Page 49 - Apple REIT 9 2008 Annual Report

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Dimension, McKibbon, Gateway, LBA, Western or Vista is not affiliated with either Marriott or Hilton, and as a result, the hotels
they manage were required to obtain separate franchise agreements with each respective franchisor. The Hilton franchise agreements
generally provide for a term of 10 to 20 years. Fees associated with the agreements generally include the payment of royalty fees
and program fees. The Marriott franchise agreements generally provide for initial terms of 13 to 20 years. Fees associated with the
agreements generally include the payment of royalty fees, marketing fees, reservation fees and a communications support fee based on
room revenues. For the year ended December 31, 2008 the Company incurred approximately $468,000 in franchise fee expense.
Note 7
Related Parties
The Company has significant transactions with related parties. These transactions cannot be construed to be at arms length and the
results of the Company’s operations may be different than if conducted with non-related parties.
The Company has a contract with ASRG, to acquire and dispose of real estate assets for the Company. A fee of 2% of the gross
purchase price or gross sale price in addition to certain reimbursable expenses is paid to ASRG for these services. As of December 31,
2008, payments to ASRG for services under the terms of this contract have totaled approximately $6.8 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 Nine Advisors, Inc. (“A9A”) to provide management of the Company
and its assets. 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. A9A has entered into an agreement with Apple REIT Six, Inc. (“AR6”) to
provide certain management services to the Company. The Company will reimburse A9A for the cost of the services provided by
AR6. A9A will in turn reimburse AR6. Total advisory fees and reimbursable expenses incurred by the Company under the advisory
agreement are included in general and administrative expenses and totaled approximately $766,000 for the year ended December 31,
2008 and $15,000 for the period November 9, 2007 (initial capitalization) through December 31, 2007.
ASRG and A9A 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 Eight,
Inc., other REITS. Members of the Company’s Board of Directors are also on the Board of Directors of Apple REIT Six, Inc., Apple
REIT Seven, Inc. and Apple REIT Eight, Inc.
During the fourth quarter of 2008, the Company entered into a series of assignment of contracts with Apple REIT Eight,
Inc. (“AR8”) to become the purchaser under three purchase contracts. The purchase contracts are for four hotels which are under
construction: a Fairfield Inn & Suites and SpringHill Suites, both 200 room hotels located in Orlando, Florida, with a combined
purchase price of $54.8 million, a 119 room SpringHill Suites hotel in Baton Rouge, Louisiana with a purchase price of $15.1
million and a 124 room Hampton Inn & Suites hotel in Rochester, Minnesota with a purchase price of $14.1 million. Under the
terms and conditions of the contracts, AR8 assigned to the Company all of its rights and obligations under these purchase contracts.
No consideration or fees was paid to AR8 for the assignment of the purchase contracts except for the reimbursement payment of the
following: (i) initial deposits totaling $1.2 million made by AR8; and (ii) other costs totaling approximately $64,000 paid by AR8 to
third parties. These reimbursement payments did not constitute or result in a profit for AR8.