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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, 2022

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______

 

Commission File Number 001-37389

APPLE HOSPITALITY REIT, INC.

(Exact name of registrant as specified in its charter)

 

Virginia

 

26-1379210

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

814 East Main Street

Richmond, Virginia

 

23219

(Address of principal executive offices)

 

(Zip Code)

 

(804) 344-8121

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Shares, no par value

 

APLE

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Number of registrant’s common shares outstanding as of November 4, 2022: 228,752,610

 

 


 

Apple Hospitality REIT, Inc.

Form 10-Q

Index

 

 

 

 

Page

Number

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

 

 

 

 

 

Consolidated Balance Sheets – September 30, 2022 and December 31, 2021

3

 

 

 

 

 

 

Consolidated Statements of Operations and Comprehensive Income – three and nine months ended September 30, 2022 and 2021

4

 

 

 

 

 

 

Consolidated Statements of Shareholders’ Equity – three and nine months ended September 30, 2022 and 2021

5

 

 

 

 

 

 

Consolidated Statements of Cash Flows – nine months ended September 30, 2022 and 2021

6

 

 

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

 

 

 

 

 

Item 4.

Controls and Procedures

41

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

42

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

 

 

 

 

 

Item 6.

Exhibits

43

 

 

 

 

Signatures

44

 

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®, Hilton Garden Inn®, Home2 Suites by Hilton® and Homewood Suites by Hilton® trademarks are the property of Hilton Worldwide Holdings Inc. or one or more of its affiliates. The Hyatt®, Hyatt House® and Hyatt Place® trademarks are the property of Hyatt Hotels Corporation or one or more of its affiliates. For convenience, the applicable trademark or service mark symbol has been omitted but will be deemed to be included wherever the above referenced terms are used.

 


Index

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Apple Hospitality REIT, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Investment in real estate, net of accumulated depreciation and amortization of
   $
1,446,221 and $1,311,262, respectively

 

$

4,567,000

 

 

$

4,677,185

 

Cash and cash equivalents

 

 

25,573

 

 

 

3,282

 

Restricted cash-furniture, fixtures and other escrows

 

 

38,821

 

 

 

36,667

 

Due from third party managers, net

 

 

65,110

 

 

 

40,052

 

Other assets, net

 

 

80,999

 

 

 

33,341

 

Total Assets

 

$

4,777,503

 

 

$

4,790,527

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Debt, net

 

$

1,318,319

 

 

$

1,438,758

 

Finance lease liabilities

 

 

111,969

 

 

 

111,776

 

Accounts payable and other liabilities

 

 

94,219

 

 

 

92,672

 

Total Liabilities

 

 

1,524,507

 

 

 

1,643,206

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

Preferred stock, authorized 30,000,000 shares; none issued and outstanding

 

 

-

 

 

 

-

 

Common stock, no par value, authorized 800,000,000 shares; issued and outstanding
   
228,833,710 and 228,255,642 shares, respectively

 

 

4,579,198

 

 

 

4,569,352

 

Accumulated other comprehensive income (loss)

 

 

38,354

 

 

 

(15,508

)

Distributions greater than net income

 

 

(1,364,556

)

 

 

(1,406,523

)

Total Shareholders' Equity

 

 

3,252,996

 

 

 

3,147,321

 

 

 

 

 

 

 

 

Total Liabilities and Shareholders' Equity

 

$

4,777,503

 

 

$

4,790,527

 

 

See notes to consolidated financial statements.

3


Index

 

Apple Hospitality REIT, Inc.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Room

 

$

315,940

 

 

$

260,415

 

 

$

866,286

 

 

$

640,062

 

Food and beverage

 

 

11,870

 

 

 

6,315

 

 

 

32,353

 

 

 

14,186

 

Other

 

 

13,340

 

 

 

10,434

 

 

 

40,657

 

 

 

29,033

 

Total revenue

 

 

341,150

 

 

 

277,164

 

 

 

939,296

 

 

 

683,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Hotel operating expense:

 

 

 

 

 

 

 

 

 

 

 

 

Operating

 

 

81,320

 

 

 

61,954

 

 

 

221,715

 

 

 

153,290

 

Hotel administrative

 

 

27,516

 

 

 

23,126

 

 

 

78,711

 

 

 

62,408

 

Sales and marketing

 

 

28,533

 

 

 

23,015

 

 

 

78,494

 

 

 

58,283

 

Utilities

 

 

13,383

 

 

 

11,410

 

 

 

34,226

 

 

 

31,322

 

Repair and maintenance

 

 

15,632

 

 

 

12,600

 

 

 

43,468

 

 

 

34,711

 

Franchise fees

 

 

14,949

 

 

 

12,274

 

 

 

41,015

 

 

 

30,058

 

Management fees

 

 

11,734

 

 

 

9,574

 

 

 

31,955

 

 

 

23,031

 

Total hotel operating expense

 

 

193,067

 

 

 

153,953

 

 

 

529,584

 

 

 

393,103

 

Property taxes, insurance and other

 

 

19,052

 

 

 

17,927

 

 

 

56,510

 

 

 

54,936

 

General and administrative

 

 

10,271

 

 

 

13,261

 

 

 

30,216

 

 

 

29,815

 

Loss on impairment of depreciable real estate assets

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,754

 

Depreciation and amortization

 

 

45,135

 

 

 

44,217

 

 

 

135,781

 

 

 

139,313

 

Total expense

 

 

267,525

 

 

 

229,358

 

 

 

752,091

 

 

 

627,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate

 

 

1,785

 

 

 

44

 

 

 

1,785

 

 

 

3,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

75,410

 

 

 

47,850

 

 

 

188,990

 

 

 

59,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other expense, net

 

 

(14,933

)

 

 

(15,977

)

 

 

(44,785

)

 

 

(53,108

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

60,477

 

 

 

31,873

 

 

 

144,205

 

 

 

5,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(1,331

)

 

 

(114

)

 

 

(1,712

)

 

 

(309

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

59,146

 

 

$

31,759

 

 

$

142,493

 

 

$

5,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate derivatives

 

 

16,024

 

 

 

3,426

 

 

 

53,862

 

 

 

18,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

75,170

 

 

$

35,185

 

 

$

196,355

 

 

$

23,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net income per common share

 

$

0.26

 

 

$

0.14

 

 

$

0.62

 

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

 

228,991

 

 

 

228,436

 

 

 

228,992

 

 

 

225,664

 

 

See notes to consolidated financial statements.

4


Index

 

Apple Hospitality REIT, Inc.

Consolidated Statements of Shareholders' Equity

(Unaudited)

(in thousands, except per share data)

 

Three Months Ended September 30, 2022 and 2021

 

 

 

Common Stock

 

 

Accumulated
Other

 

 

Distributions

 

 

 

 

 

 

Number
of Shares

 

 

Amount

 

 

Comprehensive
Income (Loss)

 

 

Greater Than
Net Income

 

 

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
  per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(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

 

Share based compensation, net

 

 

13

 

 

 

915

 

 

 

-

 

 

 

-

 

 

 

915

 

Issuance of common shares, net

 

 

-

 

 

 

(30

)

 

 

-

 

 

 

-

 

 

 

(30

)

Interest rate derivatives

 

 

-

 

 

 

-

 

 

 

3,426

 

 

 

-

 

 

 

3,426

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

31,759

 

 

 

31,759

 

Distributions declared to shareholders ($0.01
  per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,279

)

 

 

(2,279

)

Balance at September 30, 2021

 

 

228,354

 

 

$

4,570,217

 

 

$

(24,650

)

 

$

(1,417,453

)

 

$

3,128,114