Business Context and Reporting Period
Company: Apple REIT Nine, Inc. (Apple Hospitality REIT, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: November 12, 2008
Event: Entry into a Material Definitive Agreement (Item 1.01) regarding the potential acquisition of eight hotels.
Key Financial Metrics and Transaction Details
This filing details a proposed acquisition rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
| Metric | Value |
|---|---|
| Total Purchase Price (8 Hotels) | $127,600,000 |
| Total Room Count | 858 |
| Initial Deposits Paid | $1,600,000 |
| Additional Deposits Required (if not terminated) | $1,600,000 |
| Assumed Debt (4 Hotels) | $29,345,370 |
| Debt Interest Rates | 5.95% - 6.07% |
| Debt Maturity Dates | March 2016 - May 2016 |
Material Changes and Transaction Structure
- Acquisition Targets: Eight hotels located in Texas (Austin, Round Rock), Florida (Fort Lauderdale), New Hampshire (Portsmouth), Pennsylvania (Pittsburgh), and Tennessee (Jackson).
- Franchises: Includes Homewood Suites, Hampton Inn, Hampton Inn & Suites, and Courtyard.
- Review Period: The purchasing subsidiary has until December 27, 2008, to terminate contracts for any reason with a full refund of initial deposits.
- Funding Source: Initial deposits funded by proceeds from the ongoing offering of Units (common and Series A preferred shares). Additional deposits and purchase price expected to be funded similarly upon closing.
- Debt Assumption: The transaction includes assuming existing loans on four properties totaling approximately $29.3 million.
Outlook, Risks, and Contingencies
Closing Conditions: The transaction is subject to several unsatisfied conditions, including:
- Obtaining all necessary third-party consents.
- Termination of existing management/franchise agreements and execution of new ones.
- Defeasance of existing loans on the Pittsburgh and Fort Lauderdale properties (costs to be added to purchase price).
- Seller compliance with covenants.
Risks: There is no assurance that the acquisition will close. If the subsidiary terminates the contract after the review period (post-December 27, 2008) for reasons other than seller failure, the deposits may be forfeited to the seller. The filing explicitly states that the sellers are affiliated with each other but have no material relationship with the Company other than these contracts.
Investor Verification Checklist
- Verify the status of the "review period" termination rights as of December 27, 2008.
- Confirm whether the defeasance costs for the Pittsburgh and Fort Lauderdale loans have been quantified and added to the purchase price.
- Monitor the Company's ongoing Unit offering to ensure sufficient capital is raised to fund the $127.6 million purchase price and additional deposits.
- Check for subsequent filings regarding the satisfaction of third-party consents and franchise agreement transitions.
- Review the specific terms of the assumed debt to ensure no prepayment penalties or restrictive covenants exist.