Apple Hospitality REIT(APLE) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's analysis of financial condition and operations Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with detailed notes on accounting policies and financial positions Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific points in time | Metric (in thousands) | September 30, 2024 | December 31, 2023 | | :-------------------- | :----------------- | :---------------- | | Total Assets | $5,021,803 | $4,937,298 | | Total Liabilities | $1,724,934 | $1,613,317 | | Total Shareholders' Equity | $3,296,869 | $3,323,981 | - Total Assets increased by approximately $84.5 million, driven primarily by an increase in Investment in real estate, net[4] - Total Liabilities increased by approximately $111.6 million, mainly due to an increase in Debt, net[4] Consolidated Statements of Operations and Comprehensive Income This section details the company's revenues, expenses, net income, and comprehensive income over specific periods | Metric (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenue | $378,843 | $358,260 | $1,098,432 | $1,031,344 | | Total Expense | $301,117 | $281,965 | $873,791 | $822,773 | | Operating Income | $77,726 | $76,295 | $242,856 | $208,571 | | Net Income | $56,266 | $58,512 | $184,247 | $156,724 | | Basic and Diluted Net Income per Common Share | $0.23 | $0.26 | $0.76 | $0.68 | - Total revenue increased by 5.7% for the three months and 6.5% for the nine months ended September 30, 2024, compared to the same periods in 2023[5] - Net income decreased by 3.8% for the three months but increased by 17.6% for the nine months ended September 30, 2024, year-over-year[5] Consolidated Statements of Shareholders' Equity This section outlines changes in the company's equity, including common stock, retained earnings, and other comprehensive income | Metric (in thousands) | September 30, 2024 | December 31, 2023 | | :-------------------- | :----------------- | :---------------- | | Total Shareholders' Equity | $3,296,869 | $3,323,981 | | Common Stock, Amount | $4,772,759 | $4,794,804 | | Accumulated Other Comprehensive Income | $4,792 | $20,404 | | Distributions Greater Than Net Income | $(1,480,682) | $(1,491,227) | - Shareholders' equity decreased from $3,323,981 thousand at December 31, 2023, to $3,296,869 thousand at September 30, 2024, primarily due to common shares repurchased and interest rate derivatives[7][8] - Common shares outstanding decreased from 241,515,532 at December 31, 2023, to 239,925,065 at September 30, 2024[4] Consolidated Statements of Cash Flows This section reports the cash generated and used by the company's operating, investing, and financing activities | Metric (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $310,145 | $302,164 | | Net Cash Used in Investing Activities | $(216,870) | $(86,095) | | Net Cash Used in Financing Activities | $(98,176) | $(190,518) | | Net Change in Cash, Cash Equivalents and Restricted Cash | $(4,901) | $25,551 | - Operating cash flow increased slightly year-over-year, while investing activities saw a significant increase in cash used, primarily due to hotel acquisitions[9] - Financing activities used less cash in 2024 compared to 2023, mainly due to higher net proceeds from revolving credit facility and term loans[9] Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements 1. Organization and Summary of Significant Accounting Policies This section describes the company's structure, business, and key accounting principles applied in financial reporting - Apple Hospitality REIT, Inc. is a self-advised REIT investing in income-producing lodging real estate in the U.S., owning 224 hotels (30,068 guest rooms) in 37 states and D.C. as of September 30, 2024[10] - The unaudited consolidated financial statements are prepared in accordance with Form 10-Q, using GAAP, and include normal recurring accruals[11] - New accounting standards (ASU No. 2023-07 Segment Reporting and ASU No. 2023-09 Income Taxes) are expected to impact disclosures but not the consolidated financial statements[14][16] 2. Investment in Real Estate This section details the company's real estate portfolio, including acquisitions, dispositions, and carrying values | Investment Category (in thousands) | September 30, 2024 | December 31, 2023 | | :--------------------------------- | :----------------- | :---------------- | | Land | $844,711 | $828,868 | | Building and improvements | $5,095,351 | $4,917,105 | | Furniture, fixtures and equipment | $602,212 | $571,026 | | Total Gross Investment | $6,670,089 | $6,440,316 | | Investment in real estate, net | $4,873,083 | $4,777,374 | - The Company acquired two hotels during the nine months ended September 30, 2024, for a gross purchase price of $196.3 million, adding 496 guest rooms[19][20] - As of September 30, 2024, the Company had one outstanding contract for the potential purchase of a hotel in Nashville, Tennessee, for approximately $98.2 million, expected to be completed in late 2025[23] 3. Assets Held for Sale and Dispositions This section reports on properties classified as held for sale and the financial impact of hotel dispositions - One hotel was classified as held for sale as of September 30, 2024, with an expected sale in November 2024 for $3.1 million, resulting in a $2.3 million impairment loss[24][27] - During the nine months ended September 30, 2024, the Company sold three hotels for a combined gross sales price of approximately $40.6 million, realizing a combined gain of $18.2 million[25] - A portion of the proceeds from two hotel sales in February 2024 was used for a like-kind exchange for the AC Hotel in Washington, D.C., deferring $15.1 million in taxable gains[26] 4. Debt This section provides a comprehensive overview of the company's debt structure, including credit facilities, term loans, and mortgages | Debt Category (in thousands) | September 30, 2024 | December 31, 2023 | | :--------------------------- | :----------------- | :---------------- | | Revolving credit facility | $110,500 | $- | | Term loans and senior notes, net | $1,134,667 | $1,088,904 | | Mortgage debt, net | $256,022 | $282,590 | | Total Debt, net | $1,501,189 | $1,371,494 | | Debt Type (in thousands) | September 30, 2024 | Percentage | December 31, 2023 | Percentage | | :----------------------- | :----------------- | :--------- | :---------------- | :--------- | | Fixed-rate debt | $1,116,514 | 74% | $1,228,002 | 89% | | Variable-rate debt | $390,500 | 26% | $150,000 | 11% | | Weighted-average interest rate of debt | 4.87% | | 4.26% | | - The Company has a $1.2 billion credit facility, a $225 million term loan facility, a $130 million term loan facility (increased from $85 million in July 2024), an $85 million term loan facility, and $50 million and $75 million senior notes facilities[32][34][35][36][37][38] - The Company was in compliance with all applicable debt covenants as of September 30, 2024[42] 5. Fair Value of Financial Instruments This section discusses the fair value measurements of financial instruments, particularly debt and interest rate derivatives - The fair value of the Company's debt approximated its carrying value of $1.5 billion as of September 30, 2024[46] - The Company uses interest rate swaps to manage variable-rate debt risk, effectively fixing interest payments, with 12 active swaps covering $735.0 million of variable-rate debt as of September 30, 2024[47][48] - Approximately $6.1 million of net unrealized gains from cash flow hedges are expected to be reclassified as a decrease to interest and other expense within the next 12 months[49] 6. Related Parties This section discloses transactions and relationships with entities and individuals considered related parties to the company - The Company engages in transactions with related parties, including Apple Realty Group, Inc. (ARG), owned by the Executive Chairman, for support services[50][51] - ARG reimbursed the Company approximately $1.0 million for support services during the nine months ended September 30, 2024, recorded as a reduction to general and administrative expenses[52] - The Company also utilizes aircraft owned by an entity of its Executive Chairman, reimbursing at third-party rates, with costs less than $0.1 million for the nine months ended September 30, 2024[55] 7. Shareholders' Equity This section details changes in shareholders' equity, including distributions, share repurchases, and capital activities - The Company paid distributions of $0.24 per common share for the three months and $0.77 per common share for the nine months ended September 30, 2024, totaling $57.7 million and $185.9 million, respectively[56] - The Board of Directors approved a one-year extension of the Share Repurchase Program in May 2024, authorizing repurchases up to $335.4 million[58] - During the nine months ended September 30, 2024, the Company repurchased approximately 2.4 million common shares for $34.7 million, with $300.8 million remaining available under the program as of September 30, 2024[58] 8. Compensation Plans This section outlines the company's executive and employee compensation plans, including incentive awards and related expenses - The 2024 Incentive Plan for executive management is based 50% on operational performance goals (RevPAR growth, Adjusted Hotel EBITDA margin, Adjusted EBITDAre, MFFO per share, capital expenditures) and 50% on shareholder return metrics[59][60] - As of September 30, 2024, approximately $10.4 million was accrued for potential executive incentive compensation payments under the 2024 Incentive Plan[60] - Compensation expense recognized under the 2024 Incentive Plan was $2.4 million for the three months and $10.4 million for the nine months ended September 30, 2024[60] 9. Subsequent Events This section reports significant events that occurred after the balance sheet date but before the financial statements were issued - On October 15, 2024, the Company paid $19.2 million ($0.08 per common share) in distributions to shareholders[65] - On October 18, 2024, a monthly cash distribution of $0.08 per common share was declared, payable on November 15, 2024[65] - In October 2024, the Company entered into agreements to sell three hotels for a combined gross sales price of $28.0 million, with sales expected in late 2024 or early 2025[66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, including an overview of its business, recent hotel portfolio activities, detailed analysis of hotel operations, revenues, and various expenses. It also discusses non-GAAP financial measures, the current hotel portfolio, related party transactions, liquidity and capital resources, and the impact of external factors like inflation and seasonality Forward-Looking Statements This section highlights statements about future expectations, risks, and uncertainties that may affect the company's performance - The report contains forward-looking statements regarding acquisitions, dispositions, distributions, capital funding, operating strategy, and market conditions[68][69] - These statements involve known and unknown risks and uncertainties, including economic conditions, geopolitical uncertainty, health concerns, natural disasters, and changes in real estate markets or regulations[69] Overview This section provides a general description of the company's business, structure, and hotel portfolio - Apple Hospitality REIT, Inc. is a self-advised REIT focused on income-producing lodging real estate in the U.S.[71] - As of September 30, 2024, the Company owned 224 hotels (30,068 guest rooms) across 37 states and D.C., primarily operating under Marriott or Hilton brands[71] - Hotels are managed by 16 unaffiliated hotel management companies, and the Company's common shares are listed on the NYSE under 'APLE'[71] Recent Hotel Portfolio Activities This section details recent acquisitions, dispositions, and other significant changes to the company's hotel portfolio - During the nine months ended September 30, 2024, the Company acquired two hotels for $196.3 million: an AC Hotel in Washington, D.C., and an Embassy Suites in Madison, Wisconsin[72] - The Company sold three hotels for approximately $40.6 million, resulting in an $18.2 million gain, with proceeds used for acquisitions and general corporate purposes[74] - An operating lease for a New York boutique hotel is under legal proceedings due to the operator's failure to make payments, with the Company intending to transition management[76] Hotel Operations This section analyzes key operational metrics for the company's hotels, including ADR, occupancy, and RevPAR - As of September 30, 2024, the Company owned 224 hotels (30,068 guest rooms), compared to 220 hotels (28,929 guest rooms) as of September 30, 2023[77] | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | ADR | $162.57 | $159.36 | $159.78 | $157.61 | | Occupancy | 77.0% | 77.1% | 76.3% | 75.8% | | RevPAR | $125.10 | $122.91 | $121.84 | $119.48 | - Comparable Hotels (223 hotels) showed a 0.8% increase in RevPAR for the three months and 1.1% for the nine months ended September 30, 2024, year-over-year[81] - Same Store Hotels (215 hotels) reported a 0.6% increase in RevPAR for the three months and 0.8% for the nine months ended September 30, 2024, year-over-year[84] Revenues This section discusses the drivers and trends in the company's total revenue for the reported periods | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenue | $378.8 | $358.3 | $1,100 | $1,000 | - Revenue growth was driven by additional hotel acquisitions in 2023 and 2024 and increased business transient demand[86] - Leisure demand showed increased rate sensitivity, and midweek rate growth was lower than weekend rates, impacting overall ADR growth[86] Hotel Operating Expense This section analyzes the components and trends of hotel operating expenses, including labor and maintenance costs | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Hotel Operating Expense | $219.9 | $203.7 | $633.5 | $589.4 | | % of Total Revenue | 58.1% | 56.9% | 57.7% | 57.1% | - Increases in hotel operating expense were due to additional hotel acquisitions and amplified by increased labor costs, repairs and maintenance, and sales and marketing costs driven by inflationary pressures[87] - The Company anticipates a slightly more favorable operating expense environment for the remainder of 2024 as inflationary pressures moderate[87] Property Taxes, Insurance and Other Expense This section details expenses related to property taxes, insurance, and other miscellaneous operating costs | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Property Taxes, Insurance and Other Expense | $20.9 | $21.7 | $63.9 | $61.3 | | % of Total Revenue | 5.5% | 6.1% | 5.8% | 5.9% | - The decrease for the three months was primarily due to a state franchise tax refund from legislative changes[88] - The increase for the nine months was mainly due to higher casualty insurance premiums and property taxes in some locations, partially offset by successful tax assessment appeals and the tax refund[88] General and Administrative Expense This section discusses the trends and components of general and administrative expenses, including compensation costs | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | General and Administrative Expense | $9.2 | $11.1 | $30.8 | $34.6 | | % of Total Revenue | 2.4% | 3.1% | 2.8% | 3.4% | - Decreases in G&A expense were primarily due to reduced accruals for executive incentive compensation, partially offset by increased payroll and related benefit costs[89] Loss on Impairment of Depreciable Real Estate Assets This section reports on impairment losses recognized on real estate assets identified for potential sale - A loss on impairment of depreciable real estate assets of approximately $2.9 million was recognized for the three and nine months ended September 30, 2024[90] - This loss was due to two properties identified for potential sale in the third quarter of 2024, with one already classified as held for sale[90] Depreciation and Amortization Expense This section details the depreciation and amortization expenses related to the company's real estate investments | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Depreciation and Amortization Expense | $48.1 | $45.5 | $142.7 | $137.4 | - Increases were primarily due to acquisitions of six hotels and one parking garage in 2023, two hotels in 2024, and renovations, partially offset by three hotel sales in 2024[91] Interest and Other Expense, net This section analyzes interest expenses, other financial costs, and their impact on net income | Metric (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest and Other Expense, net | $21.2 | $17.5 | $57.9 | $51.0 | - Interest expense increased due to higher average borrowings on variable-rate debt and higher average interest rates in the current inflationary environment[93] - The proportion of fixed-rate debt decreased as six interest rate swaps matured in 2024, while four new swaps were entered into at higher fixed rates[93] Non-GAAP Financial Measures This section presents and reconciles non-GAAP financial measures used by management to evaluate performance FFO and MFFO This section defines and presents Funds from Operations (FFO) and Modified Funds from Operations (MFFO) - FFO (Funds from Operations) is calculated per Nareit standards, excluding gains/losses from real estate sales, extraordinary items, and accounting changes, plus real estate depreciation, amortization, and impairments[95] - MFFO (Modified Funds from Operations) further adjusts FFO by excluding amortization of finance ground lease assets, favorable/unfavorable operating leases, and non-cash straight-line operating ground lease expense[96] | Metric (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income | $56,266 | $58,512 | $184,247 | $156,724 | | Funds from Operations | $106,545 | $103,246 | $309,322 | $291,829 | | Modified Funds from Operations | $107,439 | $104,139 | $312,008 | $294,497 | EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA This section defines and presents various EBITDA metrics used to assess operational performance - EBITDA is net income excluding interest, income taxes, depreciation, and amortization, used to evaluate ongoing operating performance[98] - EBITDAre, per Nareit standards, further excludes gains/losses from real estate sales and includes real estate related impairments[99] | Metric (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income | $56,266 | $58,512 | $184,247 | $156,724 | | EBITDA | $125,971 | $121,892 | $385,843 | $346,250 | | EBITDAre | $128,867 | $121,892 | $370,524 | $346,250 | | Adjusted EBITDAre | $128,900 | $121,927 | $370,626 | $346,359 | | Adjusted Hotel EBITDA | $139,088 | $132,161 | $400,561 | $380,154 | Hotels Owned This section provides a detailed listing and breakdown of the company's hotel portfolio by brand and location - As of September 30, 2024, the Company owned 224 hotels with 30,068 guest rooms across 37 states and D.C.[105] | Brand | Number of Hotels | Number of Guest Rooms | | :---------------- | :--------------- | :-------------------- | | Hilton Garden Inn | 40 | 5,593 | | Hampton | 36 | 4,831 | | Courtyard | 35 | 4,982 | | Residence Inn | 30 | 3,695 | | Homewood Suites | 29 | 3,291 | | Fairfield | 10 | 1,213 | | Home2 Suites | 10 | 1,146 | | SpringHill Suites | 9 | 1,463 | | TownePlace Suites | 9 | 931 | | Embassy Suites | 4 | 770 | | AC Hotels | 4 | 702 | | Hyatt Place | 3 | 411 | | Marriott | 2 | 619 | | Hyatt House | 2 | 264 | | Aloft Hotels | 1 | 157 | | Total | 224 | 30,068 | - The largest concentrations of hotels by state are in California (26 hotels, 3,722 rooms), Texas (27 hotels, 3,328 rooms), and Florida (22 hotels, 2,844 rooms)[105] Related Parties This section discloses transactions and relationships with entities and individuals considered related parties to the company - The Company engages in related party transactions, including support services provided to Apple Realty Group, Inc. (ARG), owned by the Executive Chairman[114] - These transactions are not at arm's length, and the results of operations may differ if conducted with non-related parties[114] Liquidity and Capital Resources This section discusses the company's sources and uses of cash, capital structure, and financial flexibility Capital Resources This section outlines the company's available sources of funds for short-term and long-term needs - Principal short-term liquidity sources are operating cash flows and the Revolving Credit Facility[115] - Long-term liquidity may come from debt financing, property dispositions, and common share offerings (including a $500 million at-the-market program)[115][120] - As of September 30, 2024, the Company had $6.1 million in corporate cash and $539.5 million available under its Revolving Credit Facility[116] Capital Uses This section details the anticipated expenditures and commitments requiring capital from the company - Anticipated liquidity requirements include share repurchases, capital improvements, debt service, hotel acquisitions, lease commitments, cash management, and shareholder distributions[121] Distributions This section explains the company's dividend policy and requirements for maintaining REIT status - The Company must distribute at least 90% of its REIT taxable income annually to maintain REIT status[122] - Current annual distribution rate is $0.96 per common share, payable monthly at $0.08 per share[123] - The Company may use its Revolving Credit Facility to maintain consistent monthly distributions, subject to Board approval and other cash requirements[123] Share Repurchases This section reports on the company's share repurchase program and related activities - The Share Repurchase Program, extended in May 2024, authorizes repurchases up to $335.4 million and ends in July 2025[124] - During the nine months ended September 30, 2024, approximately 2.4 million common shares were repurchased for $34.7 million[124] - Repurchases are funded by cash on hand, disposition proceeds, or unsecured credit facilities, with $300.8 million remaining available as of September 30, 2024[124] Capital Improvements This section details planned and actual capital expenditures for property renovations and enhancements - The Company invested approximately $47.7 million in capital expenditures during the nine months ended September 30, 2024[125] - Anticipated capital expenditures for 2024 are $75 million to $85 million, including comprehensive renovations for about 20 properties[125] - No existing or planned projects for new property development are currently underway[125] Upcoming Debt Maturities and Debt Service Payments This section outlines future debt obligations, maturities, and anticipated interest expense trends - Approximately $340.1 million in principal and interest payments are due on debt over the next 12 months, including $34.0 million in mortgages and $225.0 million in term loans maturing in Q2 and Q3 2025, respectively[126] - The Company plans to use funds from operations, Revolving Credit Facility borrowings, new financing, or refinancing to meet these obligations[126] - Interest expense is expected to be higher over the next 12 months due to increased Revolving Credit Facility borrowings and a decrease in variable-rate debt fixed by interest rate swaps[126] Purchase Contract Commitments This section discloses contractual obligations for future property acquisitions - As of September 30, 2024, the Company had one outstanding contract for a potential hotel purchase in Nashville, Tennessee, for approximately $98.2 million, expected to open in late 2025[128] - A $1.1 million contract deposit has been paid, and the Company plans to use available cash or borrowings for the purchase, though closing is subject to several conditions[128] Cash Management Activities This section describes the company's practices for managing cash flows and intercompany balances - The Company and ARG (a related party) engage in cash management activities, advancing or deferring up to $1 million, with quarterly settlements to minimize cash on hand and reduce costs[129] Impact of Inflation This section discusses how inflationary pressures affect the company's operations and pricing strategies - The Company relies on hotel operators' ability to adjust room rates daily to offset inflationary impacts on operating expenses[130] - Competitive pressures and other factors could limit rate increases, potentially preventing the Company from fully offsetting rising operating expenses[130] Business Interruption This section addresses potential risks from natural disasters and the adequacy of insurance coverage - The Company is exposed to natural disasters, but management believes it has adequate insurance coverage[131] - There is no assurance that such events will not materially adversely affect the Company's financial position or results of operations[131] Seasonality This section explains the seasonal nature of the hotel industry and its impact on financial performance - The hotel industry is seasonal, with higher occupancy and revenues typically in the second and third quarters[132] - The Company expects to use cash on hand or available financing to meet cash requirements during periods of insufficient operating cash flow due to seasonal fluctuations[132] Critical Accounting Policies and Estimates This section highlights key accounting policies and management judgments that significantly impact financial reporting - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts[133] - No material changes to critical accounting policies or the methods/assumptions applied have occurred since the 2023 Annual Report on Form 10-K[133] Subsequent Events This section reports significant events that occurred after the balance sheet date but before the financial statements were issued - On October 15, 2024, the Company paid $19.2 million ($0.08 per common share) in distributions[134] - On October 18, 2024, a monthly cash distribution of $0.08 per common share was declared, payable on November 15, 2024[134] - In October 2024, agreements were made to sell three hotels for $28.0 million, with sales expected in late 2024 or early 2025[135] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section assesses the company's exposure to market risks, primarily focusing on interest rate fluctuations and their management - As of September 30, 2024, approximately $390.5 million (26%) of the Company's total debt was subject to variable interest rates, after accounting for interest rate swaps[137] - A 100 basis point change in interest rates would impact the Company's annual net income by approximately $3.9 million[137] - The Company uses 12 interest rate swap agreements to effectively fix interest payments on approximately $735.0 million of its variable-rate debt, with maturities ranging from May 2025 to December 2029[138] | Debt Type | October - December 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | Fair Market Value | | :-------- | :---------------------- | :-------- | :-------- | :-------- | :-------- | :--------- | :---------- | :---------------- | | Total debt (Maturities in thousands) | $2,109 | $295,140 | $315,149 | $278,602 | $334,066 | $281,948 | $1,507,014 | $1,476,149 | | Average interest rates (1) | 4.9% | 4.9% | 5.0% | 5.0% | 4.4% | 3.8% | | | | Variable-rate debt (Maturities in thousands) | $- | $225,000 | $240,500 | $275,000 | $300,000 | $85,000 | $1,125,500 | $1,125,180 | | Average interest rates (1) | 5.1% | 5.2% | 5.3% | 5.3% | 4.7% | 3.0% | | | | Fixed-rate debt (Maturities in thousands) | $2,109 | $70,140 | $74,649 | $3,602 | $34,066 | $196,948 | $381,514 | $350,969 | | Average interest rates | 4.1% | 4.0% | 4.0% | 4.1% | 4.1% | 4.1% | | | Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting - The Company's disclosure controls and procedures were effective as of September 30, 2024[141] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[141] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings and equity matters Item 1. Legal Proceedings This section discloses any material legal actions or threats that could impact the company's financial position - The Company is not currently involved in any material legal proceedings[142] - No litigation is threatened that would have a material adverse effect on the Company's financial position or results[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes the Company's common share repurchases during the third quarter of 2024 under its publicly announced Share Repurchase Program | Period | Total Number of Shares Purchased | Average Price per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | :--------------------- | :------------------------------- | :---------------------- | :------------------------------------------------------------------------------- | | July 1 - July 31, 2024 | 537,296 | $14.18 | 537,296 | | August 1 - August 31, 2024 | 565,086 | $13.89 | 565,086 | | September 1 - September 30, 2024 | 264,828 | $13.94 | 264,828 | | Total | 1,367,210 | | 1,367,210 | - Approximately $300.8 million remained available under the $335.4 million Share Repurchase Program as of September 30, 2024[143] Item 5. Other Information This section covers miscellaneous disclosures, including trading arrangements and executive incentive award agreements - No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q3 2024[144] - In November 2024, the compensation committee approved a new form of Grant and Performance Award Agreement for future executive incentive awards, which will be based on operating goals and long-term metrics, settled in cash, common stock, or both[145] Item 6. Exhibits This section lists all supplementary documents and certifications filed as part of the report - Exhibits include Amended and Restated Articles of Incorporation, Third Amended and Restated Bylaws, 2024 Omnibus Incentive Plan, Form of Restricted Stock Agreement, and the new Grant and Performance Award Agreement[146] - Certifications from the CEO, CFO, and CAO under Sarbanes-Oxley Act sections 302 and 906 are filed[146] - The financial statements are provided in iXBRL format as Exhibit 101[146] Signatures This section contains the official certifications and signatures of the company's principal executive and financial officers - The report is signed by Justin G. Knight (CEO), Elizabeth S. Perkins (CFO), and Rachel S. Labrecque (CAO) on November 4, 2024[149]