Business Context and Reporting Period
This Form 8-K was filed by Apple REIT Nine, Inc. on October 10, 2008, to disclose the entry into a material definitive agreement. The registrant is a Virginia corporation focused on hotel real estate investments.
Key Financial Metrics and Transaction Details
- Transaction Type: Potential acquisition of a Homewood Suites hotel in Durham, North Carolina.
- Asset Size: 122 guest rooms.
- Purchase Price: $19,050,000.
- Initial Deposit: $500,000 (refundable during the review period).
- Additional Deposit: $500,000 (due within three business days after the review period expires if the contract is not terminated).
- Funding Source: Proceeds from the Company's ongoing offering of Units (one common share and one Series A preferred share).
- Review Period End Date: November 24, 2008.
Material Changes and Contract Terms
The filing represents a new potential asset acquisition. The purchasing subsidiary has the right to terminate the contract at any time during the review period for any reason. If terminated after the review period but before closing (and not due to seller failure), deposits are forfeited to the seller. If closing occurs, deposits are credited toward the purchase price.
Outlook, Risks, and Contingencies
Closing Conditions: The transaction is contingent upon several unsatisfied conditions, including:
- Seller compliance with all material covenants.
- Obtaining all necessary third-party consents.
- Termination of existing management and franchise agreements by the seller.
- Execution of new management and franchise agreements by a Company subsidiary.
Risk Statement: There is no assurance that the acquisition will close. The subsidiary may terminate the agreement if due diligence reveals unfavorable facts or if closing conditions are not met.
Investor Verification Checklist
- Verify the status of the ongoing Unit offering to confirm funding availability for the additional deposit and purchase price.
- Monitor the review period deadline of November 24, 2008, for any termination announcements.
- Confirm whether the seller has successfully terminated existing franchise agreements and secured third-party consents.
- Review future filings to determine if the $500,000 initial deposit was refunded or if the additional $500,000 deposit was paid.