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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
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): June 8, 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 |
of incorporation) |
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Identification Number) |
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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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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
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o |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o |
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)) |
Apple REIT Ten, Inc. hereby amends Item 9.01 of its Current Report on Form 8-K dated June 8, 2011 and filed (by the required date) on June 13, 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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Hawkeye Hotel Portfolio (3 Hotels) |
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(Cedar Rapids, Iowa Homewood Suites; Cedar Rapids, Iowa Hampton Inn & Suites and Davenport, Iowa Hampton Inn & Suites) |
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(Audited) |
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3 |
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4 |
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Combined Statements of Operations Years Ended December 31, 2010 and 2009 |
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5 |
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6 |
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Combined Statements of Cash Flows Years Ended December 31, 2010 and 2009 |
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7 |
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8 |
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(Unaudited) |
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16 |
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Combined Statements of Operations For the Three Months Ended March 31, 2011 and 2010 |
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17 |
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18 |
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Combined Statements of Cash Flows For the Three Months Ended March 31, 2011 and 2010 |
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19 |
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(b) |
Pro forma financial information. |
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The below pro forma financial information pertains to the hotels 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 March 31, 2011 |
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20 |
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22 |
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23 |
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Notes to Pro Forma Condensed Consolidated Statement of Operations |
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26 |
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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
Members of the Board of Directors
Apple REIT Ten, Inc.
Richmond, Virginia
We have audited the accompanying combined balance sheets of the group of selected entities managed by Hawkeye Hospitality Management, Inc., an Iowa corporation, as defined in Note 1, as of December 31, 2010 and 2009, and the related statements of operations, statements of members equity and accumulated comprehensive loss, and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the group of selected entities managed by Hawkeye Hospitality Management, Inc. at December 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
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/s/ Wade Stables P.C. |
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Wade Stables P.C. |
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Certified Public Accountants |
Hannibal, Missouri
June 17, 2011
3
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GROUP OF SELECTED ENTITIES MANAGED BY HAWKEYE HOSPITALITY MANAGEMENT, INC. |
December 31, 2010 and 2009 |
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2010 |
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2009 |
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ASSETS |
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Current assets |
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Cash and Cash equivalents |
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$ |
2,188,768 |
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$ |
419,433 |
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Tax Escrow |
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17,993 |
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Accounts receivable |
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54,931 |
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42,158 |
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Due from affiliated parties (Note 6) |
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3,841,628 |
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1,769,808 |
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Total current assets |
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$ |
6,103,320 |
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$ |
2,231,399 |
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Property and equipment (Note 3) |
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Property and equipment |
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$ |
26,499,545 |
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$ |
20,660,908 |
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Accumulated depreciation |
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(1,533,135 |
) |
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(820,540 |
) |
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$ |
24,966,410 |
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$ |
19,840,368 |
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Other assets |
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Franchise fees, net of amortization (Note 1) |
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$ |
147,970 |
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$ |
154,356 |
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$ |
147,970 |
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$ |
154,356 |
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$ |
31,217,700 |
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$ |
22,226,123 |
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LIABILITIES AND MEMBERS EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
7,058 |
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$ |
56,067 |
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Due to affiliated parties (Note 7) |
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5,217,083 |
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6,072,911 |
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Accrued payroll and payroll taxes |
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12,939 |
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Accrued property taxes |
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8,184 |
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108,188 |
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Other accrued expenses |
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42,174 |
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53,321 |
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Current portion of long-term debt (Note 8) |
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714,515 |
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926,713 |
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Total current liabilities |
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$ |
6,001,953 |
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$ |
7,217,200 |
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Long-term debt (Note 8) |
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$ |
22,311,334 |
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$ |
12,851,899 |
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Fair value of interest rate swap (Note 9) |
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289,830 |
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73,747 |
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$ |
22,601,164 |
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$ |
12,925,646 |
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Members equity |
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$ |
2,904,413 |
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$ |
2,157,024 |
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Accumulated comprehensive income (Loss) |
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(289,830 |
) |
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(73,747 |
) |
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Total members equity |
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$ |
2,614,583 |
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$ |
2,083,277 |
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$ |
31,217,700 |
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$ |
22,226,123 |
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The accompanying notes to financial statements are an integral part of this statement.
4
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GROUP OF SELECTED ENTITIES MANAGED BY HAWKEYE HOSPITALITY MANAGEMENT, INC. |
Years ended December 31, 2010 and 2009 |
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2010 |
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2009 |
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Revenue |
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Rooms |
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$ |
6,644,418 |
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$ |
5,130,598 |
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Food and beverage |
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Telephone |
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Vending, rent, and other |
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66,382 |
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47,577 |
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Total revenue |
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$ |
6,710,800 |
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$ |
5,178,175 |
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Department expense |
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Rooms |
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$ |
988,020 |
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$ |
845,913 |
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Food and beverage |
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Telephone |
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12,035 |
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13,519 |
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Vending, rent, and other |
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3,980 |
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Total department expense |
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$ |
1,004,035 |
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859,432 |
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Department profit |
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$ |
5,706,765 |
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$ |
4,318,743 |
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Undistributed expenses |
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Administrative and general |
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$ |
386,690 |
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$ |
339,916 |
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Sales and promotion |
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43,701 |
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18,422 |
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Franchise fees (Note 4) |
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529,626 |
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|
408,467 |
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Other outside administration and program fees (Note 4) |
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522,873 |
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|
360,086 |
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Utilities |
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223,896 |
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179,122 |
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Repairs and maintenance |
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151,008 |
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101,512 |
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Total undistributed expenses |
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$ |
1,857,794 |
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$ |
1,407,525 |
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House profit |
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$ |
3,848,971 |
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$ |
2,911,218 |
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Other expenses |
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Property tax |
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$ |
369,104 |
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$ |
216,376 |
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Property insurance |
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|
82,096 |
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|
80,290 |
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Income before management fees and other expense |
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$ |
3,397,771 |
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$ |
2,614,552 |
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Management and accounting fees (Note 5) |
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$ |
420,544 |
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$ |
288,960 |
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Income before other expense |
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$ |
2,977,227 |
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$ |
2,325,592 |
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Other (income) expense |
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Depreciation and amortization |
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$ |
718,980 |
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$ |
512,852 |
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Interest expense (net) |
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|
1,051,435 |
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|
802,880 |
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Organizational and preopening expenses (Note 1) |
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|
18,359 |
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|
11,250 |
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Loan and refinancing expenses (Note 1) |
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|
158,516 |
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|
40,465 |
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Swap agreement fees (Note 9) |
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|
154,565 |
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|
95,563 |
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Other |
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(17,017 |
) |
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(15,299 |
) |
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Total other expense |
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$ |
2,084,838 |
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$ |
1,447,711 |
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Net income |
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$ |
892,389 |
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$ |
877,881 |
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The accompanying notes to financial statements are an integral part of this statement.
5
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GROUP OF SELECTED ENTITIES MANAGED BY HAWKEYE HOSPITALITY MANAGEMENT, INC. |
COMBINED STATEMENTS OF MEMBERS EQUITY AND ACCUMULATED COMPREHENSIVE LOSS |
Years ended December 31, 2010 and 2009 |
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Members |
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Accumulated |
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Total |
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Comprehensive |
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Balances, January 1, 2009 |
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$ |
1,323,545 |
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$ |
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$ |
1,323,545 |
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Contributions from members |
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200,000 |
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200,000 |
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Distributions to members |
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(244,402 |
) |
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(244,402 |
) |
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Comprehensive income: |
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Net income |
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|
877,881 |
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|
877,881 |
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$ |
877,881 |
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Unrealized loss on hedging activities, net |
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(73,747 |
) |
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(73,747 |
) |
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(73,747 |
) |
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Total comprehensive income (loss) |
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$ |
804,134 |
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Balances, December 31, 2009 |
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$ |
2,157,024 |
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$ |
(73,747 |
) |
$ |
2,083,277 |
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Contributions from members/partners |
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Distributions to members |
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(145,000 |
) |
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(145,000 |
) |
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Comprehensive income: |
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Net income |
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|
892,389 |
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|
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|
892,389 |
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$ |
892,389 |
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Unrealized loss on hedging activities, net |
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|
|
(216,083 |
) |
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(216,083 |
) |
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(216,083 |
) |
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|
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Total comprehensive income (loss) |
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$ |
676,306 |
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Balances, December 31, 2010 |
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$ |
2,904,413 |
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$ |
(289,830 |
) |
$ |
2,614,584 |
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The accompanying notes to financial statements are an integral part of this statement.
6
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GROUP OF SELECTED ENTITIES MANAGED BY HAWKEYE HOSPITALITY MANAGEMENT, INC. |
Years ended December 31, 2010 and 2009 |
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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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$ |
892,389 |
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$ |
877,881 |
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Adjustments to reconcile net profit to net cash provided by (used in) operating activities |
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|
|
|
|
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Depreciation |
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|
712,595 |
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|
507,717 |
|
Amortization |
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|
6,385 |
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|
5,135 |
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(Increase)/decrease in assets |
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|
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|
|
|
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Accounts receivable |
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|
(12,773 |
) |
|
(38,494 |
) |
Due from affiliatied companies |
|
|
(16,667 |
) |
|
2,146 |
|
Increase/(decrease) in liabilities |
|
|
|
|
|
|
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Accounts payable |
|
|
(49,009 |
) |
|
(1,105 |
) |
Due to affiliated companies |
|
|
8,249 |
|
|
8,249 |
|
Accrued payroll and payroll taxes |
|
|
12,939 |
|
|
|
|
Accrued property taxes |
|
|
(100,004 |
) |
|
56,087 |
|
Other accrued expenses |
|
|
(11,147 |
) |
|
(91,086 |
) |
|
|
|
|
|
|
|
|
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|
|
Net cash provided by (used in) operating activities |
|
$ |
1,424,964 |
|
$ |
1,326,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Capital expenditures for property and equipment |
|
$ |
(5,838,636 |
) |
$ |
(6,246,087 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activites |
|
$ |
(5,838,636 |
) |
$ |
(6,246,087 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from the issuance of debt |
|
$ |
23,067,000 |
|
$ |
8,433,583 |
|
Principal payments on debt |
|
|
(13,819,763 |
) |
|
(5,195,215 |
) |
Due from affiliated companies |
|
|
(2,055,154 |
) |
|
(746,558 |
) |
Due to affiliated companies |
|
|
(864,076 |
) |
|
2,828,946 |
|
Contributions from members |
|
|
|
|
|
200,000 |
|
Distributions to members |
|
|
(145,000 |
) |
|
(244,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
$ |
6,183,006 |
|
$ |
5,276,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
$ |
1,769,335 |
|
$ |
356,798 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
419,433 |
|
|
62,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
2,188,768 |
|
$ |
419,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
Cash paid during the year for interest, net of capitalized interest |
|
$ |
1,088,749 |
|
$ |
944,972 |
|
|
|
|
|
|
|
|
|
The accompanying notes to financial statements are an integral part of this statement.
7
Group
of Selected Entities Managed by Hawkeye Hospitality Management, Inc.
Notes to Combined Financial Statements
Years ended December 31, 2010 and 2009
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Basis of Combination: The accompanying combined financial statements include the accounts of the following group of selected entities managed by Hawkeye Hospitality, Inc.:
|
|
|
|
|
Sajni, Inc. which owns and operates a Hampton Inn and Suites located in Davenport, IA. The hotel was opened for operations on October 9, 2007. |
|
|
Collins Hospitality, Inc. which owns and operates a Hampton Inn and Suites located in Cedar Rapids, IA. The hotel opened for operations on January 8, 2009. |
|
|
Five Seasons Hospitality, Inc. which owns and operates a Homewood Suites located in Cedar Rapids, IA. The hotel opened for operations on August 13, 2010. |
The above entities are managed by Hawkeye Hospitality Management, Inc., a related party as discussed in Note 5. All material intercompany accounts have been eliminated.
Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents include deposits in financial institutions.
Accounts Receivable: The selected entities account for trade receivables based on the amounts billed to customers. The selected entities periodically review outstanding accounts for potential losses of receivables based on existing economic conditions and historical relationships with customers. Management has determined no allowance on the receivable accounts is necessary as of December 31, 2010 and 2009.
Depreciation: Property and equipment are carried at cost less accumulated depreciation. Depreciation is provided on the property and equipment over their estimated useful lives. The selected entities compute depreciation using a straight-line depreciation method.
Financial Instruments: The carrying values of accounts receivable, accounts payable, and current and long-term debt approximate fair value. The fair value of the derivative instrument is based on the amount the selected entities would pay to terminate the agreement as of December 31, 2010 and 2009.
Revenue Recognition: Revenue is recognized as services are provided.
Franchise Fees: Franchise fees are carried at cost less accumulated amortization and are being amortized on a straight-line basis over 20 years. At December 31, 2010 and 2009, accumulated amortization was $14,729 and $8,344, respectively. Total amortization expense was $6,385 and $5,135 for December 31, 2010 and 2009 respectively.
Refinancing and Loan Costs: Due to the nature of these financial statements and subsequent sale of entities costs incurred to obtain debt financing are expensed in the period incurred.
Preopening and other organizational Expenses: Preopening and other organizational expenses consist of legal and other period expenses incurred prior to the opening of the hotel and are expensed in the period incurred.
Comprehensive Loss: Comprehensive Loss includes both the net loss and other comprehensive income (loss). Other Comprehensive income (loss) represents the change in unrealized gains and losses on hedging activities relating to an interest rate swap.
8
|
Group of Selected Entities Managed by
Hawkeye Hospitality Management, Inc. |
|
|
NOTE 1 NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICES (Continued)
Impairment of Long-Lived Assets: On an ongoing basis, the selected entities review long-lived assets for impairment whenever events or circumstances indicate that the carrying amounts may be overstated. The selected entities recognize impairment losses if the undiscounted cash flows expected to be generated by the asset are less than the carrying value of the related asset. The impairment loss adjusts the assets to fair value. As of December 31, 2010 and 2009, management believes no impairments existed.
NOTE 2 INCOME TAXES
The combined financial statements include three S-corporation entities. Under the Internal Revenue Code S-corporations will be treated as a partnership for tax purposes. A partnership is not subject to income taxes. Each member or partner reports their distributive share of the selected entities profit or loss on their personal income tax return.
NOTE 3 PROPERTY AND EQUIPMENT
Property and Equipment at December 31, 2010 and 2009 consisted of the following:
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Land |
|
$ |
2,436,902 |
|
$ |
2,436,902 |
|
Building and building improvements |
|
|
19,896,749 |
|
|
15,733,461 |
|
Furniture, fixtures, and equipment |
|
|
4,165,894 |
|
|
2,490,545 |
|
|
|
|
|
|
|
|
|
|
|
$ |
26,499,545 |
|
$ |
20,660,908 |
|
Accumulated Depreciation |
|
|
(1,533,135 |
) |
|
(820,540 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
24,966,410 |
|
$ |
19,840,368 |
|
|
|
|
|
|
|
|
|
A total of $808,255 in interest cost was capitalized and added to building costs above over the construction periods involved. Depreciation expense was $712,595 and $507,717 for the years ended December 31, 2010 and 2009, respectively.
NOTE 4 FRANCHISE AGREEMENTS
Franchise fees and royalty fees are computed in accordance with the terms of individual franchise agreements between the selected entities and Promus Hotels, Inc. The agreements are for periods of 20 years from the opening date of the hotels. As of December 31, 2010 and 2009, franchise fees are computed as 4% of the gross room revenues, as defined in the agreement. Royalty fees are computed as 5% of the gross room revenues.
During the years ended December 31, 2010 and 2009, franchise fee and royalty expenses were $529,626 and $408,467, respectively.
In addition to the monthly fees above, the entities are subject to other costs including the Hilton HHonors, computer and marketing support, and travel agent commissions.
During the years ended December 31, 2010 and 2009, these fees were $522,873 and $360,086, respectively.
9
|
Group of Selected Entities Managed by
Hawkeye Hospitality Management, Inc. |
|
|
NOTE 5 RELATED-PARTY TRANSACTIONS
The selected entities have entered into individual management agreements with Hawkeye Hospitality Management, Inc., an entity related through common ownership. No written agreements exist between entities. The agreements provide for base monthly management fees calculated at 4% of gross revenue, as calculated by Hawkeye Hospitality Management, Inc. Base management fees for 2010 and 2009 were $408,540 and $278,960, respectively. In addition base monthly accounting fees of $400 per month are charged by Hawkeye Hospitality Management, Inc. to all selected entities. Accounting fees for 2010 and 2009 were $12,004 and $10,000, respectively.
NOTE 6 DUE FROM AFFILIATED PARTIES
A summary of due from affiliated parties follows. All amounts are considered in the ordinary course of business and have not been eliminated in these combined financial statements.
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Sanji, Inc. (Hampton Inn and Suites - Davenport) |
|
|
|
|
|
|
|
Due from Patel Investments. No written note. No interest paid or accrued. |
|
$ |
2,206,053 |
|
$ |
1,761,559 |
|
|
|
|
|
|
|
|
|
Due from Bapa, Inc. No written note. No interest paid or accrued. |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Due from Kriya, Inc. No written note. No interest paid or accrued. |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Due from Mile High, Inc. No written note. No interest paid or accrued |
|
|
600,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Collins Hospitality, Inc. (Hampton Inn and Suites - Cedar Rapids) |
|
|
|
|
|
|
|
Due from Five Seasons, Inc. for property taxes. No written note. No interest paid or accrued. |
|
|
16,498 |
|
|
8,249 |
|
|
|
|
|
|
|
|
|
Due from Sajni, Inc. No written note. No interest paid or accrued. |
|
|
810,659 |
|
|
|
|
|
|
|
|
|
|
|
|
Due from Arya Hospitality, Inc. No written note. No interest paid or accrued. |
|
|
8,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,841,628 |
|
$ |
1,769,808 |
|
|
|
|
|
|
|
|
|
10
|
Group of Selected Entities Managed by
Hawkeye Hospitality Management, Inc. |
|
|
NOTE 7 DUE TO AFFILIATED PARTIES
A summary of due to affiliated parties follows. All amounts are considered in the ordinary course of business and have not been eliminated in these combined financial statements.
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Sanji, Inc. (Hampton Inn and Suites- Davenport) |
|
|
|
|
|
|
|
Due to Collins Hospitality. No written note. No interest paid or accrued. |
|
$ |
810,659 |
|
$ |
|
|
|
|
|
|
|
|
|
|
Due to Hawkeye Hospitality. No Written note. No interest paid or accrued |
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Five Seasons Hospitality, Inc. (Homewood Suites- Cedar Rapids) |
|
|
|
|
|
|
|
Due to Parul Patel. No written note. Interest paid and expensed in 2010 $21,713, none in 2009. No interest accrued. |
|
|
250,000 |
|
|
250,000 |
|
|
|
|
|
|
|
|
|
Due to Collins Hospitality. No written note. Due for property tax. |
|
|
16,498 |
|
|
8,249 |
|
|
|
|
|
|
|
|
|
Due to Patel Investments. No written note. Interest paid and capitalized to building costs $153,339 in 2009 and $156,126 in 2010. $95,338 in interest paid and expensed in 2010 after facility opened. |
|
|
3,667,941 |
|
|
5,017,412 |
|
|
|
|
|
|
|
|
|
Collins Hospitality, Inc. (Hampton Inn and Suites-Cedar Rapids) |
|
|
|
|
|
|
|
Due to Patel Investments. No written note. $96,535 interest expensed in 2009 and $58,278 in 2010. |
|
|
451,985 |
|
|
397,250 |
|
|
|
|
|
|
|
|
|
Due to Sat West Enterprises, Inc. No written note. $5,359 interest expense in 2009 and $1,677 in 2010. |
|
|
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
Due to Sat West Live Oak. No written note. $3,353 interest expense in 2009 and $839 in 2010. |
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
Due to Val Plaza, LLC. No written note. $3,353 interest expense in 2009 and $839 in 2010. |
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,217,083 |
|
$ |
6,072,911 |
|
|
|
|
|
|
|
|
|
11
|
Group of Selected Entities
Managed by Hawkeye Hospitality Management, Inc. |
|
|
NOTE 8 LONG-TERM DEBT
The Company had the following long-term debt obligations at December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Sanji, Inc. (Hampton Inn and Suites Davenport) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GE Capital Financial, Inc. dated December 31, 2010. Original amount $8,510,000. Due in 60 monthly payments of $59,166 including interest at 5.55%. In addition the note requires a monthly tax escrow impound amount. |
|
$ |
8,510,000 |
|
$ |
|
|
|
|
|
|
|
|
|
|
Bankers Trust Company, N.A. dated April 21, 2009. Original amount $7,000,000. Due in 58 monthly payments of $42,569 including interest at 4.08531%. Note was paid off December 31, 2010 by GE Capital Financial, Inc. |
|
|
|
|
|
6,850,082 |
|
|
|
|
|
|
|
|
|
Five Seasons Hospitality, Inc. (Homewood Suites- Cedar Rapids) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bjorsen Investment Corporation dated February 15, 2007. Original amount $567,200. Due in monthly payments of $4,569 including interest at 7.5%. Due February 15, 2012. Note was paid off by Patel Investments on January 19, 2010. |
|
|
|
|
|
528,530 |
|
|
|
|
|
|
|
|
|
State Central Bank dated December 3, 2010. Original amount $6,200,105. Beginning February 1, 2011 due in monthly payments of $49,236 including interest at 7% over a 19 year term. |
|
|
6,199,448 |
|
|
|
|
|
|
|
|
|
|
|
|
State Central Bank dated December 3, 2010. Original amount $1,146,895. Beginning February 1, 2011 due in monthly payments of $16,699 including interest at 7% over a 7 year term. |
|
|
1,106,400 |
|
|
|
|
|
|
|
|
|
|
|
|
Collins Hospitality, Inc. (Hampton Inn and Suites-Cedar Rapids) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GE Capital Financial, Inc. dated December 31, 2010. Original amount $7,210,100. Due in 60 monthly payments of $50,128 including interest at 5.55%. In addition the note requires a monthly tax escrow impound amount. |
|
|
7,210,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Cedar Rapids Bank and Trust dated April 1, 2008. Original amount $5,225,000. Due in 24 monthly interest only payments beginning May 1, 2008. Beginning April 16, 2010 due in 47 semi-monthly payments of $17,464 including interest at 6.3%. Balloon payment due April 1, 2012. Note was paid off December 31, 2010 by GE Capital Financial, Inc. |
|
|
|
|
|
5,225,000 |
|
12
|
Group of Selected Entities Managed by Hawkeye Hospitality Management, Inc. |
Notes to Combined Financial Statements |
|
|
|
NOTE 8 LONG-TERM DEBT (Continued) |
|
|
|
|
|
|
|
|
Cedar Rapids Bank and Trust dated April 1, 2008. Original amount $1,175,000. Due in 24 monthly interest only payments beginning May 1,2008. Beginning April 16,2010 due in 47 semi-monthly payments of $8,693 including interest at 6.3%. Balloon payment due April 1, 2012. Note was paid off December 31, 2010 by GE Capital Financial, Inc. |
|
|
|
|
|
1,175,000 |
|
|
|
|
|
|
|
|
|
|
|
$ |
23,025,849 |
|
$ |
13,778,612 |
|
|
|
|
|
|
|
|
|
Current Portion |
|
|
(714,515 |
) |
|
(926,713 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,311,334 |
|
$ |
12,851,899 |
|
|
|
|
|
|
|
|
|
Long-term debt maturities for the years subsequent to December 31, 2010 are as follows:
|
|
|
|
|
2011 |
|
$ |
714,515 |
|
2012 |
|
|
784,108 |
|
2013 |
|
|
833,480 |
|
2014 |
|
|
886,006 |
|
2015 |
|
|
14,138,336 |
|
Thereafter |
|
|
5,669,405 |
|
|
|
|
|
|
|
|
$ |
23,025,849 |
|
|
|
|
|
|
During 2010 and 2009, the Company capitalized interest of $329,214 and $193,578, respectively, related to the construction of the selected hotels.
NOTE 9 FINANCIAL DERIVATIVES
As a result of financing activities, the Company is exposed to change in interest rates which may adversely affect its results of operations and financial condition. In seeking to minimize the risks and/or costs associated with such activities, the Company manages exposure to changes in interest rates through its regular operating and financing activities and, when deemed appropriate, through the use of swap agreements. On April 21, 2009, the Company entered into an interest rate swap agreement which expires on April 21, 2014. Under the agreement, the rate of interest on $6,300,000 of variable rate debt was converted to a fixed interest rate. This interest rate swap was entered into by Sanji, Inc. on its note with Bankers Trust Company, N.A.
The Company accounts for this instrument as a cash flow hedge and considers the hedge to be highly effective. Any ineffective amounts are considered not to be significant. As a result, the Company records the derivative instrument as an asset or liability at its fair value, with any unrealized gains or losses recognized as other comprehensive income (loss) in the statements of members equity. In 2010 and 2009, the Company recognized an unrealized loss of $216,083 and an unrealized loss of $73,747, respectively, relating to the swap agreement. The net settlements on the interest rate swap ($154,565 in 2010 and $95,563 in 2009) are included in the combined statements of operations. The Company expects to hold this swap through its term, and the fair value of the swap will reverse out of other comprehensive income with the passage of time.
13
|
Group of Selected Entities Managed by Hawkeye Hospitality Management, Inc. |
Notes to Combined Financial Statements |
Years ended December 31, 2010 and 2009 |
|
|
NOTE 9 FINANCIAL DERIVATIVES (Continued)
Below is a summary of the interest rate swap classification on the balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Interest Rate Swap |
|
||||
|
Balance Sheet Location |
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
|
||
Interest rate swap |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
|
|
$ |
|
|
|
Long-term liabilities |
|
|
289,830 |
|
|
73,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
289,830 |
|
$ |
73,747 |
|
|
|
|
|
|
|
|
|
|
Although the Note entered into with Bankers Trust Company, N.A., was paid off December 31, 2010, the swap agreement will continue with agreed upon future financing.
The ability of the Company to realize the benefit of this arrangement is dependent upon the creditworthiness of the counterparty, which the Company expects will perform in accordance with the terms if the swap.
NOTE 10 FAIR VALUE
The Company accounts for items requiring fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs within the fair value hierarchy are defined as follows:
|
|
|
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date. |
|
|
|
Level 2: Significant other observable inputs other that Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|
|
|
Level 3: Significant unobservable inputs that reflect the Companys own assumptions about the assumptions that market participants would use in pricing an asset or liability |
The interest rate swap does not have observable market quotes. For this financial instrument, the related Companys swap counterparty provides a periodic valuation using the difference between the fixed rate paid by the related Company and the counterpartys interest rate forecast discounted at the swap yield curve. The model is based on observable inputs for forward interest rates and discount rates. As such, this derivative instrument is classified within Level 2 of the fair value hierarchy.
NOTE 11 OTHER COMPREHENSIVE INCOME (LOSS)
The activity relating to hedging transactions included in other comprehensive income (loss) in 2010 and 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Unrealized gain (loss) on hedging activities with interest rate swap |
|
$ |
(216,083 |
) |
$ |
(73,747 |
) |
|
|
|
|
|
|
|
|
14
|
Group of Selected Entities Managed by Hawkeye Hospitality Management, Inc. |
Notes to Combined Financial Statements |
|
|
NOTE 12 CASH CONCENTRATION
At December 31, 2010, the Company had deposits in various financial institutions. At December 31, 2010 no accounts at any one institution exceeded $250,000. Due to the Companys participation in the Transaction Account Guarantee Program, presently deposits are unlimitedly secured by the FDIC.
Included in cash at December 31, 2010 the company had $2,544,304 in an uninsured sweep account backed by various securities.
NOTE 13 SUBSEQUENT EVENTS
On April 4, 2011, The Group of Selected Entities Managed by Hawkeye Hospitality Management, Inc. entered into agreements with Apple Ten Hospitality Ownership, Inc. for a sale of the three hotels. As of June 17, 2011 two of the three properties have closed. A total of $39,000,000 will be paid for the three hotels including all of the associated furniture and equipment of each property. As part of the sale agreement, a total of $600,000 will be put into escrow for a period of nine months for any potential asserted claims. As part of the transaction, all of the related debt and the interest rate swap will be paid off or renegotiated. In addition, the existing management agreements were terminated and new management agreements were entered into between Apple Ten Hospitality Ownership, Inc. and new management.
As part of the sale contract, the existing franchise agreements discussed in note 4 were terminated and new agreements were obtained by Apple Ten Hospitality Ownership, Inc.
The Company has evaluated subsequent events through June 17, 2011, the date the financial statements were available to be issued.
15
|
GROUP OF SELECTED ENTITIES MANAGED BY HAWKEYE HOSPITALITY MANAGEMENT, INC. |
March 31, 2011 and 2010 |
|
|
|
|
|
|
|
|
|
|
2011 |
|
2010 |
|
||
|
|
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and Cash equivalents |
|
$ |
1,546,581 |
|
$ |
372,494 |
|
Tax Escrow |
|
|
77,958 |
|
|
|
|
Accounts receivable |
|
|
120,310 |
|
|
77,712 |
|
Due from affiliated parties |
|
|
4,965,086 |
|
|
2,578,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
$ |
6,709,935 |
|
$ |
3,028,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
|
|
|
|
|
Property and equipment |
|
$ |
26,504,325 |
|
$ |
21,629,052 |
|
Accumulated depreciation |
|
|
(1,781,634 |
) |
|
(948,690 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,722,691 |
|
$ |
20,680,362 |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
Franchise fees, net of amortization |
|
$ |
145,970 |
|
$ |
153,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
145,970 |
|
$ |
153,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
31,578,596 |
|
$ |
23,861,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS EQUITY |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
11,626 |
|
$ |
61,241 |
|
Due to affiliated parties |
|
|
5,589,718 |
|
|
5,116,221 |
|
Accrued payroll and payroll taxes |
|
|
36,388 |
|
|
601 |
|
Accrued property taxes |
|
|
8,184 |
|
|
91,000 |
|
Swap termination fee payable |
|
|
21,683 |
|
|
|
|
Other accrued expenses |
|
|
117,049 |
|
|
64,174 |
|
Current portion of long-term debt |
|
|
724,515 |
|
|
491,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
$ |
6,509,163 |
|
$ |
5,824,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
22,180,758 |
|
$ |
15,634,897 |
|
Fair value of interest rate swap |
|
|
|
|
|
73,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,180,758 |
|
$ |
15,708,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members equity |
|
$ |
2,888,675 |
|
$ |
2,402,681 |
|
Accumulated comprehensive income |
|
|
|
|
|
(73,747 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members equity |
|
$ |
2,888,675 |
|
$ |
2,328,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
31,578,596 |
|
$ |
23,861,825 |
|
|
|
|
|
|
|
|
|
16
|
GROUP OF SELECTED ENTITIES MANAGED BY HAWKEYE HOSPITALITY MANAGEMENT, INC. |
COMBINED STATEMENTS OF OPERATIONS (UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
2011 |
|
2010 |
|
||
|
|
|
|
|
|
||
Revenue |
|
|
|
|
|
|
|
Rooms |
|
$ |
1,699,657 |
|
$ |
1,288,776 |
|
Telephone |
|
|
181 |
|
|
|
|
Vending, rent, and other |
|
|
16,776 |
|
|
13,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
1,716,614 |
|
$ |
1,302,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Department expense |
|
|
|
|
|
|
|
Rooms |
|
$ |
278,807 |
|
$ |
163,514 |
|
Telephone |
|
|
2,500 |
|
|
2,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total department expense |
|
$ |
281,307 |
|
|
166,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Department profit |
|
$ |
1,435,307 |
|
$ |
1,136,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed expenses |
|
|
|
|
|
|
|
Administrative and general |
|
$ |
124,076 |
|
$ |
56,295 |
|
Sales and promotion |
|
|
10,985 |
|
|
3,043 |
|
Franchise fees |
|
|
141,537 |
|
|
102,662 |
|
Other outside administration and program fees |
|
|
124,075 |
|
|
90,205 |
|
Utilities |
|
|
88,542 |
|
|
43,114 |
|
Repairs and maintenance |
|
|
42,335 |
|
|
22,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undistributed expenses |
|
$ |
531,550 |
|
$ |
317,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
House profit |
|
$ |
903,757 |
|
$ |
818,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
Property tax |
|
$ |
184,552 |
|
$ |
91,000 |
|
Property insurance |
|
|
|
|
|
5,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before management fees and other expense |
|
$ |
719,205 |
|
$ |
722,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management and accounting fees |
|
$ |
87,273 |
|
$ |
99,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before other expense |
|
$ |
631,932 |
|
$ |
622,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense |
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
250,500 |
|
$ |
129,375 |
|
Interest expense (net) |
|
|
343,237 |
|
|
205,344 |
|
Organizational and preopening expenses |
|
|
|
|
|
5,025 |
|
Swap agreement fees |
|
|
37,533 |
|
|
39,101 |
|
Swap termination fees |
|
|
21,683 |
|
|
|
|
Other |
|
|
(5,283 |
) |
|
(2,060 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
$ |
647,670 |
|
$ |
376,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (Loss) |
|
$ |
(15,738 |
) |
$ |
245,657 |
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members |
|
Accumulated |
|
Total |
|
Comprehensive |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2010 |
|
$ |
2,157,024 |
|
$ |
(73,747 |
) |
$ |
2,083,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions from members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
245,657 |
|
|
|
|
|
245,657 |
|
$ |
245,657 |
|
Unrealized loss on hedging activities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
$ |
245,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2010 |
|
$ |
2,402,681 |
|
$ |
(73,747 |
) |
$ |
2,328,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2011 |
|
$ |
2,904,413 |
|
$ |
(289,830 |
) |
$ |
2,614,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions from members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (Loss) |
|
|
(15,738 |
) |
|
|
|
|
(15,738 |
) |
$ |
(15,738 |
) |
Unrealized gain on hedging activities, net |
|
|
|
|
|
289,830 |
|
|
289,830 |
|
|
289,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
$ |
274,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2011 |
|
$ |
2,888,675 |
|
$ |
|
|
$ |
2,888,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
GROUP OF SELECTED ENTITIES MANAGED BY HAWKEYE HOSPITALITY MANAGEMENT, INC. |
For the three months ended March 31, 2011 and 2010 |
|
|
|
|
|
|
|
|
|
|
2011 |
|
2010 |
|
||
|
|
|
|
|
|
||
Cash flows from operating activities |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(15,738 |
) |
$ |
245,657 |
|
Adjustments to reconcile net profit to net cash provided by (used in) operating activities |
|
|
|
|
|
|
|
Depreciation |
|
|
248,500 |
|
|
128,150 |
|
Amortization |
|
|
2,000 |
|
|
1,225 |
|
(Increase)/decrease in assets |
|
|
|
|
|
|
|
Escrow - tax and insurance |
|
|
(59,965 |
) |
|
|
|
Accounts receivable |
|
|
(65,379 |
) |
|
(35,554 |
) |
Due from affiliatied companies |
|
|
|
|
|
(8,249 |
) |
Increase/(decrease) in liabilities |
|
|
|
|
|
|
|
Accounts payable |
|
|
4,568 |
|
|
5,174 |
|
Due to affiliated companies |
|
|
|
|
|
8,249 |
|
Accrued payroll and payroll taxes |
|
|
23,449 |
|
|
601 |
|
Accrued property taxes |
|
|
|
|
|
(17,188 |
) |
Swap termination fees |
|
|
21,683 |
|
|
|
|
Other accrued expenses |
|
|
74,875 |
|
|
10,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
233,993 |
|
$ |
338,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Capital expenditures for property and equipment |
|
$ |
(4,781 |
) |
$ |
(968,144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activites |
|
$ |
(4,781 |
) |
$ |
(968,144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from the issuance of debt |
|
$ |
|
|
$ |
2,930,397 |
|
Principal payments on debt |
|
|
(120,576 |
) |
|
(583,102 |
) |
Due from affiliated companies |
|
|
(1,123,457 |
) |
|
(800,070 |
) |
Due to affiliated companies |
|
|
372,634 |
|
|
(964,939 |
) |
Contributions from members |
|
|
|
|
|
|
|
Distributions to members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
$ |
(871,399 |
) |
$ |
582,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
$ |
(642,187 |
) |
$ |
(46,939 |
) |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
2,188,768 |
|
|
419,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
1,546,581 |
|
$ |
372,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
Cash paid during the year for interest, net of capitalized interest |
|
$ |
271,115 |
|
$ |
196,901 |
|
|
|
|
|
|
|
|
|
19
Apple REIT Ten, Inc.
Pro Forma Condensed Consolidated Balance Sheet as
of March 31, 2011 (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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CN Hotel Portfolio (1 Hotel): |
|
|
|
|
|
|
|
|
Home2 Suites |
|
Jacksonville, NC |
|
$ |
12.0 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
McKibbon Hotel Portfolio (8 Hotels): |
|
|
|
|
|
|
|
|
SpringHill Suites |
|
Knoxville, TN |
|
|
14.5 |
|
June 2, 2011 |
|
Hilton Garden Inn |
|
Gainesville, FL |
|
|
12.5 |
|
June 2, 2011 |
|
SpringHill Suites |
|
Richmond, VA |
|
|
11.0 |
|
June 2, 2011 |
|
TownePlace Suites |
|
Pensacola, FL |
|
|
11.5 |
|
June 2, 2011 |
|
Hampton Inn & Suites |
|
Mobile, AL |
|
|
13.0 |
|
June 2, 2011 |
|
Homewood Suites |
|
Knoxville, TN |
|
|
15.0 |
|
July 19, 2011 |
|
TownePlace Suites |
|
Knoxville, TN |
|
|
9.0 |
|
Pending |
|
Homewood Suites |
|
Gainesville, FL |
|
|
14.6 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Hawkeye Hotel Portfolio (3 Hotels): |
|
|
|
|
|
|
|
|
Homewood Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
|
Hampton Inn & Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
|
Hampton Inn & Suites |
|
Davenport, IA |
|
|
13.0 |
|
July 19, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
152.1 |
|
|
|
|
|
|
|
|
|
|
|
|
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 MHH Management, LLC and Schulte 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 March 31, 2011 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.
20
Balance Sheet as of March 31, 2011
(unaudited)
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Pro forma |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties, net |
|
$ |
89,983 |
|
$ |
151,314 |
|
(A) |
$ |
241,297 |
|
Cash and cash equivalents |
|
|
120,708 |
|
|
(119,958 |
) |
(D) |
|
750 |
|
Other assets |
|
|
1,161 |
|
|
2,999 |
|
(C) |
|
4,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
211,852 |
|
$ |
34,355 |
|
|
$ |
246,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Note payable |
|
$ |
|
|
|
32,049 |
|
(C) |
$ |
32,049 |
|
Accounts payable and accrued expenses |
|
|
438 |
|
|
800 |
|
(C) |
|
1,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
438 |
|
|
32,849 |
|
|
|
33,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
215,642 |
|
|
4,930 |
|
(E) |
|
220,572 |
|
Accumulated deficit |
|
|
(2,421 |
) |
|
(3,424 |
) |
(B) |
|
(5,845 |
) |
Cumulative distributions paid |
|
|
(1,855 |
) |
|
|
|
|
|
(1,855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity |
|
|
211,414 |
|
|
1,506 |
|
|
|
212,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
211,852 |
|
$ |
34,355 |
|
|
$ |
246,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Jacksonville, NC |
|
Cedar |
|
Cedar |
|
Davenport, IA |
|
Knoxville, TN |
|
Gainesville, FL |
|
Richmond, VA |
|
Pensacola, FL |
|
Mobile, AL |
|
Knoxville, TN |
|
Knoxville, TN |
|
Gainesville, FL |
|
Total |
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Purchase price per contract |
|
$ |
12,000 |
|
$ |
13,000 |
|
$ |
13,000 |
|
$ |
13,000 |
|
$ |
14,500 |
|
$ |
12,500 |
|
$ |
11,000 |
|
$ |
11,500 |
|
$ |
13,000 |
|
$ |
9,000 |
|
$ |
15,000 |
|
$ |
14,550 |
|
$ |
152,050 |
|
|
Other capitalized costs (credits) incurred |
|
|
50 |
|
|
65 |
|
|
71 |
|
|
71 |
|
|
122 |
|
|
80 |
|
|
50 |
|
|
50 |
|
|
(1,475 |
) |
|
50 |
|
|
65 |
|
|
65 |
|
|
(736 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties |
|
|
12,050 |
|
|
13,065 |
|
|
13,071 |
|
|
13,071 |
|
|
14,622 |
|
|
12,580 |
|
|
11,050 |
|
|
11,550 |
|
|
11,525 |
|
|
9,050 |
|
|
15,065 |
|
|
14,615 |
|
|
151,314 |
|
(A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition fee payable to Apple Suites Realty Group (2% of purchase price per contract) |
|
|
240 |
|
|
260 |
|
|
260 |
|
|
260 |
|
|
290 |
|
|
250 |
|
|
220 |
|
|
230 |
|
|
260 |
|
|
180 |
|
|
300 |
|
|
291 |
|
|
3,041 |
|
(B) |
Other acquisition related costs |
|
|
30 |
|
|
33 |
|
|
33 |
|
|
33 |
|
|
36 |
|
|
31 |
|
|
28 |
|
|
29 |
|
|
33 |
|
|
23 |
|
|
38 |
|
|
36 |
|
|
383 |
|
(B) |
Net other assets/(liabilities) assumed |
|
|
(24 |
) |
|
(15 |
) |
|
(153 |
) |
|
(205 |
) |
|
(51 |
) |
|
(48 |
) |
|
(34 |
) |
|
(30 |
) |
|
1,467 |
|
|
(7,217 |
) |
|
(11,036 |
) |
|
(12,504 |
) |
|
(29,850 |
) |
(C) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price |
|
$ |
12,296 |
|
$ |
13,343 |
|
$ |
13,211 |
|
$ |
13,159 |
|
$ |
14,897 |
|
$ |
12,813 |
|
$ |
11,264 |
|
$ |
11,779 |
|
$ |
13,285 |
|
$ |
2,036 |
|
$ |
4,367 |
|
$ |
2,438 |
|
$ |
124,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Cash on hand at March 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(120,708 |
) |
|
Plus: Working capital requirements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(119,958 |
) |
(D) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity proceeds needed for acquisitions and working capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,930 |
|
(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, mortgage payable, debt service escrows, operational charges and credits and accrued property taxes. |
|
|
(D) |
Represents the reduction of cash and cash equivalents by the amount utilized to fund the acquisitions. |
|
|
(E) |
Represents the issuance of additional shares required to fund acquisitions. |
22
Apple REIT Ten, Inc.
Pro Forma Condensed Consolidated Statements of
Operations (unaudited)
For the year ended December 31, 2010 and three months ended March 31, 2011
(in thousands, except per share data)
The following unaudited Pro Forma Condensed Consolidated Statements 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 |
|
|
|
|
|
|
|
|
McKibbon Hotel Portfolio (8 Hotels): |
|
|
|
|
|
|
|
SpringHill Suites |
|
Knoxville, TN |
|
|
14.5 |
|
June 2, 2011 |
Hilton Garden Inn |
|
Gainesville, FL |
|
|
12.5 |
|
June 2, 2011 |
SpringHill Suites |
|
Richmond, VA |
|
|
11.0 |
|
June 2, 2011 |
TownePlace Suites |
|
Pensacola, FL |
|
|
11.5 |
|
June 2, 2011 |
Hampton Inn & Suites |
|
Mobile, AL |
|
|
13.0 |
|
June 2, 2011 |
Homewood Suites |
|
Knoxville, TN |
|
|
15.0 |
|
July 19, 2011 |
TownePlace Suites |
|
Knoxville, TN |
|
|
9.0 |
|
Pending |
Homewood Suites |
|
Gainesville, FL |
|
|
14.6 |
|
Pending |
|
|
|
|
|
|
|
|
Hawkeye Hotel Portfolio (3 Hotels): |
|
|
|
|
|
|
|
Homewood Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
Hampton Inn & Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
Hampton Inn & Suites |
|
Davenport, IA |
|
|
13.0 |
|
July 19, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
242.1 |
|
|
|
|
|
|
|
|
|
|
These Pro Forma Condensed Consolidated Statements of Operations also assume 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, Newport Hospitality Group, Inc. and Schulte Hospitality Group, Inc. under separate management agreements.
Such pro forma information is based in part upon the historical Consolidated Statements of Operations of Apple REIT Ten, Inc. and the historical Statements of Operations of the hotel properties.
The following unaudited Pro Forma Condensed Consolidated Statements of Operations of Apple REIT Ten, Inc. are 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 Statements of Operations should be read in conjunction with, and is qualified in its entirety by the historical Statements of Operations of the acquired hotels.
23
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 |
|
McKibbon Hotel |
|
Hawkeye Hotel |
|
Pro forma |
|
Total |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
|
|
$ |
8,978 |
|
$ |
3,339 |
|
$ |
21,903 |
|
$ |
6,644 |
|
$ |
|
|
$ |
40,864 |
|
Other revenue |
|
|
|
|
|
2,372 |
|
|
59 |
|
|
510 |
|
|
67 |
|
|
|
|
|
3,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
11,350 |
|
|
3,398 |
|
|
22,413 |
|
|
6,711 |
|
|
|
|
|
43,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
3,798 |
|
|
1,097 |
|
|
7,925 |
|
|
1,946 |
|
|
|
|
|
14,766 |
|
General and administrative |
|
|
28 |
|
|
1,635 |
|
|
34 |
|
|
2,369 |
|
|
387 |
|
|
750 |
(B) |
|
5,203 |
|
Management and franchise fees |
|
|
|
|
|
1,003 |
|
|
494 |
|
|
1,935 |
|
|
950 |
|
|
|
|
|
4,382 |
|
Taxes, insurance and other |
|
|
|
|
|
374 |
|
|
234 |
|
|
1,336 |
|
|
451 |
|
|
|
|
|
2,395 |
|
Acquisition related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,140 |
(H) |
|
5,140 |
|
Depreciation of real estate owned |
|
|
|
|
|
1,325 |
|
|
463 |
|
|
4,083 |
|
|
720 |
|
|
(6,591 |
) (C) |
|
6,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,024 |
(D) |
|
|
|
Interest, net |
|
|
3 |
|
|
753 |
|
|
324 |
|
|
3,227 |
|
|
1,365 |
|
|
(3,747 |
) (E) |
|
1,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
31 |
|
|
8,888 |
|
|
2,646 |
|
|
20,875 |
|
|
5,819 |
|
|
1,576 |
|
|
39,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(31 |
) |
$ |
2,462 |
|
$ |
752 |
|
$ |
1,538 |
|
$ |
892 |
|
$ |
(1,576 |
) |
$ |
4,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
$ |
(3,083.50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,582 |
(F) |
|
19,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Pro Forma Condensed Consolidated Statement of Operations
(unaudited)
For the three months ended March 31, 2011
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Denver, CO |
|
CN Hotel |
|
McKibbon Hotel |
|
Hawkeye Hotel |
|
Pro forma |
|
Total |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
749 |
|
$ |
1,273 |
|
$ |
1,061 |
|
$ |
5,203 |
|
$ |
1,700 |
|
$ |
|
|
$ |
9,986 |
|
Other revenue |
|
|
144 |
|
|
381 |
|
|
19 |
|
|
123 |
|
|
17 |
|
|
|
|
|
684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
893 |
|
|
1,654 |
|
|
1,080 |
|
|
5,326 |
|
|
1,717 |
|
|
|
|
|
10,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
419 |
|
|
736 |
|
|
334 |
|
|
1,976 |
|
|
547 |
|
|
|
|
|
4,012 |
|
General and administrative |
|
|
597 |
|
|
142 |
|
|
68 |
|
|
667 |
|
|
124 |
|
|
100 |
(B) |
|
1,698 |
|
Management and franchise fees |
|
|
65 |
|
|
224 |
|
|
96 |
|
|
461 |
|
|
229 |
|
|
|
|
|
1,075 |
|
Taxes, insurance and other |
|
|
64 |
|
|
66 |
|
|
84 |
|
|
342 |
|
|
185 |
|
|
|
|
|
741 |
|
Acquisition related costs |
|
|
2,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,988 |
) (H) |
|
32 |
|
Depreciation of real estate owned |
|
|
214 |
|
|
225 |
|
|
135 |
|
|
926 |
|
|
246 |
|
|
(1,532 |
) (C) |
|
1,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,443 |
(D) |
|
|
|
Interest, net |
|
|
(96 |
) |
|
128 |
|
|
137 |
|
|
781 |
|
|
402 |
|
|
(878 |
) (E) |
|
474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
3,283 |
|
|
1,521 |
|
|
854 |
|
|
5,153 |
|
|
1,733 |
|
|
(2,855 |
) |
|
9,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(2,390 |
) |
$ |
133 |
|
$ |
226 |
|
$ |
173 |
|
$ |
(16 |
) |
$ |
2,855 |
|
$ |
981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
$ |
(0.23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
10,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,369 |
(F) |
|
21,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
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, three properties began operations subsequent to January 1, 2010, and one property remained under construction as of March 31, 2011. 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, Cedar Rapids, IA Homewood Suites, opened August 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.
26
|
|
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 |
|
|
|
|
|
July 20, 2011 |
27