Apple Hospitality Reit, Inc. · NYSE:APLE
Apple Hospitality Reit — Investor Presentation (September 2016)
45 slides from Apple Hospitality Reit's investor presentation, Sep 12, 2016
Slide 1: Investor Presentation
§ — @ APPLE HOSPITALITY REIT Investor Presentation September 2( NYSE:APLE
Slide 2: Forward-Looking Statements
APPLE HOSPITALITY 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 substantia
Slide 3: Company Profile
APPLE HOSPITALITY COMPANY PROFILE Ce) States 96 msas | 236 Hotels # | 30, 298 Guestrooms 4 YIS. Average Effective Age 3 .OX Net Debt/Adjusted EBITDA $4.4 Billion Equity Market Cap . A te ResidencednmeBurbonk, CA a P Note: Statistics as of August 31, 2016 and include Apple REIT Ten. Net Debt/Adjusted
Slide 4: High Quality Portfolio
4 APPLE HOSPITALITY HIGH QUALITY PORTFOLIO Stemi. | eit ae SPRINGHILL SUITES. Burbank, CA 170 Keys HAMPTONGININ & SUITES Phoenix, AZ 125 Keys
Slide 5: Equity Market Capitalization
APPLE HOSPITALITY EQUITY MARKET CAPITALIZATION ($ millions) Mmmm «Upscale MEE Upper Upscale MEE Apple Hospitality $13,199 $4,383 $3,173 $3,008 $2,902 $2,161 $2,127 ¢y 919 $1,248 $983 $829 $795 $670 HST PLE!) LHO SHO RU PEB DRH XHR INN FCH HT CLOT AHT Largest select service public lodging REIT with a
Slide 6: Acquired Highly Complementary Apple REIT Ten Portfolio 9/1/16
APPLE HOSPITALITY ACQUIRED HIGHLY COMPLEMENTARY APPLE REIT TEN PORTFOLIO 9/1/16 Strengthens position as the largest upscale select service focused lodging REIT Further diversifies broad geographically diversified portfolio Significant growth while maintaining an upscale select service portfolio with
Slide 7: Management Team with Deep Industry Experience Over Multiple Hotel Cycles
APPLE HOSPITALITY MANAGEMENT TEAM WITH DEEP INDUSTRY EXPERIENCE OVER MULTIPLE HOTEL CYCLES + Average executive tenure with the Apple REIT Companies is more than 14 years * Established and operated 8 public hospitality REITs * Raised and invested approximately $7 billion in hotel assets * Purchased o
Slide 8: Proven Investment Strategy
APPLE HOSPITALITY PROVEN INVESTMENT STRATEGY i] HHILTON 3 0 MARRIOTT Hire brand leading Strategically SnesT TM reinvest in assets to Concentrate on Pursue broad Partner with the enhance : Maintain a strong, ' f establish and , Upscale, rooms geographic best brands in that performance aa flexible bal
Slide 9: Why Rooms Focused Product?
APPLE HOSPITALITY WHY ROOMS FOCUSED PRODUCT? Strong Simple, : , Consumer Efficient High ee 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 extended sta
Slide 10: Efficient Hotel Operations
4 @ APPLE HOSPITALITY REIT EFFICIENT HOTEL OPERATIONS YTD 6/30/16 Hotel EBITDA Margin and RevPAR Comparison MEE Upscale Upper Upscale A2% MEE = Apple Hospitality 39% 39% 37% 34% 38% = 33% «= 33% any 30% 30% =~ 290 $210 7 $178 $162 | 150 $178 $106. clot) APLE" INN RU HT AHT = XHR-~=—s« LHO.--”—CO*EBS
Slide 11: Geographic Diversity
APPLE HOSPITALITY | GEOGRAPHIC DIVERSITY Adjusted Hotel EBITDA contribution by market type Urban 22% Airport 7% Interstate 3% Resort Suburban 59% 4% Small Metro 5% Disciplined strategy of investing in ‘ urban, high end suburban, and de — developing markets where diverse demand generators and proximi
Slide 12: Concentrated Brand Ownership
APPLE HOSPITALITY CONCENTRATED BRAND OWNERSHIP Ranked among top five largest owners for both Hilton® and Marriott® HOMER] A HILTON C COURTYARD arnott WORLDWIDE _| MARRIOTT 50%, cS 50%, BB Upscale BB Upper Midscale R RENAISSANCE 1) Upper Upscale Residence Va arnott i) Hilton (1) Statistics are based
Slide 13: Why Marriott & Hilton?
APPLE HOSPITALITY WHY MARRIOTT® & HILTON ©2 Institutional Brands J foster strong resale market, financing flexibility and investor confidence [RRRRMI Premier System Standards drive consistent quality, 7 @ award winning service, innovative design, and modern amenities Brand Channels Deliver Guests ap
Slide 14: Benefits of Concentrated Brand Strategy
4 APPLE HOSPITALITY BENEFITS OF CONCENTRATED BRAND STRATEGY One of the largest owners of Expe rfl se Hilton® & Marriot® Upscale hotels Unparalleled representation on Brand Advisory Boards with management serving on 7 boards Influence 14
Slide 15: History of Apple REIT Brand Ownership
APPLE HOSPITALITY HISTORY OF APPLE REIT BRAND OWNERSHIP Embassy Suites by Hilton® 2) 2) Hampton Inn by Hilton® and Hampton Inn & Suites by Hilton® 52 36 Hilton® 1 ] Hilton Garden Inn® 58 Al Home? Suites by Hilton® 6 6 Homewood Suites by Hilton® 62 34 Courtyard by Marriot® 62 39 Fairfield Inn by Marr
Slide 16: High Quality Operators
APPLE HOSPITALITY HIGH QUALITY OPERATORS tt portfolio operated by 34 party property managers 93% of 34 party property management contracts are on m independent of brand management 2? award winning operating companies provide a platform for comparative analytics and shared best practices 23% average
Slide 17: Management Contract Transformation
APPLE HOSPITALITY MANAGEMENT CONTRACT TRANSFORMATION Original Structure New Structure M Variable Management Fee Base l|anagement Fee 2.5% - 3.5% of Revenues Typically 3% of Revenues Sliding scale tied to hotel specific + balanced scorecard goals/performance compared to other participating hotels. In
Slide 18: Well Maintained Portfolio
APPLE HOSPITALITY WELL MAINTAINED PORTFOLIO Quality Portfolio with Average Effective Age of 4 Years." ...the Result of Consistent Reinvestment... * Neer $455 $385 $313 $239 $181 $115 $139 2010 2011 2012 2013 2014 2015 2016 Forecast Years since built or last renovated Cumulative CapEx ($ in millions)
Slide 19: REIT Ten Merger Overview
APPLE HOSPITALITY APPLE REIT TEN MERGER OVERVIEW (Merger Closed 9/1/16) is Pro Forma W APPLE HOSPITALITY REIT Apple =e Ten Combined Company'4) Enterprise Value!) $4.4 billion $1.3 billion $5.7 billion Equity Market Cap!") $3.4 billion $1.0 billion $4.4 billion Hotels (as of 8/31/16} 180 56 236 Guest
Slide 20: Pro Forma Combined Capitalization
APPLE HOSPITALITY PRO FORMA COMBINED CAPITALIZATION Pro Forma Combined Company has a conservative and flexible balance sheet with a Net Debt / 2016E Pro Forma Adjusted EBITDA of 3.0x Pro Forma Combined Capitalizati {in thousands, excep! per share amounts} Transaction Pro Forma Combined Apple Hospita
Slide 21: Flexible Balance Sheet
APPLE HOSPITALITY FLEXIBLE BALANCE SHEET 3.0X Net Debt / 2016 Estimated Pro Forma Adjusted EBITDA BT MATURITY SCHEDULE (1) 2) ($ in millions) Hotels: 1 Keys: 130 Rale 4.2% Hotels: 20 Term loan Keys: 3,056 Rate: 2.8%!) Rate: 4.5% Hoes. Term loan fotels: Rate: 3.19%! ian Keys: 180 cs oles: Rale: 4.8%
Slide 22: Positive Industry Fundamentals
APPLE HOSPITALITY POSITIVE INDUSTRY FUNDAMENTALS US Hotel Forecast % Change vs. Prior Year STR CBRE PwC STR CBRE PwC Supply 16°20 IGeomN nT zal (Zt072m TON NO Demand 1.6% 1.7% 1.4% 1.6% 1.8% 1.5% RevPAR Can | ies | es | Ane | ies | eee 22 Source: Smith Travel Reseorch [STR] August 2016; CBRE Hotel H
Slide 23: Comparable Hotels Financial Highlights
APPLE HOSPITALITY COMPARABLE HOTELS FINANCIAL HIGHLIGHTS ($ in thousands except statistical data) Three Months Ended June 30, Six Months Ended June 30, 2016 2015 aakies 2016 2015 aaktice RevPAR $113.59 $108.09 5.1% $106.13 $101.53 45% Revenue $257,589 $244,511 5.3% $482,173 $459,984 48% Adjusted Hot
Slide 24: 2016 Guidance
APPLE HOSPITALITY 2016 GUIDANCE low High Comparable Hotels RevPAR Growth!) 2.0% 4.0% Adjusted EBITDA?) $370 million $390 million Note: The Company's achievement of the current outlook is subject to risks and uncertainties, including those disclosed in the Company’s filings with the Securities and Ex
Slide 25: Corporate Governance Aligns with Shareholders
APPLE HOSPITALITY 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% of
Slide 26: Investment Summary
APPLE HOSPITALITY INVESTMENT SUMMARY Focused on Performance Management team with extensive transaction and operations experience Strong regional and national operators Analytical approach to drive property level results Scale to negotiate attractive national contracts Structured fo Reduce Risk Exclu
Slide 27: Appendix
4 & APPLE HOSPITALITY REIT APPENDIX
Slide 28: Company Overview
APPLE HOSPITALITY COMPANY OVERVIEW ENTITY EXCHANGE: TICKER DIVIDEND YIELD at 8/31/2016 EXEC! (1] Proforma including Apple REIT Ten, Inc., merger closed 9/1/16. (2) See following pages for reconciliation to nel income year to date 6/30/16. Apple Hospitality REIT, Inc. NYSE: APLE 6.1% yield, annual ra
Slide 29: Consolidated Balance Sheets
APPLE HOSPITALITY APPLE HOSPITALITY REIT, INC. CONSOLIDATED BALANCE SHEETS {in thousands, except share data) June 30, December 31, 2016 2015 (Unaudited) Assets Investment in real estate, net of accumulated depreciation of $489,860 and $423,057, respectively $ 3,603,695 $ 3,641,767 Cash and cash equi
Slide 30: Consolidated Statements of Operations and Comprehensive Income
APPLE HOSPITALITY APPLE HOSPITALITY REIT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME [in thousands, except per share data) (Unaudited) Three Months Ended June 30, ZOIS 2015 2015 Revenues: Room $ 237,340 $ 214,991 $ 443,490 $ 407,004 Other 20,296 19,383 38,633 37,722 Total re
Slide 31: Reconciliation of GAAP Net Income to EBITDA, Adjusted EBITDA and Adjusted Hotel EBITDA
APPLE HOSPITALITY THE FOLLOWING TABLE RECONCILES THE COMPANY’S GAAP NET INCOME TO EBITDA, ADJUSTED EBITDA AND ADJUSTED HOTEL EBITDA FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (Unaudited) {in thousands} Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Net incom
Slide 32: Reconciliation of GAAP Net Income to FFO and MFFO
APPLE HOSPITALITY THE FOLLOWING TABLE RECONCILES THE COMPANY'S GAAP NET INCOME TO FFO AND MFFO FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (Unaudited) {in thousands) Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Net income $ 54,718 $ 44,245 $ 89,404 $ 88,112
Slide 33: Comparable Hotels Operating Metrics and Statistical Data
APPLE HOSPITALITY APPLE HOSPITALITY REIT, INC. COMPARABLE HOTELS OPERATING METRICS AND STATISTICAL DATA (Unaudited) {in thousands except statistical data) Three Months Ended Six Months Ended June 30 june 30, 2016 2015 % Change 2016 2015 Change Room revenue $ 237,340 $= 224,168 5.9% $ 443,490 $ 418,8
Slide 34: Comparable Hotels Quarterly Operating Metrics and Statistical Data
APPLE HOSPITALITY APPLE HOSPITALITY REIT, INC. COMPARABLE HOTELS QUARTERLY OPERATING METRICS AND STATISTICAL DATA (Unaudited) (in thousands except statistical data) Three Months Ended 9/30/2014 _ 12/31/2014 3/31/2015 6/30/2015 9/30/2015 12/31/2015, 3/31/2016 6/30/2016 Room revenue $ 210,503 $ 179,87
Slide 35: Comparable Hotels Operating Metrics by Region, Three Months
APPLE HOSPITALITY APPLE HOSPITALITY AND APPLE REIT TEN COMPARABLE HOTELS OPERATING METRICS BY REGION THREE MONTHS ENDED JUNE 30 (Unaudited) % of Adjusted Region/State Occupane Average Daily Rate RevPAR Hotel EBITDA, #ofHotels _Q2 2016 Q22015 %Change __Q22016_Q2201S %Change __Q2 2016 _Q2201S %Change
Slide 36: Comparable Hotels Operating Metrics by Region, Three Months
APPLE HOSPITALITY APPLE HOSPITALITY AND APPLE REIT TEN COMPARABLE HOTELS OPERATING METRICS BY REGION THREE MONTHS ENDED JUNE 30 (Unaudited) % of Adjusted Region/State Oceupane Average Daily Rate RevPAR Hote! EBITDA #ofHotels _Q2 2016 Q22015 %Change _Q22016 Q22OIS %Change __Q22OIS Q22015 %Change __Q2
Slide 37: Comparable Hotels Operating Metrics by Region, Six Months
APPLE HOSPITALITY APPLE HOSPITALITY AND APPLE REIT TEN COMPARABLE HOTELS OPERATING METRICS BY REGION SIX MONTHS ENDED JUNE 30 (Unaudited) % of Adjusted Region/State Occupane Average Daily Rate RevPAR Hotel EBITDA # of Hotels YTD 2016 YTD 2015 _% Change YTD 2016 YTD 2015 _% Change YTD 2016 YTD 2015 _
Slide 38: Comparable Hotels Operating Metrics by Region, Six Months
APPLE HOSPITALITY APPLE HOSPITALITY AND APPLE REIT TEN COMPARABLE HOTELS OPERATING METRICS BY REGION SIX MONTHS ENDED JUNE 30 (Unaudited) % of Adjusted Region/State Occupane Average Daily Rate RevPAR Hotel EBITDA #ofHotels YTD 2016 _YID2015 %Change _YID 2016 YID2015 %Change YTD 2016 YTD 2015 %Change
Slide 39: Comparable Hotels Operating Metrics by Chain Scale, Three Months
APPLE HOSPITALITY APPLE HOSPITALITY AND APPLE REIT TEN COMPARABLE HOTELS OPERATING METRICS BY CHAIN SCALE THREE MONTHS ENDED JUNE 30. (Unaudited) % of Adjusted Chain Scale/Brand Occupane) Average Daily Rate RevPAR Hotel EBITDA #ofHolels _@Q2 2016 _Q22015 %Change _Q2 2016 _Q22015 %Change _@22016_Q220
Slide 40: Comparable Hotels Operating Metrics by Chain Scale, Six Months
APPLE HOSPITALITY APPLE HOSPITALITY AND APPLE REIT TEN COMPARABLE HOTELS OPERATING METRICS BY CHAIN SCALE SIX MONTHS ENDED JUNE 30 (Unaudited) % of Adjusted Chain Scale/Brand Occupane) Average Daily Rate RevPAR Hotel EBITDA #ofHolels YTD 2016 YTD 2015 _%Change YTD. 2016 YTD 2015 %Change YTD 2016 YTD
Slide 41: Management Companies
APPLE HOSPITALITY MANAGEMENT COMPANIES TOP 11 APPLE HOSPITALITY OPERATORS AS OF SEPTEMBER 1, 2016 Apple Total #of SF Apple Hospitaliy's Reville Company Properties (1) Hospitality % of 6 oy Name Portfolio (2) Operator's 100% of Apple Hospitality’s portfolio Portfolio (2) operated by 34 party property
Slide 42: Definitions
APPLE HOSPITALITY DEFINITIONS 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, Depre
Slide 43: Definitions (Continued)
APPLE HOSPITALITY DEFINITIONS (CONTINUED) FEO 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 {computed in accordance with generally accepted accounting p
Slide 44: Trademark Information
APPLE HOSPITALITY TRADEMARK INFORMATION “Courtyard by Marriot®,” “Fairfield Inn by Marriot®,” “Fairfield Inn & Suites by Marriot®,” “Marriott® Hotels,” “Renaissance® Hotels,” “Residence Inn by Marriott®,” “SpringHill Suites by Marriot®,” and “TownePlace Suites by Marriott®” are each a registered tra
Slide 45: Contact Information
APPLE HOSPITALITY CONTACT INFORMATION 814 East Main Street Richmond, VA 23219 (804) 344-8121 www.applehospitalityreit.com
Apple Hospitality REIT — Investor Presentation (September 2016) on 6ix