10-Q 1 c62392_10-q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________


Commission File Number 000-53175

Apple REIT Eight, Inc.
(Exact name of registrant as specified in its charter)

Virginia		20- 8268625
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

814 East Main Street
Richmond, Virginia		23219
(Address of principal executive offices)		(Zip Code)

(804) 344-8121
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Number of registrant’s common shares outstanding as of August 1, 2010: 94,222,583

Apple REIT Eight, Inc.
FORM 10-Q
INDEX


			Page Number

PART I.		FINANCIAL INFORMATION

	Item 1.	Financial Statements (Unaudited)
		Consolidated Balance Sheets –June 30, 2010 and December 31, 2009	3
		Consolidated Statements of Operations and Comprehensive Income – Three and six months ended June 30, 2010 and 2009	4
		Consolidated Statements of Cash Flows – Six months ended June 30, 2010 and 2009	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
	Item 4.	Controls and Procedures	19

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings (not applicable)
	Item 1A.	Risk Factors (not applicable)
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
	Item 3.	Defaults Upon Senior Securities (not applicable)
	Item 4.	(Removed and Reserved)
	Item 5.	Other Information (not applicable)
	Item 6.	Exhibits	21

Signatures			22

This Form 10-Q includes references to certain trademarks or service marks. The SpringHill Suites^® by Marriott, TownePlace Suites^® by Marriott, Fairfield Inn^® by Marriott, Residence Inn^® by Marriott, Courtyard^® by Marriott, Marriott^®, and Renaissance^® trademarks are the property of Marriott International, Inc. or one of its affiliates. The Homewood Suites^® by Hilton, Hilton Garden Inn^®, Hampton Inn^® and Hampton Inn & Suites^® trademarks are the property of Hilton Worldwide or one or more of its affiliates. For convenience, the applicable trademark or service mark symbol has been omitted but will be deemed to be included wherever the above referenced terms are used.

Apple REIT Eight, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)


	June 30, 2010			December 31, 2009


ASSETS
Investment in hotels, net of accumulated depreciation of $72,681 and $55,282	$	961,857		$	974,773
Restricted cash-furniture, fixtures and other escrows		10,107			12,268
Due from third party managers, net		9,010			3,919
Other assets, net		4,698			7,891

TOTAL ASSETS	$	985,672		$	998,851


LIABILITIES
Accounts payable and accrued expenses	$	15,185		$	14,465
Intangible liabilities, net		11,032			11,112
Notes payable		195,373			184,175

TOTAL LIABILITIES		221,590			209,752


SHAREHOLDERS’ EQUITY
Preferred stock, authorized 15,000,000 shares; none issued and outstanding		—			—
Series A preferred stock, no par value, authorized 200,000,000 shares; issued and outstanding 94,301,213 and 93,643,430 shares		—			—
Series B convertible preferred stock, no par value, authorized 240,000 shares; issued and outstanding 240,000 shares		24			24
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 94,301,213 and 93,643,430 shares		934,990			927,269
Distributions greater than net income		(170,932	)		(140,598	)
Accumulated other comprehensive income		—			2,404

TOTAL SHAREHOLDERS’ EQUITY		764,082			789,099

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	985,672		$	998,851

See notes to consolidated financial statements.

Apple REIT Eight, Inc.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
(In thousands, except per share data)


	Three months ended June 30, 2010			Three months ended June 30, 2009			Six months ended June 30, 2010			Six months ended June 30, 2009

Revenues:
Room revenue	$	46,084		$	42,340		$	82,639		$	76,519
Other revenue		3,190			3,196			6,038			5,977

Total revenue		49,274			45,536			88,677			82,496

Expenses:
Operating expense		12,328			11,752			23,353			22,196
Hotel administrative expense		3,987			4,164			7,723			8,146
Sales and marketing		3,737			3,306			6,851			6,332
Utilities		1,857			1,814			3,787			3,784
Repair and maintenance		2,421			2,248			4,606			4,367
Franchise fees		1,965			1,873			3,472			3,374
Management fees		1,675			1,596			3,054			2,923
Taxes, insurance and other		2,711			2,595			5,286			5,019
Land lease expense		1,597			1,590			3,194			3,181
General and administrative		1,539			1,298			2,736			2,360
Depreciation expense		8,747			8,110			17,399			15,975

Total expenses		42,564			40,346			81,461			77,657

Operating income		6,710			5,190			7,216			4,839

Investment income, net		7			5			3,023			17
Interest expense		(2,306	)		(1,867	)		(4,439	)		(3,410	)


Net income	$	4,411		$	3,328		$	5,800		$	1,446


Unrealized gain on investments		—			1,206			—			1,577


Comprehensive income	$	4,411		$	4,534		$	5,800		$	3,023


Basic and diluted net income per common share	$	0.05		$	0.04		$	0.06		$	0.02


Weighted average common shares outstanding - basic and diluted		94,069			92,825			93,920			92,663

Distributions declared and paid per common share	$	0.19		$	0.20		$	0.39		$	0.42

See notes to consolidated financial statements.

Apple REIT Eight, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)


	Six months ended June 30, 2010			Six months ended June 30, 2009


Cash flow from operating activities:
Net income	$	5,800		$	1,446
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		17,399			15,975
Amortization of deferred financing costs, fair value adjustments and other non-cash expenses, net		316			(199	)
Net realized gain on sale of investments		(3,011	)		—
Changes in operating assets and liabilities:
(Increase)/decrease in other assets		(693	)		1,349
Increase in funds due from third party managers		(5,091	)		(4,167	)
Increase in accounts payable and accrued expenses		1,521			3,737

Net cash provided by operating activities		16,241			18,141

Cash flow from investing activities:
(Increase)/decrease in capital improvement reserves		2,467			(1,112	)
Proceeds from sale of equity securities - available for sale		3,804			—
Investment in other assets		—			(3,240	)
Capital improvements		(5,284	)		(15,274	)

Net cash provided by (used in) investing activities		987			(19,626	)

Cash flow from financing activities:
Net proceeds related to issuance of Units		13,057			13,931
Redemptions of Units		(5,455	)		(7,149	)
Cash distributions paid to common shareholders		(36,134	)		(39,044	)
Net proceeds from line of credit		12,405			34,780
Payments of notes payable		(1,101	)		(1,033	)

Net cash (used in) provided by financing activities		(17,228	)		1,485

Net change in cash and cash equivalents		—			—

Cash and cash equivalents, beginning of period		—			—


Cash and cash equivalents, end of period	$	—		$	—

See notes to consolidated financial statements.

APPLE REIT EIGHT, INC.

Notes to Consolidated Financial Statements

1. General Information and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements included in its 2009 Annual Report on Form 10-K. Operating results for the three and six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the period ending December 31, 2010.

Organization

Apple REIT Eight, Inc., together with its wholly owned subsidiaries, (the “Company”) is a Virginia corporation that has elected to be treated as a real estate investment trust (“REIT”) for federal income tax purposes. The Company was formed to invest in hotels, residential apartment communities and other income-producing real estate assets in selected metropolitan areas in the United States. Initial capitalization occurred on January 22, 2007, when 10 Units, each Unit consisting of one common share and one Series A preferred share, were purchased by Apple Eight Advisors, Inc. (“A8A”), owned by Glade M. Knight, the Company’s Chairman and Chief Executive Officer, and 240,000 Series B convertible shares were also purchased individually by Glade M. Knight. The Company began operations on November 9, 2007 when it acquired its first hotels. The Company completed its best efforts offering of Units in April 2008. The Company’s fiscal year end is December 31. As of June 30, 2010, the Company owned 51 hotels. 45 of the hotels were acquired in 2008 and six in late 2007. The Company has no foreign operations or assets and its operating structure includes two segments. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.

Significant Accounting Policies

Use of Estimates

The preparation of the financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Earnings Per Common Share

Basic earnings per common share is computed as net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the period. There were no shares with a dilutive effect for the three and six months ended June 30, 2010 or 2009. As a result, basic and dilutive outstanding shares were the same. Series B convertible preferred shares are not included in earnings per common share calculations until such time the Series B convertible preferred shares are converted to common shares.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued a pronouncement (Accounting Standards Update No. 2009-17) which amends its guidance surrounding a company’s analysis to determine

whether any of its variable interests constitute controlling financial interests in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has both of the following characteristics: (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Additionally, an enterprise is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity’s economic performance. The new pronouncement also requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity and enhanced disclosure about an enterprise’s involvement with a variable interest entity. This pronouncement was adopted by the Company in the first quarter of 2010. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

2. Other Assets

Included in other assets, net on the Company’s consolidated balance sheet is a 24% ownership interest in Apple Air Holding, LLC (“Apple Air”), purchased by the Company for $3.2 million in cash in 2009. The other members of Apple Air are Apple REIT Six, Inc., Apple REIT Seven, Inc. and Apple REIT Nine, Inc. The interest was purchased to allow the Company access to two Lear jets for asset management and renovation purposes. The Company has recorded its share of income and losses of the entity under the equity method of accounting and adjusted its investment in Apple Air accordingly. The Company’s ownership interest was $2.6 million at June 30, 2010 and $2.8 million at December 31, 2009 and is included in Other assets, net on the Company’s consolidated balance sheets. For the three months ended June 30, 2010 and 2009, the Company recorded a loss of approximately $0.1 million in each period as its share of the net loss of Apple Air. For the six months ended June 30, 2010 and 2009, the Company recorded a loss of approximately $0.2 million in each period as its share of the net loss of Apple Air. This loss primarily relates to depreciation of the aircraft, and is included in General and Administrative expense on the Company’s consolidated statements of operations.

At December 31, 2009 the Company held equity securities classified as available-for-sale, in accordance with the FASB’s pronouncement for accounting for certain investments in debt and equity securities. These securities were included in Other assets, net on the Company’s consolidated balance sheet at December 31, 2009 at fair value of $3.2 million. Unrealized gains were reported as accumulated other comprehensive income, $2.4 million at December 31, 2009. In the first quarter of 2010, the Company sold these equity securities, resulting in a realized gain of $3.0 million which is recorded in Investment income, net on the Company’s consolidated statement of operations.

3. Notes Payable

In November 2008, the Company entered into a $75 million unsecured line of credit with a commercial bank. The applicable interest rate is equal to LIBOR (the London Interbank Offered Rate, 0.35% at June 30, 2010) plus 1.75% annually. Interest payments are due monthly. The principal must be paid by the maturity date of November 2010, and may be prepaid without penalty. At June 30, 2010, the credit line had an outstanding principal balance of $70.8 million. At December 31, 2009, the credit line had an outstanding principal balance of $58.3 million. The line of credit is unsecured, however does contain a negative pledge agreement that requires approval from the lender to materially change the Company’s investment in 10 properties including using those 10 properties as security for additional financing.

4. Fair Value of Financial Instruments

The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates consistent with the maturity of the debt obligation with similar credit policies. Market rates take into consideration general market conditions and maturity. As of June 30, 2010, the carrying value and estimated fair value of the Company’s debt was $195.4 million and $191.4 million. As of December 31, 2009, the carrying value and estimated fair value of the Company’s debt was $184.2

million and $186.0 million. The carrying value of the Company’s other financial instruments approximates fair value due to the short-term nature of these financial instruments.

5. Related Parties

The Company has significant transactions with related parties. These transactions cannot be construed to be arm’s length, and the results of the Company’s operations may be different if these transactions were conducted with non-related parties.

The Company is party to an advisory agreement with A8A, pursuant to which A8A provides management services to the Company. An annual fee ranging from 0.1% to 0.25% of total equity proceeds received by the Company, in addition to certain reimbursable expenses, are payable for these services. A8A utilizes Apple REIT Six, Inc. to provide these services. Total expenses related to this agreement totaled $1.6 million for the first six months of 2010 and $1.4 million for the same period in 2009. Of these total expenses, $0.5 million were fees paid to A8A for each of the six months ended June 30, 2010 and 2009 and $1.1 million and $0.9 million were expenses reimbursed by A8A to Apple REIT Six, Inc. for the six months ended June 30, 2010 and 2009. These expenses are recorded in General and Administrative expense.

A8A is 100% owned by Glade M. Knight, Chairman and Chief Executive Officer of the Company. Mr. Knight is also Chairman and Chief Executive Officer of Apple REIT Six, Inc., Apple REIT Seven, Inc. and Apple REIT Nine, Inc. Members of the Company’s Board of Directors are also on the boards of Apple REIT Six, Inc., Apple REIT Seven, Inc. and Apple REIT Nine, Inc.

6. Shareholder’s Equity

In the second quarter of 2008, the Company instituted a Dividend Reinvestment Plan for its shareholders. The plan provides a convenient and cost effective way to increase shareholder investment in the Company by reinvesting dividends to purchase additional Units of the Company. The uses of the proceeds from this plan may include purchasing Units under the Company’s Unit Redemption Program, enhancing properties, satisfying financing obligations and other expenses, increasing working capital, funding various corporate operations, and acquiring hotels. The Company has registered 10 million Units for potential issuance under the plan. During the first six months of 2010, approximately 1.2 million Units were issued under the plan representing approximately $13.1 million. For the six months ending June 30, 2009, approximately 1.3 million Units were issued under the plan representing approximately $13.9 million. Since inception of the plan through June 30, 2010, the Company has issued approximately 5.1 million Units representing approximately $55.9 million.

The Company has a Unit Redemption Program to provide limited interim liquidity to its shareholders who have held their Units for at least one year. Shareholders may request redemption of Units for a purchase price equal to 92% of the price paid per Unit if the Units have been owned for less than three years, or 100% of the price paid per Unit if the Units have been owned more than three years. The maximum number of Units that may be redeemed in any 12-month period will be three percent of the weighted average number of Units outstanding during the 12-month period immediately prior to the date of redemption. The Company reserves the right to change the purchase price for redemptions, reject any request for redemption, or otherwise amend the terms of, suspend, or terminate the Unit Redemption Program. During the six months ended June 30, 2010, the Company redeemed approximately 529 thousand Units in the amount of $5.5 million under the program. For the first six months of 2009, the Company redeemed approximately 696 thousand Units in the amount of $7.1 million. Since inception of the program through June 30, 2010, the Company has redeemed approximately 1.9 million Units representing approximately $19.7 million.

7. Segments

The Company has two reportable segments (the New York hotel and all other hotels). The Company does not allocate corporate-level accounts to its operating segments, including corporate general and

administrative expenses, non-operating interest income and interest expense. Dollar amounts are in thousands.


	For the three months ended June 30, 2010

	New York, New York Hotel			All Other Hotels			Corporate			Consolidated

Total revenue	$	4,860		$	44,414		$	—		$	49,274
Hotel operating expenses		4,408			27,870			—			32,278
General and administrative expense		—			—			1,539			1,539
Depreciation expense		1,602			7,145			—			8,747

Operating income/(loss)		(1,150	)		9,399			(1,539	)		6,710
Investment income, net		—			—			7			7
Interest expense		—			(1,928	)		(378	)		(2,306	)

Net income/(loss)	$	(1,150	)	$	7,471		$	(1,910	)	$	4,411


Total assets	$	121,298		$	861,767		$	2,607		$	985,672

	For the six months ended June 30, 2010

	New York, New York Hotel			All Other Hotels			Corporate			Consolidated

Total revenue	$	8,808		$	79,869		$	—		$	88,677
Hotel operating expenses		8,482			52,844			—			61,326
General and administrative expense		—			—			2,736			2,736
Depreciation expense		3,195			14,204			—			17,399

Operating income/(loss)		(2,869	)		12,821			(2,736	)		7,216
Investment income, net		—			—			3,023			3,023
Interest expense		—			(3,733	)		(706	)		(4,439	)

Net income/(loss)	$	(2,869	)	$	9,088		$	(419	)	$	5,800


Total assets	$	121,298		$	861,767		$	2,607		$	985,672

	For the three months ended June 30, 2009

	New York, New York Hotel			All Other Hotels			Corporate			Consolidated

Total revenue	$	3,149		$	42,387		$	—		$	45,536
Hotel operating expenses		3,768			27,170			—			30,938
General and administrative expense		—			—			1,298			1,298
Depreciation expense		1,432			6,678			—			8,110

Operating income/(loss)		(2,051	)		8,539			(1,298	)		5,190
Investment income, net		—			—			5			5
Interest (expense)/income		305			(1,944	)		(228	)		(1,867	)

Net income/(loss)	$	(1,746	)	$	6,595		$	(1,521	)	$	3,328


Total assets	$	122,412		$	880,358		$	5,789		$	1,008,559

	For the six months ended June 30, 2009

	New York, New York Hotel			All Other Hotels			Corporate			Consolidated

Total revenue	$	4,972		$	77,524		$	—		$	82,496
Hotel operating expenses		7,119			52,203			—			59,322
General and administrative expense		—			—			2,360			2,360
Depreciation expense		2,743			13,232			—			15,975

Operating income/(loss)		(4,890	)		12,089			(2,360	)		4,839
Investment income, net		—			—			17			17
Interest (expense)/income		641			(3,673	)		(378	)		(3,410	)

Net income/(loss)	$	(4,249	)	$	8,416		$	(2,721	)	$	1,446


Total assets	$	122,412		$	880,358		$	5,789		$	1,008,559

8. Subsequent Events

In July 2010, the Company declared and paid approximately $6.1 million in distributions to its common shareholders, or $0.064167 per outstanding common share. Under the Company’s Dividend Reinvestment Plan, $2.2 million were reinvested, resulting in the issuance of approximately 198,000 Units.

In July 2010, the Company redeemed approximately 274,000 Units in the amount of $2.8 million under its Unit Redemption Program.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the ability of the Company to implement its acquisition strategy and operating strategy; the Company’s ability to manage planned growth; changes in economic cycles, including the current economic recession throughout the United States, and competition within the hotel industry. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in the 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. In addition, the Company’s qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code. Readers should carefully review the Company’s financial statements and the notes thereto, as well as the risk factors described in the Company’s filings with the Securities and Exchange Commission. Any forward-looking statement that the Company makes speaks only as of the date of this report. The Company undertakes no obligation to publically update or revise any forward-looking statements or cautionary factors, as a result of new information, future events, or otherwise, except as required by law.

Overview

Apple REIT Eight, Inc. together with its wholly owned subsidiaries (the “Company”) is a Virginia corporation that has elected to be treated as a real estate investment trust (“REIT”) for federal income tax purposes. The Company, which owned 51 properties as of June 30, 2010 and has a limited operating history with its first hotel acquired on November 9, 2007, was formed to invest in hotels, residential apartment communities and other real estate in selected metropolitan areas in the United States. Initial capitalization occurred on January 22, 2007, when 10 Units, each Unit consisting of one share of common stock and one share of Series A preferred stock were purchased by Apple Eight Advisors, Inc. (“A8A”) and 240,000 shares of Series B Preferred shares were purchased by Mr. Glade M. Knight, the Company’s Chairman and Chief Executive Officer. The Company completed its best-efforts offering of Units in April 2008. The Company’s fiscal year end is December 31. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Although hotel performance can be influenced by many factors, including local competition, local and general economic conditions in the United States and the performance of individual managers assigned to each hotel, performance of the hotels as compared to other hotels within their respective local market, in general, has met the Company’s expectations for the period owned. With the significant decline in economic conditions throughout the United States, overall performance of the Company’s hotels have not met expectations. Although there is no way to predict future general economic conditions, many industry analysts believe that hotel industry revenues are improving and will see low single digit increases in 2010 as compared to 2009.

In evaluating financial condition and operating performance, the most important matters on which the Company focuses are revenue measurements, such as average occupancy, average daily rate (“ADR”), revenue per available room (“RevPAR”), and Market Yield which compares an individual hotel’s results to other hotels in its local market, and expenses, such as hotel operating expenses, general and administrative and other expenses described below. Although it is not possible to predict when general economic conditions will improve or their impact on the hotel industry, with the significant number of renovations (15) of existing properties by the Company in 2009, the number of hotels that were new (9) when acquired by the Company, and the expected industry stabilization, the Company anticipates moderate growth in

2010 as compared to 2009 for the Company’s hotels. Additionally, with the overall economic declines, the Company continues to focus on improving market share. The Company’s properties overall are revenue leaders in their respective markets with an Average RevPAR Index (a comparison of a property’s RevPAR to the market average) of 132 for the first six months of 2010, a 4% increase from the same period in 2009 for comparable hotels.

The following is a summary of the Company’s results (in thousands, except statistical data):


	Three months ended												Six months ended

(in thousands, except statistical data)	6/30/10			Percent of Revenue		6/30/09			Percent of Revenue		Percent Change		6/30/10			Percent of Revenue		6/30/09			Percent of Revenue		Percent Change

Total revenues	$	49,274		100	%	$	45,536		100	%	8	%	$	88,677		100	%	$	82,496		100	%	7	%
Hotel direct expenses		27,970		57	%		26,753		59	%	5	%		52,846		60	%		51,122		62	%	3	%
Taxes, insurance and other expense		2,711		6	%		2,595		6	%	4	%		5,286		6	%		5,019		6	%	5	%
Land lease expense		1,597		3	%		1,590		3	%	—	%		3,194		4	%		3,181		4	%	—	%
General and administrative expense		1,539		3	%		1,298		3	%	19	%		2,736		3	%		2,360		3	%	16	%
Depreciation		8,747					8,110				8	%		17,399					15,975				9	%
Investment income, net		7					5				40	%		3,023					17				N/A
Interest expense		(2,306	)				(1,867	)			24	%		(4,439	)				(3,410	)			30	%

Average RevPAR Index⁽¹⁾		130					129				1	%		132					127				4	%
Number of hotels		51					51				—	%		51					51				—	%
Average Daily Rate (ADR)	$	112				$	111				1	%	$	109				$	110				-1	%
Occupancy		76	%				70	%			9	%		70	%				65	%			8	%
RevPAR	$	85				$	78				9	%	$	77				$	71				8	%

⁽¹⁾ Statistics calculated from data provided by Smith Travel Research, Inc.^® and excludes new properties open less than 2 years or under renovation during the applicable period.

Hotels Owned

The following table summarizes the location, brand, manager, date acquired, number of rooms and gross purchase price for each of the 51 hotels the Company owned at June 30, 2010. All dollar amounts are in thousands.

Location

State

Brand

Manager

Date
Acquired

Rooms

Gross
Purchase
Price

Birmingham

Homewood Suites

McKibbon

5/23/2008

16,500

Rogers

Fairfield Inn & Suites

Intermountain

2/29/2008

8,000

Rogers

Residence Inn

Intermountain

2/29/2008

11,744

Springdale

Residence Inn

Intermountain

3/14/2008

5,606

Sacramento

Hilton Garden Inn

Dimension

3/7/2008

154

27,630

Cypress

Courtyard

Dimension

4/30/2008

180

31,164

Burbank

Residence Inn

Marriott

5/13/2008

166

50,500

Oceanside

Residence Inn

Marriott

5/13/2008

125

28,750

Tulare

Hampton Inn & Suites

Inn Ventures

6/26/2008

10,331

San Jose

Homewood Suites

Dimension

7/2/2008

140

21,862

Tallahassee

Hilton Garden Inn

LBA

1/25/2008

13,200

Sanford

SpringHill Suites

LBA

3/14/2008

105

11,150

Jacksonville

Homewood Suites

McKibbon

6/17/2008

119

23,250

Tampa

TownePlace Suites

McKibbon

6/17/2008

11,250

Port Wentworth

Hampton Inn

Newport

1/2/2008

106

10,780

Savannah

Hilton Garden Inn

Newport

7/31/2008

105

12,500

Overland Park

SpringHill Suites

True North

3/17/2008

102

8,850

Overland Park

Residence Inn

True North

4/30/2008

120

15,850

Wichita

Courtyard

Intermountain

6/13/2008

8,874

Overland Park

Fairfield Inn & Suites

True North

8/20/2008

110

12,050

Bowling Green

Hampton Inn

Newport

12/6/2007

130

18,832

Marlborough

Residence Inn

True North

1/15/2008

112

20,200

Westford

Hampton Inn & Suites

True North

3/6/2008

110

15,250

Westford

Residence Inn

True North

4/30/2008

108

14,850

Annapolis

Hilton Garden Inn

White

1/15/2008

126

25,000

Kansas City

Residence Inn

True North

4/30/2008

106

17,350

Greensboro

SpringHill Suites

Newport

11/9/2007

8,000

Matthews

Hampton Inn

Newport

1/15/2008

11,300

Dunn

Hampton Inn

McKibbon

1/24/2008

120

12,500

Concord

Hampton Inn

Newport

3/7/2008

101

9,200

Fayetteville

Residence Inn

Intermountain

5/9/2008

12,201

Winston-Salem

Courtyard

McKibbon

5/19/2008

122

13,500

Carolina Beach

Courtyard

Crestline

6/5/2008

144

24,214

Wilmington

Fairfield Inn & Suites

Crestline

12/11/2008

122

14,800

Somerset

Courtyard

Newport

11/9/2007

162

16,000

New York

Renaissance

Marriott

1/4/2008

200

99,000

Tulsa

Hampton Inn & Suites

Western

12/28/2007

102

10,200

Greenville

Residence Inn

McKibbon

5/19/2008

8,700

Hilton Head

Hilton Garden Inn

McKibbon

5/29/2008

104

13,500

Columbia

Hilton Garden Inn

Newport

9/22/2008

143

21,200

Chattanooga

Homewood Suites

LBA

12/14/2007

8,600

Texarkana

Courtyard

Intermountain

3/7/2008

12,924

Texarkana

TownePlace Suites

Intermountain

3/7/2008

9,057

Harrisonburg

Courtyard

Newport

11/16/2007

125

23,219

Charlottesville

Courtyard

Crestline

6/5/2008

137

27,900

Virginia Beach

Courtyard

Crestline

6/5/2008

141

27,100

Virginia Beach

Courtyard

Crestline

6/5/2008

160

39,700

Suffolk

Courtyard

Crestline

7/2/2008

12,500

Suffolk

TownePlace Suites

Crestline

7/2/2008

10,000

Chesapeake

Marriott

Crestline

10/21/2008

226

38,400

Tukwila

Homewood Suites

Dimension

7/2/2008

106

15,707

5,908

950,745

With the exception of assumed mortgage loans in 2008 on 15 of its hotel properties, substantially all of the purchases were funded with proceeds of the Company’s best-efforts offering of Units, which was completed in April 2008. The Company leases all of its hotels to its wholly-owned taxable REIT subsidiaries under hotel lease agreements. The Company also used the proceeds of its offering to pay $19.0 million, representing 2% of the gross purchase price for these hotels, as a commission to Apple Suites Realty Group, Inc. (“ASRG”), 100% owned by Glade M. Knight, the Company’s Chairman and Chief Executive Officer. No hotels have been purchased since December 2008, and there are no outstanding purchase contracts for additional hotels as of June 30, 2010.

Of the Company’s 51 hotels owned at June 30, 2010, six were purchased in 2007 and 45 were purchased in 2008.

Results of Operations

As of June 30, 2010, the Company owned 51 hotels with 5,908 rooms. The Company’s portfolio of hotels owned is unchanged since 2008. Hotel performance is impacted by many factors, including economic conditions in the United States, as well as each locality. During the past two years, the overall weakness in the U.S. economy has had a considerable negative impact on both consumer and business travel. As a result, lodging demand in most markets in the United States has declined. Although economic conditions appear to be stabilizing, and in some markets improving over 2009 results, the Company expects demand for the industry as a whole to continue to be below pre-recession levels until general economic conditions improve. The Company does anticipate moderate revenue and income improvements as compared to 2009 due to the significant number of renovations (12) completed in 2009 and the significant number of newly opened properties acquired by the Company in 2008 (9) which were in a ramp up stage in 2009. The Company’s hotels have shown results consistent with industry and brand averages for the period of ownership.

Revenues
The Company’s principal source of revenue is hotel room revenue and other related revenue. For the three months ended June 30, 2010 and 2009, the Company had total revenue of $49.3 million and $45.5 million. Revenue for the hotel located in New York, New York (the “New York hotel”) was $4.9 million or 10% of total revenue for the second quarter of 2010 and $3.1 million or 7% of total revenue for the second quarter of 2009. For the three months ended June 30, 2010, the hotels achieved combined average occupancy of approximately 76%, ADR of $112 and RevPAR of $85. The New York hotel had average occupancy of 91%, ADR of $262 and RevPAR of $238. For the three months ended June 30, 2009, the hotels achieved combined average occupancy of approximately 70%, ADR of $111 and RevPAR of $78. For the same period, the New York hotel had average occupancy of 70%, ADR of $196 and RevPAR of $137.

For the six months ended June 30, 2010 and 2009, the Company had total revenue of $88.7 million and $82.5 million. Revenue for the New York hotel was $8.8 million or 10% of total revenue for the six months of 2010 and $5.0 million or 6% of total revenue for the six months of 2009. For the six months ended June 30, 2010, the hotels achieved combined average occupancy of approximately 70%, ADR of $109 and RevPAR of $77. The New York hotel had average occupancy of 86%, ADR of $238 and RevPAR of $205. For the six months ended June 30, 2009, the hotels achieved combined average occupancy of approximately 65%, ADR of $110 and RevPAR of $71. For the same period, the New York hotel had average occupancy of 61%, ADR of $170 and RevPAR of $105.

As reflected in the Company’s occupancy increase (the Company has seen year over year occupancy improvement every month since November 2009), the industry is beginning to realize an increase in demand as compared to 2009. The increase is a result of reduced room rates and the sense that the overall economy is stabilizing, generating more business and leisure travelers. While ADR still trails pre-recession levels, it has stabilized as compared to 2009. As a result, the Company’s RevPAR has increased 8% year to date as compared to the same period in 2009. The Company anticipates similar continued RevPAR improvement throughout the remainder of 2010.

While the revenue rates earned by the Company are consistent with industry and brand averages, the Company continues to focus on improving market share. The Company’s properties overall lead their respective markets with an Average RevPAR Index (a comparison of a property’s RevPAR to the market average) of 132 year-to-date, a 4% increase from 2009 for comparable properties.

During the first half of 2009, the Company was in the process of completing its conversion of the New York hotel from an unbranded hotel to a Renaissance hotel. Consequently, the hotel had an average of 32 rooms out of service each night for the first half of 2009 and experienced other disruptions to its common areas. As a result of the conversion effort and declines in economic conditions, revenue at the hotel was unusually low for the first half of 2009. The Company completed the conversion to a Renaissance in late April 2009. The RevPAR Index for the New York hotel was 115 for the six months ending June 30, 2010, an increase of 75% from 66 for the first six months of 2009. Although the hotel’s revenue has increased 77% in the first 6 months of 2010 as compared to the same period in 2009, the Company believes there continues to be opportunity for market penetration and continues to work with Marriott management to increase the RevPAR Index for the New York hotel.

Expenses
For the three months ended June 30, 2010, hotel direct expenses of the Company’s hotels totaled $28.0 million or 57% of total revenue (the New York hotel had direct expenses of $2.7 million or 56% of its total revenue for the quarter) and for the three months ended June 30, 2009 direct expenses were $26.8 million or 59% of total revenue (the New York hotel had direct expenses of $2.3 million or 72% of its total revenue for the quarter). For the six months ended June 30, 2010 and 2009, hotel direct expenses of the Company’s hotels totaled $52.8 million or 60% of total revenue (the New York hotel had direct expenses of $5.2 million or 59% of its total revenue for the quarter) and $51.1 million or 62% of total revenue (the New York hotel had direct expenses of $4.0 million or 80% of its total revenue for the quarter). Hotel direct expenses consist of operating expense, hotel administrative expense, sales and marketing expense, utilities expense, repair and maintenance expense, franchise fees and management fees. Operating expenses in 2009 were negatively impacted due to the significant number of renovations and the ramp up of newly opened hotels in late 2008.

The Company continues its efforts to control costs, however, certain operating costs such as management costs, certain utility costs and minimum supply and maintenance costs are relatively fixed in nature, and cannot be curtailed or eliminated. The Company has been successful in reducing certain labor costs, food and supply costs and utility costs by continually monitoring and sharing utilization data across its hotels and management companies.

Taxes, insurance, and other expense for the three months ended June 30, 2010 and 2009 totaled $2.7 million and $2.6 million, or 6% of total revenues (of which approximately $208 thousand and $77 thousand related to the New York hotel). For the six months ended June 30, 2010 and 2009, taxes, insurance, and other expenses were $5.3 million and $5.0 million, or 6% of total revenues (of which approximately $345 thousand and $210 thousand related to the New York hotel).

Land lease expense was $1.6 million for both the three months ended June 30, 2010 and June 30, 2009 and was $3.2 million for the six month periods ended June 30, 2010 and 2009. This expense represents the expense incurred by the Company to lease land for five hotel properties. Land lease expense for the New York hotel was $1.5 million for each second quarter of 2010 and 2009 and was $2.9 million for the six months ended June 30, 2010 and 2009.

General and administrative expense for the three months ended June 30, 2010 and 2009 was $1.5 million and $1.3 million. For the six months ended June 30, 2010 and 2009, general and administrative expense was $2.7 million and $2.4 million. The principal components of general and administrative expense are advisory fees, legal fees, accounting fees, reporting expense, and the Company’s share of loss from its investment in Apple Air Holding LLC.

Depreciation expense was $8.7 million for the second quarter of 2010 and $8.1 million for the second quarter of 2009. For the six months ended June 30, 2010 and 2009, depreciation expense was $17.4 million and $16.0 million. These expenses include $1.6 million and $1.4 million for the New York hotel

for the quarterly periods and $3.2 million and $2.7 million for the six month periods ended June 30, 2010 and 2009. Depreciation expense represents depreciation expense of the Company’s hotel buildings and related improvements, and associated furniture, fixtures and equipment, for the respective periods owned. The increase is a result of capital improvements made by the Company in 2009 of approximately $25 million to complete 12 renovations.

In the first quarter of 2010, the Company sold its equity securities in a publicly traded real estate investment trust, resulting in realized gains and other investment income of $3.0 million. For the same period in 2009, the Company had investment income of $12 thousand.

Interest expense for the second quarter and six months ended June 30, 2010 was $2.3 million and $4.4 million. Interest expense for both periods includes interest expense on 15 mortgages assumed in 2008 and the Company’s line of credit offset by capitalized interest of $101 thousand in the first quarter of 2010 related to the renovation of 2 hotels. Interest expense for the same periods in 2009 was $1.9 million and $3.4 million, offset by capitalized interest of $376 thousand for the three months of 2009 related to three hotels under renovation and $947 thousand for the six month period in 2009, related to the renovation of eight hotel properties.

Liquidity and Capital Resources

In November 2008, the Company entered into a $75.0 million revolving line of credit which expires in November 2010. The line of credit was obtained to meet short-term cash needs as the Company planned on completing a significant number of hotel renovations, and newly opened properties have a period of ramp up to normal operating status. Through June 30, 2010, substantially all of the planned renovation work was completed. With the availability of this line of credit, the Company maintains little cash on hand, accessing the line as necessary. As a result, cash on hand was $0 at June 30, 2010. The outstanding balance on the line of credit was $70.8 million at June 30, 2010 and its interest rate was 2.1%. The Company anticipates that cash flow from operations and the revolving line of credit will be adequate to meet its liquidity requirements, including required distributions to shareholders, capital expenditures and debt service. The Company is pursuing extending its existing debt that is due in 2010 and additional financing in 2010 so that it can make distributions in excess of required amounts to maintain its REIT status. The Company intends to maintain a relatively stable dividend rate instead of raising and lowering the distribution rate with varying economic cycles. With the depressed financial results of the Company and the lodging industry, the Company will attempt to utilize additional financing to achieve this objective. Although the Company has relatively low levels of debt, there can be no assurances it will be successful with this strategy and may need to reduce its distributions to required levels.

To maintain its REIT status the Company is required to distribute at least 90% of its ordinary income. Distributions in the first six months of 2010 totaled $36.1 million and were paid monthly at a rate of $0.064167 per common share. For the same six month period, the Company’s cash generated from operations was approximately $16.2 million. This shortfall includes a return of capital and was funded primarily by additional borrowings under the Company’s line of credit facility. The Company intends to continue paying distributions on a monthly basis. However, since there can be no assurance of the ability of the Company’s properties to provide income at this level, there can be no assurance as to the classification or duration of distributions at the current monthly rate. In consideration of the weakness in economic conditions throughout the United States, the Board of Directors monitors the Company’s distribution rate relative to the performance of the hotels on an ongoing basis and may make adjustments to the distribution rate as determined to be prudent in relation to other cash requirements of the Company. In April 2009, the Board of Directors approved a reduction in the Company’s annual distribution rate from $0.88 to $0.77 per common share. The reduction of the dividend was effective beginning with the May 15, 2009 distribution.

The Company has on-going capital commitments to fund its capital improvements. The Company is required, under all of the hotel management agreements, to make available, for the repair, replacement, refurbishing of furniture, fixtures, and equipment, a percentage of gross revenues provided that such amount may be used for the Company’s capital expenditures with respect to the hotels. As of June 30,

2010, the Company held $8.8 million in reserve for capital expenditures. Total capital expenditures in the first six months of 2010 were $4.5 million. Total capital expenditures for 2010 are anticipated to be approximately $10-11 million. The Company completed 12 renovations throughout 2009. In 2010 the Company anticipates the completion of three renovations, thus substantially reducing capital expenditures as compared to 2009.

In the second quarter of 2008, the Company instituted a Dividend Reinvestment Plan for its shareholders. The plan provides a convenient and cost effective way to increase shareholder investment in the Company by reinvesting dividends to purchase additional Units of the Company. The uses of the proceeds from this plan may include purchasing Units under the Company’s Unit Redemption Program, enhancing properties, satisfying financing obligations and other expenses, increasing working capital, funding various corporate operations, and acquiring hotels. The Company has registered 10 million Units for potential issuance under the plan. During the first six months of 2010, approximately 1.2 million Units were issued under the plan representing approximately $13.1 million. For the six months ended June 30, 2009, approximately 1.3 million Units were issued under the plan representing approximately $13.9 million. Since inception of the plan through June 30, 2010, the Company has issued approximately 5.1 million Units representing approximately $55.9 million.

Related Party Transactions

The Company has a contract with Apple Suites Realty Group (“ASRG”), to provide brokerage services for the acquisition and disposition of the Company’s real estate assets. In accordance with the contract, ASRG is paid a fee of 2% of the gross purchase price of any acquisitions or gross sale price of any dispositions of real estate investments, subject to certain conditions. As of June 30, 2010 payments to ASRG for services under the terms of this contract have totaled $19.0 million since inception, which were capitalized as a part of the purchase price of the hotels. No brokerage services were provided by ASRG in the first six months of 2010 or in 2009.

The Company is party to an advisory agreement with A8A, pursuant to which A8A provides management services to the Company. An annual fee ranging from 0.1% to 0.25% of total equity proceeds received by the Company, in addition to certain reimbursable expenses, are payable for these services. A8A utilizes Apple REIT Six, Inc. to provide these services. Total expenses related to this agreement totaled $1.6 million in the first six months of 2010 and $1.4 million for the same period in 2009. Of these total expenses, $0.5 million were fees paid to A8A for each of the six months ended June 30, 2010 and 2009 and $1.1 million and $0.9 million were expenses reimbursed by A8A to Apple REIT Six, Inc. for the six months ended June 30, 2010 and 2009. These expenses are recorded in General and Administrative expense.

ASRG and A8A are 100% owned by Glade M. Knight, Chairman and Chief Executive Officer of the Company. Mr. Knight is also Chairman and Chief Executive Officer of Apple REIT Six, Inc., Apple REIT Seven, Inc. and Apple REIT Nine, Inc. Members of the Company’s Board of Directors are also on the boards of Apple REIT Six, Inc., Apple REIT Seven, Inc. and Apple REIT Nine, Inc.

Subsequent Events

In July 2010, the Company redeemed approximately 274,000 Units in the amount of $2.8 million under its Unit Redemption Program.

Impact of Inflation

Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Competitive pressures may, however, limit the operators’ ability to raise room rates. Currently the Company is not experiencing any material impact from inflation.

Business Interruption

Being in the real estate industry, the Company is exposed to natural disasters on both a local and national scale. Although management believes there is adequate insurance to cover this exposure, there can be no assurance that such events will not have a material adverse effect on the Company’s financial position or results of operations.

Seasonality

The hotel industry historically has been seasonal in nature. Generally, occupancy rates and hotel revenues are greater in the second and third quarters than in the first and fourth quarters. As a result, there may be quarterly fluctuations in results of operations. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or seasonal fluctuations in revenue, the Company expects to utilize cash on hand or available credit to make distributions.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board issued a pronouncement (Accounting Standards Update No. 2009-17) which amends its guidance surrounding a company’s analysis to determine whether any of its variable interests constitute controlling financial interests in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has both of the following characteristics: (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Additionally, an enterprise is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity’s economic performance. The new pronouncement also requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity and enhanced disclosure about an enterprise’s involvement with a variable interest entity. This pronouncement was adopted by the Company in the first quarter of 2010. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company does not engage in transactions in derivative financial instruments or derivative commodity instruments. As of June 30, 2010, the Company’s financial instruments were not exposed to significant market risk due to foreign currency exchange risk or commodity price risk. The Company will be exposed to interest rate risk due to possible changes in short term interest rates as it invests its cash or borrows on its line of credit and due to its variable interest rate mortgage on its Columbia, South Carolina hotel. The Company had an outstanding balance of $70.8 million on its $75 million line of credit at June 30, 2010, and to the extent it utilizes the line of credit, the Company will be exposed to changes in short-term interest rates. The outstanding balance of the Company’s variable rate mortgage was $11.0 million at June 30, 2010. Based on these outstanding balances at June 30, 2010, every 100 basis point change in interest rates will impact the Company’s annual net income by $0.8 million, all other factors remaining the same. The Company’s cash balance at June 30, 2010 was $0.


Item 4. Controls and Procedures

Senior management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective and that there have been no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Since that evaluation process was completed there have been no significant changes in internal controls or in other factors that could significantly affect these controls.

PART II. OTHER INFORMATION


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unit Redemption Program

The Company has a Unit Redemption Program to provide limited interim liquidity to its shareholders who have held their Units for at least one year. Shareholders may request redemption of Units for a purchase price equal to 92% of the price paid per Unit if the Units have been owned for less than three years, or 100% of the price paid per Unit if the Units have been owned more than three years. The maximum number of Units that may be redeemed in any 12-month period will be three percent of the weighted average number of Units outstanding during the 12-month period immediately prior to the date of redemption. The Company reserves the right to change the purchase price for redemptions, reject any request for redemption, or otherwise amend the terms of, suspend, or terminate the Unit Redemption Program. The following is a summary of redemptions during the second quarter of 2010 (no redemption occurred in May and June 2010).


Issuer Purchases of Equity Securities

	(a)	(b)	(c)	(d)
Period	Total Number of Units Purchased	Average Price Paid per Unit	Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs

April 2010	312,864	$10.25	1,905,043	⁽¹⁾

⁽¹⁾ The maximum number of Units that may be redeemed in any 12 month period is limited to three percent (3.0%) of the weighted average number of Units outstanding from the beginning of the 12 month period.


Item 6. Exhibits


Exhibit Number		Description of Documents


3.1		Articles of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 to the registrant’s registration statement on Form S-11 (SEC File No. 333-140548) effective July 19, 2007)

3.2		Bylaws of the Registrant, as amended. (Incorporated by reference to Exhibit 3.2 to amendment no. 1 to the registrant’s registration statement on Form S-11 (SEC File No. 333-140548) effective July 19, 2007)

31.1		Certification of the Company’s Chief Executive Officer pursuant to Rule 13a – 14(a) and Rule 15d – 14(a) of the Securities Exchange Act, as amended (FILED HEREWITH).

31.2		Certification of the Company’s Chief Financial Officer pursuant to Rule 13a – 14(a) and Rule 15d – 14(a) of the Securities Exchange Act, as amended (FILED HEREWITH).

32.1		Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Apple REIT Eight, Inc.

By:	/s/ GLADE M. KNIGHT	Date: August 3, 2010

	Glade M. Knight,
	Chairman of the Board, and
	Chief Executive Officer
	(Principal Executive Officer)

By:	/s/ BRYAN PEERY	Date: August 3, 2010

	Bryan Peery,
	Chief Financial Officer
	(Principal Financial and Principal Accounting Officer)