8-K: Apple Hospitality REIT Expands Portfolio with Madison Acquisition, Sells Greensboro Property

Apple Hospitality REIT has acquired a new Embassy Suites in Madison, Wisconsin for $79.5 million and sold a SpringHill Suites in Greensboro, North Carolina for $7.1 million.

Summary

• Apple Hospitality REIT has acquired the 262-room Embassy Suites by Hilton Madison Downtown for approximately $79.5 million, or $303,000 per key.
• The company also sold the 82-room SpringHill Suites by Marriott Greensboro for approximately $7.1 million.
• The Madison hotel was acquired through a fixed-price, take-out contract secured ahead of development.
• The company anticipates acquiring a Motto by Hilton in Nashville for approximately $98.2 million with 260 rooms in late 2025.
• The company's portfolio now includes 224 hotels with 30,066 guest rooms across 37 states and the District of Columbia.

Sentiment

Score: 7

Explanation: The document conveys a positive sentiment due to the strategic acquisition in a strong market and the successful disposition of a property. However, there are some risks associated with the future acquisition and general market conditions.

Positives

• The acquisition of the Embassy Suites in Madison expands the company's presence in a strong market.
• The fixed-price contract for the Madison hotel acquisition helped secure an attractive price despite rising construction costs.
• The sale of the Greensboro property allows the company to redeploy capital.
• The company's portfolio is geographically diversified across 37 states and the District of Columbia.
• The Madison CBD submarket has seen a 7% year-over-year improvement in RevPAR.

Negatives

• The sale of the Greensboro property resulted in a relatively small transaction of $7.1 million.
• The acquisition of the Nashville hotel is subject to conditions and there is no guarantee it will close.

Risks

• The acquisition of the Nashville hotel is subject to various conditions and may not be completed.
• The company is exposed to general economic and competitive conditions, including potential effects of inflation or a recession.
• The company is exposed to risks related to reduced business and leisure travel due to geopolitical uncertainty and health concerns.
• The company is exposed to risks related to adverse changes in the real estate and real estate capital markets and changes in interest rates.
• The company is exposed to risks related to litigation and regulatory proceedings.

Future Outlook

The company anticipates acquiring a Motto by Hilton in Nashville in late 2025, subject to certain conditions. The company will continue to evaluate opportunities to acquire and dispose of properties.

Management Comments

• Nelson Knight, President, Real Estate and Investments of Apple Hospitality, stated that they are pleased to expand their portfolio with the acquisition of the newly constructed, custom Embassy Suites Madison Downtown.
• Nelson Knight also mentioned that the company secured a fixed-price, take-out contract ahead of development, enabling them to acquire the Hotel at an attractive price.

Industry Context

The acquisition and disposition are part of Apple Hospitality's strategy to optimize its portfolio and capitalize on market opportunities. The Madison market is showing positive trends with a 7% year-over-year increase in RevPAR, indicating a strong demand for hotel rooms in the area. The company's focus on upscale, rooms-focused hotels aligns with current industry trends.

Comparison to Industry Standards

• Apple Hospitality's acquisition of the Embassy Suites in Madison at $303,000 per key is within the range of recent transactions for similar upscale hotels in urban markets.
• The 7% year-over-year RevPAR growth in the Madison CBD submarket is a positive indicator, suggesting that the acquisition is well-timed.
• Compared to other REITs, Apple Hospitality's portfolio diversification across 37 states and the District of Columbia is a strength, reducing risk associated with regional economic downturns.
• The company's focus on industry-leading brands like Marriott, Hilton, and Hyatt is consistent with strategies of other successful hotel REITs.

Stakeholder Impact

• Shareholders may view the acquisition and disposition positively as it reflects active portfolio management.
• Employees at the acquired hotel will become part of the Apple Hospitality team.
• Customers in Madison will have access to a new upscale hotel option.
• The sale of the Greensboro property may impact employees and customers at that location.

Next Steps

• The company will continue to evaluate opportunities to acquire and dispose of properties.
• The company anticipates acquiring the Motto by Hilton in Nashville in late 2025, subject to certain conditions.

Key Dates

Keywords

REIT, hotel, acquisition, disposition, real estate, hospitality, Embassy Suites, SpringHill Suites, Madison, Greensboro, Nashville