Filed Pursuant to Rule 424(B)(3)
Registration No. 333-53984
SUPPLEMENT NO. 1 DATED AUGUST 10, 2001
TO PROSPECTUS DATED APRIL 19, 2001
APPLE HOSPITALITY TWO, INC.
The following information supplements the prospectus of Apple Hospitality
Two, Inc. dated April 19, 2001 and is part of the prospectus. Prospective
investors should carefully review the prospectus and this Supplement No. 1.
TABLE OF CONTENTS FOR SUPPLEMENT NO. 1
Status of the Offering...................................................... S-2
Potential Hotel Acquisitions................................................ S-2
Description of Hotels....................................................... S-4
The prospectus and the supplements contain forward-looking statements within
the meaning of the federal securities laws which are intended to be covered by
the safe harbors created by those laws. These statements include our plans and
objectives for future operations, including plans and objectives relating to
future growth and availability of funds. These forward-looking statements are
based on current expectations that involve numerous risks and uncertainties.
Assumptions relating to these statements involve judgments with respect to,
among other things, the continuation of our offering of shares, future
economic, competitive and market conditions and future business decisions. All
of these matters are difficult or impossible to predict accurately and many of
them are beyond our control. Although we believe the assumptions underlying the
forward-looking statements, and the forward-looking statements themselves, are
reasonable, any of the assumptions could be inaccurate and, therefore, there
can be no assurance that these forward-looking statements will prove to be
accurate. In light of the significant uncertainties inherent in these
forward-looking statements, the inclusion of this information should not be
regarded as a representation by us or any other person that our objectives and
plans, which we consider to be reasonable, will be achieved.
STATUS OF THE OFFERING
We completed the minimum offering of Units (consisting of one Common Share
and one Series A Preferred Share) at $9.50 per Unit on May 1, 2001. We are
continuing the offering at $10 per Unit in accordance with the prospectus.
As of July 20, 2001, we had closed on the following sales of Units:
Proceeds Net of Selling
Price Per Number of Gross Commissions and Marketing
Unit Units Sold Proceeds Expense Allowance
--------- ------------ ----------- -------------------------
$ 9.50 3,157,894.70 $30,000,000 $27,000,000
$10.00 4,598,601.00 45,986,010 41,387,409
------------ ----------- -----------
Total 7,756,495.70 $75,986,010 $68,387,409
============ =========== ===========
POTENTIAL HOTEL ACQUISITIONS
We have entered into a purchase agreement dated as of May 18, 2001 for the
potential acquisition of 10 extended-stay hotels that operate as part of the
Residence Inn(R) by Marriott(R) franchise. The total base purchase price for
the hotels would be $119 million. The acquisitions are considered potential,
and not probable, due to the number of conditions to closing and other
contingencies, including our ability to obtain financing on terms that are
acceptable to us and the results of our ongoing offering. The purchase
agreement provides that the closing on the acquisitions, if any, must occur by
no later than August 31, 2001.
As required by the purchase agreement, we made an escrow deposit equal to
$1,001,000. This amount, plus any accrued interest, would be applied as a
credit toward the purchase price if the acquisitions occur. On May 31, 2001,
$1,000,000 of our deposit became non-refundable. Also on May 31, 2001, we used
a portion of our offering proceeds to provide short-term financing in the
amount of $47,000,000 to Crestline Capital Corporation as the parent company of
the prospective seller of the hotels. To evidence this financing, we received a
secured promissory note from Crestline Capital Corporation for advances up to
$50,000,000, with interest to accrue at the rate of 12% per year. The note will
mature on either the close of the potential acquisitions or August 31, 2001,
whichever is earlier. Prior to maturity, monthly interest payments are required
under the note. Under a pledge agreement dated as of May 31, 2001, the secured
promissory note is secured by negotiable certificates of deposit, $9,000,000 of
which are held in escrow. The other certificates are required to be delivered
to us. If the potential acquisition occurs, we expect to apply the advance
toward the purchase price of the hotels.
Under the purchase agreement, we are required to satisfy a portion of the
purchase price by assuming existing debt on the hotels. This existing debt is
evidenced by a loan agreement dated as of December 29, 1999 between the
potential seller of the hotels and Bank of America, N.A. The loan was made in
the amount of $55,588,000 at an interest rate of 8.08%. The monthly payment
amount is $489,067.76. The maturity date of the loan is January 1, 2010. A
balloon payment would be due at maturity. As of July 2, 2001, the unpaid
balance of principal and interest under the loan was $53,490,994. By letter
agreement dated May 18, 2001, we also would be required to pay any fees for the
assumption or transfer of the existing debt, up to a maximum amount of
$750,000.
If the acquisitions occur, we would make a cash payment to the seller for
the remaining balance of the purchase price, after credit for our deposit
amount, our advance to Crestline Capital Corporation and our assumption of the
existing debt on the hotels. We expect that the proceeds of our ongoing
offering would be the source of any such cash payment.
S-2
In the event the potential acquisitions are consummated, we would be
required to pay 2% of the total purchase price, or $2,380,000, as a commission
to Apple Suites Realty Group, Inc. This entity is owned by Glade M. Knight, who
is one of our directors and our Chief Executive Officer. If the acquisitions
occur, we also anticipate spending a total of approximately $19,380,000 in
improvements to the hotels over the next 12 months.
The 10 hotels that we may acquire are identified below, and are described in
the following section.
[MAP]
Number Number
of of
General Location of Hotel Suites General Location of Hotel Suites
------------------------- ------ ------------------------- ------
Montgomery, Alabama.......... 94 Atlanta, Georgia....... 126
Bakersfield, California...... 114 Boston, Massachusetts.. 130
Concord, California.......... 126 Cincinnati, Ohio....... 118
San Ramon, California........ 106 Dallas, Texas.......... 120
Meriden, Connecticut......... 106 Houston, Texas......... 110
-----
Total Suites..... 1,150
=====
S-3
DESCRIPTION OF HOTELS
Unless otherwise specified, all room rates shown below are those in effect
as of June 30, 2001, and the other rate information is for the period from
January 1, 2001 through June 30, 2001.
1. Residence Inn Montgomery
1200 Hilmar Court
Montgomery, Alabama 36117
The hotel opened in June 1990. It consists of five buildings, each with two
stories. The hotel contains 94 suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
Studio Suite 66 452
One-Bedroom Suite 4 547
Two-Bedroom Suite 24 881
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) Studio One-Bedroom Two-Bedroom
------------------ ------ ----------- -----------
1 to 4 $119 $119 $145
5 to 11 95 95 125
12 to 29 85 85 115
30 or more 75 75 105
For the period from January 1, 2001 through June 15, 2001:
Average Daily Occupancy Rate....................... 89.10%
Average Daily Rate per Suite....................... $81.91
Average Daily Net Revenue per Suite................ $72.98
Improvement/Renovation Budget During Next 12 Months $1,600,000.00
2. Residence Inn Bakersfield
4241 Chester Lane
Bakersfield, California 93390
The hotel opened in August 1990. It consists of five buildings, each with
two stories. The hotel contains 114 suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
Studio Suite 80 467
One-Bedroom Suite 6 547
Two-Bedroom Suite 28 740
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) Studio One-Bedroom Two-Bedroom
------------------ ------ ----------- -----------
1 to 4 $114 $124 $139
5 to 11 99 119 129
12 to 29 94 104 119
30 or more 84 94 115
S-4
Average Daily Occupancy Rate....................... 88.00%
Average Daily Rate per Suite....................... $90.88
Average Daily Net Revenue per Suite................ $79.97
Improvement/Renovation Budget During Next 12 Months $2,200,000.00
3. Residence Inn Concord-Pleasant Hill
700 Ellinwood Way
Pleasant Hill, California 94523
The hotel opened in November 1990. It consists of six buildings, each with
two stories. The hotel contains 126 suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
Studio Suite 90 470
One-Bedroom Suite 8 547
Two-Bedroom Suite 28 740
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) Studio One-Bedroom Two-Bedroom
------------------ ------ ----------- -----------
1 to 4 $199 $209 $239
5 to 11 169 189 229
12 to 29 159 179 219
30 or more 139 159 209
For the period from January 1, 2001 through June 15, 2001:
Average Daily Occupancy Rate....................... 86.43%
Average Daily Rate per Suite....................... $136.44
Average Daily Net Revenue per Suite................ $117.93
Improvement/Renovation Budget During Next 12 Months $2,200,000.00
4. Residence Inn San Ramon
1071 Market Place
San Ramon, California 94583
The hotel opened in September 1990. It consists of six buildings, each with
two stories. The hotel contains 106 suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
Studio Suite 82 490
Two-Bedroom Suite 24 800
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) Studio Two-Bedroom
------------------ ------ -----------
1 to 4 $219 $249
5 to 11 179 219
12 to 29 159 199
30 or more 139 189
S-5
Average Daily Occupancy Rate......................... 65.63%
Average Daily Rate per Suite......................... $151.37
Average Daily Net Revenue per Suite.................. $99.34
Improvement/Renovation Budget During Next 12 Months.. $680,000.00
5. Residence Inn Meriden
390 Bee Street
Meriden, Connecticut 06450
The hotel opened in September 1990. It consists of five buildings, each with
three stories, and two buildings with two-stories. The hotel contains 106
suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
One-Bedroom Suite 81 494
Two-Bedroom Suite 25 723
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) One-Bedroom Two-Bedroom
------------------ ----------- -----------
1 to 4 $154 $175
5 to 11 139 164
12 to 29 124 149
30 or more 103 129
Average Daily Occupancy Rate....................... 80.26%
Average Daily Rate per Suite....................... $110.62
Average Daily Net Revenue per Suite................ $88.78
Improvement/Renovation Budget During Next 12 Months $1,900,000.00
6. Residence Inn Atlanta Airport
3401 International Boulevard
Hapeville, Georgia 30354
The hotel opened in June 1990. It consists of six buildings, each with two
stories. The hotel contains 126 suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
Studio Suite 84 550
One-Bedroom Suite 10 650
Two-Bedroom Suite 32 750
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) Studio One-Bedroom Two-Bedroom
------------------ ------ ----------- -----------
1 to 4 $139 $139 $181
5 to 11 122 122 169
12 to 29 114 114 149
30 or more 99 99 139
S-6
For the period from January 1, 2001 through June 15, 2001:
Average Daily Occupancy Rate....................... 87.90%
Average Daily Rate per Suite....................... $104.20
Average Daily Net Revenue per Suite................ $91.59
Improvement/Renovation Budget During Next 12 Months $2,300,000.00
7. Residence Inn Boston
1775 Andover Street
Tewksbury, Massachusetts 01876
The hotel opened in June 1990. It consists of seven buildings, each with
three stories, and three buildings with two stories. The hotel contains 130
suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
One-Bedroom Suite 96 415
Two-Bedroom Suite 33 571
Hospitality Suite 1 500
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) One-Bedroom Two-Bedroom Hospitality
------------------ ----------- ----------- -----------
1 to 4 $139 $179 $179
5 to 11 129 169 169
12 to 29 119 159 159
30 or more 99 139 139
Average Daily Occupancy Rate....................... 79.40%
Average Daily Rate per Suite....................... $114.92
Average Daily Net Revenue per Suite................ $91.25
Improvement/Renovation Budget During Next 12 Months $2,100,000.00
8. Residence Inn Cincinnati
11401 Reed Hartman Highway
Blue Ash, Ohio 45241
The hotel opened in May 1990. It consists of two buildings, each with two
stories. The hotel contains 118 suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
Studio Suite 90 500
Two-Bedroom Suite 28 900
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) Studio Two-Bedroom
------------------ ------ -----------
1 to 4 $129 $149
5 to 11 109 129
12 to 29 89 119
30 or more 69 109
S-7
Average Daily Occupancy Rate....................... 65.20%
Average Daily Rate per Suite....................... $89.27
Average Daily Net Revenue per Suite................ $58.20
Improvement/Renovation Budget During Next 12 Months $1,800,000.00
9. Residence Inn Dallas
950 Walnut Hill Lane
Irving, Texas 75038
The hotel opened in December 1989. It consists of 16 buildings, each with
two stories. The hotel contains 120 suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
Studio Suite 90 460
Two-Bedroom Suite 30 706
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) Studio Two-Bedroom
------------------ ------ -----------
1 to 4 $149 $159
5 to 11 139 149
12 to 29 119 135
30 or more 92 115
Average Daily Occupancy Rate....................... 85.70%
Average Daily Rate per Suite....................... $105.20
Average Daily Net Revenue per Suite................ $90.16
Improvement/Renovation Budget During Next 12 Months $2,900,000.00
10. Residence Inn Houston
525 Bay Area Boulevard
Houston, Texas 77058
The hotel opened in June 1990. It consists of five buildings, each with two
stories. The hotel contains 110 suites, as follows:
Type of Suite Number Available Square Feet/per Suite
------------- ---------------- ---------------------
Studio Suite 82 480
Two-Bedroom Suite 28 714
Room rates and other information for the hotel are set forth in the tables
below:
Length of Stay
(number of nights) Studio Two-Bedroom
------------------ ------ -----------
1 to 4 $125 $159
5 to 11 115 154
12 to 29 105 149
30 or more 88 149
For the period from January 1, 2001 through June 15, 2001:
Average Daily Occupancy Rate....................... 92.30%
Average Daily Rate per Suite....................... $89.29
Average Daily Net Revenue per Suite................ $82.41
Improvement/Renovation Budget During Next 12 Months $1,700,000.00
S-8