Apple Hospitality REIT, Inc. Reports Results of Operations for Second Quarter 2016

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 2016.

Justin Knight, President and Chief Executive Officer, commented, “We are pleased with our second quarter results including Comparable Hotels RevPAR growth of 5.1 percent, Adjusted EBITDA growth of 11.6 percent and an increase in Comparable Hotels Adjusted Hotel EBITDA Margin of 90 basis points. We remain excited by the financial and strategic merits of the potential merger with Apple REIT Ten, which we anticipate to close in early September assuming shareholder vote and other closing conditions are satisfied. Our combined portfolio of hotels would continue to benefit from broad geographic diversification and a focus on the upscale, select service segment of the industry which we believe positions us well for solid performance through the remainder of this year.”

Comparable Hotels is defined as the 179 hotels owned by the Company as of June 30, 2016. 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. Results included for periods prior to the Company's ownership are based on information from the prior owner of each hotel at the time of acquisition and have not been audited or adjusted.

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 June 30, 2016, Apple Hospitality owned 179 hotels, with 22,961 rooms, comprised of 95 Marriott® branded hotels and 84 Hilton® branded hotels, with locations in more than 80 MSAs across 32 states.

Transactional Activity

In April 2016, Apple Hospitality announced that it and Apple REIT Ten, Inc. (“Apple Ten”) had entered into a definitive merger agreement pursuant to which the Company would acquire all of the issued and outstanding shares of Apple Ten. The required shareholder meetings for each company are scheduled for August 31, 2016. If the necessary shareholder approvals are received and all other conditions to closing are satisfied, the Company anticipates completing the merger in early September 2016. The transaction would join two highly complementary select service hotel portfolios with a combined asset base consisting of 236 hotels and 30,298 guestrooms geographically diversified across 96 MSAs throughout 33 states. Apple Ten owns 56 hotels with 7,209 guestrooms. Under the merger agreement, each outstanding Unit of Apple Ten (consisting of one common share of Apple Ten and one Series A preferred share of Apple Ten) would be exchanged for combined consideration of $1.00 in cash and 0.522 shares of the Company’s common stock, and each Apple Ten Series B convertible preferred share would receive the same consideration on an as-converted basis. Also under the merger agreement, the Company would assume all of Apple Ten’s assets and liabilities at closing.

As previously announced, Apple Hospitality closed on the acquisition of a newly constructed 128-room Home2 Suites by Hilton® in Atlanta, GA for a purchase price of $24.6 million on July 1, 2016.

Capital Improvements

Apple Hospitality consistently reinvests in its properties in order to maintain their relevance and competitiveness within their markets. During the six months ended June 30, 2016, the Company invested approximately $29 million in capital expenditures for existing hotels and anticipates investing an additional $20 to $30 million during the remainder of 2016, which includes various scheduled renovation projects for approximately 15 to 20 properties.

Balance Sheet

As of June 30, 2016, Apple Hospitality had approximately $1.0 billion of total indebtedness with a current combined weighted average interest rate of approximately 3.5% for the remainder of 2016. Excluding unamortized debt issuance costs and fair value adjustments, the total indebtedness is comprised of approximately $400 million in property-level debt secured by 31 hotels, and $631 million outstanding on its unsecured credit facilities. Apple Hospitality’s undrawn capacity on its unsecured credit facilities at June 30, 2016 was approximately $484 million. At June 30, 2016, the Company had $21.6 million of cash and cash equivalents. The Company’s net debt to trailing twelve months Adjusted EBITDA ratio at June 30, 2016 was 3.0 times, which provides Apple Hospitality with financial flexibility to fund capital requirements and pursue opportunities in the marketplace, including the potential merger with Apple Ten.

Shareholder Distributions

Apple Hospitality paid distributions of $0.30 per common share during the three-month period ended June 30, 2016. Based on the Company’s common share closing price of $20.12 on August 4, 2016, the annualized distribution of $1.20 per common share represents an annual yield of approximately 6.0%. 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.

2016 Outlook

Apple Hospitality is providing its operational and financial outlook for 2016. 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 the proposed merger with Apple Ten or any unanticipated developments in its business or changes in its operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions. For the full year 2016, the Company anticipates:

Earnings Call

The Company will host a quarterly conference call for investors and interested parties on Tuesday, August 9, 2016, at 9:00 a.m. 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 p.m. Eastern Time on August 9, 2016, through midnight Eastern Time on August 23, 2016. 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 13640231. 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. The Company’s portfolio consists of 180 hotels, with over 23,000 guestrooms, diversified across the Hilton® and Marriott® families of brands with locations in urban, high-end suburban and developing markets throughout 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 the Company and Apple Ten to obtain the required shareholder or other third-party approvals to consummate the proposed merger; the satisfaction or waiver of other conditions in the merger agreement; the risk that the merger or the other transactions contemplated by the merger agreement may not be completed in the time frame expected by the parties or at all; the ability of Apple Hospitality to effectively acquire and dispose of properties; the ability of Apple Hospitality to successfully integrate pending transactions and 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, including any legal proceedings that have been or may be instituted against Apple Hospitality, Apple Ten or others related to the merger agreement; 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, 2015 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016. Any forward-looking statement that Apple Hospitality makes speaks only as of the date of such statement. 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.

Note: State categorization is based on STR, Inc. census region designation.