Apple Hospitality Reit, Inc. · NYSE:APLE
Apple Hospitality Reit — Investor Presentation (May 2017)
39 slides from Apple Hospitality Reit's investor presentation, May 12, 2017
Slide 1: ile el:
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Slide 2: Forward-Looking Statements
& APPLE HOSPITALITY REIT FORWARD-LOOKING STATEMENTS Certain statements made in this presentation are forward-looking statements. These forward-looking statements include statements regarding our intent, belief or current expectations and are based on various assumptions. These statements involve sub
Slide 3: Company Profile
APPLE HOSPITALITY RE COMPANY PROEIE= 33 ST AC Ee a 87 MARKETS 235 HPOni bebe 29 a9 GUESTROOMS 4 yrs AGVEESR A Gee E epee Get | MibeAtGHE 25% eevee cre B. T 7: eREO A Ls Ce As Rese amesient en! aN $4.3 Billion iltoh. Garden Inn, Nashville, TN — QR) le Tener: (Mi Aries Recast ap Note: Hotel portfolio
Slide 4: High Quality Portfolio
@ wre HOSPITALITY REIT HIGH QUALITY PORTFOLIO 98% of APLE’s Hotels are Select Service or Extended Stay SpringHill Suites, Burbank, CA - ard, Frankl S —__ Hampton Inn, Cypress, CA
Slide 5: Equity Market Capitalization
& APPLE HOSPITALITY REIT EQUITY MARKET CAPITALIZATION ($ in billions) $13.8 MEE Upscale (NN Upper Upscale IEEE Apple Hospitality $5.5 $4.3 $3.4 $3.3 $2.9 eo 2 $20 $18 $15 $14 $10 goa $08 . fe be 0.6 HST PK = APLE = SHO LHO RU DRH PEB XHR INN CHSP FCH HT = CLDT = AHT Largest select service public lod
Slide 6: Proven Investment Strategy
& APPLE HOSPITALITY REIT PROVEN INVESTMENT STRATEGY 2a Debi/Capitalization Hilton MARRIOTT Hire brand leading Strategically operators and , : Concentrate on Partner with the Pursue broad enhance ee teal ad ©) Maintain a strong, Upscale, rooms best brands in that geographic performance esta 7 an flex
Slide 7: Why Rooms Focused Product?
& APPLE HOSPITALITY REIT WHY ROOMS FOCUSED PRODUCT? Strong Simple, Consumer Efficient High Margins with Lower Volatility Demand & Operating Broad Appeal Model With more than 28,000 select service and extended stay hotel rooms, Apple Hospitality is one of the largest owners of select service and exte
Slide 8: Broad Geographic Diversification
e& APPLE HOSPITALITY REIT BROAD GEOGRAPHIC DIVERSIFICATION Apple Hospitality REIT owns a property in this market Apple Hospitality REIT owns more than one property in this market Adjusted Hotel EBITDA contribution by market type Urban 22% Airport 7% Interstate 2% Resort 5% Small Metro 5% Disciplined
Slide 9: Concentrated Brand Ownership
@ wre HOSPITALITY REIT CONCENTRATED BRAND OWNERSHIP HOME fs EMBASSY SUITES IEWOOD SUITES iy HiLTON With focus on Upscale Bauer R Select Service and Garden Inn RENAISSANCE Extended Stay Residence V Inn armott \ = Upscale TOWNEPLACE = Upper Midscale SUITES: » Upper Upscale One of the largest owners fo
Slide 10: Why Marriott and Hilton?
& APPLE HOSPITALITY REIT WHY MARRIOTT® AND HILTON®? @ NA Institutional Brands Ji RevPAR Premiums Global Distribution foster strong resale market, eet service an? ; _—,, V1 240 het Fmt financing flexibility, and outperform comparable hotels \ mo! investor confidence across North America than 100 coun
Slide 11: Benefits of Concentrated Brand Strategy
& APPLE HOSPITALITY REIT BENEFITS OF CONCENTRATED BRAND STRATEGY branded hotels with concentration on efficient, rooms focused properties Exclusive ownership of Hilton® & Marriott® Scale ownership within specific brands Expe rtise yields comparable hotel operating data to benchmark and drive perform
Slide 12: Benefits of Scale Ownership
& APPLE HOSPITALITY REIT BENEFITS OF SCALE OWNERSHIP Largest Select Service Public Lodging REIT Unparalleled Access to Performance Data ¢ With current management of 235 hotels and more than 400 historically, unique ability to identify areas of opportunity and implement best practices * Unique variab
Slide 13: Efficient Hotel Operations
& APPLE HOSPITALITY REIT EFFICIENT HOTEL OPERATIONS Year end 2016 Hotel EBITDA Margin and RevPAR Comparison a UKs (NN Upper Upscale 41% IEEE Apple Hospitality 38% 38% 36% 36% 35% 6 34% 33% 33% ~«=—-33% CLDT APLE "INN RU HT PEB LHO CHSP AHT XHR DRH FCH SHO HST r —RevPAR Higher operating margins provi
Slide 14: High Quality Operators
& APPLE HOSPITALITY REIT HIGH QUALITY OPERATORS tt portfolio operated by 34 party property managers 93% (1) of 3°4 party property management contracts are = independent of brand management 2? award winning operating companies provide a platform for comparative analytics and shared best practices 23%
Slide 15: Unique Management Contract Structure
& APPLE HOSPITALITY REIT UNIQUE MANAGEMENT CONTRACT STRUCTURE Apple Hospitality’s Unique Structure Better aligns owner and manager to maximize performance in all market environments Variable Management Fee 2.5% - 3.5% of Revenues Based on Property's Balanced Scorecard Performance Balanced Scorecard
Slide 16: Well Maintained Portfolio
r APPLE HOSPITALITY REIT WELL MAINTAINED PORTFOLIO Quality Portfolio with Average Effective Age of 4 Years. ...the Result of Consistent Reinvestment... $514 $444 2011 2012 2013 2014 2015 2016 2017 Forecast Years since built or last renovated = Cumulative CapEx ($ in millions) ...Leads to Traveler Sa
Slide 17: Flexible Balance Sheet
& APPLE HOSPITALITY REIT FLEXIBLE BALANCE SHEET Debt Composition!) Debt Maturity Schedule!) ($ in millions) Hotels: 1 Keys: 130 Hotels: 23 Rate 4.1% Keys: 3,668 Term loan Rate: 4.3% Rate: 2.9%! Term loan Hotels: 2 | 3 Keys: 180 Rate: 3.19%) Rate: 4.8% Revolver Rate: 2.5% $16 v v UNENCUMBERED PORTFOL
Slide 18: Industry Fundamentals
& APPLE HOSPITALITY REIT INDUSTRY FUNDAMENTALS US Hotel Forecast % Change vs. Prior Year STR CBRE PwC SIR Supply 2.0% 2.0% 1.9% 2.2% Demand 1.7% 1.9% 1.6% 2.0% RevPAR 2.5% 3.0% 2.3% 2.6% CBRE 2.1% 1.8% 2.5% Source: Smith Travel Research (STR) February 2017; CBRE Hotel Horizons March ~ May 2017 Editi
Slide 19: Comparable Hotels Financial Highlights
@& wre HOSPITALITY REIT COMPARABLE HOTELS FINANCIAL HIGHLIGHTS ($ in thousands except statistical data) % CHANGE RevPAR 1.4% Revenue $289,191 $284,920 1.5% Adjusted Hotel $104,771 $106,738 (1.8%) EBITDA Adjusted Hotel 36.2% 37.5% (130 bps} EBITDA Margin Note: Comparable Hotels is defined as the 235
Slide 20: Corporate Governance
& APPLE HOSPITALITY REIT CORPORATE GOVERNANCE Aligns with Shareholders + Audit, Compensation and Corporate Governance Committees are independent + Regular executive sessions of independent directors + Required resignation of an incumbent director not receiving majority of votes cast in election + 80
Slide 21: Investment Summary
& APPLE HOSPITALITY REIT INVESTMENT SUMMARY Focused on Performance Management team with extensive transaction and Operations experience Strong regional and national operators Analytical data driven approach to drive property level results Scale to negotiate attractive national contracts Structured t
Slide 22: Appendix
@ APPLE HOSPITALITY REIT APPENDIX Residence Inn, Fayetteville, NC
Slide 23: Real Estate Portfolio at 4/30/2017
& APPLE HOSPITALITY REIT 7 REAL ESTATE PORTFOLIO at 4/30/2017 GEOGRAPHIC DIVERSIFICATION 2016 COMPARABLE HOTELS REVENUE!) 201 2016 CAPEX!! MANAGEMENT TEAM EXE COMPANY OVERVIEW 6 COMPARABLE HOTELS ADJUSTED HOTEL EBITDA MARGIN!) IVE TARGET COMPENSATION STI E (1) See following pages for reconciliation
Slide 24: Management Team with Deep Industry Experience
& APPLE HOSPITALITY REIT MANAGEMENT TEAM WITH DEEP INDUSTRY EXPERIENCE OVER MULTIPLE HOTEL CYCLES ¢ Average executive tenure with the Apple REIT Companies is more than 15 years ¢ Established and operated 8 public hospitality REITs * Raised and invested approximately $7 billion in hotel assets ¢ Purc
Slide 25: History of Apple REIT Brand Ownership
@ APPLE HOSPITALITY REIT HISTORY OF APPLE REIT BRAND OWNERSHIP Hilton Garden Inn® 58 Al Courtyard by Marriott® 63 40 Hampton by Hilton® 2 36 Homewood Suites by Hilton® 62 34 Residence Inn by Marriott® 102 32 SpringHill Suites by Marriott® 26 il TownePlace Suites by Marriott® 21 12 Fairfield Inn by M
Slide 26: Consolidated Balance Sheets
) APREE HOSHITALIN REIT APPLE HOSPITALITY REIT, INC. CONSOLIDATED BALANCE SHEETS. {in thousands, except share data) March 31, December 31, 2017 2016 Assets (unaudited) Investment in real estate, net of accumulated depreciation of $601,055 and $557,597, respectively $ 4,803,503 4,823,489 Assets held
Slide 27: Consolidated Statements of Operations and Comprehensive Income
© were noserauy as SEE HOSPITALITY REVE APPLE HOSPITALITY REIT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) {in thousands, except per share data} Three Months Ended March 31, 2017 2016 Revenues: Room $ 269,393 $ 206,150 Other 23,532 18,337 Total revenue 292,925 22
Slide 28: Reconciliation of Net Income to EBITDA and Adjusted Hotel EBITDA
& APPLE HOSPITALITY REIT THE FOLLOWING TABLE RECONCILES THE COMPANY'S GAAP NET INCOME (LOSS) TO EBITDA, ADJUSTED EBITDA AND ADJUSTED HOTEL EBITDA ON A QUARTERLY BASIS FROM JUNE 30, 2015 THROUGH MARCH 31, 2017 Net income (loss} Depreciation Amortization of favorable and unfavorable leases, net Intere
Slide 29: Reconciliation of Net Income to FFO and MFFO
& APPLE HOSPITALITY REIT THE FOLLOWING TABLE RECONCILES THE COMPANY'S GAAP NET INCOME TO FFO AND MFFO FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (Unaudited) (in thousands) Net income Depreciation of real estate owned Loss on impairment of depreciable real estate assets Amortization of favora
Slide 30: Comparable Hotels Operating Metrics and Statistical Data
& APPLE HOSPITALITY REIT APPLE HOSPITALITY REIT, INC. COMPARABLE HOTELS OPERATING METRICS AND STATISTICAL DATA (Unaudited) (in thousands except statistical data) Three Months Ended March 31, 2017 2016 % Change Room revenue $ 266,735 $ 262,733 1.5% Other revenue 22,456 22,187 1.2% Total revenue 289,1
Slide 31: Comparable Hotels Quarterly Operating Metrics
& APPLE HOSPITALITY REIT APPLE HOSPITALITY REIT, INC. COMPARABLE HOTELS QUARTERLY OPERATING METRICS AND STATISTICAL DATA (Unaudited) (in thousands except statistical data) Three Months Ended 6/30/2015 9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016 12/31/2016 3/31/2017, Room revenue $ 285,907 $ 2
Slide 32: Comparable Hotels Operating Metrics Top 20 Markets
@& wre HOSPITALITY REIT APPLE HOSPITALITY REIT, INC. COMPARABLE HOTELS OPERATING METRICS TOP 20 MARKETS!) THREE MONTHS ENDED MARCH 31 (Unaudited) % of Adjusted Hotel Market Occupancy ADR RevPAR EBITDA # of Hotels Q12017_Q1 2016 _% Change Q12017_@Q12016_% Change Q12017_Q1 2016 _% Change Q12017 Top 20
Slide 33: Comparable Hotels Operating Metrics by Region
& APPLE HOSPITALITY REIT APPLE HOSPITALITY REIT, INC. COMPARABLE HOTELS OPERATING METRICS BY REGION THREE MONTHS ENDED MARCH 31 (Unaudited) % of Adjusted Hotel Region Occupancy ADR RevPAR EBITDA # of Hotels —_Q1 2017 _@Q12016 %Change _Q1 2017 _Q12016 %Change _Q12017_Q12016 %Change _QI 2017 STR Regio
Slide 34: Comparable Hotels Operating Metrics by Chain Scale
& APPLE HOSPITALITY REIT APPLE HOSPITALITY REIT, INC. COMPARABLE HOTELS OPERATING METRICS BY CHAIN SCALE THREE MONTHS ENDED MARCH 31 (Unaudited) % of Adjusted Hotel Chain Scale/Brand Occupancy ADR RevPAR EBITDA # of Hotels Q12017_Q1 2016 _% Change Q12017__Q1 2016 _% Change Q12017_Q1 2016 _% Change Q
Slide 35: Management Companies
@& wre HOSPITALITY REIT MANAGEMENT COMPANIES TOP 10 APPLE HOSPITALITY OPERATORS. AS OF MARCH 3 Company Total # of Rank Name Properties("! 1 IBA 40 2. White Lodging 29 3 Dimension 24 4 McKibbon 18 5 Western 17 6 Marriott 14 7 Raymond 14 8 Newport 9 9 North Central 9 10 Vista Host g O17 % of Apple Hos
Slide 36: Definitions
& APPLE HOSPITALITY REIT DEFINITIONS GAAP Financi 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
Slide 37: Definitions (Continued)
& APPLE HOSPITALITY REIT DEFINITIONS (CONTINUED) FO and MFFO The Company calculates and presents FFO in accordance with standards established by the National Association of Real Estate Investment Trusts {NAREIT"), which defines FFO as net income (loss) (computed in accordance with generally accepted
Slide 38: Trademark Information
& APPLE HOSPITALITY REIT TRADEMARK INFORMATION “Courtyard by Marriott®,” “Fairfield Inn by Marriott®,” “Fairfield Inn & Suites by Marriot®,” “Marriot® Hotels,” “Renaissance® Hotels,” “Residence Inn by Marriott®,” “SpringHill Suites by Marriott®,” and “TownePlace Suites by Marriott®” are each a regis
Slide 39: Contact Information
& APPLE HOSPITALITY REIT CONTACT INFORMATION 814 East Main Street Richmond, VA 23219 (804) 344-8121 www.applehospitalityreit.com 39
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