Attached files
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| 8-K - Apple REIT Eight, Inc. | c71727_8k.htm |
Exhibit 99.1
DEAR SHAREHOLDER, Beginning in 2011 and continuing through the first nine months of this year, performance of the Apple REIT Eight, Inc. portfolio of hotels has improved from the challenging economic conditions that negatively affected the hotel industry in 2009 and 2010. Based on Company and industry trends, we anticipate a low single-digit percentage increase in funds from operations for the fourth quarter of 2012 as compared to the same period of 2011. Although multiple factors within the hotel industry and the general economy will contribute to the pace at which our hotels continue to improve, I am optimistic that the future of Apple REIT Eight is positive.
The 51 Marriott® - and Hilton® - branded hotels of the Apple REIT Eight portfolio are diversified across 19 states and continue to be leaders within their respective markets. For the three-month periods ending September 30, 2012 and 2011, our hotels achieved an average occupancy rate of 78 percent for each period, an average daily rate (ADR) of $121 and $118, and revenue per available room (RevPAR) of $94 and $92, respectively. For the nine-month periods ending September 30, 2012 and 2011, our hotels achieved an average occupancy rate of 75 percent and 74 percent, ADR of $116 and $113, and RevPAR of $87 and $84, respectively. Driven by steady increases in ADR, RevPAR at our hotels increased by approximately two percent and nearly four percent this year as compared to the same three- and nine-month periods of 2011, respectively.
Funds from operations (FFO) for the third quarter of this year totaled $14.6 million, or $0.16 per share, and for the nine-month period ending September 30, 2012, FFO was $35.2 million, or $0.38 per share. These results were down slightly as compared to FFO for the same periods of 2011, which totaled $16.1 million, or $0.17 per share, and $36.8 million, or $0.39 per share, respectively (2011 included a gain of $1.1 million related to debt restructuring). Over the first nine months of the year, the Company paid distributions of approximately $0.41 per share.
Since the time of the Company’s first distribution payment through October 31, 2012, we have paid approximately $3.98 per share, or $343 million, in shareholder distributions. Additionally the Company has maintained a conservative balance sheet, with a debt level of approximately 26 percent as compared to our total initial capitalization. Our annualized distribution rate of $0.55 per share is closely monitored, taking into account varying economic cycles and capital improvements, as well as current and projected hotel performance, and adjustments may be made as needed, based on available cash resources.
Our team at Apple REIT Eight remains committed to maximizing shareholder value through our conservative approach to the ownership of high-quality, well-branded hotels. If hotel industry fundamentals continue to strengthen as analysts have forecasted, I am confident the Company is positioned to take advantage of improving conditions. I look forward to sharing our continued progress with you in upcoming shareholder communications.
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Sincerely, |
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Glade M. Knight |
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Chairman and Chief Executive Officer |
Statements of Operations (Unaudited)
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(In thousands except statistical data) |
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Three months ended |
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Three months ended |
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Nine months ended |
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Nine months ended |
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REVENUES |
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Room revenue |
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$ |
51,894 |
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$ |
50,138 |
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$ |
142,118 |
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$ |
136,023 |
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Other revenue |
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3,736 |
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3,792 |
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10,360 |
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10,107 |
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Total revenue |
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$ |
55,630 |
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$ |
53,930 |
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$ |
152,478 |
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$ |
146,130 |
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EXPENSES |
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Direct operating expense |
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$ |
14,184 |
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$ |
13,569 |
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$ |
40,039 |
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$ |
37,668 |
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Other hotel operating expenses |
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21,432 |
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21,224 |
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61,269 |
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60,053 |
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General and administrative |
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1,548 |
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1,335 |
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5,050 |
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3,874 |
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Depreciation |
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9,287 |
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8,961 |
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27,613 |
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26,990 |
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Net gain from mortgage debt restructuring |
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- |
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(1,093) |
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- |
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(1,093) |
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Interest expense, net |
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3,844 |
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2,797 |
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10,884 |
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8,836 |
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Total expenses |
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$ |
50,295 |
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$ |
46,793 |
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$ |
144,855 |
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$ |
136,328 |
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NET INCOME |
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Net income |
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$ |
5,335 |
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$ |
7,137 |
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$ |
7,623 |
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$ |
9,802 |
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Net income per share |
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$ |
0.06 |
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$ |
0.08 |
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$ |
0.08 |
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$ |
0.10 |
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FUNDS FROM OPERATIONS (A) |
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Net income |
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$ |
5,335 |
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$ |
7,137 |
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$ |
7,623 |
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$ |
9,802 |
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Depreciation of real estate owned |
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9,287 |
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8,961 |
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27,613 |
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26,990 |
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Funds from operations (FFO) |
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$ |
14,622 |
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$ |
16,098 |
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$ |
35,236 |
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$ |
36,792 |
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FFO per share |
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$ |
0.16 |
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$ |
0.17 |
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$ |
0.38 |
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$ |
0.39 |
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WEIGHTED-AVERAGE SHARES OUTSTANDING |
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92,968 |
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93,930 |
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93,123 |
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94,162 |
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OPERATING STATISTICS |
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Occupancy |
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78% |
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78% |
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75% |
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74% |
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Average daily rate |
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$ |
121 |
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$ |
118 |
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$ |
116 |
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$ |
113 |
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RevPAR |
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$ |
94 |
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$ |
92 |
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$ |
87 |
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$ |
84 |
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Number of hotels |
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51 |
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51 |
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Distributions per share |
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$ |
0.14 |
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$ |
0.14 |
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$ |
0.41 |
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$ |
0.52 |
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Balance Sheet Highlights (Unaudited) |
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(In thousands) |
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September 30, 2012 |
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December 31, 2011 |
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ASSETS |
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Investment in real estate, net |
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$ |
897,071 |
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$ |
914,594 |
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Other assets |
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28,270 |
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21,115 |
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Total assets |
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$ |
925,341 |
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$ |
935,709 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Notes payable |
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$ |
257,219 |
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$ |
236,257 |
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Other liabilities |
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32,321 |
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27,464 |
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Total liabilities |
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289,540 |
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263,721 |
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Total shareholders’ equity |
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635,801 |
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671,988 |
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Total liabilities & shareholders’ equity |
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$ |
925,341 |
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$ |
935,709 |
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(A) Funds from operations (FFO) is defined as net income (loss) (computed in accordance with generally accepted accounting principles – GAAP) excluding gains and losses from sales of depreciable property, plus depreciation and amortization. The company considers FFO in evaluating property acquisitions and its operating performance and believes that FFO 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 is not necessarily indicative of cash available to fund cash needs.
The financial information furnished reflects all adjustments necessary for a fair presentation of financial position at September 30, 2012 and the results of operations for the interim period ended September 30, 2012. Such interim results are not necessarily indicative of the results that can be expected for the full year. The accompanying financial statements should be read in conjunction with the audited financial statements and related notes appearing in the Apple REIT Eight, Inc. 2011 Annual Report.
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Cover images from left to right, top to bottom: SPRINGHILL SUITES, GREENSBORO, NC; HOMEWOOD SUITES, SAN JOSE, CA; COURTYARD, CHARLOTTESVILLE, VA; RENAISSANCE NEW YORK HOTEL 57, NEW YORK CITY, NY; COURTYARD, CAROLINA BEACH, NC; HAMPTON INN, CONCORD, NC |
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This quarterly report contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include: the availability and terms of financing; changes in national, regional and local economies and business conditions; competitors within the hotel industry; the outcome of current and future litigation and regulatory proceedings or inquiries; and the ability of the company to implement its operating strategy and to manage planned growth. |
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In addition, the timing and amounts of distributions to common shareholders are within the discretion of the company’s board of directors. Although the company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate; therefore, there can be no assurance that such statements included in this quarterly report 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 the company or any other person that the results or conditions described in such statements or the objectives and plans of the company will be achieved. |
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“Marriott®,” “Courtyard® by Marriott®,” “SpringHill Suites® by Marriott®,” “Fairfield Inn® by Marriott®,” “Fairfield Inn & Suites® by Marriott®,” “TownePlace Suites® by Marriott®,” “Residence Inn® by Marriott®” and “Renaissance Hotels & Resorts®” are each a registered trademark of Marriott International, Inc. or one of its affiliates. All references to “Marriott” mean Marriott International, Inc. and all of its affiliates and subsidiaries and their respective officers, directors, agents, employees, accountants and attorneys. Marriott is not responsible for the content of this report, whether relating to the hotel information, operating information, financial information, Marriott’s relationship with Apple REIT Eight or otherwise. Marriott was not involved in any way whether as an “issuer” or “underwriter” or otherwise in the Apple REIT Eight offering and received no proceeds from the offering. Marriott has not expressed any approval or disapproval regarding this report, and the grant by Marriott of any franchise or other rights to Apple REIT Eight shall not be construed as any expression of approval or disapproval. Marriott has not assumed and shall not have any liability in connection with this report. |
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“Hampton Inn®,” “Hampton Inn & Suites®,” “Hilton Garden Inn®” and “Homewood Suites by Hilton®” are each a registered trademark of Hilton Worldwide or one of its affiliates. All references to “Hilton” mean Hilton Worldwide and all of its affiliates and subsidiaries, and their respective officers, directors, agents, employees, accountants and attorneys. Hilton is not responsible for the content of this report, whether relating to hotel information, operating information, financial information, Hilton’s relationship with Apple REIT Eight, or otherwise. Hilton was not involved in any way, whether as an “issuer” or “underwriter” or otherwise, in the Apple REIT Eight offering and received no proceeds from the offering. Hilton has not expressed any approval or disapproval regarding this report, and the grant by Hilton of any franchise or other rights to Apple REIT Eight shall not be construed as any expression of approval or disapproval. Hilton has not assumed and shall not have any liability in connection with this report. |
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CORPORATE PROFILE Apple REIT Eight, Inc. is a real estate investment
trust (REIT) focused on the ownership of hotels that generate attractive returns for our
shareholders. Our hotels operate under the Courtyard® by
Marriott®, Fairfield Inn & Suites® by
Marriott®, Residence Inn® by Marriott®,
SpringHill Suites® by Marriott®, TownePlace
Suites® by Marriott®, Marriott® Hotels &
Resorts, Renaissance® Hotels, Homewood Suites by Hilton®,
Hilton Garden Inn®, Hampton Inn®, and Hampton Inn &
Suites® brands. Our portfolio consists of 51 hotels, containing a
total of 5,912 guestrooms in 19 states. |
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Market Diversity |
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STATE/CITY |
Portfolio of hotels |
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ALABAMA |
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Birmingham |
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ARKANSAS |
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Rogers (2), Springdale |
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CALIFORNIA |
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Burbank, Cypress, Oceanside, Sacramento, |
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FLORIDA |
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Jacksonville, Orlando/Sanford, Tallahassee, Tampa |
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GEORGIA |
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Savannah (2) |
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KANSAS |
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Overland Park (3), Wichita |
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KENTUCKY |
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Bowling Green |
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MARYLAND |
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Annapolis |
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MASSACHUSETTS |
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Marlborough, Westford (2) |
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MISSOURI |
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Kansas City |
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NEW JERSEY |
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Somerset |
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NEW YORK |
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New York City |
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NORTH CAROLINA |
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Carolina Beach, Concord, Dunn, Fayetteville, |
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OKLAHOMA |
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Tulsa/South-Bixby |
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SOUTH CAROLINA |
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Columbia, Greenville, Hilton Head |
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TENNESSEE |
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Chattanooga |
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TEXAS |
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Texarkana (2) |
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VIRGINIA |
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Charlottesville, Harrisonburg, Norfolk/Chesapeake, |
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WASHINGTON |
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Tukwila |
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CORPORATE HEADQUARTERS |
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814 East Main Street |
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Richmond, Virginia 23219 |
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(804) 344-8121 |
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(804) 344-8129 FAX |
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www.applereiteight.com |
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INVESTOR INFORMATION |
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For additional information about the |
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Company, please contact: Kelly Clarke, |
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Director of Investor Services |
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(804) 727-6321 or |
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kclarke@applereit.com |
