Page 33 - Apple REIT 9 2008 Annual Report

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In February 2009, the Company declared and paid approximately $3.3 million in dividend distributions to its common
shareholders, or $0.073334 per outstanding common share. The Company also closed on the issuance of 3.7 million Units through its
ongoing best-efforts offering, representing gross proceeds to the Company of $41.0 million and proceeds net of selling and marketing
costs of $36.9 million.
On January 5, 2009, the Company entered into a purchase contract for the potential acquisition of a Hampton Inn & Suites hotel
in Yuma, Arizona. On February 4, 2009, this contract was terminated. The gross purchase price for the 90 room hotel was $11.3
million.
On January 6, 2009, the Company entered into a purchase contract for the potential acquisition of a Hampton Inn hotel in Holly
Springs, North Carolina. The gross purchase price for the 124 room hotel is $14.9 million, and a refundable deposit of $100,000 was
paid by the Company in connection with the contract. The hotel is currently under construction. The number of rooms refers to the
expected number of rooms upon completion.
On January 21, 2009, the Company entered into a purchase contract for the potential purchase of approximately 500 acres of
land to be used for natural gas production located on approximately 115 sites in Texas. The purchase contract is with a subsidiary of
Chesapeake Energy Corporation. The total purchase price under the contract is approximately $150 million. The purchase contract
also contemplates that at closing, the Company would enter into a long-term lease with a lessee that will use the land for natural gas
production. A refundable deposit of $500,000 was paid by the Company in connection with this contract.
On January 29, 2009, the Company terminated a purchase contract for a hotel located in Portsmouth, New Hampshire. The hotel
had a purchase price of $15.8 million, secured debt to be assumed by the Company totaling $9.7 million and contained 126 guest
rooms. In connection with the termination of this contract, the initial deposit of $200,000 was repaid to the Company.
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. 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.
Critical Accounting Policies
The following contains a discussion of what the Company believes to be critical accounting policies. These items should be
read to gain a further understanding of the principles used to prepare the Company’s financial statements. These principles include
application of judgment; therefore, changes in judgments may have a significant impact on the Company’s reported results of
operations and financial condition.
Capitalization Policy
The Company considers expenditures to be capital in nature based on the following criteria: (1) for a single asset, the cost must
be at least $500, including all normal and necessary costs to place the asset in service, and the useful life must be at least one year; (2)
for group purchases of 10 or more identical assets, the unit cost for each asset must be at least $50, including all normal and necessary
costs to place the asset in service, and the useful life must be at least one year; (3) for major repairs to buildings, the repair must be at
least $2,500 and the useful life of the asset must be substantially extended.