Business Context and Reporting Period
This Form 8-K is filed by Apple REIT Nine, Inc. (a subsidiary of Apple Hospitality REIT, Inc.) for the reporting period ending October 3, 2008. The filing details the entry into material definitive agreements for potential hotel acquisitions and the completion of one hotel acquisition.
Key Financial Metrics and Transactions
Completed Acquisition
- Asset: Hilton Garden Inn in Twinsburg, Ohio (142 rooms).
- Purchase Price: $17.8 million.
- Funding Source: Proceeds from the Company's ongoing offering of Units (one common share and one Series A preferred share).
Potential Acquisitions (Pending)
| Location | Franchise | Rooms | Purchase Price |
|---|---|---|---|
| Pueblo, Colorado | Hampton Inn & Suites | 81 | $8,025,000 |
| Hillsboro, Oregon | Embassy Suites | 165 (under construction) | $32,500,000 |
| Hillsboro, Oregon | Hampton Inn & Suites | 106 (under construction) | $14,500,000 |
| Total | 352 | $55,025,000 |
- Initial Deposits Paid: $300,000 aggregate.
- Additional Deposits Due: $400,000 aggregate for Hillsboro properties if not terminated during the review period.
Note: The filing does not provide revenue, profit, cash flow, margin, or debt metrics for the Company as a whole, as this is a current report focused on specific asset transactions.
Material Changes and Transaction Status
The Company has expanded its portfolio by closing on the Twinsburg, Ohio property. Simultaneously, it has entered into contracts for three additional properties totaling $55.025 million. Two of these pending properties are currently under construction. The filing notes that two closings have now occurred under a series of contracts executed on August 1, 2008, for a potential total of five hotels.
Outlook, Risks, and Contingencies
- Closing Conditions: The pending acquisitions are subject to unsatisfied conditions, including the completion of construction for the Hillsboro hotels, obtaining third-party consents, and executing new management and franchise agreements.
- Termination Rights: The Company may terminate the purchase contracts for the Hillsboro hotels during a 45-day "review" period following the delivery of final plans. If terminated during this period, initial deposits are refundable.
- Deposit Risk: If a contract is terminated after the review period but before closing (and not due to seller failure), deposits may be forfeited to the seller.
- Assurance: There is no assurance that the Company will acquire any or all of the pending hotels.
Key Facts for Investor Verification
- Verify the status of the construction for the two Hillsboro, Oregon hotels, as completion is a closing condition.
- Confirm whether the Company has elected to terminate any of the pending purchase contracts during the review period.
- Monitor the execution of new management and franchise agreements required for the pending acquisitions.
- Review the Company's ongoing Unit offering to ensure sufficient capital is raised to fund the $55 million in pending purchase prices and additional deposits.