Apple Hospitality REIT Reports Results of Operations for Third Quarter 2024

Apple Hospitality REIT, Inc. (NYSE:APLE) (the "Company" or "Apple Hospitality") today announced results of operations for the third quarter ended September 30, 2024.

Justin Knight, Chief Executive Officer of Apple Hospitality, commented, "With slow but steady improvement in business transient demand and ongoing strength in leisure travel, operating fundamentals remained strong across our portfolio during the quarter, with Comparable Hotels RevPAR growth of approximately 1% as compared to the third quarter of 2023. Based on preliminary results, occupancy for the month of October was approximately 80%, with continued improvement in ADR. We remain intently focused on maximizing the profitability of our hotels through strategic asset management and are pleased to report strong bottom-line performance for the quarter, bolstered by recent acquisitions, continued strength in ADR and moderating expense growth."

Mr. Knight continued, "Evolving market conditions over the past year have provided us with the opportunity to demonstrate our disciplined and strategic approach to capital allocation and portfolio management to drive earnings per share and maximize long-term value for our shareholders. Since the beginning of this year through October, we strategically acquired two hotels for $196 million, sold three hotels for $41 million, repurchased 2.4 million common shares for $35 million, and entered into contracts for the sale of an additional four hotels for a combined sales price of $31 million. Our recent activity highlights our ability to effectively allocate capital in the current environment while maintaining our balance sheet. We are confident that with our portfolio of high-quality, rooms-focused hotels broadly diversified across markets and demand generators, the effectiveness of our brands and management companies, the strength and flexibility of our balance sheet, and the depth of our corporate team, we are well positioned for continued outperformance."

Hotel Portfolio Overview

As of September 30, 2024, Apple Hospitality owned 224 hotels, including one hotel classified as held for sale, with an aggregate of 30,068 guest rooms located in 87 markets throughout 37 states and the District of Columbia.

Third Quarter 2024 Highlights

• Strong operating performance: For the third quarter 2024, Comparable Hotels ADR was $163, approximately a 1% improvement over third quarter 2023; Comparable Hotels Occupancy was 77%, essentially flat to third quarter 2023; and Comparable Hotels RevPAR was $125, an increase of approximately 1% over third quarter 2023. Comparable Hotels Occupancy, ADR and RevPAR exceeded industry averages as reported by STR for the third quarter 2024. Preliminary results for the Company's portfolio for the month of October 2024 show Comparable Hotels RevPAR growth of approximately 4%, with growth in both Comparable Hotels Occupancy and ADR, as compared to October 2023.
• Strong bottom-line performance: For the third quarter 2024, the Company achieved Comparable Hotels Adjusted Hotel EBITDA of approximately $139 million, a slight improvement over third quarter 2023, and Comparable Hotels Adjusted Hotel EBITDA Margin of approximately 37%, down 60 bps to third quarter 2023. The Company achieved Adjusted EBITDAre of approximately $129 million for the third quarter 2024, an increase of approximately 6% as compared to third quarter 2023. The Company achieved MFFO of approximately $107 million for the third quarter 2024, an increase of approximately 3% as compared to third quarter 2023.
• Transactional activity: The Company currently has four hotels under contract for sale for a combined gross sales price of approximately $31 million.
• Capital markets: During the third quarter 2024, the Company purchased, under its Share Repurchase Program, approximately 1.4 million of its common shares at a weighted-average market purchase price of approximately $14.02 per common share, for an aggregate purchase price of approximately $19.2 million, bringing the total shares purchased year to date through September 30, 2024, to approximately 2.4 million common shares at a weighted-average market purchase price of approximately $14.16 per common share, for an aggregate purchase price of approximately $34.7 million.
• Balance sheet: The Company has maintained the strength and flexibility of its balance sheet. At September 30, 2024, the Company's total debt to total capitalization, net of cash and cash equivalents, was approximately 30%.
• Monthly distributions: During the three months ended September 30, 2024, the Company paid distributions totaling $0.24 per common share. Based on the Company's common stock closing price of $14.68 on November 1, 2024, the current annualized regular monthly cash distribution of $0.96 per common share represents an annual yield of approximately 6.5%.

The Company is providing monthly performance detail for its Comparable Hotels with comparisons to the respective periods of 2023. The following table highlights the Company's Comparable Hotels monthly performance during the third quarter of 2024 as compared to the third quarter of 2023 (in thousands, except statistical data):

Portfolio Activity

Acquisitions

As previously announced, since the beginning of 2024, the Company has acquired two hotels for a combined total purchase price of approximately $196.3 million. The acquisitions include the following:

• In March 2024, the Company acquired the 234-room AC Hotel by Marriott Washington DC Convention Center for a total purchase price of approximately $116.8 million, or $499,000 per key.

• In June 2024, the Company acquired the newly built, 262-room Embassy Suites by Hilton Madison Downtown for a total purchase price of approximately $79.5 million, or $303,000 per key.

Contract for Potential Acquisition

As previously announced, the Company continues to have one additional hotel under contract for purchase, a Motto by Hilton that is under development 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 this hotel 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.

Dispositions

As previously announced, during the nine months ended September 30, 2024, the Company sold three hotels for a combined gross sales price of approximately $40.6 million, resulting in a combined gain on the sales of approximately $18.2 million, which is included in the Company's consolidated statement of operations for the nine months ended September 30, 2024. The dispositions include the following:

• 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 used a portion of the net proceeds from the sale of these two hotels to complete a 1031 exchange with the acquisition of the AC Hotel Washington DC Convention Center in March 2024, which resulted in the deferral of taxable gains of $15.1 million.
• In May 2024, the Company sold the 82-room SpringHill Suites by Marriott Greensboro for a gross sales price of approximately $7.1 million.

Contracts for Potential Dispositions

The Company recently entered into four separate contracts for the sale of four hotels for a combined gross sales price of approximately $31.1 million. The potential dispositions include the following:

• In August 2024, the Company entered into a contract for the sale of its 90-room Courtyard by Marriott Wichita East for a gross sales price of approximately $3.1 million. The Company expects to complete the sale of this hotel in November 2024.
• In October 2024, the Company entered into a contract for the sale of its 97-room TownePlace Suites by Marriott Knoxville Cedar Bluff for a gross sales price of approximately $9.4 million. The Company expects to complete the sale of this hotel in late 2024 or early 2025.
• In October 2024, the Company entered into a contract for the sale of its 76-room Homewood Suites by Hilton Chattanooga-Hamilton Place for a gross sales price of approximately $8.3 million. The Company expects to complete the sale of this hotel in late 2024 or early 2025.
• In October 2024, the Company entered into a contract for the sale of its 117-room Hilton Garden Inn Austin North for a gross sales price of approximately $10.4 million. The Company expects to complete the sale of this hotel in late 2024 or early 2025.

As a result of these potential sales, in the third quarter 2024, the Company recognized an impairment loss of approximately $2.9 million in the aggregate with respect to two of the potential sale properties. There are many conditions to closing on the sales of these hotels that have not yet been satisfied, and there can be no assurance that closings on the sales of these hotels will occur under the outstanding sale agreements.

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, 2024, the Company invested approximately $48 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

As of September 30, 2024, the Company had approximately $1.5 billion of total outstanding debt with a current combined weighted-average interest rate of approximately 4.9%, cash on hand of approximately $6 million and availability under its revolving credit facility of approximately $540 million. Excluding unamortized debt issuance costs and fair value adjustments, the Company's total outstanding debt as of September 30, 2024, was comprised of approximately $257 million in property-level debt secured by 14 hotels and approximately $1.3 billion outstanding under its unsecured credit facilities. In August 2024, the Company repaid in full one secured mortgage loan for a total of approximately $20 million, increasing the number of unencumbered hotels in the Company's portfolio as of September 30, 2024, to 210. The Company's total debt to total capitalization, net of cash and cash equivalents at September 30, 2024, was approximately 30%, which provides Apple Hospitality with financial flexibility to fund capital requirements and pursue opportunities in the marketplace. As of September 30, 2024, the Company's weighted-average debt maturities were 3.0 years.

On July 17, 2024, the Company amended its unsecured $85 million term loan facility, which increased the amount of the term loan facility to $130 million, with the additional $45 million funded at closing; extended the maturity date to July 25, 2026; and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.35% to 2.20%, depending on the Company's leverage ratio, as calculated under the terms of the amended credit agreement. Subject to certain conditions, including covenant compliance and additional fees, the maturity date of the $130 million term loan facility may be extended by the Company to July 25, 2027.

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 three months ended September 30, 2024, the Company purchased, under its Share Repurchase Program, approximately 1.4 million of its common shares at a weighted-average market purchase price of approximately $14.02 per common share, for an aggregate purchase price of approximately $19.2 million, bringing the total shares purchased year to date through September 30, 2024, to approximately 2.4 million common shares at a weighted-average market purchase price of approximately $14.16 per common share, for an aggregate purchase price of approximately $34.7 million. As of September 30, 2024, the Company had approximately $301 million remaining under its Share Repurchase Program for the repurchase of shares.

ATM Program

The Company also has in place an at-the-market offering program (the "ATM Program"). As of September 30, 2024, the Company had $500 million remaining under its ATM Program for the issuance of shares. No shares were sold under the current or prior ATM Program during the three and nine months ended September 30, 2024.

Shareholder Distributions

During the three months ended September 30, 2024, the Company paid distributions totaling $0.24 per common share. Based on the Company's common stock closing price of $14.68 on November 1, 2024, the current annualized regular monthly cash distribution of $0.96 per common share represents an annual yield of approximately 6.5%. 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.

Updated 2024 Outlook

The Company is updating 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. As compared to the midpoint of previously provided 2024 guidance, the Company is decreasing Net Income by $1 million, decreasing Comparable Hotels RevPAR Change by 12.5 bps, increasing Comparable Hotels Adjusted Hotel EBITDA Margin % by 20 bps, and decreasing Adjusted EBITDAre by $1.5 million. 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 completed dispositions since January 1, 2023, exclude announced dispositions anticipated to close by year-end 2024, and exclude one non-hotel property. 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:

Third Quarter 2024 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 5, 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 November 5, 2024, through 11:59 p.m. Eastern Time on November 19, 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 13748421. 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 224 hotels with more than 30,000 guest rooms located in 87 markets throughout 37 states and the District of Columbia. Concentrated with industry-leading brands, the Company's hotel portfolio consists of 100 Marriott-branded hotels, 119 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 the 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 2023 and 2024: