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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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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
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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.
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
Smaller reporting company
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Emerging growth company
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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
Number of registrant’s common shares outstanding as of May 3, 2021:
Apple Hospitality REIT, Inc.
Form 10-Q
Index
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PART I. FINANCIAL INFORMATION |
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Item 1. |
3 |
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Consolidated Balance Sheets – March 31, 2021 and December 31, 2020 |
3 |
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Consolidated Statements of Operations and Comprehensive Loss – three months ended March 31, 2021 and 2020 |
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Consolidated Statements of Shareholders’ Equity – three months ended March 31, 2021 and 2020 |
5 |
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Consolidated Statements of Cash Flows – three months ended March 31, 2021 and 2020 |
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7 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
19 |
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Item 3. |
36 |
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Item 4. |
36 |
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PART II. OTHER INFORMATION |
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Item 1. |
37 |
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Item 2. |
37 |
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Item 6. |
38 |
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39 |
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This Form 10-Q includes references to certain trademarks or service marks. The 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®, Hampton Inn by Hilton®, Hampton Inn & Suites 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.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Apple Hospitality REIT, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
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March 31, |
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December 31, |
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2021 |
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2020 |
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(unaudited) |
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Assets |
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Investment in real estate, net of accumulated depreciation and amortization of
$
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$ |
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$ |
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Assets held for sale |
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Cash and cash equivalents |
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Restricted cash-furniture, fixtures and other escrows |
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Due from third party managers, net |
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Other assets, net |
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Total Assets |
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$ |
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$ |
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Liabilities |
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Debt, net |
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$ |
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$ |
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Finance lease liabilities |
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Accounts payable and other liabilities |
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Total Liabilities |
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Shareholders' Equity |
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Preferred stock, authorized
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Common stock, no par value, authorized
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Accumulated other comprehensive loss |
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(
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(
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Distributions greater than net income |
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(
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) |
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(
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Total Shareholders' Equity |
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Total Liabilities and Shareholders' Equity |
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$ |
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$ |
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See notes to consolidated financial statements.
3
Apple Hospitality REIT, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except per share data)
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Three Months Ended |
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March 31, |
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2021 |
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2020 |
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Revenues: |
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Room |
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$ |
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$ |
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Food and beverage |
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Other |
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Total revenue |
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Expenses: |
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Hotel operating expense: |
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Operating |
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Hotel administrative |
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Sales and marketing |
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Utilities |
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Repair and maintenance |
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Franchise fees |
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Management fees |
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Total hotel operating expense |
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Property taxes, insurance and other |
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General and administrative |
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Loss on impairment of depreciable real estate assets |
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Depreciation and amortization |
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Total expense |
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Gain on sale of real estate |
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Operating income (loss) |
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(
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) |
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Interest and other expense, net |
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(
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) |
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(
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Loss before income taxes |
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(
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) |
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(
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Income tax expense |
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(
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) |
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(
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Net loss |
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$ |
(
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) |
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$ |
(
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) |
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Other comprehensive income (loss): |
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Interest rate derivatives |
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(
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) |
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Comprehensive loss |
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$ |
(
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) |
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$ |
(
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Basic and diluted net loss per common share |
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$ |
(
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) |
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$ |
(
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Weighted average common shares outstanding - basic and diluted |
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See notes to consolidated financial statements.
4
Apple Hospitality REIT, Inc.
Consolidated Statements of Shareholders' Equity
Three Months Ended March 31, 2021 and 2020
(Unaudited)
(in thousands, except per share data)
|
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Common Stock |
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Accumulated Other |
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Distributions |
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|||||||
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Number of Shares |
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Amount |
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Comprehensive Income (Loss) |
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Greater Than Net Income |
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Total |
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Balance at December 31, 2020 |
|
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$ |
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$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
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Share based compensation, net |
|
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- |
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- |
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Equity issuance costs |
|
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- |
|
|
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(
|
) |
|
|
- |
|
|
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- |
|
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(
|
) |
|
Interest rate derivatives |
|
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- |
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- |
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- |
|
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Net loss |
|
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- |
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- |
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- |
|
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(
|
) |
|
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(
|
) |
|
Distributions declared to shareholders ($
|
|
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- |
|
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|
- |
|
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- |
|
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(
|
) |
|
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(
|
) |
|
Balance at March 31, 2021 |
|
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|
$ |
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$ |
(
|
) |
|
$ |
(
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) |
|
$ |
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Balance at December 31, 2019 |
|
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$ |
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|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
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|
Share based compensation, net |
|
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- |
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- |
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Common shares repurchased |
|
|
(
|
) |
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|
(
|
) |
|
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- |
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|
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- |
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|
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(
|
) |
|
Interest rate derivatives |
|
|
- |
|
|
|
- |
|
|
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(
|
) |
|
|
- |
|
|
|
(
|
) |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
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(
|
) |
|
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(
|
) |
|
Distributions declared to shareholders ($
|
|
|
- |
|
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|
- |
|
|
|
- |
|
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(
|
) |
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(
|
) |
|
Balance at March 31, 2020 |
|
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|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
See notes to consolidated financial statements.
5
Apple Hospitality REIT, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
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Three Months Ended |
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|||||
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March 31, |
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|||||
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2021 |
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2020 |
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Cash flows from operating activities: |
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Net loss |
|
$ |
(
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) |
|
$ |
(
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) |
|
Adjustments to reconcile net loss to cash provided by operating activities: |
|
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Depreciation and amortization |
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Loss on impairment of depreciable real estate assets |
|
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- |
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Gain on sale of real estate |
|
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(
|
) |
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(
|
) |
|
Other non-cash expenses, net |
|
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Changes in operating assets and liabilities: |
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Decrease (increase) in due from third party managers, net |
|
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(
|
) |
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Decrease in other assets, net |
|
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Increase (decrease) in accounts payable and other liabilities |
|
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(
|
) |
|
Net cash provided by (used in) operating activities |
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(
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) |
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Cash flows from investing activities: |
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Acquisition of hotel properties, net |
|
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(
|
) |
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- |
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Capital improvements |
|
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(
|
) |
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(
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) |
|
Net proceeds from sale of real estate |
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Net cash provided by (used in) investing activities |
|
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(
|
) |
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Cash flows from financing activities: |
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Repurchases of common shares |
|
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- |
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(
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) |
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Repurchases of common shares to satisfy employee withholding requirements |
|
|
(
|
) |
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(
|
) |
|
Distributions paid to common shareholders |
|
|
- |
|
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(
|
) |
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Equity issuance costs |
|
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(
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) |
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- |
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Net proceeds from revolving credit facility |
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Proceeds from term loans and senior notes |
|
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- |
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Proceeds from mortgage debt and other loans |
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- |
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Payments of mortgage debt and other loans |
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|
(
|
) |
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(
|
) |
|
Financing costs |
|
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(
|
) |
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(
|
) |
|
Net cash provided by financing activities |
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Net change in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
|
$ |
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$ |
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Supplemental cash flow information: |
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Interest paid |
|
$ |
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$ |
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Supplemental disclosure of noncash investing and financing activities: |
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Accrued distribution to common shareholders |
|
$ |
|
|
|
$ |
- |
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|
|
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
$ |
|
|
|
$ |
- |
|
|
Restricted cash-furniture, fixtures and other escrows, beginning of period |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of period |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash-furniture, fixtures and other escrows, end of period |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
|
$ |
|
|
See notes to consolidated financial statements.
6
Apple Hospitality REIT, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization
Apple Hospitality REIT, Inc. together with its wholly-owned subsidiaries, the “Company” is a Virginia corporation that has elected to be treated as a real estate investment trust (“REIT”) for federal income tax purposes. The Company is a self-advised REIT that invests in income-producing real estate, primarily in the lodging sector, in the United States (“U.S.”). The Company’s fiscal year end is December 31. The Company has no foreign operations or assets and its operating structure includes only
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include all of the information required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the twelve month period ending December 31, 2021.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Novel Coronavirus COVID-19 Pandemic
As a result of the current novel coronavirus COVID-19 pandemic (“COVID-19”) and the impact it has had on travel and the broader economy throughout the U.S. since March 2020, the Company’s hotels have experienced significant declines in occupancy, which has had and is expected to continue to have a significant negative effect on the Company’s revenue and operating results. There remains significant uncertainty as to when operations at the hotels will return to normalized levels.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original maturities of three months or less. The fair market value of cash and cash equivalents approximates their carrying value. The Company’s cash and cash equivalents are distributed among several major banks, but the balances may at times exceed federal depository insurance limits.
Net Loss Per Common Share
Basic net loss per common share is computed based upon the weighted average number of shares outstanding during the period. Diluted net loss per common share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the period. Basic and diluted net loss per common share were the same for each of the periods presented.
Accounting Standards Recently Adopted
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) , which provides optional guidance through December 31, 2022 to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. In January 2021, the FASB issued 2021-01, Reference Rate Reform (Topic 848), Scope, which further clarified the scope of the reference rate reform optional practical expedients and exceptions outlined in Topic 848. The amendments in ASU Nos. 2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge
7
effectiveness in hedging relationships that have been modified to replace a reference rate. The guidance in ASU No s . 2020-04 and 2021-01 became effective upon issuance and the provisions of the ASU s have not had a material impact on the Company’s consolidated financial statements and related disclosures as of March 31, 2021. The provisions of these updates will generally affect the Company by allowing, among other things, the following:
|
|
• |
Allowing modifications of the Company’s unsecured credit facilities to replace the London Interbank Offered Rate (LIBOR) with a substitute index to be accounted for as a non-substantial modification and not be considered a debt extinguishment. |
|
|
• |
Allowing changes to the floating interest rate index used in the Company’s interest rate swaps to not be considered a change to the critical terms of the hedge and therefore not requiring a dedesignation of the hedging relationship. |
The Company has not entered into any contract modifications yet as it directly relates to reference rate reform but anticipates having to undertake such modifications in the future as a majority of the Company’s unsecured credit facilities and interest rate swaps are indexed to LIBOR.
2. Investment in Real Estate
The Company’s investment in real estate consisted of the following (in thousands):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Land |
|
$ |
|
|
|
$ |
|
|
|
Building and improvements |
|
|
|
|
|
|
|
|
|
Furniture, fixtures and equipment |
|
|
|
|
|
|
|
|
|
Finance ground lease assets |
|
|
|
|
|
|
|
|
|
Franchise fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
(
|
) |
|
|
(
|
) |
|
Investment in real estate, net |
|
$ |
|
|
|
$ |
|
|
As of March 31, 2021, the Company owned
The Company leases all of its hotels to its wholly-owned taxable REIT subsidiary (or a subsidiary thereof) under master hotel lease agreements.
Hotel Acquisitions
The Company acquired
During the year ended December 31, 2020, the Company acquired
|
City |
|
State |
|
Brand |
|
Manager |
|
Date Acquired |
|
Rooms |
|
|
Gross Purchase Price |
|
||
|
Cape Canaveral |
|
FL |
|
Hampton |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Cape Canaveral |
|
FL |
|
Home2 Suites |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempe |
|
AZ |
|
Hyatt House |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempe |
|
AZ |
|
Hyatt Place |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
8
The Company utilized $
3. Assets Held for Sale and Dispositions
Assets Held for Sale
In February 2021, the Company entered into a purchase and sale agreement with an unrelated party for the sale of its Overland Park, Kansas SpringHill Suites for a gross sales price of $
Dispositions
During the three months ended March 31, 2021, the Company sold
|
City |
|
State |
|
Brand |
|
Date Sold |
|
Rooms |
|
|
|
Charlotte |
|
NC |
|
Homewood Suites |
|
|
|
|
|
|
|
Memphis |
|
TN |
|
Homewood Suites |
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2020, the Company sold three hotels in
|
City |
|
State |
|
Brand |
|
Date Sold |
|
Rooms |
|
|
|
Sanford |
|
FL |
|
SpringHill Suites |
|
|
|
|
|
|
|
Boise |
|
ID |
|
SpringHill Suites |
|
|
|
|
|
|
|
Tulare |
|
CA |
|
Hampton |
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
Excluding gains on sale of real estate, the Company’s consolidated statements of operations include operating loss of approximately $(
Hotel Sale Contracts and Loss on Impairment of Depreciable Real Estate Assets
During the first quarter of 2021, the Company identified the Overland Park, Kansas SpringHill Suites for potential sale and, in February 2021, entered into a purchase and sale agreement with an unrelated party for the sale of the hotel for a gross sales price of $
9
Additionally, during the first quarter of 2021, the Company recognized impairment losses totaling approximately $
4. Debt
Summary
As of March 31, 2021 and December 31, 2020, the Company’s debt consisted of the following (in thousands):
|
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Revolving credit facility |
|
$ |
|
|
|
$ |
|
|
|
Term loans and senior notes, net |
|
|
|
|
|
|
|
|
|
Mortgage debt, net |
|
|
|
|
|
|
|
|
|
Debt, net |
|
$ |
|
|
|
$ |
|
|
The aggregate amounts of principal payable under the Company’s total debt obligations as of March 31, 2021 (including the revolving credit facility, term loans, senior notes and mortgage debt), for each of the next five fiscal years and thereafter are as follows (in thousands):
|
2021 (April - December) |
|
$ |
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
Unamortized fair value adjustment of assumed debt |
|
|
|
|
|
Unamortized debt issuance costs |
|
|
(
|
) |
|
Total |
|
$ |
|
|
The Company uses interest rate swaps to manage its interest rate risks on a portion of its variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the London Inter-Bank Offered Rate for a one-month term (“one-month LIBOR”). The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. See Note 5 for more information on the interest rate swap agreements. The Company’s total fixed-rate and variable-rate debt, after giving effect to its interest rate swaps in effect at March 31, 2021 and December 31, 2020, is set forth below. All dollar amounts are in thousands.
|
|
|
March 31, 2021 |
|
|
Percentage |
|
|
December 31, 2020 |
|
|
Percentage |
|
||||
|
Fixed-rate debt (1) |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Variable-rate debt |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Weighted-average interest rate of debt |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
(1) |
10
|
|
Credit Facilities
Credit Facilities Amendments
In early 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to the Company’s operating results, the Company anticipated that it could potentially not be in compliance with certain covenants under each of its unsecured credit facilities, as previously amended, in future periods if the existing Covenant Waiver Period (as defined below) under such facilities was not extended. As a result, on March 1, 2021, the Company entered into amendments to each of the unsecured credit facilities (the “March 2021 amendments”).
The Company previously entered into amendments in June 2020 that suspended the testing of the Company’s existing financial maintenance covenants under the unsecured credit facilities until the date the compliance certificate is required to be delivered for the fiscal quarter ending June 30, 2021 (unless the Company elects an earlier date) (the “Covenant Waiver Period”), and imposed certain restrictions that apply during such testing suspension period. The March 2021 amendments extend the testing for all but two of the Company’s existing financial maintenance covenants under the unsecured credit facilities until the date the compliance certificate is required to be delivered for the fiscal quarter ending June 30, 2022 (unless the Company elects an earlier date) (the “Extended Covenant Waiver Period”). The testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio is suspended until the compliance certificate is required to be delivered for the fiscal quarter ending March 31, 2022.
The March 2021 amendments also provide for, among other restrictions, the following during the remainder of the Extended Covenant Waiver Period:
|
|
● |
Mandatory prepayments of amounts outstanding under the Company’s unsecured credit facilities of net cash proceeds from certain debt and equity issuances and asset dispositions, subject to various exceptions, including an allowance of $
|
|
|
● |
A minimum liquidity covenant of $
|
|
|
● |
A requirement to pledge the equity interests of each direct or indirect owner of certain unencumbered property in favor of the administrative agents if average liquidity for any month is less than $
|
|
|
● |
Restrictions on the Company’s and its subsidiaries’ ability to incur additional indebtedness (except for maturities beyond 2026) or prepay certain existing indebtedness, except that the Company is permitted to prepay (prior to maturity) up to $
|
|
|
● |
Restrictions on the Company’s ability to make cash distributions (except the payment of cash dividends of $
|
|
|
● |
Maximum discretionary capital expenditures of $
|
|
|
● |
Limitations on additional investments; and |
|
|
● |
An increase in the applicable interest rate under the unsecured credit facilities until the end of the Extended Covenant Waiver Period to a rate that corresponds to the highest leverage-based applicable interest rate margin plus
|
The amendments also modify the calculation of the existing financial covenants for the four quarters subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts to the extent the most recently ended fiscal quarter is not at least four fiscal quarters from the end of the Extended Covenant Waiver Period, and provide for a LIBOR floor under the credit agreements of
11
|
|
● |
Maximum Consolidated Leverage Ratio of
|
|
|
● |
Minimum Fixed Charge Coverage Ratio of
|
|
|
● |
Minimum Unsecured Interest Coverage Ratio of no less than
|
|
|
● |
Maximum Unsecured Leverage Ratio of
|
Except as otherwise set forth in the amendments, the terms of the credit agreements remain in effect. As of March 31, 2021, the Company was in compliance with the applicable covenants of the credit agreements as amended.
$850 Million Credit Facility
The Company utilizes an unsecured “$
$225 Million Term Loan Facility
The Company has an unsecured $
2017 $85 Million Term Loan Facility
On July 25, 2017, the Company entered into an unsecured $
2019 $85 Million Term Loan Facility
On December 31, 2019, the Company entered into an unsecured $
$50 Million Senior Notes Facility
On March 16, 2020, the Company entered into an unsecured $
12
funding for general corporate purposes. The note agreement contains requirements and covenants similar to the Company’s $850 million credit facility. The Company may make voluntary prepayments in whole or in part, at any time, subject to certain conditions, including make-whole provisions. Interest payments on the $50 million senior notes facility are due quarterly and the interest rate, subject to certain exceptions, ranges from an annual rate of
As of March 31, 2021 and December 31, 2020, the details of the Company’s unsecured credit facilities were as set forth below. All dollar amounts are in thousands.
|
|
|
|
|
|
|
Outstanding Balance |
|
|||||
|
|
|
Interest Rate (1) |
|
Maturity Date |
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Revolving credit facility (2) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans and senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
$200 million term loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
$225 million term loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
$50 million term loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
$175 million term loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 $85 million term loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 $85 million term loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
$50 million senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans and senior notes at stated value |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
Term loans and senior notes, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facilities, net (2) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted-average interest rate (3) |
|
|
|
|
|
|
|
% |
|
|
|
% |
|
(1) |
|
|
( 2 ) |
|
|
( 3 ) |
|
Mortgage Debt
As of March 31, 2021, the Company had approximately $
13
|
Location |
|
Brand |
|
Interest Rate (1) |
|
|
Loan Assumption or Origination Date |
|
Maturity Date |
|
Principal Assumed or Originated |
|
|
Outstanding balance as of March 31, 2021 |
|
|
Outstanding balance as of December 31, 2020 |
|
||||
|
Cape Canaveral, FL |
|
Hampton |
|
|
(2 |
) |
|
|
|
(3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Cape Canaveral, FL |
|
Home2 Suites |
|
|
(2 |
) |
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado Springs, CO |
|
Hampton |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franklin, TN |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franklin, TN |
|
Residence Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grapevine, TX |
|
Hilton Garden Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collegeville/Philadelphia, PA |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hattiesburg, MS |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirkland, WA |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rancho Bernardo/San Diego, CA |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seattle, WA |
|
Residence Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anchorage, AK |
|
Embassy Suites |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Somerset, NJ |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tukwila, WA |
|
Homewood Suites |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntsville, AL |
|
Homewood Suites |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prattville, AL |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Diego, CA |
|
Residence Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami, FL |
|
Homewood Suites |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orleans, LA |
|
Homewood Suites |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westford, MA |
|
Residence Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denver, CO |
|
Hilton Garden Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oceanside, CA |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Omaha, NE |
|
Hilton Garden Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boise, ID |
|
Hampton |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Burbank, CA |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Diego, CA |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Diego, CA |
|
Hampton |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Burbank, CA |
|
SpringHill Suites |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa Ana, CA |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richmond, VA |
|
Courtyard |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richmond, VA |
|
Residence Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portland, ME |
|
Residence Inn |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Jose, CA |
|
Homewood Suites |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Unamortized fair value adjustment of assumed debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
( 2 ) |
|
|
(3) |
|
5. Fair Value of Financial Instruments
Except as described below, the carrying value of the Company’s financial instruments approximates fair value due to the short-term nature of these financial instruments.
Debt
The Company estimates the fair value of its debt by discounting the future cash flows of each instrument at estimated market rates consistent with the maturity of a debt obligation with similar credit terms and credit characteristics, which are Level 3 inputs under the fair value hierarchy. Market rates take into consideration general market conditions and maturity. As of March 31, 2021, and December 31, 2020, both the carrying value and estimated fair value of the Company’s debt were approximately $
14
carrying value and estimated fair value of the Company’s debt (as discussed above) are net of unamortized debt issuance costs related to term loans, senior notes and mortgage debt for each specific year.
Derivative Instruments
Currently, the Company uses interest rate swaps to manage its interest rate risks on variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the one-month LIBOR. The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. These swap instruments are recorded at fair value and, if in an asset position, are included in other assets, net, and, if in a liability position, are included in accounts payable and other liabilities in the Company’s consolidated balance sheets. The fair values of the Company’s interest rate swap agreements are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts, which is considered a Level 2 measurement under the fair value hierarchy. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Asset (Liability) |
|
|||||
|
Notional Amount at March 31, 2021 |
|
|
Origination Date |
|
Effective Date |
|
Maturity Date |
|
Swap Fixed Interest Rate |
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||||
|
Active interest rate swaps designated as cash flow hedges at March 31, 2021: |
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
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|
|
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|
|
|
|
|
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|
|
(
|
) |
|
|
(
|
) |
|
|
|
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|
|
(
|
) |
|
|
(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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|
(
|
) |
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|
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|
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|
(
|
) |
|
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(
|
) |
|
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
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(
|
) |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matured interest rate swap at March 31, 2021: |
|
|
|
|
|
|
|
|
|
|||||||||||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
||||||||
The Company assesses, both at inception and on an ongoing basis, the effectiveness of its qualifying cash flow hedges. As of March 31, 2021, all of the
15
The following table presents the effect of derivative instruments in cash flow hedging relationships in the Company’s consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2021 and 2020 (in thousands):
|
|
|
Net Unrealized Gain (Loss) Recognized in Other Comprehensive Loss |
|
|
Net Unrealized (Loss) Reclassified from Accumulated Other Comprehensive Loss to Interest and Other Expense, net |
|
||||||||||
|
|
|
Three Months Ended March 31, |
|
|
Three Months Ended March 31, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Interest rate derivatives in cash flow hedging relationships |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
6. Related Parties
The Company has, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. There have been no changes to the contracts and relationships discussed in the 2020 Form 10-K. Below is a summary of the significant related party relationships in effect during the three months ended March 31, 2021 and 2020.
Glade M. Knight, Executive Chairman of the Company, owns Apple Realty Group, Inc. (“ARG”), which receives support services from the Company and reimburses the Company for the cost of these services as discussed below. Mr. Knight is also currently a partner and Chief Executive Officer of Energy 11 GP, LLC and Energy Resources 12 GP, LLC, which are the respective general partners of Energy 11, L.P. and Energy Resources 12, L.P., each of which receives support services from ARG.
The Company provides support services, including the use of the Company’s employees and corporate office, to ARG and is reimbursed by ARG for the cost of these services. Under this cost sharing structure, amounts reimbursed to the Company include both compensation for personnel and office related costs (including office rent, utilities, office supplies, etc.) used by ARG. The amounts reimbursed to the Company are based on the actual costs of the services and a good faith estimate of the proportionate amount of time incurred by the Company’s employees on behalf of ARG. Total reimbursed costs allocated by the Company to ARG for the three months ended March 31, 2021 and 2020 totaled approximately $
As part of the cost sharing arrangement, certain day-to-day transactions may result in amounts due to or from the Company and ARG.
The Company, through its wholly-owned subsidiary, Apple Air Holding, LLC, owns a Learjet used primarily for acquisition, asset management, renovation and investor and public relations purposes. The aircraft is also leased to affiliates of the Company based on third party rates, which leasing activity was not significant during the reporting periods. The Company also utilizes one aircraft, owned through an entity owned by the Company’s Executive Chairman, for acquisition, asset management, renovation and investor and public relations purposes, and reimburses the entity at third party rates. Total costs incurred for the use of the aircraft during the three months ended March 31, 2021 and 2020 were less than
$
7. Shareholders’ Equity
Distributions
Subsequent to the distribution paid in March 2020, the Company announced the suspension of its monthly distributions due to the impact of COVID-19 on its operating cash flows. Prior to the suspension of its distributions, the Company’s annual distribution rate, payable monthly, was $
16
an accrued distribution of $
Issuance of Shares
On August 12, 2020, the Company entered into an equity distribution agreement pursuant to which the Company may sell, from time to time, up to an aggregate of $
Share Repurchases
In May 2020, the Company’s Board of Directors approved an extension of its existing share repurchase program, authorizing share repurchases up to an aggregate of $
8. Compensation Plans
The Company annually establishes an incentive plan for its executive management. Under the incentive plan for 2021 (the “2021 Incentive Plan”), participants are eligible to receive a bonus based on the achievement of certain 2021 performance measures, consisting of operational performance metrics and shareholder return metrics (including shareholder return relative to a peer group and total shareholder return, over one-year, two-year and three-year periods). With respect to the operational performance metrics, the first half of the year, for the period of January 1 – June 30, 2021, will be based on operational performance metrics including portfolio occupancy growth, expense management, successful negotiation of amendments to each of the Company’s unsecured credit facilities and effective allocation of capital to drive incremental returns, with no specific target or weighting assigned to each metric. The Compensation Committee intends to review performance mid-year to determine the feasibility of reverting back to operational performance metrics for the second half of the year that are more consistent with the Company’s historical operational performance metrics.
Under the incentive plan for 2020 (the “2020 Incentive Plan”), the Company recorded approximately $
During the three months ended March 31, 2020, the Company accrued expense associated with
17
Share-Based Compensation Awards
The following table sets forth information pertaining to the share-based compensation issued under the 2020 Incentive Plan and the incentive plan for 2019 (the “2019 Incentive Plan”).
|
|
|
2020 Incentive Plan |
|
|
|
2019 Incentive Plan |
|
|
||
|
Period common shares issued |
|
First Quarter 2021 |
|
|
|
First Quarter 2020 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares earned under each incentive plan |
|
|
|
|
|
|
|
|
|
|
|
Common shares surrendered on issuance date to satisfy tax withholding obligations |
|
|
|
|
|
|
|
|
|
|
|
Common shares earned and issued under each incentive plan, net of common shares surrendered on issuance date to satisfy tax withholding obligations |
|
|
|
|
|
|
|
|
|
|
|
Closing stock price on issuance date |
|
$ |
|
|
|
|
$ |
|
|
|
|
Total share-based compensation earned, including the surrendered shares (in millions) |
|
$ |
|
|
(1) |
|
$ |
|
|
(2) |
|
Of the total common shares earned and issued, total common shares unrestricted at time of issuance |
|
|
|
|
|
|
|
|
|
|
|
Of the total common shares earned and issued, total common shares restricted at time of issuance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted common shares vesting date |
|
|
|
|
|
|
|
|
||
|
Common shares surrendered on vesting date to satisfy tax withholding requirements resulting from vesting of restricted common shares |
|
n/a |
|
|
|
|
|
|
|
|
|
(1) |
|
|
(2) |
|
Additionally, in conjunction with the appointment of
9. Subsequent Events
On April 15, 2021, the Company paid approximately $
In February 2021, the Company entered into a purchase and sale agreement with an unrelated party for the sale of its
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are typically identified by use of statements that include phrases such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “target,” “goal,” “plan,” “should,” “will,” “predict,” “potential,” “outlook,” “strategy,” 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 the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Company’s forward-looking statements continues to be the adverse effect of COVID-19, including resurgences and new variants, on the Company’s business, financial performance and condition, operating results and cash flows, the real estate market and the hospitality industry specifically, and the global economy and financial markets generally. The significance, extent and duration of the continued impacts caused by the COVID-19 outbreak on the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including the scope, severity and duration of the pandemic, the extent and effectiveness of the actions taken to contain the pandemic or mitigate its impact, the speed of the vaccine roll-out, the efficacy, acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against emerging variants of COVID-19, the potential for additional hotel closures/consolidations that may be mandated or advisable, whether based on increased COVID-19 cases, new variants or other factors, the slowing or potential rollback of “reopenings” in certain states, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled “Risk Factors” in the Company’s 2020 Form 10-K as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Such additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of properties; the ability of the Company to successfully integrate pending transactions and implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions; reduced business and leisure travel due to travel-related health concerns, including the widespread outbreak of COVID-19 or an increase in COVID-19 cases or any other infectious or contagious diseases in the U.S. or abroad; adverse changes in the real estate and real estate capital markets; financing risks; changes in interest rates; litigation risks; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact the Company’s business, assets or classification as a REIT. Although the Company 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 Quarterly Report 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 the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved. In addition, the Company’s qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended. Readers should carefully review the risk factors described in the Company’s filings with the Securities and Exchange Commission (“SEC”), including but not limited to those discussed in the section titled “Risk Factors” in the 2020 Form 10-K. Any forward-looking statement that the Company makes speaks only as of the date of this Quarterly Report. The Company 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.
The following discussion and analysis should be read in conjunction with the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the information contained in the 2020 Form 10-K.
Overview
The Company is a Virginia corporation that has elected to be treated as a REIT for federal income tax purposes. The Company is self-advised and invests in income-producing real estate, primarily in the lodging sector, in the U.S. As of March 31, 2021, the Company owned 233 hotels with an aggregate of 29,855 rooms located in urban, high-end suburban and developing markets throughout 35 states, including one hotel with 102 rooms classified as held for sale, which was sold to an unrelated party in April 2021. Substantially all of the Company’s hotels operate under Marriott or Hilton brands. The hotels are operated and managed under separate management agreements with 16 hotel management companies, none of which are affiliated with the Company. The Company’s common shares are listed on the NYSE under the ticker symbol “APLE.”
The Impact of COVID-19 on the Company and Hospitality Industry
Since first being reported in December 2019, COVID-19 has spread globally, including to every state in the U.S. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19.
19
The outbreak of COVID-19 has not only specifically r educed travel, but also has had a detrimental impact on regional and global economies and financial markets. The global, national and local impact of the outbreak has rapidly evolved and many countries, including the U.S., as well as state and local govern ments, have reacted by instituting and reinstitu ting a wide variety of measures intended to control its spread, including states of emergency, mandatory quarantines, implementation of “stay at home” orders, business closures, border closings, and restrictions on travel and large gatherings, which has resulted in , and may continue to result in, cancellation of events, including sporting events, conferences and meetings. The pandemic triggered a period of material global economic slowdown and the National Bureau of Economic Research declared that the U.S. has been in a recession since February 2020. While the Company’s operating results and the overall economy in the U.S. have shown signs of a gradual recovery, the Company cannot presently determine the extent or duration of the overall operational and financial effects that COVID-19 will have on the Company, its business, the hospitality industry and the economy , or whether the recovery will continue .
The effects of the pandemic on the hotel industry are unprecedented. COVID-19 has disrupted the industry and has dramatically reduced business and leisure travel, which has had a significant adverse impact on, and management expects COVID-19 will continue to significantly adversely impact and disrupt, the Company’s business, financial performance and condition, operating results and cash flows. While the economy has shown signs of recovery as some of the initial restrictions put into place during 2020 have eased, occupancy and average daily rate (“ADR”) are still significantly below 2019 levels. Additionally, while vaccines have been developed and distribution began in December 2020 and these efforts suggest that conditions may continue to gradually improve during 2021, there can be no assurances of how quickly the vaccines will slow the spread of the virus and allow the economy to recover. The Company expects the significant decline in revenue associated with COVID-19 and the overall decline in the U.S. economy to negatively impact the Company’s revenue and operating results for an extended period of time. The Company does not expect a material improvement in results until business travel and general consumer confidence related to risks associated with the economy and COVID-19 improve and government restrictions on travel and business operations are broadly lifted.
Since the beginning of the pandemic, the Company, its management companies and its brands have taken steps to minimize costs and cash outflow to maintain a sound liquidity position. The Company has implemented cost elimination and efficiency initiatives at each of the Company’s hotels by reducing labor costs, reducing or eliminating certain amenities and reducing rates under various service contracts, enhanced its sales efforts by focusing on COVID-19-specific demand opportunities in certain markets and has strategically targeted and maximized performance based on available demand, reduced non-essential capital improvement projects planned for 2021, and entered into amendments to its unsecured credit facilities to temporarily waive the financial covenant testing for the majority of its financial maintenance covenants until June 30, 2022. Despite the cost reduction initiatives discussed above, the Company does not expect to be able to fully, or even materially, offset revenue losses from COVID-19. The extent and duration of COVID-19 effects are not currently known, and these uncertainties continue to make it difficult to predict operating results for the Company’s hotels for the near future. Therefore, while the ongoing vaccination efforts suggest that conditions may continue to gradually improve during 2021, there can be no assurances that the Company will not experience further declines in hotel revenues or earnings at its hotels or how long the effects will continue to impact the Company’s operating results.
2021 Hotel Portfolio Activities
The following discussion regarding the Company’s approach to acquisitions and dispositions reflects the Company’s historical strategy. While the Company anticipates it will continue to approach the acquisition and disposition of hotels similarly over the long term, the detrimental impact of COVID-19 to the Company and overall lodging industry has and may continue to limit the Company’s ability to effectively acquire or dispose of hotels until the industry recovers.
The Company continually monitors market conditions and attempts to maximize shareholder value by investing in properties that it believes provide superior value over the long term. Consistent with this strategy and the Company’s focus on investing in rooms-focused hotels, in 2019 the Company entered into a contract to purchase a 176-room Hilton Garden Inn to be constructed in Madison, Wisconsin. Construction of the hotel was completed in February 2021 and the Company acquired the hotel on February 18, 2021 for a gross purchase price of $49.6 million, utilizing borrowings on the Company’s revolving credit facility.
For its existing portfolio, the Company monitors each property’s profitability, market conditions and capital requirements and attempts to maximize shareholder value by disposing of properties when it believes that superior value can be provided from the sale of the property. As a result, during the first quarter of 2021, the Company sold two hotels for a total combined gross sales price of $18.3 million and recognized a gain on sale of approximately $4.5 million in the first quarter of 2021. Additionally, as of March 31, 2021, the Company had an outstanding contract to sell one of its hotels for a gross sales price of approximately $5.3 million, which was completed in April 2021. The Company used the net proceeds from the sales to pay down borrowings on the Company’s revolving credit facility.
See Note 2 titled “Investment in Real Estate” and Note 3 titled “Assets Held for Sale and Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these transactions.
20
Hotel Operations
As of March 31, 2021, the Company owned 233 hotels with a total of 29,855 rooms as compared to 231 hotels with a total of 29,535 rooms as of March 31, 2020. Results of operations are included only for the period of ownership for hotels acquired or disposed of during the current reporting period and prior year. During the three months ended March 31, 2021, the Company acquired one newly constructed hotel on February 18, 2021 and sold one hotel on February 25, 2021 and one hotel on March 16, 2021. During 2020, the Company acquired two newly constructed hotels on April 30, 2020 and two newly constructed hotels on August 13, 2020, and sold three hotels (one on January 16, 2020, one on February 27, 2020 and one on December 30, 2020). As a result, the comparability of results for the three months ended March 31, 2021 and 2020 as discussed below is impacted by these transactions in addition to the impact of COVID-19 beginning in March 2020.
In evaluating financial condition and operating performance, the most important indicators on which the Company focuses are revenue measurements, such as average occupancy, ADR and revenue per available room (“RevPAR”), and expenses, such as hotel operating expenses, general and administrative expenses and other expenses described below.
The following is a summary of the results from operations of the Company’s hotels for their respective periods of ownership by the Company:
|
|
|
Three Months Ended March 31, |
|
|||||||||||||||||
|
(in thousands, except statistical data) |
|
2021 |
|
|
Percent of Revenue |
|
|
2020 |
|
|
Percent of Revenue |
|
|
Percent Change |
|
|||||
|
Total revenue |
|
$ |
158,713 |
|
|
|
100.0 |
% |
|
$ |
238,010 |
|
|
|
100.0 |
% |
|
|
-33.3 |
% |
|
Hotel operating expense |
|
|
103,740 |
|
|
|
65.4 |
% |
|
|
155,266 |
|
|
|
65.2 |
% |
|
|
-33.2 |
% |
|
Property taxes, insurance and other expense |
|
|
19,688 |
|
|
|
12.4 |
% |
|
|
19,595 |
|
|
|
8.2 |
% |
|
|
0.5 |
% |
|
General and administrative expense |
|
|
8,119 |
|
|
|
5.1 |
% |
|
|
9,523 |
|
|
|
4.0 |
% |
|
|
-14.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on impairment of depreciable real estate assets |
|
|
10,754 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
n/a |
|
|
|
Depreciation and amortization expense |
|
|
48,710 |
|
|
|
|
|
|
|
49,522 |
|
|
|
|
|
|
|
-1.6 |
% |
|
Gain on sale of real estate |
|
|
4,484 |
|
|
|
|
|
|
|
8,839 |
|
|
|
|
|
|
n/a |
|
|
|
Interest and other expense, net |
|
|
18,513 |
|
|
|
|
|
|
|
15,566 |
|
|
|
|
|
|
|
18.9 |
% |
|
Income tax expense |
|
|
108 |
|
|
|
|
|
|
|
146 |
|
|
|
|
|
|
|
-26.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(46,435 |
) |
|
|
|
|
|
|
(2,769 |
) |
|
|
|
|
|
|
n/a |
|
|
Adjusted hotel EBITDA (1) |
|
|
35,427 |
|
|
|
|
|
|
|
63,297 |
|
|
|
|
|
|
|
-44.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of hotels owned at end of period |
|
|
233 |
|
|
|
|
|
|
|
231 |
|
|
|
|
|
|
|
0.9 |
% |
|
ADR |
|
$ |
99.19 |
|
|
|
|
|
|
$ |
132.55 |
|
|
|
|
|
|
|
-25.2 |
% |
|
Occupancy |
|
|
55.5 |
% |
|
|
|
|
|
|
60.9 |
% |
|
|
|
|
|
|
-8.9 |
% |
|
RevPAR |
|
$ |
55.09 |
|
|
|
|
|
|
$ |
80.66 |
|
|
|
|
|
|
|
-31.7 |
% |
|
(1) |
See reconciliation of Adjusted Hotel EBITDA to net loss in “Non-GAAP Financial Measures” below. |
The following table highlights the quarterly impact of COVID-19 on the Company’s ADR, Occupancy, RevPAR, net loss and adjusted hotel earnings before interest, income taxes, depreciation and amortization for real estate (“Adjusted Hotel EBITDA”) during the last five quarters (in thousands except statistical data):
|
|
|
1st Quarter |
|
|
2nd Quarter |
|
|
3rd Quarter |
|
|
4th Quarter |
|
|
1st Quarter |
|
|||||
|
|
|
2020 |
|
|
2020 |
|
|
2020 |
|
|
2020 |
|
|
2021 |
|
|||||
|
ADR |
|
$ |
132.55 |
|
|
$ |
100.76 |
|
|
$ |
104.78 |
|
|
$ |
97.87 |
|
|
$ |
99.19 |
|
|
Occupancy |
|
|
60.9 |
% |
|
|
28.2 |
% |
|
|
48.6 |
% |
|
|
46.5 |
% |
|
|
55.5 |
% |
|
RevPAR |
|
$ |
80.66 |
|
|
$ |
28.44 |
|
|
$ |
50.94 |
|
|
$ |
45.46 |
|
|
$ |
55.09 |
|
|
Net loss |
|
$ |
(2,769 |
) |
|
$ |
(78,243 |
) |
|
$ |
(40,948 |
) |
|
$ |
(51,247 |
) |
|
$ |
(46,435 |
) |
|
Adjusted Hotel EBITDA (1) |
|
$ |
63,297 |
|
|
$ |
704 |
|
|
$ |
34,688 |
|
|
$ |
23,296 |
|
|
$ |
35,427 |
|
|
(1) |
See reconciliation of Adjusted Hotel EBITDA to net loss in “Non-GAAP Financial Measures” below. |
Beginning in March 2020, COVID-19 caused widespread cancellations of both business and leisure travel throughout the U.S., resulting in significant decreases in RevPAR throughout the Company’s hotel portfolio and the hospitality industry as a whole. With the overall uncertainty of the longevity of COVID-19 in the U.S. and the resulting economic decline, it is difficult to project the duration of revenue declines for the industry and Company; however, the Company currently expects declines in revenue and operating results as compared to 2019 to continue throughout the remainder of 2021 and potentially into future years. While the
21
Company experienced its most significant decline in operating results during the second quarter of 2020 as compared to previous quarters , occupancy and RevPAR ha ve since show n improvement, with average occupancy reaching 55.5 % by the first quarter of 2021 , resulting in the strongest operating results since the onset of the pandemic . Although the Company expects this trend to gradually continue, future revenues and operating results could be negatively impacted if , among other things, COVID-19 cases increase and state a nd local governments and businesses revert back to tighter mitigation restrictions or consumer sentiment deteriorates.
Comparable Hotels Operating Results
The following table reflects certain operating statistics for the Company’s 232 hotels owned and held for use as of March 31, 2021 (“Comparable Hotels”). The Company defines metrics from Comparable Hotels as results generated by the 232 hotels owned and held for use as of the end of the reporting period, and excludes the hotel held for sale. For the hotels acquired during the current reporting period and prior year, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership using information provided by the properties’ prior owners at the time of acquisition and not adjusted by the Company. This information has not been audited, either for the periods owned or prior to ownership by the Company. For dispositions and assets held for sale, results have been excluded for the Company’s period of ownership.
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
|
|
2021 |
|
|
2020 |
|
|
Percent Change |
|
|||
|
ADR |
|
$ |
99.29 |
|
|
$ |
133.05 |
|
|
|
-25.4 |
% |
|
Occupancy |
|
|
55.8 |
% |
|
|
60.9 |
% |
|
|
-8.4 |
% |
|
RevPAR |
|
$ |
55.39 |
|
|
$ |
81.01 |
|
|
|
-31.6 |
% |
Same Store Operating Results
The following table reflects certain operating statistics for the 227 hotels owned and held for use by the Company as of January 1, 2020 and during the entirety of the reporting periods being compared (“Same Store Hotels”). This information has not been audited.
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
|
|
2021 |
|
|
2020 |
|
|
Percent Change |
|
|||
|
ADR |
|
$ |
99.12 |
|
|
$ |
133.05 |
|
|
|
-25.5 |
% |
|
Occupancy |
|
|
56.1 |
% |
|
|
60.9 |
% |
|
|
-7.9 |
% |
|
RevPAR |
|
$ |
55.61 |
|
|
$ |
81.01 |
|
|
|
-31.4 |
% |
As discussed above, hotel performance is impacted by many factors, including the economic conditions in the U.S. as well as each individual locality. COVID-19 has been negatively affecting the U.S. hotel industry since March 2020. As a result of COVID-19, the Company’s revenue and operating results declined during the three months ended March 31, 2021 compared to the three months ended March 31, 2020, which is consistent with the overall lodging industry. Compared to 2019, the Company expects declines in revenue and operating results to continue throughout the remainder of 2021, but the Company can give no assurances of the amount or period of decline due to the uncertainty regarding the duration and long-term impact of and governmental and consumer response to COVID-19.
Revenues
The Company’s principal source of revenue is hotel revenue consisting of room, food and beverage, and other related revenue. For the three months ended March 31, 2021 and 2020, the Company had total revenue of $158.7 million and $238.0 million, respectively. For the three months ended March 31, 2021 and 2020, respectively, Comparable Hotels achieved combined average occupancy of 55.8% and 60.9%, ADR of $99.29 and $133.05 and RevPAR of $55.39 and $81.01. ADR is calculated as room revenue divided by the number of rooms sold, and RevPAR is calculated as occupancy multiplied by ADR.
Compared to the same period in 2020, during the three months ended March 31, 2021, the Company experienced decreases in ADR and occupancy, resulting in a decrease of 31.6% in RevPAR for Comparable Hotels. As compared to the first quarter of 2019 (pre-COVID-19), Comparable Hotels RevPAR for the first quarter of 2021 decreased by 45.8% as a result of reductions in rate and occupancy. During March 2020, the hotel industry and the Company began to see a significant decrease in occupancy as both mandated and voluntary restrictions on travel were implemented throughout the U.S. For Comparable Hotels, average occupancy declined to 28.2% for the second quarter 2020 before improving over subsequent quarters to 55.8% in the first quarter of 2021 driven predominately by increased leisure demand over the summer months as a result of improved consumer confidence in travel and the lifting of some COVID-19 mitigation restrictions, but also from a wide variety of demand generators such as government, healthcare, construction, disaster recovery, insurance, athletics, education and local and regional business-related travel. Revenue recovery in the
22
first quarter of 2021 was led by leisure demand and small corporate, government and leisure based group business, with more favorable results in suburban markets . Throughout the hospitality industry, upscale and upper mid-scale chain scales have outperformed luxury and upper upscale and suburban locations have outperformed urban locations . Occupancy increased throughout the first quarter of 2021 and the trend continued in to April, with estimated occupancy of approximately 68 % for the month . The Company expects this trend to gradually continue, however, future revenues could be negatively impacted if COVID-19 cases increase and state and local governments tighten or implement new mitigation restrictions or consumer sentiment deteriorates.
Hotel Operating Expense
The Company, its management companies and the brands the Company’s hotels are franchised with have all aggressively worked to mitigate the costs and uses of cash associated with operating the hotels in a low-occupancy environment and are thoughtfully working to position the hotels to adapt to the changes that may occur to guest preferences in the future. The impact has varied and will continue to vary by market and hotel. With the support of its brands and third-party management companies, the Company will continue to evaluate and implement additional measures as the situation evolves.
Hotel operating expense consists of direct room operating expense, hotel administrative expense, sales and marketing expense, utilities expense, repair and maintenance expense, franchise fees and management fees. Hotel operating expense for the three months ended March 31, 2021 and 2020 totaled $103.7 million and $155.3 million, respectively, or 65.4% and 65.2% of total revenue for the respective periods. Comparatively, prior to COVID-19, hotel operating expense was 57.8% of total revenue for the three months ended March 31, 2019. Included in hotel operating expense for the three months ended March 31, 2021 are an additional $1.8 million of utility costs resulting from extraordinary rate increases and fees assessed at some of the Company’s hotels in Texas as a result of winter and ice storms in the first quarter of 2021. The Company has worked and will continue to work with its management companies to optimize staffing models, consolidate operations in markets with multiple properties, and adjust food and beverage offerings and other amenities, among other efficiency initiatives to mitigate the impact of revenue declines on its results of operations. For example, in some markets the Company “clustered” hotels in 2020, whereby multiple properties in a market consolidated their operations to increase efficiency; the Company has reduced service and amenity offerings as allowed by the relaxation of certain brand standards; and the Company also successfully reduced rates under various service contracts. Although certain operating costs of a hotel are more fixed in nature, such as base utility and maintenance costs, the Company has worked and will continue to work to reduce all non-essential costs including service contracts, utilities in areas not utilized and certain maintenance costs. However, the Company may continue to see ongoing cost increases related to the supplying of personal protective equipment for employees and guests as well as increased sanitation and other measures. Additionally, as is typical in an economic recovery, the Company has begun to experience increases in the cost of labor, and expects to continue to do so, as it competes with other employers for hourly wage labor as unemployment rates decrease.
Property Taxes, Insurance and Other Expense
Property taxes, insurance, and other expense for the three months ended March 31, 2021 and 2020 totaled $19.7 million and $19.6 million, respectively, or 12.4% and 8.2% of total revenue for the respective periods. Prior to COVID-19, property taxes, insurance and other expense totaled $19.6 million, or 6.5% of total revenue, for the period ended March 31, 2019. Although the Company will continue to aggressively appeal assessments and monitor locality guidance as a result of COVID-19, it does not currently anticipate significant decreases in property taxes in 2021 as compared to 2020. Additionally, the Company has faced increases in premiums on its property insurance coverage.
General and Administrative Expense
General and administrative expense for the three months ended March 31, 2021 and 2020 was $8.1 million and $9.5 million, respectively, or 5.1% and 4.0% of total revenue for the respective periods. The principal components of general and administrative expense are payroll and related benefit costs, legal fees, accounting fees and reporting expenses. General and administrative expense for the three months ended March 31, 2020 included the accrual of approximately $2.5 million in separation benefits awarded in connection with the retirements of the Company’s former Chief Operating Officer and former Chief Financial Officer on March 31, 2020. Excluding the separation benefit accrual, general and administrative expense increased by approximately $1.1 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to increased accruals for incentive compensation related to anticipated higher operating performance in 2021 as compared to 2020.
Loss on Impairment of Depreciable Real Estate Assets
Loss on impairment of depreciable real estate assets was $10.8 million for the three months ended March 31, 2021, consisting of impairment losses of $1.3 million for the Overland Park, Kansas SpringHill Suites and $9.4 million for four hotel properties identified by the Company in the first quarter of 2021 for potential sale. See Note 3 titled “Assets Held for Sale and Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these impairment losses.
23
Depreciation and Amortization Expense
Depreciation and amortization expense for the three months ended March 31, 2021 and 2020, expense was $48.7 million and $49.5 million, respectively. Depreciation and amortization expense primarily represents expense of the Company’s hotel buildings and related improvements, and associated personal property (furniture, fixtures, and equipment) for the respective periods owned. The decrease of approximately $0.8 million was primarily due to the hotel dispositions completed throughout 2020 and the first three months of 2021, partially offset by acquisitions and limited renovation activity.
Interest and Other Expense, net
Interest and other expense, net for the three months ended March 31, 2021 and 2020 was $18.5 million and $15.6 million, respectively. Interest and other expense, net for the three months ended March 31, 2020 is net of approximately $0.7 million of interest capitalized associated with renovation projects. Additionally, interest and other expense, net for the three months ended March 31, 2021 and 2020 includes approximately $2.9 million and $2.8 million, respectively, of interest recorded on the Company’s finance lease liabilities.
Interest expense related to the Company’s debt instruments increased as a result of increased average borrowings in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 combined with increased interest rates on the Company’s unsecured credit facilities associated with the amendments to obtain covenant waivers. The Company anticipates interest expense to be higher for the remainder of 2021 compared to the same period of 2020 due to these increased interest rates. See Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional discussion of the Company’s amended unsecured credit facilities.
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 Funds from Operations (“MFFO”), Earnings before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”), Adjusted EBITDAre and 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, EBITDAre, Adjusted EBITDAre 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, EBITDAre, Adjusted EBITDAre, and Adjusted Hotel EBITDA as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre 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.
FFO and MFFO
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 GAAP), excluding gains and losses from the sale of certain real estate assets (including gains and losses from change in control), extraordinary items as defined by GAAP, and the cumulative effect of changes in accounting principles, plus real estate related depreciation, amortization and impairments, and adjustments for unconsolidated affiliates. 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 calculates MFFO by further adjusting FFO for the exclusion of amortization of finance ground lease assets, amortization of favorable and unfavorable operating leases, net and non-cash straight-line operating ground lease expense, as these expenses do 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.
24
The following table reconciles the Company’s GAAP net loss to FFO and MFFO for the three months ended March 31, 2021 and 2020 (in thousands):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Net loss |
|
$ |
(46,435 |
) |
|
$ |
(2,769 |
) |
|
Depreciation of real estate owned |
|
|
47,088 |
|
|
|
47,668 |
|
|
Gain on sale of real estate |
|
|
(4,484 |
) |
|
|
(8,839 |
) |
|
Loss on impairment of depreciable real estate assets |
|
|
10,754 |
|
|
|
- |
|
|
Funds from operations |
|
|
6,923 |
|
|
|
36,060 |
|
|
Amortization of finance ground lease assets |
|
|
1,617 |
|
|
|
1,602 |
|
|
Amortization of favorable and unfavorable operating leases, net |
|
|
98 |
|
|
|
101 |
|
|
Non-cash straight-line operating ground lease expense |
|
|
44 |
|
|
|
47 |
|
|
Modified funds from operations |
|
$ |
8,682 |
|
|
$ |
37,810 |
|
|
|
|
|
|
|
|
|
|
|
EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA
EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes, 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 agreements governing the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance.
In addition to EBITDA, the Company also calculates and presents EBITDAre in accordance with standards established by Nareit, which defines EBITDAre as EBITDA, excluding gains and losses from the sale of certain real estate assets (including gains and losses from change in control), plus real estate related impairments, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. The Company presents EBITDAre because it believes that it provides further useful information to investors in comparing its operating performance between periods and between REITs that report EBITDAre using the Nareit definition.
The Company also considers the exclusion of non-cash straight-line operating ground lease expense from EBITDAre useful, as this expense does not reflect the underlying performance of the related hotels.
The Company further excludes actual corporate-level general and administrative expense for the Company from Adjusted EBITDAre (Adjusted Hotel EBITDA) to isolate property-level operational performance over which the Company’s hotel operators have direct control. The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels.
25
The following table reconciles the Company’s GAAP net loss to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA by quarter for the last five quarters (in thousands):
|
|
|
1st Quarter |
|
|
2nd Quarter |
|
|
3rd Quarter |
|
|
4th Quarter |
|
|
1st Quarter |
|
|||||
|
|
|
2020 |
|
|
2020 |
|
|
2020 |
|
|
2020 |
|
|
2021 |
|
|||||
|
Net loss |
|
$ |
(2,769 |
) |
|
$ |
(78,243 |
) |
|
$ |
(40,948 |
) |
|
$ |
(51,247 |
) |
|
$ |
(46,435 |
) |
|
Depreciation and amortization |
|
|
49,522 |
|
|
|
49,897 |
|
|
|
50,171 |
|
|
|
50,196 |
|
|
|
48,710 |
|
|
Amortization of favorable and unfavorable operating leases, net |
|
|
101 |
|
|
|
101 |
|
|
|
103 |
|
|
|
137 |
|
|
|
98 |
|
|
Interest and other expense, net |
|
|
15,566 |
|
|
|
18,386 |
|
|
|
18,531 |
|
|
|
18,352 |
|
|
|
18,513 |
|
|
Income tax expense |
|
|
146 |
|
|
|
58 |
|
|
|
61 |
|
|
|
67 |
|
|
|
108 |
|
|
EBITDA |
|
|
62,566 |
|
|
|
(9,801 |
) |
|
|
27,918 |
|
|
|
17,505 |
|
|
|
20,994 |
|
|
(Gain) loss on sale of real estate |
|
|
(8,839 |
) |
|
|
54 |
|
|
|
- |
|
|
|
(2,069 |
) |
|
|
(4,484 |
) |
|
Loss on impairment of depreciable real estate assets |
|
|
- |
|
|
|
4,382 |
|
|
|
- |
|
|
|
715 |
|
|
|
10,754 |
|
|
EBITDAre |
|
|
53,727 |
|
|
|
(5,365 |
) |
|
|
27,918 |
|
|
|
16,151 |
|
|
|
27,264 |
|
|
Non-cash straight-line operating ground lease expense |
|
|
47 |
|
|
|
44 |
|
|
|
44 |
|
|
|
45 |
|
|
|
44 |
|
|
Adjusted EBITDAre |
|
|
53,774 |
|
|
|
(5,321 |
) |
|
|
27,962 |
|
|
|
16,196 |
|
|
|
27,308 |
|
|
General and administrative expense |
|
|
9,523 |
|
|
|
6,025 |
|
|
|
6,726 |
|
|
|
7,100 |
|
|
|
8,119 |
|
|
Adjusted Hotel EBITDA |
|
$ |
63,297 |
|
|
$ |
704 |
|
|
$ |
34,688 |
|
|
$ |
23,296 |
|
|
$ |
35,427 |
|
Hotels Owned
As of March 31, 2021, the Company owned 233 hotels with an aggregate of 29,855 rooms located in 35 states, including one hotel with 102 rooms classified as held for sale, which was sold to an unrelated party in April 2021. The following tables summarize the number of hotels and rooms by brand and by state:
|
Number of Hotels and Guest Rooms by Brand |
|
|||||
|
|
|
Number of |
|
Number of |
|
|
|
Brand |
|
Hotels |
|
Rooms |
|
|
|
Hilton Garden Inn |
|
42 |
|
|
5,843 |
|
|
Hampton |
|
39 |
|
|
4,986 |
|
|
Courtyard |
|
36 |
|
|
4,948 |
|
|
Residence Inn |
|
33 |
|
|
3,939 |
|
|
Homewood Suites |
|
31 |
|
|
3,473 |
|
|
SpringHill Suites |
|
13 |
|
|
1,705 |
|
|
Fairfield |
|
11 |
|
|
1,300 |
|
|
Home2 Suites |
|
10 |
|
|
1,146 |
|
|
TownePlace Suites |
|
9 |
|
|
931 |
|
|
Marriott |
|
2 |
|
|
619 |
|
|
Embassy Suites |
|
2 |
|
|
316 |
|
|
Hyatt Place |
|
2 |
|
|
281 |
|
|
Independent |
|
2 |
|
|
263 |
|
|
Hyatt House |
|
1 |
|
|
105 |
|
|
Total |
|
233 |
|
|
29,855 |
|
26
|
Number of Hotels and Guest Rooms by State |
|
|||||||
|
|
|
Number of |
|
|
Number of |
|
||
|
State |
|
Hotels |
|
|
Rooms |
|
||
|
Alabama |
|
|
15 |
|
|
|
1,434 |
|
|
Alaska |
|
|
2 |
|
|
|
304 |
|
|
Arizona |
|
|
14 |
|
|
|
1,903 |
|
|
Arkansas |
|
|
3 |
|
|
|
336 |
|
|
California |
|
|
26 |
|
|
|
3,721 |
|
|
Colorado |
|
|
4 |
|
|
|
567 |
|
|
Florida |
|
|
23 |
|
|
|
2,922 |
|
|
Georgia |
|
|
6 |
|
|
|
672 |
|
|
Idaho |
|
|
1 |
|
|
|
186 |
|
|
Illinois |
|
|
8 |
|
|
|
1,420 |
|
|
Indiana |
|
|
4 |
|
|
|
479 |
|
|
Iowa |
|
|
3 |
|
|
|
301 |
|
|
Kansas |
|
|
4 |
|
|
|
422 |
|
|
Louisiana |
|
|
3 |
|
|
|
422 |
|
|
Maine |
|
|
1 |
|
|
|
179 |
|
|
Maryland |
|
|
2 |
|
|
|
233 |
|
|
Massachusetts |
|
|
4 |
|
|
|
466 |
|
|
Michigan |
|
|
1 |
|
|
|
148 |
|
|
Minnesota |
|
|
3 |
|
|
|
405 |
|
|
Mississippi |
|
|
2 |
|
|
|
168 |
|
|
Missouri |
|
|
4 |
|
|
|
544 |
|
|
Nebraska |
|
|
4 |
|
|
|
621 |
|
|
New Jersey |
|
|
5 |
|
|
|
629 |
|
|
New York |
|
|
4 |
|
|
|
554 |
|
|
North Carolina |
|
|
9 |
|
|
|
973 |
|
|
Ohio |
|
|
2 |
|
|
|
252 |
|
|
Oklahoma |
|
|
4 |
|
|
|
545 |
|
|
Pennsylvania |
|
|
3 |
|
|
|
391 |
|
|
South Carolina |
|
|
5 |
|
|
|
538 |
|
|
Tennessee |
|
|
12 |
|
|
|
1,362 |
|
|
Texas |
|
|
31 |
|
|
|
3,755 |
|
|
Utah |
|
|
3 |
|
|
|
393 |
|
|
Virginia |
|
|
13 |
|
|
|
1,825 |
|
|
Washington |
|
|
4 |
|
|
|
609 |
|
|
Wisconsin |
|
|
1 |
|
|
|
176 |
|
|
Total |
|
|
233 |
|
|
|
29,855 |
|
|
|
|
|
|
|
|
|
|
|
27
The following table summarizes the location, brand, manager, date acquired or completed and number of rooms for each of the 233 hotels the Company owned as of March 31, 2021.
|
City |
|
State |
|
Brand |
|
Manager |
|
Date Acquired or Completed |
|
Rooms |
|
|
|
Anchorage |
|
AK |
|
Embassy Suites |
|
Stonebridge |
|
4/30/2010 |
|
|
169 |
|
|
Anchorage |
|
AK |
|
Home2 Suites |
|
Stonebridge |
|
12/1/2017 |
|
|
135 |
|
|
Auburn |
|
AL |
|
Hilton Garden Inn |
|
LBA |
|
3/1/2014 |
|
|
101 |
|
|
Birmingham |
|
AL |
|
Courtyard |
|
LBA |
|
3/1/2014 |
|
|
84 |
|
|
Birmingham |
|
AL |
|
Hilton Garden Inn |
|
LBA |
|
9/12/2017 |
|
|
104 |
|
|
Birmingham |
|
AL |
|
Home2 Suites |
|
LBA |
|
9/12/2017 |
|
|
106 |
|
|
Birmingham |
|
AL |
|
Homewood Suites |
|
McKibbon |
|
3/1/2014 |
|
|
95 |
|
|
Dothan |
|
AL |
|
Hilton Garden Inn |
|
LBA |
|
6/1/2009 |
|
|
104 |
|
|
Dothan |
|
AL |
|
Residence Inn |
|
LBA |
|
3/1/2014 |
|
|
84 |
|
|
Huntsville |
|
AL |
|
Hampton |
|
LBA |
|
9/1/2016 |
|
|
98 |
|
|
Huntsville |
|
AL |
|
Hilton Garden Inn |
|
LBA |
|
3/1/2014 |
|
|
101 |
|
|
Huntsville |
|
AL |
|
Home2 Suites |
|
LBA |
|
9/1/2016 |
|
|
77 |
|
|
Huntsville |
|
AL |
|
Homewood Suites |
|
LBA |
|
3/1/2014 |
|
|
107 |
|
|
Mobile |
|
AL |
|
Hampton |
|
McKibbon |
|
9/1/2016 |
|
|
101 |
|
|
Montgomery |
|
AL |
|
Hilton Garden Inn |
|
LBA |
|
3/1/2014 |
|
|
97 |
|
|
Montgomery |
|
AL |
|
Homewood Suites |
|
LBA |
|
3/1/2014 |
|
|
91 |
|
|
Prattville |
|
AL |
|
Courtyard |
|
LBA |
|
3/1/2014 |
|
|
84 |
|
|
Rogers |
|
AR |
|
Hampton |
|
Raymond |
|
8/31/2010 |
|
|
122 |
|
|
Rogers |
|
AR |
|
Homewood Suites |
|
Raymond |
|
4/30/2010 |
|
|
126 |
|
|
Rogers |
|
AR |
|
Residence Inn |
|
Raymond |
|
3/1/2014 |
|
|
88 |
|
|
Chandler |
|
AZ |
|
Courtyard |
|
North Central |
|
11/2/2010 |
|
|
150 |
|
|
Chandler |
|
AZ |
|
Fairfield |
|
North Central |
|
11/2/2010 |
|
|
110 |
|
|
Phoenix |
|
AZ |
|
Courtyard |
|
North Central |
|
11/2/2010 |
|
|
164 |
|
|
Phoenix |
|
AZ |
|
Courtyard |
|
North Central |
|
9/1/2016 |
|
|
127 |
|
|
Phoenix |
|
AZ |
|
Hampton |
|
North Central |
|
9/1/2016 |
|
|
125 |
|
|
Phoenix |
|
AZ |
|
Hampton |
|
North Central |
|
5/2/2018 |
|
|
210 |
|
|
Phoenix |
|
AZ |
|
Homewood Suites |
|
North Central |
|
9/1/2016 |
|
|
134 |
|
|
Phoenix |
|
AZ |
|
Residence Inn |
|
North Central |
|
11/2/2010 |
|
|
129 |
|
|
Scottsdale |
|
AZ |
|
Hilton Garden Inn |
|
North Central |
|
9/1/2016 |
|
|
122 |
|
|
Tempe |
|
AZ |
|
Hyatt House |
|
Crestline |
|
8/13/2020 |
|
|
105 |
|
|
Tempe |
|
AZ |
|
Hyatt Place |
|
Crestline |
|
8/13/2020 |
|
|
154 |
|
|
Tucson |
|
AZ |
|
Hilton Garden Inn |
|
Western |
|
7/31/2008 |
|
|
125 |
|
|
Tucson |
|
AZ |
|
Residence Inn |
|
Western |
|
3/1/2014 |
|
|
124 |
|
|
Tucson |
|
AZ |
|
TownePlace Suites |
|
Western |
|
10/6/2011 |
|
|
124 |
|
|
Agoura Hills |
|
CA |
|
Homewood Suites |
|
Dimension |
|
3/1/2014 |
|
|
125 |
|
|
Burbank |
|
CA |
|
Courtyard |
|
Huntington |
|
8/11/2015 |
|
|
190 |
|
|
Burbank |
|
CA |
|
Residence Inn |
|
Marriott |
|
3/1/2014 |
|
|
166 |
|
|
Burbank |
|
CA |
|
SpringHill Suites |
|
Marriott |
|
7/13/2015 |
|
|
170 |
|
|
Clovis |
|
CA |
|
Hampton |
|
Dimension |
|
7/31/2009 |
|
|
86 |
|
|
Clovis |
|
CA |
|
Homewood Suites |
|
Dimension |
|
2/2/2010 |
|
|
83 |
|
|
Cypress |
|
CA |
|
Courtyard |
|
Dimension |
|
3/1/2014 |
|
|
180 |
|
|
Cypress |
|
CA |
|
Hampton |
|
Dimension |
|
6/29/2015 |
|
|
110 |
|
|
Oceanside |
|
CA |
|
Courtyard |
|
Marriott |
|
9/1/2016 |
|
|
142 |
|
|
Oceanside |
|
CA |
|
Residence Inn |
|
Marriott |
|
3/1/2014 |
|
|
125 |
|
|
Rancho Bernardo/San Diego |
|
CA |
|
Courtyard |
|
InnVentures |
|
3/1/2014 |
|
|
210 |
|
|
Sacramento |
|
CA |
|
Hilton Garden Inn |
|
Dimension |
|
3/1/2014 |
|
|
153 |
|
|
San Bernardino |
|
CA |
|
Residence Inn |
|
InnVentures |
|
2/16/2011 |
|
|
95 |
|
|
San Diego |
|
CA |
|
Courtyard |
|
Huntington |
|
9/1/2015 |
|
|
245 |
|
|
San Diego |
|
CA |
|
Hampton |
|
Dimension |
|
3/1/2014 |
|
|
177 |
|
|
San Diego |
|
CA |
|
Hilton Garden Inn |
|
InnVentures |
|
3/1/2014 |
|
|
200 |
|
28
|
City |
|
State |
|
Brand |
|
Manager |
|
Date Acquired or Completed |
|
Rooms |
|
|
|
San Diego |
|
CA |
|
Residence Inn |
|
Dimension |
|
3/1/2014 |
|
|
121 |
|
|
San Jose |
|
CA |
|
Homewood Suites |
|
Dimension |
|
3/1/2014 |
|
|
140 |
|
|
San Juan Capistrano |
|
CA |
|
Residence Inn |
|
Marriott |
|
9/1/2016 |
|
|
130 |
|
|
Santa Ana |
|
CA |
|
Courtyard |
|
Dimension |
|
5/23/2011 |
|
|
155 |
|
|
Santa Clarita |
|
CA |
|
Courtyard |
|
Dimension |
|
9/24/2008 |
|
|
140 |
|
|
Santa Clarita |
|
CA |
|
Fairfield |
|
Dimension |
|
10/29/2008 |
|
|
66 |
|
|
Santa Clarita |
|
CA |
|
Hampton |
|
Dimension |
|
10/29/2008 |
|
|
128 |
|
|
Santa Clarita |
|
CA |
|
Residence Inn |
|
Dimension |
|
10/29/2008 |
|
|
90 |
|
|
Tustin |
|
CA |
|
Fairfield |
|
Marriott |
|
9/1/2016 |
|
|
145 |
|
|
Tustin |
|
CA |
|
Residence Inn |
|
Marriott |
|
9/1/2016 |
|
|
149 |
|
|
Colorado Springs |
|
CO |
|
Hampton |
|
Chartwell |
|
9/1/2016 |
|
|
101 |
|
|
Denver |
|
CO |
|
Hilton Garden Inn |
|
Stonebridge |
|
9/1/2016 |
|
|
221 |
|
|
Highlands Ranch |
|
CO |
|
Hilton Garden Inn |
|
Dimension |
|
3/1/2014 |
|
|
128 |
|
|
Highlands Ranch |
|
CO |
|
Residence Inn |
|
Dimension |
|
3/1/2014 |
|
|
117 |
|
|
Boca Raton |
|
FL |
|
Hilton Garden Inn |
|
Dimension |
|
9/1/2016 |
|
|
149 |
|
|
Cape Canaveral |
|
FL |
|
Hampton |
|
LBA |
|
4/30/2020 |
|
|
116 |
|
|
Cape Canaveral |
|
FL |
|
Homewood Suites |
|
LBA |
|
9/1/2016 |
|
|
153 |
|
|
Cape Canaveral |
|
FL |
|
Home2 Suites |
|
LBA |
|
4/30/2020 |
|
|
108 |
|
|
Fort Lauderdale |
|
FL |
|
Hampton |
|
Dimension |
|
6/23/2015 |
|
|
156 |
|
|
Fort Lauderdale |
|
FL |
|
Residence Inn |
|
LBA |
|
9/1/2016 |
|
|
156 |
|
|
Gainesville |
|
FL |
|
Hilton Garden Inn |
|
McKibbon |
|
9/1/2016 |
|
|
104 |
|
|
Gainesville |
|
FL |
|
Homewood Suites |
|
McKibbon |
|
9/1/2016 |
|
|
103 |
|
|
Jacksonville |
|
FL |
|
Homewood Suites |
|
McKibbon |
|
3/1/2014 |
|
|
119 |
|
|
Jacksonville |
|
FL |
|
Hyatt Place |
|
Crestline |
|
12/7/2018 |
|
|
127 |
|
|
Lakeland |
|
FL |
|
Courtyard |
|
LBA |
|
3/1/2014 |
|
|
78 |
|
|
Miami |
|
FL |
|
Courtyard |
|
Dimension |
|
3/1/2014 |
|
|
118 |
|
|
Miami |
|
FL |
|
Hampton |
|
White Lodging |
|
4/9/2010 |
|
|
121 |
|
|
Miami |
|
FL |
|
Homewood Suites |
|
Dimension |
|
3/1/2014 |
|
|
162 |
|
|
Orlando |
|
FL |
|
Fairfield |
|
Marriott |
|
7/1/2009 |
|
|
200 |
|
|
Orlando |
|
FL |
|
Home2 Suites |
|
LBA |
|
3/19/2019 |
|
|
128 |
|
|
Orlando |
|
FL |
|
SpringHill Suites |
|
Marriott |
|
7/1/2009 |
|
|
200 |
|
|
Panama City |
|
FL |
|
Hampton |
|
LBA |
|
3/12/2009 |
|
|
95 |
|
|
Panama City |
|
FL |
|
TownePlace Suites |
|
LBA |
|
1/19/2010 |
|
|
103 |
|
|
Pensacola |
|
FL |
|
TownePlace Suites |
|
McKibbon |
|
9/1/2016 |
|
|
97 |
|
|
Tallahassee |
|
FL |
|
Fairfield |
|
LBA |
|
9/1/2016 |
|
|
97 |
|
|
Tallahassee |
|
FL |
|
Hilton Garden Inn |
|
LBA |
|
3/1/2014 |
|
|
85 |
|
|
Tampa |
|
FL |
|
Embassy Suites |
|
White Lodging |
|
11/2/2010 |
|
|
147 |
|
|
Albany |
|
GA |
|
Fairfield |
|
LBA |
|
1/14/2010 |
|
|
87 |
|
|
Atlanta/Downtown |
|
GA |
|
Hampton |
|
McKibbon |
|
2/5/2018 |
|
|
119 |
|
|
Atlanta/Perimeter Dunwoody |
|
GA |
|
Hampton |
|
LBA |
|
6/28/2018 |
|
|
132 |
|
|
Atlanta |
|
GA |
|
Home2 Suites |
|
McKibbon |
|
7/1/2016 |
|
|
128 |
|
|
Macon |
|
GA |
|
Hilton Garden Inn |
|
LBA |
|
3/1/2014 |
|
|
101 |
|
|
Savannah |
|
GA |
|
Hilton Garden Inn |
|
Newport |
|
3/1/2014 |
|
|
105 |
|
|
Cedar Rapids |
|
IA |
|
Hampton |
|
Aimbridge |
|
9/1/2016 |
|
|
103 |
|
|
Cedar Rapids |
|
IA |
|
Homewood Suites |
|
Aimbridge |
|
9/1/2016 |
|
|
95 |
|
|
Davenport |
|
IA |
|
Hampton |
|
Aimbridge |
|
9/1/2016 |
|
|
103 |
|
|
Boise |
|
ID |
|
Hampton |
|
Raymond |
|
4/30/2010 |
|
|
186 |
|
|
Des Plaines |
|
IL |
|
Hilton Garden Inn |
|
Raymond |
|
9/1/2016 |
|
|
252 |
|
|
Hoffman Estates |
|
IL |
|
Hilton Garden Inn |
|
White Lodging |
|
9/1/2016 |
|
|
184 |
|
|
Mettawa |
|
IL |
|
Hilton Garden Inn |
|
White Lodging |
|
11/2/2010 |
|
|
170 |
|
|
Mettawa |
|
IL |
|
Residence Inn |
|
White Lodging |
|
11/2/2010 |
|
|
130 |
|
29
|
City |
|
State |
|
Brand |
|
Manager |
|
Date Acquired or Completed |
|
Rooms |
|
|
|
Rosemont |
|
IL |
|
Hampton |
|
Raymond |
|
9/1/2016 |
|
|
158 |
|
|
Schaumburg |
|
IL |
|
Hilton Garden Inn |
|
White Lodging |
|
11/2/2010 |
|
|
166 |
|
|
Skokie |
|
IL |
|
Hampton |
|
Raymond |
|
9/1/2016 |
|
|
225 |
|
|
Warrenville |
|
IL |
|
Hilton Garden Inn |
|
White Lodging |
|
11/2/2010 |
|
|
135 |
|
|
Indianapolis |
|
IN |
|
SpringHill Suites |
|
White Lodging |
|
11/2/2010 |
|
|
130 |
|
|
Merrillville |
|
IN |
|
Hilton Garden Inn |
|
White Lodging |
|
9/1/2016 |
|
|
124 |
|
|
Mishawaka |
|
IN |
|
Residence Inn |
|
White Lodging |
|
11/2/2010 |
|
|
106 |
|
|
South Bend |
|
IN |
|
Fairfield |
|
White Lodging |
|
9/1/2016 |
|
|
119 |
|
|
Overland Park |
|
KS |
|
Fairfield |
|
Raymond |
|
3/1/2014 |
|
|
110 |
|
|
Overland Park |
|
KS |
|
Residence Inn |
|
Raymond |
|
3/1/2014 |
|
|
120 |
|
|
Overland Park |
|
KS |
|
SpringHill Suites |
|
Raymond |
|
3/1/2014 |
|
|
102 |
|
|
Wichita |
|
KS |
|
Courtyard |
|
Aimbridge |
|
3/1/2014 |
|
|
90 |
|
|
Lafayette |
|
LA |
|
Hilton Garden Inn |
|
LBA |
|
7/30/2010 |
|
|
153 |
|
|
Lafayette |
|
LA |
|
SpringHill Suites |
|
LBA |
|
6/23/2011 |
|
|
103 |
|
|
New Orleans |
|
LA |
|
Homewood Suites |
|
Dimension |
|
3/1/2014 |
|
|
166 |
|
|
Andover |
|
MA |
|
SpringHill Suites |
|
Marriott |
|
11/5/2010 |
|
|
136 |
|
|
Marlborough |
|
MA |
|
Residence Inn |
|
Crestline |
|
3/1/2014 |
|
|
112 |
|
|
Westford |
|
MA |
|
Hampton |
|
Crestline |
|
3/1/2014 |
|
|
110 |
|
|
Westford |
|
MA |
|
Residence Inn |
|
Crestline |
|
3/1/2014 |
|
|
108 |
|
|
Annapolis |
|
MD |
|
Hilton Garden Inn |
|
Crestline |
|
3/1/2014 |
|
|
126 |
|
|
Silver Spring |
|
MD |
|
Hilton Garden Inn |
|
Crestline |
|
7/30/2010 |
|
|
107 |
|
|
Portland |
|
ME |
|
Residence Inn |
|
Crestline |
|
10/13/2017 |
|
|
179 |
|
|
Novi |
|
MI |
|
Hilton Garden Inn |
|
White Lodging |
|
11/2/2010 |
|
|
148 |
|
|
Maple Grove |
|
MN |
|
Hilton Garden Inn |
|
North Central |
|
9/1/2016 |
|
|
121 |
|
|
Rochester |
|
MN |
|
Hampton |
|
Raymond |
|
8/3/2009 |
|
|
124 |
|
|
St. Paul |
|
MN |
|
Hampton |
|
Raymond |
|
3/4/2019 |
|
|
160 |
|
|
Kansas City |
|
MO |
|
Hampton |
|
Raymond |
|
8/31/2010 |
|
|
122 |
|
|
Kansas City |
|
MO |
|
Residence Inn |
|
Raymond |
|
3/1/2014 |
|
|
106 |
|
|
St. Louis |
|
MO |
|
Hampton |
|
Raymond |
|
8/31/2010 |
|
|
190 |
|
|
St. Louis |
|
MO |
|
Hampton |
|
Raymond |
|
4/30/2010 |
|
|
126 |
|
|
Hattiesburg |
|
MS |
|
Courtyard |
|
LBA |
|
3/1/2014 |
|
|
84 |
|
|
Hattiesburg |
|
MS |
|
Residence Inn |
|
LBA |
|
12/11/2008 |
|
|
84 |
|
|
Carolina Beach |
|
NC |
|
Courtyard |
|
Crestline |
|
3/1/2014 |
|
|
144 |
|
|
Charlotte |
|
NC |
|
Fairfield |
|
Newport |
|
9/1/2016 |
|
|
94 |
|
|
Durham |
|
NC |
|
Homewood Suites |
|
McKibbon |
|
12/4/2008 |
|
|
122 |
|
|
Fayetteville |
|
NC |
|
Home2 Suites |
|
LBA |
|
2/3/2011 |
|
|
118 |
|
|
Fayetteville |
|
NC |
|
Residence Inn |
|
LBA |
|
3/1/2014 |
|
|
92 |
|
|
Greensboro |
|
NC |
|
SpringHill Suites |
|
Newport |
|
3/1/2014 |
|
|
82 |
|
|
Jacksonville |
|
NC |
|
Home2 Suites |
|
LBA |
|
9/1/2016 |
|
|
105 |
|
|
Wilmington |
|
NC |
|
Fairfield |
|
Crestline |
|
3/1/2014 |
|
|
122 |
|
|
Winston-Salem |
|
NC |
|
Hampton |
|
McKibbon |
|
9/1/2016 |
|
|
94 |
|
|
Omaha |
|
NE |
|
Courtyard |
|
Marriott |
|
3/1/2014 |
|
|
181 |
|
|
Omaha |
|
NE |
|
Hampton |
|
White Lodging |
|
9/1/2016 |
|
|
139 |
|
|
Omaha |
|
NE |
|
Hilton Garden Inn |
|
White Lodging |
|
9/1/2016 |
|
|
178 |
|
|
Omaha |
|
NE |
|
Homewood Suites |
|
White Lodging |
|
9/1/2016 |
|
|
123 |
|
|
Cranford |
|
NJ |
|
Homewood Suites |
|
Dimension |
|
3/1/2014 |
|
|
108 |
|
|
Mahwah |
|
NJ |
|
Homewood Suites |
|
Dimension |
|
3/1/2014 |
|
|
110 |
|
|
Mount Laurel |
|
NJ |
|
Homewood Suites |
|
Newport |
|
1/11/2011 |
|
|
118 |
|
|
Somerset |
|
NJ |
|
Courtyard |
|
Newport |
|
3/1/2014 |
|
|
162 |
|
|
West Orange |
|
NJ |
|
Courtyard |
|
Newport |
|
1/11/2011 |
|
|
131 |
|
|
Islip/Ronkonkoma |
|
NY |
|
Hilton Garden Inn |
|
Crestline |
|
3/1/2014 |
|
|
166 |
|
|
New York |
|
NY |
|
Independent |
|
Highgate |
|
3/1/2014 |
|
|
208 |
|
30
|
City |
|
State |
|
Brand |
|
Manager |
|
Date Acquired or Completed |
|
Rooms |
|
|
|
Syracuse |
|
NY |
|
Courtyard |
|
Crestline |
|
10/16/2015 |
|
|
102 |
|
|
Syracuse |
|
NY |
|
Residence Inn |
|
Crestline |
|
10/16/2015 |
|
|
78 |
|
|
Mason |
|
OH |
|
Hilton Garden Inn |
|
Raymond |
|
9/1/2016 |
|
|
110 |
|
|
Twinsburg |
|
OH |
|
Hilton Garden Inn |
|
Aimbridge |
|
10/7/2008 |
|
|
142 |
|
|
Oklahoma City |
|
OK |
|
Hampton |
|
Raymond |
|
5/28/2010 |
|
|
200 |
|
|
Oklahoma City |
|
OK |
|
Hilton Garden Inn |
|
Raymond |
|
9/1/2016 |
|
|
155 |
|
|
Oklahoma City |
|
OK |
|
Homewood Suites |
|
Raymond |
|
9/1/2016 |
|
|
100 |
|
|
Oklahoma City (West) |
|
OK |
|
Homewood Suites |
|
Chartwell |
|
9/1/2016 |
|
|
90 |
|
|
Collegeville/Philadelphia |
|
PA |
|
Courtyard |
|
Newport |
|
11/15/2010 |
|
|
132 |
|
|
Malvern/Philadelphia |
|
PA |
|
Courtyard |
|
Newport |
|
11/30/2010 |
|
|
127 |
|
|
Pittsburgh |
|
PA |
|
Hampton |
|
Newport |
|
12/31/2008 |
|
|
132 |
|
|
Charleston |
|
SC |
|
Home2 Suites |
|
LBA |
|
9/1/2016 |
|
|
122 |
|
|
Columbia |
|
SC |
|
Hilton Garden Inn |
|
Newport |
|
3/1/2014 |
|
|
143 |
|
|
Columbia |
|
SC |
|
TownePlace Suites |
|
Newport |
|
9/1/2016 |
|
|
91 |
|
|
Greenville |
|
SC |
|
Residence Inn |
|
McKibbon |
|
3/1/2014 |
|
|
78 |
|
|
Hilton Head |
|
SC |
|
Hilton Garden Inn |
|
McKibbon |
|
3/1/2014 |
|
|
104 |
|
|
Chattanooga |
|
TN |
|
Homewood Suites |
|
LBA |
|
3/1/2014 |
|
|
76 |
|
|
Franklin |
|
TN |
|
Courtyard |
|
Chartwell |
|
9/1/2016 |
|
|
126 |
|
|
Franklin |
|
TN |
|
Residence Inn |
|
Chartwell |
|
9/1/2016 |
|
|
124 |
|
|
Jackson |
|
TN |
|
Hampton |
|
Newport |
|
12/30/2008 |
|
|
85 |
|
|
Johnson City |
|
TN |
|
Courtyard |
|
LBA |
|
9/25/2009 |
|
|
90 |
|
|
Knoxville |
|
TN |
|
Homewood Suites |
|
McKibbon |
|
9/1/2016 |
|
|
103 |
|
|
Knoxville |
|
TN |
|
SpringHill Suites |
|
McKibbon |
|
9/1/2016 |
|
|
103 |
|
|
Knoxville |
|
TN |
|
TownePlace Suites |
|
McKibbon |
|
9/1/2016 |
|
|
97 |
|
|
Memphis |
|
TN |
|
Hampton |
|
Crestline |
|
2/5/2018 |
|
|
144 |
|
|
Nashville |
|
TN |
|
Hilton Garden Inn |
|
Dimension |
|
9/30/2010 |
|
|
194 |
|
|
Nashville |
|
TN |
|
Home2 Suites |
|
Dimension |
|
5/31/2012 |
|
|
119 |
|
|
Nashville |
|
TN |
|
TownePlace Suites |
|
LBA |
|
9/1/2016 |
|
|
101 |
|
|
Addison |
|
TX |
|
SpringHill Suites |
|
Marriott |
|
3/1/2014 |
|
|
159 |
|
|
Allen |
|
TX |
|
Hampton |
|
Aimbridge |
|
9/26/2008 |
|
|
103 |
|
|
Allen |
|
TX |
|
Hilton Garden Inn |
|
Aimbridge |
|
10/31/2008 |
|
|
150 |
|
|
Arlington |
|
TX |
|
Hampton |
|
Western |
|
12/1/2010 |
|
|
98 |
|
|
Austin |
|
TX |
|
Courtyard |
|
White Lodging |
|
11/2/2010 |
|
|
145 |
|
|
Austin |
|
TX |
|
Fairfield |
|
White Lodging |
|
11/2/2010 |
|
|
150 |
|
|
Austin |
|
TX |
|
Hampton |
|
Dimension |
|
4/14/2009 |
|
|
124 |
|
|
Austin |
|
TX |
|
Hilton Garden Inn |
|
White Lodging |
|
11/2/2010 |
|
|
117 |
|
|
Austin |
|
TX |
|
Homewood Suites |
|
Dimension |
|
4/14/2009 |
|
|
97 |
|
|
Austin/Round Rock |
|
TX |
|
Hampton |
|
Dimension |
|
3/6/2009 |
|
|
94 |
|
|
Austin/Round Rock |
|
TX |
|
Homewood Suites |
|
Dimension |
|
9/1/2016 |
|
|
115 |
|
|
Beaumont |
|
TX |
|
Residence Inn |
|
Western |
|
10/29/2008 |
|
|
133 |
|
|
Burleson/Fort Worth |
|
TX |
|
Hampton |
|
LBA |
|
10/7/2014 |
|
|
88 |
|
|
Dallas |
|
TX |
|
Homewood Suites |
|
Western |
|
9/1/2016 |
|
|
130 |
|
|
Denton |
|
TX |
|
Homewood Suites |
|
Chartwell |
|
9/1/2016 |
|
|
107 |
|
|
El Paso |
|
TX |
|
Hilton Garden Inn |
|
Western |
|
12/19/2011 |
|
|
145 |
|
|
El Paso |
|
TX |
|
Homewood Suites |
|
Western |
|
3/1/2014 |
|
|
114 |
|
|
Fort Worth |
|
TX |
|
Courtyard |
|
LBA |
|
2/2/2017 |
|
|
124 |
|
|
Fort Worth |
|
TX |
|
TownePlace Suites |
|
Western |
|
7/19/2010 |
|
|
140 |
|
|
Frisco |
|
TX |
|
Hilton Garden Inn |
|
Western |
|
12/31/2008 |
|
|
102 |
|
|
Grapevine |
|
TX |
|
Hilton Garden Inn |
|
Western |
|
9/24/2010 |
|
|
110 |
|
|
Houston |
|
TX |
|
Courtyard |
|
LBA |
|
9/1/2016 |
|
|
124 |
|
|
Houston |
|
TX |
|
Marriott |
|
Western |
|
1/8/2010 |
|
|
206 |
|
|
Houston |
|
TX |
|
Residence Inn |
|
Western |
|
3/1/2014 |
|
|
129 |
|
|
Houston |
|
TX |
|
Residence Inn |
|
Western |
|
9/1/2016 |
|
|
120 |
|
31
|
City |
|
State |
|
Brand |
|
Manager |
|
Date Acquired or Completed |
|
Rooms |
|
|
|
Irving |
|
TX |
|
Homewood Suites |
|
Western |
|
12/29/2010 |
|
|
77 |
|
|
Lewisville |
|
TX |
|
Hilton Garden Inn |
|
Aimbridge |
|
10/16/2008 |
|
|
165 |
|
|
San Antonio |
|
TX |
|
TownePlace Suites |
|
Western |
|
3/1/2014 |
|
|
106 |
|
|
Shenandoah |
|
TX |
|
Courtyard |
|
LBA |
|
9/1/2016 |
|
|
124 |
|
|
Stafford |
|
TX |
|
Homewood Suites |
|
Western |
|
3/1/2014 |
|
|
78 |
|
|
Texarkana |
|
TX |
|
Hampton |
|
Aimbridge |
|
1/31/2011 |
|
|
81 |
|
|
Provo |
|
UT |
|
Residence Inn |
|
Dimension |
|
3/1/2014 |
|
|
114 |
|
|
Salt Lake City |
|
UT |
|
Residence Inn |
|
Huntington |
|
10/20/2017 |
|
|
136 |
|
|
Salt Lake City |
|
UT |
|
SpringHill Suites |
|
White Lodging |
|
11/2/2010 |
|
|
143 |
|
|
Alexandria |
|
VA |
|
Courtyard |
|
Marriott |
|
3/1/2014 |
|
|
178 |
|
|
Alexandria |
|
VA |
|
SpringHill Suites |
|
Marriott |
|
3/28/2011 |
|
|
155 |
|
|
Charlottesville |
|
VA |
|
Courtyard |
|
Crestline |
|
3/1/2014 |
|
|
139 |
|
|
Manassas |
|
VA |
|
Residence Inn |
|
Crestline |
|
2/16/2011 |
|
|
107 |
|
|
Richmond |
|
VA |
|
Independent |
|
Crestline |
|
10/9/2019 |
|
|
55 |
|
|
Richmond |
|
VA |
|
Courtyard |
|
White Lodging |
|
12/8/2014 |
|
|
135 |
|
|
Richmond |
|
VA |
|
Marriott |
|
White Lodging |
|
3/1/2014 |
|
|
413 |
|
|
Richmond |
|
VA |
|
Residence Inn |
|
White Lodging |
|
12/8/2014 |
|
|
75 |
|
|
Richmond |
|
VA |
|
SpringHill Suites |
|
McKibbon |
|
9/1/2016 |
|
|
103 |
|
|
Suffolk |
|
VA |
|
Courtyard |
|
Crestline |
|
3/1/2014 |
|
|
92 |
|
|
Suffolk |
|
VA |
|
TownePlace Suites |
|
Crestline |
|
3/1/2014 |
|
|
72 |
|
|
Virginia Beach |
|
VA |
|
Courtyard |
|
Crestline |
|
3/1/2014 |
|
|
141 |
|
|
Virginia Beach |
|
VA |
|
Courtyard |
|
Crestline |
|
3/1/2014 |
|
|
160 |
|
|
Kirkland |
|
WA |
|
Courtyard |
|
InnVentures |
|
3/1/2014 |
|
|
150 |
|
|
Seattle |
|
WA |
|
Residence Inn |
|
InnVentures |
|
3/1/2014 |
|
|
234 |
|
|
Tukwila |
|
WA |
|
Homewood Suites |
|
Dimension |
|
3/1/2014 |
|
|
106 |
|
|
Vancouver |
|
WA |
|
SpringHill Suites |
|
InnVentures |
|
3/1/2014 |
|
|
119 |
|
|
Madison |
|
WI |
|
Hilton Garden Inn |
|
Raymond |
|
2/18/2021 |
|
|
176 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
29,855 |
|
Related Parties
The Company has, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. See Note 6 titled “Related Parties” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning the Company’s related party transactions.
Liquidity and Capital Resources
Capital Resources
The Company’s principal short term sources of liquidity are the operating cash flows generated from the Company’s properties and availability under its revolving credit facility. Periodically, the Company may receive proceeds from strategic additional secured and unsecured debt financing, dispositions of its hotel properties (such as the sale of two hotels in the first quarter of 2021 for proceeds of approximately $18 million discussed above in “2021 Hotel Portfolio Activities”) and offerings of the Company’s common shares, including pursuant to the ATM Program (as defined below). As a result of declines in occupancy caused by COVID-19, the Company anticipates significantly reduced cash from operations until travel increases in the U.S. and therefore anticipates funding its near-term cash needs with operating cash flows generated from the Company’s properties and availability under its revolving credit facility.
As of March 31, 2021, the Company had $1.5 billion of total outstanding debt consisting of $509.8 million of mortgage debt and $1.0 billion outstanding under its unsecured credit facilities, excluding unamortized debt issuance costs and fair value adjustments. As of March 31, 2021, the Company had available corporate cash on hand of approximately $5.8 million as well as unused borrowing capacity under its revolving credit facility of approximately $275.1 million. In the near term, the impact of COVID-19 on the global economy, including any sustained decline in the Company’s performance, may make it more difficult or costly for the Company to raise debt or equity capital to fund long-term liquidity requirements. The credit agreements governing the unsecured credit facilities contain mandatory prepayment requirements, customary affirmative and negative covenants and events of default. The credit
32
agreements require that the Company comply with various covenants, which include, among others, a minimum tangible net worth, maximum debt limits, minimum interest and fixed charge coverage ratios and restrictions on certain investments.
As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company anticipated that it may not be able to maintain compliance with certain of these covenants in future periods. On June 5, 2020, the Company entered into amendments to each of the unsecured credit facilities, which the Company again amended on March 1, 2021. The combined amendments suspend the testing for all but two of the Company’s existing financial maintenance covenants under the unsecured credit facilities until the date the compliance certificate is required to be delivered for the fiscal quarter ending June 30, 2022 (unless the Company elects an earlier date) (the “Extended Covenant Waiver Period”), suspend the testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio until the compliance certificate is required to be delivered for the fiscal quarter ending March 31, 2022 and provide for, among other restrictions, the following during the Extended Covenant Waiver Period:
|
|
● |
Mandatory prepayments of amounts outstanding under the Company’s unsecured credit facilities, of net cash proceeds from certain debt and equity issuances, and asset dispositions, subject to various exceptions , including an allowance of $300 million for acquiring unencumbered assets with proceeds from assets sales and a $300 million allowance for acquiring unencumbered assets funded by common equity so long as outstanding borrowings under the revolving credit facility are less than $275 million. A portion of the mandatory prepayments will be available for future borrowing under the revolving credit facility; |
|
|
● |
A minimum liquidity covenant of $125 million; |
|
|
● |
A requirement to pledge the equity interests of each direct or indirect owner of certain unencumbered property in favor of the administrative agents if average liquidity for any month is less than $200 million or the total amount outstanding under the revolving credit facility exceeds $275 million; |
|
|
● |
Restrictions on the Company’s and its subsidiaries’ ability to incur additional indebtedness (except for maturities beyond 2026) or prepay certain existing indebtedness , except that the Company is permitted to prepay (prior to maturity) up to $35 million of secured debt maturities in 2021 ; |
|
|
● |
Restrictions on the Company’s ability to make cash distributions (except the payment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status) and share repurchases; |
|
|
● |
Maximum discretionary capital expenditures of $50 million; |
|
|
● |
Limitations on additional investments; and |
|
|
● |
An increase in the applicable interest rate under the unsecured credit facilities until the end of the Extended Covenant Waiver Period to a rate that corresponds to the highest leverage-based applicable interest rate margin plus 0.15% with respect to the unsecured credit facilities. |
The amendments also modify the calculation of the existing financial covenants for the four quarters subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts to the extent the most recently ended fiscal quarter is not at least four fiscal quarters from the end of the Extended Covenant Waiver Period, and provide for a LIBOR floor under the credit agreements of 25 basis points for Eurodollar Rate Loans and 1.25% for Base Rate Loans on the revolving credit facility, and any term loans under the credit agreements that are not hedged. The March 2021 amendments also modify certain of the existing financial maintenance covenants to less restrictive levels following the Extended Covenant Waiver Period as follows (capitalized terms are defined in the credit agreements) :
|
|
● |
Maximum Consolidated Leverage Ratio of 8.50 to 1.00 for the first two fiscal quarters, 8.00 to 1.00 for two fiscal quarters, 7.50 to 1.00 for one fiscal quarter and then a ratio of 6.50 to 1.00 thereafter; |
|
|
● |
Minimum Fixed Charge Coverage Ratio of 1.05 to 1.00 for the first fiscal quarter, 1.25 to 1.00 for one fiscal quarter and then a ratio of 1.50 to 1.00 thereafter; |
|
|
● |
Minimum Unsecured Interest Coverage Ratio of no less than 1.25 to 1.00 for one fiscal quarter, 1.50 to 1.00 for one fiscal quarter, 1.75 to 1.00 for one fiscal quarter and a ratio of 2.00 to 1.00 thereafter; and |
|
|
● |
Maximum Unsecured Leverage Ratio of 65% for two fiscal quarters and 60% thereafter. |
Except as otherwise set forth in the amendments, the terms of the credit agreements remain in effect. The Company anticipates meeting the applicable covenants after the conclusion of the Extended Covenant Waiver Period, although there can be no assurances.
33
See Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, ap pearing elsewhere in this Quarterly Report on Form 10-Q, for a description of the Company’s debt instruments as of March 31, 2021 .
On August 12, 2020, the Company entered into an equity distribution agreement pursuant to which the Company may sell, from time to time, up to an aggregate of $300 million of its common shares under an at-the-market offering program (the “ATM Program”). As of March 31, 2021, the Company had not sold any common shares under the ATM Program. The Company plans to use the net proceeds from the sale of these shares to pay down borrowings on its revolving credit facility and, under certain circumstances, to repay proportionally amounts under each of the Company’s revolving credit facility, term loans and senior notes, subject to certain restrictions during the Extended Covenant Waiver Period pursuant to the Company’s unsecured credit facilities, as discussed further in Note 4, titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q. The Company plans to use the corresponding increased availability under the revolving credit facility for general corporate purposes which may include, among other things, acquisitions of additional properties, the repayment of other outstanding indebtedness, capital expenditures, improvement of properties in its portfolio and working capital. The Company may also use the net proceeds to acquire another REIT or other company that invests in income producing properties.
Capital Uses
Although there can be no assurances, the Company anticipates that available cash and availability under its revolving credit facility as of March 31, 2021 will be adequate to meet its near-term potential operating cash flow deficits that may result from the effect of COVID-19, debt service and capital expenditures. Though not expected, if the Company is unable to meet its near-term anticipated capital uses as currently planned, it may raise capital through disposition of assets, issuance of equity or issuance of debt, which may be more costly to the Company in the current environment.
Distributions
To maintain its REIT status, the Company is required to distribute at least 90% of its ordinary income. No distributions were paid during the three months ended March 31, 2021. For the same period, the Company’s net cash used by operations was approximately $2.1 million. As a result of COVID-19 and the impact on its business, the Company suspended its monthly distributions in March 2020. As discussed in Note 4, titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, as a requirement under the amendments to its unsecured credit facilities, the Company is restricted in its ability to make distributions during the Extended Covenant Waiver Period, except for the payment of cash distributions of $0.01 per common share per quarter or to the extent required to maintain REIT status. Subject to these distribution restrictions, the Company’s Board of Directors, in consultation with management, will continue to monitor hotel operations and intends to adjust distributions at a time and level determined to be prudent in relation to the Company’s other cash requirements or in order to maintain its REIT status for federal income tax purposes, subject to any applicable distribution restrictions under the Company’s unsecured credit facilities. In the first quarter of 2021, the Company resumed the declaration of distributions with the declaration of a quarterly distribution of $0.01 per common share in March 2021, totaling approximately $2.2 million, which was paid on April 15, 2021.
Share Repurchases
In May 2020, the Company’s Board of Directors approved an extension of its existing share repurchase program, authorizing share repurchases up to an aggregate of $345 million (the “Share Repurchase Program”). The Share Repurchase Program may be suspended or terminated at any time by the Company and will end in July 2021 if not terminated earlier. During the first three months of 2020, the Company purchased, under its Share Repurchase Program approximately 1.5 million of its common shares at a weighted-average market purchase price of approximately $9.42 per common share, for an aggregate purchase price, including commissions, of approximately $14.3 million. The shares were repurchased under a written trading plan that provided for share repurchases in open market transactions and was intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In March 2020 the Company terminated its written trading plan under the Share Repurchase Program and has not repurchased any shares since that time. Repurchases under the Share Repurchase Program have been funded, and the Company intends to fund any future purchases, with cash on hand or availability under its unsecured credit facilities subject to any applicable restrictions under the Company’s unsecured credit facilities. The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will depend upon prevailing market conditions, regulatory requirements and other factors. As discussed above, share repurchases are subject to certain restrictions during the Extended Covenant Waiver Period as a condition to the amendments to the Company’s unsecured credit facilities, as discussed above.
Capital Improvements
The Company is committed to maintaining and enhancing each property’s competitive position in its market. The Company has invested in and, subject to improved operating results, plans to continue to reinvest in its hotels. Under certain loan and management agreements, the Company is required to place in escrow funds for the repair, replacement and refurbishing of furniture, fixtures, and equipment, based on a percentage of gross revenues, provided that such amount may be used for the Company’s capital expenditures
34
with respect to the hotels. As of March 31, 2021 , the Company held approximately $ 26.4 million in reserve related to these properties. During the three months ended March 31, 2021 , the Company invested approximately $ 2.2 million in capital expenditures, and anticipates spending an additional $ 23-28 million during the remainder of 202 1 . The Company does not currently have any existing or planned projects for new property development.
Cash Management Activities
As part of the cost sharing arrangements discussed in Note 6 titled “Related Parties” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under the cash management process, each company may advance or defer up to $1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies.
Business Interruption
Being in the real estate industry, the Company is exposed to natural disasters on both a local and national scale. Although management believes there is adequate insurance to cover this exposure, there can be no assurance that such events will not have a material adverse effect on the Company’s financial position or results of operations.
Seasonality
The hotel industry historically has been seasonal in nature. Seasonal variations in occupancy at the Company’s hotels may cause quarterly fluctuations in its revenues. Generally, occupancy rates and hotel revenues are greater in the second and third quarters than in the first and fourth quarters. However, due to the effects of COVID-19, these typical seasonal patterns were disrupted in 2020 and may also be disrupted in the remainder of 2021. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenue, the Company expects to utilize cash on hand or available financing sources to meet cash requirements.
New Accounting Standards
See Note 1 titled “Organization and Summary of Significant Accounting Policies” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q , for information on the adoption of the guidance in the reference rate reform accounting standards effective in March 2020 and January 2021.
Subsequent Events
On April 15, 2021, the Company paid approximately $2.2 million, or $0.01 per outstanding common share, in distributions to its common shareholders.
In February 2021, the Company entered into a purchase and sale agreement with an unrelated party for the sale of its 102-room Overland Park, Kansas SpringHill Suites for a gross sales price of approximately $5.3 million. On April 30, 2021, the Company completed the sale of the hotel. The net proceeds from the sale were used to pay down borrowings on the Company’s revolving credit facility.
35
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2021, the Company’s financial instruments were not exposed to significant market risk due to foreign currency exchange risk, commodity price risk or equity price risk. However, the Company is exposed to interest rate risk due to possible changes in short term interest rates as it invests its cash or borrows on its revolving credit facility and due to the portion of its variable-rate debt that is not fixed by interest rate swaps. As of March 31, 2021, after giving effect to interest rate swaps, as described below, approximately $295.5 million, or approximately 19% of the Company’s total debt outstanding, was subject to variable interest rates. Based on the Company’s variable-rate debt outstanding as of March 31, 2021, every 100 basis points change in interest rates will impact the Company’s annual net income by approximately $3.0 million (subject to the LIBOR floor as discussed in Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q), all other factors remaining the same. With the exception of interest rate swap transactions, the Company has not engaged in transactions in derivative financial instruments or derivative commodity instruments.
As of March 31, 2021, the Company’s variable-rate debt consisted of its unsecured credit facilities, including borrowings outstanding under its $425 million revolving credit facility and $870 million of term loans, and a $20.6 million loan secured by two of its properties (the $20.6 million loan was repaid on April 12, 2021). Currently, the Company uses interest rate swaps to manage its interest rate risk on a portion of its variable-rate debt. As of March 31, 2021, the Company had 13 interest rate swap agreements that effectively fix the interest payments on approximately $695.0 million of the Company’s variable-rate debt outstanding with swap maturity dates ranging from August 2022 to December 2029. In addition, the Company has entered into an interest rate swap agreement which, beginning May 18, 2021, will effectively fix the interest rate on an additional $75 million of its variable-rate debt. Under the terms of all of the Company’s interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the one-month LIBOR. See Note 5 titled “Fair Value of Financial Instruments” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for a description of the Company’s interest rate swaps as of March 31, 2021.
In addition to its variable-rate debt and interest rate swaps discussed above, the Company has assumed or originated fixed interest rate mortgages payable to lenders under permanent financing arrangements as well as one $50 million fixed-rate senior notes facility. The following table summarizes the annual maturities and average interest rates of the Company’s mortgage debt and borrowings outstanding under its unsecured credit facilities at March 31, 2021. All dollar amounts are in thousands.
|
|
|
April 1 - December 31, 2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
Thereafter |
|
|
Total |
|
|
Fair Market Value |
|
||||||||
|
Total debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities |
|
$ |
67,706 |
|
|
$ |
259,731 |
|
|
$ |
296,213 |
|
|
$ |
338,597 |
|
|
$ |
245,140 |
|
|
$ |
322,265 |
|
|
$ |
1,529,652 |
|
|
$ |
1,488,025 |
|
|
Average interest rates (1) |
|
|
3.9 |
% |
|
|
3.9 |
% |
|
|
4.1 |
% |
|
|
4.3 |
% |
|
|
4.4 |
% |
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities |
|
$ |
20,551 |
|
|
$ |
149,900 |
|
|
$ |
250,000 |
|
|
$ |
310,000 |
|
|
$ |
175,000 |
|
|
$ |
85,000 |
|
|
$ |
990,451 |
|
|
$ |
965,647 |
|
|
Average interest rates (1) |
|
|
3.7 |
% |
|
|
3.8 |
% |
|
|
4.1 |
% |
|
|
4.5 |
% |
|
|
5.0 |
% |
|
|
5.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities |
|
$ |
47,155 |
|
|
$ |
109,831 |
|
|
$ |
46,213 |
|
|
$ |
28,597 |
|
|
$ |
70,140 |
|
|
$ |
237,265 |
|
|
$ |
539,201 |
|
|
$ |
522,378 |
|
|
Average interest rates |
|
|
4.3 |
% |
|
|
4.1 |
% |
|
|
4.0 |
% |
|
|
4.0 |
% |
|
|
4.0 |
% |
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
(1) |
The average interest rate gives effect to interest rate swaps, as applicable. |
Item 4. Controls and Procedures
Senior management, including the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2021. There have been no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is or may be a party to various legal proceedings that arise in the ordinary course of business. The Company is not currently involved in any litigation nor, to management’s knowledge, is any litigation threatened against the Company where the outcome would, in management’s judgment based on information currently available to the Company, have a material adverse effect on the Company’s consolidated financial position or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
The following is a summary of all share repurchases during the first quarter of 2021.
|
|
Issuer Purchases of Equity Securities |
|
|||||||||||||||
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
||||
|
Period |
|
Total Number of Shares Purchased |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (1) |
|
||||
|
Janaury 1 - Janaury 31, 2021 |
|
|
- |
|
|
- |
|
|
|
- |
|
|
$ |
345,000 |
|
|
|
February 1 - February 28, 2021 |
|
|
- |
|
|
- |
|
|
|
- |
|
|
$ |
345,000 |
|
|
|
March 1 - March 31, 2021 (2) |
|
|
117,647 |
|
|
$ |
14.03 |
|
|
|
- |
|
|
$ |
345,000 |
|
|
Total |
|
|
117,647 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
(1) |
Represents amount outstanding under the Company's authorized $345 million share repurchase program. This program may be suspended or terminated at any time by the Company and will end in July 2021 if not terminated earlier. |
|
(2) |
Represents common shares surrendered to the Company to satisfy tax withholding obligations associated with the issuance of common shares awarded to employees. |
Dividends
During the Extended Covenant Waiver Period (as defined in the Company’s amended unsecured credit facilities), the Company is subject to more restrictive limits on its ability to pay distributions on its common shares. See “Liquidity and Capital Resources” in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations , appearing in Part I this Quarterly Report on Form 10-Q .
37
Item 6. Exhibits
|
Exhibit Number |
|
Description of Documents |
|
3.1 |
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
10.1 |
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
31.3 |
|
|
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
101 |
|
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Consolidated Statements of Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these financial statements, tagged as blocks of text and in detail (FILED HEREWITH)
|
|
104 |
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted as Inline XBRL and contained in Exhibit 101. |
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Apple Hospitality REIT, Inc. |
|
||
|
|
|
|
|
|
By: |
/s/ Justin G. Knight |
|
Date: May 6, 2021 |
|
|
Justin G. Knight, |
|
|
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
|
|
|
By: |
/s/ Elizabeth S. Perkins |
|
Date: May 6, 2021 |
|
|
Elizabeth S. Perkins, |
|
|
|
|
Chief Financial Officer (Principal Financial Officer) |
|
|
|
|
|
|
|
|
By: |
/s/ Rachel S. Labrecque |
|
Date: May 6, 2021 |
|
|
Rachel S. Labrecque, |
|
|
|
|
Chief Accounting Officer (Principal Accounting Officer) |
|
|
39
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|