Apple Hospitality REIT, Inc. (NYSE: APLE) (the “Company” or “Apple Hospitality”) today announced results of operations for the third quarter ended September 30, 2022.

Comparable Hotels is defined as the 218 hotels owned by the Company as of September 30, 2022. For hotels acquired during the periods noted, the Company has included, as applicable, results of those hotels for periods prior to the Company's ownership, and for dispositions, results have been excluded for the Company's period of ownership. Results for periods prior to the Company's ownership have not been included in the Company's actual Consolidated Financial Statements and are included only for comparison purposes. Results included for periods prior to the Company's ownership are based on information from the prior owner of each hotel and have not been audited or adjusted.

Justin Knight, Chief Executive Officer of Apple Hospitality, commented, “With continued improvement in business transient demand and the ongoing strength of leisure travel across our markets, we achieved our highest quarterly RevPAR growth over the same period in 2019, with third quarter 2022 RevPAR for our portfolio exceeding third quarter 2019 by approximately 8%. The shift in consumer spending toward experiences and improvements in business travel demand enabled us to build upon second quarter rate growth. Our portfolio ADR was up more than 13% for the third quarter 2022 as compared to the third quarter 2019, despite continued opportunity in occupancy. We believe there is additional upside for our business as corporate travel improves, additional markets fully recover and occupancy across our portfolio further strengthens. In a challenging labor and inflationary environment, we are working with the management teams at our hotels to balance cost controls with guest satisfaction in order to maintain the strong value proposition of our assets and create an environment for sustainable rate improvement. During the quarter, we achieved a strong Comparable Hotels Adjusted Hotel EBITDA Margin of approximately 38% and MFFO of approximately $103 million, or $0.45 per share. Recent acquisitions combined with robust performance from our existing portfolio enabled us to achieve third quarter 2022 Adjusted EBITDAre of $119 million, a 3% increase over the same period in 2019. While we are mindful of potential macroeconomic headwinds, the travel industry has proven resilient and based on what we are seeing in our own portfolio, is poised for a countercyclical recovery.”

Mr. Knight continued, “During the quarter, we successfully refinanced and upsized our primary unsecured credit facility, further enhancing the strength and financial flexibility of our balance sheet and providing the Company with greater access to liquidity for strategic growth. We continue to allocate capital in ways that we believe will optimize our performance and maximize total returns for our shareholders over time, and in recent months opportunistically repurchased shares, increased our monthly distribution, reinvested in our assets and strategically acquired two high-quality hotels poised for future growth. Given the broad consumer appeal, geographic diversification and quality of our hotels, and the strength and financial flexibility of our balance sheet, we are confident we are well positioned for outperformance in any macroeconomic environment.”

Hotel Portfolio Overview

As of September 30, 2022, Apple Hospitality owned 218 hotels with an aggregate of 28,693 guest rooms located in 86 markets throughout 36 states.

Highlights

• Strong operating performance: For the third quarter 2022, as compared to the third quarter 2019, the Company's portfolio achieved an improvement in RevPAR of approximately 8%, despite lower occupancy, with ADR growth of approximately 13% and a decline in occupancy of approximately 5%. Occupancy, ADR and RevPAR for the Company’s portfolio for the third quarter 2022 exceeded industry averages as reported by STR. Occupancy for the Company's portfolio for the month of October 2022 accelerated relative to August and September, reaching approximately 78%, up 7% as compared to October 2021 and down 4% as compared to October 2019, with continued strength in ADR.
• Strong bottom-line performance: The Company achieved Comparable Hotels Adjusted Hotel EBITDA of approximately $129 million for the third quarter 2022, an improvement of approximately 19% and 4%, as compared to the third quarters of 2021 and 2019, respectively. The Company achieved Comparable Hotels Adjusted Hotel EBITDA Margin of approximately 38% for the third quarter 2022, a decline of 40 bps and 80 bps, as compared to the third quarters of 2021 and 2019, respectively. Actual Adjusted Hotel EBITDA Margin for the quarter was 38%, down 10 bps and up 30 bps to the third quarters of 2021 and 2019, respectively.
• Hurricane Ian: The Company's hotels in the direct path of Hurricane Ian did not sustain any material damage and remained open during and after the storm.
• Transactional activity: During the third quarter 2022, the Company sold a 55-room independent boutique hotel in Richmond, Virginia, for approximately $8.5 million. In October 2022, the Company acquired the AC Hotel by Marriott Louisville Downtown and the AC Hotel by Marriott Pittsburgh Downtown for a total combined purchase price of $85 million.
• Balance sheet: In July 2022, the Company amended and restated its existing unsecured $850 million credit facility, increasing the total credit facility to approximately $1.2 billion and extending the maturity dates while achieving improved pricing terms across the total credit facility.
• Monthly distributions: During the quarter, the Company's Board of Directors approved an increase in the Company's regular monthly cash distribution to $0.07 per common share, up from $0.05 per common share, beginning with the Company's September 2022 distribution payment. Then, in October 2022, the Company's Board of Directors approved an additional increase in the Company's regular monthly cash distribution to $0.08 per common share, beginning with the Company's November 2022 distribution payment.

The following tables highlight the Company’s monthly performance during the third quarter of 2022, as compared to the third quarters of 2021 and 2019 (in thousands, except statistical data):

Portfolio Activity

Acquisitions

As previously announced, in October 2022, the Company acquired the existing 156-room AC Hotel Louisville Downtown in Louisville, Kentucky, for $51 million, or approximately $327,000 per key, and the existing 134-room AC Hotel Pittsburgh Downtown in Pittsburgh, Pennsylvania, for $34 million, or approximately $254,000 per key.

Disposition

In September 2022, the Company sold its 55-room independent boutique hotel in Richmond, Virginia, for a gross sales price of approximately $8.5 million, resulting in a gain on sale of approximately $1.8 million, which is included in the Company's consolidated statement of operations for the nine months ended September 30, 2022.

Contract for Potential Acquisition

As previously announced, the Company has an outstanding contract for the purchase of an Embassy Suites by Hilton in Madison, Wisconsin, for an anticipated total purchase price of approximately $79 million. The hotel is currently under development and expected to include 260 rooms. There are many conditions to closing that have not yet been satisfied, and there can be no assurance that a closing on this hotel will occur under the outstanding purchase contract. Assuming all conditions to closing are met, the Company anticipates acquiring the hotel following completion of construction, which is expected to occur in early 2024.

Capital Improvements

Apple Hospitality consistently reinvests in its hotels to maintain and enhance each property’s relevance and competitive position within its respective market. During the nine months ended September 30, 2022, the Company invested approximately $32 million in capital expenditures. The Company anticipates investing approximately $55 million to $65 million in capital improvements during 2022, which includes various renovation projects for approximately 20 to 25 hotels; however, inflationary pressures or supply chain shortages, among other issues, may result in increased costs and delays for anticipated projects.

Balance Sheet and Liquidity

Summary

As of September 30, 2022, the Company had approximately $1.3 billion of total outstanding debt with a current combined weighted-average interest rate of approximately 3.7%, cash on hand of approximately $26 million, availability under its revolving credit facility of $650 million and term loan availability of $100 million, of which $50 million was drawn subsequent to September 30, 2022. Excluding unamortized debt issuance costs and fair value adjustments, the Company’s total outstanding debt is comprised of approximately $332 million in property-level debt secured by 19 hotels and approximately $1.0 billion outstanding under its unsecured credit facilities. The number of unencumbered hotels in the Company’s portfolio as of September 30, 2022, was 199. The Company’s total debt to total capitalization, net of cash and cash equivalents at September 30, 2022, was approximately 29%. The Company’s weighted-average debt maturities are 4.7 years.

Amended and Restated Primary Unsecured Credit Facility

On July 25, 2022, the Company amended and restated its existing $850 million credit facility, increasing the borrowing capacity to approximately $1.2 billion, extending maturity dates and achieving improved pricing across the credit facility. Through the amended credit agreement, the Company has greater access to liquidity for strategic growth and the opportunity to reduce its already conservative secured debt exposure. The $1.2 billion credit facility is comprised of a term loan of $275 million with a maturity date of July 25, 2027; a term loan of up to $300 million with a maturity date of January 31, 2028 (including $150 million available via a delayed draw option until 180 days from closing); and a revolving credit facility of $650 million with an initial maturity date of July 25, 2026, which may be extended up to one year subject to certain conditions. The amendments under the total $1.2 billion credit facility provide for additional capacity of $150 million under the term loans and additional capacity of $225 million under the revolving credit facility. The credit agreement also includes an accordion feature through which the amount of the total credit facility may be increased from approximately $1.2 billion to $1.5 billion. The terms of the amended and restated credit agreement are generally similar to the Company’s previous $850 million credit agreement. The facilities will bear interest pursuant to a leverage-based pricing grid ranging from 1.35% to 2.25% over an adjusted SOFR rate. At closing, the Company borrowed $475 million under the term loans and used the proceeds to repay the $425 million outstanding under the term loans of the previous credit facility and $50 million outstanding under the revolving credit facility.

Capital Markets

Share Repurchase Program

The Company has in place a Share Repurchase Program that provides for share repurchases in open market transactions. During the nine months ended September 30, 2022, the Company purchased, under its Share Repurchase Program, approximately 0.1 million of its common shares at a weighted-average market purchase price of approximately $14.20 per common share, for an aggregate purchase price of approximately $1.5 million. Subsequent to the end of the third quarter, the Company purchased, under its Share Repurchase Program, an additional 81,100 common shares, bringing the total shares purchased year-to-date through October 31, 2022, to approximately 0.2 million common shares at a weighted-average market purchase price of approximately $14.21 per common share, for an aggregate purchase price of approximately $2.7 million. As of October 31, 2022, the Company had approximately $342.3 million remaining under its Share Repurchase Program for the repurchase of shares. Shares were repurchased under a written trading plan as part of the Share Repurchase Program that provides for share repurchases in open market transactions and that is intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934.

ATM Program

The Company also has in place an at-the-market offering program (the “ATM Program”). As of September 30, 2022, the Company had approximately $224 million remaining under its ATM Program for the issuance of shares. No shares were sold under the ATM program during the nine months ended September 30, 2022.

Shareholder Distributions

During the three months ended September 30, 2022, the Company paid distributions totaling $0.17 per common share. In August 2022, the Company's Board of Directors approved an increase in the Company's regular monthly cash distribution from $0.05 to $0.07 per common share, which was paid in September and October. In October 2022, the Company's Board of Directors approved an additional increase in the Company's regular monthly cash distribution from $0.07 to $0.08 per common share and declared a regular monthly cash distribution of $0.08 per common share for the month of November 2022. Based on the Company’s common stock closing price of $16.21 on November 4, 2022, the current annualized distribution of $0.96 per common share represents an annual yield of approximately 5.9%. While the Company expects monthly distributions to continue, each distribution is subject to approval by the Company’s Board of Directors. The Company’s Board of Directors, in consultation with management, will continue to monitor the Company’s distribution rate and timing relative to the performance of its hotels, capital improvement needs, varying economic cycles, acquisitions, dispositions, other cash requirements and the Company’s REIT status for federal income tax purposes, and may make adjustments as it deems appropriate.

2022 Outlook

The Company is providing the following full year 2022 outlook regarding certain corporate expenses, which is based on management’s current view and does not take into account any unanticipated developments in its business or changes in its operating environment:

• General and administrative expenses are projected to be approximately $38 million to $42 million, including both cash and share-based compensation.
• Interest expense is projected to be approximately $58 million to $63 million.
• Capital expenditures are projected to be approximately $55 million to $65 million.

As compared to previously provided 2022 corporate expense guidance, the Company is adjusting general and administrative expenses by increasing both the low and high ends of the range related to executive incentive compensation, based on operational and shareholder return performance through September 30, 2022. The Company does not expect to issue operational guidance or provide additional outlook updates until it has more certainty on trends within the industry or otherwise deems appropriate.

Third Quarter 2022 Earnings Conference Call

The Company will host a quarterly conference call for investors and interested parties at 10 a.m. Eastern Time on Tuesday, November 8, 2022. The conference call will be accessible by telephone and the internet. To access the call, participants from within the U.S. should dial 877-407-9039, and participants from outside the U.S. should dial 201-689-8470. Participants may also access the call via live webcast by visiting the Investor Information section of the Company's website at ir.applehospitalityreit.com. A replay of the call will be available from approximately 1 p.m. Eastern Time on November 8, 2022, through 11:59 p.m. Eastern Time on November 29, 2022. To access the replay, the domestic dial-in number is 844-512-2921, the international dial-in number is 412-317-6671, and the passcode is 13732679. The archive of the webcast will be available on the Company's website for a limited time.

About Apple Hospitality REIT, Inc.

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 220 hotels with approximately 29,000 guest rooms located in 87 markets throughout 37 states. Concentrated with industry-leading brands, the Company’s portfolio consists of 96 Marriott-branded hotels, 119 Hilton-branded hotels, four Hyatt-branded hotels and one independent hotel. For more information, please visit www.applehospitalityreit.com.

Apple Hospitality REIT Non-GAAP Financial Measures

The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its operating performance: Funds from Operations (“FFO”); Modified FFO (“MFFO”); Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”); Earnings Before Interest, Income Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”); Adjusted EBITDAre; and Adjusted Hotel EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss), cash flow from operations or any other operating GAAP measure. FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA are not necessarily indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions. Although FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as reported by other companies that do not define such terms exactly as the Company defines such terms, the Company believes these supplemental measures are useful to investors when comparing the Company’s results between periods and with other REITs. Reconciliations of these non-GAAP financial measures to net income (loss) are provided in the following pages.

Forward-Looking Statements Disclaimer

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are typically identified by use of statements that include phrases such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “target,” “goal,” “plan,” “should,” “will,” “predict,” “potential,” “outlook,” “strategy,” and similar expressions that convey the uncertainty of future events or outcomes. 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 future results, performance or achievements expressed or implied by such forward-looking statements.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Company’s forward-looking statements continues to be the adverse effect of COVID-19, including resurgences and variants, on the Company’s business, financial performance and condition, operating results and cash flows, the real estate market and the hospitality industry specifically, and the global economy and financial markets generally. The significance, extent and duration of the continued impacts caused by the COVID-19 pandemic on the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including the extent and effectiveness of the actions taken to mitigate its impact, the acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against variants of COVID-19, the potential for additional hotel closures/consolidations that may be mandated or advisable, whether based on increased COVID-19 cases, new variants or other factors, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of properties and redeploy proceeds; the anticipated timing and frequency of shareholder distributions; the ability of the Company to fund capital obligations; the ability of the Company to successfully integrate pending transactions and implement its operating strategy; changes in general political, economic and competitive conditions and specific market conditions (including the potential effects of inflation or a recessionary environment); reduced business and leisure travel due to travel-related health concerns, including the COVID-19 pandemic or an increase in COVID-19 cases or any other infectious or contagious diseases in the U.S. or abroad; adverse changes in the real estate and real estate capital markets; financing risks; changes in interest rates; litigation risks; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact the Company’s business, assets or classification as a REIT. Although the Company 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 press release 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. In addition, the Company’s qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended. Readers should carefully review the risk factors described in the Company’s filings with the Securities and Exchange Commission, including but not limited to those discussed in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Any forward-looking statement that the Company makes speaks only as of the date of this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements or cautionary factors, as a result of new information, future events, or otherwise, except as required by law.

For additional information or to receive press releases by email, visit www.applehospitalityreit.com.