EX-99.1 2 c63465_ex99-1.htm

Exhibit 99.1

(FRONT COVER)



Dear Shareholder

 

 

 

(PHOTO OF GLADE M. KNIGHT)
GLADE M. KNIGHT

 


 

 

 

I am pleased to report that hotel operations have steadily improved at the majority of hotels in the Apple REIT Six, Inc. portfolio since the beginning of 2010. Limited new supply entering the lodging market combined with an increase in demand has resulted in better year-over-year operations and I believe an overall positive environment for the hotel industry going forward.

For the three-month period ending September 30, 2010, occupancy rates among our 66 hotels with continuing operations averaged 77 percent and for the nine-month period ending September 30, 2010, 73 percent. Occupancy rates for the same periods last year were 71 percent and 67 percent, respectively. Average daily rate (ADR) was $108 for the third quarter of this year, the same as last year’s average, and $105 for the first nine months of this year, down three percent from the same period last year. Revenue per available room (RevPAR) was $83 for the third quarter of this year and $76 for the nine-month period ending September 30, 2010, up eight percent and four percent over the same periods last year, respectively. With our current positive trend in occupancy, we see opportunity for rate growth in the majority of our markets now and well into next year. Although operational performance has not reached pre-recession levels, we are pleased to report that our hotels continue to perform ahead of market averages.

 

During the third quarter of this year modified funds from operations (MFFO) totaled $21.2 million, or $0.23 per share. For the nine-month period ending September 30, 2010, MFFO totaled $56.2 million, or $0.62 per share. MFFO results for 2009 were $18.8 million and $51.7 million, respectively. During the third quarter of this year the Company paid distributions of $0.19 per share and for the nine-month period ending September 30, 2010, $0.60 per share. Following the reduction of our annualized distribution rate in March of this year from 8.2 percent to seven percent, or $0.77 per share, based on an $11 share price, the actual annualized distribution rate for 2010 will equal 7.2 percent, or $0.79 per share, based on an $11 share price. Our management team and Board of Directors continue to closely monitor hotel operations and projected long-term performance as compared to distributions.

 

In an effort to maximize shareholder value, we continually monitor the profitability of our properties. Based on changing market conditions, we have committed to sell two hotels that were underperforming and plan to redirect the capital to higher returning assets. After careful consideration, the properties to be sold are the TownePlace Suites® by Marriott® and the SpringHill Suites® by Marriott® in Tempe, Arizona. We anticipate the transaction will close during the fourth quarter of 2010. The operating results for these properties have been included in discontinued operations.

 

With industry-wide third quarter results better than anticipated, analysts are generally optimistic about the future. We believe our diversified portfolio of Marriott®- and Hilton®-branded hotels, acquired primarily on an all-cash basis, are well-poised for continued improvement and we project moderate revenue growth in 2011. We remain committed to growing the value of your investment over the long term and continue to aggressively pursue market opportunities to improve revenue. I look forward to reporting to you year-end results in our 2010 Annual Report which is scheduled for distribution next spring. As always, thank you for investing with Apple REIT Six.


Sincerely,

-s- Glade M. Knight

Glade M. Knight
Chairman and Chief Executive Officer


Statements of Operations (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months
ended

 

Three months
ended

 

Nine months
ended

 

Nine months
ended

 

(In thousands except statistical data)

 

Sept. 30, 2010

 

Sept. 30, 2009

 

Sept. 30, 2010

 

Sept. 30, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

Room revenue

 

$

58,094

 

$

53,952

 

$

159,752

 

$

151,597

 

Other revenue

 

 

3,676

 

 

3,558

 

 

10,792

 

 

11,009

 

Reimbursed expenses

 

 

1,417

 

 

1,311

 

 

4,685

 

 

3,931

 

Total revenue

 

$

63,187

 

$

58,821

 

$

175,229

 

$

166,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expense

 

$

15,541

 

$

14,837

 

$

43,657

 

$

42,178

 

Other hotel operating expenses

 

 

22,799

 

 

22,028

 

 

64,755

 

 

64,082

 

Reimbursed expenses

 

 

1,417

 

 

1,311

 

 

4,685

 

 

3,931

 

General and administrative

 

 

1,203

 

 

1,057

 

 

3,645

 

 

3,559

 

Depreciation

 

 

7,711

 

 

7,634

 

 

23,028

 

 

22,767

 

Interest expense, net

 

 

990

 

 

660

 

 

2,864

 

 

1,470

 

Total expenses

 

$

49,661

 

$

47,527

 

$

142,634

 

$

137,987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

13,526

 

 

11,294

 

 

32,595

 

 

28,550

 

Loss from discontinued operations

 

 

(3,289

)

 

(270

)

 

(2,908

)

 

(29

)

Net income

 

$

10,237

 

$

11,024

 

$

29,687

 

$

28,521

 

Income from continuing operations per share

 

$

0.15

 

$

0.12

 

$

0.36

 

$

0.31

 

Loss from discontinued operations per share

 

 

(0.04

)

 

-

 

 

(0.03

)

 

-

 

Net income per share

 

$

0.11

 

$

0.12

 

$

0.33

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MODIFIED FUNDS FROM OPERATIONS (A)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

10,237

 

$

11,024

 

$

29,687

 

$

28,521

 

Depreciation of real estate owned

 

 

7,842

 

 

7,765

 

 

23,421

 

 

23,157

 

Funds from operations

 

 

18,079

 

 

18,789

 

 

53,108

 

 

51,678

 

Loss on hotels held for sale

 

 

3,071

 

 

-

 

 

3,071

 

 

-

 

Modified Funds from Operations

 

$

21,150

 

$

18,789

 

$

56,179

 

$

51,678

 

FFO per share

 

$

0.20

 

$

0.21

 

$

0.58

 

$

0.57

 

Modified FFO per share

 

$

0.23

 

$

0.21

 

$

0.62

 

$

0.57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE SHARES OUTSTANDING

 

 

91,300

 

 

91,097

 

 

91,334

 

 

91,165

 

 

OPERATING STATISTICS

 

 

 

 

 

 

 

 

 

 

 

 

 

Occupancy of continuing operations

 

 

77

%

 

71

%

 

73

%

 

67

%

Average daily rate of continuing operations

 

$

108

 

$

108

 

$

105

 

$

108

 

RevPAR of continuing operations

 

$

83

 

$

77

 

$

76

 

$

73

 

Number of hotels owned

 

 

68

 

 

68

 

 

 

 

 

 

 

Dividends per share

 

$

0.19

 

$

0.23

 

$

0.60

 

$

0.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Highlights (Unaudited)

 

 

 

 

 

 

 

 

(In thousands)

 

September 30,
2010

 

December 31,
2009

 

 

ASSETS

 

 

 

 

 

 

 

Investment in real estate, net

 

$

768,772

 

$

801,646

 

Hotels held for sale

 

 

11,250

 

 

-

 

Other assets

 

 

17,088

 

 

13,938

 

Total assets

 

$

797,110

 

$

815,584

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Notes payable

 

$

59,170

 

$

54,040

 

Other liabilities

 

 

5,182

 

 

4,056

 

Total liabilities

 

 

64,352

 

 

58,096

 

Total shareholders’ equity

 

 

732,758

 

 

757,488

 

Total liabilities & shareholders’ equity

 

$

797,110

 

$

815,584

 

 

 

 

 

 

 

 

 

(A) Funds from operations (FFO) is defined as net income (computed in accordance with generally accepted accounting principles – GAAP) excluding gains and losses from sales of depreciable property, plus depreciation and amortization. Modified funds from operations (MFFO) excludes the loss on hotels held for sale. The company considers FFO and MFFO in evaluating property acquisitions and its operating performance and believes that FFO and MFFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of the company’s activities in accordance with GAAP. FFO and MFFO are not necessarily indicative of cash available to fund cash needs.

The financial information furnished reflects all adjustments necessary for a fair presentation of financial position at September 30, 2010 and the results of operations for the interim periods ended September 30, 2010. Such interim results are not necessarily indicative of the results that can be expected for the full year. The accompanying financial statements should be read in conjunction with the audited financial statements and related notes appearing in the Apple REIT Six, Inc. 2009 Annual Report.


Market Diversity
Portfolio of hotels

 

STATE / CITY

 

ALABAMA

Birmingham, Dothan (2), Huntsville (2),

Montgomery, Tuscaloosa (2)

ALASKA

Anchorage (3)

ARIZONA

Phoenix, Tempe (2)

CALIFORNIA

Arcadia (2), Bakersfield, Folsom, Foothill Ranch,

Lake Forest, Milpitas, Roseville, San Francisco

COLORADO

Boulder, Denver (2)

CONNECTICUT

Farmington, Rocky Hill, Wallingford

FLORIDA

Clearwater, Lakeland, Lake Mary, Orange Park,

Panama City, Pensacola (3), Tallahassee

GEORGIA

Albany, Columbus, Savannah, Valdosta

NEW JERSEY

Mt. Olive, Somerset

NEW YORK

Saratoga Springs

NORTH CAROLINA

Roanoke Rapids

OREGON

Hillsboro (3), Portland

PENNSYLVANIA

Pittsburgh

SOUTH CAROLINA

Myrtle Beach

TENNESSEE

Nashville

TEXAS

Arlington (2), Dallas, Fort Worth (3), Laredo (2),

Las Colinas, McAllen

VIRGINIA

Fredericksburg

WASHINGTON

Kent, Mukilteo, Redmond, Renton

(IMAGE)

 

CORPORATE HEADQUARTERS

814 East Main Street

Richmond, Virginia 23219

(804) 344-8121

(804) 344-8129 FAX

www.applereitsix.com

 

INVESTOR INFORMATION

For additional information about the

company, please contact: Kelly Clarke,

Director of Investor Services

804-727-6321 or

KClarke@applereit.com



Corporate Profile

Apple REIT Six, Inc. is a real estate investment trust (REIT) focused on the ownership of hotels that generate attractive returns for our shareholders. Our hotels operate under the Courtyard® by Marriott®, Fairfield Inn® by Marriott®, Residence Inn® by Marriott®, SpringHill Suites® by Marriott®, TownePlace Suites® by Marriott®, Marriott®, Homewood Suites by Hilton®, Hilton Garden Inn®, Hampton Inn® and Hampton Inn & Suites® brands. Our portfolio consists of 68 hotels, containing a total of 7,897 guestrooms in 18 states.

Mission

Apple REIT Six, Inc. is a premier real estate investment company committed to providing maximum value for our shareholders.

COVER: COURTYARD, MYRTLE BEACH, SC

BACK: SPRINGHILL SUITES, DALLAS, TX; MARRIOTT, REDMOND, WA

This quarterly report contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. 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 any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include: the availability and terms of financing; changes in national, regional and local economies and business conditions; competitors within the hotel industry; and the ability of the company to implement its operating strategy and to manage planned growth.

In addition, the timing and amounts of distributions to common shareholders are within the discretion of the company’s board of directors. Although the company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate; therefore, there can be no assurance that such statements included in this quarterly report 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.

“Marriott®,” “Courtyard® by Marriott®,” “SpringHill Suites® by Marriott®,” “Fairfield Inn® by Marriott®,” “TownePlace Suites® by Marriott®” and “Residence Inn® by Marriott®” are each a registered trademark of Marriott International, Inc. or one of its affiliates. All references to “Marriott” mean Marriott International, Inc. and all of its affiliates and subsidiaries and their respective officers, directors, agents, employees, accountants and attorneys. Marriott is not responsible for the content of this report, whether relating to the hotel information, operating information, financial information, Marriott’s relationship with Apple REIT Six or otherwise. Marriott was not involved in any way whether as an “issuer” or “underwriter” or otherwise in the Apple REIT Six offering and received no proceeds from the offering. Marriott has not expressed any approval or disapproval regarding this report, and the grant by Marriott of any franchise or other rights to Apple REIT Six shall not be construed as any expression of approval or disapproval. Marriott has not assumed and shall not have any liability in connection with this report.

“Hampton Inn®,” “Hampton Inn & Suites®,” “Hilton Garden Inn®” and “Homewood Suites by Hilton®” are each a registered trademark of Hilton Worldwide or one of its affiliates. All references to “Hilton” mean Hilton Worldwide and all of its affiliates and subsidiaries, and their respective officers, directors, agents, employees, accountants and attorneys. Hilton is not responsible for the content of this report, whether relating to hotel information, operating information, financial information, Hilton’s relationship with Apple REIT Six, or otherwise. Hilton was not involved in any way, whether as an “issuer” or “underwriter” or otherwise, in the Apple REIT Six offering and received no proceeds from the offering. Hilton has not expressed any approval or disapproval regarding this report, and the grant by Hilton of any franchise or other rights to Apple REIT Six shall not be construed as any expression of approval or disapproval. Hilton has not assumed and shall not have any liability in connection with this report.



(BACK COVER)