Apple Hospitality REIT, Inc.

Greetings and welcome to the Apple Hospitality REIT first quarter 2019 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kelly Clark, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning. We welcome you to Apple Hospitality REIT's first quarter 2019 earnings call on this, the ninth day of May, 2019. Today's call will be based on the first quarter 2019 earnings release, which was distributed yesterday afternoon. As a reminder, today's call will contain forward-looking statements, as defined by federal securities laws, including statements regarding future operating results. These statements involve known and unknown risks and other factors which may cause actual results, performance, or achievements of Apple Hospitality to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. Participants should carefully review our financial statements and the notes thereto, as well as the risk factors described in Apple Hospitality's 2018 Form 10-K and other filings with the SEC. Any forward-looking statement that Apple Hospitality makes speaks only as of today, and the company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. In addition, certain non-GAAP measures of performance, such as EBITDA, EBITDA RE, Adjusted EBITDA, Adjusted Hotel EBITDA, FFO, Modified FFO, will be discussed during this call. We encourage participants to review reconciliations of those measures to GAAP measures, as included in yesterday's earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the company, please visit applehospitalityreit.com. This morning, Justin Knight, our Chief Executive Officer, Chrissy Gathright, our Chief Operating Officer, And Brian Peary, our Chief Financial Officer, will provide an overview of our results for the first quarter 2019 and an outlook for the sector and for the company. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to our CEO, Justin Knight.

Thank you, Kelly. Good morning, and thank you for joining us today. Performance across our portfolio of hotels during the first quarter was steady and generally in line with our expectations. Parable Hotels RevPAR increased by 0.1% in the quarter, driven by 1.2% increase in average daily rate, and adjusted EBITDA grew approximately 0.5% for the quarter. Our asset management and on-site management teams have done an exceptional job during this period of moderate top-line growth, to maximize profitability through strategic revenue management and effective cost control measures. With that in mind, we are pleased to report a strong comparable hotels adjusted hotel EBITDA margin of 36% for the quarter. Our 2019 guidance was updated to reflect our performance to date and adoption of a new lease accounting standard, which Brian will discuss in greater detail. We continue to anticipate demand growth will remain healthy New supply will continue to impact property-level performance in several of our markets, and there will be continued cost and wage pressures during the year. Given the size, quality, diversification, and effective age of our portfolio of rooms-focused hotels, and the strength and flexibility of our balance sheet, we remain confident we are well-positioned to maximize operating results and pursue opportunities in the marketplace as they arise. We are pleased to have completed the sale of nine hotels, totaling just over 1,000 guest rooms during the quarter for $95 million. We achieved attractive pricing for the portfolio, and through the transactions, we reduced our exposure to certain lower rev-par markets, which we believe will enhance the long-term strength and stability of our remaining hospitality platform. We acquired two hotels during the quarter, the existing Hampton Inn & Suites in St. Paul, Minnesota, and the newly constructed Home 2 Suites in Orlando, Florida, for a combined total of $52 million. Currently, we have five hotels under contract for acquisition, all of which are under development, for an aggregate expected purchase price of $159 million. We have highlighted four of the hotels under contract on previous calls, and they include the Hyatt Place and Hyatt House in Tempe, Arizona, and the Hampton Inn Suites and Home 2 Suites in Cape Canaveral, Florida, We anticipate construction of these four hotels will be completed in 2020. Most recently, we entered into a purchase contract for a courtyard to be built in downtown Denver, Colorado, with an expected completion date of 2021. The hotel is planned for the Union Station Lodo neighborhood in downtown Denver. Vibrant location with an abundance of demand drivers is within walking distance of Union Station and Coors Field, among many other attractions and businesses. We believe that through these transactions, we will be able to continue to enhance our market mix and the value of our overall portfolio. Although the strength of the broader economy continues to drive demand for travel, new supply remains a headwind for our portfolio in many of our markets. At the end of the first quarter, approximately 66.2% of our properties had one or more upper mid-scale, upscale, or upper upscale new construction projects within a five-mile radius. which represents an uptick from what we reported at the end of the fourth quarter. As construction costs continue to rise, we remain optimistic that new supply will begin to peak over the next year, year and a half, and begin to represent less of a headwind for us. With the strength of our brands, our consistent reinvestment, our locations within markets, and the quality of our onsite management teams, we are confident that our portfolio is uniquely positioned to remain competitive over the long term, fight near-term increased competition from newly opened hotels. Consistent reinvestment in our hotels enables us to maintain competitive positioning within our markets and helps to mitigate the impact of competing new supply. In addition to cyclical renovations at our hotels, we continually seek opportunities to implement environmental efficiency enhancements, including equipment upgrades and replacements that reduce energy and water consumption and improve waste management. By investing in proven sustainability practices, we are able to enhance operating performance at our hotels while reducing the negative impact of our business on the environment. Our team is also continually evaluating opportunities to enhance the competitive position of our properties and drive incremental return on our investments. During the first quarter, the company invested approximately $19 million in renovations, and we plan to spend an additional $60 to $70 million during the remainder of 2019, which includes the beginning of the renovation at our full-service Marriott in Richmond, Virginia. Also of note, we have property improvement plans that will be completed in the second quarter for our recently purchased Atlanta and Memphis Ampton Inn & Suites. These hotels are well-located and strong performers, and despite the short-term disruption, will benefit from the reinvestment as each of their markets continue to draw increased demand from demographic shifts and city investments in amenities and attractions. Our portfolio of 234 hotels is broadly diversified across 87 U.S. markets to reduce volatility and provide exposure to a variety of industries and demand generators. I will now hand the call over to Chrissy to provide additional detail regarding performance across our markets during the first quarter of 2019.