Apple Hospitality REIT, Inc.

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. Please go ahead.

Thank you, and good morning. Welcome to Apple Hospitality REIT's third quarter 2023 earnings call. Today's call will be based on the earnings release in Form 10-Q, which we distributed and filed yesterday afternoon. Before we begin, please note that today's call may include forward-looking statements as defined by federal securities laws. These forward-looking statements are based on current views and assumptions, and as a result, are subject to numerous risks uncertainties, and the outcome of future events that could cause actual results, performance, or achievements to materially differ from those expressed, projected, or implied. Any such forward-looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2022 Annual Report on Form 10-K, and speak only as of today. The company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are 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, and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the third quarter 2023 and an operational outlook for the remainder of the year. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

Good morning, and thank you for joining us today. We are incredibly pleased with our performance here today. A steady recovery in business transient and continued strength in leisure demand drove Comparable Hotels' third quarter REVPAR growth of more than 7% as compared to the third quarter of 2019, our highest quarterly Comparable Hotels REVPAR growth since the onset of the pandemic. Despite more challenging year-over-year comparisons during the third quarter, we achieved improvements in occupancy, ADR, and REVPAR. Third quarter 2023, comparable hotels ADR increased by 1%. Occupancy was up 2%, and rep are improved by 3% as compared to the third quarter of 2022. Continued top line growth enabled us to achieve third quarter comparable hotels adjusted hotel EBITDA of $132 million, a 1% improvement over third quarter 2022. Positive trends have continued, and based on preliminary results, Comparable hotels occupancy for the month of October was 78%, with continued growth in ADR. Given the strength of our performance as we approach the end of last year, top-line comparisons will become increasingly difficult as we continue through the fourth quarter. Still, overall travel trends are favorable. Leisure demand remains elevated to pre-pandemic levels, and steady improvement in business travel demand continues to bolster midweek occupancies. We have adjusted our annual guidance to reflect portfolio performance through the first nine months of the year, top-line performance through October, and the recently completed and announced acquisitions. Expense growth, which was elevated as a result of general inflationary pressures and a competitive labor environment, moderated somewhat in the latter portion of the quarter as we lapped periods where we saw significant growth last year. Through continued rate growth and disciplined cost controls, we achieved a comparable hotels-adjusted hotels EBITDA margin for the quarter of 37%, down 110 basis points the third quarter of 2022. We are fortunate to be partnered with some of the best operators in the industry who, together with our experienced asset management team, work to share best practices, monitor real-time performance, and focus on-site efforts to maximize profitability at our hotels without sacrificing service, cleanliness, or overall guest satisfaction. Our outperformance since the onset of the pandemic is a tribute to the combined efforts of our corporate team and our managers, and is a testament to our strategy of investing in a broadly diversified portfolio of high-quality, rooms-focused hotels with low leverage, which has enabled us to maintain the strength and flexibility of our balance sheet, positioning us to be acquisitive within the current transaction environment. We have acquired four hotels since the beginning of the year, with three additional hotels under contract for purchase and are actively underwriting additional opportunities. In October, we acquired a courtyard, a recently renovated Hyatt House, and a corresponding parking garage in downtown Salt Lake City for a combined total of $91.5 million. We are pleased to expand our presence within the business-friendly downtown Salt Lake City area, which has seen significant economic growth and positive demographic trends in recent years and is poised for continued expansion. These hotels sit adjacent to one another and are located directly across the street from the Delta Center within walking distance of the Salt Palace Convention Center and convenient to Temple Square, the Utah State Capitol, the University of Utah, Salt Lake City International Airport, numerous performing arts venues, and multiple ski areas. Salt Lake City's diversified economy offers a wide variety of business and leisure demand generators and includes software development, hardware manufacturing, and information technology firms, as well as defense, oil and gas, transportation, tourism, healthcare, and financial service industries, among others. In October, we acquired the recently built Residence Inn Seattle South Renton for $55.5 million. Renton is well known for its proximity to downtown Seattle and Bellevue, as well as its strong business environment that spans aviation, aerospace, manufacturing, technology, life science, and healthcare. The hotel is less than one mile from Boeing's Renton Production Facility, known for its assembly of the Boeing 737 family of commercial airplanes. And from a leisure perspective, the hotel is located across from the southeastern shore of Lake Washington and convenient to the Seattle Seahawks headquarters and training facility, Tukwila Station, and the Seattle-Tacoma International Airport. We continue to have one existing hotel under contract for purchase for a total of approximately $37 million, the Embassy Suites South Jordan Salt Lake City, which we anticipate acquiring by year end. This hotel is part of a transit-oriented mixed-use development with two Class A office buildings located just off Interstate 15 in the Silicon Slopes region of the Salt Lake City metropolitan area, just 20 minutes south of downtown Salt Lake City, with a variety of amenities nearby, including Utah Transit SoJo Station north and south, serving an 83-mile corridor with connections to downtown Salt Lake City and the Salt Lake City International Airport, South Jordan Town Center, and South Valley Regional Airport. South Jordan is home to a diverse range of businesses, including technology, biotech, healthcare, education, and retail, and is near several ski areas. The 192-room hotel opened in 2018 and has market-leading meeting space at over 8,000 square feet. The combined purchase price for the recently acquired Salt Lake City and rent in assets, together with the Embassy Suites in South Jordan, represent a blended 8% cap rate on trailing 12-month financials through September of this year, after an industry standard 4% FF&E reserve. We believe each of these assets has embedded upside and will be a meaningful contributor to our overall portfolio performance. We also have two hotels under contract for purchase that are currently under development. the Embassy Suites in downtown Madison, Wisconsin for a purchase price of $79 million, and the Motto in downtown Nashville for $97 million. We anticipate acquiring the Madison Embassy in mid-2024 and the Nashville Motto in 2025, both following completion of construction. Since the onset of the pandemic, we have strategically transacted in ways that have refined and grown our portfolio. We have completed approximately $253 million in hotel sales and have invested approximately $736 million in new acquisitions. On a trailing 12-month basis, the 14 hotels acquired since the pandemic and owned for at least a full year have produced an unlevered yield of approximately 9% after capital expenditures. Importantly, we have completed these acquisitions while maintaining the strength of our balance sheet, with estimated post-acquisitions debt levels still below 3.5 times trailing 12-month EBITDA. We continue to underwrite numerous potential opportunities and remain intently focused on maximizing total returns for our shareholders through strong operating fundamentals and portfolio growth when conditions are optimal. With our tremendous transaction experience, our available balance sheet capacity, and our deep industry relationships, we are well positioned within the current marketplace. Supported by our strong operating performance, we continue to lead our peers in post-pandemic dividend payments. During the quarter, we paid distributions totaling $0.24 per share. Based on Monday's closing stock price, our annualized distribution of $0.96 per share represents an annual yield of approximately 5.7%. Together with our board of directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital. As we approach year-end, the fundamentals of our business remain favorable with continued strength in demand and limited near-term supply growth. As has been the case for several quarters, nearly half of our hotels do not have any new supply under construction within a five-mile radius, providing us with the ability to meaningfully benefit from incremental demand. and we believe our recent acquisitions further enhance our portfolio and position us for continued outperformance. Our strategy was designed to create an asymmetrical risk profile, mitigating downside risk while providing significant opportunity for upside. Our portfolio of upscale, rooms-focused hotels is broadly diversified across a wide variety of markets and demand generators. Our hotels are franchised with industry-leading brands, managed by some of the best management companies in the industry and provide a strong value proposition with broad consumer appeal. Underlying the strength of our portfolio is a balance sheet with low leverage and financial flexibility, a consistent reinvestment and effective portfolio management strategy, and dedicated corporate team with extensive industry experience. While we have reason to be optimistic about the trajectory of our industry and our portfolio specifically, I am confident we are well-positioned to continue to outperform and maximize shareholder value in any macroeconomic environment. It is now my pleasure to turn the call over to Liz for additional details on our balance sheet, financial performance during the quarter, and updated annual guidance.