Apple Hospitality REIT Reports Results of Operations for Fourth Quarter and Full Year 2023

Apple Hospitality REIT, Inc. (NYSE: APLE) (the “Company” or “Apple Hospitality”) today announced results of operations for the fourth quarter and full year ended December 31, 2023.

Justin Knight, Chief Executive Officer of Apple Hospitality, commented, “With continued strength in leisure demand and steady improvements in business travel, we are pleased to report Comparable Hotels RevPAR growth of more than 2% for the fourth quarter 2023 and 7% for the full year 2023, as compared to the same periods of 2022. Comparable Hotels RevPAR was up approximately 8% relative to both the fourth quarter and full year 2019, with Comparable Hotels Occupancy still below pre-pandemic levels. Our revenue and asset management teams continue to leverage our scale ownership of rooms-focused hotels and the access to performance data that our platform provides to maximize profitability across our hotels, driving strong margins despite continued inflationary and wage pressures. As we look ahead, the fundamentals of our business remain favorable, with continued strength in both business and leisure demand bolstered by limited near-term supply growth."

Mr. Knight continued, “During the fourth quarter, we acquired five high-quality hotels located in dynamic and growing markets that complement our existing portfolio and reflect our proven investment strategy. Our effective capital raise in the quarter enabled us to complete these transactions while maintaining the strength and flexibility of our balance sheet, positioning us for continued external growth as strategic opportunities arise. We currently have two hotels under contract for purchase and continue to underwrite numerous potential opportunities that will further enhance our unique and scalable platform and maximize long-term value for our shareholders. Our accomplishments in 2023 and our outperformance since the onset of the pandemic are a testament to the merits of our strategy of owning a high-quality, diversified portfolio of rooms-focused hotels with broad consumer appeal while maintaining financial flexibility with low leverage and speak to the strength of the brands and management companies we work with. I am confident we are well positioned to continue to outperform in the year ahead."

Hotel Portfolio Overview

As of December 31, 2023, Apple Hospitality owned 225 hotels, including two properties classified as held for sale, with an aggregate of 29,900 guest rooms located in 88 markets throughout 38 states.

Highlights

• Strong operating performance: Comparable Hotels RevPAR was $105 for the fourth quarter 2023 and $116 for the full year 2023, increases of 2% and 7%, respectively, as compared to the same periods of 2022. Comparable Hotels ADR was $151 for the fourth quarter 2023 and $157 for the full year 2023, increases of 3% and 5%, respectively, as compared to the same periods of 2022. Comparable Hotels Occupancy was 70% for the fourth quarter 2023, essentially flat to fourth quarter 2022, and 74% for the full year 2023, an increase of 2% as compared to 2022. Comparable Hotels Occupancy and RevPAR exceeded industry averages as reported by STR for the fourth quarter 2023. Comparable Hotels Occupancy, ADR and RevPAR exceeded industry averages as reported by STR for the full year 2023. Based on preliminary results for the Company's portfolio for the month of January 2024, Comparable Hotels Occupancy was approximately 64%, an increase compared to January 2023, with growth in Comparable Hotels ADR as compared to January 2023.
• Strong bottom-line performance: The Company achieved Comparable Hotels Adjusted Hotel EBITDA of approximately $104 million for the fourth quarter 2023 and $500 million for the full year 2023, down 2% and up 5%, respectively, as compared to the same periods of 2022. The Company achieved Comparable Hotels Adjusted Hotel EBITDA Margin of approximately 32.9% for the fourth quarter 2023 and 36.4% for the full year 2023, down 160 bps and 90 bps, respectively, as compared to the same periods of 2022.
• Transactional activity: During the year, the Company acquired six hotels and a free-standing parking garage for a combined total purchase price of approximately $289.8 million. The Company currently has two additional hotels under contract for purchase for an anticipated combined total purchase price of approximately $177.5 million. In February 2024, the Company sold two hotels for a combined gross sales price of approximately $33.5 million.
• Capital markets: During the fourth quarter 2023, the Company sold approximately 12.8 million shares under its at-the-market offering program (the “ATM Program”) at a weighted-average market sales price of approximately $17.05 per common share and received net proceeds of approximately $216 million.
• Balance sheet: The Company has maintained the strength and flexibility of its balance sheet. At December 31, 2023, the Company’s total debt to total capitalization, net of cash and cash equivalents, was approximately 25%.
• Monthly distributions: During the three months ended December 31, 2023, the Company paid distributions totaling $0.24 per common share. Based on the Company’s common stock closing price of $15.91 on February 20, 2024, the current annualized monthly cash distribution of $0.96 per common share represents an annual yield of approximately 6.0%.
• Corporate Responsibility Report: In December 2023, the Company published its annual Corporate Responsibility Report which details the Company's performance and initiatives in this area and features its commitment to environmental sustainability, governance and resiliency, corporate employees, hotel associates and guests, communities and other stakeholders. The Company's 2023 Corporate Responsibility Report and related materials can be found on the Corporate Responsibility section of the Company's website.

The Company is providing monthly performance detail for its Comparable Hotels with comparisons to the respective periods of 2022. The following table highlights the Company’s Comparable Hotels monthly performance during the fourth quarter of 2023 as compared to the fourth quarter of 2022 (in thousands, except statistical data):

Portfolio Activity

Acquisitions

As previously announced, during 2023, the Company acquired six hotels and a free-standing parking garage for a combined total purchase price of approximately $289.8 million. The acquisitions include the following:

• In June 2023, the Company acquired the 154-room Courtyard by Marriott Cleveland University Circle for a total purchase price of approximately $31.0 million, or $201,000 per key.
• In October 2023, the Company acquired the 175-room Courtyard by Marriott Salt Lake City Downtown for a total purchase price of approximately $48.1 million, or $275,000 per key.
• In October 2023, the Company acquired the 159-room Hyatt House Salt Lake City/Downtown for a total purchase price of approximately $34.3 million, or $215,000 per key.
• In October 2023, the Company acquired a 346-space parking garage for approximately $9.1 million, which serves the two Salt Lake City hotels as well as the surrounding area.
• In October 2023, the Company acquired the 146-room Residence Inn by Marriott Seattle South/Renton for a total purchase price of approximately $55.5 million, or $380,000 per key.
• In November 2023, the Company acquired the 192-room Embassy Suites by Hilton South Jordan Salt Lake City for a total purchase price of approximately $36.8 million, or $191,000 per key.
• In December 2023, the Company acquired the 299-room SpringHill Suites by Marriott Las Vegas Convention Center for a total purchase price of approximately $75.0 million, or $251,000 per key.

Contracts for Potential Acquisitions

As previously announced, the Company currently has two additional hotels under contract for purchase for a combined total anticipated purchase price of approximately $177.5 million. The hotels currently under contract for purchase include:

• An Embassy Suites by Hilton currently under development in downtown Madison, Wisconsin, for an anticipated total purchase price of approximately $79.3 million with an expected 262 rooms, which the Company anticipates acquiring in mid-2024 following completion of construction.
• A Motto by Hilton to be developed in downtown Nashville, Tennessee, for an anticipated total purchase price of approximately $98.2 million with an expected 260 rooms, which the Company anticipates acquiring in late 2025 following completion of construction.

There are many conditions to closing on each of these hotels that have not yet been satisfied, and there can be no assurance that closings on these hotels will occur under the outstanding purchase contracts.

Dispositions

In February 2024, the Company sold the 122-room Hampton Inn by Hilton Bentonville/Rogers and the 126-room Homewood Suites by Hilton Bentonville-Rogers in one transaction, for a combined gross sales price of approximately $33.5 million. The Company anticipates a portion of the proceeds from the sale of these two hotels will be used to complete a 1031 Exchange with future acquisitions, which will result in the deferral of taxable gains of approximately $15 million.

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 year ended December 31, 2023, the Company invested approximately $77 million in capital expenditures. The Company anticipates investing approximately $75 million to $85 million in capital improvements during 2024, which includes comprehensive renovation projects for approximately 20 hotels.

Balance Sheet and Liquidity

Summary

As of December 31, 2023, the Company had approximately $1.4 billion of total outstanding debt with a current combined weighted-average interest rate of approximately 4.3%, cash on hand of approximately $10 million and availability under its revolving credit facility of approximately $650 million. Excluding unamortized debt issuance costs and fair value adjustments, the Company’s total outstanding debt as of December 31, 2023, was comprised of approximately $283 million in property-level debt secured by 15 hotels and approximately $1.1 billion outstanding under its unsecured credit facilities. The number of unencumbered hotels in the Company’s portfolio as of December 31, 2023, was 210. The Company’s total debt to total capitalization, net of cash and cash equivalents at December 31, 2023, was approximately 25%, which provides Apple Hospitality with financial flexibility to fund capital requirements and pursue opportunities in the marketplace. As of December 31, 2023, the Company’s weighted-average debt maturities were 3.7 years.

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 year ended December 31, 2023, the Company purchased, under its Share Repurchase Program, approximately 0.5 million of its common shares at a weighted-average market purchase price of approximately $14.34 per common share, for an aggregate purchase price of approximately $7 million. Shares were repurchased in open market transactions under the Share Repurchase Program, including pursuant to written trading plans intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. As of December 31, 2023, the Company had approximately $335 million remaining under its Share Repurchase Program for the repurchase of shares.

ATM Program

During the fourth quarter 2023, the Company sold approximately 12.8 million shares under its ATM Program at a weighted-average market sales price of approximately $17.05 per common share and received aggregate gross proceeds of approximately $218.6 million and proceeds net of offering costs of approximately $216.0 million. As of December 31, 2023, the Company had approximately $5.3 million remaining under its ATM Program for the issuance of shares. The Company used the proceeds from the sales of these shares to pay down borrowings on its revolving credit facility and for general corporate purposes, including hotel acquisitions, providing additional capacity for strategic growth while maintaining the Company’s strong balance sheet.

Shareholder Distributions

During the three months ended December 31, 2023, the Company paid distributions totaling $0.24 per common share. For the year ended December 31, 2023, the Company paid distributions of $1.04 per common share for a total of approximately $238.3 million. On January 16, 2024, the Company paid a regular monthly cash distribution of $0.08 per common share and a special cash distribution of $0.05 per common share, for a combined distribution of $0.13 per common share, to shareholders of record as of December 29, 2023.

Based on the Company’s common stock closing price of $15.91 on February 20, 2024, the current annualized regular monthly cash distribution of $0.96 per common share represents an annual yield of approximately 6.0%. While the Company currently 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.

2024 Outlook

The Company is providing its operational and financial outlook for 2024. This outlook, which is based on management’s current view of both operating and economic fundamentals of the Company's existing portfolio of hotels, does not take into account any unanticipated developments in its business or changes in its operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions. Comparable Hotels RevPAR Change guidance, which is the change in Comparable Hotels RevPAR in 2024 compared to 2023, and Comparable Hotels Adjusted Hotel EBITDA Margin % guidance include properties acquired and announced for acquisition by year-end 2024 as if the hotels were owned as of January 1, 2023, exclude dispositions and assets held for sale since January 1, 2023, and exclude one non-hotel property leased to third parties. Results for periods prior to the Company’s ownership are not included in the Company’s actual Consolidated Financial Statements, are based on information from the prior owner of each hotel, and have not been audited or adjusted. For the full year 2024, the Company anticipates its 2024 results will be in the following range:

Fourth Quarter and Full Year 2023 Earnings Conference Call

The Company will host a quarterly conference call for investors and interested parties at 10 a.m. Eastern Time on Friday, February 23, 2024. 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 2 p.m. Eastern Time on February 23, 2024, through 11:59 p.m. Eastern Time on March 8, 2024. 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 13743323. 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 223 hotels with more than 29,600 guest rooms located in 87 markets throughout 37 states as well as one property leased to third parties. Concentrated with industry-leading brands, the Company’s hotel portfolio consists of 100 Marriott-branded hotels, 118 Hilton-branded hotels and five Hyatt-branded hotels. 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; Adjusted Hotel EBITDA; Comparable Hotels Adjusted Hotel EBITDA; and Same Store Hotels 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, Adjusted Hotel EBITDA, Comparable Hotels Adjusted Hotel EBITDA and Same Store Hotels 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, Adjusted Hotel EBITDA, Comparable Hotels Adjusted Hotel EBITDA and Same Store Hotels Adjusted Hotel EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Adjusted Hotel EBITDA, Comparable Hotels Adjusted Hotel EBITDA and Same Store Hotels 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.

Such 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 geopolitical uncertainty, including terrorism and acts of war; travel-related health concerns, including widespread outbreaks of infectious or contagious diseases in the U.S.; inclement weather conditions, including natural disasters such as hurricanes, earthquakes and wildfires; government shutdowns, airline strikes or equipment failures or other disruptions; 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, 2023. 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.

Apple Hospitality REIT, Inc.

Reconciliation of Net Income to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA

(Unaudited)

(in thousands)

EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes, depreciation and amortization. The Company believes EBITDA is useful to investors because it helps the Company and its investors evaluate the ongoing operating performance of the Company by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). In addition, certain covenants included in the agreements governing the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance.

In addition to EBITDA, the Company also calculates and presents EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), which defines EBITDAre as EBITDA, excluding gains and losses from the sale of certain real estate assets (including gains and losses from change in control), plus real estate related impairments, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. The Company presents EBITDAre because it believes that it provides further useful information to investors in comparing its operating performance between periods and between REITs that report EBITDAre using the Nareit definition.

The Company also considers the exclusion of non-cash straight-line operating ground lease expense from EBITDAre useful, as this expense does not reflect the underlying performance of the related hotels (Adjusted EBITDAre).

The Company further excludes actual corporate-level general and administrative expense for the Company as well as Adjusted EBITDAre from its non-hotel property from Adjusted EBITDAre (Adjusted Hotel EBITDA) to isolate property-level operational performance over which the Company’s hotel operators have direct control. The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and it is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels.

The following table reconciles the Company’s GAAP net income to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA on a quarterly basis for 2022 and 2023: