UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20212022
☐ | 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) (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 November 1, 2021: 228,354,2144, 2022: 228,752,610
Apple Hospitality REIT, Inc.
Form 10-Q
Index
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| Page Number |
PART I. FINANCIAL INFORMATION |
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| Item 1. | 3 | |
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| Consolidated Balance Sheets – September 30, | 3 |
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| Consolidated Statements of Operations and Comprehensive Income | 4 |
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| Consolidated Statements of Shareholders’ Equity – three and nine months ended September 30, | 5 |
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| Consolidated Statements of Cash Flows – nine months ended September 30, | 6 |
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| 7 | |
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| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
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| Item 4. |
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PART II. OTHER INFORMATION |
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| Item 1. | 42 | |
Item 2. |
| 42 | |
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| Item 6. |
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This Form 10-Q includes references to certain trademarks or service marks. The AC Hotels by Marriott®, Aloft Hotels®, Courtyard by Marriott®, Fairfield by Marriott®, Marriott® 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)
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (unaudited) |
|
|
|
|
|
| (unaudited) |
|
|
|
| |||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Investment in real estate, net of accumulated depreciation and amortization of $1,266,122 and $1,235,698, respectively |
| $ | 4,541,424 |
|
| $ | 4,732,896 |
| ||||||||
Assets held for sale |
|
| 0 |
|
|
| 5,316 |
| ||||||||
Investment in real estate, net of accumulated depreciation and amortization of |
| $ | 4,567,000 |
|
| $ | 4,677,185 |
| ||||||||
Cash and cash equivalents |
|
| 39,432 |
|
|
| 5,556 |
|
|
| 25,573 |
|
|
| 3,282 |
|
Restricted cash-furniture, fixtures and other escrows |
|
| 34,446 |
|
|
| 28,812 |
|
|
| 38,821 |
|
|
| 36,667 |
|
Due from third party managers, net |
|
| 52,322 |
|
|
| 22,137 |
|
|
| 65,110 |
|
|
| 40,052 |
|
Other assets, net |
|
| 37,203 |
|
|
| 35,042 |
|
|
| 80,999 |
|
|
| 33,341 |
|
Total Assets |
| $ | 4,704,827 |
|
| $ | 4,829,759 |
|
| $ | 4,777,503 |
|
| $ | 4,790,527 |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Debt, net |
| $ | 1,366,621 |
|
| $ | 1,482,571 |
|
| $ | 1,318,319 |
|
| $ | 1,438,758 |
|
Finance lease liabilities |
|
| 111,706 |
|
|
| 219,981 |
|
|
| 111,969 |
|
|
| 111,776 |
|
Accounts payable and other liabilities |
|
| 98,386 |
|
|
| 97,860 |
|
|
| 94,219 |
|
|
| 92,672 |
|
Total Liabilities |
|
| 1,576,713 |
|
|
| 1,800,412 |
|
|
| 1,524,507 |
|
|
| 1,643,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shareholders' Equity |
|
|
|
|
|
|
|
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|
|
|
|
|
| ||
Preferred stock, authorized 30,000,000 shares; NaN issued and outstanding |
|
| 0 |
|
|
| 0 |
| ||||||||
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 228,354,214 and 223,212,346 shares, respectively |
|
| 4,570,217 |
|
|
| 4,488,419 |
| ||||||||
Accumulated other comprehensive loss |
|
| (24,650 | ) |
|
| (42,802 | ) | ||||||||
Preferred stock, authorized 30,000,000 shares; none issued and outstanding |
|
| - |
|
|
| - |
| ||||||||
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding |
|
| 4,579,198 |
|
|
| 4,569,352 |
| ||||||||
Accumulated other comprehensive income (loss) |
|
| 38,354 |
|
|
| (15,508 | ) | ||||||||
Distributions greater than net income |
|
| (1,417,453 | ) |
|
| (1,416,270 | ) |
|
| (1,364,556 | ) |
|
| (1,406,523 | ) |
Total Shareholders' Equity |
|
| 3,128,114 |
|
|
| 3,029,347 |
|
|
| 3,252,996 |
|
|
| 3,147,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total Liabilities and Shareholders' Equity |
| $ | 4,704,827 |
|
| $ | 4,829,759 |
|
| $ | 4,777,503 |
|
| $ | 4,790,527 |
|
See notes to consolidated financial statements.
3
Apple Hospitality REIT, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except per share data)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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| |||||||
Room |
| $ | 260,415 |
|
| $ | 140,116 |
|
| $ | 640,062 |
|
| $ | 434,923 |
|
| $ | 315,940 |
|
| $ | 260,415 |
|
| $ | 866,286 |
|
| $ | 640,062 |
|
Food and beverage |
|
| 6,315 |
|
|
| 2,235 |
|
|
| 14,186 |
|
|
| 14,386 |
|
|
| 11,870 |
|
|
| 6,315 |
|
|
| 32,353 |
|
|
| 14,186 |
|
Other |
|
| 10,434 |
|
|
| 6,475 |
|
|
| 29,033 |
|
|
| 18,605 |
|
|
| 13,340 |
|
|
| 10,434 |
|
|
| 40,657 |
|
|
| 29,033 |
|
Total revenue |
|
| 277,164 |
|
|
| 148,826 |
|
|
| 683,281 |
|
|
| 467,914 |
|
|
| 341,150 |
|
|
| 277,164 |
|
|
| 939,296 |
|
|
| 683,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
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|
| ||||
Expenses: |
|
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|
|
|
|
|
|
|
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|
|
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|
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| ||||
Hotel operating expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating |
|
| 61,954 |
|
|
| 33,124 |
|
|
| 153,290 |
|
|
| 120,860 |
|
|
| 81,320 |
|
|
| 61,954 |
|
|
| 221,715 |
|
|
| 153,290 |
|
Hotel administrative |
|
| 23,126 |
|
|
| 16,625 |
|
|
| 62,408 |
|
|
| 54,079 |
|
|
| 27,516 |
|
|
| 23,126 |
|
|
| 78,711 |
|
|
| 62,408 |
|
Sales and marketing |
|
| 23,015 |
|
|
| 13,728 |
|
|
| 58,283 |
|
|
| 47,517 |
|
|
| 28,533 |
|
|
| 23,015 |
|
|
| 78,494 |
|
|
| 58,283 |
|
Utilities |
|
| 11,410 |
|
|
| 9,967 |
|
|
| 31,322 |
|
|
| 25,465 |
|
|
| 13,383 |
|
|
| 11,410 |
|
|
| 34,226 |
|
|
| 31,322 |
|
Repair and maintenance |
|
| 12,600 |
|
|
| 8,842 |
|
|
| 34,711 |
|
|
| 26,983 |
|
|
| 15,632 |
|
|
| 12,600 |
|
|
| 43,468 |
|
|
| 34,711 |
|
Franchise fees |
|
| 12,274 |
|
|
| 6,603 |
|
|
| 30,058 |
|
|
| 20,516 |
|
|
| 14,949 |
|
|
| 12,274 |
|
|
| 41,015 |
|
|
| 30,058 |
|
Management fees |
|
| 9,574 |
|
|
| 4,873 |
|
|
| 23,031 |
|
|
| 15,425 |
|
|
| 11,734 |
|
|
| 9,574 |
|
|
| 31,955 |
|
|
| 23,031 |
|
Total hotel operating expense |
|
| 153,953 |
|
|
| 93,762 |
|
|
| 393,103 |
|
|
| 310,845 |
|
|
| 193,067 |
|
|
| 153,953 |
|
|
| 529,584 |
|
|
| 393,103 |
|
Property taxes, insurance and other |
|
| 17,927 |
|
|
| 20,523 |
|
|
| 54,936 |
|
|
| 58,820 |
|
|
| 19,052 |
|
|
| 17,927 |
|
|
| 56,510 |
|
|
| 54,936 |
|
General and administrative |
|
| 13,261 |
|
|
| 6,726 |
|
|
| 29,815 |
|
|
| 22,274 |
|
|
| 10,271 |
|
|
| 13,261 |
|
|
| 30,216 |
|
|
| 29,815 |
|
Loss on impairment of depreciable real estate assets |
|
| 0 |
|
|
| 0 |
|
|
| 10,754 |
|
|
| 4,382 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,754 |
|
Depreciation and amortization |
|
| 44,217 |
|
|
| 50,171 |
|
|
| 139,313 |
|
|
| 149,590 |
|
|
| 45,135 |
|
|
| 44,217 |
|
|
| 135,781 |
|
|
| 139,313 |
|
Total expense |
|
| 229,358 |
|
|
| 171,182 |
|
|
| 627,921 |
|
|
| 545,911 |
|
|
| 267,525 |
|
|
| 229,358 |
|
|
| 752,091 |
|
|
| 627,921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gain on sale of real estate |
|
| 44 |
|
|
| 0 |
|
|
| 3,664 |
|
|
| 8,785 |
|
|
| 1,785 |
|
|
| 44 |
|
|
| 1,785 |
|
|
| 3,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating income (loss) |
|
| 47,850 |
|
|
| (22,356 | ) |
|
| 59,024 |
|
|
| (69,212 | ) | ||||||||||||||||
Operating income |
|
| 75,410 |
|
|
| 47,850 |
|
|
| 188,990 |
|
|
| 59,024 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest and other expense, net |
|
| (15,977 | ) |
|
| (18,531 | ) |
|
| (53,108 | ) |
|
| (52,483 | ) |
|
| (14,933 | ) |
|
| (15,977 | ) |
|
| (44,785 | ) |
|
| (53,108 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income taxes |
|
| 31,873 |
|
|
| (40,887 | ) |
|
| 5,916 |
|
|
| (121,695 | ) | ||||||||||||||||
Income before income taxes |
|
| 60,477 |
|
|
| 31,873 |
|
|
| 144,205 |
|
|
| 5,916 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense |
|
| (114 | ) |
|
| (61 | ) |
|
| (309 | ) |
|
| (265 | ) |
|
| (1,331 | ) |
|
| (114 | ) |
|
| (1,712 | ) |
|
| (309 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 31,759 |
|
| $ | (40,948 | ) |
| $ | 5,607 |
|
| $ | (121,960 | ) | ||||||||||||||||
Net income |
| $ | 59,146 |
|
| $ | 31,759 |
|
| $ | 142,493 |
|
| $ | 5,607 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Interest rate derivatives |
|
| 3,426 |
|
|
| 2,739 |
|
|
| 18,152 |
|
|
| (43,622 | ) |
|
| 16,024 |
|
|
| 3,426 |
|
|
| 53,862 |
|
|
| 18,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Comprehensive income (loss) |
| $ | 35,185 |
|
| $ | (38,209 | ) |
| $ | 23,759 |
|
| $ | (165,582 | ) | ||||||||||||||||
Comprehensive income |
| $ | 75,170 |
|
| $ | 35,185 |
|
| $ | 196,355 |
|
| $ | 23,759 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted net income (loss) per common share |
| $ | 0.14 |
|
| $ | (0.18 | ) |
| $ | 0.02 |
|
| $ | (0.55 | ) | ||||||||||||||||
Basic and diluted net income per common share |
| $ | 0.26 |
|
| $ | 0.14 |
|
| $ | 0.62 |
|
| $ | 0.02 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Weighted average common shares outstanding - basic and diluted |
|
| 228,436 |
|
|
| 223,293 |
|
|
| 225,664 |
|
|
| 223,620 |
|
|
| 228,991 |
|
|
| 228,436 |
|
|
| 228,992 |
|
|
| 225,664 |
|
See notes to consolidated financial statements.
4
Apple Hospitality REIT, Inc.
(Unaudited)
(in thousands, except per share data)
Three Months Ended September 30, 2021 and 2020 |
| |||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2022 and 2021 | Three Months Ended September 30, 2022 and 2021 |
| ||||||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
| Accumulated Other |
|
| Distributions |
|
|
|
|
|
| Common Stock |
|
| Accumulated |
|
| Distributions |
|
|
|
| |||||||||||||||
|
| Number of Shares |
|
| Amount |
|
| Comprehensive Income (Loss) |
|
| Greater Than Net Income |
|
| Total |
|
| Number |
|
| Amount |
|
| Comprehensive |
|
| Greater Than |
|
| Total |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Balance at June 30, 2022 |
|
| 228,886 |
|
| $ | 4,579,590 |
|
| $ | 22,330 |
|
| $ | (1,380,294 | ) |
| $ | 3,221,626 |
| ||||||||||||||||||||
Share based compensation, net |
|
| 45 |
|
|
| 996 |
|
|
| - |
|
|
| - |
|
|
| 996 |
| ||||||||||||||||||||
Equity issuance costs |
|
| - |
|
|
| (12 | ) |
|
| - |
|
|
| - |
|
|
| (12 | ) | ||||||||||||||||||||
Common shares repurchased |
|
| (97 | ) |
|
| (1,376 | ) |
|
| - |
|
|
| - |
|
|
| (1,376 | ) | ||||||||||||||||||||
Interest rate derivatives |
|
| - |
|
|
| - |
|
|
| 16,024 |
|
|
| - |
|
|
| 16,024 |
| ||||||||||||||||||||
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 59,146 |
|
|
| 59,146 |
| ||||||||||||||||||||
Distributions declared to shareholders ($0.19 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (43,408 | ) |
|
| (43,408 | ) | ||||||||||||||||||||
Balance at September 30, 2022 |
|
| 228,834 |
|
| $ | 4,579,198 |
|
| $ | 38,354 |
|
| $ | (1,364,556 | ) |
| $ | 3,252,996 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance at June 30, 2021 |
|
| 228,341 |
|
| $ | 4,569,332 |
|
| $ | (28,076 | ) |
| $ | (1,446,933 | ) |
| $ | 3,094,323 |
|
|
| 228,341 |
|
| $ | 4,569,332 |
|
| $ | (28,076 | ) |
| $ | (1,446,933 | ) |
| $ | 3,094,323 |
|
Share based compensation, net |
|
| 13 |
|
|
| 915 |
|
|
| - |
|
|
| - |
|
|
| 915 |
|
|
| 13 |
|
|
| 915 |
|
|
| - |
|
|
| - |
|
|
| 915 |
|
Issuance of common shares, net |
|
| - |
|
|
| (30 | ) |
|
| - |
|
|
| - |
|
|
| (30 | ) |
|
| - |
|
|
| (30 | ) |
|
| - |
|
|
| - |
|
|
| (30 | ) |
Interest rate derivatives |
|
| - |
|
|
| - |
|
|
| 3,426 |
|
|
| - |
|
|
| 3,426 |
|
|
| - |
|
|
| - |
|
|
| 3,426 |
|
|
| - |
|
|
| 3,426 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 31,759 |
|
|
| 31,759 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 31,759 |
|
|
| 31,759 |
|
Distributions declared to shareholders ($0.01 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,279 | ) |
|
| (2,279 | ) | ||||||||||||||||||||
Distributions declared to shareholders ($0.01 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,279 | ) |
|
| (2,279 | ) | ||||||||||||||||||||
Balance at September 30, 2021 |
|
| 228,354 |
|
| $ | 4,570,217 |
|
| $ | (24,650 | ) |
| $ | (1,417,453 | ) |
| $ | 3,128,114 |
|
|
| 228,354 |
|
| $ | 4,570,217 |
|
| $ | (24,650 | ) |
| $ | (1,417,453 | ) |
| $ | 3,128,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at June 30, 2020 |
|
| 223,224 |
|
| $ | 4,488,034 |
|
| $ | (51,059 | ) |
| $ | (1,324,016 | ) |
| $ | 3,112,959 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Nine Months Ended September 30, 2022 and 2021 | Nine Months Ended September 30, 2022 and 2021 |
| ||||||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
| Accumulated |
| Distributions |
|
|
| ||||||||||||||||||||||||||||||
|
| Number |
|
| Amount |
|
| Comprehensive |
|
| Greater Than |
|
| Total |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Balance at December 31, 2021 |
|
| 228,256 |
|
| $ | 4,569,352 |
|
| $ | (15,508 | ) |
| $ | (1,406,523 | ) |
| $ | 3,147,321 |
| ||||||||||||||||||||
Share based compensation, net |
|
| 685 |
|
|
| 11,585 |
|
|
| - |
|
|
| - |
|
|
| 11,585 |
| ||||||||||||||||||||
Equity issuance costs |
|
| - |
|
|
| (218 | ) |
|
| - |
|
|
| - |
|
|
| (218 | ) | ||||||||||||||||||||
Common shares repurchased |
|
| (107 | ) |
|
| (1,521 | ) |
|
| - |
|
|
| - |
|
|
| (1,521 | ) | ||||||||||||||||||||
Interest rate derivatives |
|
| - |
|
|
| - |
|
|
| 53,862 |
|
|
| - |
|
|
| 53,862 |
| ||||||||||||||||||||
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 142,493 |
|
|
| 142,493 |
| ||||||||||||||||||||
Distributions declared to shareholders ($0.44 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (100,526 | ) |
|
| (100,526 | ) | ||||||||||||||||||||
Balance at September 30, 2022 |
|
| 228,834 |
|
| $ | 4,579,198 |
|
| $ | 38,354 |
|
| $ | (1,364,556 | ) |
| $ | 3,252,996 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Balance at December 31, 2020 |
|
| 223,212 |
|
| $ | 4,488,419 |
|
| $ | (42,802 | ) |
| $ | (1,416,270 | ) |
| $ | 3,029,347 |
| ||||||||||||||||||||
Share based compensation, net |
|
| 7 |
|
|
| 591 |
|
|
| - |
|
|
| - |
|
|
| 591 |
|
|
| 465 |
|
|
| 6,762 |
|
|
| - |
|
|
| - |
|
|
| 6,762 |
|
Issuance of common shares, net |
|
| - |
|
|
| (337 | ) |
|
| - |
|
|
| - |
|
|
| (337 | ) |
|
| 4,677 |
|
|
| 75,036 |
|
|
| - |
|
|
| - |
|
|
| 75,036 |
|
Interest rate derivatives |
|
| - |
|
|
| - |
|
|
| 2,739 |
|
|
| - |
|
|
| 2,739 |
|
|
| - |
|
|
| - |
|
|
| 18,152 |
|
|
| - |
|
|
| 18,152 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (40,948 | ) |
|
| (40,948 | ) | ||||||||||||||||||||
Balance at September 30, 2020 |
|
| 223,231 |
|
| $ | 4,488,288 |
|
| $ | (48,320 | ) |
| $ | (1,364,964 | ) |
| $ | 3,075,004 |
| ||||||||||||||||||||
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,607 |
|
|
| 5,607 |
| ||||||||||||||||||||
Distributions declared to shareholders ($0.03 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (6,790 | ) |
|
| (6,790 | ) | ||||||||||||||||||||
Balance at September 30, 2021 |
|
| 228,354 |
|
| $ | 4,570,217 |
|
| $ | (24,650 | ) |
| $ | (1,417,453 | ) |
| $ | 3,128,114 |
|
Nine Months Ended September 30, 2021 and 2020 |
| |||||||||||||||||||
|
| Common Stock |
|
| Accumulated Other |
|
| Distributions |
|
|
|
|
| |||||||
|
| Number of Shares |
|
| Amount |
|
| Comprehensive Income (Loss) |
|
| Greater Than Net Income |
|
| Total |
| |||||
Balance at December 31, 2020 |
|
| 223,212 |
|
| $ | 4,488,419 |
|
| $ | (42,802 | ) |
| $ | (1,416,270 | ) |
| $ | 3,029,347 |
|
Share based compensation, net |
|
| 465 |
|
|
| 6,762 |
|
|
| - |
|
|
| - |
|
|
| 6,762 |
|
Issuance of common shares, net |
|
| 4,677 |
|
|
| 75,036 |
|
|
| - |
|
|
| - |
|
|
| 75,036 |
|
Interest rate derivatives |
|
| - |
|
|
| - |
|
|
| 18,152 |
|
|
| - |
|
|
| 18,152 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,607 |
|
|
| 5,607 |
|
Distributions declared to shareholders ($0.03 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (6,790 | ) |
|
| (6,790 | ) |
Balance at September 30, 2021 |
|
| 228,354 |
|
| $ | 4,570,217 |
|
| $ | (24,650 | ) |
| $ | (1,417,453 | ) |
| $ | 3,128,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 |
|
| 223,863 |
|
| $ | 4,493,763 |
|
| $ | (4,698 | ) |
| $ | (1,198,052 | ) |
| $ | 3,291,013 |
|
Share based compensation, net |
|
| 889 |
|
|
| 9,198 |
|
|
| - |
|
|
| - |
|
|
| 9,198 |
|
Issuance of common shares, net |
|
| - |
|
|
| (337 | ) |
|
|
|
|
|
|
|
|
|
| (337 | ) |
Common shares repurchased |
|
| (1,521 | ) |
|
| (14,336 | ) |
|
| - |
|
|
| - |
|
|
| (14,336 | ) |
Interest rate derivatives |
|
| - |
|
|
| - |
|
|
| (43,622 | ) |
|
| - |
|
|
| (43,622 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (121,960 | ) |
|
| (121,960 | ) |
Distributions declared to shareholders ($0.20 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (44,952 | ) |
|
| (44,952 | ) |
Balance at September 30, 2020 |
|
| 223,231 |
|
| $ | 4,488,288 |
|
| $ | (48,320 | ) |
| $ | (1,364,964 | ) |
| $ | 3,075,004 |
|
See notes to consolidated financial statements.
5
Apple Hospitality REIT, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income (loss) |
| $ | 5,607 |
|
| $ | (121,960 | ) | ||||||||
Adjustments to reconcile net loss to cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Net income |
| $ | 142,493 |
|
| $ | 5,607 |
| ||||||||
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
| ||||||||||
Depreciation and amortization |
|
| 139,313 |
|
|
| 149,590 |
|
|
| 135,781 |
|
|
| 139,313 |
|
Loss on impairment of depreciable real estate assets |
|
| 10,754 |
|
|
| 4,382 |
|
|
| - |
|
|
| 10,754 |
|
Gain on sale of real estate |
|
| (3,664 | ) |
|
| (8,785 | ) |
|
| (1,785 | ) |
|
| (3,664 | ) |
Other non-cash expenses, net |
|
| 8,208 |
|
|
| 6,055 |
|
|
| 6,582 |
|
|
| 8,208 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Increase in due from third party managers, net |
|
| (30,383 | ) |
|
| (3,037 | ) |
|
| (25,058 | ) |
|
| (30,383 | ) |
Increase in other assets, net |
|
| (755 | ) |
|
| (1,627 | ) |
|
| (4,069 | ) |
|
| (755 | ) |
Increase in accounts payable and other liabilities |
|
| 17,282 |
|
|
| 1,581 |
|
|
| 19,257 |
|
|
| 17,282 |
|
Net cash provided by operating activities |
|
| 146,362 |
|
|
| 26,199 |
|
|
| 273,201 |
|
|
| 146,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Acquisition of hotel properties, net |
|
| (197,228 | ) |
|
| (88,687 | ) |
|
| - |
|
|
| (197,228 | ) |
Refunds (payments) for potential acquisitions, net |
|
| (2,645 | ) |
|
| 585 |
| ||||||||
Disbursements for potential acquisitions, net |
|
| (1,602 | ) |
|
| (2,645 | ) | ||||||||
Capital improvements |
|
| (9,138 | ) |
|
| (44,383 | ) |
|
| (34,921 | ) |
|
| (9,138 | ) |
Net proceeds from sale of real estate |
|
| 231,008 |
|
|
| 44,385 |
|
|
| 8,293 |
|
|
| 231,008 |
|
Net cash provided by (used in) investing activities |
|
| 21,997 |
|
|
| (88,100 | ) |
|
| (28,230 | ) |
|
| 21,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net proceeds related to issuance of common shares |
|
| 75,036 |
|
|
| (247 | ) | ||||||||
Net proceeds (disbursements) related to issuance of common shares |
|
| (218 | ) |
|
| 75,036 |
| ||||||||
Repurchases of common shares |
|
| - |
|
|
| (14,336 | ) |
|
| (1,521 | ) |
|
| - |
|
Repurchases of common shares to satisfy employee withholding requirements |
|
| (1,650 | ) |
|
| (1,748 | ) |
|
| (4,415 | ) |
|
| (1,650 | ) |
Distributions paid to common shareholders |
|
| (4,510 | ) |
|
| (67,324 | ) |
|
| (86,792 | ) |
|
| (4,510 | ) |
Net proceeds from (payments on) revolving credit facility |
|
| (105,800 | ) |
|
| 78,800 |
| ||||||||
Net payments on revolving credit facility |
|
| (76,000 | ) |
|
| (105,800 | ) | ||||||||
Proceeds from term loans and senior notes |
|
| - |
|
|
| 50,000 |
|
|
| 125,000 |
|
|
| - |
|
Proceeds from mortgage debt and other loans |
|
| - |
|
|
| 81,520 |
| ||||||||
Payments of mortgage debt and other loans |
|
| (66,349 | ) |
|
| (41,523 | ) |
|
| (166,243 | ) |
|
| (66,349 | ) |
Payments of finance lease settlement |
|
| (24,000 | ) |
|
| - |
| ||||||||
Principal payments on finance leases |
|
| (108 | ) |
|
| (24,000 | ) | ||||||||
Financing costs |
|
| (1,576 | ) |
|
| (2,283 | ) |
|
| (10,229 | ) |
|
| (1,576 | ) |
Net cash provided by (used in) financing activities |
|
| (128,849 | ) |
|
| 82,859 |
| ||||||||
Net cash used in financing activities |
|
| (220,526 | ) |
|
| (128,849 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net change in cash, cash equivalents and restricted cash |
|
| 39,510 |
|
|
| 20,958 |
|
|
| 24,445 |
|
|
| 39,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash, cash equivalents and restricted cash, beginning of period |
|
| 34,368 |
|
|
| 34,661 |
|
|
| 39,949 |
|
|
| 34,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash, cash equivalents and restricted cash, end of period |
| $ | 73,878 |
|
| $ | 55,619 |
|
| $ | 64,394 |
|
| $ | 73,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest paid |
| $ | 49,735 |
|
| $ | 46,737 |
|
| $ | 42,651 |
|
| $ | 49,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Notes payable originated from acquisitions |
| $ | 56,000 |
|
| $ | 20,551 |
|
| $ | - |
|
| $ | 56,000 |
|
Accrued distribution to common shareholders |
| $ | 2,279 |
|
| $ | - |
|
| $ | 15,981 |
|
| $ | 2,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents, beginning of period |
| $ | 5,556 |
|
| $ | - |
|
| $ | 3,282 |
|
| $ | 5,556 |
|
Restricted cash-furniture, fixtures and other escrows, beginning of period |
|
| 28,812 |
|
|
| 34,661 |
|
|
| 36,667 |
|
|
| 28,812 |
|
Cash, cash equivalents and restricted cash, beginning of period |
| $ | 34,368 |
|
| $ | 34,661 |
|
| $ | 39,949 |
|
| $ | 34,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents, end of period |
| $ | 39,432 |
|
| $ | 27,435 |
|
| $ | 25,573 |
|
| $ | 39,432 |
|
Restricted cash-furniture, fixtures and other escrows, end of period |
|
| 34,446 |
|
|
| 28,184 |
|
|
| 38,821 |
|
|
| 34,446 |
|
Cash, cash equivalents and restricted cash, end of period |
| $ | 73,878 |
|
| $ | 55,619 |
|
| $ | 64,394 |
|
| $ | 73,878 |
|
See notes to consolidated financial statements.
6
Apple Hospitality REIT, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization
Organization
Apple Hospitality REIT, Inc., formed in November 2007 as a Virginia corporation, together with its wholly-owned subsidiaries (the “Company”), is a Virginia corporation that has elected to be treated as aself-advised 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 1one reportable segment. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. Although the Company has interests in potential variable interest entities through its purchase commitments, it is not the primary beneficiary as the Company does not have any elements of power in the decision-making process of these entities, and therefore does not consolidate the entities. As of September 30, 2021,2022, the Company owned 215218 hotels with an aggregate of 28,08528,693 rooms located in 3536 states. The Company’s common shares are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “APLE.”
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include all of the information required by U.S. generally accepted accounting principles (“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, 20202021 (the “2020“2021 Form 10-K”). Operating results for the three and nine months ended September 30, 20212022 are not necessarily indicative of the results that may be expected for the twelve monthtwelve-month period ending December 31, 2021.2022.
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.
Coronavirus COVID-19 Pandemic
As a result of the coronavirus COVID-19 pandemic (“COVID-19”) and subsequent variants and the impact it has had on travel and the broader economy throughout the U.S. since March 2020, the Company’s hotels have experienced significant declines in occupancy which have hadin 2020 and are expected2021 relative to continue to have a significant negative effect on the Company’s revenue and operating results.2019 levels. While occupancy has largely recovered significantly duringto 2019 pre-pandemic levels, due to the first nine months of 2021,continued impacts from the COVID-19 variants on the hotel industry and the general economy, there remains significant uncertainty as to when or if operations at the hotels will fully return to pre-pandemic levels.levels on a sustained basis.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed based upon the weighted average number of shares outstanding during the period. Diluted net income (loss) per common share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the period. Basic and diluted net income (loss) per common share were the same for each of the periods presented.
Accounting Standards Recently Adopted
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 Nos. 2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge effectiveness in hedging relationships that have been modified to replace a reference rate. The guidance in ASU Nos. 2020-04 and 2021-01 became effective upon issuance and the provisions of the ASUs have not had a material impact on the Company’s
7
consolidated financial statements and related disclosures as of September 30, 2021.2022. The provisions of these updates will generally affect the Company by allowing, among other things, the following:
• Modifications of the Company’s unsecured credit facilities (as defined below) to replace the London Interbank Offered Rate (“LIBOR”) with a substitute index to be accounted for as a non-substantial modification and not considered a debt extinguishment. • Changes to the floating interest rate index used in the Company’s interest rate swaps to not be considered a change to the critical terms of the hedge and therefore not requiring a dedesignation of the hedging relationship.
|
|
|
|
TheIn July 2022, the Company has not entered into any contract modifications yetamended each of its unsecured credit facilities and interest rate swap agreements to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”) as it directly relatesthe reference rate. In accordance with ASU 2020-04, as amended, these amendments were accounted for as non-substantial modifications. See Notes 4 and 5 for more information regarding amendments made 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.swap agreements.
Accounting Standards Recently Issued
Accounting for Certain Equity Options
In May 2021, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)ASU No. 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (Topics 260, 470, 718 and 815), which provides updated guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The provisions of this update are effective for annual and interim periods beginning after December 15, 2021. The adoption of this update is not material to the Company’s consolidated financial statements.
Accounting for Funds Received as Government Assistance
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) to increase the transparency of government assistance disclosures including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The provisions of this update are effective for annual periods beginning after December 15, 2021. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.
2. Investment in Real Estate
The Company’s investment in real estate consisted of the following (in thousands):
|
| September 30, |
|
| December 31, |
|
| September 30, |
| December 31, |
| |||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Land |
| $ | 771,639 |
|
| $ | 725,512 |
|
| $ | 794,317 |
|
| $ | 794,899 |
|
Building and improvements |
|
| 4,441,034 |
|
|
| 4,525,850 |
|
|
| 4,593,388 |
|
|
| 4,584,829 |
|
Furniture, fixtures and equipment |
|
| 475,807 |
|
|
| 499,865 |
|
|
| 505,065 |
|
|
| 488,773 |
|
Finance ground lease assets |
|
| 102,084 |
|
|
| 203,617 |
|
|
| 102,084 |
|
|
| 102,084 |
|
Franchise fees |
|
| 16,982 |
|
|
| 13,750 |
|
|
| 18,367 |
|
|
| 17,862 |
|
|
|
| 5,807,546 |
|
|
| 5,968,594 |
|
|
| 6,013,221 |
|
|
| 5,988,447 |
|
Less accumulated depreciation and amortization |
|
| (1,266,122 | ) |
|
| (1,235,698 | ) |
|
| (1,446,221 | ) |
|
| (1,311,262 | ) |
Investment in real estate, net |
| $ | 4,541,424 |
|
| $ | 4,732,896 |
|
| $ | 4,567,000 |
|
| $ | 4,677,185 |
|
As of September 30, 2021,2022, the Company owned 215218 hotels with an aggregate of 28,08528,693 rooms located in 3536 states.
The Company leases all of its hotels to its wholly-owned taxable REIT subsidiary (or a subsidiary thereof) under a master hotel lease agreements.agreement.
8
Hotel Acquisitions
TheThere were no acquisitions during the nine months ended September 30, 2022. During the year ended December 31, 2021, the Company acquired 4eight hotels, including four hotels during the nine months ended September 30, 2021. The following table sets forth the location, brand, manager, date acquired, number of rooms and gross purchase price, excluding transaction costs, for each hotel. All dollar amounts are in thousands.
City |
| State |
| Brand |
| Manager |
| Date Acquired |
| Rooms |
|
| Gross Purchase Price |
|
| State |
| Brand |
| Manager |
| Date |
| Rooms |
|
| Gross |
| ||||
Madison |
| WI |
| Hilton Garden Inn |
| Raymond |
| 2/18/2021 |
|
| 176 |
|
| $ | 49,599 |
|
| WI |
| Hilton Garden Inn |
| Raymond |
| 2/18/2021 |
|
| 176 |
|
| $ | 49,599 |
|
Portland |
| ME |
| AC Hotels |
| Crestline |
| 8/20/2021 |
|
| 178 |
|
|
| 66,750 |
|
| ME |
| AC Hotels |
| Crestline |
| 8/20/2021 |
|
| 178 |
|
|
| 66,750 |
|
Greenville |
| SC |
| Hyatt Place |
| Crestline |
| 9/1/2021 |
|
| 130 |
|
|
| 30,000 |
|
| SC |
| Hyatt Place |
| Crestline |
| 9/1/2021 |
|
| 130 |
|
|
| 30,000 |
|
Portland |
| ME |
| Aloft |
| Crestline |
| 9/10/2021 |
|
| 157 |
|
|
| 51,150 |
|
| ME |
| Aloft |
| Crestline |
| 9/10/2021 |
|
| 157 |
|
|
| 51,150 |
|
Memphis |
| TN |
| Hilton Garden Inn |
| Crestline |
| 10/28/2021 |
|
| 150 |
|
|
| 38,000 |
| ||||||||||||||||
Fort Worth |
| TX |
| Hilton Garden Inn |
| Raymond |
| 11/17/2021 |
|
| 157 |
|
|
| 29,500 |
| ||||||||||||||||
Fort Worth |
| TX |
| Homewood Suites |
| Raymond |
| 11/17/2021 |
|
| 112 |
|
|
| 21,500 |
| ||||||||||||||||
Portland |
| OR |
| Hampton |
| Raymond |
| 11/17/2021 |
|
| 243 |
|
|
| 75,000 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| 641 |
|
| $ | 197,499 |
|
|
|
|
| 1,303 |
|
| $ | 361,499 |
|
8
DuringIn 2021, the year ended December 31, 2020, the Company acquired 4 hotels, including 4 hotels during the nine months ended September 30, 2020. The following table sets forth the location, brand, manager, date acquired, number of rooms and gross purchase price, excluding transaction costs, for each hotel. All dollar amounts are in thousands.
City |
| State |
| Brand |
| Manager |
| Date Acquired |
| Rooms |
|
| Gross Purchase Price |
| ||
Cape Canaveral |
| 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 |
|
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 bore interest, which was payable monthly, at a floating annual rate equal to the London Inter-Bank Offered Rate for a one-month term (“one-month LIBOR”) plus a margin of 2.0% for the first six months of the loan term and 3.0% for the second six months of the loan term. In July 2020, the principal amount of the note was reduced by approximately $1.1 million representing a credit from the developer for shared construction savings, and the note was repaid in full on April 12, 2021. The Company used borrowings under its $425 million revolving credit facility (as defined below) to purchase the Tempe, Arizona and Madison, Wisconsin and Memphis, Tennessee hotels, and used available cash to purchase the Portland, Maine and Greenville, South Carolina hotels and used a mix of available cash and borrowings under its $425 million revolving credit facility to purchase the Fort Worth, Texas and Portland, Oregon 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 4four hotels acquired during the nine months ended September 30, 2021, the amount of revenue and operating income included in the Company’s consolidated statement of operations from the date of acquisition through September 30, 2021 was approximately $5.8$5.8 million and $0.7$0.7 million, respectively. For the 4 hotels acquired during the nine months ended September 30, 2020, the amount of revenue and operating loss included in the Company’s consolidated statement of operations from the date of acquisition through September 30, 2020 was approximately $1.5 million and $(0.9) million, respectively.
Seattle Land Acquisition
On August 16, 2021, the Company purchased the fee interest in the land at the Seattle, Washington Residence Inn, previously held under a finance ground lease. The Company utilized $24.0$24.0 million of its available cash and entered into a one-year note payable to the seller for $56.0$56.0 million to fund the purchase price of $80.0$80.0 million. The note payable bearsbore interest, which iswas payable monthly, at a fixed annual rate of 4.0%4.0%. On June 16, 2022, the note was repaid in full. The land purchase was accounted for as a retirement of the finance lease, with the difference of $16.6$16.6 million between the carrying amount of the net right-of-use asset of $94.5$94.5 million and the finance lease liability of $111.1$111.1 million applied as an adjustment to the carrying amount of the acquired land.
Hotel Purchase Contract Commitments
As of September 30, 2021,2022, the Company had outstanding contracts for the potential purchase of 5three hotels for a total expected purchase price of approximately $242.6$163.6 million. Of these fivethree hotels, 4two are existing, and the Company expects to completecompleted the purchase of the two existing hotels on October 25, 2022. See Note 9 for additional information concerning these hotels in the fourth quartertwo acquisitions. The remaining hotel purchase contract as of 2021; and 1September 30, 2022 is for a hotel is under development andthat is currently planned to be completed and opened for business in 2023,early 2024, at which time the Company expects to complete the purchase of this hotel. Although the Company is working towards acquiring these hotels, in each casethis hotel, there are a number of conditions to closing that have not yet been satisfied and there can be no assurance that closingsclosing on these hotelsthis hotel will occur under the outstanding purchase contracts.contract. If the sellers meetseller meets all of the conditions to closing, the Company is obligated to specifically perform under these contracts. this contract and acquire the hotel. 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) deposits paid, and gross purchase price for each of the contracts outstanding at September 30, 2021.2022. All dollar amounts are in thousands.
Location |
| Brands |
| Date of Purchase Contract |
| Rooms |
|
| Refundable Deposits |
|
| Gross Purchase Price |
| |||
Madison, WI (1) |
| Embassy Suites |
| 7/27/2021 |
|
| 260 |
|
| $ | 893 |
|
| $ | 78,598 |
|
Memphis, TN |
| Hilton Garden Inn |
| 8/27/2021 |
|
| 150 |
|
|
| 300 |
|
|
| 38,000 |
|
Fort Worth, TX |
| Hilton Garden Inn |
| 9/2/2021 |
|
| 157 |
|
|
| 176 |
|
|
| 29,500 |
|
Fort Worth, TX |
| Homewood Suites |
| 9/2/2021 |
|
| 112 |
|
|
| 128 |
|
|
| 21,500 |
|
Portland, OR |
| Hampton |
| 9/2/2021 |
|
| 243 |
|
|
| 446 |
|
|
| 75,000 |
|
|
|
|
|
|
|
| 922 |
|
| $ | 1,943 |
|
| $ | 242,598 |
|
9
Location |
| Brands |
| Date of |
| Rooms |
|
| Refundable |
|
| Gross |
| |||
Madison, WI (1) |
| Embassy Suites |
| 7/27/2021 |
|
| 260 |
|
| $ | 893 |
|
| $ | 78,598 |
|
Louisville, KY (2) |
| AC Hotels |
| 9/8/2022 |
|
| 156 |
|
|
| 750 |
|
|
| 51,000 |
|
Pittsburgh, PA (2) |
| AC Hotels |
| 9/8/2022 |
|
| 134 |
|
|
| 500 |
|
|
| 34,000 |
|
|
|
|
|
|
|
| 550 |
|
| $ | 2,143 |
|
| $ | 163,598 |
|
(1) This hotel is currently under development. The table shows the expected number of rooms upon hotel completion and the expected franchise brand. Assuming all conditions to closing are met, the purchase of this hotel is expected to occur in early 2024. If the seller meets all of the conditions to closing, the Company is obligated to specifically perform under the contract. As this property is under development, at this time, the seller has not met all of the conditions to closing. (2) The Company completed the purchase of these hotels in October 2022. See Note 9 for additional information concerning these two acquisitions.
|
|
3. Dispositions
Dispositions
During the nine months ended September 30, 2022, the Company sold one hotel, a 55-room independent boutique hotel in Richmond, Virginia, to an unrelated party for a gross sales price of approximately $8.5 million, resulting in a gain on sale of approximately $1.8 million, net of transaction costs, which is included in the Company's consolidated statement of operations for the nine months ended September 30, 2022. The hotel had a total carrying value of approximately $6.5 million at the time of the sale.
During the year ended December 31, 2021, the Company sold 23 hotels in 4four separate transactions with unrelated parties for a total combined gross sales price of approximately $234.6$234.6 million, resulting in a combined net gain on sale, after giving effect to impairment charges discussed below, of approximately $3.7$3.6 million, net of transaction costs, which is included in the Company’s consolidated statement of operations for the nine monthsyear ended September 30,December 31, 2021. The 23 hotels had a total carrying value of approximately $227.2$227.2 million at the time of sale. The following table lists the 23 hotels sold:
City |
| State |
| Brand |
| Date Sold |
| Rooms |
| |
Charlotte |
| NC |
| Homewood Suites |
| 2/25/2021 |
|
| 118 |
|
Memphis |
| TN |
| Homewood Suites |
| 3/16/2021 |
|
| 140 |
|
Overland Park |
| KS |
| SpringHill Suites |
| 4/30/2021 |
|
| 102 |
|
Montgomery |
| AL |
| Hilton Garden Inn |
| 7/22/2021 |
|
| 97 |
|
Montgomery |
| AL |
| Homewood Suites |
| 7/22/2021 |
|
| 91 |
|
Rogers |
| AR |
| Residence Inn |
| 7/22/2021 |
|
| 88 |
|
Phoenix |
| AZ |
| Courtyard |
| 7/22/2021 |
|
| 127 |
|
Lakeland |
| FL |
| Courtyard |
| 7/22/2021 |
|
| 78 |
|
Albany |
| GA |
| Fairfield |
| 7/22/2021 |
|
| 87 |
|
Schaumburg |
| IL |
| Hilton Garden Inn |
| 7/22/2021 |
|
| 166 |
|
Andover |
| MA |
| SpringHill Suites |
| 7/22/2021 |
|
| 136 |
|
Fayetteville |
| NC |
| Residence Inn |
| 7/22/2021 |
|
| 92 |
|
Greenville |
| SC |
| Residence Inn |
| 7/22/2021 |
|
| 78 |
|
Jackson |
| TN |
| Hampton |
| 7/22/2021 |
|
| 85 |
|
Johnson City |
| TN |
| Courtyard |
| 7/22/2021 |
|
| 90 |
|
Allen |
| TX |
| Hampton |
| 7/22/2021 |
|
| 103 |
|
Allen |
| TX |
| Hilton Garden Inn |
| 7/22/2021 |
|
| 150 |
|
Beaumont |
| TX |
| Residence Inn |
| 7/22/2021 |
|
| 133 |
|
Burleson/Fort Worth |
| TX |
| Hampton |
| 7/22/2021 |
|
| 88 |
|
El Paso |
| TX |
| Hilton Garden Inn |
| 7/22/2021 |
|
| 145 |
|
Irving |
| TX |
| Homewood Suites |
| 7/22/2021 |
|
| 77 |
|
Richmond |
| VA |
| SpringHill Suites |
| 7/22/2021 |
|
| 103 |
|
Vancouver |
| WA |
| SpringHill Suites |
| 7/22/2021 |
|
| 119 |
|
Total |
|
|
|
|
|
|
|
| 2,493 |
|
During the year ended December 31, 2020, the Company sold 3 hotels in 3 transactions with unrelated parties for a total combined gross sales price of approximately $55.3 million, resulting in a combined gain on sale of approximately $10.9 million, which is included in the Company’s consolidated statement of operations for the year ended December 31, 2020. The three hotels had a total carrying value of approximately $43.8 million at the time of the sale. The following table lists the three hotels sold:
|
|
|
|
| ||||||
|
|
|
|
| ||||||
|
|
|
|
| ||||||
|
|
|
|
| ||||||
|
|
Excluding gains on sale of real estate, the Company’s consolidated statements of operations for the three months ended September 30, 2022 and 2021 include an operating lossincome of approximately $(6.8)$0.1 million and $(6.7)$1.4 million, respectively, and for the nine months ended September 30, 2022 and 2021 include an operating income (loss) of approximately $0.3 million and 2020, $(6.7) million,
10
respectively, relating to the results of operations of the 2624 hotels noted above (the 23 hotelsone hotel sold in the first nine months of 20212022 and the 323 hotels sold in 2020)2021) for the period of ownership. The sale of these properties does not represent a strategic shift that has, or will have, a major effect on the Company’s operations and financial results, and therefore the operating results for the period of ownership of these properties are included in income from continuing operations for the three and nine months ended September 30, 20212022 and 2020. A portion2021. The net proceeds from the sale of the one hotel during the three and nine months ended September 30, 2022 were used for general corporate purposes, while the net proceeds
10
from the salessale of the 23 hotels in 2021 were used to pay down borrowings onunder the Company’s $425 million revolving credit facility and the remaining proceeds are available for general corporate purposes, including acquisitions of hotel properties.
Hotel Sale Contracts and Loss on Impairment of Depreciable Real Estate Assets
During the first quarter of 2021, the Company identified 20 hotels for potential sale and, in April 2021, entered into a purchase contract with an unrelated party for the sale of the hotels for a gross sales price of $211.0$211.0 million. As a result, the Company recognized impairment losses totaling approximately $9.4$9.4 million in the first quarter of 2021, to adjust the carrying values of four of these hotels to their estimated fair values. The fair values of these properties were based on broker opinions of value using multiple methods to determine their value, including but not limited to replacement value, discounted cash flows and the income approach based on historical and forecasted operating results of the specific properties. These valuations are Level 3 inputs under the fair value hierarchy. The Company completed the sale of the hotels in July 2021 and used the net proceeds from the sale to pay down borrowings on the Company’s revolving credit facility and for general corporate purposes, including acquisitions of hotel properties.2021.
Additionally, during the first quarter of 2021, the Company identified the Overland Park, Kansas SpringHill Suites for potential sale and, in February 2021, entered into a purchase contract with an unrelated party for the sale of the hotel for a gross sales price of $ $5.35.3 million. As a result, the Company recognized an impairment loss totaling approximately $1.3$1.3 million in the first quarter of 2021, to adjust the carrying value of the hotel to its estimated fair value less cost to sell, which was based on the contracted sales price, a Level 1 input under the fair value hierarchy. The Company completed the sale of the hotel in April 2021 and 2021.used the net proceeds from the sale to pay down borrowings on the Company’s revolving credit facility.
4. Debt
In June 2020, the Company entered into a purchase contract with an unrelated party for the sale of its 140-room Memphis, Tennessee Homewood Suites for a gross sales price of approximately $9.0 million. As a result, the Company recognized an impairment loss of approximately $4.4 million in the second quarter of 2020, representing the difference between the carrying value of the hotel and the contracted sales price, net of estimated selling costs, which is a Level 1 input under the fair value hierarchy. The Company completed the sale of the hotel in March 2021 and used the net proceeds from the sale to pay down borrowings on the Company’s revolving credit facility.Summary
4. Debt
Summary
As of September 30, 20212022 and December 31, 2020,2021, the Company’s debt consisted of the following (in thousands):
|
| September 30, |
|
| December 31, |
| ||
Revolving credit facility (1) |
| $ | - |
|
| $ | 76,000 |
|
Term loans and senior notes, net (1) |
|
| 986,904 |
|
|
| 865,189 |
|
Mortgage debt, net |
|
| 331,415 |
|
|
| 497,569 |
|
Debt, net |
| $ | 1,318,319 |
|
| $ | 1,438,758 |
|
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Revolving credit facility |
| $ | - |
|
| $ | 105,800 |
|
Term loans and senior notes, net |
|
| 864,705 |
|
|
| 864,225 |
|
Mortgage debt, net |
|
| 501,916 |
|
|
| 512,546 |
|
Debt, net |
| $ | 1,366,621 |
|
| $ | 1,482,571 |
|
The aggregate amounts of principal payable under the Company’s total debt obligations as of September 30, 20212022 (including the revolving credit facility,Revolving Credit Facility (if any) (as defined below), term loans, senior notes and mortgage debt), for the remainder of this fiscal year, each of the next fivefour fiscal years and thereafter are as follows (in thousands):
2021 (October - December) |
| $ | 4,375 |
| ||||
2022 |
|
| 165,831 |
| ||||
2022 (October - December) |
| $ | 2,587 |
| ||||
2023 |
|
| 296,213 |
|
|
| 96,214 |
|
2024 |
|
| 338,597 |
|
|
| 113,597 |
|
2025 |
|
| 245,140 |
|
|
| 245,140 |
|
2026 |
|
| 74,649 |
| ||||
Thereafter |
|
| 322,265 |
|
|
| 794,616 |
|
|
|
| 1,372,421 |
|
|
| 1,326,803 |
|
Unamortized fair value adjustment of assumed debt |
|
| 1,070 |
|
|
| 843 |
|
Unamortized debt issuance costs |
|
| (6,870 | ) |
|
| (9,327 | ) |
Total |
| $ | 1,366,621 |
|
| $ | 1,318,319 |
|
The Company uses interest rate swaps to manage its interest rate risk on a portion of its variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the London Inter-Bank Offered Rate annual SOFR
11
for a one-month term (“one-month LIBOR”SOFR”)plus a 0.10% SOFR spread adjustment. 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
11
and variable-rate debt, after giving effect to its interest rate swaps in effect at September 30, 20212022 and December 31, 2020,2021, is set forth below. All dollar amounts are in thousands.
|
| September 30, |
|
| Percentage |
|
| December 31, |
|
| Percentage |
| ||||
Fixed-rate debt (1) |
| $ | 1,151,803 |
|
|
| 87 | % |
| $ | 1,318,046 |
|
|
| 91 | % |
Variable-rate debt |
|
| 175,000 |
|
|
| 13 | % |
|
| 126,000 |
|
|
| 9 | % |
Total |
| $ | 1,326,803 |
|
|
|
|
| $ | 1,444,046 |
|
|
|
| ||
Weighted-average interest rate of debt |
|
| 3.72 | % |
|
|
|
|
| 3.38 | % |
|
|
|
|
| September 30, 2021 |
|
| Percentage |
|
| December 31, 2020 |
|
| Percentage |
| ||||
Fixed-rate debt (1) |
| $ | 1,322,421 |
|
|
| 96 | % |
| $ | 1,287,219 |
|
|
| 86 | % |
Variable-rate debt |
|
| 50,000 |
|
|
| 4 | % |
|
| 201,351 |
|
|
| 14 | % |
Total |
| $ | 1,372,421 |
|
|
|
|
|
| $ | 1,488,570 |
|
|
|
|
|
Weighted-average interest rate of debt |
|
| 3.47 | % |
|
|
|
|
|
| 3.86 | % |
|
|
|
|
|
|
Credit Facilities
$1.2 Billion Credit Facility
Prior to July 2022, the Company utilized an unsecured credit facility comprised of (i) a $425 million revolving credit facility with an initial maturity date of July 27, 2022 (the "$425 million revolving credit facility") and (ii) a $425 million term loan facility consisting of two term loans: a $200 million term loan with a maturity date of July 27, 2023, and a $225 million term loan with a maturity date of January 31, 2024, both funded in July 2018 (collectively, the “$850 million credit facility”).On July 25, 2022, the Company entered into an amendment and restatement of its $850 million credit facility, which among other things, increased the borrowing capacity to $1.2 billion, extended the maturity dates, transitioned the reference rate from LIBOR to SOFR, reduced the margin rate for calculating interest rates and modified certain of the financial maintenance covenants (the “$1.2 billion credit facility”). The $1.2 billion credit facility is comprised of (i) a $650 million revolving credit facility with an initial maturity date of July 25, 2026 (the "Revolving Credit Facility"), (ii) a $275 million term loan with a maturity date of July 25, 2027, funded at closing, and (iii) a $300 million term loan with a maturity date of January 31, 2028 (including a $150 million delayed draw option until 180 days from closing), of which $200 million was funded at closing (the "$575 million term loan facility"). At closing, the Company repaid the outstanding $425 million term loans and $50 million outstanding under the $425 million revolving credit facility under the $850 million credit facility with proceeds from the $1.2 billion credit facility.
Subject to certain conditions, including covenant compliance and additional fees, the Revolving Credit Facility maturity date may be extended up to one year. The credit agreement for the $1.2 billion credit facility contains mandatory prepayment requirements, customary affirmative and negative covenants (as described below), restrictions on certain investments and events of default, which are similar to the terms of the previous credit agreement for the $850 million credit facility. The Company may make voluntary prepayments, in whole or in part, at any time. Interest payments on the $1.2 billion credit facility are due monthly, and the interest rate, subject to certain exceptions, is equal to the one-month SOFR plus a 0.10% SOFR spread adjustment 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. 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 Revolving Credit Facility, based on the amount of borrowings outstanding during the quarter.
A summary of the 2022 debt refinancing is set forth below. All dollar amounts are in thousands.
| 2022 Refinancing |
| Prior to Refinancing | ||||||||||||
| Capacity |
|
| Maturity Date |
| Interest Rate |
| Capacity |
|
| Maturity Date |
| Interest Rate (1) | ||
Revolving credit facility | $ | 650,000 |
|
| 7/25/2026 |
| SOFR + 0.10% + 1.40% - 2.25% |
| $ | 425,000 |
|
| 7/27/2022 |
| LIBOR + 1.40% - 2.25% |
Term loan |
| 275,000 |
|
| 7/25/2027 |
| SOFR + 0.10% + 1.35% - 2.20% |
|
| 200,000 |
|
| 7/27/2023 |
| LIBOR + 1.35% - 2.20% |
Term loan |
| 300,000 |
|
| 1/31/2028 |
| SOFR + 0.10% + 1.35% - 2.20% |
|
| 225,000 |
|
| 1/31/2024 |
| LIBOR + 1.35% - 2.20% |
Total | $ | 1,225,000 |
|
|
|
|
|
| $ | 850,000 |
|
|
|
|
|
12
$225 Million Term Loan Facility
The Company also has an unsecured 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 (the “$225 million term loan 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 SOFR plus a 0.10% SOFR spread adjustment 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. In July 2022, this term loan was amended to align the financial covenants with the $1.2 billion credit facility and to replace the reference rate with SOFR.
2017 $85 Million Term Loan Facility
On July 25, 2017, the Company entered into an unsecured term loan facility with a maturity date of July 25, 2024, consisting of one term loan (the “2017 $85 million term loan facility”), that was funded at closing. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions. Interest payments on the 2017 $85 million term loan facility are due monthly, and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.30% to 2.10%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. In July 2022, this term loan was amended to align the financial covenants with the $1.2 billion credit facility and to replace the reference rate with SOFR.
2019 $85 Million Term Loan Facility
On December 31, 2019, the Company entered into an unsecured term loan facility with a maturity date of December 31, 2029, consisting of one 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 under the Company’s $425 million revolving 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 SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.70% to 2.55%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. In July 2022, this term loan was amended to align the financial covenants with the $1.2 billion credit facility and to replace the reference rate with SOFR.
$50 Million Senior Notes Facility
On March 16, 2020, the Company entered into an unsecured 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”). Net proceeds from the $50 million senior notes facility were available to provide funding for general corporate purposes. 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 the note agreement. In July 2022, this notes facility was amended to align the financial covenants with the $1.2 billion credit facility.
$75 Million Senior Notes Facility
On June 2, 2022, the Company entered into an unsecured senior notes facility with a maturity date of June 2, 2029, consisting of senior notes totaling $75 million funded at closing (the “$75 million senior notes facility”, and collectively with the $850 million credit facility and, after the amendments in July 2022, the $1.2 billion credit facility, the $225 million term loan facility, the 2017 $85 million term loan facility, the 2019 $85 million term loan facility and the $50 million senior notes facility, the “unsecured credit facilities”). Net proceeds from the $75 million senior notes facility were available to provide funding for general corporate purposes, including the repayment of borrowings under the Company’s $425 million revolving credit facility and repayment of mortgage debt. 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 $75 million senior notes facility are due quarterly, and the interest rate, subject to certain exceptions, ranges from an annual rate of 4.88% to 5.63% depending on the Company’s leverage ratio, as calculated under the terms of the note agreement. In July 2022, this notes facility was amended to align the financial covenants with the $1.2 billion credit facility.
13
As of September 30, 2022 and December 31, 2021, the details of the Company’s unsecured credit facilities were as set forth in the table below. All dollar amounts are in thousands.
|
|
|
|
|
| September 30, 2022 |
| December 31, 2021 | ||||||
|
| Origination |
| Maturity |
| Outstanding Balance |
| Interest Rate (1) |
| Outstanding Balance |
| Interest Rate (2) | ||
Revolving credit facility (3) (4) |
| 7/25/2022 |
| 7/25/2026 |
| $ | - |
| SOFR + 0.10% + 1.40% - 2.25% |
| $ | 76,000 |
| LIBOR + 1.40% - 2.25% |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Term loans and senior notes |
|
|
|
|
|
|
|
|
|
|
|
| ||
$275 million term loan (4) |
| 7/25/2022 |
| 7/25/2027 |
|
| 275,000 |
| SOFR + 0.10% + 1.35% - 2.20% |
|
| - |
| n/a |
$200 million term loan (4) |
| 7/27/2018 |
| repaid 7/25/22 |
|
| - |
| n/a |
|
| 200,000 |
| LIBOR + 1.35% - 2.20% |
$300 million term loan (4) |
| 7/25/2022 |
| 1/31/2028 |
|
| 200,000 |
| SOFR + 0.10% + 1.35% - 2.20% |
|
| - |
| n/a |
$225 million term loan (4) |
| 7/27/2018 |
| repaid 7/25/22 |
|
| - |
| n/a |
|
| 225,000 |
| LIBOR + 1.35% - 2.20% |
$50 million term loan |
| 8/2/2018 |
| 8/2/2023 |
|
| 50,000 |
| SOFR + 0.10% + 1.35% - 2.20% |
|
| 50,000 |
| LIBOR + 1.35% - 2.20% |
$175 million term loan |
| 8/2/2018 |
| 8/2/2025 |
|
| 175,000 |
| SOFR + 0.10% + 1.65% - 2.50% |
|
| 175,000 |
| LIBOR + 1.65% - 2.50% |
2017 $85 million term loan |
| 7/25/2017 |
| 7/25/2024 |
|
| 85,000 |
| SOFR + 0.10% + 1.30% - 2.10% |
|
| 85,000 |
| LIBOR + 1.30% - 2.10% |
2019 $85 million term loan |
| 12/31/2019 |
| 12/31/2029 |
|
| 85,000 |
| SOFR + 0.10% + 1.70% - 2.55% |
|
| 85,000 |
| LIBOR + 1.70% - 2.55% |
$50 million senior notes |
| 3/16/2020 |
| 3/31/2030 |
|
| 50,000 |
| 3.60% - 4.35% |
|
| 50,000 |
| 3.60% - 4.35% |
$75 million senior notes |
| 6/2/2022 |
| 6/2/2029 |
|
| 75,000 |
| 4.88% - 5.63% |
|
| - |
| n/a |
Term loans and senior notes at stated |
|
|
|
|
|
| 995,000 |
|
|
|
| 870,000 |
|
|
Unamortized debt issuance costs |
|
|
|
|
|
| (8,096 | ) |
|
|
| (4,811 | ) |
|
Term loans and senior notes, net |
|
|
|
|
|
| 986,904 |
|
|
|
| 865,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Credit facilities, net (3) |
|
|
|
|
| $ | 986,904 |
|
|
| $ | 941,189 |
|
|
Weighted-average interest rate (5) |
|
|
|
|
|
| 3.64 | % |
|
|
| 2.97 | % |
|
14
Credit Facilities AmendmentsCovenants
The credit agreements governing the unsecured credit facilities (collectively, the “credit agreements”) contain mandatory prepayment requirements, customary affirmative and negative covenants, restrictions on certain investments and events of default. After giving effect to the July 2022 amendments, the credit agreements contain the following financial and restrictive covenants (capitalized terms not defined below are defined in the credit agreements):
The Company was in compliance with the applicable covenants at September 30, 2022.
Prior Amendments to Credit Agreements
As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company first entered into amendments in June 2020 that suspended the testing of the Company’s existing financial maintenance covenants under the unsecured credit facilities. These amendmentsfacilities and imposed certain restrictions regarding the Company’sCompany's investing and financing activities thatactivities. Further amendments were applicable during a specified waiver period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders, capital expenditures and use of proceeds from the sale of property or common shares of the Company, that applied during such testing suspension period. On March 1, 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to the Company’s future operating results, the Company entered into further amendments to each of the unsecured credit facilitiesin March 2021 (the “March 2021 amendments”) to extend, extending the majority of the covenant waiver period for all but two of the Company’s existing financial maintenance covenantswaivers until the date that the compliance certificate was required to be delivered for the fiscal quarter endingended June 30, 2022 (unless the Company elected an earlier date) (the “Extended Covenant Waiver Period”). The testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio was suspended until the compliance certificate was required to be delivered for the fiscal quarter ending March 31, 2022 (unless the Company elected an earlier date).
In addition to the2021 amendments imposed several modifications and restrictions imposed during the Extended Covenant Waiver Period, including continued cash distribution restrictions, except for the amendments modifiedpayment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status, modification of the previous operating restrictions to less restrictive levels, changes to the calculation of the existing financial maintenance covenants for the first three quarterly calculations subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts based on the period beginning with the first fiscal quarter upon exiting the Extended Covenant Waiver Period, throughand an increase in the most recently ended fiscal quarter. The March 2021 amendments also modified certainLIBOR floor and establishment of the existing financial maintenance covenants to less restrictive levels upon exiting the Extended Covenant Waiver Period as follows (capitalized terms area Base Rate (as defined in the credit agreements): floor under the $425 million revolving credit facility.
|
|
|
|
|
|
|
|
Except as otherwise set forth in the amendments, the terms of the credit agreements remain in effect.
In July 2021, the Company notified its lenders under its unsecured credit facilities that it had elected to exit the Extended Covenant Waiver Period early, effective on July 29, 2021 pursuant to the terms of each of its unsecured credit facilities. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit. Upon exiting the Extended Covenant Waiver Period, the Company iswas no longer subject to the restrictions described above regarding its investing and financing activities that were applicable during the Extended Covenant Waiver Period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders (except for the payment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status), capital expenditures and use of proceeds from the sale of property or common shares of the Company. Those restrictions, including the restriction on payment of distributions to shareholders, were still in place throughout the second quarter of 2021.
As of September 30, 2021, the Company met the applicable financial maintenance covenants based on the annualized results of the six months ended September 30, 2021 at the levels required for the second fiscal quarter tested upon exiting the Extended Covenant Waiver Period. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit.
1215
$850 Million Credit FacilityMortgage Debt
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 if certain criteria are met at the time of extension. 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 September 30, 2021, the Company had availability of $425 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.
$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, and (ii) a $175 million term loan with a maturity date of August 2, 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, and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR plus a margin ranging from 1.30% to 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, each as amended, the “unsecured credit facilities”). Net proceeds from the $50 million senior notes facility were available to provide funding for general corporate purposes. The note agreement contains requirements and covenants similar to the Company’s $850 million credit facility. The Company may make voluntary prepayments in whole or in part, at 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 the facility.
13
As of September 30, 2021 and December 31, 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 (1) |
| Maturity Date |
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Revolving credit facility (2) |
| LIBOR + 1.40% - 2.25% |
| 7/27/2022 (4) |
| $ | - |
|
| $ | 105,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans and senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
$200 million term loan |
| LIBOR + 1.35% - 2.20% |
| 7/27/2023 |
|
| 200,000 |
|
|
| 200,000 |
|
$225 million term loan |
| LIBOR + 1.35% - 2.20% |
| 1/31/2024 |
|
| 225,000 |
|
|
| 225,000 |
|
$50 million term loan |
| LIBOR + 1.35% - 2.20% |
| 8/2/2023 |
|
| 50,000 |
|
|
| 50,000 |
|
$175 million term loan |
| LIBOR + 1.65% - 2.50% |
| 8/2/2025 |
|
| 175,000 |
|
|
| 175,000 |
|
2017 $85 million term loan |
| LIBOR + 1.30% - 2.10% |
| 7/25/2024 |
|
| 85,000 |
|
|
| 85,000 |
|
2019 $85 million term loan |
| LIBOR + 1.70% - 2.55% |
| 12/31/2029 |
|
| 85,000 |
|
|
| 85,000 |
|
$50 million senior notes |
| 3.60% - 4.35% |
| 3/31/2030 |
|
| 50,000 |
|
|
| 50,000 |
|
Term loans and senior notes at stated value |
|
|
|
|
|
| 870,000 |
|
|
| 870,000 |
|
Unamortized debt issuance costs |
|
|
|
|
|
| (5,295 | ) |
|
| (5,775 | ) |
Term loans and senior notes, net |
|
|
|
|
|
| 864,705 |
|
|
| 864,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facilities, net (2) |
|
|
|
|
| $ | 864,705 |
|
| $ | 970,025 |
|
Weighted-average interest rate (3) |
|
|
|
|
|
| 3.07 | % |
|
| 3.64 | % |
|
|
|
|
|
|
(4) 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, to July 27, 2023, if certain criteria are met at the time of extension.
Mortgage Debt
As of September 30, 2021,2022, the Company had approximately $502.4$331.8 million in outstanding mortgage debt secured by 2819 properties with maturity dates ranging from August 2022February 2023 to May 2038, stated interest rates ranging from 3.40%3.40% to 5.00%4.46% and effective interest rates ranging from 3.40%3.40% to 4.97%4.68%. The loans generally provide for monthly payments of principal and interest on an amortized basis and defeasance or prepayment penalties if prepaid. As a result of the effects of the COVID-19 pandemic on certain hotels, the associated lenders granted temporary deferrals of principal and interest payments during 2020, however all payments resumed as of December 31, 2020. The following table sets forth the hotel properties securing each loan, the interest rate, loan assumption or origination date, maturity date, the principal amount assumed or originated, and the outstanding balance prior to any fair value adjustments or debt issuance costs as of September 30, 20212022 and December 31, 20202021 for each of the Company’s mortgage debt obligations. All dollar amounts are in thousands.
14
Location |
| Brand |
| Interest |
|
| Loan |
| Maturity |
| Principal |
|
| Outstanding |
|
| Outstanding |
| ||||
Seattle, WA |
| (2) |
|
| 4.00 | % |
| 8/16/2021 |
| (4) |
| $ | 56,000 |
|
| $ | - |
|
| $ | 56,000 |
|
Grapevine, TX |
| Hilton Garden Inn |
|
| 4.89 | % |
| 8/29/2012 |
| (5) |
|
| 11,810 |
|
|
| - |
|
|
| 9,075 |
|
Collegeville/Philadelphia, PA |
| Courtyard |
|
| 4.89 | % |
| 8/30/2012 |
| (5) |
|
| 12,650 |
|
|
| - |
|
|
| 9,720 |
|
Hattiesburg, MS |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| (5) |
|
| 5,732 |
|
|
| - |
|
|
| 4,550 |
|
Kirkland, WA |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| (5) |
|
| 12,145 |
|
|
| - |
|
|
| 9,640 |
|
Rancho Bernardo/San Diego, CA |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| (5) |
|
| 15,060 |
|
|
| - |
|
|
| 11,954 |
|
Seattle, WA |
| Residence Inn |
|
| 4.96 | % |
| 3/1/2014 |
| (5) |
|
| 28,269 |
|
|
| - |
|
|
| 22,412 |
|
Anchorage, AK |
| Embassy Suites |
|
| 4.97 | % |
| 9/13/2012 |
| (6) |
|
| 23,230 |
|
|
| - |
|
|
| 17,959 |
|
Somerset, NJ |
| Courtyard |
|
| 4.73 | % |
| 3/1/2014 |
| (6) |
|
| 8,750 |
|
|
| - |
|
|
| 6,903 |
|
Tukwila, WA |
| Homewood Suites |
|
| 4.73 | % |
| 3/1/2014 |
| (6) |
|
| 9,431 |
|
|
| - |
|
|
| 7,440 |
|
Huntsville, AL |
| Homewood Suites |
|
| 4.12 | % |
| 3/1/2014 |
| 2/6/2023 |
|
| 8,306 |
|
|
| 6,264 |
|
|
| 6,473 |
|
Prattville, AL |
| Courtyard |
|
| 4.12 | % |
| 3/1/2014 |
| 2/6/2023 |
|
| 6,596 |
|
|
| 4,975 |
|
|
| 5,141 |
|
San Diego, CA |
| Residence Inn |
|
| 3.97 | % |
| 3/1/2014 |
| 3/6/2023 |
|
| 18,600 |
|
|
| 13,987 |
|
|
| 14,456 |
|
Miami, FL |
| Homewood Suites |
|
| 4.02 | % |
| 3/1/2014 |
| 4/1/2023 |
|
| 16,677 |
|
|
| 12,582 |
|
|
| 13,000 |
|
New Orleans, LA |
| Homewood Suites |
|
| 4.36 | % |
| 7/17/2014 |
| 8/11/2024 |
|
| 27,000 |
|
|
| 21,370 |
|
|
| 21,981 |
|
Westford, MA |
| Residence Inn |
|
| 4.28 | % |
| 3/18/2015 |
| 4/11/2025 |
|
| 10,000 |
|
|
| 8,099 |
|
|
| 8,320 |
|
Denver, CO |
| Hilton Garden Inn |
|
| 4.46 | % |
| 9/1/2016 |
| 6/11/2025 |
|
| 34,118 |
|
|
| 28,659 |
|
|
| 29,415 |
|
Oceanside, CA |
| Courtyard |
|
| 4.28 | % |
| 9/1/2016 |
| 10/1/2025 |
|
| 13,655 |
|
|
| 12,095 |
|
|
| 12,318 |
|
Omaha, NE |
| Hilton Garden Inn |
|
| 4.28 | % |
| 9/1/2016 |
| 10/1/2025 |
|
| 22,681 |
|
|
| 20,090 |
|
|
| 20,460 |
|
Boise, ID |
| Hampton |
|
| 4.37 | % |
| 5/26/2016 |
| 6/11/2026 |
|
| 24,000 |
|
|
| 21,318 |
|
|
| 21,680 |
|
Burbank, CA |
| Courtyard |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 25,564 |
|
|
| 21,522 |
|
|
| 22,098 |
|
San Diego, CA |
| Courtyard |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 25,473 |
|
|
| 21,445 |
|
|
| 22,019 |
|
San Diego, CA |
| Hampton |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 18,963 |
|
|
| 15,964 |
|
|
| 16,392 |
|
Burbank, CA |
| SpringHill Suites |
|
| 3.94 | % |
| 3/9/2018 |
| 4/1/2028 |
|
| 28,470 |
|
|
| 25,256 |
|
|
| 25,845 |
|
Santa Ana, CA |
| Courtyard |
|
| 3.94 | % |
| 3/9/2018 |
| 4/1/2028 |
|
| 15,530 |
|
|
| 13,777 |
|
|
| 14,098 |
|
Richmond, VA |
| Courtyard |
|
| 3.40 | % |
| 2/12/2020 |
| 3/11/2030 |
|
| 14,950 |
|
|
| 14,222 |
|
|
| 14,447 |
|
Richmond, VA |
| Residence Inn |
|
| 3.40 | % |
| 2/12/2020 |
| 3/11/2030 |
|
| 14,950 |
|
|
| 14,222 |
|
|
| 14,447 |
|
Portland, ME (3) |
| Residence Inn |
|
| 3.43 | % |
| 3/2/2020 |
| 3/1/2032 |
|
| 33,500 |
|
|
| 30,500 |
|
|
| 33,500 |
|
San Jose, CA |
| Homewood Suites |
|
| 4.22 | % |
| 12/22/2017 |
| 5/1/2038 |
|
| 30,000 |
|
|
| 25,456 |
|
|
| 26,303 |
|
|
|
|
|
|
|
|
|
|
|
| $ | 572,110 |
|
|
| 331,803 |
|
|
| 498,046 |
| |
Unamortized fair value adjustment of |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 843 |
|
|
| 1,010 |
| ||
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,231 | ) |
|
| (1,487 | ) | ||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 331,415 |
|
| $ | 497,569 |
|
Location |
| Brand |
| Interest Rate (1) |
|
| Loan Assumption or Origination Date |
| Maturity Date |
| Principal Assumed or Originated |
|
| Outstanding balance as of September 30, 2021 |
|
| Outstanding balance as of December 31, 2020 |
| ||||
Cape Canaveral, FL |
| Hampton |
|
| (2 | ) |
| 4/30/2020 |
| (3) |
| $ | 10,852 |
|
| $ | - |
|
| $ | 10,275 |
|
Cape Canaveral, FL |
| Home2 Suites |
|
| (2 | ) |
| 4/30/2020 |
| (3) |
|
| 10,852 |
|
|
| - |
|
|
| 10,275 |
|
Colorado Springs, CO |
| Hampton |
|
| 6.25 | % |
| 9/1/2016 |
| (4) |
|
| 7,923 |
|
|
| - |
|
|
| 7,317 |
|
Franklin, TN |
| Courtyard |
|
| 6.25 | % |
| 9/1/2016 |
| (4) |
|
| 14,679 |
|
|
| - |
|
|
| 13,563 |
|
Franklin, TN |
| Residence Inn |
|
| 6.25 | % |
| 9/1/2016 |
| (4) |
|
| 14,679 |
|
|
| - |
|
|
| 13,563 |
|
Seattle, WA |
| (5) |
|
| 4.00 | % |
| 8/16/2021 |
| 8/16/2022 |
|
| 56,000 |
|
|
| 56,000 |
|
|
| - |
|
Grapevine, TX |
| Hilton Garden Inn |
|
| 4.89 | % |
| 8/29/2012 |
| 9/1/2022 |
|
| 11,810 |
|
|
| 9,167 |
|
|
| 9,434 |
|
Collegeville/Philadelphia, PA |
| Courtyard |
|
| 4.89 | % |
| 8/30/2012 |
| 9/1/2022 |
|
| 12,650 |
|
|
| 9,818 |
|
|
| 10,105 |
|
Hattiesburg, MS |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| 9/1/2022 |
|
| 5,732 |
|
|
| 4,596 |
|
|
| 4,729 |
|
Kirkland, WA |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| 9/1/2022 |
|
| 12,145 |
|
|
| 9,737 |
|
|
| 10,018 |
|
Rancho Bernardo/San Diego, CA |
| Courtyard |
|
| 5.00 | % |
| 3/1/2014 |
| 9/1/2022 |
|
| 15,060 |
|
|
| 12,074 |
|
|
| 12,422 |
|
Seattle, WA |
| Residence Inn |
|
| 4.96 | % |
| 3/1/2014 |
| 9/1/2022 |
|
| 28,269 |
|
|
| 22,638 |
|
|
| 23,294 |
|
Anchorage, AK |
| Embassy Suites |
|
| 4.97 | % |
| 9/13/2012 |
| 10/1/2022 |
|
| 23,230 |
|
|
| 18,139 |
|
|
| 18,660 |
|
Somerset, NJ |
| Courtyard |
|
| 4.73 | % |
| 3/1/2014 |
| 10/6/2022 |
|
| 8,750 |
|
|
| 6,973 |
|
|
| 7,179 |
|
Tukwila, WA |
| Homewood Suites |
|
| 4.73 | % |
| 3/1/2014 |
| 10/6/2022 |
|
| 9,431 |
|
|
| 7,516 |
|
|
| 7,737 |
|
Huntsville, AL |
| Homewood Suites |
|
| 4.12 | % |
| 3/1/2014 |
| 2/6/2023 |
|
| 8,306 |
|
|
| 6,542 |
|
|
| 6,742 |
|
Prattville, AL |
| Courtyard |
|
| 4.12 | % |
| 3/1/2014 |
| 2/6/2023 |
|
| 6,596 |
|
|
| 5,195 |
|
|
| 5,354 |
|
San Diego, CA |
| Residence Inn |
|
| 3.97 | % |
| 3/1/2014 |
| 3/6/2023 |
|
| 18,600 |
|
|
| 14,610 |
|
|
| 15,061 |
|
Miami, FL |
| Homewood Suites |
|
| 4.02 | % |
| 3/1/2014 |
| 4/1/2023 |
|
| 16,677 |
|
|
| 13,136 |
|
|
| 13,537 |
|
New Orleans, LA |
| Homewood Suites |
|
| 4.36 | % |
| 7/17/2014 |
| 8/11/2024 |
|
| 27,000 |
|
|
| 22,181 |
|
|
| 22,766 |
|
Westford, MA |
| Residence Inn |
|
| 4.28 | % |
| 3/18/2015 |
| 4/11/2025 |
|
| 10,000 |
|
|
| 8,393 |
|
|
| 8,605 |
|
Denver, CO |
| Hilton Garden Inn |
|
| 4.46 | % |
| 9/1/2016 |
| 6/11/2025 |
|
| 34,118 |
|
|
| 29,663 |
|
|
| 30,387 |
|
Oceanside, CA |
| Courtyard |
|
| 4.28 | % |
| 9/1/2016 |
| 10/1/2025 |
|
| 13,655 |
|
|
| 12,391 |
|
|
| 12,605 |
|
Omaha, NE |
| Hilton Garden Inn |
|
| 4.28 | % |
| 9/1/2016 |
| 10/1/2025 |
|
| 22,682 |
|
|
| 20,581 |
|
|
| 20,936 |
|
Boise, ID |
| Hampton |
|
| 4.37 | % |
| 5/26/2016 |
| 6/11/2026 |
|
| 24,000 |
|
|
| 21,799 |
|
|
| 22,146 |
|
Burbank, CA |
| Courtyard |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 25,564 |
|
|
| 22,482 |
|
|
| 23,315 |
|
San Diego, CA |
| Courtyard |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 25,473 |
|
|
| 22,402 |
|
|
| 23,232 |
|
San Diego, CA |
| Hampton |
|
| 3.55 | % |
| 11/3/2016 |
| 12/1/2026 |
|
| 18,963 |
|
|
| 16,677 |
|
|
| 17,295 |
|
Burbank, CA |
| SpringHill Suites |
|
| 3.94 | % |
| 3/9/2018 |
| 4/1/2028 |
|
| 28,470 |
|
|
| 26,264 |
|
|
| 27,078 |
|
Santa Ana, CA |
| Courtyard |
|
| 3.94 | % |
| 3/9/2018 |
| 4/1/2028 |
|
| 15,530 |
|
|
| 14,326 |
|
|
| 14,770 |
|
Richmond, VA |
| Courtyard |
|
| 3.40 | % |
| 2/12/2020 |
| 3/11/2030 |
|
| 14,950 |
|
|
| 14,521 |
|
|
| 14,739 |
|
Richmond, VA |
| Residence Inn |
|
| 3.40 | % |
| 2/12/2020 |
| 3/11/2030 |
|
| 14,950 |
|
|
| 14,521 |
|
|
| 14,739 |
|
Portland, ME |
| Residence Inn |
|
| 3.43 | % |
| 3/2/2020 |
| 4/1/2030 |
|
| 33,500 |
|
|
| 33,500 |
|
|
| 33,500 |
|
San Jose, CA |
| Homewood Suites |
|
| 4.22 | % |
| 12/22/2017 |
| 5/1/2038 |
|
| 30,000 |
|
|
| 26,579 |
|
|
| 27,392 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 631,096 |
|
|
| 502,421 |
|
|
| 512,770 |
|
Unamortized fair value adjustment of assumed debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,070 |
|
|
| 1,624 |
|
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,575 | ) |
|
| (1,848 | ) |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 501,916 |
|
| $ | 512,546 |
|
(2) On August 16, 2021, the Company acquired the fee interest in the land at the Seattle, Washington Residence Inn, previously held under a finance ground lease, for a purchase price of $80.0 million, consisting of a $24.0 million cash payment and a one-year note payable to the seller for $56.0 million. (3) Loan was amended effective March 1, 2022, in conjunction with a $3.0 million prepayment of loan principal. In addition, the maturity date of the loan was extended by two years to March 1, 2032. (4) Loan was repaid in full on June 16, 2022. (5) Loans were repaid in full on June 30, 2022. (6) Loans were repaid in full on August 1, 2022.
|
|
|
|
|
|
|
|
|
|
15
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
16
under the fair value hierarchy. Market rates take into consideration general market conditions and maturity. As of September 30, 2021, the carrying value and estimated fair value of the Company’s debt were approximately $1.4 billion and $1.3 billion, respectively. As of December 31, 2020,2022, both the carrying value and estimated fair value of the Company’s debt were approximately $1.5$1.3 billion. As of December 31, 2021, both the carrying value and estimated fair value of the Company’s debt were approximately $1.4 billion. Both the carrying value and estimated fair value of the Company’s debt (as discussed above) are 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 risk 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.SOFR plus a 0.10% SOFR spread adjustment. The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. As discussed in Note 1, the Company entered into amendments of its swap agreements during July 2022, to replace LIBOR with SOFR. These swap instruments are recorded at fair value and, if in an asset position, are included in other assets, net, and, if in a liability position, are included in accounts payable and other liabilities in the Company’s consolidated balance sheets. The fair values of the Company’s interest rate swap agreements are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts, which is considered a Level 2 measurement under the fair value hierarchy. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The following table sets forth information for each of the Company’s interest rate swap agreements outstanding as of September 30, 20212022 and December 31, 2020.2021. All dollar amounts are in thousands.
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Asset (Liability) |
| |||||||
Notional Amount at |
|
| Origination |
| Effective |
| Maturity |
| Swap Fixed |
|
| Swap Fixed |
| September 30, |
|
| December 31, |
| ||||
Active interest rate swaps designated as cash flow hedges at September 30, 2022: |
|
|
|
|
|
| ||||||||||||||||
$ | 100,000 |
|
| 4/7/2016 |
| 9/30/2016 |
| 3/31/2023 |
| 1.30% |
|
| 1.33% |
| $ | 1,357 |
|
| $ | (955 | ) | |
| 75,000 |
|
| 5/31/2017 |
| 7/31/2017 |
| 6/30/2024 |
| 1.95% |
|
| 1.96% |
|
| 2,960 |
|
|
| (1,902 | ) | |
| 10,000 |
|
| 8/10/2017 |
| 8/10/2017 |
| 6/30/2024 |
| 2.02% |
|
| 2.01% |
|
| 380 |
|
|
| (268 | ) | |
| 50,000 |
|
| 6/1/2018 |
| 1/31/2019 |
| 6/30/2025 |
| 2.88% |
|
| 2.89% |
|
| 1,589 |
|
|
| (3,123 | ) | |
| 50,000 |
|
| 7/2/2019 |
| 7/5/2019 |
| 7/18/2024 |
| 1.64% |
|
| 1.65% |
|
| 2,274 |
|
|
| (894 | ) | |
| 50,000 |
|
| 8/21/2019 |
| 8/23/2019 |
| 8/18/2024 |
| 1.31% |
|
| 1.32% |
|
| 2,688 |
|
|
| (457 | ) | |
| 50,000 |
|
| 8/21/2019 |
| 8/23/2019 |
| 8/30/2024 |
| 1.32% |
|
| 1.32% |
|
| 2,719 |
|
|
| (455 | ) | |
| 85,000 |
|
| 12/31/2019 |
| 12/31/2019 |
| 12/31/2029 |
| 1.87% |
|
| 1.86% |
|
| 10,200 |
|
|
| (3,277 | ) | |
| 25,000 |
|
| 12/6/2018 |
| 1/31/2020 |
| 6/30/2025 |
| 2.74% |
|
| 2.75% |
|
| 884 |
|
|
| (1,442 | ) | |
| 50,000 |
|
| 12/7/2018 |
| 5/18/2020 |
| 1/31/2024 |
| 2.71% |
|
| 2.72% |
|
| 1,040 |
|
|
| (1,965 | ) | |
| 75,000 |
|
| 8/21/2019 |
| 5/18/2020 |
| 5/18/2025 |
| 1.26% |
|
| 1.27% |
|
| 5,395 |
|
|
| (458 | ) | |
| 75,000 |
|
| 8/21/2019 |
| 5/18/2021 |
| 5/18/2026 |
| 1.29% |
|
| 1.30% |
|
| 6,868 |
|
|
| (391 | ) | |
| 695,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 38,354 |
|
|
| (15,587 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Matured interest rate swap at September 30, 2022: |
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 75,000 |
|
| 7/31/2020 |
| 8/18/2020 |
| 8/18/2022 |
|
| - |
|
| 0.13% |
|
| - |
|
|
| 79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 38,354 |
|
| $ | (15,508 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Asset (Liability) |
| |||||
Notional Amount at September 30, 2021 |
|
| Origination Date |
| Effective Date |
| Maturity Date |
| Swap Fixed Interest Rate |
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||||
Active interest rate swaps designated as cash flow hedges at September 30, 2021: |
|
|
|
|
|
|
|
|
| |||||||||||
| 100,000 |
|
| 4/7/2016 |
| 9/30/2016 |
| 3/31/2023 |
| 1.33% |
|
| $ | (1,690 | ) |
| $ | (2,681 | ) | |
| 75,000 |
|
| 5/31/2017 |
| 7/31/2017 |
| 6/30/2024 |
| 1.96% |
|
|
| (3,022 | ) |
|
| (4,639 | ) | |
| 10,000 |
|
| 8/10/2017 |
| 8/10/2017 |
| 6/30/2024 |
| 2.01% |
|
|
| (416 | ) |
|
| (636 | ) | |
| 50,000 |
|
| 6/1/2018 |
| 1/31/2019 |
| 6/30/2025 |
| 2.89% |
|
|
| (4,065 | ) |
|
| (5,911 | ) | |
| 50,000 |
|
| 7/2/2019 |
| 7/5/2019 |
| 7/18/2024 |
| 1.65% |
|
|
| (1,610 | ) |
|
| (2,593 | ) | |
| 50,000 |
|
| 8/21/2019 |
| 8/23/2019 |
| 8/18/2024 |
| 1.32% |
|
|
| (1,141 | ) |
|
| (2,036 | ) | |
| 50,000 |
|
| 8/21/2019 |
| 8/23/2019 |
| 8/30/2024 |
| 1.32% |
|
|
| (1,143 | ) |
|
| (2,049 | ) | |
| 85,000 |
|
| 12/31/2019 |
| 12/31/2019 |
| 12/31/2029 |
| 1.86% |
|
|
| (3,978 | ) |
|
| (8,677 | ) | |
| 25,000 |
|
| 12/6/2018 |
| 1/31/2020 |
| 6/30/2025 |
| 2.75% |
|
|
| (1,904 | ) |
|
| (2,801 | ) | |
| 50,000 |
|
| 12/7/2018 |
| 5/18/2020 |
| 1/31/2024 |
| 2.72% |
|
|
| (2,736 | ) |
|
| (3,967 | ) | |
| 75,000 |
|
| 8/21/2019 |
| 5/18/2020 |
| 5/18/2025 |
| 1.27% |
|
|
| (1,536 | ) |
|
| (3,294 | ) | |
| 75,000 |
|
| 7/31/2020 |
| 8/18/2020 |
| 8/18/2022 |
| 0.13% |
|
|
| (8 | ) |
|
| 14 |
| |
| 75,000 |
|
| 8/21/2019 |
| 5/18/2021 |
| 5/18/2026 |
| 1.30% |
|
|
| (1,401 | ) |
|
| (3,415 | ) | |
| 770,000 |
|
|
|
|
|
|
|
|
|
|
|
|
| (24,650 | ) |
|
| (42,685 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
Matured interest rate swap at September 30, 2021: |
|
|
|
|
|
|
|
|
| |||||||||||
$ | 50,000 |
|
| 4/7/2016 |
| 9/30/2016 |
| 3/31/2021 |
| 1.09% |
|
|
| - |
|
|
| (117 | ) | |
|
|
|
|
|
| $ | (24,650 | ) |
| $ | (42,802 | ) |
The Company assesses, both at inception and on an ongoing basis, the effectiveness of its qualifying cash flow hedges. As of September 30, 2021,2022, all of the 1312 active interest rate swap agreements listed above were designated as cash flow hedges. The change in the fair value of the Company’s designated cash flow hedges is recorded to accumulated other comprehensive loss,income, a component of shareholders’ equity in the Company’s consolidated balance sheets.
Amounts reported in accumulated other comprehensive lossincome 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 $11.4$15.7 million of net unrealized lossesgains included in accumulated other comprehensive lossincome at September 30, 20212022 will be reclassified as an increasea decrease to interest and other expense, net within the next 12 months.
1617
The following table presents the effect of derivative instruments in cash flow hedging relationships in the Company’s consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 20212022 and 20202021 (in thousands):
|
| Net Unrealized Gain |
|
| Net Unrealized Gain (Loss) Reclassified |
| ||||||||||
|
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Interest rate derivatives in cash flow |
| $ | 17,130 |
|
| $ | 478 |
|
| $ | 1,106 |
|
| $ | (2,948 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Net Unrealized Gain |
|
| Net Unrealized Loss Reclassified |
| ||||||||||
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Interest rate derivatives in cash flow |
| $ | 50,649 |
|
| $ | 9,714 |
|
| $ | (3,213 | ) |
| $ | (8,438 | ) |
|
| Net Unrealized Gain Recognized in Other Comprehensive Income (Loss) |
|
| Net Unrealized Loss Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest and Other Expense, net |
| ||||||||||
|
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Interest rate derivatives in cash flow hedging relationships |
| $ | 478 |
|
| $ | 33 |
|
| $ | (2,948 | ) |
| $ | (2,706 | ) |
|
| Net Unrealized Gain (Loss) Recognized in Other Comprehensive Income (Loss) |
|
| Net Unrealized Loss Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest and Other Expense, net |
| ||||||||||
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Interest rate derivatives in cash flow hedging relationships |
| $ | 9,714 |
|
| $ | (48,628 | ) |
| $ | (8,438 | ) |
| $ | (5,006 | ) |
6. Related Parties
The Company has engaged in, 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 20202021 Form 10-K. Below is a summary of the significant related party relationships in effect during the nine months ended September 30, 20212022 and 2020.2021.
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 receives 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 nine months ended September 30, 20212022 and 20202021 totaled approximately $0.5$0.6 million and $0.9$0.5 million, 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$1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies. As of September 30, 20212022 and December 31, 2020,2021, total amounts due from ARG for reimbursements under the cost sharing structure totaled approximately $0.2$0.2 million and $0.3$0.3 million, respectively, and are included in other assets, net in the Company’s consolidated balance sheets.
The Company, through its wholly-owned subsidiary, Apple Air Holding, LLC, owns a Learjet used primarily for acquisition, asset management, renovation, and investor, corporate and public relations and other business purposes. The aircraft is also leased to affiliates of the Company based on third party rates, which leasingthird-party rates. Lease activity was not significant during the reporting periods. The
From time to time, the Company also utilizes one aircraft, owned throughby an entity which is owned by the Company’s Executive Chairman, for acquisition, asset management, renovation, and investor, corporate and public relations and other business purposes, and reimburses thethis entity at third party rates. Total costs incurred for the use of thethese aircraft during the nine months ended September 30, 20212022 and 20202021 were less than $0.1$0.1 million for each respective period and are included in general and administrative expenses in the Company’s consolidated statements of operations.
1718
7. Shareholders’ Equity
Distributions
For the three and nine months ended September 30, 2021 and 2020,2022, the Company paid distributions of $0.02$0.17 and $0.30$0.38, respectively, per common share for a total of $4.5$38.8 million and $67.3$86.8 million, respectively. Prior toDuring the suspension of its distributions in March 2020 due to the impact of COVID-19 on its operating cash flows, the Company’s annual distribution rate, payable monthly, was $1.20 per common share. In Marchthree and June 2021, the Company declared quarterly distributions of $0.01 per common share, which were paid in April and July, respectively, totaling $4.5 million for the nine months ended September 30, 2021.2021, the Company paid distributions of $0.01 and $0.02, respectively, per common share for a total of $2.3 million and $4.5 million, respectively. Additionally, in September 2021,2022, the Company declared a quarterlymonthly cash distribution of $0.01$0.07 per common share, totaling $2.3$16.0 million, which was recorded as a payable as of September 30, 20212022 and paid on October 17, 2022. As of December 31, 2021, a quarterly distribution of $0.01 per common share declared in December 2021 totaled $2.3 million and was paid on January 18, 2021. This2022. These accrued distribution wasdistributions were included in accounts payable and other liabilities in the Company’s consolidated balance sheet atsheets as of September 30, 2021.2022 and December 31, 2021, respectively.
Issuance of Shares
On August 12, 2020, theThe Company has entered into an equity distribution agreement pursuant to which the Company may sell, from time to time, up to an aggregate of $300$300 million of its common shares under an at-the-market offering program (the “ATM Program”). DuringSince inception of the second quarter of 2021,ATM Program in August 2020 through September 30, 2022, the Company has sold approximately 4.7 million common shares under its ATM Program at a weighted-average market sales price of approximately $16.26$16.26 per common share and received aggregate gross proceeds of approximately $76.0$76.0 million and proceeds net of offering costs, which included $0.9$0.9 million of commissions, of approximately $75.1$75.1 million. The Company used the net proceeds from the sale of these shares to pay down borrowings onunder its $425 million revolving credit facility and for general corporate purposes, including acquisitions of hotel properties. As of September 30, 2021,2022, approximately $224.0$224.0 million remained available for issuance under the ATM Program. NaNNo shares were sold under the Company’s ATM Program in the third quarter of 2021.nine months ended September 30, 2022. The Company plans to use future net proceeds from the sale of these shares to pay down borrowings on its revolving credit facility (if any). The Company plans to use the corresponding increased availability under the revolving credit facilityATM Program for general corporate purposes which may include, among other things, acquisitions of additional properties, the repayment of other outstanding indebtedness, capital expenditures, improvement of properties in its portfolio and working capital. The Company may also use the net proceeds to acquire another REIT or other company that invests in income producing properties.
Share Repurchases
In May 2021,2022, the Company’s Board of Directors approved a one-year extension of its existing share repurchase program, authorizing share repurchases up to an aggregate of $345$345 million (the “Share Repurchase Program”). The Share Repurchase Program may be suspended or terminated at any time by the Company and will end in July 20222023 if not terminated earlier or extended.extended earlier. During the first nine months of 2020,ended September 30, 2022, the Company purchased, under its Share Repurchase Program, approximately 1.50.1 million of its common shares at a weighted-average market purchase price of approximately $9.42$14.20 per common share for an aggregate purchase price, including commissions, of approximately $14.3$1.5 million. The shares were repurchased under a written trading plan as part of the Share Repurchase Program that providedprovides for share repurchases in open market transactions and wasthat is 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.amended (the “Exchange Act”). Repurchases under the Share Repurchase Program have been funded, and the Company intends to fund future purchases,repurchases, with cash on hand or availability under its unsecured credit facilitiesRevolving Credit Facility, subject to applicable restrictions under the Company’s unsecured credit facilities (if any). The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will also depend upon the prevailing market conditions, regulatory requirements and other factors, including compliance with applicable credit facility covenants (if any).factors. As of September 30, 2022, approximately $343.5 million remained available for purchase under the Share Repurchase Program.
8. Compensation Plans
The Company annually establishes an incentive plan for its executive management.management team. Under the incentive plan for 20212022 (the “2021“2022 Incentive Plan”), participants are eligible to receive incentive compensation based on the achievement of certain 20212022 performance measures, consistingwith one-half (50%) of incentive compensation based on operational performance goals and metrics and one-half (50%) of incentive compensation based on shareholder return metrics. With respect to the shareholder return metrics, (including75% of the target will be based on shareholder return relative to a peer group and 25% will be based on total shareholder return metrics over one-year, two-year, and three-year periods).periods. With respect to the operational performance goals and metrics, for the period of January 1 – June 30, 2021, metrics included portfolio occupancy growth, expense management, successful negotiation of amendments to each25% of the Company’s unsecured credit facilitiestarget will be based on modified funds from operations per share (as defined within this Quarterly Report on Form 10-Q) and effective allocation75% of the target will be based on operational performance goals including: management of capital structure; environmental, social and governance goals; evaluation and pursuit of accretive transactions; effective execution of capital renovation plans; and management of operating expenses to drive incremental returns, with no specific target or weighting assigned to each metric. Operational performance metrics for the period of July 1 – December 31, 2021, include metrics regarding top line growth, bottom line growth, capital allocation and balance sheet metrics, with no specific target or weighting assigned to each metric. The operational performance metrics account for 50% of the total target incentive compensation. The shareholder return metrics are weighted 75% for relative shareholder return metrics and 25% for total shareholder return metrics, and account for 50% of the total target incentive compensation.maximize Adjusted Hotel EBITDA (as defined within this Quarterly Report on Form 10-Q). At September 30, 2021,2022, the range of potential aggregate payouts under the 20212022 Incentive Plan was $0$0 - $22.4$25 million. Based on performance through September 30, 2021,2022, the Company has accrued approximately $13.0$12.0 million as a liability for potential executive incentive compensation payments under the 20212022 Incentive Plan, which is included in accounts payable and other liabilities in the Company’s
19
consolidated balance sheet as of September 30, 2021.2022. Compensation expense recognized by the Company under the 20212022 Incentive Plan is included in general
18
and administrative expenses in the Company’s consolidated statement of operations and totaled approximately $7.0$4.0 million and $13.0$12.0 million for the three and nine months ended September 30, 2021.2022, respectively. Approximately 25%25% of target awards under the 20212022 Incentive Plan, if any, will be paid in cash, and 75%75% will be issued in stockcommon shares under the Company’s 2014 Omnibus Incentive Plan, approximately two-thirds of which will be unrestricted and one-third of which will vest in December 2021 and one-third of which will vest in December 2022.2023.
Under the incentive plan for 20202021 (the “2020“2021 Incentive Plan”), the Company recorded approximately $1.5$7.0 million and $4.0$13.0 million in general and administrative expenses in its consolidated statement of operations for the three and nine months ended September 30, 2020.2021, respectively.
During the nine months ended September 30, 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 amounts were paid in October 2020. The accrued expense was included in general and administrative expenses in the Company’s consolidated statement of operations for the nine months ended September 30, 2020.
Share-Based Compensation Awards
The following table sets forth information pertaining to the share-based compensation issued under the 20202021 Incentive Plan and the incentive plan for 20192020 (the “2019“2020 Incentive Plan”).
|
| 2020 Incentive Plan |
|
|
| 2019 Incentive Plan |
|
| ||
Period common shares issued |
| First Quarter 2021 |
|
|
| First Quarter 2020 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
Common shares earned under each incentive plan |
|
| 555,726 |
|
|
|
| 665,552 |
|
|
Common shares surrendered on issuance date to satisfy tax withholding obligations |
|
| 117,647 |
|
|
|
| 60,616 |
|
|
Common shares earned and issued under each incentive plan, net of common shares surrendered on issuance date to satisfy tax withholding obligations |
|
| 438,079 |
|
|
|
| 604,936 |
|
|
Closing stock price on issuance date |
| $ | 14.03 |
|
|
| $ | 13.01 |
|
|
Total share-based compensation earned, including the surrendered shares (in millions) |
| $ | 7.8 |
| (1) |
| $ | 8.7 |
| (2) |
Of the total common shares earned and issued, total common shares unrestricted at time of issuance |
|
| 160,216 |
|
|
|
| 426,553 |
|
|
Of the total common shares earned and issued, total common shares restricted at time of issuance |
|
| 277,863 |
|
|
|
| 178,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted common shares vesting date |
| December 10, 2021 |
|
|
| December 11, 2020 |
|
| ||
Common shares surrendered on vesting date to satisfy tax withholding requirements resulting from vesting of restricted common shares |
| n/a |
|
|
|
| 60,066 |
|
|
|
| 2021 Incentive |
|
|
| 2020 Incentive |
|
| ||
Period common shares issued |
| First Quarter 2022 |
|
|
| First Quarter 2021 |
|
| ||
|
|
|
|
|
|
|
|
| ||
Common shares earned under each incentive plan |
|
| 868,079 |
|
|
|
| 555,726 |
|
|
Common shares surrendered on issuance date to |
|
| 245,597 |
|
|
|
| 117,647 |
|
|
Common shares earned and issued under each |
|
| 622,482 |
|
|
|
| 438,079 |
|
|
Closing stock price on issuance date |
| $ | 17.79 |
|
|
| $ | 14.03 |
|
|
Total share-based compensation earned, including the |
| $ | 15.4 |
| (1) |
| $ | 7.8 |
| (2) |
Of the total common shares earned and issued, total |
|
| 338,032 |
|
|
|
| 160,216 |
|
|
Of the total common shares earned and issued, total |
|
| 284,450 |
|
|
|
| 277,863 |
|
|
|
|
|
|
|
|
|
|
| ||
Restricted common shares vesting date |
| December 9, 2022 |
|
|
| December 10, 2021 |
|
| ||
Common shares surrendered on vesting date to satisfy |
| n/a |
|
|
|
| 108,292 |
|
|
|
Of the total 2021 share-based compensation, approximately $12.9 million was recorded as a liability as of December 31, 2021 and is included in accounts payable and other liabilities in the Company’s consolidated balance sheet at December 31, |
|
|
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
19
approximately $1.8 million. For each grantee, the restricted shares will vest on March 31, 2023 if the individual remains in service of the Company through the date of vesting. The expense associated with the awards will be amortized over the 3-year restriction period. For the three months ended September 30, 2021 and 2020,2022, the Company recognized approximately $0.1$0.6 million in each respective period,and $1.9 million, respectively, of share-based compensation expense related to these awards, and $0.4 million andrestricted share awards.
20
9. Subsequent Events
On October 18, 2021,17, 2022, the Company paid approximately $2.3$16.0 million, or $0.01$0.07 per outstanding common share, in distributions to itsshareholders of record as of October 4, 2022.
In October 2022, the Company declared a monthly cash distribution of $0.08 per common shareholders.share for the month of November 2022. The distribution is payable on November 15, 2022, to shareholders of record as of November 2, 2022.
On October 28, 2021,25, 2022, the Company completed the purchase of the existing 150-room Hilton Garden Inn156-room AC Hotel in Memphis, TennesseeLouisville, Kentucky and the 134-room AC Hotel in Pittsburgh, Pennsylvania for a total combined gross purchase price of approximately $38.0$85 million. The Company utilized its available cash on hand and a $50 million draw on its $575 million term loan facility to purchase the hotel.hotels. After this transaction, the $575 million term loan facility had $50 million of remaining available capacity on its delayed draw option.
2021
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended.Act. 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 continues to be the adverse effect of COVID-19, including resurgences and variants, on the Company’s business, financial performance and condition, operating results and cash flows, the real estate market and the hospitality industry specifically, and the global economy and financial markets generally. The significance, extent and duration of the continued impacts caused by the COVID-19 outbreakpandemic on the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including the scope, severity and duration of the pandemic, the extent and effectiveness of the actions taken to contain the pandemic or mitigate its impact, the speed of the vaccine distribution, the efficacy, acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against variants of COVID-19, the potential for additional hotel closures/consolidations that may be mandated or advisable, whether based on increased COVID-19 cases, new variants or other factors, the slowing or potential rollback of “reopenings” in certain states, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled “Risk Factors” in the Company’s 20202021 Form 10-K as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of properties and redeploy proceeds; the anticipated timing and frequency of shareholder distributions; the ability of the Company to fund capital obligations; the ability of the Company to successfully integrate pending transactions and implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions;conditions (including the potential effects of inflation or a recessionary environment); reduced business and leisure travel due to travel-related health concerns, including the widespread outbreak of COVID-19 pandemic 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 of 1986, as amended.amended (the “Code”). 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 20202021 Form 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 20202021 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 September 30, 2021,2022, the Company owned 215218 hotels with an aggregate of 28,08528,693 rooms located in urban, high-end suburban and developing markets throughout 3536 states. Substantially all of the Company’s hotels operate under Marriott or Hilton brands. The hotels are operated and managed under separate management agreements with 1617 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.”
22
The Impact of COVID-19 on the Company and Hospitality Industry
Since first being reported in December 2019, COVID-19 has spread globally, including to every state in the U.S. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19.
21
The outbreak of COVID-19 pandemic has not only specifically reduced travel, but also has had a detrimental impact on regionalnegatively impacted the U.S. and global economies and financial markets. The global, national and local impacteffect of the outbreak has continued to evolve and many countries, including the U.S., as well as state and local governments, have reacted and continue to react with a wide variety of measures intended to control its spread, including states of emergency, mandatory quarantines, implementation of “stay at home” orders, business closures, border closings, and restrictions on travel and large gatherings, which has resulted in, and may continue to result in, cancellation of events, including sporting events, conferences and meetings. While the Company’s operating results and the overall economy in the U.S. continue to show signs of recovery, the Company cannot presently determine the extent or duration of the overall operational and financial effects that COVID-19 will have on the Company, its business, the hospitality industry and the economy, or whether the recovery will continue.
The effects of the pandemic on the hotel industry are unprecedented. COVID-19 disrupted the industryhas been unprecedented and has dramatically reduced business and impacted leisure travel, which has had a significant adverse impact on, and management expects COVID-19 will continue to significantly adversely impact and disrupt,impacted the Company’s business, financial performance, and condition, operating results and cash flows. While a number of initial restrictions put into place during 2020 have eased, occupancy and average daily rate (“ADR”) duringflows, beginning in March 2020.
From the first three quarters of 2021 were still generally below 2019 pre-pandemic levels. Additionally, while the development and distribution of vaccines have helped contribute to improved conditions over the first three quarters of 2021, there can be no assurances that the vaccines will contain the spread of the virus and its variants and allow the economy to fully recover. The Company expects the decline in revenue associated with COVID-19 and the overall influence on the U.S. economy to negatively impact the Company’s operating results for an extended period of time. While the Company has experienced significant recovery in leisure travel through the third quarter of 2021, the Company does not expect a full recovery in results until business travel improves and government restrictions on travel and business operations are lifted more broadly.
Since the beginningoutset of the pandemic, the Company, with the support of its management companies and its brands, havehas taken steps to minimize costs and cash outflow to maintain a sound liquidity position. The Company has implementedoperate efficiently and maximize performance in light of the impacts to business resulting from COVID-19. These activities included implementing cost elimination and efficiency initiatives at each of the Company’sits hotels by adjusting operations to manage total labor costs, reducing or eliminating certain amenities and reducing rates under various service contracts,contracts; enhancing its sales efforts by focusing on COVID-19-specific demand opportunities in certain markets and has strategically targeted and maximized performance based ontargeting available demand, reduced non-essentialdemand; reducing capital improvement projects, planned for 2021,particularly in 2020 and 2021; and entering into various amendments to its unsecured credit facilities that providedto provide for the temporary waiver of financial covenant testing for the majority of its financial maintenance covenants (the Company exited thethis waiver period early in July 2021 due to improved financial performance). Cost reduction initiatives, including those discussed above have not, and are not expected to, fully, or even materially offset revenue losses from COVID-19. The extent and duration
While operations in the first nine months of 2022 have continued to improve to 2019 pre-pandemic levels, the volatility due to the impacts of COVID-19 effects continue to remain unknown, and these uncertaintiesvariants continue to make it difficult to predictproject operating results forresults. The Company has experienced significant improvement in its business during 2021 and through the Company’s hotels for the near future.first nine months of 2022 driven by strength in leisure, small group and local negotiated business demand. While the Company has experiencedseen continued improvement through the third quarter of 2021 and expects continued improvement, future revenues and operating results could be negatively impacted by, among other things, historical seasonal trends, an increase in COVID-19 cases, state and local governments and businesses reverting backoverall business demand, it anticipates that some larger corporate demand drivers may take longer to tighter mitigation restrictions, deterioration of consumer sentiment, labor shortages and resulting pressure on wages or significant inflationary impacts. Therefore, there can be no assurances that the Company will not experience setbacks or further declines in hotel revenues or earnings at its hotels and the Company cannot predict how long the effects will continue to impact the Company’s operating results as compared to pre-pandemic levels.fully recover.
20212022 Hotel Portfolio Activities
The Company continually monitors market conditions and attempts to maximize shareholder value by investing in properties that it believes provide superior value over the long term. Consistent with this strategy and the Company’s focus on investing in rooms-focused hotels, in 2019 the Company entered into a contract to purchase a 176-room Hilton Garden Inn to be constructed in Madison, Wisconsin. Construction of the hotel was completed in February 2021 and the Company acquired the hotel on February 18, 2021 for a gross purchase price of $49.6 million, utilizing borrowings on the Company’s revolving credit facility. In 2021, the Company entered into contracts to purchase a 178-room AC Hotel in Portland, Maine, acquired on August 20, 2021, a 130-room Hyatt Place in Greenville, South Carolina, acquired on September 1, 2021, and a 157-room Aloft in Portland, Maine, acquired on September 10, 2021 for an aggregate gross purchase price of $147.9 million, utilizing available cash (including a portion of the proceeds from the sale of 20 hotels in July 2021). In addition, during the second quarter of 2021 the Company entered into a contract to purchase the fee interest in the land at its Seattle, Washington Residence Inn that was previously under a ground lease. The land purchase was completed on August 16, 2021 for a purchase price of $80.0 million, consisting of a $24.0 million cash payment utilizing a portion of the proceeds from the sale of 20 hotels in July 2021 and a one-year note payable to the seller for $56.0 million.
Asas of September 30, 2021,2022, the Company had separate outstanding contracts for the potential purchase of fivethree hotels, consisting of one hotel in Madison, Wisconsin, one hotel in Memphis, Tennessee, two hotels in Fort Worth, TexasLouisville, Kentucky and one hotel in Portland, OregonPittsburgh, Pennsylvania for a total combined purchase price of approximately $242.6$163.6 million. FourTwo of the hotels are already in operation and one is in development and scheduled to open no earlier than 2023.in early 2024. Closings on the fourtwo hotels already in operation are expected to occurwere completed on October 25, 2022. See Note 9 titled “Subsequent Events” in the fourth quarter of 2021, while closingCompany’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on theForm 10-Q, for additional information concerning these two acquisitions. The remaining hotel is expected to close upon completion of development.development, which is currently expected in early 2024. Although the Company is working towards acquiring these hotels,this hotel, there are many conditions to closing that have not yet been satisfied and there can be no
22
assurance that closingsclosing on these hotelsthis hotel will occur under the outstanding purchase contracts.contract. The Company plans to utilize its available cash or borrowings under its unsecured credit facilities available at closing to purchase hotelsthe remaining hotel under contract if closings occur.closing occurs.
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 nine months of 2021,2022, the Company sold 23 hotelsone hotel for a total combined gross sales price of approximately $234.6$8.5 million and recognized a net gain on sale after giving effect to impairment charges discussed below, of approximately $3.7$1.8 million. The Company used the net proceeds from the sales to pay down borrowings on the Company’s revolving credit facility, for the acquisitions of hotel properties in the second half of 2021 andsale for general corporate purposes.
See Note 2 titled “Investment in Real Estate” and Note 3 titled “Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these transactions.
Hotel Operations
As of September 30, 2021,2022, the Company owned 218 hotels with a total of 28,693 rooms as compared to 215 hotels with a total of 28,085 rooms as compared to 235 hotels with a total of 30,023 rooms as of September 30, 2020.2021. Results of operations are included only for the period of ownership for hotels acquired or disposed of during the current reporting period and prior year. During the nine months ended September 30, 2022, the Company sold one hotel and did not acquire any properties. During the same period of 2021, the Company acquired four hotels and sold 23 hotels. During 2020, the Company acquired four hotels and sold three hotels. As a result, the comparability of results for the three and nine months ended September 30, 20212022 and 20202021, as discussed below, is impacted by these transactions in addition to the impact of COVID-19 beginning in March 2020.transactions.
In evaluating financial condition and operating performance, the most important indicators on which the Company focuses are revenue measurements, such as average occupancy, ADRaverage daily rate (“ADR”) and revenue per available room (“RevPAR”), and expenses, such as hotel operating expenses, general and administrative expenses and other expenses described below. RevPAR and operating results may be impacted by regional and local economies as well as changes in lodging demand due to macroeconomic factors including inflationary pressures, higher energy prices or a recessionary environment.
23
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 September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||
(in thousands, except statistical data) |
| 2022 |
|
| Percent |
|
| 2021 |
|
| Percent |
|
| Percent |
|
| 2022 |
|
| Percent |
|
| 2021 |
|
| Percent |
|
| Percent |
| ||||||||||
Total revenue |
| $ | 341,150 |
|
|
| 100.0 | % |
| $ | 277,164 |
|
|
| 100.0 | % |
|
| 23.1 | % |
| $ | 939,296 |
|
|
| 100.0 | % |
| $ | 683,281 |
|
|
| 100.0 | % |
|
| 37.5 | % |
Hotel operating expense |
|
| 193,067 |
|
|
| 56.6 | % |
|
| 153,953 |
|
|
| 55.5 | % |
|
| 25.4 | % |
|
| 529,584 |
|
|
| 56.4 | % |
|
| 393,103 |
|
|
| 57.5 | % |
|
| 34.7 | % |
Property taxes, insurance and other |
|
| 19,052 |
|
|
| 5.6 | % |
|
| 17,927 |
|
|
| 6.5 | % |
|
| 6.3 | % |
|
| 56,510 |
|
|
| 6.0 | % |
|
| 54,936 |
|
|
| 8.0 | % |
|
| 2.9 | % |
General and administrative expense |
|
| 10,271 |
|
|
| 3.0 | % |
|
| 13,261 |
|
|
| 4.8 | % |
|
| -22.5 | % |
|
| 30,216 |
|
|
| 3.2 | % |
|
| 29,815 |
|
|
| 4.4 | % |
|
| 1.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Loss on impairment of depreciable real |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
| n/a |
|
|
| - |
|
|
|
|
|
| 10,754 |
|
|
|
|
| n/a |
| ||||||
Depreciation and amortization expense |
|
| 45,135 |
|
|
|
|
|
| 44,217 |
|
|
|
|
|
| 2.1 | % |
|
| 135,781 |
|
|
|
|
|
| 139,313 |
|
|
|
|
|
| -2.5 | % | ||||
Gain on sale of real estate |
|
| 1,785 |
|
|
|
|
|
| 44 |
|
|
|
|
| n/a |
|
|
| 1,785 |
|
|
|
|
|
| 3,664 |
|
|
|
|
|
| -51.3 | % | |||||
Interest and other expense, net |
|
| 14,933 |
|
|
|
|
|
| 15,977 |
|
|
|
|
|
| -6.5 | % |
|
| 44,785 |
|
|
|
|
|
| 53,108 |
|
|
|
|
|
| -15.7 | % | ||||
Income tax expense |
|
| 1,331 |
|
|
|
|
|
| 114 |
|
|
|
|
| n/a |
|
|
| 1,712 |
|
|
|
|
|
| 309 |
|
|
|
|
|
| 454.0 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net income |
|
| 59,146 |
|
|
|
|
|
| 31,759 |
|
|
|
|
|
| 86.2 | % |
|
| 142,493 |
|
|
|
|
|
| 5,607 |
|
|
|
|
| n/a |
| |||||
Adjusted Hotel EBITDA (1) |
|
| 129,166 |
|
|
|
|
|
| 105,423 |
|
|
|
|
|
| 22.5 | % |
|
| 353,617 |
|
|
|
|
|
| 235,664 |
|
|
|
|
|
| 50.1 | % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Number of hotels owned at end of period |
|
| 218 |
|
|
|
|
|
| 215 |
|
|
|
|
|
| 1.4 | % |
|
| 218 |
|
|
|
|
|
| 215 |
|
|
|
|
|
| 1.4 | % | ||||
ADR |
| $ | 157.91 |
|
|
|
|
| $ | 140.02 |
|
|
|
|
|
| 12.8 | % |
| $ | 150.02 |
|
|
|
|
| $ | 121.36 |
|
|
|
|
|
| 23.6 | % | ||||
Occupancy |
|
| 75.7 | % |
|
|
|
|
| 71.5 | % |
|
|
|
|
| 5.9 | % |
|
| 73.6 | % |
|
|
|
|
| 65.9 | % |
|
|
|
|
| 11.7 | % | ||||
RevPAR |
| $ | 119.52 |
|
|
|
|
| $ | 100.14 |
|
|
|
|
|
| 19.4 | % |
| $ | 110.40 |
|
|
|
|
| $ | 79.94 |
|
|
|
|
|
| 38.1 | % |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||
(in thousands, except statistical data) |
| 2021 |
|
| Percent of Revenue |
|
| 2020 |
|
| Percent of Revenue |
|
| Percent Change |
|
| 2021 |
|
| Percent of Revenue |
|
| 2020 |
|
| Percent of Revenue |
|
| Percent Change |
| ||||||||||
Total revenue |
| $ | 277,164 |
|
|
| 100.0 | % |
| $ | 148,826 |
|
|
| 100.0 | % |
|
| 86.2 | % |
| $ | 683,281 |
|
|
| 100.0 | % |
| $ | 467,914 |
|
|
| 100.0 | % |
|
| 46.0 | % |
Hotel operating expense |
|
| 153,953 |
|
|
| 55.5 | % |
|
| 93,762 |
|
|
| 63.0 | % |
|
| 64.2 | % |
|
| 393,103 |
|
|
| 57.5 | % |
|
| 310,845 |
|
|
| 66.4 | % |
|
| 26.5 | % |
Property taxes, insurance and other expense |
|
| 17,927 |
|
|
| 6.5 | % |
|
| 20,523 |
|
|
| 13.8 | % |
|
| -12.6 | % |
|
| 54,936 |
|
|
| 8.0 | % |
|
| 58,820 |
|
|
| 12.6 | % |
|
| -6.6 | % |
General and administrative expense |
|
| 13,261 |
|
|
| 4.8 | % |
|
| 6,726 |
|
|
| 4.5 | % |
|
| 97.2 | % |
|
| 29,815 |
|
|
| 4.4 | % |
|
| 22,274 |
|
|
| 4.8 | % |
|
| 33.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on impairment of depreciable real estate assets |
|
| - |
|
|
|
|
|
|
| - |
|
|
|
|
|
| n/a |
|
|
| 10,754 |
|
|
|
|
|
|
| 4,382 |
|
|
|
|
|
|
| 145.4 | % | |
Depreciation and amortization expense |
|
| 44,217 |
|
|
|
|
|
|
| 50,171 |
|
|
|
|
|
|
| -11.9 | % |
|
| 139,313 |
|
|
|
|
|
|
| 149,590 |
|
|
|
|
|
|
| -6.9 | % |
Gain on sale of real estate |
|
| 44 |
|
|
|
|
|
|
| - |
|
|
|
|
|
| n/a |
|
|
| 3,664 |
|
|
|
|
|
|
| 8,785 |
|
|
|
|
|
|
| -58.3 | % | |
Interest and other expense, net |
|
| 15,977 |
|
|
|
|
|
|
| 18,531 |
|
|
|
|
|
|
| -13.8 | % |
|
| 53,108 |
|
|
|
|
|
|
| 52,483 |
|
|
|
|
|
|
| 1.2 | % |
Income tax expense |
|
| 114 |
|
|
|
|
|
|
| 61 |
|
|
|
|
|
|
| 86.9 | % |
|
| 309 |
|
|
|
|
|
|
| 265 |
|
|
|
|
|
|
| 16.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
| 31,759 |
|
|
|
|
|
|
| (40,948 | ) |
|
|
|
|
| n/a |
|
|
| 5,607 |
|
|
|
|
|
|
| (121,960 | ) |
|
|
|
|
| n/a |
| ||
Adjusted hotel EBITDA (1) |
|
| 105,423 |
|
|
|
|
|
|
| 34,688 |
|
|
|
|
|
|
| 203.9 | % |
|
| 235,664 |
|
|
|
|
|
|
| 98,689 |
|
|
|
|
|
|
| 138.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of hotels owned at end of period |
|
| 215 |
|
|
|
|
|
|
| 235 |
|
|
|
|
|
|
| -8.5 | % |
|
| 215 |
|
|
|
|
|
|
| 235 |
|
|
|
|
|
|
| -8.5 | % |
ADR |
| $ | 140.02 |
|
|
|
|
|
| $ | 104.78 |
|
|
|
|
|
|
| 33.6 | % |
| $ | 121.36 |
|
|
|
|
|
| $ | 116.16 |
|
|
|
|
|
|
| 4.5 | % |
Occupancy |
|
| 71.5 | % |
|
|
|
|
|
| 48.6 | % |
|
|
|
|
|
| 47.1 | % |
|
| 65.9 | % |
|
|
|
|
|
| 45.9 | % |
|
|
|
|
|
| 43.6 | % |
RevPAR |
| $ | 100.14 |
|
|
|
|
|
| $ | 50.94 |
|
|
|
|
|
|
| 96.6 | % |
| $ | 79.94 |
|
|
|
|
|
| $ | 53.33 |
|
|
|
|
|
|
| 49.9 | % |
|
|
23
The following table highlights the Company’s quarterly impact of COVID-19 on the Company’s ADR, Occupancy, RevPAR, net income (loss) and adjusted hotel earnings before interest, income taxes, depreciation and amortization for real estate (“Adjusted Hotel EBITDA”), all of which have been impacted by COVID-19, during the last five quarters (in thousands except statistical data):
|
| 3rd Quarter |
|
| 4th Quarter |
|
| 1st Quarter |
|
| 2nd Quarter |
|
| 3rd Quarter |
| |||||
|
| 2021 |
|
| 2021 |
|
| 2022 |
|
| 2022 |
|
| 2022 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
ADR |
| $ | 140.02 |
|
| $ | 131.04 |
|
| $ | 137.03 |
|
| $ | 153.35 |
|
| $ | 157.91 |
|
Occupancy |
|
| 71.5 | % |
|
| 67.5 | % |
|
| 67.1 | % |
|
| 77.9 | % |
|
| 75.7 | % |
RevPAR |
| $ | 100.14 |
|
| $ | 88.43 |
|
| $ | 91.98 |
|
| $ | 119.41 |
|
| $ | 119.52 |
|
Net income |
| $ | 31,759 |
|
| $ | 13,221 |
|
| $ | 18,002 |
|
| $ | 65,345 |
|
| $ | 59,146 |
|
Adjusted Hotel EBITDA (1) |
| $ | 105,423 |
|
| $ | 84,609 |
|
| $ | 87,936 |
|
| $ | 136,515 |
|
| $ | 129,166 |
|
|
| 3rd Quarter |
|
| 4th Quarter |
|
| 1st Quarter |
|
| 2nd Quarter |
|
| 3rd Quarter |
| |||||
|
| 2020 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
| |||||
ADR |
| $ | 104.78 |
|
| $ | 97.87 |
|
| $ | 99.19 |
|
| $ | 120.56 |
|
| $ | 140.02 |
|
Occupancy |
|
| 48.6 | % |
|
| 46.5 | % |
|
| 55.5 | % |
|
| 70.7 | % |
|
| 71.5 | % |
RevPAR |
| $ | 50.94 |
|
| $ | 45.46 |
|
| $ | 55.09 |
|
| $ | 85.28 |
|
| $ | 100.14 |
|
Net income (loss) |
| $ | (40,948 | ) |
| $ | (51,247 | ) |
| $ | (46,435 | ) |
| $ | 20,283 |
|
| $ | 31,759 |
|
Adjusted Hotel EBITDA (1) |
| $ | 34,688 |
|
| $ | 23,296 |
|
| $ | 35,427 |
|
| $ | 94,814 |
|
| $ | 105,423 |
|
|
|
Beginning in March 2020, COVID-19 caused widespread cancellations of both business and leisure travel throughout the U.S., resulting in significant decreases in RevPAR throughout the Company’s hotel portfolio and the hospitality industry as a whole. With the overall uncertainty of the longevity of COVID-19 in the U.S. and the resulting economic decline, it is difficult to project the depth and duration of revenue declines for the industry and Company; however, the Company currently expects declines in revenue and operating results as compared to 2019 to continue throughout the remainder of 2021 and into the future. While the Company experienced its most significant decline in operating results (driven by the impact of COVID-19) during 2020 and the secondfirst quarter of 2020 as compared to previous quarters,2021, occupancy and RevPAR have since shown improvement.improvement with a RevPAR increase of 19.4% and 38.1% for the three and nine months ended September 30, 2022, compared to the same periods in 2021. Although the Company expects continued recovery in rate and occupancy, it is difficult to project the pace at which the Company will experience a full recovery to pre-pandemic levels and future revenues and operating results could be negatively impacted by, among other things, historical seasonal trends, an increase innew COVID-19 cases,variants, state and local governments and businesses reverting back to tighter COVID-19 mitigation restrictions, deterioration of consumer sentiment, or significant labor andshortages, supply chain disruptions, a recessionary macroeconomic environment or inflationary pressures.
24
Comparable Hotels Operating Results
The following table reflectstables reflect certain operating statistics for the Company’s 215218 hotels owned as of September 30, 20212022 (“Comparable Hotels”). The Company defines metrics from Comparable Hotels as results generated by the 215218 hotels owned as of the end of the reporting period. For the hotels acquired during the current reporting period and prior year,periods shown, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership using information provided by the properties’ prior owners at the time of acquisition and not adjusted by the Company. This information has not been audited, either for the periods owned or prior to ownership by the Company. For dispositions, results have been excluded for the Company’s period of ownership.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
| |||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| Percent Change |
|
| 2021 |
|
| 2020 |
|
| Percent Change |
|
| 2022 |
|
| 2021 |
|
| Percent Change 2021 |
|
| 2019 |
|
| Percent Change 2019 |
| |||||||||||
ADR |
| $ | 141.56 |
|
| $ | 106.13 |
|
|
| 33.4 | % |
| $ | 123.19 |
|
| $ | 117.16 |
|
|
| 5.1 | % |
| $ | 157.90 |
|
| $ | 141.84 |
|
|
| 11.3 | % |
| $ | 143.87 |
|
|
| 9.8 | % |
Occupancy |
|
| 71.6 | % |
|
| 48.7 | % |
|
| 47.0 | % |
|
| 66.0 | % |
|
| 45.9 | % |
|
| 43.8 | % |
|
| 75.7 | % |
|
| 71.4 | % |
|
| 6.0 | % |
|
| 80.1 | % |
|
| -5.5 | % |
RevPAR |
| $ | 101.32 |
|
| $ | 51.64 |
|
|
| 96.2 | % |
| $ | 81.33 |
|
| $ | 53.81 |
|
|
| 51.1 | % |
| $ | 119.53 |
|
| $ | 101.34 |
|
|
| 17.9 | % |
| $ | 115.30 |
|
|
| 3.7 | % |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| Percent Change 2021 |
|
| 2019 |
|
| Percent Change 2019 |
| |||||||||||||||||||||||||||||
ADR |
| $ | 149.99 |
|
| $ | 123.41 |
|
|
| 21.5 | % |
| $ | 143.06 |
|
|
| 4.8 | % | ||||||||||||||||||||||||
Occupancy |
|
| 73.6 | % |
|
| 65.9 | % |
|
| 11.7 | % |
|
| 78.6 | % |
|
| -6.4 | % | ||||||||||||||||||||||||
RevPAR |
| $ | 110.40 |
|
| $ | 81.33 |
|
|
| 35.7 | % |
| $ | 112.38 |
|
|
| -1.8 | % |
Same Store Operating Results
The following table reflectstables reflect certain operating statistics for the 207204 hotels owned by the Company as of January 1, 20202019 and during the entirety of the reporting periods being compared (“Same Store Hotels”). Comparisons to 2019 operating results are included to provide a better understanding of the Company’s recovery from the impact of COVID-19 on hotel operations. This information has not been audited.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
| |||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| Percent Change |
|
| 2021 |
|
| 2020 |
|
| Percent Change |
|
| 2022 |
|
| 2021 |
|
| Percent Change 2021 |
|
| 2019 |
|
| Percent Change 2019 |
| |||||||||||
ADR |
| $ | 139.75 |
|
| $ | 105.71 |
|
|
| 32.2 | % |
| $ | 122.17 |
|
| $ | 117.41 |
|
|
| 4.1 | % |
| $ | 155.09 |
|
| $ | 140.04 |
|
|
| 10.7 | % |
| $ | 142.25 |
|
|
| 9.0 | % |
Occupancy |
|
| 71.7 | % |
|
| 48.9 | % |
|
| 46.6 | % |
|
| 66.4 | % |
|
| 46.0 | % |
|
| 44.3 | % |
|
| 75.5 | % |
|
| 71.8 | % |
|
| 5.2 | % |
|
| 80.1 | % |
|
| -5.7 | % |
RevPAR |
| $ | 100.24 |
|
| $ | 51.64 |
|
|
| 94.1 | % |
| $ | 81.08 |
|
| $ | 54.02 |
|
|
| 50.1 | % |
| $ | 117.12 |
|
| $ | 100.53 |
|
|
| 16.5 | % |
| $ | 113.90 |
|
|
| 2.8 | % |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| Percent Change 2021 |
|
| 2019 |
|
| Percent Change 2019 |
| |||||||||||||||||||||||||||||
ADR |
| $ | 148.17 |
|
| $ | 122.40 |
|
|
| 21.1 | % |
| $ | 142.08 |
|
|
| 4.3 | % | ||||||||||||||||||||||||
Occupancy |
|
| 73.7 | % |
|
| 66.4 | % |
|
| 11.0 | % |
|
| 78.7 | % |
|
| -6.4 | % | ||||||||||||||||||||||||
RevPAR |
| $ | 109.24 |
|
| $ | 81.32 |
|
|
| 34.3 | % |
| $ | 111.82 |
|
|
| -2.3 | % |
As discussed above, hotel performance is impacted by many factors, including the economic conditions in the U.S. as well as each individual locality. COVID-19 has been negatively affecting the U.S. hotel industry since March 2020. The Company’s Same Store Hotels revenue and operating results improved during the three and nine months ended September 30, 20212022 compared to the three and nine months ended September 30, 2020,2021, which is consistent with the overall lodging industry. However, as a result of COVID-19,While the Company’s revenue and operating results have declined asSame Store Hotels RevPAR was down approximately 2.3% for the nine months ended September 30, 2022, compared to the same period in 2019 and(the last year prior to the COVID-19 pandemic), RevPAR was approximately 2.8% higher for the three months ended September 30, 2022 compared to the same period in 2019. Though the Company expects these declines relativeanticipates further improvement to 2019 levelsRevPAR compared to continue throughout2021, the remainder of 2021. The Company can give no assurances as to the amount or period of declineimprovement due to the uncertainty regardingresulting from the duration and long-term impact of as well as governmental and consumer response to, COVID-19.
2425
Revenues
The Company’s principal source of revenue is hotel revenue consisting of room, food and beverage, and other related revenue. For the three months ended September 30, 20212022 and 2020,2021, the Company had total revenue of $277.2$341.2 million and $148.8$277.2 million, respectively. For the nine months ended September 30, 20212022 and 2020,2021, the Company had total revenue of $683.3$939.3 million and $467.9$683.3 million, respectively. For the three months ended September 30, 20212022 and 2020,2021, respectively, Comparable Hotels achieved combined average occupancy of 71.6%75.7% and 48.7%71.4%, ADR of $141.56$157.90 and $106.13$141.84 and RevPAR of $101.32$119.53 and $51.64.$101.34. For the nine months ended September 30, 20212022 and 2020,2021, respectively, Comparable Hotels achieved combined average occupancy of 66.0%73.6% and 45.9%65.9%, ADR of $123.19$149.99 and $117.16$123.41 and RevPAR of $81.33$110.40 and $53.81.$81.33. 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 periodperiods in 2020,2021, during the three and nine months ended September 30, 2021,2022, the Company experienced increases in ADR and occupancy, resulting in an increaseincreases of 96.2%17.9% and 35.7%, respectively, in RevPAR for Comparable Hotels. As comparedCompared to the third quartersame periods of 2019 (pre-COVID-19), Comparable Hotels RevPAR for the third quarter of 2021 decreased2022 increased by 11.4%3.7% primarily as a result of reducedincreases in ADR, offset by reductions in occupancy as Comparable Hotels ADRand for the first nine months of 2022 decreased by only 1.0%. Occupancy for the Company’s portfolio for the month of July 2021 was approximately 76%, the highest monthly level since the onset of the pandemic. Occupancy for the month of October 2021 was approximately 73%. During March 2020, the hotel industry and the Company began to see a significant decrease in occupancy as both mandated and voluntary restrictions on travel were implemented throughout the U.S. For Comparable Hotels, average occupancy fell below 50% for most of 2020 before improving over subsequent quarters to 71.6% in the third quarter of 2021 driven predominately by increased leisure demand1.8% primarily as a result of improved consumer confidencereductions in travel and the lifting of some COVID-19 mitigation restrictions, but alsooccupancy, offset by increased demand from a wide variety of demand generators such as government, healthcare, automotive, construction, disaster recovery, insurance, athletics, education and local and regional business-related travel.increases in ADR. Revenue recovery in the third quarterthree and nine months ended September 30, 2022, as compared to the same periods of 2021 was led by leisure transient and small group demand, with increased demand from small corporate and government business. Suburban markets continued to see stronger demand than urban markets. Throughoutmarkets and the Sun Belt generally outperformed other regions of the U.S. throughout the hospitality industry, upscale and upper mid-scale chain scales have outperformed luxury and upper upscale and suburban locations have outperformed urban locations.industry. The Company expects this trendimprovement to generally continue, however, future revenues could be negatively impacted by, among other things, historical seasonal trends, an increase in COVID-19 cases, new COVID-19 variants, state and local governments and businesses reverting back to tighter mitigation restrictions, or deterioration of consumer sentiment.sentiment, labor shortages, supply chain disruptions, a recessionary macroeconomic environment or inflationary pressures.
Hotel Operating Expense
The Company, its management companies and the brands the Company’s hotels are franchised with all aggressively worked to mitigate the costs and uses of cash associated with operating the hotels in the low-occupancy environment experienced in 2020, have worked to maintain cost-reduction practices where feasible as the economy recovers, and are thoughtfully working to position the hotels to adapt to the changes that may occur to guest preferences in the future. The impact has varied and will continue to vary by market and hotel. With the support of its brands and third-party management companies, the Company will continue to evaluate and implement adjustments to the hotel operating model in response to continued changes in the operating environment and guest preferences.
Hotel operating expense consists of direct room operating expense, hotel administrative expense, sales and marketing expense, utilities expense, repair and maintenance expense, franchise fees and management fees. Hotel operating expense for the three months ended September 30, 2022 and 2021 and 2020 totaled $154.0$193.1 million and $93.8$154.0 million, respectively, or 55.5%56.6% and 63.0%55.5% of total revenue for the respective periods. Hotel operating expense for the nine months ended September 30, 2022 and 2021 and 2020 totaled $393.1$529.6 million and $310.8$393.1 million, respectively, or 57.5%56.4% and 66.4%57.5% of total revenue for the respective periods. Comparatively, prior to COVID-19, hotel operating expense was 56.6% and 56.3%, respectively, of total revenue for the three and nine months ended September 30, 2019.
The Companyimpact of the pandemic has workedvaried and will continue to work withvary by market and hotel. With the support of its brands and third-party management companies, to optimize staffing models, and adjust food and beverage offerings and other amenities, among other efficiency initiatives, to mitigate the impact of revenue declines and cost pressures on its results of operations. For example, the Company has reduced service and amenity offerings as allowed by the relaxation of certain brand standards and the Company also successfully reduced rates under various service contracts. Although certain operating costs of a hotel are more fixed in nature, such as base utility and maintenance costs, the Company has worked and will continue to work to reduce all non-essential costs including service contracts, utilitiesassociated with operating hotels in areas not utilized and certain maintenance costs. However, the Company may continuea lower occupancy environment than that experienced prior to see ongoing cost increases related to both labor and supplies due to scarcity.COVID-19. As occupancy has increased, throughout the nine months ended September 30, 2021, increasing staffingadding staff to meet increased demand has been challenging, and while the Company’s hotels made progress in filling open positions duringthrough the third quarterfirst three quarters of 2021,2022, they have often done so at higher wage rates.rates or with more expensive contract labor as compared to 2021 and 2019. Likewise, supply chain disruptions and broader inflationary pressures throughout the overall economy and global tensions have driven shortages and cost increases in the cost offor materials and supplies such as food and equipment. The Company continues to work with its management companies to realize operational efficiencies and mitigate the impact of cost pressures resulting from supply chain shortages, inflation and staffing challenges. The Company will continue to evaluate and work with its management companies to implement adjustments to the hotel operating model in response to continued changes in the operating environment and guest preferences including evaluating staffing levels at its hotels to maximize efficiency.
Property Taxes, Insurance and Other Expense
Property taxes, insurance, and other expense for the three months ended September 30, 2022 and 2021 and 2020 was $17.9$19.1 million and $20.5$17.9 million, respectively, or 6.5%5.6% and 13.8%6.5% of total revenue for the respective periods. For the nine months ended September 30, 20212022 and 2020,2021, property taxes, insurance and other expense totaled $54.9$56.5 million and $58.8$54.9 million, respectively, or 8.0%6.0% and 12.6%
25
of total revenue for the respective periods. Prior to COVID-19, property taxes, insurance and other expense for the three and nine months ended September 30, 2019 totaled $19.6 million and $58.5 million, respectively, or 5.9% and 6.0%8.0% of total revenue for the respective periods. The decrease from 2019 and 2020 to 2021 wasincreases were primarily due to decreasesincreases in property taxes in certain localities. Althoughlocations due to the reassessment of property values by localities related to the improved economy, partially offset by decreases at other locations due to successful appeals of tax assessments. The Company will continue to aggressively appeal tax assessments in certain jurisdictions in an attempt to minimize tax increases, as warranted, and will continue to monitor locality guidance as a result of COVID-19, it does not currently anticipate further significant decreases in property taxes in 2021 as compared to 2020.COVID-19.
General and Administrative Expense
General and administrative expense for the three months ended September 30, 2022 and 2021 and 2020 was $13.3$10.3 million and $6.7$13.3 million, respectively, or 4.8%3.0% and 4.5%4.8% of total revenue for the respective periods. For the nine months ended September 30, 2022 and
26
2021, and 2020, general and administrative expense was $29.8$30.2 million and $22.3$29.8 million, respectively, or 4.4%3.2% and 4.8%4.4% of total revenue for the respective periods. The principal components of general and administrative expense are payroll and related benefit costs, legal fees, accounting fees and reporting expenses. The increases in generalGeneral and administrative expense for the three and nine months ended September 30, 2022 and 2021 over the three and nine months ended September 30, 2020 include increased accruals of $5.5included approximately $4.0 million and $9.0$7.0 million, respectively, of expense related to the accrual for executive incentive compensation. The third quarter of 2021 included an adjustment to previous estimates of the projected executive incentive compensation relatedpayout based on favorable increases to anticipated higherexpected shareholder return and operating performance in 2021 as compared to 2020. Additionally, general and administrative expense in 2020 was reduced by voluntary reductions in compensation by the Company’s Executive Chairman, Chief Executive Officer and non-employee directors on the Board of Directors.metrics.
Loss on Impairment of Depreciable Real Estate Assets
The Company did not recognize any loss on the impairment of depreciable real estate assets for the nine months ended September 30, 2022. Loss on impairment of depreciable real estate assets was $10.8 million for the nine months ended September 30, 2021, consisting of impairment losses of $1.3 million for the Overland Park, Kansas SpringHill Suites and $9.4 million for four hotel properties identified by the Company in the first quarter of 2021 for potential sale. Loss on impairment of depreciable real estate assets was $4.4 million for the nine months ended September 30, 2020, consisting of an impairment charge for the Memphis, Tennessee Homewood Suites in 2020. See Note 3 titled “Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these impairment losses.
Depreciation and Amortization Expense
Depreciation and amortization expense for the three months ended September 30, 2022 and 2021 and 2020 was $44.2$45.1 million and $50.2$44.2 million, respectively. For the nine months ended September 30, 20212022 and 2020,2021, depreciation and amortization expense was $139.3$135.8 million and $149.6$139.3 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 the respective periods owned. The decreases wereincrease of approximately $0.9 million for the three months ended September 30, 2022 compared to the same period in 2021 was primarily due to the acquisition of four hotels betweenSeptember 30, 2021 and September 30, 2022. The decrease of approximately $3.5 million for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily due to the hotel dispositions completed throughout 2020 and the first nine months of 2021, partially offset by acquisitions completed throughout 2021 and limited renovation activity.renovations completed throughout 2022.
Interest and Other Expense, net
Interest and other expense, net for the three months ended September 30, 2022 and 2021 and 2020 was $16.0$14.9 million and $18.5$16.0 million, respectively. For the nine months ended September 30, 20212022 and 2020,2021, interest and other expense, net was $53.1$44.8 million and $52.5$53.1 million, respectively. Interest and other expense, net for the nine months ended September 30, 20202022 is net of approximately $0.9$0.5 million of interest capitalized associated with renovation projects. Additionally, interest and other expense, net for the three months ended September 30, 20212022 and 20202021 includes approximately $2.1$1.5 million and $2.8$2.1 million, respectively, of interest recorded on the Company’s finance lease liabilities. For the nine months ended September 30, 20212022 and 2020,2021, interest and other expense, net includes approximately $7.9$4.4 million and $8.5$7.9 million, respectively, of interest recorded on the Company’sCompany's finance lease liabilities.
Interest expense related The decrease is due to the August 16, 2021 purchase of the fee interest in the land at the Company’s debt instruments for the three months ended September 30, 2021 decreased compared to the three months ended September 30, 2020 asSeattle, Washington Residence Inn that was previously under a result of both lower average borrowings and lower average interest rates as the Company exited the Extended Covenant Waiver Period in July 2021. ground lease.
Interest expense related to the Company’s debt instruments for the nine months ended September 30, 2021 was virtually unchanged2022 decreased compared to the nine months ended September 30, 20202021 as a result of lower average borrowings offset by increaseddue to the repayment of loans maturing in 2022 and lower average interest rates onas the Company’s unsecured credit facilities associated withCompany paid higher rates due to its covenant waiver status during the amendments to obtain covenant waivers.first half of 2021. The Company anticipates interest expense to be lower for the remainder of 2021 compared2022 to be similar to the interest expense for the same period of 20202021 due to reduced average borrowings on the Company’s unsecured credit facilities and loweroffset by higher interest rates compared to the same period of 2020 as a result of exiting the Extended Covenant Waiver Period (as discussed below under “Liquidity and Capital Resources”).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, for additional discussion of the Company’s amended unsecured credit facilities.
Income tax expense
Income tax expense for the three months ended September 30, 2022 and 2021 was $1.3 million and $0.1 million, respectively. For the nine months ended September 30, 2022 and 2021, income tax expense was $1.7 million and $0.3 million, respectively. The increase is primarily due to increases in state income taxes as a result of significant improvement in operating results in 2022 as well as limitations placed by certain states on the application of prior net operating losses.
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 Funds from Operations (“MFFO”), Earnings Before Interest,
2627
Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”), Adjusted EBITDAre (“Adjusted EBITDAre”) and Adjusted Hotel EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss), cash flow from operations or any other operating GAAP measure. FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA are not necessarily indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions. Although FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as reported by other companies that do not define such terms exactly as the Company defines such terms, the Company believes these supplemental measures are useful to investors when comparing the Company’s results between periods and with other REITs.
FFO and MFFO
The Company calculates and presents FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), 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.
The following table reconciles the Company’s GAAP net income (loss) to FFO and MFFO for the three and nine months ended September 30, 20212022 and 20202021 (in thousands):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
Net income (loss) |
| $ | 31,759 |
|
| $ | (40,948 | ) |
| $ | 5,607 |
|
| $ | (121,960 | ) | ||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
Net income |
| $ | 59,146 |
|
| $ | 31,759 |
|
| $ | 142,493 |
|
| $ | 5,607 |
| ||||||||||||||||
Depreciation of real estate owned |
|
| 43,028 |
|
|
| 48,307 |
|
|
| 134,880 |
|
|
| 144,019 |
|
|
| 44,372 |
|
|
| 43,028 |
|
|
| 133,489 |
|
|
| 134,880 |
|
Gain on sale of real estate |
|
| (44 | ) |
|
| - |
|
|
| (3,664 | ) |
|
| (8,785 | ) |
|
| (1,785 | ) |
|
| (44 | ) |
|
| (1,785 | ) |
|
| (3,664 | ) |
Loss on impairment of depreciable real estate assets |
|
| - |
|
|
| - |
|
|
| 10,754 |
|
|
| 4,382 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,754 |
|
Funds from operations |
|
| 74,743 |
|
|
| 7,359 |
|
|
| 147,577 |
|
|
| 17,656 |
|
|
| 101,733 |
|
|
| 74,743 |
|
|
| 274,197 |
|
|
| 147,577 |
|
Amortization of finance ground lease assets |
|
| 1,183 |
|
|
| 1,612 |
|
|
| 4,418 |
|
|
| 4,816 |
|
|
| 759 |
|
|
| 1,183 |
|
|
| 2,278 |
|
|
| 4,418 |
|
Amortization of favorable and unfavorable operating leases, net |
|
| 98 |
|
|
| 103 |
|
|
| 294 |
|
|
| 305 |
|
|
| 97 |
|
|
| 98 |
|
|
| 299 |
|
|
| 294 |
|
Non-cash straight-line operating ground lease expense |
|
| 41 |
|
|
| 44 |
|
|
| 128 |
|
|
| 135 |
|
|
| 38 |
|
|
| 41 |
|
|
| 116 |
|
|
| 128 |
|
Modified funds from operations |
| $ | 76,065 |
|
| $ | 9,118 |
|
| $ | 152,417 |
|
| $ | 22,912 |
|
| $ | 102,627 |
|
| $ | 76,065 |
|
| $ | 276,890 |
|
| $ | 152,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA
EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes, 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
28
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.
27
The Company also considers the exclusion of non-cash straight-line operating ground lease expense from EBITDAre useful, as this expense does not reflect the underlying performance of the related hotels (Adjusted EBITDAre).
The Company further excludes actual corporate-level general and administrative expense for the Company from Adjusted EBITDAre (Adjusted Hotel EBITDA) to isolate property-level operational performance over which the Company’s hotel operators have direct control. The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels.
The following table reconciles the Company’s GAAP net income (loss) to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA for the three and nine months ended September 30, 20212022 and 20202021 (in thousands):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
Net income (loss) |
| $ | 31,759 |
|
| $ | (40,948 | ) |
| $ | 5,607 |
|
| $ | (121,960 | ) | ||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
Net income |
| $ | 59,146 |
|
| $ | 31,759 |
|
| $ | 142,493 |
|
| $ | 5,607 |
| ||||||||||||||||
Depreciation and amortization |
|
| 44,217 |
|
|
| 50,171 |
|
|
| 139,313 |
|
|
| 149,590 |
|
|
| 45,135 |
|
|
| 44,217 |
|
|
| 135,781 |
|
|
| 139,313 |
|
Amortization of favorable and unfavorable operating leases, net |
|
| 98 |
|
|
| 103 |
|
|
| 294 |
|
|
| 305 |
|
|
| 97 |
|
|
| 98 |
|
|
| 299 |
|
|
| 294 |
|
Interest and other expense, net |
|
| 15,977 |
|
|
| 18,531 |
|
|
| 53,108 |
|
|
| 52,483 |
|
|
| 14,933 |
|
|
| 15,977 |
|
|
| 44,785 |
|
|
| 53,108 |
|
Income tax expense |
|
| 114 |
|
|
| 61 |
|
|
| 309 |
|
|
| 265 |
|
|
| 1,331 |
|
|
| 114 |
|
|
| 1,712 |
|
|
| 309 |
|
EBITDA |
|
| 92,165 |
|
|
| 27,918 |
|
|
| 198,631 |
|
|
| 80,683 |
|
|
| 120,642 |
|
|
| 92,165 |
|
|
| 325,070 |
|
|
| 198,631 |
|
Gain on sale of real estate |
|
| (44 | ) |
|
| - |
|
|
| (3,664 | ) |
|
| (8,785 | ) |
|
| (1,785 | ) |
|
| (44 | ) |
|
| (1,785 | ) |
|
| (3,664 | ) |
Loss on impairment of depreciable real estate assets |
|
| - |
|
|
| - |
|
|
| 10,754 |
|
|
| 4,382 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,754 |
|
EBITDAre |
|
| 92,121 |
|
|
| 27,918 |
|
|
| 205,721 |
|
|
| 76,280 |
|
|
| 118,857 |
|
|
| 92,121 |
|
|
| 323,285 |
|
|
| 205,721 |
|
Non-cash straight-line operating ground lease expense |
|
| 41 |
|
|
| 44 |
|
|
| 128 |
|
|
| 135 |
|
|
| 38 |
|
|
| 41 |
|
|
| 116 |
|
|
| 128 |
|
Adjusted EBITDAre |
|
| 92,162 |
|
|
| 27,962 |
|
|
| 205,849 |
|
|
| 76,415 |
|
|
| 118,895 |
|
|
| 92,162 |
|
|
| 323,401 |
|
|
| 205,849 |
|
General and administrative expense |
|
| 13,261 |
|
|
| 6,726 |
|
|
| 29,815 |
|
|
| 22,274 |
|
|
| 10,271 |
|
|
| 13,261 |
|
|
| 30,216 |
|
|
| 29,815 |
|
Adjusted Hotel EBITDA |
| $ | 105,423 |
|
| $ | 34,688 |
|
| $ | 235,664 |
|
| $ | 98,689 |
|
| $ | 129,166 |
|
| $ | 105,423 |
|
| $ | 353,617 |
|
| $ | 235,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the Company’s GAAP net income (loss) to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA by quarter for the last five quarters (in thousands):
|
| 3rd Quarter |
|
| 4th Quarter |
|
| 1st Quarter |
|
| 2nd Quarter |
|
| 3rd Quarter |
| |||||||||||||||||||||||||
|
| 2020 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 3rd Quarter |
| 4th Quarter |
|
| 1st Quarter |
| 2nd Quarter |
|
| 3rd Quarter |
| ||||||||||||
Net income (loss) |
| $ | (40,948 | ) |
| $ | (51,247 | ) |
| $ | (46,435 | ) |
| $ | 20,283 |
|
| $ | 31,759 |
| ||||||||||||||||||||
|
| 2021 |
|
| 2021 |
|
| 2022 |
|
| 2022 |
|
| 2022 |
| |||||||||||||||||||||||||
Net income |
| $ | 31,759 |
|
| $ | 13,221 |
|
| $ | 18,002 |
|
| $ | 65,345 |
|
| $ | 59,146 |
| ||||||||||||||||||||
Depreciation and amortization |
|
| 50,171 |
|
|
| 50,196 |
|
|
| 48,710 |
|
|
| 46,386 |
|
|
| 44,217 |
|
|
| 44,217 |
|
|
| 45,158 |
|
|
| 45,324 |
|
|
| 45,322 |
|
|
| 45,135 |
|
Amortization of favorable and unfavorable operating leases, net |
|
| 103 |
|
|
| 137 |
|
|
| 98 |
|
|
| 98 |
|
|
| 98 |
|
|
| 98 |
|
|
| 99 |
|
|
| 99 |
|
|
| 103 |
|
|
| 97 |
|
Interest and other expense, net |
|
| 18,531 |
|
|
| 18,352 |
|
|
| 18,513 |
|
|
| 18,618 |
|
|
| 15,977 |
|
|
| 15,977 |
|
|
| 14,640 |
|
|
| 14,654 |
|
|
| 15,198 |
|
|
| 14,933 |
|
Income tax expense |
|
| 61 |
|
|
| 67 |
|
|
| 108 |
|
|
| 87 |
|
|
| 114 |
|
|
| 114 |
|
|
| 159 |
|
|
| 179 |
|
|
| 202 |
|
|
| 1,331 |
|
EBITDA |
|
| 27,918 |
|
|
| 17,505 |
|
|
| 20,994 |
|
|
| 85,472 |
|
|
| 92,165 |
|
|
| 92,165 |
|
|
| 73,277 |
|
|
| 78,258 |
|
|
| 126,170 |
|
|
| 120,642 |
|
(Gain) loss on sale of real estate |
|
| - |
|
|
| (2,069 | ) |
|
| (4,484 | ) |
|
| 864 |
|
|
| (44 | ) |
|
| (44 | ) |
|
| 68 |
|
|
| - |
|
|
| - |
|
|
| (1,785 | ) |
Loss on impairment of depreciable real estate assets |
|
| - |
|
|
| 715 |
|
|
| 10,754 |
|
|
| - |
|
|
| - |
| ||||||||||||||||||||
EBITDAre |
|
| 27,918 |
|
|
| 16,151 |
|
|
| 27,264 |
|
|
| 86,336 |
|
|
| 92,121 |
|
|
| 92,121 |
|
|
| 73,345 |
|
|
| 78,258 |
|
|
| 126,170 |
|
|
| 118,857 |
|
Non-cash straight-line operating ground lease expense |
|
| 44 |
|
|
| 45 |
|
|
| 44 |
|
|
| 43 |
|
|
| 41 |
|
|
| 41 |
|
|
| 41 |
|
|
| 40 |
|
|
| 38 |
|
|
| 38 |
|
Adjusted EBITDAre |
|
| 27,962 |
|
|
| 16,196 |
|
|
| 27,308 |
|
|
| 86,379 |
|
|
| 92,162 |
|
|
| 92,162 |
|
|
| 73,386 |
|
|
| 78,298 |
|
|
| 126,208 |
|
|
| 118,895 |
|
General and administrative expense |
|
| 6,726 |
|
|
| 7,100 |
|
|
| 8,119 |
|
|
| 8,435 |
|
|
| 13,261 |
|
|
| 13,261 |
|
|
| 11,223 |
|
|
| 9,638 |
|
|
| 10,307 |
|
|
| 10,271 |
|
Adjusted Hotel EBITDA |
| $ | 34,688 |
|
| $ | 23,296 |
|
| $ | 35,427 |
|
| $ | 94,814 |
|
| $ | 105,423 |
|
| $ | 105,423 |
|
| $ | 84,609 |
|
| $ | 87,936 |
|
| $ | 136,515 |
|
| $ | 129,166 |
|
2829
Hotels Owned
As of September 30, 2021,2022, the Company owned 215218 hotels with an aggregate of 28,08528,693 rooms located in 3536 states. The following tables summarize the number of hotels and rooms by brand and by state:
Number of Hotels and Guest Rooms by Brand | Number of 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 |
| 38 |
|
| 5,285 |
|
|
| 40 |
|
|
| 5,593 |
|
Hampton |
| 36 |
|
| 4,710 |
|
|
| 37 |
|
|
| 4,953 |
|
Courtyard |
| 33 |
|
| 4,653 |
|
|
| 33 |
|
|
| 4,653 |
|
Homewood Suites |
|
| 30 |
|
|
| 3,417 |
| ||||||
Residence Inn |
| 29 |
|
| 3,548 |
|
|
| 29 |
|
|
| 3,548 |
|
Homewood Suites |
| 29 |
|
| 3,305 |
| ||||||||
Fairfield |
| 10 |
|
| 1,213 |
|
|
| 10 |
|
|
| 1,213 |
|
Home2 Suites |
| 10 |
|
| 1,146 |
|
|
| 10 |
|
|
| 1,146 |
|
SpringHill Suites |
| 9 |
|
| 1,245 |
|
|
| 9 |
|
|
| 1,245 |
|
TownePlace Suites |
| 9 |
|
| 931 |
|
|
| 9 |
|
|
| 931 |
|
Hyatt Place |
| 3 |
|
| 411 |
|
|
| 3 |
|
|
| 411 |
|
Marriott |
| 2 |
|
| 619 |
|
|
| 2 |
|
|
| 619 |
|
Embassy Suites |
| 2 |
|
| 316 |
|
|
| 2 |
|
|
| 316 |
|
Independent |
| 2 |
|
| 263 |
|
|
| 1 |
|
|
| 208 |
|
AC Hotels |
| 1 |
|
| 178 |
|
|
| 1 |
|
|
| 178 |
|
Aloft |
| 1 |
|
| 157 |
|
|
| 1 |
|
|
| 157 |
|
Hyatt House |
| 1 |
|
| 105 |
|
|
| 1 |
|
|
| 105 |
|
Total |
| 215 |
|
| 28,085 |
|
|
| 218 |
|
|
| 28,693 |
|
29
30
Number of Hotels and Guest Rooms by State |
| |||||||
|
| Number of |
|
| Number of |
| ||
State |
| Hotels |
|
| Rooms |
| ||
Alabama |
|
| 13 |
|
|
| 1,246 |
|
Alaska |
|
| 2 |
|
|
| 304 |
|
Arizona |
|
| 13 |
|
|
| 1,776 |
|
Arkansas |
|
| 2 |
|
|
| 248 |
|
California |
|
| 26 |
|
|
| 3,721 |
|
Colorado |
|
| 4 |
|
|
| 567 |
|
Florida |
|
| 22 |
|
|
| 2,844 |
|
Georgia |
|
| 5 |
|
|
| 585 |
|
Idaho |
|
| 1 |
|
|
| 186 |
|
Illinois |
|
| 7 |
|
|
| 1,255 |
|
Indiana |
|
| 4 |
|
|
| 479 |
|
Iowa |
|
| 3 |
|
|
| 301 |
|
Kansas |
|
| 3 |
|
|
| 320 |
|
Louisiana |
|
| 3 |
|
|
| 422 |
|
Maine |
|
| 3 |
|
|
| 514 |
|
Maryland |
|
| 2 |
|
|
| 233 |
|
Massachusetts |
|
| 3 |
|
|
| 330 |
|
Michigan |
|
| 1 |
|
|
| 148 |
|
Minnesota |
|
| 3 |
|
|
| 405 |
|
Mississippi |
|
| 2 |
|
|
| 168 |
|
Missouri |
|
| 4 |
|
|
| 544 |
|
Nebraska |
|
| 4 |
|
|
| 621 |
|
New Jersey |
|
| 5 |
|
|
| 629 |
|
New York |
|
| 4 |
|
|
| 554 |
|
North Carolina |
|
| 8 |
|
|
| 881 |
|
Ohio |
|
| 2 |
|
|
| 252 |
|
Oklahoma |
|
| 4 |
|
|
| 545 |
|
Oregon |
|
| 1 |
|
|
| 243 |
|
Pennsylvania |
|
| 3 |
|
|
| 391 |
|
South Carolina |
|
| 5 |
|
|
| 590 |
|
Tennessee |
|
| 11 |
|
|
| 1,337 |
|
Texas |
|
| 27 |
|
|
| 3,328 |
|
Utah |
|
| 3 |
|
|
| 393 |
|
Virginia |
|
| 11 |
|
|
| 1,667 |
|
Washington |
|
| 3 |
|
|
| 490 |
|
Wisconsin |
|
| 1 |
|
|
| 176 |
|
Total |
|
| 218 |
|
|
| 28,693 |
|
|
|
|
|
|
|
|
Number of Hotels and Guest Rooms by State |
| |||||||
|
| Number of |
|
| Number of |
| ||
State |
| Hotels |
|
| Rooms |
| ||
Alabama |
|
| 13 |
|
|
| 1,246 |
|
Alaska |
|
| 2 |
|
|
| 304 |
|
Arizona |
|
| 13 |
|
|
| 1,776 |
|
Arkansas |
|
| 2 |
|
|
| 248 |
|
California |
|
| 26 |
|
|
| 3,721 |
|
Colorado |
|
| 4 |
|
|
| 567 |
|
Florida |
|
| 22 |
|
|
| 2,844 |
|
Georgia |
|
| 5 |
|
|
| 585 |
|
Idaho |
|
| 1 |
|
|
| 186 |
|
Illinois |
|
| 7 |
|
|
| 1,254 |
|
Indiana |
|
| 4 |
|
|
| 479 |
|
Iowa |
|
| 3 |
|
|
| 301 |
|
Kansas |
|
| 3 |
|
|
| 320 |
|
Louisiana |
|
| 3 |
|
|
| 422 |
|
Maine |
|
| 3 |
|
|
| 514 |
|
Maryland |
|
| 2 |
|
|
| 233 |
|
Massachusetts |
|
| 3 |
|
|
| 330 |
|
Michigan |
|
| 1 |
|
|
| 148 |
|
Minnesota |
|
| 3 |
|
|
| 405 |
|
Mississippi |
|
| 2 |
|
|
| 168 |
|
Missouri |
|
| 4 |
|
|
| 544 |
|
Nebraska |
|
| 4 |
|
|
| 621 |
|
New Jersey |
|
| 5 |
|
|
| 629 |
|
New York |
|
| 4 |
|
|
| 554 |
|
North Carolina |
|
| 8 |
|
|
| 881 |
|
Ohio |
|
| 2 |
|
|
| 252 |
|
Oklahoma |
|
| 4 |
|
|
| 545 |
|
Pennsylvania |
|
| 3 |
|
|
| 391 |
|
South Carolina |
|
| 5 |
|
|
| 590 |
|
Tennessee |
|
| 10 |
|
|
| 1,187 |
|
Texas |
|
| 25 |
|
|
| 3,059 |
|
Utah |
|
| 3 |
|
|
| 393 |
|
Virginia |
|
| 12 |
|
|
| 1,722 |
|
Washington |
|
| 3 |
|
|
| 490 |
|
Wisconsin |
|
| 1 |
|
|
| 176 |
|
Total |
|
| 215 |
|
|
| 28,085 |
|
|
|
|
|
|
|
|
|
|
3031
The following table summarizes the location, brand, manager, date acquired or completed and number of rooms for each of the 215218 hotels the Company owned as of September 30, 2021.2022:
City |
| State |
| Brand |
| Manager |
| Date
|
| Rooms |
| |
Anchorage |
| AK |
| Embassy Suites |
| Stonebridge(1) |
| 4/30/2010 |
|
| 169 |
|
Anchorage |
| AK |
| Home2 Suites |
| Stonebridge(1) |
| 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 |
|
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 |
|
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 |
| 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 |
|
San Diego |
| CA |
| Residence Inn |
| Dimension |
| 3/1/2014 |
|
| 121 |
|
San Jose |
| CA |
| Homewood Suites |
| Dimension |
| 3/1/2014 |
|
| 140 |
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
31
32
City |
| State |
| Brand |
| Manager |
| Date
|
| Rooms |
| |
|
| CA |
|
|
|
|
| 9/ |
|
|
|
|
Santa |
| CA |
|
|
| Dimension |
|
|
|
|
|
|
Santa Clarita |
| CA |
|
|
| Dimension |
|
|
|
|
|
|
Santa Clarita |
| CA |
|
|
| Dimension |
| 10/29/2008 |
|
|
|
|
|
| CA |
|
|
|
|
|
|
|
|
|
|
|
| CA |
| Residence Inn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
| CO |
|
|
|
|
|
|
|
|
|
|
|
| CO |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hilton Garden Inn |
| Dimension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| FL |
|
|
|
|
| 9/1/2016 |
|
|
|
|
Cape Canaveral |
| FL |
|
|
| LBA |
| 4/30/2020 |
|
|
|
|
|
| FL |
|
|
|
|
|
|
|
|
|
|
|
| FL |
|
|
| LBA |
|
|
|
|
|
|
|
| FL |
|
|
|
|
|
|
|
|
|
|
|
| FL |
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
| FL |
|
|
| McKibbon |
|
|
|
|
|
|
|
| FL |
|
|
|
|
|
|
|
|
|
|
|
| FL |
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
| FL |
|
|
|
|
|
|
|
|
|
|
Miami |
| FL |
|
|
| Dimension |
| 3/1/2014 |
|
|
|
|
|
| FL |
|
|
|
|
|
|
|
|
|
|
|
| FL |
|
|
|
|
| 3/ |
|
|
|
|
Orlando |
| FL |
|
|
| Marriott |
| 7/1/2009 |
|
| 200 |
|
|
| FL |
|
|
| LBA |
| 3/ |
|
|
|
|
|
| FL |
|
|
|
|
| 7/1/ |
|
|
|
|
|
| FL |
|
|
|
|
|
|
|
|
|
|
|
| FL |
|
|
| LBA |
|
|
|
|
|
|
|
| FL |
|
|
|
|
|
|
|
|
|
|
|
| FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GA |
|
|
| McKibbon |
|
|
|
|
|
|
|
| GA |
|
|
| LBA |
|
|
|
|
|
|
|
| GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| IA |
| Hampton |
| Aimbridge |
| 9/1/2016 |
|
| 103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| IL |
| Hilton Garden Inn |
|
|
|
|
|
|
|
|
|
| IL |
|
|
|
|
|
|
|
|
|
|
|
| IL |
|
|
|
|
|
|
|
|
|
|
|
| IL |
|
|
|
|
|
|
|
|
|
|
|
| IL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hilton Garden Inn |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
32
33
City |
| State |
| Brand |
| Manager |
| Date
|
| Rooms |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
| Crestline |
|
|
|
|
|
|
|
|
|
|
|
| Crestline |
|
|
|
|
|
|
|
|
|
|
|
| Crestline |
|
|
|
|
|
|
|
|
|
|
|
| Crestline |
|
|
|
|
|
|
|
|
|
| Hilton Garden Inn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hampton |
| Raymond |
| 8/ |
|
|
|
|
St. |
|
|
| Hampton |
| Raymond |
| 3/4/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residence Inn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LBA |
|
|
|
|
|
|
|
| NC |
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
| NC |
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
| NC |
|
|
|
|
|
|
|
| 122 |
|
|
| NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/1/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NJ |
|
|
|
|
| 3/1/ |
|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Courtyard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hilton Garden Inn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Raymond |
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
3334
City |
| State |
| Brand |
| Manager |
| Date
|
| Rooms |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hampton |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
| 9/1/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TN |
|
|
|
|
|
|
|
|
|
|
|
| TN |
|
|
|
|
|
|
|
|
|
|
|
| TN |
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hilton Garden Inn |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dimension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
| Western |
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
| 124 |
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
|
|
| 9/1/2016 |
|
|
|
|
|
| TX |
|
|
| Western |
| 9/1/ |
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
| Western |
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
| TX |
|
|
| Western |
|
|
|
|
|
|
|
| TX |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
3435
City |
| State |
| Brand |
| Manager |
| Date
|
| Rooms |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Courtyard |
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
| 3/ |
|
|
|
|
|
|
|
|
|
|
|
| 3/1/2014 |
|
|
|
|
|
|
|
|
|
|
|
| 2/ |
|
|
|
|
|
| VA |
| Courtyard |
| White Lodging |
| 12/8/2014 |
|
|
|
|
Richmond | VA | Marriott | White Lodging | 3/1/2014 | 413 | |||||||
Richmond | VA | Residence Inn | White Lodging | 12/8/2014 | 75 | |||||||
Suffolk | VA | Courtyard | Crestline | 3/1/2014 | 92 | |||||||
Suffolk | VA | TownePlace Suites | Crestline | 3/1/2014 | 72 | |||||||
Virginia Beach | VA | Courtyard | Crestline | 3/1/2014 | 141 | |||||||
Virginia Beach | VA | Courtyard | Crestline | 3/1/2014 | 160 | |||||||
Kirkland | WA | Courtyard | InnVentures | 3/1/2014 | 150 | |||||||
Seattle | WA | Residence Inn | InnVentures | 3/1/2014 | 234 | |||||||
Tukwila | WA | Homewood Suites | Dimension | 3/1/2014 | 106 | |||||||
Madison | WI | Hilton Garden Inn | Raymond | 2/18/2021 | 176 | |||||||
Total | 28,693 |
Related Parties
The Company has engaged in, 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
The Company’s principal short term sources of liquidity are the operating cash flows generated from the Company’s properties and availability under its revolving credit facility. Periodically,Revolving Credit Facility. Over the long term, the Company may receive proceeds from strategic additional secured and unsecured debt financing, dispositions of its hotel properties (such as the sale of 23 hotels in the first nine months of 2021 for proceeds of approximately $235 million discussed above in “2021 Hotel Portfolio Activities”) and offerings of the Company’s common shares, including pursuant to the ATM Program (as defined below).Program. Macroeconomic pressures including inflation, increases in interest rates and general market uncertainty could impact the Company’s ability to raise debt or equity capital to fund long-term liquidity requirements in a cost-effective manner.
As of September 30, 2021,2022, the Company had $1.4$1.3 billion of total outstanding debt consisting of $502.4$331.8 million of mortgage debt and $870.0 million$1.0 billion outstanding under its unsecured credit facilities, excluding unamortized debt issuance costs and fair value adjustments. As of September 30, 2021,2022, the Company had available corporate cash on hand of approximately $39.4$25.6 million, as well as$100 million of available funds under the $575 million term loan facility and unused borrowing capacity under its revolving credit facilityRevolving Credit Facility of approximately $425$650 million. In the near term, the impact of COVID-19 on the global economy, including any sustained decline in the Company’s performance, may make it more difficult or costly for the Company to raise debt or equity capital to fund long-term liquidity requirements.
The credit agreements governing the unsecured 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
36
coverage ratios, and restrictions on certain investments. The Company was in compliance with the applicable covenants as of September 30, 2022.
As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company first entered into amendments in June 2020 that suspended the testing of the Company’s existing financial maintenance covenants under the unsecured credit facilities. These amendmentsfacilities and imposed certain restrictions regarding itsthe Company's investing and financing activities including, but not limited to, limitations onactivities. Further amendments were entered into in March 2021 (the “March 2021 amendments”), extending the acquisition of property, payment of distributions to shareholders, capital expenditures and use of proceeds from the sale of property or common sharesmajority of the Company, that applied during such testing suspension period. On March 1, 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to the Company’s future operating results, the Company entered into further amendments to each of the unsecured credit facilities to extend the covenant waiver period for all but two of the Company’s existing financial maintenance covenantswaivers until the date that the compliance certificate was required to be delivered for the fiscal quarter endingended June 30, 2022 (unless the Company elected an earlier date) (the “Extended Covenant Waiver Period”). The testing for the Minimum Fixed Charge Coverage RatioMarch 2021 amendments imposed several modifications and the Minimum Unsecured Interest Coverage Ratio was suspended until the compliance certificate was required to be delivered for the fiscal quarter ending March 31, 2022 (unless the Company elected an earlier date).
Additionally, these amendments modified the calculation of the existing financial covenants for the first three quarterly calculations subsequent to the end ofrestrictions during the Extended Covenant Waiver Period, including continued cash distribution restrictions, except for the payment of cash dividends of $0.01 per common share per quarter or to annualize calculated amounts based on the period beginning withextent required to maintain REIT status, modification of the first fiscal quarterprevious operating restrictions to less restrictive levels, and changes to the calculation, of the financial maintenance covenants upon exiting the Extended Covenant Waiver Period, throughand an increase in the most recently ended fiscal
35
quarter. The March 2021 amendments also modified certainLIBOR floor and establishment of the existing financial maintenance covenants to less restrictive levels upon exiting the Extended Covenant Waiver Period as follows (capitalized terms area Base Rate (as defined in the credit agreements): floor under the $425 million revolving credit facility.
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|
|
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|
|
Except as otherwise set forth in the amendments, the terms of the credit agreements remain in effect.
In July 2021, the Company notified its lenders under its unsecured credit facilities that it had elected to exit the Extended Covenant Waiver Period early, effective on July 29, 2021.2021 pursuant to the terms of each of its unsecured credit facilities. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit. Upon exiting the Extended Covenant Waiver Period, the Company iswas no longer subject to the restrictions described above regarding its investing and financing activities that were applicable during the Extended Covenant Waiver Period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders (except for the payment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status), capital expenditures and use of proceeds from the sale of property or common shares of the Company. Those restrictions, including the restriction on payment of distributions to shareholders, were still in place throughout the second quarter of 2021.
On June 2, 2022, the Company entered into an unsecured $75 million senior notes facility with a maturity date of June 2, 2029. The Company used the net proceeds from the $75 million senior notes facility for general corporate purposes, including the repayment of borrowings under the Company’s annualized results for$425 million revolving credit facility and repayment of mortgage debt.
In July 2022, the six months ended September 30, 2021 metCompany entered into an amendment and restatement of its $850 million credit facility, increasing the financial maintenance covenants basedborrowing capacity to $1.2 billion. The amendment and restatement effectively extended the maturity date of the facility and changed the reference rate of the facility from LIBOR to SOFR plus 10 basis points plus a margin ranging from 1.35% to 2.25% depending on the thresholds stipulated for the second fiscal quarter tested upon exiting the Extended Covenant Waiver Period as described in Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit.leverage ratio.
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 instrumentsagreements as of September 30, 2021.2022 and amendments to those agreements prior to that date.
On August 12, 2020,The Company has a universal shelf registration statement on Form S-3 (No. 333-262915) that was automatically effective upon filing on February 23, 2022. The Company may offer an indeterminate number or amount, as the case may be, of (1) common shares, no par value per share; (2) preferred shares, no par value per share; (3) depository shares representing the Company’s preferred shares; (4) warrants exercisable for the Company’s common shares, preferred shares or depository shares representing preferred shares; (5) rights to purchase common shares; and (6) unsecured senior or subordinate debt securities, all of which may be issued from time to time on a delayed or continuous basis pursuant to Rule 415 under the Securities Act. Future offerings will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company’s common shares and opportunities for uses of any proceeds.
The Company has 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”). During the second quarterATM Program under the Company’s prior shelf registration statement and the current shelf registration statement described above. Since inception of 2021,the ATM Program in August 2020 through September 30, 2022, the Company has sold approximately 4.7 million common shares under its ATM Program at a weighted-average market sales price of approximately $16.26 per common share and received aggregate gross proceeds of approximately $76.0 million and proceeds net of offering costs, which included $0.9 million of commissions, of approximately $75.1 million. The Company used the net proceeds from the sale of these shares primarily to pay down borrowings onunder its $425 million revolving credit facility and for general corporate purposes, including acquisitions of hotel properties. As of September 30, 2021,2022, approximately $224.0 million remained available for issuance under the ATM Program. No shares were sold under the Company’s ATM Program in the third quarterfirst three quarters of 2021.2022. The Company plans to use future net proceeds from the sale of these shares to continue to pay down borrowings on its revolving credit facility (if any). The Company plans to use the corresponding increased availability under the revolving credit facilityATM Program for general corporate purposes which may include, among other things, acquisitions of additional properties, the repayment of other outstanding indebtedness, capital
37
expenditures, improvement of properties in its portfolio and working capital. The Company may also use the net proceeds to acquire another REIT or other company that invests in income producing properties.
Capital Uses
The Company anticipates that cash flow from operations, availability under its unsecured credit facilities, additional borrowings and proceeds from hotel dispositions and equity offerings will be adequate to meet its anticipated liquidity requirements, including required distributions to shareholders, share repurchases, capital improvements, debt service, hotel acquisitions, hotel renovations, share repurchases,lease commitments, and required distributions to shareholders.cash management activities.
Distributions
The Company generally must distribute annually at least 90% of its REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order to maintain its REIT status. During the Extended Covenant Waiver Period, as a requirement under the amendments to its unsecured credit facilities, the Company was restricted in its ability to make distributions except for the payment of cash distributions of $0.01 per common share per quarter or to the extent required to maintain REIT status. In March and June 2021,The Company exited the Company declared quarterly distributions of $0.01 per common share, which were paid in April and July, respectively, totaling $0.02 per common share and $4.5 million for the nine months ended September 30, 2021. Additionally, in September 2021, the Company declared a quarterly distribution of $0.01 per common share, totaling $2.3 million that was paid on October 18, 2021. As discussed above, in July 2021, the Company notified its lendersExtended Covenant Waiver Period under its unsecured credit facilities that it had elected to exit the
36
Extended Covenant Waiver Period effective onin July 29, 2021. As2021 and, as a result, upon exiting the Extended Covenant Waiver Period, the Company is no longer subject to the restrictionsabove-described restriction on distributions. On February 22, 2022, the Company announced that its Board of Directors reinstated its policy of distributions that were applicable duringon a monthly basis, and declared a monthly cash distribution of $0.05 per common share with the Extended Covenant Waiver Period.first monthly cash distribution paid on March 15, 2022 for shareholders of record on March 4, 2022. In August 2022, the Board of Directors approved an increase in the monthly cash distribution from $0.05 to $0.07 per common share and declared a monthly cash distribution of $0.07 per common share payable on September 15, 2022 for shareholders of record on September 2, 2022. On September 20, 2022, the Company declared a monthly cash distribution of $0.07 per common share for the month of October, paid on October 17, 2022, to shareholders of record as of October 4, 2022. For the three and nine months ended September 30, 2022, the Company paid distributions of $0.17 and $0.38, respectively, per common share for a total of $38.8 million and $86.8 million, respectively. Subsequent to quarter end, in October 2022, the Company declared a monthly cash distribution of $0.08 per common share for the month of November 2022.
The Company, as it has done historically due to seasonality, may use its revolving credit facilityRevolving Credit Facility to maintain the consistency of distributions, taking into consideration any acquisitions, dispositions, capital improvements and economic cycles. Any distribution will be subject to approval of the Company’s Board of Directors and there can be no assurance of the classification or duration of distributions at any particular distribution rate. The Board of Directors monitors the Company’s distribution rate relative to the performance of its hotels on an ongoing basis and may make adjustments to the distribution rate as determined to be prudent in relation to other cash requirements of the Company.Company or to the extent required to maintain REIT status. If cash flow from operations and the revolving credit facilityRevolving Credit Facility are not adequate to meet liquidity requirements, the Company may utilize additional financing sources to make distributions. Although the Company has relatively low levels of debt, there can be no assurancesassurance it will be successful with this strategy, and it may need to reduce its distributions to minimum levels required to maintain its qualification as a real estate investment trust. If the Company were unable to extend its maturing debt in future periods or if it were to default on its debt, it may be unable to make distributions.
Share Repurchases
In May 2021,2022, the Company’s Board of Directors approved a one-year extension of its existing share repurchase program, authorizing share repurchases up to an aggregate of $345 million (the “Share Repurchase Program”). The Share Repurchase Program may be suspended or terminated at any time by the Company and will end in July 20222023 if not terminated or extended earlier. During the first threenine months of 2020,ended September 30, 2022, the Company purchased, under its Share Repurchase Program, approximately 1.50.1 million of its common shares at a weighted-average market purchase price of approximately $9.42$14.20 per common share for an aggregate purchase price, including commissions, of approximately $14.3$1.5 million. The shares were repurchased under a written trading plan as part of the Share Repurchase Program that providedprovides for share repurchases in open market transactions and wasthat is 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 under the Share Repurchase Program and has not repurchased any shares since that time.Act. Repurchases under the Share Repurchase Program have been funded, and the Company intends to fund any future purchases,repurchases, with cash on hand or availability under its unsecured credit facilities, subject to applicable restrictions under the Company’s unsecured credit facilities (if any). The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will also depend upon prevailing market conditions, regulatory requirements and other factors, including compliance with applicable credit facility covenants (if any).factors. As of September 30, 2022, approximately $343.5 million remained available for purchase under the Share Repurchase Program.
Capital Improvements
Management routinely monitors the condition and operations of its hotels and plans renovations and other improvements as it deems prudent. The Company is committed to maintaining and enhancing each property’s competitive position in its market. The
38
Company has invested in and plans to continue to reinvest in its hotels. Under certain loan and management agreements, the Company is required to place in escrow funds for the repair, replacement and refurbishing of furniture, fixtures, and equipment, based on a percentage of gross revenues, provided that such amount may be used for the Company’s capital expenditures with respect to the hotels. As of September 30, 2021,2022, the Company held approximately $27.5$31.1 million in reserve related to these properties. During the nine months ended September 30, 2021,2022, the Company invested approximately $9.7$32.2 million in capital expenditures andexpenditures. The Company anticipates spending an additional $15-20approximately $55 million to $65 million during the remainder of 2021,2022, which includes scheduledvarious renovation projects for approximately eight properties.20 to 25 properties, however, inflationary pressures or supply chain shortages, among other issues, may result in increased costs and delays for anticipated projects. The Company does not currently have any existing or planned projects for new property development.
Upcoming Debt Maturities and Debt Service Payments
The Company has approximately $146.0 million of principal and interest payments due on its debt over the next 12 months. Included in this total is approximately $37.8 million of mortgage loans maturing in the first half of 2023, which the Company plans to pay off using borrowings under its Revolving Credit Facility and/or new financing. The Company has paid off $153.5 million of loans that matured in 2022, including $31.5 million paid on August 1, 2022, using borrowings under its unsecured credit facilities. 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.
Hotel Purchase Contract Commitments
As of September 30, 2021,2022, the Company had separate outstanding contracts for the potential purchase of fivethree hotels, consisting of one hotel in Madison, Wisconsin, one hotel in Memphis, Tennessee, two hotels in Fort Worth, TexasLouisville, Kentucky and one hotel in Portland, OregonPittsburgh, Pennsylvania for a total combined purchase price of approximately $242.6$163.6 million. FourTwo of the hotels are already in operation and one is under development and scheduled to open no earlier than 2023.in early 2024. Closings on the fourtwo hotels already in operation arewere completed on October 25, 2022. See Note 9 titled “Subsequent Events” 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 two acquisitions. The remaining hotel is expected to close upon completion of development, which is currently expected to occur in the fourth quarter of 2021, while closing on the remaining hotel is expected upon completion of development.early 2024. Although the Company is working towards acquiring these hotels,this hotel, there are many conditions to closing that have not yet been satisfied and there can be no assurance that closingsclosing on these hotelsthis hotel will occur under the outstanding purchase contracts.contract. The Company plans to utilize its available cash (including a portion of the proceeds from the sale of 20 hotels in July 2021) or borrowings under its unsecured credit facilities available at closing to purchase hotelsthe remaining hotel under contract if closings occur.closing occurs.
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.
37
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 isthe Company has adequate insurance to cover this exposure, there can be no assurance that such events will not have a material adverse effect on the Company’s financial position or results of operations.
Seasonality
The hotel industry historically has been seasonal in nature. Seasonal variations in occupancy at the Company’s hotels may cause quarterly fluctuations in its revenues. Generally, occupancy rates and hotel revenues for the Company’s hotels are greater in the second and third quarters than in the first and fourth quarters. However, due to the effects of COVID-19, these typical seasonal patterns werehave been disrupted in 2020 andsince the first nine monthsquarter of 2021 and may also be disrupted2020, although the Company experienced some seasonal decrease in demand in the remainderfirst and fourth quarters of 2021.each year. To the extent that cash flow from operations is insufficient during any quarter due to temporary or seasonal fluctuations in revenue, the Company expects to utilize cash on hand or available financing sources to meet cash requirements.
39
Critical Accounting Policies and Estimates
The preparation of the Company’s financial statements in accordance with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Company’s financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the Company’s Unaudited Consolidated Financial Statements and Notes thereto. The Company has discussed those policies and estimates that it believes are critical and require the use of complex judgment in their application in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 22, 2022. There have been no material changes to the Company’s critical accounting policies or the methods or assumptions we apply.
New Accounting Standards
See Note 1 titled “Organization and Summary of Significant Accounting Policies” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q,, for information on the adoption of the guidancerecently issued accounting standards in the reference rate reform accounting standards effective in March 2020 and January 2021 as well as recent accounting standards updates to be adopted in the future.nine months ended September 30, 2022.
Subsequent Events
On October 18, 2021,17, 2022, the Company paid approximately $2.3$16.0 million, or $0.01$0.07 per outstanding common share, in distributions to itsshareholders of record as of October 4, 2022.
In October 2022, the Company declared a monthly cash distribution of $0.08 per common shareholders.share for the month of November 2022. The distribution is payable on November 15, 2022, to shareholders of record as of November 2, 2022.
On October 28, 2021,25, 2022, the Company completed the purchase of the existing 150-room Hilton Garden Inn156-room AC Hotel in Memphis, TennesseeLouisville, Kentucky and the 134-room AC Hotel in Pittsburgh, Pennsylvania for a total combined gross purchase price of approximately $38.0$85 million. The Company utilized its available cash on hand and a $50 million draw on its $575 million term loan facility to purchase the hotel.hotels. After this transaction, the $575 million term loan facility had $50 million of remaining available capacity on its delayed draw option.
3840
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2021,2022, the Company’s financial instruments were not exposed to significant market risk due to foreign currency exchange risk, commodity price risk or equity price risk. However, the Company is exposed to interest rate risk due to possible changes in short term interest rates as it invests its cash or borrows on its revolving credit facilityRevolving Credit Facility and due to the portion of its variable-rate term debt that is not fixed by interest rate swaps. As of September 30, 2021,2022, after giving effect to interest rate swaps, as described below, approximately $50.0$175.0 million, or approximately 4%13% of the Company’s total debt outstanding, was subject to variable interest rates. Based on the Company’s variable-rate debt outstanding as of September 30, 2021,2022, every 100 basis points change in interest rates will impact the Company’s annual net income by approximately $0.5$1.8 million, all other factors remaining the same. With the exception of interest rate swap transactions, the Company has not engaged in transactions in derivative financial instruments or derivative commodity instruments.
As of September 30, 2021,2022, the Company’s variable-rate debt consisted of its $820unsecured credit facilities, including borrowings outstanding under its Revolving Credit Facility and $870 million of term loans. Currently, the Company uses interest rate swaps to manage its interest rate risk on a portion of its variable-rate debt. As of September 30, 2021,2022, the Company had 1312 interest rate swap agreements that effectively fix the interest payments on approximately $770.0$695.0 million of the Company’s variable-rate debt outstanding with swap maturity dates ranging from August 2022March 2023 to December 2029. Under the terms of all of the Company’s interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the annual rate of the one-month LIBOR.SOFR plus a 0.10% SOFR spread adjustment. See Note 5 titled “Fair Value of Financial Instruments” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for a description of the Company’s interest rate swaps as of September 30, 2021.2022.
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 milliontwo fixed-rate senior notes facility.facilities totaling $125 million. 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 September 30, 2021.2022. All dollar amounts are in thousands.
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| October 1 - December 31, 2021 |
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| 2022 |
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| 2023 |
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| 2024 |
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| 2025 |
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| Thereafter |
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| Total |
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| Fair Market Value |
|
| October 1 - December 31, 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
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| 2026 |
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| Thereafter |
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| Total |
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| Fair |
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Total debt: |
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| ||||||||
Maturities |
| $ | 4,375 |
|
| $ | 165,831 |
|
| $ | 296,213 |
|
| $ | 338,597 |
|
| $ | 245,140 |
|
| $ | 322,265 |
|
| $ | 1,372,421 |
|
| $ | 1,346,923 |
|
| $ | 2,587 |
|
| $ | 96,214 |
|
| $ | 113,597 |
|
| $ | 245,140 |
|
| $ | 74,649 |
|
| $ | 794,616 |
|
| $ | 1,326,803 |
|
| $ | 1,271,535 |
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Average interest rates (1) |
|
| 3.5 | % |
|
| 3.4 | % |
|
| 3.4 | % |
|
| 3.7 | % |
|
| 3.9 | % |
|
| 4.0 | % |
|
|
|
|
|
|
|
|
|
| 3.7 | % |
|
| 3.8 | % |
|
| 3.9 | % |
|
| 4.1 | % |
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| 4.2 | % |
|
| 4.3 | % |
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Variable-rate debt: |
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Maturities |
| $ | - |
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| $ | - |
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| $ | 250,000 |
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| $ | 310,000 |
|
| $ | 175,000 |
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| $ | 85,000 |
|
| $ | 820,000 |
|
| $ | 794,876 |
|
| $ | - |
|
| $ | 50,000 |
|
| $ | 85,000 |
|
| $ | 175,000 |
|
| $ | - |
|
| $ | 560,000 |
|
| $ | 870,000 |
|
| $ | 868,364 |
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Average interest rates (1) |
|
| 3.0 | % |
|
| 3.0 | % |
|
| 3.2 | % |
|
| 3.6 | % |
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| 4.1 | % |
|
| 4.7 | % |
|
|
|
|
|
|
|
|
|
| 3.5 | % |
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| 3.6 | % |
|
| 3.9 | % |
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| 4.1 | % |
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| 4.3 | % |
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| 4.4 | % |
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Fixed-rate debt: |
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| ||||||||
Maturities |
| $ | 4,375 |
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| $ | 165,831 |
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| $ | 46,213 |
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| $ | 28,597 |
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| $ | 70,140 |
|
| $ | 237,265 |
|
| $ | 552,421 |
|
| $ | 552,047 |
|
| $ | 2,587 |
|
| $ | 46,214 |
|
| $ | 28,597 |
|
| $ | 70,140 |
|
| $ | 74,649 |
|
| $ | 234,616 |
|
| $ | 456,803 |
|
| $ | 403,171 |
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Average interest rates |
|
| 4.1 | % |
|
| 4.0 | % |
|
| 3.9 | % |
|
| 3.9 | % |
|
| 3.8 | % |
|
| 3.7 | % |
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|
|
| 4.1 | % |
|
| 4.1 | % |
|
| 4.1 | % |
|
| 4.0 | % |
|
| 4.0 | % |
|
| 4.1 | % |
|
|
|
|
|
|
| (1) The average interest rate gives effect to interest rate swaps, as applicable. |
Item 4. Controls and Procedures
Evaluation of Disclosure 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 September 30, 2021.2022. There have been no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
39
41
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
The following is a summary of all share repurchases during the third quarter of 2022.
Issuer Purchases of Equity Securities |
| |||||||||||||||
|
| (a) |
|
| (b) |
|
| (c) |
|
| (d) |
| ||||
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (1) |
| ||||
July 1 - July 31, 2022 |
|
| 7,900 |
|
| $ | 14.45 |
|
|
| 7,900 |
|
| $ | 344,741 |
|
August 1 - August 31, 2022 |
|
| - |
|
| - |
|
|
| - |
|
| $ | 344,741 |
| |
September 1 - September 30, 2022 |
|
| 89,115 |
|
| $ | 14.15 |
|
|
| 89,115 |
|
| $ | 343,479 |
|
Total |
|
| 97,015 |
|
|
|
|
|
| 97,015 |
|
|
|
|
42
Item 6. Exhibits
Exhibit Number |
| Description of Documents |
3.1 |
| |
|
|
|
3.2 |
| |
|
|
|
| ||
31.1 |
| |
|
|
|
31.2 |
| |
|
|
|
31.3 |
| |
|
|
|
32.1 |
| |
|
|
|
101 |
| The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,
|
104 |
| The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, |
4043
SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Apple Hospitality REIT, Inc. |
| ||
|
|
|
|
By: | /s/ Justin G. Knight |
| Date: |
| Justin G. Knight, |
|
|
| Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
|
By: | /s/ Elizabeth S. Perkins |
| Date: |
| Elizabeth S. Perkins, |
|
|
| Chief Financial Officer (Principal Financial Officer) |
|
|
|
|
|
|
By: | /s/ Rachel S. Labrecque |
| Date: |
| Rachel S. Labrecque, |
|
|
| Chief Accounting Officer (Principal Accounting Officer) |
|
|
4144