Hotel Portfolio Sale

Apple Hospitality REIT Sells Nine Hotels for $95 Million

Homewood Suites by Hilton Sarasota - Exterior
Homewood Suites by Hilton Sarasota

Apple Hospitality REIT

Apple Hospitality REIT, Inc. (NYSE: APLE) yesterday announced the completion of the sale of nine hotels for a total sales price of $95 million on March 28, 2019. The Company had previously announced the contracts for the sale of the Portfolio. The Company used the sale proceeds to reduce the outstanding balance of its revolving credit facility and anticipates recognizing a gain on the sale in the first quarter of 2019.

“We are pleased to have completed the sale of this Portfolio,” said Nelson Knight, Executive Vice President and Chief Investment Officer of Apple Hospitality. “Through these attractively priced transactions, we adjusted our market exposure in ways that we feel will further enhance the strength and stability of our hospitality platform.”

The following operating statistics for the Portfolio for the 12 months ended February 28, 2019, are provided for informational purposes only and have not been audited.

             
             
Hotel   State  

Number

of

Rooms

 

Trailing 12 Months

Revenue per Available

Room 2/28/2019

             
Homewood Suites by Hilton Sarasota   FL   100   $ 100.84
TownePlace Suites by Marriott Tampa   FL   94   $ 78.20
SpringHill Suites by Marriott Baton Rouge   LA   119   $ 66.40
Hampton Inn & Suites by Hilton Holly Springs   NC   124   $ 87.13
Hilton Garden Inn Duncanville   TX   142   $ 84.21
Courtyard by Marriott Texarkana   TX   90   $ 52.71
TownePlace Suites by Marriott Texarkana   TX   85   $ 48.70
Courtyard by Marriott Bristol   VA   175   $ 55.40
Courtyard by Marriott Harrisonburg   VA   125   $ 81.62
        1,054   $ 72.94
             

For the trailing 12 months ended February 28, 2019, the Portfolio had net income of approximately $5.4 million, Hotel EBITDA Margin of 31.1 percent and Hotel EBITDA of $9.5 million. Based on these trailing 12 months results, the sales price of $95 million resulted in a capitalization rate of approximately 7.3 percent including an estimated approximate $18.1 million brand property improvement plan required to be completed by the buyer, or a Hotel EBITDA multiple of 11.9 times. The following is a reconciliation between the Portfolio’s property-level net income and Hotel EBITDA, and the calculation of the capitalization rate and Hotel EBITDA multiple for the Portfolio.

     

(unaudited, dollars in thousands)

 

Trailing 12

Months

2/28/2019

     
Total Revenue   $ 30,587  
     
Portfolio Net Income   $ 5,425  
Depreciation     4,096  
Hotel EBITDA     9,521  
FF&E Reserve 4%     1,223  
Hotel Net Operating Income   $ 8,298  
     
Sales Price   $ 95,000  
Estimated Cost of Brand Property Improvement Plans     18,100  
Total Estimated Investment   $ 113,100  
     
Capitalization Rate(1)     7.3 %
Hotel EBITDA Multiple(1)     11.9  
         

(1)

 

Hotel EBITDA Multiple is calculated as Total Estimated Investment, divided by Hotel EBITDA. Capitalization Rate is calculated as Hotel Net Operating Income divided by Total Estimated Investment.

     

Hotel EBITDA and Hotel Net Operating Income are commonly used measures of performance in the hotel industry. Hotel EBITDA is defined as a hotel’s net income excluding interest, income taxes, depreciation and amortization. Hotel Net Operating Income is Hotel EBITDA less an estimated amount of capital expenditures for the period based on a percentage of revenue. The Company believes Hotel EBITDA and Hotel Net Operating Income are useful because they help the Company evaluate the ongoing operating performance of each hotel by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization), and is used by management to measure the performance of the Company’s hotels compared to each other and effectiveness of the operators of the hotels. Hotel EBITDA and Hotel Net Operating Income are non-GAAP (“Generally Accepted Account Principles”) financial measures and should be considered along with, but not as alternatives to, net income, cash flow from operations or any other operating GAAP measure.

Apple Hospitality REIT, Inc. (NYSE: APLE) is a publicly traded real estate investment trust (REIT) that owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the United States. Apple Hospitality’s portfolio consists of 234 hotels with more than 30,000 guest rooms located in 87 markets throughout 34 states. Franchised with industry-leading brands, the Company’s portfolio comprises 108 Marriott-branded hotels, 125 Hilton-branded hotels and one Hyatt-branded hotel.



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