Apple Hospitality REIT, Inc. Reports Results of Operations for Third Quarter of 2015
Richmond, VA – November 5, 2015 – Apple Hospitality REIT, Inc. (NYSE: APLE) (the “Company” or “Apple Hospitality”) today announced results of operations for the third quarter of 2015.
Justin Knight, President and Chief Executive Officer, commented, “We are pleased to report continued improvement in operating fundamentals for Apple Hospitality. During the third quarter, we achieved Comparable Hotels RevPAR growth of more than six percent and Comparable Hotels Adjusted Hotel EBITDA growth of over 11 percent. Our portfolio of Marriott® and Hilton® branded upscale hotels continues to benefit from broad geographic diversification, with locations across more than 80 MSAs. We anticipate full-year 2015 operations will be within our guidance for the year, and we believe the Company is well positioned for sustainable growth in the future.”
Selected Statistical and Financial Data
As of and For the Three and Nine Months Ended September 30, 2015
(Unaudited) (in thousands, except statistical and per share amounts)(1)
| | | Three Months Ended September 30, | | | | | | Nine Months Ended September 30, | | | | |
| | | 2015 | | | 2014 | | | % Change | | | 2015 | | | 2014 | | | % Change | |
| | | | | | | | | | | | | | | | | | | |
| Comparable Hotels ADR | | $ | 133.57 | | | $ | 126.60 | | | | 5.5 | % | | $ | 131.02 | | | $ | 124.66 | | | | 5.1 | % |
| Comparable Hotels Occupancy | | | 80.6 | % | | | 79.9 | % | | | 0.9 | % | | | 79.0 | % | | | 77.8 | % | | | 1.5 | % |
| Comparable Hotels RevPAR | | $ | 107.62 | | | $ | 101.11 | | | | 6.4 | % | | $ | 103.49 | | | $ | 96.99 | | | | 6.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted EBITDA | | $ | 90,563 | | | $ | 83,625 | | | | 8.3 | % | | $ | 251,772 | | | $ | 217,706 | | | | 15.6 | % |
| Comparable Hotels Adjusted Hotel EBITDA | | $ | 97,350 | | | $ | 87,418 | | | | 11.4 | % | | $ | 272,419 | | | $ | 245,031 | | | | 11.2 | % |
| Comparable Hotels Adjusted Hotel EBITDA Margin | | | 39.9 | % | | | 38.5 | % | | + 140 bps | | | | 38.9 | % | | | 37.8 | % | | + 110 bps | |
| Modified funds from operations (MFFO) | | $ | 80,893 | | | $ | 76,502 | | | | 5.7 | % | | $ | 225,946 | | | $ | 198,478 | | | | 13.8 | % |
| MFFO per share | | $ | 0.46 | | | $ | 0.41 | | | | 12.2 | % | | $ | 1.24 | | | $ | 1.19 | | | | 4.2 | % |
| Net income (loss) | | $ | 46,968 | | | $ | 35,162 | | | | 33.6 | % | | $ | 135,080 | | | $ | (15,501 | ) | | | n/a | |
| Net income (loss) per share | | $ | 0.27 | | | $ | 0.19 | | | | 42.1 | % | | $ | 0.74 | | | $ | (0.09 | ) | | | n/a | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions paid | | $ | 52,576 | | | $ | 62,303 | | | | -15.6 | % | | $ | 176,814 | | | $ | 169,862 | | | | 4.1 | % |
| Distributions paid per share | | $ | 0.30 | | | $ | 0.33 | | | | -9.1 | % | | $ | 0.97 | | | $ | 1.05 | | | | -7.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total debt outstanding | | $ | 964,246 | | | | | | | | | | | | | | | | | | | | | |
| Net debt to trailing twelve month Adjusted EBITDA | | | 3.0 | | | | | | | | | | | | | | | | | | | | | |
Apple Hospitality defines metrics from “Comparable Hotels” as results generated by the 177 hotels owned as of September 30, 2015. For hotels acquired during the period, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership, and for dispositions, results have been excluded for the Company’s period of ownership. Results for periods prior to the Company’s ownership have not been included in the Company’s actual Consolidated Financial Statements and are included only for comparison purposes.
 | Page | 1 |
| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Hotel Portfolio Overview
Apple Hospitality owns a highly diversified hotel portfolio, which helps insulate the revenue stream of the Company from regional economic dislocations that may occur from time to time. As of September 30, 2015, Apple Hospitality owned 177 hotels, with 22,782 rooms, comprised of 93 Marriott® branded hotels and 84 Hilton® branded hotels, with locations in more than 80 MSAs across 32 states.
Transactional Activity
During the nine months ended September 30, 2015, Apple Hospitality completed the disposition of 19 properties and used the availability on its credit facility created by the proceeds from sale to acquire seven hotels, five of which have been acquired since the end of the second quarter. During the third quarter, the following properties were acquired: a new 170-room SpringHill Suites by Marriott® in Burbank, CA; a 190-room Courtyard by Marriott® in Burbank, CA; and a 245-room Courtyard by Marriott® in San Diego, CA. In October 2015, the Company acquired a dual-branded 102-room Courtyard by Marriott® and 78-room Residence Inn by Marriott® in Syracuse, NY. These transactions represent a continued effort to refine and enhance Apple Hospitality’s portfolio through the selective sale and purchase of assets.
Apple Hospitality has entered into agreements for the potential purchase of four additional hotels, all of which are under construction, for a total purchase price of approximately $81 million. The hotels currently under contract include: a 128-room Home2 Suites by Hilton® in Atlanta, GA; a 124-room Courtyard by Marriott® in Ft. Worth, TX; and a 210-room dual-branded Hilton Garden Inn® and Home2 Suites by Hilton® property in Birmingham, AL. Although the Company is working towards acquiring these hotels, there are many conditions to closing that have not yet been satisfied, and there can be no assurance that a closing on any of these hotels will occur under the outstanding purchase contracts. If closing conditions are satisfied, the Company anticipates closing on the acquisitions of these hotels over the course of the next six to 21 months.
Share Repurchase Program
Effective July 8, 2015, as part of the implementation of its $500 million share repurchase program, Apple Hospitality established a written trading Plan (“Plan”) authorizing the repurchase of its common shares in open market transactions. The Plan is intended to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, which allows the Company, through a designated broker, to repurchase shares at times, when it might otherwise be prevented from doing so by securities laws or because of self-imposed trading blackout periods. Because repurchases under a 10b5-1 plan are subject to certain pricing, market and volume parameters, there is no guarantee as to the exact number of shares that will be repurchased under the Plan. The timing of share repurchases under the Plan and overall repurchase program will depend upon prevailing market conditions, regulatory requirements and other factors and may be suspended by the Company at any time. As of September 30, 2015, the Company had purchased approximately 1.2 million of its common shares under the Plan, at a weighted-average market purchase price of approximately $17.59 per common share, for an aggregate purchase price of approximately $21.2 million. Purchases under the Plan have been funded, and the Company intends to fund future purchases, with availability under its credit facility.
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| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Capital Improvements
Apple Hospitality consistently reinvests in its properties. During the nine months ended September 30, 2015, the Company invested approximately $33.5 million in capital expenditures, completing renovations on 16 hotels. The Company currently plans on investing an additional $20 million during the fourth quarter of 2015 with approximately 20 projects planned to begin.
Balance Sheet
At September 30, 2015, Apple Hospitality had approximately $964.2 million of total indebtedness with a current combined weighted average interest rate of approximately 3.8% for the remainder of 2015. The total indebtedness is comprised of approximately $463.7 million in property-level debt (40 hotels) and $500.5 million outstanding on its $965 million unsecured credit facility. Apple Hospitality’s combined unrestricted cash and undrawn capacity on its revolving credit facility at September 30, 2015, was approximately $464.6 million. The Company’s net debt to trailing twelve months Adjusted EBITDA ratio stands at 3.0 times, which provides Apple Hospitality with ample financial capacity to fund capital requirements and pursue opportunities in the marketplace.
Shareholder Distributions
Apple Hospitality paid distributions of $0.30 per common share during the third quarter of 2015. Concurrent with the listing of the Company’s common shares on the New York Stock Exchange on May 18, 2015, the Company’s Board of Directors approved a regular monthly distribution of $0.10 per common share. Based on the Company’s common share closing price of $19.72 on October 30, 2015, the annualized distribution of $1.20 per common share represents an annual 6.1% yield. The Company’s Board of Directors, in consultation with management, will continue to regularly monitor the Company’s distribution rate relative to the performance of its hotels, capital improvement needs, varying economic cycles, acquisitions and dispositions. At its discretion, the Company’s Board of Directors may make adjustments as determined to be prudent in relation to other cash requirements of the Company.
2015 Outlook
Apple Hospitality is reaffirming its operational and financial outlook for the 2015 fiscal year for the Company. This outlook, which is based on management’s current view of both operating and economic fundamentals of the Company’s existing portfolio of hotels, does not take into account the impact of any unanticipated developments in its business or changes in its operating environment. For the full year 2015, the Company anticipates:
| | | 2015 Guidance | |
| | | Low-End | | | High- End | |
| | | | | | | |
| Comparable Hotels RevPAR Growth | | 5% | | | 7% | |
| | | | | | | | | |
| Adjusted EBITDA | | $310 million | | | $330 million | |
Earnings Call
The Company will host a quarterly conference call for investors and interested parties on Friday, November 6, 2015, at 10:00 AM Eastern Time. The conference call will be accessible by telephone and the Internet. To access the call, participants from within the U.S. should dial (877) 407-9039, and participants from outside the U.S. should dial (201) 689-8470. Participants may also access the call via live webcast by visiting the investor information section of the Company's website at ir.applehospitalityreit.com. A replay of the call will be available from approximately 1:00 PM Eastern Time on November 6, 2015, through midnight Eastern Time on November 20, 2015. To access the replay, the domestic dial-in number is (877) 870-5176, the international dial-in number is (858) 384-5517, and the passcode is 13621400. The archive of the webcast will be available on the Company's website for a limited time.
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| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
About Apple Hospitality REIT, Inc.
Apple Hospitality REIT, Inc. (NYSE: APLE) is a publicly traded real estate investment trust (REIT) that owns one of the largest portfolios of upscale, select service hotels in the United States. The Company’s portfolio consists of 179 hotels, with approximately 22,950 guestrooms, diversified across the Hilton® and Marriott® families of brands with locations in urban, high-end suburban and developing markets across 32 states. For more information, please visit www.applehospitalityreit.com.
Forward-Looking Statements Disclaimer
Certain statements contained in this press release other than historical facts may be considered forward-looking statements. These forward-looking statements are predictions and generally can be identified by use of statements that include phrases such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “target,” “goal,” “plan,” “should,” “will,” “predict,” “potential,” and similar expressions that convey the uncertainty of future events or outcomes. Such statements, involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Apple Hospitality to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the ability of Apple Hospitality to effectively acquire and dispose of properties; the ability of Apple Hospitality to implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions; adverse changes in the real estate and real estate capital markets; financing risks; the outcome of current and future litigation; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact Apple Hospitality’s business, assets or classification as a real estate investment trust. Although Apple Hospitality 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 press release 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 Apple Hospitality or any other person that the results or conditions described in such statements or the objectives and plans of Apple Hospitality will be achieved. In addition, Apple Hospitality’s qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code. Readers should carefully review Apple Hospitality’s financial statements and the notes thereto, as well as the risk factors described in Apple Hospitality’s filings with the Securities and Exchange Commission, including, but not limited to, in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2015. Any forward-looking statement that Apple Hospitality makes speaks only as of the date of such statements. Apple Hospitality 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.
Contact:
Apple Hospitality REIT, Inc.
Kelly Clarke, Director of Investor Services
(804) 727-6321
kclarke@applereit.com
For additional information or to receive press releases by email, visit www.applehospitalityreit.com.
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| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Apple Hospitality REIT, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
| | | September 30, | | | December 31, | |
| | | 2015 | | | 2014 | |
| | | (unaudited) | | | | |
| Assets | | | | | | |
Investment in real estate, net of accumulated depreciation of $390,065 and $296,559, respectively | | $ | 3,651,482 | | | $ | 3,492,821 | |
| Assets held for sale | | | 0 | | | | 195,588 | |
| Cash and cash equivalents | | | 105 | | | | 0 | |
| Restricted cash-furniture, fixtures and other escrows | | | 25,700 | | | | 32,526 | |
| Due from third party managers, net | | | 38,436 | | | | 22,879 | |
| Other assets, net | | | 42,770 | | | | 35,935 | |
| Total Assets | | $ | 3,758,493 | | | $ | 3,779,749 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Credit facility | | $ | 500,500 | | | $ | 191,600 | |
| Mortgage debt | | | 463,746 | | | | 517,970 | |
| Accounts payable and other liabilities | | | 80,525 | | | | 55,555 | |
| Total Liabilities | | | 1,044,771 | | | | 765,125 | |
| | | | | | | | | |
| Shareholders' Equity | | | | | | | | |
Preferred stock, authorized 30,000,000 shares; none issued and outstanding | | | 0 | | | | 0 | |
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 174,404,915 and 186,910,407 shares, respectively | | | 3,501,252 | | | | 3,737,328 | |
| Accumulated other comprehensive loss | | | (6,163 | ) | | | (511 | ) |
| Distributions greater than net income | | | (781,367 | ) | | | (722,193 | ) |
| Total Shareholders' Equity | | | 2,713,722 | | | | 3,014,624 | |
| | | | | | | | | |
| Total Liabilities and Shareholders' Equity | | $ | 3,758,493 | | | $ | 3,779,749 | |
Note:
The Consolidated Balance Sheets and corresponding footnotes can be found in the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2015.
| Page | 5 |
| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Apple Hospitality REIT, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except per share data)
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2015 | | | 2014 | | | 2015 | | | 2014 | |
| Revenues: | | | | | | | | | | | | |
| Room | | $ | 221,978 | | | $ | 213,831 | | | $ | 628,982 | | | $ | 552,645 | |
| Other | | | 18,577 | | | | 18,053 | | | | 56,299 | | | | 48,928 | |
| Total revenue | | | 240,555 | | | | 231,884 | | | | 685,281 | | | | 601,573 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
| Operating | | | 59,024 | | | | 58,617 | | | | 170,781 | | | | 152,020 | |
| Hotel administrative | | | 17,684 | | | | 16,627 | | | | 52,248 | | | | 43,610 | |
| Sales and marketing | | | 18,524 | | | | 18,441 | | | | 53,502 | | | | 47,798 | |
| Utilities | | | 9,505 | | | | 9,587 | | | | 25,222 | | | | 22,965 | |
| Repair and maintenance | | | 9,245 | | | | 9,073 | | | | 27,771 | | | | 23,943 | |
| Franchise fees | | | 10,360 | | | | 9,762 | | | | 29,069 | | | | 25,137 | |
| Management fees | | | 8,491 | | | | 8,083 | | | | 24,081 | | | | 21,074 | |
| Property taxes, insurance and other | | | 10,450 | | | | 11,121 | | | | 33,727 | | | | 29,477 | |
| Ground lease | | | 2,496 | | | | 2,489 | | | | 7,504 | | | | 5,850 | |
| General and administrative | | | 5,175 | | | | 5,627 | | | | 14,421 | | | | 14,774 | |
| Transaction and listing costs | | | 842 | | | | 707 | | | | 7,891 | | | | 4,593 | |
| Series B convertible preferred share expense | | | 0 | | | | 0 | | | | 0 | | | | 117,133 | |
| Loss on impairment of depreciable real estate assets | | | 0 | | | | 8,600 | | | | 0 | | | | 8,600 | |
| Depreciation | | | 32,351 | | | | 31,095 | | | | 94,205 | | | | 81,408 | |
| Total expenses | | | 184,147 | | | | 189,829 | | | | 540,422 | | | | 598,382 | |
| | | | | | | | | | | | | | | | | |
| Operating income | | | 56,408 | | | | 42,055 | | | | 144,859 | | | | 3,191 | |
| | | | | | | | | | | | | | | | | |
| Interest and other expense, net | | | (9,302 | ) | | | (6,340 | ) | | | (24,265 | ) | | | (17,197 | ) |
| Gain on sale of real estate | | | 0 | | | | 0 | | | | 15,358 | | | | 0 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) before income taxes | | | 47,106 | | | | 35,715 | | | | 135,952 | | | | (14,006 | ) |
| | | | | | | | | | | | | | | | | |
| Income tax expense | | | (138 | ) | | | (553 | ) | | | (872 | ) | | | (1,495 | ) |
| | | | | | | | | | | | | | | | | |
| Net income (loss) | | $ | 46,968 | | | $ | 35,162 | | | $ | 135,080 | | | $ | (15,501 | ) |
| | | | | | | | | | | | | | | | | |
| Other comprehensive income (loss): | | | | | | | | | | | | | | | | |
| Unrealized gain (loss) on interest rate derivatives | | | (5,978 | ) | | | 757 | | | | (6,437 | ) | | | 311 | |
| Cash flow hedge losses reclassified to earnings | | | 0 | | | | 0 | | | | 785 | | | | 0 | |
| | | | | | | | | | | | | | | | | |
| Comprehensive income (loss) | | $ | 40,990 | | | $ | 35,919 | | | $ | 129,428 | | | $ | (15,190 | ) |
| | | | | | | | | | | | | | | | | |
| Basic and diluted net income (loss) per common share | | $ | 0.27 | | | $ | 0.19 | | | $ | 0.74 | | | $ | (0.09 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding - basic and diluted | | | 175,069 | | | | 186,910 | | | | 182,247 | | | | 166,292 | |
Note:
The Consolidated Statements of Operations and Comprehensive Income (Loss) and corresponding footnotes can be found in the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2015.
| Page | 6 |
| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Apple Hospitality REIT, Inc.
Comparable Hotels Operating Metrics and Statistical Data
(Unaudited)
(in thousands except statistical data)
| | | Three Months Ended September 30, | | | | | | Nine Months Ended September 30, | | | | |
| | | 2015 | | | 2014 | | | % Change | | | 2015 | | | 2014 | | | % Change | |
| | | | | | | | | | | | | | | | | | | |
| Room revenue | | $ | 225,201 | | | $ | 208,306 | | | | 8.1 | % | | $ | 640,093 | | | $ | 593,053 | | | | 7.9 | % |
| Other revenue | | | 18,906 | | | | 18,547 | | | | 1.9 | % | | | 59,624 | | | | 55,769 | | | | 6.9 | % |
| Total revenue | | | 244,107 | | | | 226,853 | | | | 7.6 | % | | | 699,717 | | | | 648,822 | | | | 7.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total operating expenses | | | 146,757 | | | | 139,435 | | | | 5.3 | % | | | 427,298 | | | | 403,791 | | | | 5.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Hotel EBITDA | | $ | 97,350 | | | $ | 87,418 | | | | 11.4 | % | | $ | 272,419 | | | $ | 245,031 | | | | 11.2 | % |
| Adjusted Hotel EBITDA Margin % | | | 39.9 | % | | | 38.5 | % | | | 3.6 | % | | | 38.9 | % | | | 37.8 | % | | | 2.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| ADR | | $ | 133.57 | | | $ | 126.60 | | | | 5.5 | % | | $ | 131.02 | | | $ | 124.66 | | | | 5.1 | % |
| Occupancy | | | 80.6 | % | | | 79.9 | % | | | 0.9 | % | | | 79.0 | % | | | 77.8 | % | | | 1.5 | % |
| RevPAR | | $ | 107.62 | | | $ | 101.11 | | | | 6.4 | % | | $ | 103.49 | | | $ | 96.99 | | | | 6.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation to Actual Results | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Revenue (Actual) | | $ | 240,555 | | | $ | 231,884 | | | | | | | $ | 685,281 | | | $ | 601,573 | | | | | |
Revenue from properties acquired in Apple Seven and Apple Eight mergers for periods prior to mergers | | | - | | | | - | | | | | | | | - | | | | 61,665 | | | | | |
| Revenue from acquisitions prior to ownership | | | 3,585 | | | | 8,466 | | | | | | | | 20,003 | | | | 25,473 | | | | | |
| Revenue from dispositions | | | - | | | | (13,639 | ) | | | | | | | (7,359 | ) | | | (40,143 | ) | | | | |
| Lease revenue intangible amortization | | | (33 | ) | | | 142 | | | | | | | | 1,792 | | | | 254 | | | | | |
| Comparable Hotels Total Revenue | | $ | 244,107 | | | $ | 226,853 | | | | | | | $ | 699,717 | | | $ | 648,822 | | | | | |
| | | | | | | | | �� | | | | | | | | | | | | | | | | |
| Adjusted Hotel EBITDA (AHEBITDA) (Actual) | | $ | 95,738 | | | $ | 89,252 | | | | | | | $ | 266,193 | | | $ | 232,480 | | | | | |
AHEBITDA from properties acquired in Apple Seven and Apple Eight mergers for periods prior to mergers | | | - | | | | - | | | | | | | | - | | | | 17,415 | | | | | |
| AHEBITDA from acquisitions prior to ownership | | | 1,612 | | | | 3,156 | | | | | | | | 8,249 | | | | 9,729 | | | | | |
| AHEBITDA from dispositions | | | - | | | | (4,990 | ) | | | | | | | (2,023 | ) | | | (14,593 | ) | | | | |
| Comparable Hotels AHEBITDA | | $ | 97,350 | | | $ | 87,418 | | | | | | | $ | 272,419 | | | $ | 245,031 | | | | | |
Note:
Comparable Hotels is defined as the 177 hotels owned by the Company as of September 30, 2015. For hotels acquired during the periods noted, the Company has included, as applicable, results of those hotels for periods prior to the Company's ownership, and for dispositions, results have been excluded for the Company's period of ownership. Results for periods prior to the Company's ownership have not been included in the Company's actual Consolidated Financial Statements and are included only for comparison purposes.
Reconciliation of Net Income (Loss) to Non-GAAP financial measures is included in the following pages.
| Page | 7 |
| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Apple Hospitality REIT, Inc.
Comparable Hotels Quarterly Operating Metrics and Statistical Data
(Unaudited)
(in thousands except statistical data)
| | | Three Months Ended | |
| | | 3/31/2014 | | | 6/30/2014 | | | 9/30/2014 | | | 12/31/2014 | | | 3/31/2015 | | | 6/30/2015 | | | 9/30/2015 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Room revenue | | $ | 177,636 | | | $ | 207,111 | | | $ | 208,306 | | | $ | 177,980 | | | $ | 192,820 | | | $ | 222,072 | | | $ | 225,201 | |
| Other revenue | | | 17,509 | | | | 19,713 | | | | 18,547 | | | | 19,328 | | | | 20,590 | | | | 20,128 | | | | 18,906 | |
| Total revenue | | | 195,145 | | | | 226,824 | | | | 226,853 | | | | 197,308 | | | | 213,410 | | | | 242,200 | | | | 244,107 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total operating expenses | | | 126,941 | | | | 137,415 | | | | 139,435 | | | | 128,092 | | | | 135,418 | | | | 145,123 | | | | 146,757 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Hotel EBITDA | | $ | 68,204 | | | $ | 89,409 | | | $ | 87,418 | | | $ | 69,216 | | | $ | 77,992 | | | $ | 97,077 | | | $ | 97,350 | |
| Adjusted Hotel EBITDA Margin % | | | 35.0 | % | | | 39.4 | % | | | 38.5 | % | | | 35.1 | % | | | 36.5 | % | | | 40.1 | % | | | 39.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ADR | | $ | 121.61 | | | $ | 125.42 | | | $ | 126.60 | | | $ | 121.29 | | | $ | 127.43 | | | $ | 131.70 | | | $ | 133.57 | |
| Occupancy | | | 72.4 | % | | | 81.0 | % | | | 79.9 | % | | | 71.0 | % | | | 74.4 | % | | | 81.9 | % | | | 80.6 | % |
| RevPAR | | $ | 88.10 | | | $ | 101.61 | | | $ | 101.11 | | | $ | 86.07 | | | $ | 94.74 | | | $ | 107.93 | | | $ | 107.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation to Actual Results | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Revenue (Actual) | | $ | 137,121 | | | $ | 232,568 | | | $ | 231,884 | | | $ | 202,323 | | | $ | 210,352 | | | $ | 234,374 | | | $ | 240,555 | |
Revenue from properties acquired in Apple Seven and Apple Eight mergers for periods prior to mergers | | | 61,665 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Revenue from acquisitions prior to ownership | | | 8,660 | | | | 8,347 | | | | 8,466 | | | | 6,809 | | | | 8,327 | | | | 8,091 | | | | 3,585 | |
| Revenue from dispositions | | | (12,243 | ) | | | (14,261 | ) | | | (13,639 | ) | | | (11,966 | ) | | | (7,127 | ) | | | (232 | ) | | | - | |
| Lease revenue intangible amortization | | | (58 | ) | | | 170 | | | | 142 | | | | 142 | | | | 1,858 | | | | (33 | ) | | | (33 | ) |
| Comparable Hotels Total Revenue | | $ | 195,145 | | | $ | 226,824 | | | $ | 226,853 | | | $ | 197,308 | | | $ | 213,410 | | | $ | 242,200 | | | $ | 244,107 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Hotel EBITDA (AHEBITDA) (Actual) | | $ | 51,172 | | | $ | 92,056 | | | $ | 89,252 | | | $ | 71,073 | | | $ | 76,650 | | | $ | 93,805 | | | $ | 95,738 | |
AHEBITDA from properties acquired in Apple Seven and Apple Eight mergers for periods prior to mergers | | | 17,415 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| AHEBITDA from acquisitions prior to ownership | | | 3,569 | | | | 3,004 | | | | 3,156 | | | | 2,115 | | | | 3,399 | | | | 3,238 | | | | 1,612 | |
| AHEBITDA from dispositions | | | (3,952 | ) | | | (5,651 | ) | | | (4,990 | ) | | | (3,972 | ) | | | (2,057 | ) | | | 34 | | | | - | |
| Comparable Hotels AHEBITDA | | $ | 68,204 | | | $ | 89,409 | | | $ | 87,418 | | | $ | 69,216 | | | $ | 77,992 | | | $ | 97,077 | | | $ | 97,350 | |
Note:
Comparable Hotels is defined as the 177 hotels owned by the Company as of September 30, 2015. For hotels acquired during the periods noted, the Company has included, as applicable, results of those hotels for periods prior to the Company's ownership, and for dispositions, results have been excluded for the Company's period of ownership. Results for periods prior to the Company's ownership have not been included in the Company's actual Consolidated Financial Statements and are included only for comparison purposes.
Reconciliation of Net Income (Loss) to Non-GAAP financial measures is included in the following pages.
| Page | 8 |
| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Apple Hospitality REIT, Inc.
Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures
Apple Hospitality REIT Non-GAAP Financial Measures
The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its operating performance: Funds from Operations (“FFO”); Modified FFO (“MFFO”); Earnings before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”); Adjusted EBITDA (“Adjusted EBITDA”); and Adjusted Hotel EBITDA (“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, Adjusted EBITDA, 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, Adjusted EBITDA, and Adjusted Hotel EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, Adjusted EBITDA, 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.
| Page | 9 |
| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Reconciliation of Net Income (Loss) to FFO and MFFO
(Unaudited) (in thousands)
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 generally accepted accounting principles (“GAAP”)), excluding gains or losses from sales of real estate, extraordinary items as defined by GAAP, the cumulative effect of changes in accounting principles, plus real estate related depreciation, amortization and impairments, and adjustments for unconsolidated partnerships and joint ventures. 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 further adjusts FFO for certain additional items that are not in NAREIT’s definition of FFO, including: (i) the exclusion of the non-cash Series B convertible preferred share conversion expense and transaction and listing costs as these do not represent ongoing operations and (ii) the exclusion of non-cash straight-line ground lease expense as this expense does not reflect the underlying performance of the related hotels. 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, 2015 and 2014 (in thousands).
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2015 | | | 2014 | | | 2015 | | | 2014 | |
| Net income (loss) | | $ | 46,968 | | | $ | 35,162 | | | $ | 135,080 | | | $ | (15,501 | ) |
| Depreciation of real estate owned | | | 32,121 | | | | 30,865 | | | | 93,516 | | | | 80,872 | |
| Gain on sale of real estate | | | - | | | | - | | | | (15,358 | ) | | | - | |
Loss on impairment of depreciable real estate assets | | | - | | | | 8,600 | | | | - | | | | 8,600 | |
Amortization of favorable and unfavorable leases, net | | | 133 | | | | 308 | | | | 2,289 | | | | 748 | |
| Funds from operations | | | 79,222 | | | | 74,935 | | | | 215,527 | | | | 74,719 | |
| Series B convertible preferred share expense | | | - | | | | - | | | | - | | | | 117,133 | |
| Transaction and listing costs | | | 842 | | | | 707 | | | | 7,891 | | | | 4,593 | |
| Non-cash straight-line ground lease expense | | | 829 | | | | 860 | | | | 2,528 | | | | 2,033 | |
| Modified funds from operations | | $ | 80,893 | | | $ | 76,502 | | | $ | 225,946 | | | $ | 198,478 | |
| Page | 10 |
| Apple Hospitality REIT, Inc. • 814 East Main Street • Richmond, Virginia 23219 • 804‐344‐8121 • applehospitalityreit.com |
Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Adjusted Hotel EBITDA
(Unaudited) (in thousands)
EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes and depreciation and amortization. The Company believes EBITDA is useful to investors because it helps the Company and its investors evaluate the ongoing operating performance of the Company by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). In addition, certain covenants included in the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance.
The Company considers the exclusion of certain additional items from EBITDA useful, including: (i) the exclusion of the non-cash Series B convertible preferred share conversion expense, transaction and listing costs, gains or losses from sales of real estate, and the loss on impairment of depreciable real estate assets as these do not represent ongoing operations and (ii) the exclusion of non-cash straight-line ground lease expense as this expense does not reflect the underlying performance of the related hotels.
The following table reconciles the Company’s GAAP net income (loss) to EBITDA, Adjusted EBITDA and Adjusted Hotel EBITDA for the three and nine months ended September 30, 2015 and 2014 (in thousands).
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2015 | | | 2014 | | | 2015 | | | 2014 | |
| Net income (loss) | | $ | 46,968 | | | $ | 35,162 | | | $ | 135,080 | | | $ | (15,501 | ) |
| Depreciation | | | 32,351 | | | | 31,095 | | | | 94,205 | | | | 81,408 | |
| Amortization of favorable and unfavorable leases, net | | | 133 | | | | 308 | | | | 2,289 | | | | 748 | |
| Interest and other expense, net | | | 9,302 | | | | 6,340 | | | | 24,265 | | | | 17,197 | |
| Income tax expense | | | 138 | | | | 553 | | | | 872 | | | | 1,495 | |
| EBITDA | | | 88,892 | | | | 73,458 | | | | 256,711 | | | | 85,347 | |
| Series B convertible preferred share expense | | | - | | | | - | | | | - | | | | 117,133 | |
| Transaction and listing costs | | | 842 | | | | 707 | | | | 7,891 | | | | 4,593 | |
| Gain on sale of real estate | | | - | | | | - | | | | (15,358 | ) | | | - | |
Loss on impairment of depreciable real estate assets | | | - | | | | 8,600 | | | | - | | | | 8,600 | |
| Non-cash straight-line ground lease expense | | | 829 | | | | 860 | | | | 2,528 | | | | 2,033 | |
| Adjusted EBITDA | | $ | 90,563 | | | $ | 83,625 | | | $ | 251,772 | | | $ | 217,706 | |
| | | | | | | | | | | | | | | | | |
| General and administrative expense | | | 5,175 | | | | 5,627 | | | | 14,421 | | | | 14,774 | |
| Adjusted Hotel EBITDA | | $ | 95,738 | | | $ | 89,252 | | | $ | 266,193 | | | $ | 232,480 | |
