Attached files
| file | filename |
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| 8-K - APPLE REIT SIX INC | c66370_8-k.htm |
Exhibit 99.1
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Chairman’s Mid-Year Update |
July 25, 2011 |
Dear Shareholder:
Apple REIT Six, Inc. remains focused on the protection of shareholder principal and the distribution of attractive returns through the ownership and operation of the Company’s 66 Marriott®- and Hilton®-branded hotels. Representing some of the leading brands in the hotel industry, the Apple REIT Six portfolio of upscale limited-service, extended-stay and full-service hotels, with 7,658 guestrooms and locations in 18 states, was carefully selected based on market and brand as well as past and anticipated future performance. Economic conditions within our markets have fluctuated over the years, with 2009 and 2010 some of the most fiscally challenging times the industry has experienced in recent history, yet our hotels have remained profitable.
Since the beginning of Apple REIT Six, the Company has consistently maintained a balance sheet among the strongest in the hotel industry. The current debt level is less than seven percent of our total initial capitalization, which is well below industry averages. Furthermore, since the time of acquisition, we have prudently invested approximately $70 million in capital improvements and since the time of Apple REIT Six’s first dividend payment, we have paid approximately $492.6 million in shareholder distributions, or approximately $6.24 per share to those who have been shareholders of the Company since the time of the initial closing.
This year, the Company anticipates we will achieve funds from operations of approximately $73 to $83 million, or $0.80 to $0.90 per share, and net income of approximately $40 to $50 million, or $0.44 to $0.54 per share, an increase from last year’s modified funds from operations of $69.2 million or $0.76 per share and net income of $34.4 million or $0.38 per share.1 On July 1, 2011, the Company announced that our Board of Directors had approved an increase in the annualized distribution rate from $0.77 to $0.79 per share. Hotel industry analysts have forecast revenue per available room will be up approximately six to eight percent and average daily rate and occupancy will each be up approximately two to four percent in 2011 as compared to results for 2010.2 With key performance indicators showing steady improvement, I am confident in the long-term success of the Apple REIT Six program.
Since the Company’s beginning in 2004, our team has diligently worked to protect your investment while providing you with attractive distributions. Our long-term goal has always been to maximize shareholder value and over time provide a possibility of liquidity. The Company continues to review our various strategic alternatives, including a possible sale, listing or merger, and we believe conditions within the hotel industry and lending markets make now an advantageous time to pursue such options. A transaction of this magnitude is complex and could take a substantial period of time to accomplish. Details regarding this process will be made public if our Board of Directors approves a specific alternative or has other reason to comment.
We will provide complete financial results in our second quarter report on form 10Q, which we anticipate filing with the Securities and Exchange Commission (www.sec.gov) at the beginning of August. Shareholder summaries will be distributed soon thereafter. As always, thank you for your investment in Apple REIT Six. For additional information, visit www.applereitsix.com.
Sincerely,
Chairman and Chief Executive Officer
Disclosures on reverse
Disclosures
Certain statements
contained in this letter other than historical facts may be considered
forward-looking statements. These forward-looking statements are predictions
and generally can be identified by use of statements that include phrases such
as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “foresee,”
“looking ahead,” “is confident,” “should be,” “will,” “predicted,” “likely” or
other words or phrases of similar import. Such statements involve known and
unknown risks, uncertainties, and other factors which may cause the actual
results, performance, or achievements of Apple Six to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited to, the
ability of Apple Six to implement its operating strategy; Apple Six’s ability
to manage planned growth; changes in economic cycles, and competition within
the hotel industry. Although Apple Six believes that the assumptions underlying
the forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore there can be no assurance that
such statements included in this letter will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by Apple Six or any other person that the results or conditions
described in such statements or the objectives and plans of Apple Six will be
achieved. In addition, Apple Six’s qualification as a real estate investment
trust involves the application of highly technical and complex provisions of
the Internal Revenue Code. Certain factors that could cause actual results to
differ materially from these forward-looking statements are listed from time to
time in Apple Six’s SEC reports, including, but not limited to, in the section
entitled “Item 1A. Risk Factors” in the Annual Report on Form 10-K
filed by Apple Six with the SEC on March 8, 2011. Any forward-looking statement
speaks only as of the date of this letter and we undertake no obligation to
update or revise any forward-looking statements, whether as a result of new
developments or otherwise.
1 Funds from operations (FFO) is defined as net income (computed in accordance with generally accepted accounting principles – GAAP) excluding gains and losses from sales of depreciable property plus depreciation and amortization. Modified funds from operations (MFFO) excludes the loss on hotels held for sale. The Company considers FFO and MFFO in evaluating operating performance and believes FFO and MFFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of the Company’s activities in accordance with GAAP. FFO and MFFO are not necessarily indicative of cash available to fund cash needs. The difference in projected FFO and projected net income is projected depreciation of approximately $33 million for the year ending December 31, 2011. The difference in 2010 MFFO and net income was depreciation of approximately $31 million and loss on hotels held for sale of $3.6 million.
2 According to Smith Travel Research, PKF Hospitality Research and PricewaterhouseCoopers