Business Context and Reporting Period
This Form 8-K was filed by Apple REIT Nine, Inc. on March 16, 2010, to report the entry into material definitive agreements. The Company, a real estate investment trust, announced potential acquisitions of eight hotels across the United States through its wholly-owned subsidiaries.
Key Financial Metrics and Transaction Details
The filing details two distinct acquisition packages involving eight properties with a combined potential purchase price of $166,000,000.
Portfolio of Seven Hotels
- Total Purchase Price: $124,000,000
- Total Rooms: 1,072
- Initial Deposits Paid: $875,000 (refundable during review period ending April 30, 2010)
- Assumed Debt: $49,507,000 in existing loans secured by four of the properties.
Anchorage, AK Hotel
- Property: Embassy Suites (169 rooms)
- Purchase Price: $42,000,000
- Initial Deposit Paid: $50,000 (refundable during review period ending April 15, 2010)
The filing text does not provide current revenue, profit, cash flow, or margin data for the Company, as this report focuses solely on the acquisition agreements.
Material Changes and Funding
The primary material change is the commitment to acquire the specified hotel assets, subject to closing conditions. The initial deposits for both transactions were funded by proceeds from the Company's ongoing offering of Units (consisting of one common share and one Series A preferred share). The Company expects to fund additional deposits and the final purchase price through the same offering if the transactions close.
Outlook, Risks, and Contingencies
These transactions are contingent upon the satisfaction of several closing conditions, which currently remain unsatisfied. Key risks and contingencies include:
- Review Period Termination: The Company may terminate any purchase contract at any time during the review period (ending April 15 or April 30, 2010) for any reason, with deposits refunded.
- Closing Conditions: Conditions include seller compliance with covenants, obtaining third-party consents, and the termination of existing franchise/management agreements and execution of new ones.
- Due Diligence: The Company is evaluating legal, title, environmental, financial, and physical condition documents. Discovery of adverse facts could lead to termination.
- Deposit Forfeiture: If the Company terminates a contract after the review period but before closing (not due to seller failure), deposits may be forfeited to the seller.
There is no assurance that the Company will acquire any or all of the hotels.
Investor Verification Checklist
- Verify the status of the "review period" deadlines (April 15 and April 30, 2010) to determine if the Company has elected to proceed or terminate.
- Confirm whether the required third-party consents and new franchise/management agreements have been executed.
- Monitor the Company's ongoing Unit offering to ensure sufficient capital is raised to fund the remaining purchase price and assumed debt.
- Review the specific terms of the assumed debt, particularly the variable rate loan (LIBOR + 1.65%) maturing in 2011 for the Oklahoma City property.