Business Context and Reporting Period
This Form 8-K was filed by Apple REIT Nine, Inc. on September 10, 2010. The filing reports the entry into a material definitive agreement involving the potential acquisition of 16 hotels through an indirect wholly-owned subsidiary.
Key Financial Metrics and Transaction Details
The transaction involves a total aggregate purchase price of $291,250,000 for 2,240 hotel rooms across various locations including Indiana, Arizona, Illinois, Texas, Michigan, Utah, and Florida. The hotels are primarily branded under SpringHill Suites, Residence Inn, Courtyard, Hilton Garden Inn, Fairfield Inn & Suites, and Embassy Suites.
- Total Purchase Price: $291,250,000
- Total Room Count: 2,240
- Initial Deposits Paid: $4.8 million
- Additional Deposits Required (if not terminated): $8.0 million
- Funding Source: Proceeds from the Company's ongoing offering of Units (one common share and one Series A preferred share).
Material Changes and Transaction Status
As of the filing date, the purchase contracts are subject to a "review period" ending on October 25, 2010. During this period, the purchasing subsidiary may terminate any contract for any reason with a full refund of the initial deposits. If the review period expires without termination, an additional $8.0 million in deposits is required. The filing explicitly states there is no assurance that any or all hotels will be acquired.
Conditions, Risks, and Management Commentary
Closing is contingent upon several unsatisfied conditions, including:
- Sellers complying with all material covenants.
- Obtaining all necessary third-party consents.
- Termination of existing franchise and management agreements by sellers.
- Execution of new franchise and management agreements by one of the Company's subsidiaries.
If closing conditions are not met, the subsidiary may terminate the contracts and receive a refund of deposits. If a contract is terminated after the review period but before closing (and not due to seller failure), deposits may be forfeited to the seller. The sellers are affiliated with each other but have no material relationship with the Company other than through these contracts.
Key Facts for Investor Verification
- Verify the status of the review period ending October 25, 2010, and whether the additional $8.0 million deposit was paid.
- Confirm if the required third-party consents and new franchise/management agreements were executed.
- Monitor the Company's ongoing Unit offering to ensure sufficient capital remains available for the full purchase price.
- Check for any subsequent filings indicating termination of specific contracts or the final closing of the 16-hotel portfolio.