Business Context and Reporting Period
This Form 8-K was filed by Apple REIT Nine, Inc. on August 7, 2008, to report the entry into a material definitive agreement. The company is a real estate investment trust focused on hotel properties.
Key Financial Metrics and Transaction Details
- Asset: Courtyard by Marriott hotel in Bristol, Virginia (175 guest rooms).
- Purchase Price: $18,650,000.
- Debt Assumption: Existing loan with an outstanding principal balance of $9,793,768.
- Loan Terms: 6.59% interest rate, monthly amortized payments, maturing in August 2016.
- Deposits: Initial deposit of $150,000 (refundable during review period); additional deposit of $150,000 due post-review if not terminated.
- Funding Source: Proceeds from the ongoing offering of Units (one common share and one Series A preferred share).
Material Changes and Transaction Status
The filing discloses a potential acquisition rather than a completed transaction. The purchase contract includes a "review period" ending on September 21, 2008, during which the company may terminate the agreement for any reason. If terminated after the review period without seller default, deposits are forfeited to the seller. If terminated during the review period, the initial deposit is refundable.
Outlook, Risks, and Contingencies
Closing Conditions: The transaction is contingent upon several unsatisfied conditions, including seller compliance with covenants, obtaining third-party consents, and the termination of existing management/franchise agreements with the execution of new ones by a subsidiary.
Risks: There is no assurance the acquisition will close. The company may discover facts during the review period (legal, environmental, financial, etc.) that lead to termination. If the deal closes, deposits will be credited toward the purchase price.
Investor Verification Checklist
- Confirm whether the review period ended on September 21, 2008, and if the transaction was terminated or proceeded.
- Verify the status of the required third-party consents and franchise agreement transitions.
- Check subsequent filings to confirm if the $18.65 million purchase price and debt assumption were finalized.
- Review the company's capital raising activities to ensure sufficient Unit offering proceeds were available to fund the transaction.