Business Context and Reporting Period
Company: Apple REIT Nine, Inc. (Apple Hospitality REIT, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: January 6, 2009
Event: Entry into a Material Definitive Agreement (Item 1.01)
Key Financial Metrics and Transaction Details
- Asset: Hampton Inn hotel under construction in Holly Springs, North Carolina.
- Room Count: 124 guest rooms (expected upon completion).
- Purchase Price: $14,880,000.
- Initial Deposit: $100,000.
- Funding Source: Proceeds from the Company's ongoing offering of Units (one common share and one Series A preferred share).
- Financial Metrics: The filing does not provide revenue, profit, cash flow, margins, debt, or liquidity figures for the Company.
Material Changes and Contract Terms
The Company entered into a purchase contract with Viking Fund Holly Springs (NC), LLC. Key terms include:
- Review Period: Ends February 5, 2009. The $100,000 deposit is refundable if the contract is terminated during this period.
- Termination Rights: The purchasing subsidiary may terminate the contract at any time during the review period for any reason. If terminated after the review period but before closing (not due to seller failure), the deposit is forfeited to the seller.
- Closing Conditions: The transaction is contingent on several unsatisfied conditions, including completion of construction, obtaining third-party consents, and execution of new management and franchise agreements.
Outlook, Risks, and Contingencies
Management Commentary: The Company is conducting due diligence on legal, title, construction, physical condition, environmental, and financial aspects of the property.
Risks and Contingencies:
- Closing Uncertainty: There is no assurance the purchase will close. The subsidiary may terminate the contract if closing conditions are not met or if due diligence reveals unfavorable facts.
- Construction Risk: The hotel is currently under construction; completion is a required closing condition.
- Franchise/Management Risk: Existing agreements must be terminated and new ones executed by a subsidiary.
Investor Verification Checklist
- Verify the status of the hotel's construction and whether it is on schedule for completion.
- Confirm the outcome of the due diligence review period ending February 5, 2009.
- Monitor the Company's ongoing Unit offering to ensure sufficient capital is raised to fund the $14.88 million purchase price.
- Check for updates on the execution of new management and franchise agreements.
- Review subsequent filings to confirm if the transaction closes or is terminated.