Apple Hospitality REIT, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Apple Hospitality REIT, Inc. on January 27, 2015. The filing addresses Item 8.01 (Other Events) and provides an estimated fair value per share of the Company's common stock as of December 31, 2014, specifically to assist trustees and custodians of Individual Retirement Accounts (IRAs). The Company's shares are not listed on a national securities exchange, and no material public market exists for them.
Key Financial Metrics and Valuation
The filing does not report revenue, profit, cash flow, margins, debt, or liquidity figures for the period. Instead, it discloses the following valuation metrics:
- Estimated Per Share Value (Dec 31, 2014): $10.30 (mid-point of a $9.80 - $10.80 range).
- Valuation Methodology: Third-party valuation using unobservable inputs (Level 3 under ASC 820), combining income and market approaches.
- Key Assumptions Used:
- 5-year average revenue growth: 4.2%
- 5-year average annual EBITDA growth: 5.8%
- Discount rate: 9.5%
- Terminal capitalization rate: 7.0%
- Revenue multiple: 5.0
- EBITDA multiple: 15.5
Material Changes and Prior Comparisons
The filing references a prior estimated value of $10.10 per share as of March 1, 2014, which was used for accounting purposes regarding the mergers with Apple REIT Seven, Inc. and Apple REIT Eight, Inc. The current estimate of $10.30 represents an increase from the prior estimate, though the filing notes that different assumptions could yield significantly different values.
Guidance, Risks, and Limitations
The Company explicitly states that the estimated value does not represent the price at which shares would trade on an exchange, the amount a shareholder would receive upon sale, or the liquidation value. Key risks and limitations include:
- Market Liquidity: No public market exists for the shares; resale at the estimated value is not assured.
- Assumption Sensitivity: A 1% change in the EBITDA annual growth rate assumption would alter the per share value range by approximately $0.35.
- Forward-Looking Uncertainties: Risks include the execution of mergers, property disposition/acquisition, changes in real estate capital markets, financing risks, and regulatory changes affecting REIT classification.
- No Update Obligation: The Company does not intend to update this information to reflect future events or changed circumstances.
Investor Verification Checklist
- Verify the Company's current status regarding a public listing, as the filing confirms no material public market exists.
- Review the Company's most recent Form 10-K for actual revenue, EBITDA, and debt figures, as this 8-K contains only valuation assumptions.
- Confirm the specific IRA custodian requirements regarding the use of this estimated value, as the Company provides no assurance of compliance.
- Assess the sensitivity of the valuation to changes in the 9.5% discount rate and 15.5x EBITDA multiple.
- Check for any subsequent filings regarding the liquidity opportunities or property sales mentioned in the risk factors.