Business Context and Reporting Period
This Form 8-K is filed by Apple REIT Nine, Inc. (the "Company") on May 28, 2010. The filing reports the entry into material definitive agreements for potential hotel acquisitions and the completion of a hotel asset acquisition. The Company funds its acquisitions through an ongoing offering of Units, each consisting of one common share and one Series A preferred share.
Key Financial Metrics and Transactions
Completed Acquisition (Item 2.01)
- Asset: Hampton Inn and Suites in Oklahoma City, Oklahoma (200 rooms).
- Purchase Price: $32,656,898 (increased by $656,898 from the original contract price at closing).
- Debt Assumption: None. The seller extinguished an existing loan with an outstanding principal balance of approximately $21 million.
- Funding Source: Proceeds from the ongoing offering of Units.
Potential Acquisitions (Item 1.01)
| Location | Franchise | Rooms | Purchase Price |
|---|---|---|---|
| Lafayette, LA | Hilton Garden Inn | 153 | $22,900,000 |
| West Monroe, LA | Hilton Garden Inn | 134 | $10,000,000 |
| Total | - | 287 | $32,900,000 |
- Deposits: Aggregate initial deposits of $300,000 have been paid. An additional $300,000 is required within three business days after the review period expires on July 12, 2010, if contracts are not terminated.
- Refundability: Initial deposits are refundable if terminated during the review period. Deposits are non-refundable if terminated after the review period unless the seller fails to satisfy conditions.
Material Changes and Status
The Company has completed four closings under a series of purchase contracts originally executed on March 16, 2010, for the potential purchase of seven hotels. The Oklahoma City acquisition represents the fourth closing. The filing does not provide comparative financial metrics (revenue, profit, cash flow) for the Company as a whole, as this is a current report focused on specific transactional events rather than periodic financial results.
Outlook, Risks, and Contingencies
- Closing Conditions: The potential acquisitions of the two Louisiana hotels are subject to unsatisfied closing conditions, including seller compliance with covenants, obtaining third-party consents, and the termination of existing franchise/management agreements and execution of new ones.
- Termination Rights: The Company may terminate the Louisiana purchase contracts at any time during the review period (ending July 12, 2010) for any reason.
- Uncertainty: There is no assurance that the Louisiana hotels will be acquired or that further closings will occur under the remaining contracts from the March 16, 2010 series.
- Financial Reporting: Financial statements and pro forma information for the Oklahoma City hotel will be filed by amendment within the required time period.
Investor Verification Checklist
- Verify the status of the review period for the two Louisiana hotels (ending July 12, 2010) and whether the additional $300,000 deposit was paid.
- Confirm the execution of new franchise and management agreements for the Louisiana properties, a required closing condition.
- Review the upcoming amended filing for financial statements and pro forma information regarding the Oklahoma City acquisition.
- Monitor the status of the remaining three hotels under the March 16, 2010 purchase contract series.