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 SEPTEMBER 30, 2006

¨ 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 000-51270

APPLE REIT SIX, INC.

(Exact name of registrant as specified in its charter)

VIRGINIA	20-0620523
(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  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:    Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

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

Number of registrant’s common shares outstanding as of October 31, 2006: 89,276,957

APPLE REIT SIX, INC.

FORM 10-Q

INDEX

			Page Number
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)
		Consolidated Balance Sheets - September 30, 2006 and December 31, 2005	3
		Consolidated Statements of Operations - Three months and nine months ended September 30, 2006 and Three months and nine months ended September 30, 2005	4
		Consolidated Statements of Cash Flows - Nine months ended September 30, 2006 and Nine months ended September 30, 2005	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
	Item 4.	Controls and Procedures	15
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	16
	Item 3.	Defaults Upon Senior Securities (not applicable)
	Item 4.	Submission of Matters to a Vote of Security Holders (not applicable)
	Item 5.	Other Information (not applicable)
	Item 6.	Exhibits	17
Signatures			18

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, Courtyard^® by Marriott, Residence Inn^® by Marriott and Marriott Suites^® 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 Hotels Corporation or one or more of its affiliates. For convenience, the applicable trademark or servicemark symbol has been omitted but will be deemed to be included wherever the above-referenced terms are used.

2

Apple REIT Six, Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share data)

	September 30, 2006			December 31, 2005
ASSETS
Investment in real estate, net of accumulated depreciation of $31,524 and $13,247, respectively	$	837,850		$	790,170
Cash and cash equivalents		30,854			35,948
Restricted cash-furniture, fixtures and other escrows		3,381			3,152
Due from third party manager, net		12,224			7,813
Other assets, net		11,530			17,233
TOTAL ASSETS	$	895,839		$	854,316
LIABILITIES
Notes payable	$	54,142		$	76,855
Accounts payable and accrued expenses		7,329			5,626
TOTAL LIABILITIES		61,471			82,481
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 89,633,074 and 81,774,666 shares, respectively		—			—
Series B convertible preferred stock, no par value, authorized 240,000 shares; issued and outstanding 240,000 and 240,000 shares, respectively		24			24
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 89,633,074 and 81,774,666 shares, respectively		881,629			805,079
Distributions greater than net income		(47,285	)		(33,268	)
TOTAL SHAREHOLDERS' EQUITY		834,368			771,835
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	895,839		$	854,316

See notes to consolidated financial statements.

3

Apple REIT Six, Inc.

Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

	Three months ended September 30, 2006			Three months ended September 30, 2005			Nine Months ended September 30, 2006			Nine Months ended September 30, 2005
Revenues:
Room revenue	$	61,292		$	29,808		$	167,765		$	57,482
Other revenue		4,366			2,446			13,116			6,270
Total revenue		65,658			32,254			180,881			63,752
Expenses:
Operating expense		16,196			8,378			46,357			16,857
Hotel administrative expense		4,889			2,892			13,857			5,795
Sales and marketing		4,891			2,159			13,863			4,557
Utilities		2,707			1,402			7,321			2,446
Repair and maintenance		2,593			1,205			7,369			2,221
Franchise fees		2,503			1,414			6,827			2,220
Management fees		2,092			1,185			6,820			2,223
Taxes, insurance and other		3,663			1,760			10,244			3,283
General and administrative		939			952			3,125			2,308
Depreciation expense		6,476			3,314			18,913			6,659
Total expenses		46,949			24,661			134,696			48,569
Operating income		18,709			7,593			46,185			15,183
Interest income		278			1,265			839			3,045
Interest expense		(867	)		(483	)		(2,729	)		(947	)
Net income	$	18,120		$	8,375		$	44,295		$	17,281
Basic and diluted net income per common share	$	0.20		$	0.13		$	0.50		$	0.34
Weighted average common shares outstanding - basic and diluted		89,545			62,296			88,619			50,446
Distributions declared per common share	$	0.22		$	0.22		$	0.66		$	0.66

See notes to consolidated financial statements.

4

Apple REIT Six, Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine months ended September 30, 2006			Nine months ended September 30, 2005
Cash flow provided by operating activities:
Net income	$	44,295		$	17,281
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		18,913			6,659
Amortization of deferred financing costs and fair value adjustments		(314	)		31
Stock option expense		69			—
Changes in operating assets and liabilities, net of amounts acquired/assumed:
Due from third party manager		(4,408	)		(6,019	)
Other assets		(73	)		(481	)
Accounts payable and accrued expenses		3,036			1,053
Net cash provided by operating activities		61,518			18,524
Cash flow from investing activities:
Cash paid in acquisition of hotels		(37,180	)		(332,944	)
Cash paid for potential acquisition of hotels		—			(1,908	)
Acquisition of other assets		(8,447	)		(1,514	)
Capital improvements		(10,096	)		(1,620	)
Net decrease (increase) in cash restricted for property improvements		9			(1,252	)
Net cash used in investing activities		(55,714	)		(339,238	)
Cash flow from financing activities:
Payment of financing costs		(101	)		(452	)
Repayment of secured notes payable		(28,966	)		(293	)
Net proceeds from issuance of common stock		101,822			352,667
Redemptions of common stock		(25,341	)		—
Cash distributions paid to shareholders		(58,312	)		(32,756	)
Net cash provided by (used in) financing activities		(10,898	)		319,166
Decrease in cash and cash equivalents		(5,094	)		(1,548	)
Cash and cash equivalents, beginning of period		35,948			142,790
Cash and cash equivalents, end of period	$	30,854		$	141,242
Non-cash transactions:
Notes payable-secured assumed in acquisitions	$	6,663		$	37,611

See notes to consolidated financial statements.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States. 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 2005 Annual Report on Form 10-K. Operating results for the period ended September 30, 2006 are not necessarily indicative of the results that may be expected for the period ending December 31, 2006.

Note 2

General Information and Summary of Significant Accounting Policies

Organization

Apple REIT Six, Inc. (the “Company”) is a Virginia corporation formed to invest in hotels and other selected real estate in select metropolitan areas in the United States. Initial capitalization occurred on January 20, 2004 and operations began on May 28, 2004, when the Company acquired its first hotel. On March 3, 2006, the Company concluded its best-efforts offering of Units. The Company has no foreign operations or assets and its operating structure includes only one segment. The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company transactions and balances have been eliminated upon consolidation.

Stock Incentive Plans

Effective January 1, 2006, the Company adopted Financial Accounting Standards Board (FASB) Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation using the modified prospective transition method. Accordingly, no prior year amounts have been restated. Statement 123 (R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123 (R) is similar to the approach described in Statement 123. However, Statement 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The adoption of this statement has not had a material impact on the Company’s results of operations or financial position. During the second quarter of 2006 the Company issued approximately 72,000 directors’ stock options and share-based expense of approximately $69,000 was recorded.

Offering Costs

From the Company’s initial capitalization on January 20, 2004 through September 30, 2006, the Company incurred costs of approximately $102 million related to its best-efforts offering. These costs are reflected as a reduction to shareholders’ equity. As of September 30, 2006, the Company has closed on a total of 91,125,541 Units, representing proceeds net of offering costs of approximately $898 million.

6

Earnings per Common Share

Basic earnings per common share is computed based upon the weighted average number of shares outstanding during the year. Diluted earnings per share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the year. There were no potential common shares with a dilutive effect during the three months and nine months ended September 30, 2006 or 2005. Series B convertible preferred shares are not included in earnings per common share calculations until such time the Series B preferred convertible shares are converted to common shares.

Use of Estimates

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

Note 3

Property Acquisitions

The Company purchased five hotels in 2006. The following table summarizes the location, brand, property manager, date acquired, number of rooms and gross purchase price for each hotel acquired in 2006. All dollar amounts are in thousands.

Location	Brand	Manager	Date Acquired	Rooms	Gross Purchase Price
San Francisco, CA	Hilton Garden Inn	Inn Ventures	1/30/06	169	$	12,266
Clearwater, FL	SpringHill Suites	LBA	2/17/06	79		6,923
Hillsboro, OR	Residence Inn	Inn Ventures	3/09/06	122		15,500
Hillsboro, OR	Courtyard	Inn Ventures	3/09/06	155		11,000
Panama City, FL	Courtyard	LBA	4/26/06	84		9,245
Total				609	$	54,934

Substantially all of the purchases were funded with proceeds of the Company’s best-efforts offering of Units. However, the Company did assume approximately $6.7 million of secured debt associated with the purchase of the Courtyard hotel in Hillsboro, Oregon. The note bears interest at a rate of 6.4% per annum and matures on December 11, 2014.

As there can be no assurance that all conditions to closing will be satisfied, the Company includes deposits for hotels under contract in Other assets in the Company’s Consolidated Balance Sheet and in Cash paid for potential acquisition of hotels in its Consolidated Statement of Cash Flows.

The terms and fees of the new management agreements are similar to the Company’s existing management agreements.

The Company leased all of its hotels to wholly-owned taxable REIT subsidiaries under hotel lease agreements. The Company also used the proceeds of its offering to pay 2% of the gross purchase price for these hotels, or approximately $1.1 million, as a commission to Apple Six Realty Group, Inc. (“ASRG”). ASRG is owned by the Company’s Chairman, Chief Executive Officer and President, Glade M. Knight. This commission was capitalized as part of the purchase price of the hotels.

No goodwill or intangible assets were recorded in connection with any of the acquisitions.

7

As of September 30, 2006, investment in real estate consisted of the following (in thousands):

Land	$	107,490
Building and Improvements		719,282
Furniture, Fixtures and Equipment		42,602
		869,374
Less Accumulated Depreciation		(31,524	)
Investment in real estate, net	$	837,850

Note 4

Related Parties

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

The Company has a contract with ASRG, a related party, 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 September 30, 2006, payments to ASRG for services under the terms of this contract have totaled $16.6 million since inception, which were capitalized as a part of the purchase price of the hotels.

The Company is party to an advisory agreement with Apple Six Advisors, Inc. (“ASA”), pursuant to which ASA provides management services to the Company. An annual fee ranging from .1% to .25% of total equity proceeds received by the Company, in addition to certain reimbursable expenses, are payable for these services. ASA utilizes Apple Hospitality Two, Inc. to provide these services. Expenses related to the ASA agreement, for the nine months ended September 30, 2006 and 2005, totaled approximately $1.7 million and $1.1 million, respectively.

During 2006 the Company assigned its rights under four contracts for the purchase of hotels in Houston, TX, Brownsville, TX, Miami, FL and Stafford, TX to Apple REIT Seven, Inc. The assignments were completed with no cost or profit to the Company and were entered into to prevent the Company from incurring secured debt to complete its planned property acquisitions.

Mr. Knight is Chairman and Chief Executive Officer of ASRG, ASA, Apple Hospitality Two, Inc. (a hospitality REIT), Apple Hospitality Five, Inc. (a hospitality REIT) and Apple REIT Seven, Inc. (a newly formed company proposed to be a diversified REIT). The Company’s Board of Directors are also on the board of Apple Hospitality Two, Inc. and Apple Hospitality Five, Inc.

Note 5

Shareholders’ Equity

The company concluded its best-efforts offering of Units on March 3, 2006.

8

Expense related to issuance of 240,000 Series B convertible preferred shares to Mr. Knight will be recognized at such time when the number of common shares to be issued for conversion of the Series B shares can be reasonably estimated and the event triggering the conversion of the Series B shares to common shares occurs. The expense will be measured as the difference between the fair value of the common stock for which the Series B shares can be converted and the amounts paid for the Series B shares. Based on equity raised through September 30, 2006, if a triggering event had occurred, expense would have ranged from $0 to $63.8 million (assumes $11 per Unit fair market value), which represents approximately 5.8 million shares of common stock.

In July 2005, the Company instituted 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 the lesser of: (1) the purchase price per Unit that the shareholder actually paid for the Unit; or (2) $11.00 per Unit. The Company reserves the right to change the purchase price of redemptions, reject any request for redemption, or otherwise amend the terms of, suspend, or terminate the Unit Redemption Program. During the nine months ended September 30, 2006, the Company redeemed approximately 2.3 million Units in the amount of $25.3 million under the program.

In February 2006, 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. As of September 30, 2006, approximately 1.3 million Units, representing $13.9 million in proceeds to the Company, have been issued under the plan.

Note 6

Other Assets

On January 25, 2006, the Company, through a wholly-owned subsidiary, Apple Six Hospitality Air, LLC, purchased a Lear 40XR jet. The jet will be used mainly for renovation and asset management purposes. The purchase price was approximately $8.3 million. The asset is depreciated on a straight-line basis over a useful life of ten years. As of September 30, 2006, the Company recorded depreciation expense in the amount of approximately $636,000.

Note 7

Subsequent Events

On October 16, 2006, the Company declared and paid approximately $6.6 million, or $.073 per share, in distributions to its common shareholders of record on September 30, 2006, of which $2.7 million or 246,137 Units were reinvested under the Company’s Dividend Reinvestment Plan.

On October 20, 2006, the Company redeemed 0.6 million Units in the amount of $6.6 million under its Unit Redemption Program.

9

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

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 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 and competition within the extended-stay 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.

Overview

Apple REIT Six, Inc. (together with its wholly owned subsidiaries, the “Company”) was formed and initially capitalized on January 20, 2004, with its first investor closing on April 23, 2004. The Company owns 67 hotels within different markets in the United States. The Company is treated as a Real Estate Investment Trust (“REIT”) for federal income tax purposes. The Company’s first hotel was acquired on May 28, 2004, with 11 total hotels purchased in 2004, 51 hotels purchased in 2005 and 5 hotels purchased in 2006. Accordingly, the results of operations include only the results of the hotels for the period owned. 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, in general, has met the Company’s expectations for the period owned. 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”) and revenue per available room (“RevPAR”), and expenses, such as hotel operating expenses, general and administrative and other expenses described below. The following is a summary of the Company’s results. All amounts are in thousands, except for percent of revenue (“POR”) and other percentages and ratios.

	Three months ended September 30,												Nine months ended September 30,
	2006			POR		2005			POR		Percent change		2006			POR		2005			POR		Percent change
Total revenues	$	65,658		100	%	$	32,254		100	%	104	%	$	180,881		100	%	$	63,752		100	%	184	%
Hotel direct expenses		35,871		55	%		18,635		58	%	92	%		102,414		57	%		36,319		57	%	182	%
Taxes, insurance and other expense		3,663		6	%		1,760		5	%	108	%		10,244		6	%		3,283		5	%	212	%
General and administrative		939		1	%		952		3	%	(1	)%		3,125		2	%		2,308		4	%	35	%
Depreciation		6,476		10	%		3,314		10	%	95	%		18,913		10	%		6,659		10	%	184	%
ADR	$	108				$	102				6	%	$	105				$	104				1	%
Occupancy		79	%				76	%			4	%		76	%				74	%			3	%
RevPAR	$	85				$	78				9	%	$	80				$	78				3	%

10

Hotels Owned

As of September 30, 2006, the Company owned 67 hotels, with a total of 7,750 rooms. The following table summarizes the location, brand, manager, date acquired, number of rooms and gross purchase price for each hotel. All dollar amounts are in thousands.

Location	Brand	Manager	Date Acquired	Rooms	Gross Purchase Price
Ft. Worth, TX	SpringHill Suites	Marriott	5/28/04	145	$	13,340
Myrtle Beach, SC	Courtyard	Marriott	6/8/04	135		9,200
Redmond, WA	Marriott	Marriott	7/7/04	262		64,000
Anchorage, AK	Hilton Garden Inn	Stonebridge	10/12/04	125		18,900
Anchorage, AK	Homewood Suites	Stonebridge	10/12/04	122		13,200
Arcadia, CA	Hilton Garden Inn	Stonebridge	10/12/04	124		12,000
Arcadia, CA	SpringHill Suites	Stonebridge	10/12/04	86		8,100
Glendale, CO	Hampton Inn & Suites	Stonebridge	10/12/04	133		14,700
Lakewood, CO	Hampton Inn	Stonebridge	10/12/04	170		10,600
Lake Forest, CA	Hilton Garden Inn	Stonebridge	10/12/04	103		11,400
Phoenix, AZ	Hampton Inn	Stonebridge	10/12/04	99		6,700
Anchorage, AK	Hampton Inn	Stonebridge	3/14/05	101		11,500
Bakersfield, CA	Hilton Garden Inn	Hilton	3/18/05	120		11,500
Tallahassee, FL	Hilton Garden Inn	Hilton	3/18/05	99		10,850
Lake Mary, FL	Courtyard	Stonebridge	3/18/05	86		6,000
Foothill Ranch, CA	Hampton Inn	Stonebridge	4/21/05	84		7,400
Ft. Worth, TX	Residence Inn	Western	5/6/05	149		17,000
Boulder, CO	Marriott	WLS	5/9/05	157		30,000
Ft. Worth, TX	Homewood Suites	Hilton	5/24/05	137		9,097
Nashville, TN	Homewood Suites	Hilton	5/24/05	121		8,103
Albany, GA	Courtyard	LBA	6/24/05	84		8,597
Lakeland, FL	Residence Inn	LBA	6/24/05	78		9,886
Huntsville, AL	Residence Inn	LBA	6/24/05	78		8,288
Dothan, AL	Hampton Inn & Suites	LBA	6/24/05	85		8,673
Columbus, GA	Residence Inn	LBA	6/24/05	78		7,888
Las Colinas, TX	TownePlace Suites	Western	6/30/05	136		7,178
Arlington, TX	TownePlace Suites	Western	6/30/05	95		7,148
Arlington, TX	SpringHill Suites	Western	6/30/05	122		7,486
Tempe, AZ	TownePlace Suites	Western	6/30/05	119		8,128
Tempe, AZ	SpringHill Suites	Western	6/30/05	121		8,060
Wallingford, CT	Homewood Suites	WLS	7/8/05	104		12,780
McAllen, TX	Hilton Garden Inn	Western	7/19/05	104		9,000
Pensacola, FL	Hampton Inn & Suites	LBA	7/21/05	85		9,279
Rocky Hill, CT	Residence Inn	WLS	8/1/05	96		12,070
Dothan, AL	Courtyard	LBA	8/11/05	78		8,016
Somerset, NJ	Homewood Suites	WLS	8/17/05	123		17,750
Birmingham, AL	Fairfield Inn	LBA	8/25/05	63		2,176
Tuscaloosa, AL	Courtyard	LBA	8/25/05	78		7,551
Tuscaloosa, AL	Fairfield Inn	LBA	8/25/05	63		3,982
Pensacola, FL	Courtyard	LBA	8/25/05	90		11,369
Pensacola, FL	Fairfield Inn	LBA	8/25/05	63		4,858
Pittsburgh, PA	Residence Inn	WLS	9/2/05	156		11,000
Laredo, TX	Residence Inn	Western	9/12/05	109		11,445
Mt. Olive, NJ	Residence Inn	WLS	9/15/05	123		12,070
Saratoga Springs, NY	Hilton Garden Inn	WLS	9/29/05	112		17,750
Huntsville, AL	Fairfield Inn	LBA	9/30/05	79		4,954
Savannah, GA	SpringHill Suites	LBA	9/30/05	79		5,407
Montgomery, AL	SpringHill Suites	LBA	9/30/05	79		6,835
Valdosta, GA	Courtyard	LBA	10/3/05	84		8,284
Farmington, CT	Courtyard	WLS	10/20/05	119		16,330
Orange Park, FL	Fairfield Inn	LBA	11/8/05	83		7,221
Folsom, CA	Hilton Garden Inn	Inn Ventures	11/30/05	100		18,028
Milpitas, CA	Hilton Garden Inn	Inn Ventures	11/30/05	161		18,600
Roseville, CA	Hilton Garden Inn	Inn Ventures	11/30/05	131		20,759
Renton, WA	Hilton Garden Inn	Inn Ventures	11/30/05	150		16,096
Laredo, TX	Homewood Suites	Western	11/30/05	106		10,500
Dallas, TX	SpringHill Suites	Western	12/9/05	147		19,500
Hillsboro, OR	TownePlace Suites	Inn Ventures	12/19/05	136		11,500
Kent, WA	TownePlace Suites	Inn Ventures	12/19/05	152		12,000
Mukilteo, WA	TownePlace Suites	Inn Ventures	12/19/05	128		12,000
Portland, OR	Residence Inn	Inn Ventures	12/19/05	258		42,000
Fredericksburg, VA	Hilton Garden Inn	Hilton	12/20/05	148		16,600
San Francisco, CA	Hilton Garden Inn	Inn Ventures	1/30/06	169		12,266
Clearwater, FL	SpringHill Suites	LBA	2/17/06	79		6,923
Hillsboro, OR	Residence Inn	Inn Ventures	3/09/06	122		15,500
Hillsboro, OR	Courtyard	Inn Ventures	3/09/06	155		11,000
Panama City, FL	Courtyard	LBA	4/26/06	84		9,245
Total				7,750	$	827,566

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The Company leased all of its hotels to wholly-owned taxable REIT subsidiaries (collectively, the “lessee”) under hotel lease agreements. The Company also used the proceeds from its “best-efforts” offering to pay 2% of the gross purchase price for these hotels, which equals approximately $16.6 million, as a commission to Apple Six Realty Group, Inc. (“ASRG”). ASRG is owned by the Company’s Chairman, Chief Executive Officer and President, Glade M. Knight.

No goodwill or intangible assets were recorded in connection with any of the acquisitions.

Results of Operations

Due to the fact the Company only owned 48 hotels as of September 30, 2005, versus 67 hotels as of September 30, 2006, a comparison of hotel operations to 2005 would not be meaningful.

In general, performance at the Company’s hotels have met expected financial results. Hotel performance is impacted by many factors including the economic conditions in the United States, as well as each locality. As a result, there can be no assurance that the Company’s operating performance will continue to meet expectations in the future.

Revenues

The Company’s principal source of revenue is hotel room revenue and other related revenue. Hotel operations are for the 67 hotels acquired through September 30, 2006 for their respective periods owned. For the three and nine months ended September 30, 2006, the Company had room revenue and other revenue of $65.7 and $180.9 million. For the three and nine months ended September 30, 2006, the hotels achieved average occupancy of 79% and 76%, average daily rate, or ADR of $108 and $105 and revenue per available room, or RevPAR of $85 and $80. ADR is calculated as room revenue divided by the number of rooms sold, and RevPAR is calculated as occupancy multiplied by ADR. These rates are consistent with industry and brand averages.

Expenses

For the three and nine months ended September 30, 2006, hotel operating expenses totaled $35.9 and $102.4 million or 55% and 57% of total revenue. As the third quarter of 2006 was the first full quarter of operations for all 67 hotels, future operating expenses as a percentage of revenue are expected to remain consistent with third quarter 2006 results.

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Taxes, insurance, and other expenses for the three and nine months ended September 30, 2006, were $3.7 and $10.2 million. As many of the properties acquired by the Company in the previous 12 months were newly constructed, the Company expects a slight increase in property taxes in the next year.

General and administrative expense for the three and nine months ended September 30, 2006, was $0.9 and $3.1 million. The principal components of general and administrative expense are advisory fees, accounting fees and reporting expense.

Depreciation expense for the three and nine months ended September 30, 2006, was $6.5 and $18.9 million. Depreciation expense represents expense of the Company’s 67 hotels and related personal property for their respective periods owned.

Interest expense for the three and nine months ended September 30, 2006, was $0.9 and $2.7 million. Interest expense arose from debt assumed with 14 of the properties acquired and short term financing used to bridge the purchase of properties and the raising of capital. Total debt assumed was approximately $54.1 million.

Liquidity and Capital Resources

Operating cash flow from the properties owned and cash on hand ($30.9 million at September 30, 2006) are the Company’s principal source of liquidity. In addition, the Company may borrow funds, subject to limitations set forth in its bylaws. The Company anticipates that cash flow, and cash on hand, will be adequate to cover its operating expenses and to permit the Company to meet its anticipated liquidity requirements, including distributions and capital expenditures.

On March 3, 2006, the Company concluded its best-efforts offering of Units. From the Company’s initial capitalization on January 20, 2004 through March 3, 2006, the Company closed on a total of 91,125,541 Units, representing gross proceeds and proceeds net of selling, marketing fees, and other costs of approximately $1.0 billion and $898 million, respectively. These costs are reflected as a reduction to shareholders’ equity.

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, and refurbishing of furniture, fixtures, and equipment, of its hotels an amount of 1% to 5% of gross revenues. The Company expects that this amount will be adequate to fund required repair, replacement, and refurbishments and to maintain the Company’s hotels in a competitive condition. As of September 30, 2006, the Company had made approximately $10.1 million of capital expenditures during 2006.

To maintain its REIT status the Company is required to distribute at least 90% of its ordinary income. Distributions during the nine months ended September 30, 2006 totaled $58.3 million and were paid monthly at a rate of $0.073 per common share and included a return of capital. For the same period the Company’s cash generated from operations was $61.5 million. The Company intends to continue paying dividends on a monthly basis at an annual rate of 8%. 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 rate.

In conjunction with the acquisition of five hotels in December 2005, the Company utilized short-term unsecured financing from a commercial bank in the amount of $40 million to fund a portion of the aggregate gross purchase price. This financing was evidenced by a promissory note and was governed by a loan agreement. The applicable interest rate was equal to LIBOR (the London Interbank Offered Rate) plus 2.2%. Payments of interest only were due monthly. A principal payment of $12 million was made on December 30, 2005 and the remaining principal payment of $28 million was made on January 24, 2006 and the loan was extinguished.

In February 2006, 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

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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. As of September 30, 2006, approximately 1.3 million Units, representing $13.9 million in proceeds to the Company, have been issued under the plan.

In July 2005, the Company instituted 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 the lesser of: (1) the purchase price per Unit that the shareholder actually paid for the Unit; or (2) $11.00 per Unit. The Company reserves the right to change the purchase price of redemptions, reject any request for redemption, or otherwise amend the terms of, suspend, or terminate the Unit Redemption Program. During the nine months ended September 30, 2006, the Company redeemed approximately 2.3 million Units in the amount of $25.3 million under the program. It is anticipated the funds required for the redemption program will be substantially offset by the funds received from the dividend reinvestment plan.

Related Party Transactions

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

The Company has a contract with ASRG, a related party, 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 September 30, 2006, payments to ASRG for services under the terms of this contract have totaled $16.6 million since inception, which were capitalized as a part of the purchase price of the hotels.

The Company is party to an advisory agreement with Apple Six Advisors, Inc. (“ASA”), pursuant to which ASA provides management services to the Company. An annual fee ranging from .1% to .25% of total equity proceeds received by the Company, in addition to certain reimbursable expenses, are payable for these services. ASA utilizes Apple Hospitality Two, Inc. to provide these services. Expenses related to the ASA agreement, for the nine months ended September 30, 2006 and 2005, totaled approximately $1.7 million and $1.1 million, respectively.

During 2006 the Company assigned its rights under four contracts for the purchase of hotels in Houston, TX, Brownsville, TX, Miami, FL and Stafford, TX to Apple REIT Seven, Inc. The assignments were completed with no cost to the Company and were entered into to prevent the Company from incurring secured debt to complete its planned property acquisitions

Mr. Knight is Chairman and Chief Executive Officer of ASRG, ASA, Apple Hospitality Two, Inc. (a hospitality REIT), Apple Hospitality Five, Inc. (a hospitality REIT) and Apple REIT Seven, Inc. (a newly formed company proposed to be a diversified REIT). The Company’s Board of Directors are also on the board of Apple Hospitality Two, Inc. and Apple Hospitality Five, Inc.

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.

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Business Interruption

Being in the real estate industry, the Company is exposed to natural disasters both locally and nationally, and 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. Seasonal variations in occupancy at the Company’s hotels may cause quarterly fluctuations in its revenues. 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 to make distributions.

Subsequent Events

On October 16, 2006, the Company declared and paid approximately $6.6 million, or $.073 per share, in distributions to its common shareholders of record on September 30, 2006, of which $2.7 million or 246,137 Units were reinvested under the Company’s Dividend Reinvestment Plan.

On October 20, 2006, the Company redeemed 0.6 million Units in the amount of $6.6 million under its Unit Redemption Program.

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 September 30, 2006, the Company’s financial instruments were not exposed to significant market risk due to interest rate risk, foreign currency exchange risk, commodity price risk or equity price risk. The Company will be exposed to changes in short term money market rates as it invests cash on hand. Based on the Company’s cash invested at September 30, 2006, of $30.9 million, every 100 basis points change in interest rates will impact the Company’s net income by $309,000, all other factors remaining the same.

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.

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PART II. OTHER INFORMATION

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

Dividend Reinvestment Plan

During the first quarter of 2006, the Company instituted a dividend reinvestment plan. The purpose of the plan is to provide the Company’s shareholders with a convenient and inexpensive way to increase their investment in the Company by reinvesting their dividends to purchase additional Units. As of September 30, 2006, approximately 1.3 million Units, representing $13.9 million in proceeds to the Company, have been issued under the plan.

Unit Redemption Program

In July 2005, the Company instituted a Unit Redemption Program to provide its shareholders who have held their Units for at least one year with the benefit of limited interim liquidity, by presenting for redemption all or any portion of their Units at any time and in accordance with certain procedures. Once this time limitation has been met, the Company may, subject to certain conditions and limitations, redeem the Units presented for redemption for cash, to the extent that the Company has sufficient funds available to fund the redemption. If Units are held for the required one-year period, the Units may be redeemed for a purchase price equal to the lesser of: (1) $11.00 per Unit; or (2) the purchase price per Unit that was actually paid for the Units. The board of directors reserves the right, in its sole discretion, at any time and from time to time, to waive the one-year holding period, reject any request for redemption, change the purchase price for redemptions or otherwise amend the terms of, suspend, or terminate the Unit Redemption Program. The following is a summary of redemptions during the third quarter of 2006:

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
July 2006	1,226,629	$	10.93	2,752,734	(1	)

⁽¹⁾ The maximum number of Units that may be redeemed in any 12 month period is limited to five percent (5.0%) of the weighted average number of Units outstanding from the beginning of the 12 month period.

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Item 6. Exhibits

Exhibit Number	Description
3.1	Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to the registrant’s registration statement on Form S-11 (SEC File No. 333-112169) effective April 23, 2004)
3.2	Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Post-Effective Amendment No. 4 to Form S-11 (SEC File No. 333-112169) effective June 14, 2005).
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).

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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 SIX, INC.
By:	/s/ GLADE M. KNIGHT	Date: November 2, 2006
	Glade M. Knight, Chairman of the Board, Chief Executive Officer, and President (Principal Executive Officer)
By:	/s/ BRYAN PEERY	Date: November 2, 2006
	Bryan Peery,
	Chief Financial Officer (Principal Financial and Principal Accounting Officer)

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