 | ||||||||
Common shares earned and issued under each incentive plan, net of common shares surrendered on issuance date to satisfy tax withholding obligations | 604,936 | 131,927 | ||||||||
Closing stock price on issuance date | $ | 13.01 | $ | 16.49 | ||||||
Total share-based compensation earned, including the surrendered shares (in millions) | $ | 8.7 | (1) | $ | 2.6 | (2) | ||||
Of the total common shares earned and issued, total common shares unrestricted at time of issuance | 426,553 | 105,345 | ||||||||
Of the total common shares earned and issued, total common shares restricted at time of issuance | 178,383 | 26,582 | ||||||||
Restricted common shares vesting date | December 11, 2020 | December 13, 2019 | ||||||||
Common shares surrendered on vesting date to satisfy tax withholding requirements resulting from vesting of restricted common shares | n/a | 5,502 |
|
| 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 |
(2) | Of the total 2019 share-based compensation, approximately $1.2 million, which vested on December 11, 2020, was recognized as share-based compensation expense proportionately throughout 2020. For the three months ended March 31, 2020, the Company recognized approximately $0.3 million of share-based compensation expense related to restricted share awards. |
|
Additionally, in conjunction with the appointment of 5 new officers of the Company on April 1, 2020, the Company issued to the new officer group a total of approximately 200,000 restricted common shares with an aggregate grant date fair value of approximately $1.8 million. For each grantee, the restricted shares will vest on March 31, 2023 if the individual remains in service of the Company through the date of vesting. The expense associated with the awards will be amortized over the 3-year restriction period. For the three months ended March 31, 2021, the Company recognized approximately $0.1 million of share-based compensation expense related to these awards.
9. Subsequent Events
On April 30, 2020,15, 2021, the Company closed onpaid approximately $2.2 million, or $0.01 per outstanding common share, in distributions to its common shareholders.
In February 2021, the Company entered into a purchase and sale agreement with an unrelated party for the sale of the newly developed Hampton Inn &its 102-room Overland Park, Kansas SpringHill Suites and Home2 Suites in Cape Canaveral, Florida, a combined 224-room dual-branded complex, for a gross purchasesales price of approximately $46.7$5.3 million. TheOn April 30, 2021, the Company utilized $25.0 million of its available cash and entered into a one-year note payable withcompleted the developer secured by the hotels for $21.7 million to fund the purchase pricesale of the Cape Canaveral, Florida hotels.hotel. The note payable bears interest, which is payable monthly, at a floating annual rate equalnet proceeds from the sale were used to one-month LIBOR plus a margin of 2.0% forpay down borrowings on the first six months of the loan term and 3.0% for the second six months of the loan term.Company’s revolving credit facility.
18
In May 2020, the contract to purchase the Courtyard hotel in Denver, Colorado was terminated and the refundable deposit of approximately $0.6 million was repaid to the Company.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 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 the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Company’s forward-looking statements iscontinues to be the potential increased adverse effect of COVID-19, including resurgences and new variants, on the Company’s business, financial performance and condition, operating results and cash flows, the real estate market and the hospitality industry specifically, and the global economy and financial markets.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 Company’s ability to completespeed of the anticipated amendments to its credit facilitiesvaccine roll-out, the efficacy, acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against emerging variants of COVID-19, the potential for additional hotel closures/consolidations that may be mandated or advisable, whether based on increased COVID-19 cases, new variants or other factors, the terms and timing anticipated,slowing or at all,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 Annual Report on2020 Form 10-K for the fiscal year ended December 31, 2019 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Such additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of properties; the ability of the Company to successfully integrate pending transactions and implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions; reduced business and leisure travel due to travel-related health concerns, including the widespread outbreak of COVID-19 or an increase in COVID-19 cases or any other infectious or contagious diseases in the U.S. or abroad; adverse changes in the real estate and real estate capital markets; financing risks; changes in interest rates; litigation 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 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 20192020 Form 10-K and in Part II, Item 1A of this Form 10-Q.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 20192020 Form 10-K.
Overview
The Company is a Virginia corporation that has elected to be treated as a REIT for federal income tax purposes. The Company is self-advised and invests in income-producing real estate, primarily in the lodging sector, in the U.S. As of March 31, 2020,2021, the Company owned 231233 hotels with an aggregate of 29,53529,855 rooms located in urban, high-end suburban and developing markets throughout 34 states.35 states, including one hotel with 102 rooms classified as held for sale, which was sold to an unrelated party in April 2021. Substantially all of the Company’s hotels operate under Marriott or Hilton brands. The hotels are operated and managed under separate management agreements with 2016 hotel management companies, none of which are affiliated with the Company. The Company’s common shares are listed on the NYSE under the ticker symbol “APLE.”
The Impact of COVID-19 on the Company and the Company’s Actions to Mitigate its Impact
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.
19
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 been rapidly evolvingevolved and many countries, including the U.S., as well as state and local governments, have reacted by instituting and reinstituting a wide variety of measures intended to control its spread, including states of emergency, mandatory quarantines, implementation of “stay at home” orders, business closures, border closings, and restrictions on travel and large gatherings, which has resulted in, and may continue to result in, cancellation of events, including sporting events, conferences and meetings. Many experts predict that the outbreak will triggerThe pandemic triggered a period of material global economic slowdown or a global recession and many experts believethe National Bureau of Economic Research declared that the U.S. is alreadyhas been in a recession. Therecession since February 2020. While the Company’s operating results and the overall economy in the U.S. have shown signs of a gradual recovery, the Company cannot presently determine the extent or duration of the overall operational and financial effects that COVID-19 will have on the Company.
Company, its business, the hospitality industry and the economy, or whether the recovery will continue.
The effects of the pandemic on the hotel industry are unprecedented. COVID-19 has disrupted the industry and its consequences havehas 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. For example, averageWhile the economy has shown signs of recovery as some of the initial restrictions put into place during 2020 have eased, occupancy for the Company’s Comparable Hotels (as defined below) declined from approximately 76% in February to below 20% by the end of March and for the entire month of April, which has been accompanied by declines in average daily rate (“ADR”) are still significantly below 2019 levels. Additionally, while vaccines have been developed and distribution began in December 2020 and these efforts suggest that conditions may continue to gradually improve during 2021, there can be no assurances of approximately 30% forhow quickly the monthvaccines will slow the spread of April comparedthe virus and allow the economy to 2019.recover. The Company expects thisthe significant decline in revenue associated with COVID-19 throughout its portfolio and the overall decline in the U.S. economy to negatively impact the Company’s revenue and operating results for an extended period of time. The Company does not expect a material improvement in results until business travel and general consumer confidence related to risks associated with the economy and COVID-19 pandemic improvesimprove and government restrictions on travel and “stay at home” ordersbusiness operations are broadly lifted.
The following table highlightsSince the impact beginning in March to the Company’s ADR, Occupancy and revenue per available room (“RevPAR”).
Two Months Ended February 29, 2020 | Three Months Ended March 31, 2020 | Two Months Ended February 28, 2019 | Three Months Ended March 31, 2019 | Percent Change | ||||||||||||||||||||||||||||||||
March 2020 | March 2019 | Two Months Ended February | March | Three Months Ended March | ||||||||||||||||||||||||||||||||
ADR | $ | 132.73 | $ | 131.93 | $ | 132.55 | $ | 133.48 | $ | 141.16 | $ | 136.36 | -0.6 | % | -6.5 | % | -2.8 | % | ||||||||||||||||||
Occupancy | 71.0 | % | 41.0 | % | 60.9 | % | 70.5 | % | 80.2 | % | 73.9 | % | 0.7 | % | -48.9 | % | -17.6 | % | ||||||||||||||||||
RevPAR | $ | 94.28 | $ | 54.08 | $ | 80.66 | $ | 94.12 | $ | 113.23 | $ | 100.71 | 0.2 | % | -52.2 | % | -19.9 | % |
The Company, its management companies and the brands the Company’s hotels are franchised with have all aggressively worked to mitigate the costs and uses of cash associated with operating the hotels in a low-occupancy environment and are thoughtfully working to position the hotels to adapt to the changes that may occur to guest preferences in the future. The impact of the situation has varied and will vary by market and hotel. With the support of its brands and third-party management companies, the Company will continue to evaluate and implement additional measures as the situation evolves.
The following is a brief summary of certain measurespandemic, the Company, its management companies and its brands have taken steps to minimize costs and cash outflow to maintain a sound liquidity position.
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The Company has implemented cost elimination and efficiency initiatives at each of the Company’s hotels by reducing labor costs, reducing or eliminating certain amenities and reducing rates under various service contracts, enhanced its sales efforts by focusing on COVID-19-specific demand opportunities in certain markets and has strategically targeted and maximized performance based on available demand, reduced non-essential capital improvement projects planned for 2021, and entered into amendments to its unsecured credit facilities to temporarily waive the financial covenant testing for the majority of its financial maintenance covenants until June 30, 2022. Despite the cost reduction initiatives discussed above, the Company does not expect to be able to fully, or even materially, offset revenue losses from the COVID-19 pandemic.COVID-19. The significance, extent and duration of COVID-19 effects are not currently known, and these uncertainties continue to make it difficult to predict operating results for the Company’s hotels for the remainder of 2020.near future. Therefore, while the ongoing vaccination efforts suggest that conditions may continue to gradually improve during 2021, there can be no assurances that the Company will not experience further declines in hotel revenues or earnings at its hotels.hotels or how long the effects will continue to impact the Company’s operating results.
20202021 Hotel Portfolio Activities
The following discussion regarding the Company’s approach to acquisitions and dispositions reflects the Company’s historical strategy. While the Company anticipates it will continue to approach the acquisition and disposition of hotels similarly over the long term, the detrimental impact of COVID-19 to the Company and overall lodging industry has and may continue to limit the Company’s ability to effectively acquire or dispose of hotels until the industry recovers.
The Company continually monitors market conditions and attempts to maximize shareholder value by investing in properties that it believes provide superior value over the long term. Consistent with this strategy and the Company’s focus on investing in rooms-focused hotels, in 20182019 the Company entered into a contract to purchase a combined 224-room dual-branded Hampton176-room Hilton Garden Inn & Suites and Home2 Suites complex to be constructed in Cape Canaveral, Florida.Madison, Wisconsin. Construction of the hotelshotel was completed in April 2020February 2021 and the Company acquired the hotels. The purchase price was approximately $46.7 million, funded by $25.0 million of cashhotel on hand and a one-year note with the developer for $21.7 million payable in 2021. Also, as of May 15, 2020, the Company had outstanding contracts, all of which were entered into prior to 2020, for the potential purchase of three hotels under developmentFebruary 18, 2021 for a total expectedgross purchase price of approximately $113.0$49.6 million, which are planned to be completed and opened for business overutilizing borrowings on the next five to 15 months from March 31, 2020, at which time closings on these hotels are expected to occur. In each case, there are a number of conditions to closing that have not yet been satisfied and there can be no assurance that closings on these hotels will occur under the outstanding purchase contracts. If the sellers meet all of the conditions to closing, the Company is obligated to specifically perform under these contracts. The Company plans to utilize its available cash at closing for any additional acquisitions.Company’s revolving credit facility.
For its existing portfolio, the Company monitors each property’s profitability, market conditions and capital requirements and attempts to maximize shareholder value by disposing of properties when it believes that superior value can be provided from the sale of the property. As a result, during the first quarter of 2020,2021, the Company sold two hotels for a total combined gross sales price of $45.0$18.3 million and recognized a gain on sale of approximately $8.8$4.5 million in the first quarter of 2020.2021. Additionally, as of March 31, 2021, the Company had an outstanding contract to sell one of its hotels for a gross sales price of approximately $5.3 million, which was completed in April 2021. The Company used the net proceeds from the sales were used to pay down borrowings on the Company’s revolving credit facility.
See Note 2 titled “Investment in Real Estate”, and Note 3 titled “Dispositions”“Assets Held for Sale and Note 9 titled “Subsequent Events”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.
20
Effective January 20,
Hotel Operations
As of March 31, 2021, the Company owned 233 hotels with a total of 29,855 rooms as compared to 231 hotels with a total of 29,535 rooms as of March 31, 2020. Results of operations are included only for the period of ownership for hotels acquired or disposed of during the current reporting period and prior year. During the three months ended March 31, 2021, the Company acquired one newly constructed hotel on February 18, 2021 and sold one hotel on February 25, 2021 and one hotel on March 16, 2021. During 2020, the Company converted its New York, New York Renaissanceacquired two newly constructed hotels on April 30, 2020 and two newly constructed hotels on August 13, 2020, and sold three hotels (one on January 16, 2020, one on February 27, 2020 and one on December 30, 2020). As a result, the comparability of results for the three months ended March 31, 2021 and 2020 as discussed below is impacted by these 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 to an independent boutique hotel. As anticipated, the operating resultsexpenses, general and administrative expenses and other expenses described below.
The following is a summary of the hotel declined inresults from operations of the first quarterCompany’s hotels for their respective periods of 2020 (prior to COVID-19) as compared toownership by the first quarter of 2019 as the management team worked to replace revenue that was historically generated from the Renaissance brand system and have experienced further declines due to COVID-19.Company:
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| Three Months Ended March 31, |
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(in thousands, except statistical data) |
| 2021 |
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| Percent of Revenue |
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| 2020 |
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Total revenue |
| $ | 158,713 |
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| $ | 238,010 |
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| 100.0 | % |
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| -33.3 | % |
Hotel operating expense |
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| 103,740 |
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| 65.4 | % |
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| 155,266 |
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| 65.2 | % |
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| -33.2 | % |
Property taxes, insurance and other expense |
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| 19,688 |
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| 12.4 | % |
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| 19,595 |
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| 8.2 | % |
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| 0.5 | % |
General and administrative expense |
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| 8,119 |
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| 5.1 | % |
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| 9,523 |
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| 4.0 | % |
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| -14.7 | % |
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Loss on impairment of depreciable real estate assets |
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| 10,754 |
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Depreciation and amortization expense |
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| 48,710 |
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| 49,522 |
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| -1.6 | % |
Gain on sale of real estate |
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| 4,484 |
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| 8,839 |
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Interest and other expense, net |
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| 18,513 |
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| 15,566 |
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| 18.9 | % |
Income tax expense |
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| 108 |
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| 146 |
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Net loss |
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Adjusted hotel EBITDA (1) |
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| 35,427 |
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| 63,297 |
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| -44.0 | % |
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Number of hotels owned at end of period |
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| 233 |
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| 231 |
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| 0.9 | % |
ADR |
| $ | 99.19 |
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| $ | 132.55 |
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| -25.2 | % |
Occupancy |
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| 55.5 | % |
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| 60.9 | % |
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| -8.9 | % |
RevPAR |
| $ | 55.09 |
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| $ | 80.66 |
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| -31.7 | % |
(1) | See reconciliation of Adjusted Hotel EBITDA to net loss in “Non-GAAP Financial Measures” below. |
The following table highlights the quarterly impact of COVID-19 on the Company’s ADR, Occupancy, RevPAR, net loss and adjusted hotel earnings before interest, income taxes, depreciation and amortization for real estate (“Adjusted Hotel Operations EBITDA”) during the last five quarters (in thousands except statistical data):
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| 4th Quarter |
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| 2021 |
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ADR |
| $ | 132.55 |
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| $ | 100.76 |
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| $ | 104.78 |
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| $ | 97.87 |
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| $ | 99.19 |
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Occupancy |
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| 60.9 | % |
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| 28.2 | % |
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| 48.6 | % |
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| 46.5 | % |
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| 55.5 | % |
RevPAR |
| $ | 80.66 |
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| $ | 28.44 |
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| $ | 50.94 |
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| $ | 45.46 |
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| $ | 55.09 |
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Net loss |
| $ | (2,769 | ) |
| $ | (78,243 | ) |
| $ | (40,948 | ) |
| $ | (51,247 | ) |
| $ | (46,435 | ) |
Adjusted Hotel EBITDA (1) |
| $ | 63,297 |
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| $ | 704 |
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| $ | 34,688 |
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| $ | 23,296 |
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| $ | 35,427 |
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(1) | See reconciliation of Adjusted Hotel EBITDA to net loss in “Non-GAAP Financial Measures” below. |
Beginning in March 2020, COVID-19 caused widespread cancellations of both business and leisure travel throughout the U.S., resulting in significant decreases in RevPAR throughout the Company’s hotel portfolio and the hospitality industry as a whole. With the overall uncertainty of the longevity of COVID-19 in the U.S. and the resulting economic decline, it is difficult to project the duration of revenue declines for the industry and Company; however, the Company currently expects the declinedeclines in revenue and operating results as compared to 2019 to continue throughout the remainder of 2020 with2021 and potentially into future years. While the
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Company experienced its most significant decline in operating results during the second quarter having the largest decline, moderating in the third and fourth quarters of 2020. Although these are the Company’s current expectations, there can be no assurances of the amount or period of declines due to the uncertainty regarding the duration and long-term impact of COVID-19.
As of March 31, 2020 the Company owned 231 hotels with a total of 29,535 rooms as compared to 234 hotelsprevious quarters, occupancy and RevPAR have since shown improvement, with a totalaverage occupancy reaching 55.5% by the first quarter of 30,046 rooms as2021, resulting in the strongest operating results since the onset of March 31, 2019. 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 three months ended March 31, 2020,pandemic. Although the Company sold one hotel on January 16, 2020 and one hotel on February 28, 2020. During 2019, the Company acquired one newly developed hotel on March 19, 2019 and two existing hotels (one on March 4, 2019 and one on October 9, 2019), and sold 11 hotels (nine on March 28, 2019, one on December 19, 2019 and one on December 30, 2019). As a result, the comparability of results for the three months ended March 31, 2020 and 2019 as discussed below is impacted by these transactions in additionexpects this trend to the impact of COVID-19 beginning in March 2020.
In evaluating financial conditiongradually continue, future revenues and operating performance, the most important indicators on which the Company focuses are revenue measurements, such as average occupancy, ADRresults could be negatively impacted if, among other things, COVID-19 cases increase and RevPAR,state and expenses, such as hotel operating expenses, generallocal governments 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:
Three Months Ended March 31, | ||||||||||||||||||||
(in thousands, except statistical data) | 2020 | Percent of Revenue | 2019 | Percent of Revenue | Percent Change | |||||||||||||||
Total revenue | $ | 238,010 | 100.0 | % | $ | 303,787 | 100.0 | % | -21.7 | % | ||||||||||
Hotel operating expense | 155,266 | 65.2 | % | 175,449 | 57.8 | % | -11.5 | % | ||||||||||||
Property taxes, insurance and other expense | 19,595 | 8.2 | % | 19,613 | 6.5 | % | -0.1 | % | ||||||||||||
General and administrative expense | 9,523 | 4.0 | % | 8,137 | 2.7 | % | 17.0 | % | ||||||||||||
Depreciation and amortization expense | 49,522 | 47,950 | 3.3 | % | ||||||||||||||||
Gain on sale of real estate | 8,839 | 1,213 | n/a | |||||||||||||||||
Interest and other expense, net | 15,566 | 15,494 | 0.5 | % | ||||||||||||||||
Income tax expense | 146 | 206 | -29.1 | % | ||||||||||||||||
Number of hotels owned at end of period | 231 | 234 | -1.3 | % | ||||||||||||||||
ADR | $ | 132.55 | $ | 136.36 | -2.8 | % | ||||||||||||||
Occupancy | 60.9 | % | 73.9 | % | -17.6 | % | ||||||||||||||
RevPAR | $ | 80.66 | $ | 100.71 | -19.9 | % |
businesses revert back to tighter mitigation restrictions or consumer sentiment deteriorates.
Comparable Hotels Operating Results
The following table reflects certain operating statistics for the Company’s 231232 hotels owned and held for use as of March 31, 20202021 (“Comparable Hotels”). The Company defines metrics from Comparable Hotels as results generated by the 231232 hotels owned and held for use as of the end of the reporting period.period, and excludes the hotel held for sale. For the hotels acquired during the current reporting period and prior year, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership using information provided by the properties’ prior owners at the time of acquisition and not adjusted by the Company. This information has not been audited, either for the periods owned or prior to ownership by the Company. For dispositions and assets held for sale, results have been excluded for the Company’s period of ownership.
Three Months Ended March 31, | ||||||||||||||||||||||||
2020 | 2019 | Percent Change |
| Three Months Ended March 31, |
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| 2021 |
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| 2020 |
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| Percent Change |
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ADR | $ | 132.66 | $ | 137.51 | -3.5 | % |
| $ | 99.29 |
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| $ | 133.05 |
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| -25.4 | % | ||||||
Occupancy | 60.8 | % | 74.0 | % | -17.8 | % |
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| 55.8 | % |
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| 60.9 | % |
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| -8.4 | % | ||||||
RevPAR | $ | 80.70 | $ | 101.81 | -20.7 | % |
| $ | 55.39 |
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| $ | 81.01 |
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| -31.6 | % |
Same Store Operating Results
The following table reflects certain operating statistics for the 228227 hotels owned and held for use by the Company as of January 1, 20192020 and during the entirety of the reporting periods being compared (“Same Store Hotels”). This information has not been audited.
Three Months Ended March 31, | ||||||||||||||||||||||||
2020 | 2019 | Percent Change |
| Three Months Ended March 31, |
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| 2021 |
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| 2020 |
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| Percent Change |
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ADR | $ | 132.60 | $ | 137.44 | -3.5 | % |
| $ | 99.12 |
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| $ | 133.05 |
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| -25.5 | % | ||||||
Occupancy | 60.8 | % | 74.1 | % | -17.9 | % |
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| 56.1 | % |
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| 60.9 | % |
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| -7.9 | % | ||||||
RevPAR | $ | 80.57 | $ | 101.80 | -20.9 | % |
| $ | 55.61 |
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| $ | 81.01 |
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| -31.4 | % |
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 affectedaffecting the U.S. hotel industry beginning insince March 2020. As a result of COVID-19, the Company’s revenue and operating results declined during the first three months of 2020 asended March 31, 2021 compared to the first three months of 2019,ended March 31, 2020, which is consistent with the overall lodging industry. Compared to 2019, the Company expects the declinedeclines in revenue and operating results to continue throughout the remainder of 2020 with the second quarter having the largest decline, moderating in the third and fourth quarters of 2020,2021, but the Company can give no assurances of the amount or period of decline due to the uncertainty regarding the duration and long termlong-term impact of and governmental and consumer response to COVID-19.
Revenues
The Company’s principal source of revenue is hotel revenue consisting of room, food and beverage, and other related revenue. For the three months ended March 31, 20202021 and 2019,2020, the Company had total revenue of $238.0$158.7 million and $303.8$238.0 million, respectively. For the three months ended March 31, 20202021 and 2019,2020, respectively, Comparable Hotels achieved combined average occupancy of 60.8%55.8% and 74.0%60.9%, ADR of $132.66$99.29 and $137.51$133.05 and RevPAR of $80.70$55.39 and $101.81.$81.01. ADR is calculated as room revenue divided by the number of rooms sold, and RevPAR is calculated as occupancy multiplied by ADR.
Compared to the same period in 2019,2020, during the first quarter of 2020,three months ended March 31, 2021, the Company experienced decreases in ADR and occupancy, resulting in a decrease of 20.7%31.6% in RevPAR for Comparable Hotels. ForAs compared to the first two monthsquarter of 2020 (before COVID-19 significantly impacted the Company’s performance) and 2019 respectively,(pre-COVID-19), Comparable Hotels achieved combined average occupancyRevPAR for the first quarter of 71.1%2021 decreased by 45.8% as a result of reductions in rate and 70.7% (an increase of 0.6%), ADR of $132.88 and $134.62 (a decrease of 1.3%) and RevPAR of $94.45 and $95.18 (a decrease of 0.8%).occupancy. During March 2020, the hotel industry and the Company began to see a significant decrease in occupancy as both mandated and voluntary restrictions on travel were implemented throughout the U.S. For Comparable Hotels, average occupancy declined to 28.2% for the Company experiencedsecond quarter 2020 before improving over subsequent quarters to 55.8% in the first quarter of 2021 driven predominately by increased leisure demand over the summer months as a result of improved consumer confidence in travel and the lifting of some COVID-19 mitigation restrictions, but also from a wide variety of demand generators such as government, healthcare, construction, disaster recovery, insurance, athletics, education and local and regional business-related travel. Revenue recovery in the
22
first quarter of 2021 was led by leisure demand and small corporate, government and leisure based group business, with more favorable results in suburban markets. Throughout the hospitality industry, upscale and upper mid-scale chain scales have outperformed luxury and upper upscale and suburban locations have outperformed urban locations. Occupancy increased throughout the first quarter of 2021 and the trend continued into April, with estimated occupancy of approximately 41.0% in March and below 20%68% for the month of April, with ADR declines by April of approximately 30% comparedmonth. The Company expects this trend to 2019.
gradually continue, however, future revenues could be negatively impacted if COVID-19 cases increase and state and local governments tighten or implement new mitigation restrictions or consumer sentiment deteriorates.
Hotel Operating Expense
The Company, its management companies and the brands the Company’s hotels are franchised with have all aggressively worked to mitigate the costs and uses of cash associated with operating the hotels in a low-occupancy environment and are thoughtfully working to position the hotels to adapt to the changes that may occur to guest preferences in the future. The impact has varied and will continue to vary by market and hotel. With the support of its brands and third-party management companies, the Company will continue to evaluate and implement additional measures as the situation evolves.
Hotel operating expense consists of direct room operating expense, hotel administrative expense, sales and marketing expense, utilities expense, repair and maintenance expense, franchise fees and management fees. Hotel operating expense for the three months ended March 31, 2021 and 2020 and 2019 totaled $155.3$103.7 million and $175.4$155.3 million, respectively, or 65.4% and 65.2% andof total revenue for the respective periods. Comparatively, prior to COVID-19, hotel operating expense was 57.8% of total revenue for each respective period.the three months ended March 31, 2019. Included in hotel operating expense for the three months ended March 31, 2020 were approximately $1.62021 are an additional $1.8 million of utility costs resulting from extraordinary rate increases and fees assessed at some of the Company’s hotels in separation and furlough costs for hotel employeesTexas as a result of winter and ice storms in the occupancy declines discussed above.first quarter of 2021. The Company has worked and will continue to work with its management companies to make reductions inoptimize staffing models, consolidate operations in markets with multiple properties, and adjust or reduce food and beverage offerings and other amenities, among other efficiency initiatives to mitigate the impact of revenue declines on its results of operations. For example, in some markets the Company is “clustering”“clustered” hotels in 2020, whereby multiple properties in a market have consolidated their operations to increase efficiency; the Company has reduced service and amenity offerings as allowed by the relaxation of certain brand standards have been reduced;standards; and the Company has also successfully reduced or deferred paymentsrates 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 is workinghas worked and will continue to work to reduce all non-essential costs including service contracts, utilities in areas not utilized and certain maintenance costs. Additionally, asHowever, the Company modifies operationsmay continue to address concerns related to COVID-19, the Company expects to incur increased operating costssee ongoing cost increases related to the supplying of personal protective equipment for employees and guests as well as increased sanitation social distancing and other measures.
Additionally, as is typical in an economic recovery, the Company has begun to experience increases in the cost of labor, and expects to continue to do so, as it competes with other employers for hourly wage labor as unemployment rates decrease.
Property Taxes, Insurance and Other Expense
Property taxes, insurance, and other expense for the three months ended March 31, 2021 and 2020 totaled $19.7 million and 2019$19.6 million, respectively, or 12.4% and 8.2% of total revenue for the respective periods. Prior to COVID-19, property taxes, insurance and other expense totaled $19.6 million, in each respective period, or 8.2% and 6.5% of total revenue, for each respective period.the period ended March 31, 2019. Although the Company will continue to aggressively appeal assessments and monitor locality guidance as a result of COVID-19, it does not currently anticipate significant decreases in property taxes in 20202021 as compared to 2019, as many assessments are made at2020. Additionally, the beginning of each calendar year.
Company has faced increases in premiums on its property insurance coverage.
General and Administrative Expense
General and administrative expense for the three months ended March 31, 2021 and 2020 and 2019 was $9.5$8.1 million and $8.1$9.5 million, respectively, or 4.0%5.1% and 2.7%4.0% of total revenue for eachthe respective period.periods. The principal components of general and administrative expense are payroll and related benefit costs, legal fees, accounting fees and reporting expenses. General and administrative expense for the three months ended March 31, 2020 included the accrual of approximately $2.5 million in separation benefits awarded in connection with the previously announced retirements of the Company’s former Chief Operating Officer and former Chief Financial Officer on March 31, 2020. GeneralExcluding the separation benefit accrual, general and administrative expense increased by approximately $1.1 million for the three months ended March 31, 2019 included2021 compared to the accrualthree months ended March 31, 2020 primarily due to increased accruals for incentive compensation related to anticipated higher operating performance in 2021 as compared to 2020.
Loss on Impairment of approximately $0.5Depreciable Real Estate Assets
Loss on impairment of depreciable real estate assets was $10.8 million for the separation payment in connection withthree months ended March 31, 2021, consisting of impairment losses of $1.3 million for the retirement ofOverland Park, Kansas SpringHill Suites and $9.4 million for four hotel properties identified by the Company’s former Chief Legal Officer.
As discussed above, in order to minimize costs, the Company’s Executive Chairman voluntarily agreed to forego six months of salary, the Chief Executive Officer volunteered to reduce his target compensation by 60 percent and the non-employee directors on the Board of Directors volunteered as a group to reduce their annual director fees by more than 15 percent. Additionally, in light of the decline in revenue and operating results due to COVID-19 and the associated impact on the current operational and shareholder return metricsCompany in the 2020 Incentive Plan (seefirst quarter of 2021 for potential sale. See Note 83 titled “Compensation Plans”“Assets Held for Sale and Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional details), the Company anticipates a reduced payout for executive management compared to the originally established performance metrics for target compensation.information concerning these impairment losses.
23
Depreciation and Amortization Expense
Depreciation and amortization expense for the three months ended March 31, 2021 and 2020, and 2019expense was $49.5$48.7 million and $48.0$49.5 million, respectively. Depreciation and amortization expense primarily represents expense of the Company’s hotel buildings and related improvements, and associated personal property (furniture, fixtures, and equipment) for theirthe respective periods owned. Depreciation and amortization expense for the three months ended March 31, 2020 and 2019 also includes $1.6 million and $1.0 million, respectively, of amortization of the Company’s four finance ground lease assets. The remaining increasedecrease of approximately $0.9$0.8 million was primarily due to renovationsthe hotel dispositions completed throughout 20192020 and the first quarterthree months of 2020.
2021, partially offset by acquisitions and limited renovation activity.
Interest and Other Expense, net
Interest and other expense, net for the three months ended March 31, 2021 and 2020 was $18.5 million and 2019 was $15.6 million, respectively. Interest and $15.5 million, respectively, andother expense, net for the three months ended March 31, 2020 is net of approximately $0.7 million and $0.5 million, respectively, of interest capitalized associated with renovation projects. Additionally, interest and other expense, net for the three months ended March 31, 20202021 and 20192020 includes approximately $2.8$2.9 million and $1.8$2.8 million, respectively, of interest recorded on the Company’s four finance lease liabilities.
Interest expense related to the Company’s debt instruments decreasedincreased as a result of decreasedincreased average borrowings in the first three months of 2020ended March 31, 2021 as compared to the first three months of 2019 as well as a decrease inended March 31, 2020 combined with increased interest rates on the Company’s effective interest rate duringunsecured credit facilities associated with the first three months of 2020 as comparedamendments to the same period in 2019, due to lower average interest rates. However, theobtain covenant waivers. The Company anticipates interest expense to be higher for the remainder of 20202021 compared to the same period of 20192020 due to these increased borrowings under its revolving credit facility as compared to the same periods in 2019 related to declines in operating results. In March 2020, the Company drew the remaining availability under its revolving credit facility as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of uncertainty in the financial markets resulting from COVID-19. Additionally, as discussed further above ininterest rates. See 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, interest rate margins for additional discussion of the Company’s amended unsecured debt are anticipated to increase for the remainder of the year to the highest margin under each facility as a condition to obtaining waivers on those facilities’ covenants.credit 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 FFOFunds from Operations (“MFFO”), Earnings before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”), Adjusted EBITDAre and Adjusted EBITDAre (“Adjusted EBITDAre”).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 EBITDAreHotel 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 EBITDAre,Hotel EBITDA as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted EBITDAreHotel 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”), which defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains and losses from 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 affiliates. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. The Company further believes that by excluding the effects of these items, FFO is useful to investors in comparing its operating performance between periods and between REITs that report FFO using the Nareit definition. FFO as presented by the Company is applicable only to its common shareholders, but does not represent an amount that accrues directly to common shareholders.
The Company calculates MFFO by further adjusting FFO for the exclusion of amortization of finance ground lease assets, amortization of favorable and unfavorable operating leases, net and non-cash straight-line operating ground lease expense, as these expenses do not 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.
24
The following table reconciles the Company’s GAAP net income (loss)loss to FFO and MFFO for the three months ended March 31, 20202021 and 20192020 (in thousands):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net income (loss) | $ | (2,769 | ) | $ | 38,151 | |||
Depreciation of real estate owned | 47,668 | 46,666 | ||||||
Gain on sale of real estate | (8,839 | ) | (1,213 | ) | ||||
Funds from operations | 36,060 | 83,604 | ||||||
Amortization of finance ground lease assets | 1,602 | 1,041 | ||||||
Amortization of favorable and unfavorable operating leases, net | 101 | 31 | ||||||
Non-cash straight-line operating ground lease expense | 47 | 48 | ||||||
Modified funds from operations | $ | 37,810 | $ | 84,724 |
|
| Three Months Ended March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net loss |
| $ | (46,435 | ) |
| $ | (2,769 | ) |
Depreciation of real estate owned |
|
| 47,088 |
|
|
| 47,668 |
|
Gain on sale of real estate |
|
| (4,484 | ) |
|
| (8,839 | ) |
Loss on impairment of depreciable real estate assets |
|
| 10,754 |
|
|
| - |
|
Funds from operations |
|
| 6,923 |
|
|
| 36,060 |
|
Amortization of finance ground lease assets |
|
| 1,617 |
|
|
| 1,602 |
|
Amortization of favorable and unfavorable operating leases, net |
|
| 98 |
|
|
| 101 |
|
Non-cash straight-line operating ground lease expense |
|
| 44 |
|
|
| 47 |
|
Modified funds from operations |
| $ | 8,682 |
|
| $ | 37,810 |
|
|
|
|
|
|
|
|
|
|
EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted EBITDAreHotel EBITDA
EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes, depreciation and amortization. The Company believes EBITDA is useful to investors because it helps the Company and its investors evaluate the ongoing operating performance of the Company by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). In addition, certain covenants included in the agreements governing the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance.
In addition to EBITDA, the Company also calculates and presents EBITDAre in accordance with standards established by Nareit, which defines EBITDAre as EBITDA, excluding gains and losses from the sale of certain real estate assets (including gains and losses from change in control), plus real estate related impairments, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. The Company presents EBITDAre because it believes that it provides further useful information to investors in comparing its operating performance between periods and between REITs that report EBITDAre using the Nareit definition.
The Company also considers the exclusion of non-cash straight-line operating ground lease expense from EBITDAre useful, as this expense does not reflect the underlying performance of the related hotels.
The Company further excludes actual corporate-level general and administrative expense for the Company from Adjusted EBITDAre (Adjusted Hotel EBITDA) to isolate property-level operational performance over which the Company’s hotel operators have direct control. The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels.
25
The following table reconciles the Company’s GAAP net income (loss)loss to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted EBITDAreHotel EBITDA by quarter for the three months ended March 31, 2020 and 2019last five quarters (in thousands):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net income (loss) | $ | (2,769 | ) | $ | 38,151 | |||
Depreciation and amortization | 49,522 | 47,950 | ||||||
Amortization of favorable and unfavorable operating leases, net | 101 | 31 | ||||||
Interest and other expense, net | 15,566 | 15,494 | ||||||
Income tax expense | 146 | 206 | ||||||
EBITDA | 62,566 | 101,832 | ||||||
Gain on sale of real estate | (8,839 | ) | (1,213 | ) | ||||
EBITDAre | 53,727 | 100,619 | ||||||
Non-cash straight-line operating ground lease expense | 47 | 48 | ||||||
Adjusted EBITDAre | $ | 53,774 | $ | 100,667 |
|
| 1st Quarter |
|
| 2nd Quarter |
|
| 3rd Quarter |
|
| 4th Quarter |
|
| 1st Quarter |
| |||||
|
| 2020 |
|
| 2020 |
|
| 2020 |
|
| 2020 |
|
| 2021 |
| |||||
Net loss |
| $ | (2,769 | ) |
| $ | (78,243 | ) |
| $ | (40,948 | ) |
| $ | (51,247 | ) |
| $ | (46,435 | ) |
Depreciation and amortization |
|
| 49,522 |
|
|
| 49,897 |
|
|
| 50,171 |
|
|
| 50,196 |
|
|
| 48,710 |
|
Amortization of favorable and unfavorable operating leases, net |
|
| 101 |
|
|
| 101 |
|
|
| 103 |
|
|
| 137 |
|
|
| 98 |
|
Interest and other expense, net |
|
| 15,566 |
|
|
| 18,386 |
|
|
| 18,531 |
|
|
| 18,352 |
|
|
| 18,513 |
|
Income tax expense |
|
| 146 |
|
|
| 58 |
|
|
| 61 |
|
|
| 67 |
|
|
| 108 |
|
EBITDA |
|
| 62,566 |
|
|
| (9,801 | ) |
|
| 27,918 |
|
|
| 17,505 |
|
|
| 20,994 |
|
(Gain) loss on sale of real estate |
|
| (8,839 | ) |
|
| 54 |
|
|
| - |
|
|
| (2,069 | ) |
|
| (4,484 | ) |
Loss on impairment of depreciable real estate assets |
|
| - |
|
|
| 4,382 |
|
|
| - |
|
|
| 715 |
|
|
| 10,754 |
|
EBITDAre |
|
| 53,727 |
|
|
| (5,365 | ) |
|
| 27,918 |
|
|
| 16,151 |
|
|
| 27,264 |
|
Non-cash straight-line operating ground lease expense |
|
| 47 |
|
|
| 44 |
|
|
| 44 |
|
|
| 45 |
|
|
| 44 |
|
Adjusted EBITDAre |
|
| 53,774 |
|
|
| (5,321 | ) |
|
| 27,962 |
|
|
| 16,196 |
|
|
| 27,308 |
|
General and administrative expense |
|
| 9,523 |
|
|
| 6,025 |
|
|
| 6,726 |
|
|
| 7,100 |
|
|
| 8,119 |
|
Adjusted Hotel EBITDA |
| $ | 63,297 |
|
| $ | 704 |
|
| $ | 34,688 |
|
| $ | 23,296 |
|
| $ | 35,427 |
|
Hotels Owned
As of March 31, 2020,2021, the Company owned 231233 hotels with an aggregate of 29,53529,855 rooms located in 34 states.35 states, including one hotel with 102 rooms classified as held for sale, which was sold to an unrelated party in April 2021. The following tables summarize the number of hotels and rooms by brand and by state:
Number of Hotels and Guest Rooms by Brand | Number of Hotels and Guest Rooms by Brand | Number of Hotels and Guest Rooms by Brand |
| |||||||||||
Number of | Number of |
| Number of |
| Number of |
| ||||||||
Brand | Hotels | Rooms |
| Hotels |
| Rooms |
| |||||||
Hilton Garden Inn | 41 | 5,665 |
| 42 |
|
| 5,843 |
| ||||||
Hampton | 39 | 4,956 |
| 39 |
|
| 4,986 |
| ||||||
Courtyard | 36 | 4,948 |
| 36 |
|
| 4,948 |
| ||||||
Residence Inn | 33 | 3,939 |
| 33 |
|
| 3,939 |
| ||||||
Homewood Suites | 33 | 3,731 |
| 31 |
|
| 3,473 |
| ||||||
SpringHill Suites | 13 | 1,705 |
| 13 |
|
| 1,705 |
| ||||||
Fairfield | 11 | 1,300 |
| 11 |
|
| 1,300 |
| ||||||
Home2 Suites | 9 | 1,038 |
| 10 |
|
| 1,146 |
| ||||||
TownePlace Suites | 9 | 931 |
| 9 |
|
| 931 |
| ||||||
Marriott | 2 | 616 |
| 2 |
|
| 619 |
| ||||||
Embassy Suites | 2 | 316 |
| 2 |
|
| 316 |
| ||||||
Hyatt Place |
| 2 |
|
| 281 |
| ||||||||
Independent | 2 | 263 |
| 2 |
|
| 263 |
| ||||||
Hyatt Place | 1 | 127 | ||||||||||||
Hyatt House |
| 1 |
|
| 105 |
| ||||||||
Total | 231 | 29,535 |
| 233 |
|
| 29,855 |
|
26
Number of Hotels and Guest Rooms by State | ||||||||
Number of | Number of | |||||||
State | Hotels | Rooms | ||||||
Alabama | 15 | 1,434 | ||||||
Alaska | 2 | 304 | ||||||
Arizona | 12 | 1,644 | ||||||
Arkansas | 3 | 336 | ||||||
California | 27 | 3,807 | ||||||
Colorado | 4 | 567 | ||||||
Florida | 21 | 2,698 | ||||||
Georgia | 6 | 672 | ||||||
Idaho | 1 | 186 | ||||||
Illinois | 8 | 1,420 | ||||||
Indiana | 4 | 479 | ||||||
Iowa | 3 | 301 | ||||||
Kansas | 4 | 422 | ||||||
Louisiana | 3 | 422 | ||||||
Maine | 1 | 179 | ||||||
Maryland | 2 | 233 | ||||||
Massachusetts | 4 | 466 | ||||||
Michigan | 1 | 148 | ||||||
Minnesota | 3 | 404 | ||||||
Mississippi | 2 | 168 | ||||||
Missouri | 4 | 544 | ||||||
Nebraska | 4 | 621 | ||||||
New Jersey | 5 | 629 | ||||||
New York | 4 | 553 | ||||||
North Carolina | 10 | 1,091 | ||||||
Ohio | 2 | 252 | ||||||
Oklahoma | 4 | 545 | ||||||
Pennsylvania | 3 | 391 | ||||||
South Carolina | 5 | 538 | ||||||
Tennessee | 13 | 1,502 | ||||||
Texas | 31 | 3,755 | ||||||
Utah | 3 | 393 | ||||||
Virginia | 13 | 1,822 | ||||||
Washington | 4 | 609 | ||||||
Total | 231 | 29,535 |
Number of Hotels and Guest Rooms by State |
| |||||||
|
| Number of |
|
| Number of |
| ||
State |
| Hotels |
|
| Rooms |
| ||
Alabama |
|
| 15 |
|
|
| 1,434 |
|
Alaska |
|
| 2 |
|
|
| 304 |
|
Arizona |
|
| 14 |
|
|
| 1,903 |
|
Arkansas |
|
| 3 |
|
|
| 336 |
|
California |
|
| 26 |
|
|
| 3,721 |
|
Colorado |
|
| 4 |
|
|
| 567 |
|
Florida |
|
| 23 |
|
|
| 2,922 |
|
Georgia |
|
| 6 |
|
|
| 672 |
|
Idaho |
|
| 1 |
|
|
| 186 |
|
Illinois |
|
| 8 |
|
|
| 1,420 |
|
Indiana |
|
| 4 |
|
|
| 479 |
|
Iowa |
|
| 3 |
|
|
| 301 |
|
Kansas |
|
| 4 |
|
|
| 422 |
|
Louisiana |
|
| 3 |
|
|
| 422 |
|
Maine |
|
| 1 |
|
|
| 179 |
|
Maryland |
|
| 2 |
|
|
| 233 |
|
Massachusetts |
|
| 4 |
|
|
| 466 |
|
Michigan |
|
| 1 |
|
|
| 148 |
|
Minnesota |
|
| 3 |
|
|
| 405 |
|
Mississippi |
|
| 2 |
|
|
| 168 |
|
Missouri |
|
| 4 |
|
|
| 544 |
|
Nebraska |
|
| 4 |
|
|
| 621 |
|
New Jersey |
|
| 5 |
|
|
| 629 |
|
New York |
|
| 4 |
|
|
| 554 |
|
North Carolina |
|
| 9 |
|
|
| 973 |
|
Ohio |
|
| 2 |
|
|
| 252 |
|
Oklahoma |
|
| 4 |
|
|
| 545 |
|
Pennsylvania |
|
| 3 |
|
|
| 391 |
|
South Carolina |
|
| 5 |
|
|
| 538 |
|
Tennessee |
|
| 12 |
|
|
| 1,362 |
|
Texas |
|
| 31 |
|
|
| 3,755 |
|
Utah |
|
| 3 |
|
|
| 393 |
|
Virginia |
|
| 13 |
|
|
| 1,825 |
|
Washington |
|
| 4 |
|
|
| 609 |
|
Wisconsin |
|
| 1 |
|
|
| 176 |
|
Total |
|
| 233 |
|
|
| 29,855 |
|
|
|
|
|
|
|
|
|
|
27
The following table summarizes the location, brand, manager, date acquired or completed and number of rooms for each of the 231233 hotels the Company owned as of March 31, 2020.2021.
City | State | Brand | Manager | Date Acquired or Completed | Rooms | |||||||
Anchorage | AK | Embassy Suites | Stonebridge | 4/30/2010 | 169 | |||||||
Anchorage | AK | Home2 Suites | Stonebridge | 12/1/2017 | 135 | |||||||
Auburn | AL | Hilton Garden Inn | LBA | 3/1/2014 | 101 | |||||||
Birmingham | AL | Courtyard | LBA | 3/1/2014 | 84 | |||||||
Birmingham | AL | Hilton Garden Inn | LBA | 9/12/2017 | 104 | |||||||
Birmingham | AL | Home2 Suites | LBA | 9/12/2017 | 106 | |||||||
Birmingham | AL | Homewood Suites | McKibbon | 3/1/2014 | 95 | |||||||
Dothan | AL | Hilton Garden Inn | LBA | 6/1/2009 | 104 | |||||||
Dothan | AL | Residence Inn | LBA | 3/1/2014 | 84 | |||||||
Huntsville | AL | Hampton | LBA | 9/1/2016 | 98 | |||||||
Huntsville | AL | Hilton Garden Inn | LBA | 3/1/2014 | 101 | |||||||
Huntsville | AL | Home2 Suites | LBA | 9/1/2016 | 77 | |||||||
Huntsville | AL | Homewood Suites | LBA | 3/1/2014 | 107 | |||||||
Mobile | AL | Hampton | McKibbon | 9/1/2016 | 101 | |||||||
Montgomery | AL | Hilton Garden Inn | LBA | 3/1/2014 | 97 | |||||||
Montgomery | AL | Homewood Suites | LBA | 3/1/2014 | 91 | |||||||
Prattville | AL | Courtyard | LBA | 3/1/2014 | 84 | |||||||
Rogers | AR | Hampton | Raymond | 8/31/2010 | 122 | |||||||
Rogers | AR | Homewood Suites | Raymond | 4/30/2010 | 126 | |||||||
Rogers | AR | Residence Inn | Raymond | 3/1/2014 | 88 | |||||||
Chandler | AZ | Courtyard | North Central | 11/2/2010 | 150 | |||||||
Chandler | AZ | Fairfield | North Central | 11/2/2010 | 110 | |||||||
Phoenix | AZ | Courtyard | North Central | 11/2/2010 | 164 | |||||||
Phoenix | AZ | Courtyard | North Central | 9/1/2016 | 127 | |||||||
Phoenix | AZ | Hampton | North Central | 9/1/2016 | 125 | |||||||
Phoenix | AZ | Hampton | North Central | 5/2/2018 | 210 | |||||||
Phoenix | AZ | Homewood Suites | North Central | 9/1/2016 | 134 | |||||||
Phoenix | AZ | Residence Inn | North Central | 11/2/2010 | 129 | |||||||
Scottsdale | AZ | Hilton Garden Inn | North Central | 9/1/2016 | 122 | |||||||
Tempe | AZ | Hyatt House | Crestline | 8/13/2020 | 105 | |||||||
Tempe | AZ | Hyatt Place | Crestline | 8/13/2020 | 154 | |||||||
Tucson | AZ | Hilton Garden Inn | Western | 7/31/2008 | 125 | |||||||
Tucson | AZ | Residence Inn | Western | 3/1/2014 | 124 | |||||||
Tucson | AZ | TownePlace Suites | Western | 10/6/2011 | 124 | |||||||
Agoura Hills | CA | Homewood Suites | Dimension | 3/1/2014 | 125 | |||||||
Burbank | CA | Courtyard | Huntington | 8/11/2015 | 190 | |||||||
Burbank | CA | Residence Inn | Marriott | 3/1/2014 | 166 | |||||||
Burbank | CA | SpringHill Suites | Marriott | 7/13/2015 | 170 | |||||||
Clovis | CA | Hampton | Dimension | 7/31/2009 | 86 | |||||||
Clovis | CA | Homewood Suites | Dimension | 2/2/2010 | 83 | |||||||
Cypress | CA | Courtyard | Dimension | 3/1/2014 | 180 | |||||||
Cypress | CA | Hampton | Dimension | 6/29/2015 | 110 | |||||||
Oceanside | CA | Courtyard | Marriott | 9/1/2016 | 142 | |||||||
Oceanside | CA | Residence Inn | Marriott | 3/1/2014 | 125 | |||||||
Rancho Bernardo/San Diego | CA | Courtyard | InnVentures | 3/1/2014 | 210 | |||||||
Sacramento | CA | Hilton Garden Inn | Dimension | 3/1/2014 | 153 | |||||||
San Bernardino | CA | Residence Inn | InnVentures | 2/16/2011 | 95 | |||||||
San Diego | CA | Courtyard | Huntington | 9/1/2015 | 245 | |||||||
San Diego | CA | Hampton | Dimension | 3/1/2014 | 177 | |||||||
San Diego | CA | Hilton Garden Inn | InnVentures | 3/1/2014 | 200 |
28
City | State | Brand | Manager | Date Acquired or Completed | Rooms | |||||||
San Diego | CA | Residence Inn | Dimension | 3/1/2014 | 121 | |||||||
San Jose | CA | Homewood Suites | Dimension | 3/1/2014 | 140 | |||||||
San Juan Capistrano | CA | Residence Inn | Marriott | 9/1/2016 | 130 | |||||||
Santa Ana | CA | Courtyard | Dimension | 5/23/2011 | 155 | |||||||
Santa Clarita | CA | Courtyard | Dimension | 9/24/2008 | 140 | |||||||
Santa Clarita | CA | Fairfield | Dimension | 10/29/2008 | 66 | |||||||
Santa Clarita | CA | Hampton | Dimension | 10/29/2008 | 128 | |||||||
Santa Clarita | CA | Residence Inn | Dimension | 10/29/2008 | 90 | |||||||
Tustin | CA | Fairfield | Marriott | 9/1/2016 | 145 | |||||||
Tustin | CA | Residence Inn | Marriott | 9/1/2016 | 149 | |||||||
Colorado Springs | CO | Hampton | Chartwell | 9/1/2016 | 101 | |||||||
Denver | CO | Hilton Garden Inn | Stonebridge | 9/1/2016 | 221 | |||||||
Highlands Ranch | CO | Hilton Garden Inn | Dimension | 3/1/2014 | 128 | |||||||
Highlands Ranch | CO | Residence Inn | Dimension | 3/1/2014 | 117 | |||||||
Boca Raton | FL | Hilton Garden Inn | Dimension | 9/1/2016 | 149 | |||||||
Cape Canaveral | FL | Hampton | LBA | 4/30/2020 | 116 | |||||||
Cape Canaveral | FL | Homewood Suites | LBA | 9/1/2016 | 153 | |||||||
Cape Canaveral | FL | Home2 Suites | LBA | 4/30/2020 | 108 | |||||||
Fort Lauderdale | FL | Hampton | Dimension | 6/23/2015 | 156 | |||||||
Fort Lauderdale | FL | Residence Inn | LBA | 9/1/2016 | 156 | |||||||
Gainesville | FL | Hilton Garden Inn | McKibbon | 9/1/2016 | 104 | |||||||
Gainesville | FL | Homewood Suites | McKibbon | 9/1/2016 | 103 | |||||||
Jacksonville | FL | Homewood Suites | McKibbon | 3/1/2014 | 119 | |||||||
Jacksonville | FL | Hyatt Place | Crestline | 12/7/2018 | 127 | |||||||
Lakeland | FL | Courtyard | LBA | 3/1/2014 | 78 | |||||||
Miami | FL | Courtyard | Dimension | 3/1/2014 | 118 | |||||||
Miami | FL | Hampton | White Lodging | 4/9/2010 | 121 | |||||||
Miami | FL | Homewood Suites | Dimension | 3/1/2014 | 162 | |||||||
Orlando | FL | Fairfield | Marriott | 7/1/2009 | 200 | |||||||
Orlando | FL | Home2 Suites | LBA | 3/19/2019 | 128 | |||||||
Orlando | FL | SpringHill Suites | Marriott | 7/1/2009 | 200 | |||||||
Panama City | FL | Hampton | LBA | 3/12/2009 | 95 | |||||||
Panama City | FL | TownePlace Suites | LBA | 1/19/2010 | 103 | |||||||
Pensacola | FL | TownePlace Suites | McKibbon | 9/1/2016 | 97 | |||||||
Tallahassee | FL | Fairfield | LBA | 9/1/2016 | 97 | |||||||
Tallahassee | FL | Hilton Garden Inn | LBA | 3/1/2014 | 85 | |||||||
Tampa | FL | Embassy Suites | White Lodging | 11/2/2010 | 147 | |||||||
Albany | GA | Fairfield | LBA | 1/14/2010 | 87 | |||||||
Atlanta/Downtown | GA | Hampton | McKibbon | 2/5/2018 | 119 | |||||||
Atlanta/Perimeter Dunwoody | GA | Hampton | LBA | 6/28/2018 | 132 | |||||||
Atlanta | GA | Home2 Suites | McKibbon | 7/1/2016 | 128 | |||||||
Macon | GA | Hilton Garden Inn | LBA | 3/1/2014 | 101 | |||||||
Savannah | GA | Hilton Garden Inn | Newport | 3/1/2014 | 105 | |||||||
Cedar Rapids | IA | Hampton | Aimbridge | 9/1/2016 | 103 | |||||||
Cedar Rapids | IA | Homewood Suites | Aimbridge | 9/1/2016 | 95 | |||||||
Davenport | IA | Hampton | Aimbridge | 9/1/2016 | 103 | |||||||
Boise | ID | Hampton | Raymond | 4/30/2010 | 186 | |||||||
Des Plaines | IL | Hilton Garden Inn | Raymond | 9/1/2016 | 252 | |||||||
Hoffman Estates | IL | Hilton Garden Inn | White Lodging | 9/1/2016 | 184 | |||||||
Mettawa | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 170 | |||||||
Mettawa | IL | Residence Inn | White Lodging | 11/2/2010 | 130 |
29
City | State | Brand | Manager | Date Acquired or Completed | Rooms | |||||||
Rosemont | IL | Hampton | Raymond | 9/1/2016 | 158 | |||||||
Schaumburg | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 166 | |||||||
Skokie | IL | Hampton | Raymond | 9/1/2016 | 225 | |||||||
Warrenville | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 135 | |||||||
Indianapolis | IN | SpringHill Suites | White Lodging | 11/2/2010 | 130 | |||||||
Merrillville | IN | Hilton Garden Inn | White Lodging | 9/1/2016 | 124 | |||||||
Mishawaka | IN | Residence Inn | White Lodging | 11/2/2010 | 106 | |||||||
South Bend | IN | Fairfield | White Lodging | 9/1/2016 | 119 | |||||||
Overland Park | KS | Fairfield | Raymond | 3/1/2014 | 110 | |||||||
Overland Park | KS | Residence Inn | Raymond | 3/1/2014 | 120 | |||||||
Overland Park | KS | SpringHill Suites | Raymond | 3/1/2014 | 102 | |||||||
Wichita | KS | Courtyard | Aimbridge | 3/1/2014 | 90 | |||||||
Lafayette | LA | Hilton Garden Inn | LBA | 7/30/2010 | 153 | |||||||
Lafayette | LA | SpringHill Suites | LBA | 6/23/2011 | 103 | |||||||
New Orleans | LA | Homewood Suites | Dimension | 3/1/2014 | 166 | |||||||
Andover | MA | SpringHill Suites | Marriott | 11/5/2010 | 136 | |||||||
Marlborough | MA | Residence Inn | Crestline | 3/1/2014 | 112 | |||||||
Westford | MA | Hampton | Crestline | 3/1/2014 | 110 | |||||||
Westford | MA | Residence Inn | Crestline | 3/1/2014 | 108 | |||||||
Annapolis | MD | Hilton Garden Inn | Crestline | 3/1/2014 | 126 | |||||||
Silver Spring | MD | Hilton Garden Inn | Crestline | 7/30/2010 | 107 | |||||||
Portland | ME | Residence Inn | Crestline | 10/13/2017 | 179 | |||||||
Novi | MI | Hilton Garden Inn | White Lodging | 11/2/2010 | 148 | |||||||
Maple Grove | MN | Hilton Garden Inn | North Central | 9/1/2016 | 121 | |||||||
Rochester | MN | Hampton | Raymond | 8/3/2009 | 124 | |||||||
St. Paul | MN | Hampton | Raymond | 3/4/2019 | 160 | |||||||
Kansas City | MO | Hampton | Raymond | 8/31/2010 | 122 | |||||||
Kansas City | MO | Residence Inn | Raymond | 3/1/2014 | 106 | |||||||
St. Louis | MO | Hampton | Raymond | 8/31/2010 | 190 | |||||||
St. Louis | MO | Hampton | Raymond | 4/30/2010 | 126 | |||||||
Hattiesburg | MS | Courtyard | LBA | 3/1/2014 | 84 | |||||||
Hattiesburg | MS | Residence Inn | LBA | 12/11/2008 | 84 | |||||||
Carolina Beach | NC | Courtyard | Crestline | 3/1/2014 | 144 | |||||||
Charlotte | NC | Fairfield | Newport | 9/1/2016 | 94 | |||||||
Durham | NC | Homewood Suites | McKibbon | 12/4/2008 | 122 | |||||||
Fayetteville | NC | Home2 Suites | LBA | 2/3/2011 | 118 | |||||||
Fayetteville | NC | Residence Inn | LBA | 3/1/2014 | 92 | |||||||
Greensboro | NC | SpringHill Suites | Newport | 3/1/2014 | 82 | |||||||
Jacksonville | NC | Home2 Suites | LBA | 9/1/2016 | 105 | |||||||
Wilmington | NC | Fairfield | Crestline | 3/1/2014 | 122 | |||||||
Winston-Salem | NC | Hampton | McKibbon | 9/1/2016 | 94 | |||||||
Omaha | NE | Courtyard | Marriott | 3/1/2014 | 181 | |||||||
Omaha | NE | Hampton | White Lodging | 9/1/2016 | 139 | |||||||
Omaha | NE | Hilton Garden Inn | White Lodging | 9/1/2016 | 178 | |||||||
Omaha | NE | Homewood Suites | White Lodging | 9/1/2016 | 123 | |||||||
Cranford | NJ | Homewood Suites | Dimension | 3/1/2014 | 108 | |||||||
Mahwah | NJ | Homewood Suites | Dimension | 3/1/2014 | 110 | |||||||
Mount Laurel | NJ | Homewood Suites | Newport | 1/11/2011 | 118 | |||||||
Somerset | NJ | Courtyard | Newport | 3/1/2014 | 162 | |||||||
West Orange | NJ | Courtyard | Newport | 1/11/2011 | 131 | |||||||
Islip/Ronkonkoma | NY | Hilton Garden Inn | Crestline | 3/1/2014 | 166 | |||||||
New York | NY | Independent | Highgate | 3/1/2014 | 208 |
City | State | Brand | Manager | Date Acquired or Completed | Rooms | |||||||
San Jose | CA | Homewood Suites | Dimension | 3/1/2014 | 140 | |||||||
San Juan Capistrano | CA | Residence Inn | Marriott | 9/1/2016 | 130 | |||||||
Santa Ana | CA | Courtyard | Dimension | 5/23/2011 | 155 | |||||||
Santa Clarita | CA | Courtyard | Dimension | 9/24/2008 | 140 | |||||||
Santa Clarita | CA | Fairfield | Dimension | 10/29/2008 | 66 | |||||||
Santa Clarita | CA | Hampton | Dimension | 10/29/2008 | 128 | |||||||
Santa Clarita | CA | Residence Inn | Dimension | 10/29/2008 | 90 | |||||||
Tulare | CA | Hampton | InnVentures | 3/1/2014 | 86 | |||||||
Tustin | CA | Fairfield | Marriott | 9/1/2016 | 145 | |||||||
Tustin | CA | Residence Inn | Marriott | 9/1/2016 | 149 | |||||||
Colorado Springs | CO | Hampton | Chartwell | 9/1/2016 | 101 | |||||||
Denver | CO | Hilton Garden Inn | Stonebridge | 9/1/2016 | 221 | |||||||
Highlands Ranch | CO | Hilton Garden Inn | Dimension | 3/1/2014 | 128 | |||||||
Highlands Ranch | CO | Residence Inn | Dimension | 3/1/2014 | 117 | |||||||
Boca Raton | FL | Hilton Garden Inn | White Lodging | 9/1/2016 | 149 | |||||||
Cape Canaveral | FL | Homewood Suites | LBA | 9/1/2016 | 153 | |||||||
Fort Lauderdale | FL | Hampton | LBA | 6/23/2015 | 156 | |||||||
Fort Lauderdale | FL | Residence Inn | LBA | 9/1/2016 | 156 | |||||||
Gainesville | FL | Hilton Garden Inn | McKibbon | 9/1/2016 | 104 | |||||||
Gainesville | FL | Homewood Suites | McKibbon | 9/1/2016 | 103 | |||||||
Jacksonville | FL | Homewood Suites | McKibbon | 3/1/2014 | 119 | |||||||
Jacksonville | FL | Hyatt Place | Crestline | 12/7/2018 | 127 | (1) | ||||||
Lakeland | FL | Courtyard | LBA | 3/1/2014 | 78 | |||||||
Miami | FL | Courtyard | Dimension | 3/1/2014 | 118 | |||||||
Miami | FL | Hampton | White Lodging | 4/9/2010 | 121 | |||||||
Miami | FL | Homewood Suites | Dimension | 3/1/2014 | 162 | |||||||
Orlando | FL | Fairfield | Marriott | 7/1/2009 | 200 | |||||||
Orlando | FL | Home2 Suites | LBA | 3/19/2019 | 128 | |||||||
Orlando | FL | SpringHill Suites | Marriott | 7/1/2009 | 200 | |||||||
Panama City | FL | Hampton | LBA | 3/12/2009 | 95 | |||||||
Panama City | FL | TownePlace Suites | LBA | 1/19/2010 | 103 | |||||||
Pensacola | FL | TownePlace Suites | McKibbon | 9/1/2016 | 97 | |||||||
Tallahassee | FL | Fairfield | LBA | 9/1/2016 | 97 | |||||||
Tallahassee | FL | Hilton Garden Inn | LBA | 3/1/2014 | 85 | |||||||
Tampa | FL | Embassy Suites | White Lodging | 11/2/2010 | 147 | |||||||
Albany | GA | Fairfield | LBA | 1/14/2010 | 87 | |||||||
Atlanta/Downtown | GA | Hampton | McKibbon | 2/5/2018 | 119 | |||||||
Atlanta/Perimeter Dunwoody | GA | Hampton | LBA | 6/28/2018 | 132 | |||||||
Atlanta | GA | Home2 Suites | McKibbon | 7/1/2016 | 128 | |||||||
Macon | GA | Hilton Garden Inn | LBA | 3/1/2014 | 101 | |||||||
Savannah | GA | Hilton Garden Inn | Newport | 3/1/2014 | 105 | |||||||
Cedar Rapids | IA | Hampton | Aimbridge | 9/1/2016 | 103 | |||||||
Cedar Rapids | IA | Homewood Suites | Aimbridge | 9/1/2016 | 95 | |||||||
Davenport | IA | Hampton | Aimbridge | 9/1/2016 | 103 | |||||||
Boise | ID | Hampton | Raymond | 4/30/2010 | 186 | |||||||
Des Plaines | IL | Hilton Garden Inn | Raymond | 9/1/2016 | 252 | |||||||
Hoffman Estates | IL | Hilton Garden Inn | White Lodging | 9/1/2016 | 184 | |||||||
Mettawa | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 170 | |||||||
Mettawa | IL | Residence Inn | White Lodging | 11/2/2010 | 130 | |||||||
Rosemont | IL | Hampton | Raymond | 9/1/2016 | 158 | |||||||
Schaumburg | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 166 | |||||||
Skokie | IL | Hampton | Raymond | 9/1/2016 | 225 | |||||||
Warrenville | IL | Hilton Garden Inn | White Lodging | 11/2/2010 | 135 |
30
City | State | Brand | Manager | Date Acquired or Completed | Rooms | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Syracuse | NY | Courtyard | Crestline | 10/16/2015 | 102 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Syracuse | NY | Residence Inn | Crestline | 10/16/2015 | 78 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mason | OH | Hilton Garden Inn | Raymond | 9/1/2016 | 110 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Twinsburg | OH | Hilton Garden Inn | Aimbridge | 10/7/2008 | 142 |
31
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 6 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
flows generated from the Company’s properties and availability under its revolving credit facility. As of March 31, The credit agreements governing the unsecured credit facilities contain mandatory prepayment requirements, customary affirmative and negative covenants and events of default. The credit 32 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 and restrictions on certain investments. As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company
The
Except as otherwise set forth in the amendments, 33
See 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, for a description of the Company’s debt instruments as of March 31,
invests in income producing properties. Capital Uses Although there can be no assurances, the Company anticipates that available cash Distributions To maintain its REIT status, the Company is required to distribute at least 90% of its ordinary income. Share Repurchases In May 2020, the Company’s Board of Directors approved an extension of its existing Capital Improvements The Company 34 with respect to the hotels. As of March 31,
Cash Management Activities As part of the cost sharing arrangements discussed in Note 6 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 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. 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 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 Subsequent Events On April 15, 2021, the Company paid approximately $2.2 million, or $0.01 per outstanding common share, in distributions to its common shareholders. In February 2021, the Company entered into a purchase and sale agreement with an unrelated party for the sale of its 102-room Overland Park, Kansas SpringHill Suites for a gross sales price of approximately $5.3 million. On April 30,
Item 3. Quantitative and Qualitative Disclosures About Market Risk As of March 31, As of March 31, 2021. In addition to its 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 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 and borrowings outstanding under its unsecured credit facilities at March 31,
Item 4. Controls and Procedures Senior management, including the Chief Executive Officer, Chief Financial Officer and Chief 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 Accounting Officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 36
PART II. OTHER INFORMATION Item 1. Legal Proceedings
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 Company, have a material adverse effect on the Company’s consolidated financial position or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Dividends
During the Extended Covenant Waiver Period (as defined in the Company’s amended unsecured credit facilities), the Company is subject to more restrictive limits on its ability to pay distributions on its common shares. See “Liquidity and Capital Resources” in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, appearing in Part I this Quarterly Report on Form 10-Q. Item 6. Exhibits
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.
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