Apple Hospitality REIT, Inc. Reports Results of Operations for Second Quarter of 2015

RICHMOND, Va.--(BUSINESS WIRE)-- Apple Hospitality REIT, Inc. (NYSE: APLE) (the “Company” or “Apple Hospitality”) today announced results of operations for the second quarter of 2015.

Justin Knight, President and Chief Executive Officer, commented: “During the second quarter of 2015, we continued to see steady improvement in lodging fundamentals across the majority of our markets, which has led to ongoing growth in our operating results. With the broad geographic diversification of our portfolio, across more than 80 MSAs, our focus on the upscale, select service sector of the industry, our alignment with the Marriott and Hilton families of brands, and a balance sheet that provides us with significant transactional and operational flexibility, we believe the Company is well positioned for future growth.”

Second Quarter 2015 Highlights for the Company (comparisons to Second Quarter 2014):

• Completed the listing of its common shares on the New York Stock Exchange on May 18, 2015 (the “Listing”)
• Comparable Hotels revenue per available room (RevPAR) increased by 6.2 percent to $107.48
• Comparable Hotels Adjusted Hotel EBITDA increased by 8.5 percent to $94.4 million
• Comparable Hotels Adjusted Hotel EBITDA Margin increased by 70 basis points to 40.0 percent
• Modified funds from operations (MFFO) totaled $82.2 million, an increase of over 7 percent to $0.44 per share
• Acquired two hotels for a total purchase price of $43 million
• Paid distributions of $0.327 per share
• Completed a $200 million tender offer at $19.00 per common share

Hotel Portfolio Overview as of June 30, 2015:

• Number of hotels – 174
• Number of rooms – 22,177
• Number of Marriott® branded hotels – 90
• Number of Hilton® branded hotels – 84
• Number of states where hotels are located – 32

Apple Hospitality defines metrics from “Comparable Hotels” as results generated by the 174 hotels owned as of June 30, 2015. For hotels acquired during the period, the Company has included 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.

Transactional Activity

During the six months ended June 30, 2015, Apple Hospitality sold 19 properties in two separate transactions for a total sale price of approximately $208.5 million. In conjunction with these transactions, the Company recorded a gain on sale of approximately $15.4 million, which is included in the Company’s consolidated statements of operations for the six months ended June 30, 2015. The proceeds from the sale transactions were used primarily to repay the outstanding balance under the Company’s revolving credit facility, with the intent to use the increased availability to fund hotel acquisitions, hotel renovations and other general corporate purposes.

In June 2015, Apple Hospitality completed the acquisition of a 156-room Hampton Inn by Hilton® in the Las Olas area of downtown Ft. Lauderdale, FL, for a purchase price of approximately $23 million. The property, adjacent to the Ft. Lauderdale historic district, is convenient to the Port Everglades cruise port as well as the numerous dining and shopping options that line Las Olas Boulevard. The Ft. Lauderdale market continues to benefit from strengthening demand, with steady RevPAR growth of 7.5 percent year-to-date through June as compared to the same period last year, as reported by Smith Travel Research (STR). Also in June, the Company acquired a 110-room Hampton Inn by Hilton® in Cypress, CA, for approximately $20 million. The hotel is located near a variety of national and international corporations and within easy reach of Disneyland® Park. The Cypress market benefits from a variety of business and leisure demand generators and for the first six months of 2015, STR reported solid RevPAR growth of 11.5 percent as compared to the same period of 2014. Subsequent to the end of the second quarter, in July 2015, the Company purchased a new 170-room SpringHill Suites® by Marriott® in Burbank, CA, for a purchase price of approximately $60 million. Within walking distance of downtown Burbank and convenient to Hollywood attractions, the modern, boutique-style hotel provides guests easy access to numerous amenities. STR reported positive demand and rate trends for the Burbank market with RevPAR growth of 7.2 percent for the first six months of 2015 as compared to the same period of 2014.

Apple Hospitality currently has outstanding contracts for the potential purchase of five additional hotels for a total purchase price of approximately $177 million. The hotels currently under contract include: a 128-room Home2 Suites by Hilton® in Atlanta, GA, which is currently under construction; a 190-room Courtyard® by Marriott® in Burbank, CA; a 245-room Courtyard® by Marriott® in San Diego, CA; and a dual-branded property that includes a 102-room Courtyard® by Marriott® and a 78-room Residence Inn® by Marriott® in Syracuse, NY. 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 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 months.

Capital Markets Activity

As previously announced, on May 18, 2015, the Company completed the Listing of its common shares on the New York Stock Exchange. In connection with the Listing, effective May 18, 2015, the Company completed a 50% reverse share split. As a result of the reverse share split, every two common shares were converted into one common share, reducing the number of issued and outstanding common shares from 372.2 million to 186.1 million on the effective date. Except where the context indicates otherwise, all common shares and per share amounts for all periods presented have been adjusted to reflect the reverse share split.

In connection with the Company’s Listing, the Board of Directors approved a modified "Dutch Auction" tender offer to purchase up to $200 million in value of the Company’s common shares (the “Tender Offer”), which commenced on May 18, 2015 and expired on June 22, 2015. Upon expiration, the Company accepted for purchase approximately 10.5 million of its common shares, at a purchase price of $19.00 per common share, for an aggregate purchase price of approximately $200 million, excluding fees and expenses related to the Tender Offer. The total common shares accepted for purchase represented approximately 97% of the common shares properly tendered and not properly withdrawn at the purchase price of $19.00 per common share. Payment for shares accepted for purchase occurred on June 24, 2015, and the shares purchased were retired. The Company funded the Tender Offer and all related costs primarily from borrowings under its credit facility. The Company had approximately 175.6 million common shares outstanding immediately following payment for the shares purchased in the Tender Offer.

The Company’s previously announced $500 million share repurchase program became effective on July 8, 2015. As part of the implementation of the program, the Company 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 July 31, 2015, the Company had purchased approximately 186,000 shares under the Plan at a weighted average purchase price of approximately $17.80 for a total of approximately $3.3 million. Purchases under the Plan have been funded and the Company intends to fund future purchases with availability under the Company’s credit facility.

Capital Improvements

Apple Hospitality consistently reinvests in its properties and during the six months ended June 30, 2015, the Company invested approximately $19.8 million in capital expenditures, completing renovations on 12 hotels. The Company currently plans on investing an additional $30 to $40 million during the remainder of 2015.

Balance Sheet

Concurrent with the Listing, Apple Hospitality entered into an amendment and restatement of its $345 million credit facility, increasing the borrowing capacity to $965 million and extending the maturity dates. The $965 million credit facility is comprised of (a) a $540 million revolving credit facility with an initial maturity date of May 18, 2019 (subject to certain conditions can be extended one year), and (b) a $425 million term loan facility with a maturity date of May 18, 2020. Subject to the Company’s leverage ratio, interest under the new facility ranges from an annual rate of LIBOR plus 1.5% - 2.3%.

At June 30, 2015, Apple Hospitality had approximately $799.5 million of total indebtedness with a current combined weighted average interest rate of approximately 4.1% for the remainder of 2015, comprised of approximately $489.7 million in property level debt (43 hotels) and $309.8 million outstanding on its $965 million unsecured credit facility. Apple Hospitality’s combined unrestricted cash and undrawn capacity on its revolving credit facility at June 30, 2015, was approximately $655 million.

Shareholder Distributions

Apple Hospitality paid distributions of $0.327 per common share during the second quarter of 2015. Effective with the Listing, the Company’s Board of Directors approved a regular monthly distribution of $0.10 per common share. Based on the Company’s common stock closing price of $18.14 on July 31, 2015, the annualized distribution of $1.20 per common share represents an annual 6.6% yield. The 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 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 maintaining its operational and financial outlook for the 2015 fiscal year for the Company. This outlook, which is based on management’s current view of operating and economic fundamentals, does not contemplate acquisitions, dispositions, or capital market activities beyond those discussed in this release, nor does it take into account the impact of any unanticipated developments in its business or changes in its operating environment. Apple Hospitality may change its outlook during the year as actual and anticipated results vary from management’s assumptions. For the full year 2015, the Company anticipates:

Earnings Call

The Company will host a quarterly conference call for investors and interested parties on Friday, August 7, 2015, at 9:00 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 12:00 PM Eastern Time on August 7, 2015, through midnight Eastern Time on August 21, 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 13612259. The archive of the webcast will be available on the Company's website for a limited time.

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. As of June 30, 2015, the Company’s portfolio consisted of 174 hotels, with 22,177 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 June 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.

For additional information or to receive press releases by email, visit www.applehospitalityreit.com.

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.