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UNITED STATES |
Washington, D.C. 20549 |
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FORM 8-K/A |
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AMENDMENT NO. 1 TO |
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CURRENT REPORT |
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Date of Report (Date of earliest event reported): March 4, 2011 |
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APPLE REIT TEN, INC. |
(Exact name of registrant as specified in its charter) |
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Virginia |
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333-168971 |
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27-3218228 |
(State or other jurisdiction |
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(Commission File Number) |
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(I.R.S. Employer |
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814 East Main Street, Richmond, Virginia |
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23219 |
(Address of principal executive offices) |
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(Zip Code) |
(804) 344-8121
(Registrants
telephone number, including area code)
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o |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Apple REIT Ten, Inc. hereby amends Item 9.01 of its Current Report on Form 8-K dated March 4, 2011 and filed (by the required date) on March 8, 2011 for the purpose of filing certain financial statements and information. In accordance with Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, this Amendment No. 1 sets forth the complete text of the item as amended.
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Item 9.01. |
Financial Statements and Exhibits. |
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(a) |
Financial statements of businesses acquired. |
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Denver, Colorado Hilton Garden Inn |
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(Audited) |
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Report of Independent Auditors |
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3 |
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Balance Sheets As of December 31, 2010 and 2009 |
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4 |
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Statements of Operations Years Ended December 31, 2010 and 2009 |
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5 |
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Statements of Owners Equity Years Ended December 31, 2010 and 2009 |
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6 |
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Statements of Cash Flows Years Ended December 31, 2010 and 2009 |
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7 |
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Notes to Financial Statements |
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8 |
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(b) |
Pro forma financial information. |
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The below pro forma financial information pertains to the hotel referred to in the financial statements (see (a) above) and to a separate group of recently purchased hotels. |
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Apple REIT Ten, Inc. (Unaudited) |
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Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2010 |
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14 |
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Notes to Pro Forma Condensed Consolidated Balance Sheet |
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16 |
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Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2010 |
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17 |
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Notes to Pro Forma Condensed Consolidated Statement of Operations |
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19 |
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(c) |
Shell company transactions. |
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Not Applicable |
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(d) |
Exhibits. |
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None |
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2
Report of Independent Auditors
Board of
Directors
Apple REIT Ten, Inc.
We have audited the accompanying balance sheets of the Denver, Colorado Hilton Garden Inn (the Hotel) as of December 31, 2010 and 2009, and the related statements of operations, cash flows, and owners equity for the years then ended. These financial statements are the responsibility of the Hotels management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Hotels internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Hotels internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Denver, Colorado Hilton Garden Inn at December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
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/s/ Ernst & Young LLP |
May 10, 2011
3
Denver, Colorado Hilton Garden Inn
Balance Sheets
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As of December 31 |
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2010 |
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2009 |
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Assets |
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Cash and cash equivalents |
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$ |
386,202 |
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$ |
294,518 |
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Investments |
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1,036,863 |
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Accounts receivable |
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96,685 |
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65,648 |
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Prepaid expenses and other assets, net |
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293,841 |
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400,722 |
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Investment in real estate, net of accumulated depreciation of $4,482,398 and $3,189,207, respectively |
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30,323,062 |
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31,695,955 |
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$ |
31,099,790 |
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$ |
33,493,706 |
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Liabilities and owners equity |
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Accounts payable and accrued expenses |
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$ |
948,670 |
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$ |
795,004 |
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Mortgage payable |
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24,817,950 |
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25,327,285 |
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Total liabilities |
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25,766,620 |
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26,122,289 |
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Owners equity |
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5,333,170 |
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7,371,417 |
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Total liabilities and owners equity |
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$ |
31,099,790 |
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$ |
33,493,706 |
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See accompanying notes.
4
Denver, Colorado Hilton Garden Inn
Statements of Operations
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Year Ended December 31 |
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2010 |
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2009 |
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Revenues |
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Rooms |
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$ |
8,978,312 |
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$ |
7,202,922 |
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Other revenue |
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2,371,649 |
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2,210,898 |
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Total revenues |
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11,349,961 |
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9,413,820 |
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Expenses |
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Operating Expenses |
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2,766,902 |
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2,429,711 |
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Hotel administrative expenses |
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1,022,739 |
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956,448 |
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Utilities |
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343,523 |
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289,709 |
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Depreciation and amortization |
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1,324,718 |
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1,320,642 |
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Taxes, insurance and other |
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374,287 |
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525,363 |
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Sales and marketing |
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555,539 |
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280,531 |
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Repair and maintenance |
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132,239 |
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145,353 |
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Franchise and management fees |
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1,003,183 |
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831,997 |
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General and administrative |
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611,750 |
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461,081 |
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Total expenses |
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8,134,880 |
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7,240,835 |
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Operating income |
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3,215,081 |
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2,172,985 |
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Interest expense, net |
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753,328 |
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728,039 |
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Net income |
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$ |
2,461,753 |
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$ |
1,444,946 |
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See accompanying notes.
5
Denver, Colorado Hilton Garden Inn
Statements of Owners Equity
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Year Ended December 31 |
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2010 |
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2009 |
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Owners equity at beginning of period |
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$ |
7,371,417 |
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$ |
8,726,471 |
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Distributions to owner |
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(4,500,000 |
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(2,800,000 |
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Net income |
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2,461,753 |
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1,444,946 |
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Owners equity at end of period |
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$ |
5,333,170 |
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$ |
7,371,417 |
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See accompanying notes.
6
Denver, Colorado Hilton Garden Inn
Statements of Cash Flows
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Year Ended December 31 |
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2010 |
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2009 |
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Cash flows from operating activities |
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Net income |
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$ |
2,461,753 |
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$ |
1,444,946 |
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Adjustments to reconcile net income to cash provided by operating activities: |
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Depreciation and amortization |
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1,324,718 |
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1,320,642 |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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(31,037 |
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17,896 |
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Prepaid expenses and other assets, net |
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94,361 |
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(37,540 |
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Accounts payable and accrued expenses |
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153,666 |
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157,875 |
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Net cash provided by operating activities |
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4,003,461 |
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2,903,819 |
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Cash flows from investing activities |
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Investments in CDs |
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1,036,863 |
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(36,863 |
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Purchase of property and equipment |
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(91,145 |
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(206,086 |
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Reimbursement for property and equipment |
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170,847 |
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Net increase in cash restricted for property improvements |
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33,376 |
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Net cash used in investing activities |
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1,116,565 |
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(209,573 |
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Cash flows from financing activities |
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Payment of financing costs |
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(19,007 |
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Payments on secured notes payable |
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(509,335 |
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(538,454 |
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Distributions to owner |
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(4,500,000 |
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(2,800,000 |
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Net cash used in financing activities |
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(5,028,342 |
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(3,338,454 |
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Increase (decrease) in cash and cash equivalents |
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91,684 |
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(644,208 |
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Cash and cash equivalents |
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Beginning of year |
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294,518 |
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938,726 |
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End of year |
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$ |
386,202 |
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$ |
294,518 |
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Supplemental information |
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Cash paid for interest |
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$ |
695,005 |
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$ |
779,181 |
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See accompanying notes.
7
Denver, Colorado Hilton Garden Inn
Notes to Financial Statements
December 31, 2010 and 2009
1. Nature of Business
The accompanying financial statements present the financial information of the Denver, Colorado Hilton Garden Inn (the Hotel) as of December 31, 2010 and 2009, and for the years then ended. The Hotel was owned by 5280 Lodging, LLC (the Company), a Colorado Limited Liability Company that was formed for the purpose of acquiring, owning, and operating hotels. The Hotel commenced operations in July 2007 and has 221 rooms operating under the Hilton franchise in Denver, Colorado. On March 4, 2011 the Company sold the Hotel to a subsidiary of Apple REIT Ten, Inc., a Virginia Corporation, for $58,500,000.
2. Significant Accounting Policies
Basis of Accounting
The financial statements have been prepared on the accrual basis in accordance with accounting principles generally accepted in the United States.
Cash and Cash Equivalents
The Hotel considers all highly liquid instruments purchased with maturities of three months or less to be cash and cash equivalents.
Restricted Cash
Restricted cash includes reserves for furniture, fixtures, and equipment replacements. There was a zero balance at December 31, 2010 and 2009.
Investments
Investments consist of certificates of deposits (CD). The CD was purchased in December 2008 with an interest rate of 3.5% and maturity term of 14 months. The interest earned in 2010 and 2009 was $3,376 and $36,862, respectively.
Accounts Receivable
Accounts receivable are comprised of receivables due from guests of the hotel and credit card receipts yet to be processed from guests of the hotel. The Hotel records an allowance for doubtful accounts sufficient to cover potential credit losses. Management has determined that no allowance was considered necessary at December 31, 2010 and 2009.
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2. Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Investment in Real Estate
Real estate is stated at cost, net of accumulated depreciation. The Hotel capitalizes costs, which both materially add value and extend the useful life of an asset. Provisions for depreciation of buildings and improvements, furniture, fixtures, and equipment are computed on a straight-line basis over the estimated useful lives, ranging from five to 30 years. Repairs and maintenance costs are expensed as incurred.
Impairment of Long-Lived Assets
The Hotel follows the requirements of ASC Topic 360, Impairment or Disposal of Long-Lived Assets (ASC 360). ASC 360 requires impairment losses to be recorded on long-lived assets held for investment when indicators of impairment are present and the future undiscounted cash flows estimated to be generated by those assets are less than the assets carrying value.
The Hotels management reviews the carrying value of tangible and intangible assets whenever significant events or changes in circumstances occur that might impair the recovery of these costs. Recovery is evaluated by measuring the carrying value of the assets against the associated future estimated cash flows. Managements estimates of fair values are based on the best information available and require the use of estimates, judgment and projections as considered necessary. As of December 31, 2010 and 2009, no impairment losses were recognized.
Revenue Recognition
Revenue is recognized as earned, which is generally defined as the date upon which a guest occupies a room or utilizes the hotels services.
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2. Significant Accounting Policies (continued)
Advertising costs
Advertising costs are expensed when incurred. Advertising expense for the years ended December 31, 2010 and 2009 was $33,100 and $34,179, respectively, which is included in sales and marketing expense in the accompanying statements of operations.
Income Taxes
The Hotel was owned by a limited liability company. The members of the Company separately accounted for the Hotels items of income, deductions, losses, and credits for federal and state income tax reporting.
New Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures About Fair Value Measurements (ASU 2010-06), which provides amendments to ASC Subtopic No. 820-10, Fair Value Measurements and Disclosures Overall. ASU 2010-06 requires additional disclosures and clarifications of existing disclosures for recurring and nonrecurring fair value measurements. The revised guidance was effective January 1, 2010. The adoption of this guidance did not have a material impact on the Hotels financial position or results of operations.
3. Investment in Real Estate
Investment in real estate at December 31, 2010 and December 31, 2009 consisted of the following:
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2010 |
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2009 |
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Land |
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$ |
3,489,630 |
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$ |
3,489,630 |
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Building and improvements |
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27,577,216 |
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27,558,068 |
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Furnishings and equipment |
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3,738,614 |
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3,837,464 |
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Total cost |
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34,805,460 |
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34,885,162 |
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Less accumulated depreciation |
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(4,482,398 |
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(3,189,207 |
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Investment in real estate, net |
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$ |
30,323,062 |
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$ |
31,695,955 |
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Depreciation expense for the years ended 2010 and 2009 was $1,293,190 and $1,287,031, respectively. During 2010, the Hotel received reimbursements from a contractor of $170,897 for certain improvement costs incurred in 2009.
4. Loan Fees
The Hotel capitalizes fees related to mortgage note issuance costs and modifications in accordance with ASC 470. These costs are amortized as amortization expense on the effective interest method over the term of the mortgage note. The amortization expense totaled $25,753 and $27,836 for the years ended December 31, 2010 and 2009, respectively. The unamortized loan fees at December 31, 2010 and 2009 were $18,995 and $25,741, respectively.
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5. Fair Value Disclosures
At December 31, 2010, as required by ASC 825, Financial Instruments, the following presents the net book value and estimated value of the Hotels certificate of deposit and notes payable.
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December 31 |
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December 31 |
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Cost |
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Fair Market |
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Cost |
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Fair Market |
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Certificate of Deposits |
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$ |
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$ |
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$ |
1,036,863 |
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$ |
1,067,204 |
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FirsTier Bank Mortgage |
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24,817,950 |
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24,817,950 |
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25,327,285 |
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24,363,421 |
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The estimated fair values of the Hotels financial instruments are based on a cash flow model discounted at market interest rates that considers the underlying risks of these instruments.
6. Franchise Agreement
The Hotel operates as a Hilton Garden Inn under a franchise agreement. The Hotel is required to pay the franchisor a flat fee monthly for various supporting services, and is required to pay franchise, marketing, and reservation service fees which are based on a percentage of gross room revenues. These fees totaled $791,281 and $638,383 for the years ended 2010 and 2009, respectively. Of these amounts, $439,090 and $355,104 are included in franchise and management fees for the years ended 2010 and 2009, respectively. The remaining amounts are included in sales and marketing expense and operating expense.
The franchise agreement required an initial one-time fee of $91,500, which was recorded as an intangible asset. Amortization is calculated on a straight-line basis over 20 years, and began on the first day of operations.
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6. Franchise Agreement (continued)
Franchise fees at December 31, 2010 and 2009 consisted of the following:
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2010 |
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2009 |
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Initial Cost |
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$ |
91,500 |
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$ |
91,500 |
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Less accumulated amortization |
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16,394 |
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11,819 |
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Franchise fees, net |
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$ |
75,106 |
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$ |
79,681 |
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Amortization expense for 2010 and 2009 was $4,575 in each period. The estimated aggregate amortization expense is $22,875 for the five succeeding fiscal years.
The Hotel also entered into an insignificant franchise agreement that required an initial one-time fee of $12,000, which was recorded as an intangible asset. Amortization is calculated on a straight-line basis over 10 years and began on the first day of operations.
7. Related Parties
The Hotel pays a monthly management fee of 5% of gross sales, as outlined in the management agreement, to Stonebridge Hospitality Services (the Manager), an affiliate of the Company. For the years ending December 31, 2010 and 2009, the fees were $564,093 and $476,893, respectively.
The Company makes distributions to the owners when cash on hand exceeds the current and anticipated needs of the Company. For the years ending December 31, 2010 and 2009, the distributions were $4,500,000 and $2,800,000, respectively.
8. Mortgage Payable
The Hotel had a mortgage note with FirsTier Bank at December 31, 2009 with outstanding balance of $25,327,285.
On December 31, 2010, the Hotel modified the FirsTier Bank note to extend the maturity date to January 1, 2014 and changed the monthly payment to $153,315 and interest rate to Prime Rate quoted in Wall Street Journal plus 2%, with floor of 5.9%. The outstanding balance of the note at December 31, 2010 was $24,817,950.
12
8. Mortgage Payable (continued)
The FirsTier Bank note requires the Hotel to maintain compliance with certain financial and non-financial covenants, as defined. As of December 31, 2010, the hotel was in compliance with these covenants.
The annual principal payment requirements are as follows:
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2011 |
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$ |
332,121 |
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2012 |
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381,382 |
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2013 |
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409,020 |
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2014 |
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23,695,427 |
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$ |
24,817,950 |
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9. Subsequent Events
On March 4, 2011 the Company sold the Hotel to a subsidiary of Apple REIT Ten, Inc., a Virginia Corporation, for $58,500,000.
On March 4, 2011 the Company paid off the mortgage note.
On March 4, 2011 the Company made a distribution to the owners for $32,000,000.
On April 15, 2011 the Company made a distribution to the owners for $1,375,000.
The Hotel has evaluated events through May 10, 2011, which is the date the financial statements were available for issuance.
13
Apple
REIT Ten, Inc.
Pro Forma Condensed Consolidated Balance Sheet as
of December 31, 2010 (unaudited)
(in thousands, except share data)
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Apple REIT Ten, Inc. gives effect to the following hotel acquisitions:
|
|
|
|
|
|
|
|
Franchise |
|
Location |
|
Gross Purchase |
|
Actual Acquisition Date |
|
|
|
|
|
|
|
|
|
Hilton Garden Inn |
|
Denver, CO |
|
$ |
58.5 |
|
March 4, 2011 |
|
|
|
|
|
|
|
|
CN Hotel Portfolio (4 Hotels): |
|
|
|
|
|
|
|
Hampton Inn & Suites |
|
Winston-Salem, NC |
|
|
11.0 |
|
March 15, 2011 |
Fairfield Inn & Suites |
|
Matthews, NC |
|
|
10.0 |
|
March 25, 2011 |
TownePlace Suites |
|
Columbia, SC |
|
|
10.5 |
|
March 25, 2011 |
Home2 Suites |
|
Jacksonville, NC |
|
|
12.0 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
102.0 |
|
|
|
|
|
|
|
|
|
|
This Pro Forma Condensed Consolidated Balance Sheet also assumes all of the hotels had been leased to our wholly-owned taxable REIT subsidiaries pursuant to master hotel lease arrangements. The hotels acquired will be managed by affiliates of Stonebridge Realty Advisors, Inc., MHH Management, LLC and Newport Hospitality Group, Inc. under separate management agreements.
Such pro forma information is based in part upon the historical Consolidated Balance Sheet of Apple REIT Ten, Inc. and the historical balance sheets of the hotel properties.
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Apple REIT Ten, Inc. is not necessarily indicative of what the actual financial position would have been assuming such transactions had been completed as of December 31, 2010 nor does it purport to represent the future financial position of Apple REIT Ten, Inc.
The unaudited Pro Forma Condensed Consolidated Balance Sheet should be read in conjunction with, and is qualified in its entirety by, the historical balance sheets of the acquired hotels.
14
Balance Sheet as of December 31, 2010 (unaudited)
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Pro forma |
|
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties, net |
|
$ |
|
|
$ |
102,247 |
|
(A) |
|
$ |
102,247 |
|
Cash and cash equivalents |
|
|
124 |
|
|
76 |
|
(D) |
|
|
200 |
|
Other assets |
|
|
868 |
|
|
83 |
|
(C) |
|
|
951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
992 |
|
$ |
102,406 |
|
|
|
$ |
103,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Note payable |
|
$ |
400 |
|
|
(400 |
) |
(E) |
|
$ |
|
|
Accounts payable and accrued expenses |
|
|
575 |
|
|
117 |
|
(C) |
|
|
692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
975 |
|
|
(283 |
) |
|
|
|
692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, authorized 30,000,000 shares |
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock, no par value, authorized 400,000,000 shares |
|
|
|
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock, no par value, authorized 480,000 shares |
|
|
48 |
|
|
|
|
|
|
|
48 |
|
Common stock, no par value, authorized 400,000,000 shares |
|
|
|
|
|
104,978 |
|
(E) |
|
|
104,978 |
|
Accumulated deficit |
|
|
(31 |
) |
|
(2,289 |
) |
(B) |
|
|
(2,320 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity |
|
|
17 |
|
|
102,689 |
|
|
|
|
102,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
992 |
|
$ |
102,406 |
|
|
|
$ |
103,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
Notes to Pro Forma Condensed Consolidated Balance Sheet (unaudited) |
|
|
(A) |
The estimated total purchase price for the five properties that have been, or will be purchased after December 31, 2010 consists of the following. This purchase price allocation is preliminary and subject to change. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Denver, CO |
|
Winston-Salem, NC |
|
Matthews, NC |
|
Columbia, SC |
|
Jacksonville, NC |
|
Total |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
||||||||||||||||||||
Purchase price per contract |
|
$ |
58,500 |
|
$ |
11,000 |
|
$ |
10,000 |
|
$ |
10,500 |
|
$ |
12,000 |
|
$ |
102,000 |
|
|
Other capitalized costs (credits) incurred |
|
|
47 |
|
|
50 |
|
|
50 |
|
|
50 |
|
|
50 |
|
|
247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties |
|
|
58,547 |
|
|
11,050 |
|
|
10,050 |
|
|
10,550 |
|
|
12,050 |
|
|
102,247 |
|
(A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition fee payable to Apple Suites Realty Group (2% of purchase price per contract) |
|
|
1,170 |
|
|
220 |
|
|
200 |
|
|
210 |
|
|
240 |
|
|
2,040 |
|
(B) |
Other acquisition related costs |
|
|
89 |
|
|
24 |
|
|
31 |
|
|
45 |
|
|
60 |
|
|
249 |
|
(B) |
Net other assets/(liabilities) assumed |
|
|
44 |
|
|
(17 |
) |
|
(3 |
) |
|
(34 |
) |
|
(24 |
) |
|
(34 |
) |
(C) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price |
|
$ |
59,850 |
|
$ |
11,277 |
|
$ |
10,278 |
|
$ |
10,771 |
|
$ |
12,326 |
|
$ |
104,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Cash on hand at December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(124 |
) |
|
Plus: Working capital requirements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
|
(D) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Payoff of note payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
(E) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity proceeds needed for acquisitions, working capital and payoff of note payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
104,978 |
|
(E) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) |
Represents costs incurred to complete the acquisition, including, title, legal, accounting and other related costs, as well as the commission paid to Apple Suites Realty Group totaling 2% of purchase price per contract. |
|
|
(C) |
Represents other assets and liabilities assumed in the acquisition of the hotel including, operational charges and credits and accrued property taxes. |
|
|
(D) |
Represents the increase of cash and cash equivalents by the amount required for working capital. |
|
|
(E) |
Represents the issuance of additional shares required to fund working capital, payoff of note payable and fund acquisitions. |
16
Apple REIT Ten, Inc.
Pro Forma Condensed Consolidated Statement of
Operations (unaudited)
For the year ended December 31, 2010
(in thousands, except per share data)
The following unaudited Pro Forma Condensed Consolidated Statement of Operations of Apple REIT Ten, Inc. gives effect to the following hotel acquisition:
|
|
|
|
|
|
|
|
|
|
|
Franchise |
|
|
Location |
|
Gross Purchase |
|
|
Actual Acquisition Date |
|
|
|
|
|
|
|
|
|
|
|
||
|
||||||||||
Hilton Garden Inn |
|
|
Denver, CO |
|
$ |
58.5 |
|
|
March 4, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
CN Hotel Portfolio (4 Hotels): |
|
|
|
|
|
|
|
|
|
|
Hampton Inn & Suites |
|
|
Winston-Salem, NC |
|
|
11.0 |
|
|
March 15, 2011 |
|
Fairfield Inn & Suites |
|
|
Matthews, NC |
|
|
10.0 |
|
|
March 25, 2011 |
|
TownePlace Suites |
|
|
Columbia, SC |
|
|
10.5 |
|
|
March 25, 2011 |
|
Home2 Suites |
|
|
Jacksonville, NC |
|
|
12.0 |
|
|
Pending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
102.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This Pro Forma Condensed Consolidated Statement of Operations also assumes all of the hotels had been leased to our wholly-owned taxable REIT subsidiaries pursuant to master hotel lease arrangements. The hotels acquired will be managed by affiliates of Stonebridge Realty Advisors, Inc., MHH Management, LLC and Newport Hospitality Group, Inc. under separate management agreements.
Such pro forma information is based in part upon the historical Consolidated Statement of Operations of Apple REIT Ten, Inc. and the historical Statements of Operations of the hotel properties.
The following unaudited Pro Forma Condensed Consolidated Statement of Operations of Apple REIT Ten, Inc. is not necessarily indicative of what the actual financial results would have been assuming such transactions had been completed on the latter of January 1, 2010, or the date the hotel began operations nor do they purport to represent the future financial results of Apple REIT Ten, Inc.
The unaudited Pro Forma Condensed Consolidated Statement of Operations should be read in conjunction with, and is qualified in its entirety by the historical Statements of Operations of the acquired hotels.
17
Pro Forma Condensed Consolidated Statement of Operations
(unaudited)
For the year ended December 31, 2010
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Denver, CO |
|
CN Hotel |
|
Pro forma |
|
|
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
|
|
$ |
8,978 |
|
$ |
3,339 |
|
$ |
|
|
|
|
$ |
12,317 |
|
Other revenue |
|
|
|
|
|
2,372 |
|
|
59 |
|
|
|
|
|
|
|
2,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
11,350 |
|
|
3,398 |
|
|
|
|
|
|
|
14,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
3,798 |
|
|
1,097 |
|
|
|
|
|
|
|
4,895 |
|
General and administrative |
|
|
28 |
|
|
1,635 |
|
|
34 |
|
|
200 |
|
(B) |
|
|
1,897 |
|
Management and franchise fees |
|
|
|
|
|
1,003 |
|
|
494 |
|
|
|
|
|
|
|
1,497 |
|
Taxes, insurance and other |
|
|
|
|
|
374 |
|
|
234 |
|
|
|
|
|
|
|
608 |
|
Acquisition related costs |
|
|
|
|
|
|
|
|
|
|
|
1,989 |
|
(H) |
|
|
1,989 |
|
Depreciation of real estate owned |
|
|
|
|
|
1,325 |
|
|
463 |
|
|
(1,788 |
) |
(C) |
|
|
2,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,218 |
|
(D) |
|
|
|
|
Interest, net |
|
|
3 |
|
|
753 |
|
|
324 |
|
|
(1,081 |
) |
(E) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
31 |
|
|
8,888 |
|
|
2,646 |
|
|
1,538 |
|
|
|
|
13,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(31 |
) |
$ |
2,462 |
|
$ |
752 |
|
$ |
(1,538 |
) |
|
|
$ |
1,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
$ |
(3,083.50 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
8,707 |
|
(F) |
|
|
8,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Notes to Pro Forma Condensed Consolidated Statements of Operations (unaudited):
(A) Represents results of operations for the hotels on a pro forma basis as if the hotels were owned by the Company at January 1, 2010 for the respective period prior to acquisition by the Company. The Company was initially formed on August 13, 2010, and had no operations prior to that date. Additionally, two properties began operations subsequent to January 1, 2010, and one property remained under construction as of December 31, 2010. Therefore, these hotels had limited historical operational activity prior to their opening. The properties and their applicable status are as follows: Winston-Salem, NC Hampton Inn & Suites, opened April 2010, Matthews, NC Fairfield Inn & Suites opened November 2010 and Jacksonville, NC Home2 Suites is under construction.
(B) Represents adjustments to level of administrative and other costs associated with being a public company and owning additional properties, including the advisory fee, accounting and legal expenses, net of cost savings derived from owning multiple operating properties.
(C) Represents elimination of historical depreciation and amortization expense of the acquired properties.
(D) Represents the depreciation on the hotels acquired based on the purchase price allocation to depreciable property and the dates the hotels began operation. The weighted average lives of the depreciable assets are 39 years for building and seven years for furniture, fixtures and equipment (FF&E). These estimated useful lives are based on managements knowledge of the properties and the hotel industry in general.
(E) Interest expense related to prior owners debt which was not assumed has been eliminated.
(F) Represents the weighted average number of shares required to be issued to generate the purchase price of each hotel, net of any debt assumed. The calculation assumes all properties were acquired on the latter of January 1, 2010, or the dates the hotels began operations.
(G) Estimated income tax expense of our wholly owned taxable REIT subsidiaries is zero based on the contractual agreement put in place between the Company and our lessees, based on a combined tax rate of 40% of taxable income. Based on the terms of the lease agreements, our taxable subsidiaries would have incurred a loss during these periods. No operating loss benefit has been recorded as realization is not certain.
(H) Represents costs incurred to complete acquisitions, including, title, legal, accounting and other related costs, as well as the commission paid to Apple Suites Realty Group totaling 2% of purchase price per contract. These costs have been adjusted for hotel acquisitions on the latter of January 1, 2010 or the dates the hotels began operations.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
Apple REIT Ten, Inc. |
|
|
|
|
|
By: |
/s/ Glade M. Knight |
|
|
|
|
|
Glade M. Knight, |
|
|
Chief Executive Officer |
|
|
|
|
|
May 17, 2011 |
20