Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with Item 8, the Consolidated Financial Statements and Notes thereto, the introduction of Part I regarding “Forward-Looking Statements,” and Item 1A, “Risk Factors” appearing elsewhere in this Annual Report on Form 10-K.
Overview
The Company is a Virginia corporation that has elected to be treated as a REIT for U.S. federal income tax purposes. The Company is self-advised and invests in income-producing real estate, primarily in the lodging sector, in the U.S. As of December 31, 2025, the Company owned 217 hotels with an aggregate of 29,583 guest rooms located in urban, high-end suburban and developing markets throughout 37 states and the District of Columbia and substantially all of the Company’s hotels operated under Marriott or Hilton brands. As of December 31, 2025, the hotels are operated and managed under separate management agreements with one of 16 hotel management companies, none of which are affiliated with the Company. The Company’s common shares are listed on the NYSE under the ticker symbol “APLE.”
Recent Hotel Portfolio Activities
The Company continually monitors market conditions and attempts to maximize shareholder value by investing in properties that it believes provide superior value over the long term. Consistent with this strategy and the Company’s focus on investing in rooms-focused hotels, during the year ended December 31, 2025, the Company acquired two hotels for an aggregate purchase price of approximately $117.0 million: an existing 126-guest-room Homewood Suites in Tampa, Florida and a newly constructed 260-guest-room Motto in Nashville, Tennessee that was purchased at the completion of development. The Company utilized its available cash, proceeds from the sales of properties, which included proceeds from two separate 1031 Exchanges, and borrowings under its unsecured credit facilities to fund these acquisitions. The Company plans to utilize its available cash, net proceeds from the sale of shares under the ATM program, proceeds from the sales of properties or borrowings under its unsecured credit facilities for any future hotel acquisitions.
As of December 31, 2025, the Company had one outstanding contract, which was entered into during the third quarter of 2025, for the potential purchase of a hotel in Anchorage, Alaska for an expected purchase price of approximately $65.5 million. The hotel is under development as a 160-guest-room AC Hotel and is currently planned to be completed and opened for business in the fourth quarter of 2027. As of December 31, 2025, a $2.0 million contract deposit (refundable if the seller does not meet its obligations under the contract) had been paid. If the closing occurs, the Company plans to utilize its available cash or borrowings, including borrowings under its unsecured credit facilities available at closing, to purchase the hotel under contract. Although the Company is working towards acquiring this hotel, there are a number of conditions to closing that have not yet been satisfied, and there can be no assurance that closing on this hotel will occur under the outstanding purchase contract. If the seller meets all of the conditions to closing, the Company is obligated to specifically perform under the purchase contract and acquire this hotel. As this hotel is under development, at this time, the seller has not met all of the conditions to closing.
During the third quarter of 2025, the Company entered into a contract with a third party to develop a dual-branded property, consisting of an AC Hotel and a Residence Inn, on Company-owned land in Las Vegas, Nevada, adjacent to its existing SpringHill Suites. The Company expects to spend a total of approximately $143.7 million to develop the hotels, which are currently planned to be completed and opened for business in the second quarter of 2028. Upon completion, the AC Hotel and Residence Inn are expected to contain approximately 237 and 160 guest rooms, respectively.
For its existing portfolio, the Company monitors each property’s profitability, market conditions and capital requirements and attempts to maximize shareholder value by disposing of properties when it believes that superior value can be provided from the sale of the property. As a result, during the year ended December 31, 2025, the Company sold seven hotels to five unrelated parties for a combined gross sales price of approximately $73.3 million, resulting in a combined gain on the sales of approximately $13.1 million, net of transaction costs. The Company used a portion of the net proceeds from the sale of the one hotel in March 2025 to complete a 1031 Exchange for the acquisition of the Homewood Suites in Tampa, Florida, which was completed in June 2025. Similarly, a portion of the proceeds from the sale of two hotels in November 2025 were used to complete a 1031 Exchange for the acquisition of the Motto in Nashville, Tennessee, which was completed in December 2025. The net proceeds from the sale of the other four hotels were used for share repurchases and general corporate purposes.
New York Independent Boutique Hotel Lease
On April 4, 2025, the Company recovered possession of the New York Property and reinstated operations of the hotel’s 209 guest rooms through a third-party manager engaged by the Company. From May 2023 through March 2025, the Company classified the property as a “non-hotel property” and excluded it from hotel and guest room counts, as it was leased to a third-party hotel
operator. Following the third-party hotel operator’s failure to make lease payments, the Company commenced legal proceedings in 2024 to remove the third-party hotel operator from possession of the property. In April 2025, the Company and the third-party hotel operator entered into an agreement to mutually release all claims, to terminate the lease and for the third-party hotel operator to voluntarily surrender possession of the property back to the Company.
See Note 2 titled “Investment in Real Estate,” Note 3 titled “Dispositions” and Note 13 titled “Contract Commitments” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for additional information concerning these transactions.
Hotel Operations
As of December 31, 2025, the Company owned 217 hotels with a total of 29,583 guest rooms as compared to 221 hotels with a total of 29,764 guest rooms as of December 31, 2024. Results of operations are included only for the period of ownership for hotels acquired or disposed of during all periods presented. During 2025, the Company acquired two hotels and sold seven hotels. During 2024, the Company acquired two hotels and sold six hotels. On April 4, 2025, the Company recovered possession from a third-party hotel operator and reinstated operations of its 209-guest-room New York Property through a third-party manager engaged by the Company. Results of the hotel operations of the New York Property are included only after April 4, 2025. See further discussion in Note 2 titled “Investments in Real Estate” and Note 3 titled “Dispositions” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K. As a result, the comparability of results for the years ended December 31, 2025 and 2024, as discussed below, is also impacted by these transactions.
Management Company Transitions
The Company continually evaluates the performance of each property and may transfer management responsibilities to a different third-party manager to improve operational efficiency and maximize asset value. In markets or regions where the Company owns multiple properties, it may consolidate hotels under specific third-party managers to leverage regional expertise, gain operating efficiencies, and enhance overall portfolio performance. In 2025, the Company transitioned the management responsibilities for nine hotels to different third-party management companies with which it already had existing management agreements for other properties. In January 2026, the Company transitioned the nine hotels managed by affiliates of Marriott, as of December 31, 2025, to separate management companies that are not affiliated with Marriott, Hilton or Hyatt.
Operating Results
In evaluating financial condition and operating performance, the most important indicators on which the Company focuses are revenue measurements, such as average occupancy, ADR and RevPAR, and expenses, such as hotel operating expenses, general and administrative expenses and other expenses described below. RevPAR and operating results may be impacted by regional and local economies and local regulations as well as changes in lodging demand due to macroeconomic factors including inflationary pressures, higher energy prices or a recessionary environment.
The following is a summary of the results from operations of the Company’s hotels for their respective periods of ownership by the Company.
Year Ended December 31,
(in thousands, except statistical
data)
Percent
Revenue
Percent
Revenue
Change 2024 to 2025
Percent
Revenue
Change 2023 to 2024
Total revenue
Hotel operating expense
Property taxes, insurance and
other expense
General and administrative
expense
Impairment of depreciable
real estate
Depreciation and amortization
expense
Gain on sale of real estate
Interest and other expense, net
Income tax expense
Net income
Adjusted Hotel EBITDA (1)
Number of hotels owned at end
of period
ADR
Occupancy
RevPAR
See reconciliation of Adjusted Hotel EBITDA to net income in “Non-GAAP Financial Measures” below.
Comparable Hotels Operating Results
The following table reflects certain operating statistics for the Company’s 216 hotels owned as of December 31, 2025, and excludes the New York Property (“Comparable Hotels”). The Company defines metrics from Comparable Hotels as results generated by the 216 hotels owned as of the end of the reporting period, excluding the New York Property. For the hotels acquired during the reporting periods shown, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership using information provided by the properties’ prior owners at the time of acquisition and not adjusted by the Company. For dispositions and the New York Property, results have been excluded for the Company’s period of ownership.
Year Ended December 31,
Change 2024 to 2025
Change 2023 to 2024
ADR
Occupancy
RevPAR
Same Store Operating Results
The following table reflects certain operating statistics for the 206 hotels owned by the Company as of January 1, 2023 and during the entirety of the reporting periods being compared, excluding the New York Property (“Same Store Hotels”).
Year Ended December 31,
Change 2024 to 2025
Change 2023 to 2024
ADR
Occupancy
RevPAR
As discussed above, hotel performance is impacted by many factors, including the economic conditions in the U.S. as well as each individual locality. During the year ended December 31, 2025, demand was modestly impacted across the portfolio by weather related travel disruption in January and February, reduced government travel, the prolonged government shutdown and heightened macroeconomic uncertainty in the U.S. As a result, the Company’s Comparable Hotels and Same Store Hotels revenue and operating results decreased slightly during the year ended December 31, 2025, compared to the year ended December 31, 2024. For the year ended December 31, 2025, the Company’s hotels, in general, have shown results that have been broadly consistent with applicable industry, brand and chain scale averages. In 2026, the Company expects RevPAR to be similar for its Comparable Hotels as compared to 2025, which is consistent with broader expectations for applicable industry chain scale averages, and assuming the current macroeconomic environment continues.
Results of Operations
A discussion regarding the Company’s results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below. A discussion regarding the results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found under the section titled “Results of Operations” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 24, 2025, which is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov and in the Investor Information section of the Company’s website at www.applehospitalityreit.com .
Revenues
The Company’s principal source of revenue is hotel revenue consisting of room, food and beverage, and other related revenue. For the years ended December 31, 2025 and 2024, the Company had total revenue of $1.4 billion in each respective year. For the years ended December 31, 2025 and 2024, respectively, Comparable Hotels achieved combined average occupancy of 74.1% and 75.3%, ADR of $159.09 and $159.31 and RevPAR of $117.95 and $119.92. ADR is calculated as room revenue divided by the number of rooms sold, and RevPAR is calculated as occupancy multiplied by ADR.
Compared to 2024, the Company’s Comparable Hotels ADR generally remained unchanged while occupancy decreased by 1.6%, resulting in a decrease in Comparable Hotels RevPAR of 1.6%. The decline in revenue for the year ended December 31, 2025, as compared to 2024, was primarily due to weather-related travel disruption in January and February, reduced government travel, heightened macroeconomic uncertainty in the U.S., the lack of the additional day of revenues that existed in 2024 from the leap year and a decrease in available rooms due to the sale of seven hotels. Government demand softened late in the first quarter of 2025 following the current administration’s efforts to curtail government spending; it remained soft through the rest of the year, particularly in October and November, due to the extended government shutdown. Markets with significantly above-average growth in 2025, compared to 2024, for the Company included Anchorage, Chicago, Fort Lauderdale, Kansas City, Richmond, Salt Lake City, St. Louis and Syracuse. In 2026, the Company expects RevPAR to be similar for its Comparable Hotels as compared to 2025, which is consistent with broader expectations for applicable industry chain scale averages, and assuming the current macroeconomic environment continues. Future revenues could be negatively impacted by, among other things, historical seasonal trends, deterioration of consumer sentiment, a recessionary macroeconomic environment, inflationary pressures or a continuation of reduced government travel.
Hotel Operating Expense
Hotel operating expense consists of direct room operating expense, hotel administrative expense, sales and marketing expense, utilities expense, repair and maintenance expense, franchise fees and management fees. For the years ended December 31, 2025 and 2024, hotel operating expense totaled $847.3 million and $837.9 million, respectively, or 60.0% and 58.5% of total revenue, respectively.
The increase in hotel operating expense for the year ended December 31, 2025, as compared to the year ended December 31, 2024, was primarily driven by increased labor costs, utility costs, repair and maintenance costs and general inflationary pressures throughout the overall economy. The Company continues to feel upward pressure on total payroll costs given a competitive labor market where the demand for strong hotel talent remains high. However, the rate of wage growth has slowed, and management companies have made progress in reducing their use of contract labor. The Company anticipates a similar operating expense environment in 2026. The Company continues to monitor its management companies’ efforts to realize operational efficiencies and mitigate the impact of cost pressures resulting from inflation and a tight labor market. The Company will continue to support its management companies to implement adjustments to the hotel operating model in response to continued changes in the operating environment and guest preferences, including their efforts to maximize operational efficiency.
Property Taxes, Insurance and Other Expense
Property taxes, insurance and other expense for the years ended December 31, 2025 and 2024 totaled $89.7 million and $84.4 million, respectively, or 6.4% and 5.9% of total revenue, respectively. The increase in property taxes, insurance, and other expense was primarily due to increases in property taxes in certain markets and liability insurance premiums, partially offset by decreases in property insurance premiums. The Company will continue to proactively pursue tax assessment appeals in certain jurisdictions in an attempt to minimize tax increases, as warranted.
General and Administrative Expense
General and administrative expense for the years ended December 31, 2025 and 2024 was $32.3 million and $42.5 million, respectively, or 2.3% and 3.0% of total revenue, respectively. The principal components of general and administrative expense are payroll and related benefit costs, executive incentive compensation, legal fees, accounting fees and reporting expenses. The decrease in general and administrative expense in 2025 as compared to 2024 was primarily due to a decrease in the Company’s executive incentive compensation plan accrual.
Impairment of Depreciable Real Estate
Impairment of depreciable real estate was approximately $5.7 million for the year ended December 31, 2025, consisting of impairment losses at two hotel properties identified by the Company in the third quarter of 2025. Impairment of depreciable real estate was $3.1 million for the year ended December 31, 2024, consisting of impairment losses at two hotel properties identified by the Company in the third quarter of 2024, and one property identified in the fourth quarter of 2024. See Note 3, titled “Dispositions” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for additional information concerning these impairment losses.
Depreciation and Amortization Expense
Depreciation and amortization expense for the years ended December 31, 2025 and 2024 was $192.6 million and $190.6 million, respectively. Depreciation and amortization expense primarily represents expense of the Company’s hotel buildings and related improvements, and associated personal property (furniture, fixtures, and equipment) for their respective periods owned. The increase was primarily due to the capitalization of newly acquired hotels in 2024 and 2025, which had higher purchase prices compared to the carrying values of the hotels disposed of during the same periods, as well as renovations completed throughout 2024 and 2025. Additionally, the timing of the acquisitions, reclassifications to held for sale, disposals and renovations impacted depreciation, as assets acquired or placed into service earlier in the year contributed more to each respective year’s depreciation than those acquired or renovated later in the year or disposed of earlier.
Interest and Other Expense, net
Interest and other expense, net for the years ended December 31, 2025 and 2024 was $81.5 million and $77.7 million, respectively, and is net of approximately $1.6 million and $1.4 million, respectively, of interest capitalized associated with renovation projects.
Interest expense related to the Company’s debt instruments for the year ended December 31, 2025 increased compared to the year ended December 31, 2024 as a result of higher average borrowings associated with variable-rate debt and higher average interest rates on the Company’s variable-rate debt. The average proportion of variable-rate debt that is fixed by interest rate swaps was lower over the year ended December 31, 2025 compared to the same period of 2024, as the Company had three interest rate swaps in effect on $150.0 million of variable-rate debt mature during 2025 and six interest rate swaps in effect on $285.0 million of variable-rate debt mature during 2024. However, this was partially offset as the Company entered into two new interest rate swaps in effect on $100.0 million of variable-rate debt during the third quarter of 2025 and four new interest rate swaps in effect on $200.0 million of variable-rate debt during 2024, but at higher fixed rates than the swap agreements that expired. If the Company continues to replace expiring interest rate swaps in the current interest rate environment with new agreements, the Company anticipates those new agreements to generally be at higher rates than the expiring swap agreements. Interest expense related to the Company’s unsecured credit facilities in 2026 is expected to be similar to or slightly lower than in 2025, with similar borrowings and slightly lower average interest rates.
Non-GAAP Financial Measures
The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its operating performance: Funds from Operations (“FFO”), Modified Funds from Operations (“MFFO”), Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”), Adjusted EBITDAre (“Adjusted EBITDAre”) and Adjusted Hotel EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss), cash flow from operations or any other operating GAAP measure. FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA are not necessarily indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions. Although FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as reported by other companies that do not define such terms exactly as the Company defines such terms, the Company believes these supplemental measures are useful to investors when comparing the Company’s results between periods and with other REITs.
FFO and MFFO
The Company calculates and presents FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), which defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains and losses from the sale of certain real estate assets (including gains and losses from change in control), extraordinary items as defined by GAAP, and the cumulative effect of changes in accounting principles, plus real estate related depreciation, amortization and impairments, and adjustments for unconsolidated affiliates. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. The Company further believes that by excluding the effects of these items, FFO is useful to investors in comparing its operating performance between periods and between REITs that report FFO using the Nareit definition. FFO as presented by the Company is applicable only to its common shareholders, but does not represent an amount that accrues directly to common shareholders.
The Company calculates MFFO by further adjusting FFO for the exclusion of amortization of finance ground lease assets, amortization of favorable and unfavorable operating leases, net and non-cash straight-line operating ground lease expense, as these expenses do not reflect the underlying performance of the related hotels. The Company presents MFFO when evaluating its performance because it believes that it provides further useful supplemental information to investors regarding its ongoing operating performance. In addition, MFFO is a component of a key compensation measure of operational performance within the 2025 Incentive Plan. Effective January 1, 2026, in calculating MFFO, the Company expects to exclude share-based compensation expense, as it represents a non-cash transaction, consistent with the MFFO presentation of the majority of other public lodging REITs. For the year ended December 31, 2025, the expense recorded for share-based compensation totaled $7.7 million.
The following table reconciles the Company’s GAAP net income to FFO and MFFO for the years ended December 31, 2025, 2024 and 2023 (in thousands).
Year Ended December 31,
Net income
Depreciation of real estate owned
Gain on sale of real estate
Impairment of depreciable real estate
Funds from operations
Amortization of finance ground lease assets
Amortization of favorable and unfavorable operating leases, net
Non-cash straight-line operating ground lease expense
Modified funds from operations
EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA
EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes, depreciation and amortization. The Company believes EBITDA is useful to investors because it helps the Company and its investors evaluate the ongoing operating performance of the Company by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). In addition, certain covenants included in the agreements governing the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance.
In addition to EBITDA, the Company also calculates and presents EBITDAre in accordance with standards established by Nareit, which defines EBITDAre as EBITDA, excluding gains and losses from the sale of certain real estate assets (including gains and losses from change in control), plus real estate related impairments, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. The Company presents EBITDAre because it believes that it provides further useful information to investors in comparing its operating performance between periods and between REITs that report EBITDAre using the Nareit definition.
The Company also considers the exclusion of non-cash straight-line operating ground lease expense from EBITDAre useful, as this expense does not reflect the underlying performance of the related hotels (Adjusted EBITDAre).
The Company further excludes actual corporate-level general and administrative expense for the Company as well as Adjusted EBITDAre from the non-hotel property (the New York Property) from Adjusted EBITDAre (Adjusted Hotel EBITDA) to isolate property-level operational performance over which the Company’s hotel operators have direct control. The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and it is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels. In addition, Adjusted EBITDAre and Adjusted Hotel EBITDA are both components of key compensation measures of operational performance within the 2025 Incentive Plan. Effective January 1, 2026, in calculating Adjusted EBITDAre, the Company expects to exclude share-based compensation expense, as it represents a non-cash transaction and the add back to net income is consistent with the calculation of Adjusted EBITDA for the Company’s financial covenant ratios under its credit facilities and consistent with the presentation of Adjusted EBITDA for the majority of other public lodging REITs. For the year ended December 31, 2025, the expense recorded for share-based compensation totaled $7.7 million.
The following table reconciles the Company’s GAAP net income to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA for the years ended December 31, 2025, 2024 and 2023 (in thousands).
Year Ended December 31,
Net income
Depreciation and amortization
Amortization of favorable and unfavorable operating leases, net
Interest and other expense, net
Income tax expense
EBITDA
Gain on sale of real estate
Impairment of depreciable real estate
EBITDAre
Non-cash straight-line operating ground lease expense
Adjusted EBITDAre
General and administrative expense
Adjusted EBITDAre from non-hotel property (1)
Adjusted Hotel EBITDA
Non-hotel property consists of the results of the New York Property that was leased to a third-party hotel operator before possession was recovered and operations reinstated through a third-party manager on April 4, 2025. This property’s Adjusted EBITDAre results are not included in Adjusted Hotel EBITDA beginning with the second half of 2023 through the first quarter of 2025.
Hotels Owned
As of December 31, 2025, the Company owned 217 hotels with an aggregate of 29,583 guest rooms located in 37 states and the District of Columbia. See “Management and Franchise Agreements” in Part I, Item 1, Business, appearing elsewhere in this Annual Report on Form 10-K, for a table summarizing the number of hotels and guest rooms by brand. Refer to Part I, Item 2, of this Annual
Report on Form 10-K for tables summarizing the number of hotels and guest rooms by state, and summarizing the location, brand, manager, date acquired or completed and number of guest rooms for each of the 217 hotels the Company owned as of December 31, 2025.
Related Parties
The Company has engaged in, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed as being at arm’s length, and the results of the Company’s operations may have been different if these transactions were conducted with non-related parties. See Note 6, titled “Related Parties” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for additional information concerning the Company’s related party transactions.
Liquidity and Capital Resources
Capital Resources
The Company’s principal short-term sources of liquidity are the operating cash flows generated from the Company’s properties and availability under its Revolving Credit Facility. Over the long term, the Company may receive proceeds from strategic additional secured and unsecured debt financing, dispositions of its hotel properties and offerings of the Company’s common shares, including pursuant to the ATM Program. Macroeconomic pressures, including inflation, increases in interest rates and general market uncertainty, could impact the Company’s ability to raise debt or equity capital to fund long-term liquidity requirements in a cost-effective manner.
As of December 31, 2025, the Company had approximately $1.5 billion of total outstanding debt consisting of $184.3 million of mortgage debt and $1.4 billion outstanding under its credit facilities, excluding unamortized debt issuance costs and fair value adjustments. As of December 31, 2025, the Company had available corporate cash on hand of approximately $8.5 million, and unused borrowing capacity under its Revolving Credit Facility of approximately $586.9 million after taking a $2.1 million letter of credit into account.
The credit agreements governing the unsecured credit facilities contain customary affirmative and negative covenants and events of default. The covenants include, among others, a minimum tangible net worth, maximum debt limits, minimum interest and fixed charge coverage ratios, and restrictions on certain investments. The Company was in compliance with the applicable covenants as of December 31, 2025.
On July 24, 2025, the Company entered into a new term loan facility with a principal amount of $385 million and a maturity date of July 31, 2030. At closing, the Company repaid all amounts outstanding under an existing $225 million term loan facility with proceeds from the $385 million term loan facility, resulting in an additional $160 million funded at closing, which was used to repay the balance outstanding under the Revolving Credit Facility and for general corporate purposes. The outstanding principal under the $385 million term loan facility bears interest at an annual variable rate equal to a term SOFR, depending on the interest period options elected by the Company, plus a margin ranging from 1.35% to 2.20%, based on the Company’s leverage ratio as calculated under the terms of the credit agreement. Historically, the Company has elected to pay interest monthly at an annual rate equal to the one-month SOFR plus the applicable margin.
See Note 4, titled “Debt” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for a description of the Company’s debt instruments as of December 31, 2025 and a summary of the financial and restrictive covenants as defined in the credit agreements.
On February 23, 2024, the Company entered into an equity distribution agreement pursuant to which the Company may sell, from time to time, up to an aggregate of $500 million of its common shares under the ATM Program under the Company’s current shelf registration statement. During the years ended December 31, 2025 and 2024, the Company did not sell any common shares under the ATM Program, and no common shares were sold during the year ended December 31, 2024 under the previous $300 million at-the-market offering program, which was terminated in February 2024 in connection with the commencement of the current ATM Program. As of December 31, 2025, approximately $500 million remained available for issuance under the ATM Program. The Company plans to use future net proceeds from the sale of shares under the ATM Program, or a similar successor program, for general corporate purposes, which may include, among other things, acquisitions of additional properties, the repayment of outstanding indebtedness, capital expenditures, improvement of properties in its portfolio and working capital. The Company may also use the future net proceeds to acquire another REIT or other company that invests in income-producing properties. Future offerings will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company’s common shares and opportunities for uses of any proceeds.
Capital Uses
The Company anticipates that cash flow from operations, availability under its Revolving Credit Facility, additional borrowings, and proceeds from hotel dispositions and equity offerings will be adequate to meet its anticipated liquidity requirements, including required distributions to shareholders, share repurchases, capital improvements, debt service, hotel acquisitions, lease commitments, and cash management activities.
Distributions
The Company generally must distribute annually at least 90% of its REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order to maintain its REIT status. Distributions paid for the years ended December 31, 2025, 2024 and 2023 were $1.01, $1.01 and $1.04 per common share, respectively, for a total of approximately $240.4 million, $243.7 million and $238.3 million, respectively. Over this three-year period, distributions paid consisted of a regular monthly cash distribution rate of $0.08 per common share as well as special cash distributions of $0.05, $0.05 and $0.08 per common share, paid in January of 2025, 2024 and 2023, respectively, that were approved by the Board of Directors in each preceding December. No special distribution was declared in December 2025 for payment in January 2026.
The Company’s current annual distribution rate, payable monthly, is $0.96 per common share. As it has done historically, due to seasonality, the Company may use its Revolving Credit Facility to maintain the consistency of the monthly distribution rate, taking into consideration any acquisitions, dispositions, capital improvements and economic cycles. While management currently expects monthly cash distributions to continue at $0.08 per common share, any distribution will be subject to approval of the Company’s Board of Directors, and there can be no assurance of the classification, timing or duration of distributions at any particular distribution rate. The Board of Directors monitors the Company’s distribution rate relative to the performance of its hotels on an ongoing basis and may make adjustments to the distribution rate as determined to be prudent in relation to other cash requirements of the Company or to the extent required to maintain the Company’s REIT status. If cash flows from operations and the Revolving Credit Facility are not adequate to meet liquidity requirements, the Company may utilize additional financing sources to make distributions. Although the Company has relatively low levels of debt, there can be no assurance it will be successful with this strategy, and it may need to reduce its distributions to minimum levels required to maintain its qualification as a REIT. If the Company were unable to extend its maturing debt in future periods or if it were to default on its debt, it may be unable to make distributions.
Share Repurchases
In May 2025, the Company’s Board of Directors approved a one-year extension of its existing Share Repurchase Program, authorizing share repurchases up to an aggregate of $262.6 million. The Share Repurchase Program may be suspended or terminated at any time by the Company and will end in July 2026 if not terminated or extended earlier. The Company previously entered into and expects to continue to enter into written trading plans as part of the Share Repurchase Program that provide for share repurchases in open market transactions that are intended to comply with Rule 10b5-1 under the Exchange Act. During the year ended December 31, 2025, the Company purchased, under its Share Repurchase Program, approximately 4.6 million of its common shares at a weighted-average market purchase price of approximately $12.55 per common share for an aggregate purchase price, including commissions, of approximately $58.3 million. Purchases under the Share Repurchase Program have been funded, and the Company intends to fund future share repurchases, with cash on hand, proceeds from dispositions or availability under its unsecured credit facilities, subject to applicable restrictions under the Company’s unsecured credit facilities (if any). The timing of share repurchases and the number of common shares to be purchased under the Share Repurchase Program will also depend upon prevailing market conditions, regulatory requirements and other factors. As of December 31, 2025, approximately $242.5 million remained available for purchase under the Share Repurchase Program.
Capital Improvements
Management routinely monitors the condition and operations of its hotels and plans renovations and other improvements as it deems prudent. The Company is committed to maintaining and enhancing each property’s competitive position in its market. The Company has invested in and plans to continue to reinvest in its hotels. Under certain loan and management agreements, the Company is required to place in escrow funds for the repair, replacement and refurbishing of furniture, fixtures, and equipment at the applicable hotels, based on a percentage of the hotel’s gross revenues, provided that such amount may be used for the Company’s capital expenditures with respect to those hotels. As of December 31, 2025, the Company held approximately $28.0 million in reserves related to these properties. During 2025, the Company invested approximately $88.2 million in capital expenditures. The Company anticipates spending approximately $80 million to $90 million during 2026, which includes various comprehensive renovation
projects for approximately 21 properties, however, inflationary pressures, supply chain shortages or tariffs, among other issues, may result in increased costs and delays for anticipated projects.
During the third quarter of 2025, the Company entered into a contract with a third party to develop a dual-branded property, consisting of an AC Hotel and a Residence Inn, on Company-owned land in Las Vegas, Nevada, adjacent to its existing SpringHill Suites. The Company expects to spend a total of approximately $143.7 million to develop the hotels, which are currently planned to be completed and opened for business in the second quarter of 2028. Upon completion, the AC Hotel and Residence Inn are expected to contain approximately 237 and 160 guest rooms, respectively.
Upcoming Debt Maturities and Debt Service Payments
As of December 31, 2025, the Company had approximately $335.4 million of principal and interest payments due on its debt over the next 12 months. Included in this total is a $19.6 million mortgage that matures in the second quarter of 2026, a $51.6 million mortgage covering three properties that matures in the fourth quarter of 2026, a $61.0 million Revolving Credit Facility balance at December 31, 2025, and a $130.0 million unsecured term loan, both of which mature in the third quarter of 2026. The Company plans to pay outstanding amounts and service payments due upon the upcoming debt maturity dates using one or a combination of any of the following: funds from operations, borrowings under its Revolving Credit Facility, proceeds from new financing, available credit extensions under its unsecured credit facilities or by refinancing the maturing debt. The Company may also pursue amendments with its lenders to extend the maturity date of any expiring loans. Both the $130 million term loan facility and the Revolving Credit Facility mature on July 25, 2026, but they can be extended up to one year, subject to certain conditions including covenant compliance and payment of additional fees. The Company presently has the ability to exercise both of these extensions, however, it plans to pursue refinancing of the maturing debt.
Interest expense related to the Company’s unsecured credit facilities over the next 12 months is expected to be similar to or slightly less than the previous 12 months, with similar borrowings and slightly lower average interest rates. The average proportion of variable-rate debt that is fixed by interest rate swaps is expected to be lower over the next 12 months compared to the year ended December 31, 2025. The Company had three interest rate swaps in effect on $150.0 million of variable-rate debt mature during the second quarter of 2025, partially offset as the Company entered into two new interest rate swaps in effect on $100.0 million of variable-rate debt during the third quarter of 2025, but at higher fixed rates than the swap agreements that expired. In 2026, the Company has two interest rate swaps in effect on $200.0 million of variable-rate debt that will mature. If the Company continues to replace expiring interest rate swaps in the current interest rate environment with new agreements, the Company anticipates those new agreements to generally be at higher rates than the expiring swap agreements. See Note 4 titled “Debt” and Note 5 titled “Fair Value of Financial Instruments” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for more detail regarding future maturities of the Company’s debt instruments and interest rate swap agreements as of December 31, 2025.
Hotel Purchase Contract Commitments
As of December 31, 2025, the Company had one outstanding contract, which was entered into during the third quarter of 2025, for the potential purchase of a hotel in Anchorage, Alaska for an expected purchase price of approximately $65.5 million. The hotel is under development as a 160-guest-room AC Hotel and is currently planned to be completed and opened for business in the fourth quarter of 2027. As of December 31, 2025, a $2.0 million contract deposit (refundable if the seller does not meet its obligations under the contract) had been paid. If the closing occurs, the Company plans to utilize its available cash or borrowings, including borrowings under its unsecured credit facilities available at closing, to purchase the hotel under contract. Although the Company is working towards acquiring this hotel, there are a number of conditions to closing that have not yet been satisfied, and there can be no assurance that closing on this hotel will occur under the outstanding purchase contract. If the seller meets all of the conditions to closing, the Company is obligated to specifically perform under the purchase contract and acquire this hotel. As this hotel is under development, at this time, the seller has not met all of the conditions to closing.
As mentioned in the “Capital Improvements” section above, during the third quarter of 2025, the Company entered into a contract with a third party to develop a dual-branded property, consisting of an AC Hotel and a Residence Inn, on Company-owned land in Las Vegas, Nevada, adjacent to its existing SpringHill Suites. See Note 13, titled “Contract Commitments” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for more detail regarding this development project.
Lease Commitments
The Company is the lessee on certain ground leases, hotel equipment leases and office space leases. As of December 31, 2025, the Company had 14 properties subject to ground leases and three parking lot ground leases with remaining terms ranging from approximately 13 to 93 years, excluding renewal options. Certain of its ground leases have options to extend beyond the initial lease
term by periods ranging from five to 120 years. As of December 31, 2025, the Company had total remaining minimum lease payments of $268.7 million, including $7.4 million due in the next year. Refer to Note 10, titled “Lease Commitments” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K for additional details.
Cash Management Activities
As part of the cost sharing arrangements discussed in Note 6, titled “Related Parties” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under the cash management process, each company may advance or defer up to $1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies.
Management and Franchise Agreements
Each of the Company’s 217 hotels owned as of December 31, 2025 is operated and managed under separate management agreements with one of 16 hotel management companies, none of which are affiliated with the Company. As of December 31, 2025, nine of the Company’s hotels are managed by affiliates of Marriott. The remainder of the Company’s hotels are managed by companies that are not affiliated with Marriott, Hilton or Hyatt, and, as a result, those branded hotels they manage are required to obtain separate franchise agreements with each respective franchisor.
The Company continually evaluates the performance of each property and may transfer management responsibilities to a different third-party manager to improve operational efficiency and maximize asset value. In markets or regions where the Company owns multiple properties, it may consolidate hotels under specific third-party managers to leverage regional expertise, gain operating efficiencies, and enhance overall portfolio performance. In 2025, the Company transitioned the management responsibilities for nine hotels to different third-party management companies with which it already had existing management agreements for other properties. In January 2026, the Company transitioned the nine hotels managed by affiliates of Marriott, as of December 31, 2025, to separate management companies that are not affiliated with Marriott, Hilton or Hyatt.
See Note 9, titled “Management and Franchise Agreements” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for additional information pertaining to the management and franchise agreements, including a listing of the Company’s hotel management companies.
Impact of Inflation
The Company relies on the performance of its hotels and the ability of its hotel operators to increase revenue to keep pace with inflation. Hotel operators, in general, possess the ability to adjust room rates daily to reflect the effects of inflation on the Company’s operating expenses. However, competitive pressures and other factors could limit the operators’ ability to raise room rates and, as a result, the Company may not be able to offset increased operating expenses with increases in revenue. Additionally, tariff-induced inflation could increase certain operating and renovation costs, as some supplies and construction materials are imported, as well as negatively impact leisure travel by reducing the discretionary income of consumers.
Business Interruption
Being in the real estate industry, the Company is exposed to natural disasters on both a local and regional scale. Although management believes the Company has 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. Generally, occupancy rates and hotel revenues for the Company’s hotels are greater in the second and third quarters than in the first and fourth quarters. 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 or available financing sources to meet cash requirements.
Critical Accounting Policies and Estimates
The following contains a discussion of what the Company believes to be its critical accounting policies and estimates. These items should be read to gain a further understanding of the principles and estimates used to prepare the Company’s financial
statements. These principles and estimates include application of judgment; therefore, changes in judgments may have a material impact on the Company’s reported results of operations and financial condition.
Investment Policy
Upon acquisition of real estate properties, the Company estimates the fair value of acquired tangible assets (consisting of land, buildings and improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities, including in-place leases, and assumed debt based on the evaluation of information and estimates available at that date. Fair values for these assets are not directly observable and estimates are based on comparable asset sales and other information which is subjective in nature, including comparable land sales as well as industry and Company data regarding building and furniture, fixtures and equipment costs, including adjustments for estimated depreciation based on the age of the property acquired and time since its most recent renovation. The Company has not assigned any value to management contracts and franchise agreements as such contracts are generally at current market rates based on the remaining terms of the contracts and any other value attributable to these contracts is not considered material. Acquisitions of hotel properties are generally accounted for as acquisitions of a group of assets, with costs incurred to effect an acquisition, including title, legal, accounting, brokerage commissions and other related costs, being capitalized as part of the cost of the assets acquired, instead of accounted for separately as expenses in the period that they are incurred. The underlying assumptions are subject to uncertainty and thus any changes to the allocation of fair value to each of the various line items within the Company’s consolidated balance sheets could have an impact on the Company’s financial condition as well as results of operations due to resulting changes in depreciation and amortization as a result of the fair value allocation. The acquisitions of real estate subject to this estimate totaled two properties, for a combined purchase price of approximately $117.0 million for the year ended December 31, 2025 and two properties for a combined purchase price of approximately $196.3 million for the year ended December 31, 2024.
Impairment Losses Policy
The Company records impairment losses on hotel properties used in operations if indicators of impairment are present, and the sum of the undiscounted cash flows estimated to be generated by the respective properties over their estimated remaining useful life, based on historical and industry data, is less than the properties’ carrying amount. Indicators of impairment include a property with current or potential losses from operations, when it becomes more likely than not that a property will be disposed of before the end of its previously estimated useful life or when events, trends, contingencies or changes in circumstances indicate that a triggering event has occurred and an asset’s carrying value may not be recoverable. The Company monitors its properties on an ongoing basis by analytically reviewing financial performance and considers each property individually for purposes of reviewing for indicators of impairment. As many indicators of impairment are subjective, such as general economic and market declines, the Company also prepares an annual recoverability analysis for each of its properties to assist with its evaluation of impairment indicators. The Company performs quarterly recoverability analyses by comparing each property’s net book value to its estimated operating income based on assumptions and estimates about the property’s future revenues, expenses and capital expenditures after disruptive events such as renovations or newly opened hotels in the same market. The Company’s planned initial hold period for each property is generally 39 years. If events or circumstances change, such as the Company’s intended hold period for a property or if the operating performance of a property declines substantially for an extended period of time, the Company’s carrying value for a particular property may not be recoverable, and an impairment loss will be recorded. Impairment losses are measured as the difference between the asset’s fair value and its carrying value. The Company’s ongoing analyses and annual recoverability analyses have identified impairment losses on two properties recorded in 2025, three properties recorded in 2024 and two properties recorded in 2023 totaling approximately $5.7 million, $3.1 million and $5.6 million, respectively, as discussed in Note 3, titled “Dispositions” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K.
New Accounting Standards
See Note 1, titled “Organization and Summary of Significant Accounting Policies” of the Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for information on the anticipated adoption of recently issued accounting standards.
Subsequent Events
On January 15, 2026, the Company paid approximately $18.9 million, or $0.08 per common share, in distributions to shareholders of record as of December 31, 2025.
On January 20, 2026, the Company declared a monthly cash distribution of $0.08 per common share. The distribution was paid on February 17, 2026, to shareholders of record as of January 30, 2026.
On February 17, 2026, the Company declared a monthly cash distribution of $0.08 per common share. The distribution is payable on March 16, 2026, to shareholders of record as of February 27, 2026.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk
As of December 31, 2025, the Company’s financial instruments were not exposed to significant market risk due to foreign currency exchange risk, commodity price risk or equity price risk. However, the Company is exposed to interest rate risk due to possible changes in short-term interest rates as it invests its cash or borrows on its Revolving Credit Facility and due to the portion of its variable-rate term debt that is not fixed by interest rate swaps. As of December 31, 2025, after giving effect to interest rate swaps, as described below, approximately $551.0 million, or approximately 36% of the Company’s total debt outstanding, was subject to variable interest rates. Based on the Company’s variable-rate debt outstanding as of December 31, 2025, every 100 basis points change in interest rates will impact the Company’s annual net income by approximately $5.5 million, all other factors remaining the same. With the exception of interest rate swap transactions, the Company has not engaged in transactions in derivative financial instruments or derivative commodity instruments.
As of December 31, 2025, the Company’s variable-rate debt consisted of its unsecured credit facilities, including $61.0 million in borrowings outstanding under its Revolving Credit Facility and $1.2 billion of term loans. Currently, the Company uses interest rate swaps to manage its interest rate risk on a portion of its variable-rate debt. As of December 31, 2025, the Company had 11 interest rate swap agreements that effectively fix the interest payments on approximately $685.0 million of the Company’s variable-rate debt outstanding with swap maturity dates ranging from May 2026 to December 2029. Under the terms of the Company’s interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the annual rate of the one-month SOFR with nine out of eleven swaps also including an additional 0.10% SOFR spread adjustment. See Note 5, titled “Fair Value of Financial Instruments” in Part II, Item 8, of the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Annual Report on Form 10-K, for a description of the Company’s interest rate swaps as of December 31, 2025.
In addition to its variable-rate debt and interest rate swaps discussed above, the Company has assumed or originated fixed interest rate mortgages payable to lenders under permanent financing arrangements as well as two fixed-rate senior notes facilities totaling $125 million. The following table summarizes the annual maturities and average interest rates of the Company’s mortgage debt and borrowings outstanding under its unsecured credit facilities at December 31, 2025. All dollar amounts are in thousands.
Thereafter
Total
Fair
Market
Value
Total debt:
Maturities
Average interest rates (1)
Variable-rate debt:
Maturities
Average interest rates (1)
Fixed-rate debt:
Maturities
Average interest rates
The average interest rate gives effect to interest rate swaps, as applicable.
Item 8. Financial Statemen ts and Supplementary Data
Report of Management
on Internal Control over Financial Reporting
February 23, 2026
To the Shareholders
Apple Hospitality REIT, Inc.
Management of Apple Hospitality REIT, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of the Company’s principal executive, principal financial and principal accounting officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
The Company’s internal control over financial reporting is supported by written policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of the Company’s annual consolidated financial statements, management has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls.
Based on this assessment, management has concluded that as of December 31, 2025, the Company’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
KPMG LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements included in this report, has issued an attestation report on the Company’s internal control over financial reporting, a copy of which appears on the next page of this annual report.
/s/ Justin G. Knight
/s/ Elizabeth S. Perkins
/s/ Rachel S. Labrecque
Justin G. Knight,
Chief Executive Officer
Elizabeth S. Perkins,
Chief Financial Officer
Rachel S. Labrecque,
Chief Accounting Officer
(Principal Executive Officer)
(Principal Financial
Officer)
(Principal Accounting
Officer)
Report of Independent Regist ered Public Accounting Firm
To the Shareholders and the Board of Directors
Apple Hospitality REIT, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Apple Hospitality REIT, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and December 31, 2024, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes and financial statement Schedule III (collectively, the consolidated financial statements), and our report dated February 23, 2026 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Richmond, Virginia
February 23, 2026
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors
Apple Hospitality REIT, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Apple Hospitality REIT, Inc. and subsidiaries (the Company) as of December 31, 2025 and December 31, 2024, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes and financial statement Schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and December 31, 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of investments in hotel properties for impairment
As discussed in Notes 1 and 2 to the consolidated financial statements, investment in real estate, net as of December 31, 2025, was $4,787.9 million, which primarily consists of investments in hotel properties. The Company records impairment losses on hotel properties used in operations if indicators of impairment are present, and the sum of the undiscounted cash flows estimated to be generated by the respective properties over their estimated remaining useful life, based on historical and industry data, is less than the properties’ carrying amount. Indicators of impairment include a property with current or potential losses from operations, when it becomes more likely than not that a property will be disposed of before the end of its previously estimated useful life or when events, trends, contingencies or changes in circumstances indicate that a triggering event has occurred and an asset’s carrying value may not be recoverable. If events or circumstances change, such as the Company’s intended hold period for a property or if the operating performance of a property declines substantially for an extended period of time, the Company’s carrying value for a particular property may not be recoverable, and an impairment loss will be recorded. Impairment losses are measured as the difference between the asset’s fair value and its carrying value.
We identified the evaluation of investments in hotel properties for impairment as a critical audit matter. Identifying and evaluating the Company’s judgments about events or changes in circumstances that indicate the carrying amount of a hotel property
may not be recoverable involved a high degree of auditor judgment. This included judgments regarding the likelihood that a property will be sold significantly before the end of its previously estimated useful life. Changes in this judgment could have a significant impact on the determination of whether the carrying amount of the investments in hotel properties may not be recoverable.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to identify and evaluate events or changes in circumstances that indicate the carrying amount of investments in hotel properties may not be recoverable. This included a control over the identification of a potential decrease in expected future cash flows caused by a shortened hold period that may indicate an investment in a hotel property would not be recoverable. We assessed the Company’s intent and ability to hold each hotel property by examining documents to assess the Company’s plans, if any, to dispose of individual hotel properties. We inquired of Company officials and obtained written representations regarding the status of potential plans, if any, to dispose of individual hotel properties and corroborated the Company’s plans with others in the organization who are responsible for, and have the authority over, potential disposition activities.
/s/ KPMG LLP
We have served as the Company’s auditor since 2024.
Richmond, Virginia
February 23, 2026
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Hospitality REIT, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows for the year ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(2) (collectively referred to as the “consolidated financial statements”) of Apple Hospitality REIT, Inc. (the Company) . In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
We served as the Company’s auditor from 2007 to 2023.
/s/ Ernst & Young LLP
Richmond, Virginia
February 22, 2024
Apple Hospitality REIT , Inc.
Consolidated B alance Sheets
(in thousands, except share data)
As of December 31,
Assets
Investment in real estate, net of accumulated depreciation and amortization of
$ 1,972,264 and $ 1,821,344 , respectively
Assets held for sale
Cash and cash equivalents
Restricted cash-furniture, fixtures and other escrows
Due from third party managers, net
Other assets, net
Total Assets
Liabilities
Debt, net
Finance lease liabilities
Accounts payable and other liabilities
Total Liabilities
Shareholders’ Equity
Preferred stock, authorized 30,000,000 shares; none issued and outstanding
Common stock, no par value, authorized 800,000,000 shares; issued and
outstanding 235,635,813 and 239,765,905 shares, respectively
Accumulated other comprehensive income
Accumulated distributions greater than net income
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
See notes to consolidated financial statements.
Apple Hospitality REIT, Inc.
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)
Year Ended December 31,
Revenues:
Room
Food and beverage
Other
Total revenue
Expenses:
Hotel operating expense:
Operating
Hotel administrative
Sales and marketing
Utilities
Repair and maintenance
Franchise fees
Management fees
Total hotel operating expense
Property taxes, insurance and other
General and administrative
Impairment of depreciable real estate
Depreciation and amortization
Total expense
Gain on sale of real estate
Operating income
Interest and other expense, net
Income before income taxes
Income tax expense
Net income
Other comprehensive loss:
Interest rate derivatives
Comprehensive income
Basic and diluted net income per common share
Weighted average common shares outstanding - basic and
diluted
See notes to consolidated financial statements.
Apple Hospitality REIT, Inc.
Consolidated Statements of Shareholders ’ Equity
(in thousands, except per share data)
Accumulated
Accumulated
Common Stock
Other
Distributions
Number
of Shares
Amount
Comprehensive
Income (Loss)
Greater Than
Net Income
Total
Balance at December 31, 2022
Share-based compensation, net of common
shares surrendered to satisfy employee
tax withholding requirements
Issuance of common shares, net
Common shares repurchased
Interest rate derivatives
Net income
Distributions declared to shareholders ($ 1.01 per share)
Balance at December 31, 2023
Share-based compensation, net of common
shares surrendered to satisfy employee
tax withholding requirements
Equity issuance costs
Common shares repurchased
Interest rate derivatives
Net income
Distributions declared to shareholders ($ 1.01 per share)
Balance at December 31, 2024
Share-based compensation, net of common
shares surrendered to satisfy employee
tax withholding requirements
Equity issuance costs
Common shares repurchased
Interest rate derivatives
Net income
Distributions declared to shareholders ($ 0.96 per share)
Balance at December 31, 2025
See notes to consolidated financial statements.
Apple Hospitality REIT, Inc.
Consolidated Statem ents of Cash Flows
(in thousands)
Years Ended December, 31
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Impairment of depreciable real estate
Gain on sale of real estate
Other non-cash expenses, net
Changes in operating assets and liabilities:
Decrease in due from third party managers, net
Decrease (increase) in other assets, net
Increase in accounts payable and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of hotel properties, net
Disbursements for potential acquisitions, net
Capital improvements
Net proceeds from sale of real estate
Net cash used in investing activities
Cash flows from financing activities:
Net (disbursements) proceeds related to issuance of common shares
Repurchases of common shares
Common shares surrendered to satisfy employee withholding requirements
Distributions paid to common shareholders
Proceeds from revolving credit facility
Payments on revolving credit facility
Proceeds from term loans and senior notes
Payments on term loans and senior notes
Payments of mortgage debt and other loans
Principal payments on finance leases
Financing costs
Net cash used in financing activities
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
Supplemental cash flow information:
Interest paid, net
Income taxes paid
Supplemental disclosure of noncash investing and financing activities:
Accrued distribution to common shareholders
Accrued capital expenditures
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period
Restricted cash-furniture, fixtures and other escrows, beginning of period
Cash, cash equivalents and restricted cash, beginning of period
Cash and cash equivalents, end of period
Restricted cash-furniture, fixtures and other escrows, end of period
Cash, cash equivalents and restricted cash, end of period
See notes to consolidated financial statements.
Apple Hospitality REIT, Inc.
Notes to Consolidated Financial Statements
Note 1
Organization and Summary of Significant Accounting Policies
Organization
Apple Hospitality REIT, Inc., formed in November 2007 as a Virginia corporation, together with its wholly-owned subsidiaries (the “Company”), is a self-advised real estate investment trust (“REIT”) that invests in income-producing real estate, primarily in the lodging sector, in the United States (“U.S.”). The Company’s fiscal year end is December 31. The Company has no foreign operations or assets, and its operating structure includes only one reportable segment. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. Although the Company has interests in potential variable interest entities through its purchase commitments, it is not the primary beneficiary as the Company does not have any elements of power in the decision-making process of these entities; therefore, the Company does not consolidate the entities. As of December 31, 2025, the Company owned 217 hotels with an aggregate of 29,583 guest rooms located in 37 states and the District of Columbia (“D.C.”). All information related to the number of guest rooms included in these notes to the consolidated financial statements and Schedule III - Real Estate and Accumulated Depreciation and Amortization listed in the Index at Item 15 has not been audited. The Company’s common shares are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “APLE.”
The Company has elected to be treated as a REIT for U.S. federal income tax purposes. The Company has a wholly-owned taxable REIT subsidiary (or subsidiaries thereof) (collectively, the “Lessee” or “TRS”), which leases all of the Company’s hotels.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. The fair market value of cash and cash equivalents approximates their carrying value. Cash balances may at times exceed federal depository insurance limits.
Restricted Cash
Restricted cash includes reserves for debt service, real estate taxes, and insurance, and reserves for furniture, fixtures, and equipment replacements of up to 5 % of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions. The fair market value of restricted cash approximates its carrying value.
Investment in Real Estate and Related Depreciation and Amortization
Real estate is stated at cost, net of depreciation and amortization. Repair and maintenance costs are expensed as incurred while significant improvements, renovations, and replacements are capitalized. As further discussed in Note 10, finance ground lease assets are capitalized at the estimated present value of the remaining minimum lease payments under the leases. Depreciation and amortization are computed using the straight-line method over the average estimated useful lives of the assets, which are generally 39 years for buildings, the remaining life of the lease for finance ground leases (which in some instances may include renewal options), 10 to 20 years for franchise fees, 10 years for major improvements and three to seven years for furniture and equipment.
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; and (3) for major repairs to a single asset, the repair must be at least $2,500 and the useful life of the asset must be substantially extended.
Upon acquisition of real estate properties, the Company estimates the fair value of acquired tangible assets (consisting of land, buildings and improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities, including in-place leases, and assumed debt based on the evaluation of information and estimates available at that date. Fair values for these assets are not directly observable and estimates are based on comparable asset sales and other information which is subjective in nature, including comparable land sales as well as industry and Company data regarding building and furniture, fixtures and equipment costs, including adjustments for estimated depreciation based on the age of the property acquired and time since its most recent renovation. The Company has not assigned any value to management contracts and franchise agreements as such contracts are generally at current market rates based on the remaining terms of the contracts and any other value attributable to these contracts is not considered material. Acquisitions of hotel properties are generally accounted for as acquisitions of a group of assets, with costs incurred to effect
an acquisition, including title, legal, accounting, brokerage commissions and other related costs, being capitalized as part of the cost of the assets acquired, instead of accounted for separately as expenses in the period that they are incurred.
The Company records impairment losses on hotel properties used in operations if indicators of impairment are present, and the sum of the undiscounted cash flows estimated to be generated by the respective properties over their estimated remaining useful life, based on historical and industry data, is less than the properties’ carrying amount. Indicators of impairment include a property with current or potential losses from operations, when it becomes more likely than not that a property will be disposed of before the end of its previously estimated useful life or when events, trends, contingencies or changes in circumstances indicate that a triggering event has occurred and an asset’s carrying value may not be recoverable. The Company monitors its properties on an ongoing basis by analytically reviewing financial performance and considers each property individually for purposes of reviewing for indicators of impairment. As many indicators of impairment are subjective, such as general economic and market declines, the Company also prepares an annual recoverability analysis for each of its properties to assist with its evaluation of impairment indicators. The Company performs quarterly recoverability analyses by comparing each property’s net book value to its estimated operating income based on assumptions and estimates about the property’s future revenues, expenses and capital expenditures after disruptive events such as renovations or newly opened hotels in the same market. The Company’s planned initial hold period for each property is generally 39 years. If events or circumstances change, such as the Company’s intended hold period for a property or if the operating performance of a property declines substantially for an extended period of time, the Company’s carrying value for a particular property may not be recoverable, and an impairment loss will be recorded. Impairment losses are measured as the difference between the asset’s fair value and its carrying value. The Company’s ongoing analyses and annual recoverability analyses have identified impairment losses on two properties recorded in 2025, three properties recorded in 2024 and two properties recorded in 2023 totaling approximately $ 5.7 million, $ 3.1 million and $ 5.6 million, respectively, as discussed in Note 3.
Assets Held for Sale
The Company classifies assets as held for sale when a binding agreement to sell the property has been signed under which the buyer has committed a significant amount of nonrefundable cash, no significant contingencies exist which could prevent the transaction from being completed in a timely manner, and the sale is expected to close within one year. If these criteria are met, the Company will cease recording depreciation and amortization and will record an impairment charge if the fair value less costs to sell is less than the carrying amount of the disposal group. The Company will generally classify the impairment charge, together with the related operating results, as continuing operations in the Company’s consolidated statements of operations and classify the assets and related liabilities as held for sale in the Company’s consolidated balance sheets. If the Company’s plan of sale changes and the Company subsequently decides not to sell a property that is classified as held for sale, the property will be reclassified as held and used in the period the change occurs. As of December 31, 2025, the Company did no t have any hotels classified as held for sale . As of December 31, 2024 , the Company had two hotels classified as held for sale, which were sold to unrelated parties in the first quarter of 2025.
Revenue Recognition
Revenues consist of amounts derived from hotel operations, including room sales, food and beverage sales, and other hotel revenues, and are presented on a disaggregated basis in the Company’s consolidated statements of operations. The Company recognizes hotel operating revenue when guest rooms are occupied, services have been provided or fees have been earned. Revenues are recorded net of any sales, occupancy or other taxes collected from customers on behalf of third parties. Room revenue represents revenue from the occupancy of hotel rooms and is driven by the occupancy and average daily rate charged. Room revenue does not include ancillary services or fees charged. The contracts for room stays with customers generally are very short-term in duration and revenue is recognized over the course of the hotel stay. The hotel reservation defines the terms of the agreement including an agreed-upon rate and length of stay. Food and beverage revenue consists of revenue from group functions such as banquets and conferences as well as revenue from the restaurants and lounges at the Company’s hotels. Food and beverage revenue is recognized at the time the products or services are provided to the customer. Other operating revenue consists of ancillary revenues at the hotel, including attrition and cancelation fees, parking revenue and other guest services and offerings. Other operating revenue is generally recognized at the time when the goods or services are provided to the customer or when the performance obligation is satisfied. Payment is due at the time that goods or services are rendered or billed. For room revenue, payment is typically due and paid in full at the end of the stay with some customers prepaying for their rooms prior to the stay. Payments received from a customer prior to arrival are recorded as an advance deposit and are recognized as revenue at the time of occupancy.
Comprehensive Income
Comprehensive income includes net income and other comprehensive loss, which is comprised of unrealized gains or losses resulting from hedging activity.
Net Income Per Common Share
Basic net income per common share is computed based upon the weighted average number of shares outstanding during the period. Diluted net income per common share is calculated after giving effect to all potential common shares that were dilutive and outstanding for the period. The Company does not have any potential common shares that were dilutive and outstanding for the year ended December 31, 2025. Basic and diluted net income per common share were the same for each of the periods presented.
Income Taxes
The Company is operated as, and has elected to be taxed as, a REIT under Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its REIT taxable income, subject to certain adjustments and excluding any net capital gain, to shareholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income tax on its taxable income at regular corporate income tax rates (including any applicable corporate minimum tax) and generally will be unable to re-elect REIT status until the fifth calendar year after the year in which it failed to qualify as a REIT, unless it satisfies certain relief provisions. The Company intends to adhere to the REIT qualification requirements and to maintain its qualification for taxation as a REIT.
As a REIT, the Company is generally not subject to U.S. federal corporate income tax on the portion of taxable income that is distributed to shareholders. The Lessee, as a taxable REIT subsidiary of the Company, is subject to federal and state income taxes. The Company’s income tax expense as shown in the consolidated statements of operations primarily consists of income taxes on the operations of the Lessee and franchise taxes on both the REIT and the Lessee at the state jurisdiction level.
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards. The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled. The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period in which the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. Valuation allowances are provided if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company performs an annual review for any uncertain tax positions and, if necessary, will record the expected future tax consequences of uncertain tax positions in the consolidated financial statements. As of December 31, 2025, the tax years that remain subject to examination by major tax jurisdictions generally include 2022-2025. The Company evaluates whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. The Company has reviewed its tax positions for open tax years and has concluded no provision for income taxes for uncertain tax positions is required in the Company’s consolidated financial statements as of December 31, 2025 and 2024. Interest and penalties related to uncertain tax benefits, if any, in the future will be recognized as operating expense.
The Company has and may in the future enter into purchase and sale transactions in accordance with Section 1031 of the Code, for the exchange of like-kind property to defer taxable gains on the sale of real estate properties (“1031 Exchange”).
Sales and Marketing Costs
Sales and marketing costs are expensed when incurred. These costs represent the expense for franchise advertising and reservation systems under the terms of the hotel management and franchise agreements and general and administrative expenses that are directly attributable to advertising and promotion.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. ( “ GAAP ” ) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Accounting Standards Recently Adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on income tax disclosures around effective tax rates and cash income taxes paid. This update requires disclosure, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments in this ASU may be applied prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or the amendments may be applied retrospectively by providing the revised disclosures for all periods presented. The adoption of this ASU only impacted disclosures with no impact on the Company’s consolidated financial statements. See Note 11 for the Company’s income tax disclosures in accordance with the adoption of this ASU.
Accounting Standards Recently Issued
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which focuses on improving the disclosures about a public business entity’s amounts and types of expenses. The update mandates that an entity disclose the amounts of specific natural expense categories—such as purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion—within relevant expense captions presented on the face of the income statement. Additionally, an entity must disclose qualitative descriptions of the composition of any remaining expense not separately disaggregated and disclose the total amount of selling expenses, and in annual reporting periods, its definition of selling expenses. The new standard is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The amendments in this ASU may be applied prospectively by providing the revised disclosures for the period ending December 31, 2027 and continuing to provide the pre-ASU disclosures for the prior periods, or the amendments may be applied retrospectively by providing the revised disclosures for all periods presented. As of December 31, 2025 , the Company has not adopted this ASU and is currently evaluating the impact of this ASU on the Company’s consolidated financial statements and related disclosures.
Note 2
Investment in Real Estate
The Company’s investment in real estate consisted of the following (in thousands):
December 31,
December 31,
Land
Building and improvements
Furniture, fixtures and equipment
Finance ground lease assets
Franchise fees
Less accumulated depreciation and amortization
Investment in real estate, net
As of December 31, 2025, the Company owned 217 hotels with an aggregate of 29,583 guest rooms located in 37 states and the District of Columbia. Included in the Company’s hotel and guest room counts as of December 31, 2025 is its independent boutique hotel in New York, New York (the “New York Property”). On April 4, 2025, the Company recovered possession of this property and reinstated operations of the hotel’s 209 guest rooms through a third-party manager engaged by the Company. From May 2023 through March 2025, the Company classified the property as a “non-hotel property” and excluded it from hotel and guest room counts, as it was leased to a third-party hotel operator. Following the third-party hotel operator's failure to make lease payments, the Company commenced legal proceedings in 2024 to remove the third-party hotel operator from possession of the property. In April 2025, the Company and the third-party hotel operator entered into an agreement to mutually release all claims, to terminate the lease and for the third-party hotel operator to voluntarily surrender possession of the property back to the Company.
The Company leases all of its 217 hotels to a wholly-owned taxable REIT subsidiary (or a subsidiary thereof) under master hotel lease agreements.
2025 and 2024 Acquisitions
During the year ended December 31, 2025 , the Company acquired two hotels. The following table sets forth the location, brand, manager, date acquired, number of guest rooms and gross purchase price, excluding transaction costs, for each property. All dollar amounts are in thousands.
City
State
Brand
Manager
Date
Acquired
Guest Rooms
Gross
Purchase
Price
Tampa
Homewood Suites
HHM
Nashville
Motto
Chartwell
During the year ended December 31, 2024 , the Company acquired two hotels. The following table sets forth the location, brand, manager, date acquired, number of guest rooms and gross purchase price, excluding transaction costs, for each property. All dollar amounts are in thousands.
City
State
Brand
Manager
Date
Acquired
Guest Rooms
Gross
Purchase
Price
Washington, D.C.
AC Hotels
HHM
Madison
Embassy Suites
Raymond
In 2025, the Company utilized available cash, proceeds from the sales of properties, which included proceeds from two separate 1031 Exchanges, and borrowings under its unsecured credit facilities to purchase the Tampa, Florida and Nashville, Tennessee hotels. In 2024, the Company utilized proceeds from the sale of hotels and borrowings under its Revolving Credit Facility (as defined below) to purchase the Washington, D.C. and Madison, Wisconsin hotels. The acquisitions of these properties were accounted for as acquisitions of asset groups, whereby costs incurred to effect the acquisitions (which were not significant) were capitalized as part of the cost of the assets acquired. For the two hotels acquired during 2025, the amount of revenue and operating loss included in the Company’s consolidated statement of operations from the date of acquisition through December 31, 2025 were approximately $ 2.6 million and $ 0.2 million, respectively. For the two hotels acquired during 2024, the amount of revenue and operating income included in the Company’s consolidated statement of operations from the date of acquisition through December 31, 2024 were approximately $ 24.7 million and $ 4.7 million, respectively.
Note 3
Dispositions
2025 Dispositions
During the year ended December 31, 2025 , the Company sold seven hotels to five unrelated parties for a combined gross sales price of approximately $ 73.3 million, resulting in a combined gain on the sales of approximately $ 13.1 million, net of transaction costs, which is included in the Company’s consolidated statement of operations for the year ended December 31, 2025 . The seven hotels had a total carrying value of approximately $ 58.9 million at their respective times of sale. The following table lists the seven hotels sold in 2025:
City
State
Brand
Date Sold
Guest Rooms
Chattanooga
Homewood Suites
Indianapolis
SpringHill Suites
Houston
Marriott
Clovis
Hampton
Clovis
Homewood Suites
Cedar Rapids
Hampton
Cedar Rapids
Homewood Suites
Total
2024 Dispositions
During the year ended December 31, 2024 , the Company sold six hotels to five unrelated parties for a combined gross sales price of approximately $ 63.4 million, resulting in a combined gain on the sales of approximately $ 19.7 million, net of transaction costs, which was included in the Company’s consolidated statement of operations for the year ended December 31, 2024. The six hotels had a total carrying value of approximately $ 42.6 million at their respective times of sale. The following table lists the six hotels sold in 2024:
City
State
Brand
Date Sold
Guest Rooms
Rogers
Hampton
Rogers
Homewood Suites
Greensboro
SpringHill Suites
Wichita
Courtyard
Knoxville
TownePlace Suites
Austin
Hilton Garden Inn
Total
2023 Dispositions
There were no dispositions during the year ended December 31, 2023.
Excluding gains on sale of real estate, the Company’s consolidated statements of operations include operating income (loss) of approximately $( 3.7 ) million, $ 0.4 million and $( 2.5 ) million for the years ended December 31, 2025, 2024 and 2023 , respectively, relating to the results of operations of the 13 hotels discussed above (the seven hotels sold in 2025 and the six hotels sold in 2024) for the period of ownership. The sale of these properties does not represent a strategic shift that has, or will have, a major effect on the Company’s operations and financial results, and therefore the operating results for the period of ownership of these properties are included in income from continuing operations for the three years ended December 31, 2025, as applicable. A portion of the proceeds from the sale of the hotel in March 2025 was used to complete a 1031 Exchange for the acquisition of the Homewood Suites in Tampa, Florida, as discussed above in Note 2, which resulted in the deferral of taxable gains of approximately $ 2.4 million . Similarly, a portion of the proceeds from the sale of two hotels in the fourth quarter was used to complete a 1031 Exchange for the acquisition of the Motto in Nashville, Tennessee, as discussed above in Note 2, which resulted in the deferral of taxable gains of approximately $ 4.0 million . A portion of the proceeds from the sale of the two hotels in February 2024 was used to complete a 1031 Exchange, for the acquisition of the AC Hotel in Washington, D.C., as discussed above in Note 2, which resulted in the deferral of taxable gains of $ 15.1 million. The net proceeds from the sales of the remaining four hotels in 2025 and the remaining four hotels in 2024 were used for share repurchases and other general corporate purposes.
Impairment of Depreciable Real Estate
During the years ended December 31, 2025, 2024 and 2023, the Company recorded impairment losses totaling approximately $ 5.7 million , $ 3.1 million and $ 5.6 million, respectively.
During the third quarter of 2025, the Company identified indicators of impairment at two properties. The properties were identified for potential sale in August 2025, and the Company entered into a purchase and sale agreement with an unrelated party for the sale of the hotels for an aggregate gross sales price of $ 16.1 million. As a result, the Company recognized a total impairment loss of approximately $ 5.7 million for these properties in the third quarter of 2025, to adjust the carrying values of the hotels to their respective estimated fair values less costs to sell, which were based on the contracted sales prices, Level 2 inputs under the fair value hierarchy. The Company completed the sale of the hotels in the fourth quarter of 2025.
During the third and fourth quarters of 2024, the Company identified indicators of impairment at three properties, resulting in a combined loss on impairment for the year ended December 31, 2024 of $ 3.1 million . The three properties were separately identified for potential sale in either the third or fourth quarters of 2024, and the Company entered into separate purchase and sale agreements with separate unrelated parties for the sale of the hotels for a combined gross sales price of $ 21.7 million. As a result, the Company recognized impairment losses of approximately $ 2.9 million in the third quarter of 2024 and $ 0.2 million in the fourth quarter of 2024, for these properties to adjust the carrying value of these hotels to their estimated fair values less costs to sell, which were based on the contracted sales prices, Level 2 inputs under the fair value hierarchy. The Company completed the sale of one of these hotels in November 2024 and another in December 2024. For the third hotel impaired in 2024, the Company completed the sale in February 2025, therefore, the hotel was classified as assets held for sale on the Company’ s consolidated balance sheet at December 31, 2024.
During the fourth quarter of 2023, the Company identified indicators of impairment at two properties, due to declines in the current and forecasted cash flows and a shortened hold period. The Company performed a test of recoverability and determined that the carrying value for each property exceeded the estimated undiscounted future cash flows. The shortfalls in estimated cash flows were triggered by declines in existing and forecasted hotel market conditions and new supply in each respective market. For both hotels, the Company utilized an offer from an unrelated party, net of estimated selling costs (categorized as Level 2 inputs under the fair value hierarchy) to adjust the basis of the property to its estimated fair market value. Upon concluding that the carrying cost exceeded the estimated undiscounted future cash flows, the Company adjusted the carrying value of the two hotels (approximately $ 17.4 million as of December 31, 2023 ) to their estimated fair market value (approximately $ 11.8 million as of December 31, 2023), resulting in an impairment loss of $ 5.6 million .
Note 4
Debt
Summary
As of December 31, 2025 and 2024, the Company’s debt consisted of the following (in thousands):
December 31,
December 31,
Revolving credit facility
Term loans and senior notes, net
Mortgage debt, net
Debt, net
The aggregate amounts of principal payable under the Company’s total debt obligations as of December 31, 2025 (including the Revolving Credit Facility (if any) (as defined below), term loans, senior notes and mortgage debt), for the five years subsequent to December 31, 2025 and thereafter are as follows (in thousands):
Thereafter
Unamortized debt issuance costs
Total
The Company uses interest rate swaps to manage its interest rate risk on a portion of its variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the annual Secured Overnight Financing Rate (“SOFR”) for a one-month term (“one-month SOFR”) with nine out of the eleven swaps also including an additional 0.10 % SOFR spread adjustment . The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. See Note 5 for more information on the interest rate swap agreements. The Company’s total fixed-rate and variable-rate debt, after giving effect to its interest rate swaps in effect at December 31, 2025 and 2024, is set forth below. All dollar amounts are in thousands.
December 31,
Percentage
December 31,
Percentage
Fixed-rate debt (1)
Variable-rate debt
Total
Weighted-average interest rate of debt
Fixed-rate debt includes the portion of variable-rate debt where the interest payments have been effectively fixed by interest rate swaps as of the respective balance sheet date. See Note 5 for more information on the interest rate swap agreements.
Credit Facilities
$1.2 Billion Credit Facility
On July 25, 2022, the Company entered into a credit facility (the “$ 1.2 billion credit facility”) that is comprised of (i) a $ 650 million revolving credit facility with an initial maturity date of July 25, 2026 (the “Revolving Credit Facility”), (ii) a $ 275 million term loan with a maturity date of July 25, 2027 , funded at closing, and (iii) a $ 300 million term loan with a maturity date of Janu ary 31, 2028 ( including a $ 150 million delayed draw option until 180 days from closing) , of which $ 200 million was funded at closing , $ 50 million was funded on October 24, 2022 and the remaining $ 50 million was funded on January 17, 2023 (the term loans described in clauses (ii) and (iii) are referred to together as the “ $ 575 million term loan facility”).
Subject to certain conditions, including covenant compliance and payment of additional fees, the Revolving Credit Facility maturity date may be extended up to one year. The credit agreement for the $ 1.2 billion credit facility contains customary affirmative and negative covenants (as described below), restrictions on certain investments and events of default. The Company may make voluntary prepayments, in whole or in part, at any time. Interest on the $ 1.2 billion credit facility, subject to certain exceptions, is generally payable monthly, with interest rates that have historically been equal to the one-month SOFR plus a 0.10 % SOFR spread adjustment plus a margin ranging from 1.35 % to 2.25 %, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. As of December 31, 2025 , the Company had availability of $ 586.9 million under its Revolving Credit Facility after taking a $ 2.1 million letter of credit into account . The Company is also required to pay quarterly an unused facility fee at an annual rate of 0.20 % or 0.25 % on the unused portion of the Revolving Credit Facility, based on the amount of borrowings outstanding during the quarter.
$225 Million Term Loan Facility
Prior to the Company’s full repayment in July 2025 (as discussed below under “$ 385 Million Term Loan Facility”), the Company utilized an unsecured $ 225 million term loan facility that was comprised of (i) a $ 50 million term loan with a maturity date of August 2, 2025 and (ii) a $ 175 million term loan with a maturity date of August 2, 2025 (the term loans described in clauses (i) and (ii) are referred to together as the “$225 million term loan facility”). The Company was permitted to make voluntary prepayments, in whole or in part, at any time, subject to certain conditions. Interest payments on the $ 225 million term loan facility were due monthly and the interest rate, subject to certain exceptions, was equal to an annual rate of the one-month SOFR plus a 0.10 % SOFR spread adjustment plus a margin ranging from 1.35 % to 2.50 %, based upon the Company’s leverage ratio, as calculated under the terms of the credit agreement.
$385 Million Term Loan Facility
On July 24, 2025, the Company entered into a new term loan facility with a principal amount of $ 385 million and a maturity date of July 31, 2030 (the “ $ 385 million term loan facility”). At closing, the Company repaid all amounts outstanding under the $ 225 million term loan facility with proceeds from the $ 385 million term loan facility, resulting in an additional $ 160 million funded at closing, which was used to repay the balance outstanding under the Revolving Credit Facility and for general corporate purposes. The outstanding principal under the $ 385 million term loan facility bears interest at an annual variable rate equal to a term SOFR, depending on the interest period options elected by the Company, plus a margin ranging from 1.35 % to 2.20 %, based on the Company’s leverage ratio as calculated under the terms of the credit agreement. Historically, the Company has elected to pay interest monthly at an annual rate equal to the one-month SOFR plus the applicable margin . The credit agreement for the $ 385 million term loan facility contains customary affirmative and negative covenants, restrictions on certain investments and customary events of default, which are the same terms as those under the previous credit agreement for the $ 225 million term loan facility. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions.
$130 Million Term Loan Facility
On July 25, 2017, the Company entered into an unsecured $ 85 million term loan facility with an initial maturity date of July 25, 2024 , consisting of one term loan (the “2017 $ 85 million term loan facility”) that was funded at closing. Interest payments on the 2017 $ 85 million term loan facility were due monthly, and the interest rate, subject to certain exceptions, was equal to an annual rate of the one-month SOFR plus a 0.10 % SOFR spread adjustment plus a margin ranging from 1.30 % to 2.10 %, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. On July 17, 2024, the Company amended the 2017 $ 85 million term loan facility, which increased the amount of the term loan facility to $ 130 million, with the additional $ 45 million funded at closing (the "$ 130 million term loan facility"), and extended the maturity date to July 25, 2026 . Interest on the $ 130 million term loan facility , subject to certain exceptions, is generally payable monthly, with interest rates that have historically been equal to an annual rate of the one-month SOFR plus a 0.10 % SOFR spread adjustment plus a margin ranging from 1.35 % to 2.20 %, depending on the Company’s leverage ratio, as calculated under the terms of the amended credit agreement. Subject to certain conditions, including covenant compliance and payment of additional fees, the maturity date of the $ 130 million term loan facility may be extended by the Company to July 25, 2027. The credit agreement for the $ 130 million term loan facility contains customary affirmative and negative covenants, restrictions on certain investments and customary events of default. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions.
$85 Million Term Loan Facility
On December 31, 2019, the Company entered into an unsecured $ 85 million term loan facility with a maturity date of December 31, 2029 , consisting of one term loan funded at closing (the “$ 85 million term loan facility”). Interest on the $ 85 milli on term loan facility, subject to certain exceptions, is generally payable monthly, with interest rates that have historically been equal to an annual rate of the one-month SOFR plus a 0.10 % SOFR spread adjustment plus a margin ranging from 1.70 % to 2.55 %, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. The credit agreement for the $ 85 million term loan
facility contains customary affirmative and negative covenants, restrictions on certain investments and customary events of default. The Company may make voluntary prepayments, in whole or in part, subject to certain conditions.
$50 Million Senior Notes Facility
On March 16, 2020, the Company entered into an unsecured $ 50 million senior notes facility with a maturity date of March 31, 2030 , consisting of senior notes totaling $ 50 million funded at closing (the “$ 50 million senior notes facility”). T he Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions, including make-whole provisions. Interest payments on the $ 50 million senior notes facility are due quarterly, and the interest rate, subject to certain exceptions, ranges from an annual rate of 3.60 % to 4.35 % depending on the Company’s leverage ratio, as calculated under the terms of the note agreement.
$75 Million Senior Notes Facility
On June 2, 2022, the Company entered into an unsecured $ 75 million senior notes facility with a maturity date of June 2, 2029 , consisting of senior notes totaling $ 75 million funded at closing (the “$ 75 million senior notes facility”, and collectively with the $ 1.2 billion credit facility, the $ 225 million term loan facility, the $ 130 million term loan facility, the $ 85 million term loan facility and the $ 50 million senior notes facility, the “unsecured credit facilities”). The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions, including make-whole provisions. Interest payments on the $ 75 million senior notes facility are due quarterly, and the interest rate, subject to certain exceptions, ranges from an annual rate of 4.88 % to 5.63 % depending on the Company’s leverage ratio, as calculated under the terms of the note agreement.
As of December 31, 2025 and 2024, the details of the Company’s unsecured credit facilities were as set forth in the table below. All dollar amounts are in thousands.
Outstanding Balance
Interest Rate
Maturity
Date
December 31, 2025
December 31, 2024
Revolving credit facility (1)
SOFR + 0.10 % + 1.40 % to 2.25 %
Term loans and senior notes
$275 million term loan
SOFR + 0.10 % + 1.35 % to 2.20 %
$300 million term loan
SOFR + 0.10 % + 1.35 % to 2.20 %
$50 million term loan
SOFR + 0.10 % + 1.35 % to 2.20 %
$175 million term loan
SOFR + 0.10 % + 1.65 % to 2.50 %
$385 million term loan
SOFR + 1.35 % to 2.20 %
$130 million term loan
SOFR + 0.10 % + 1.35 % to 2.20 %
$85 million term loan
SOFR + 0.10 % + 1.70 % to 2.55 %
$50 million senior notes
$75 million senior notes
Term loans and senior notes at stated value
Unamortized debt issuance costs
Term loans and senior notes, net
Credit facilities, net (1)
Weighted-average interest rate (5)
Excludes unamortized debt issuance costs related to the Revolving Credit Facility totaling approximately $ 0.8 million and $ 2.1 million as of December 31, 2025 and December 31, 2024 , respectively, which are included in other assets, net in the Company’s consolidated balance sheets.
The Revolving Credit Facility matures on July 25, 2026, but it can be extended up to one year, subject to certain conditions including covenant compliance and payment of additional fees. The Company presently has the ability to exercise this extension, however, it plans to pursue refinancing of the maturing debt.
On July 24, 2025, the Company repaid all amounts outstanding under the $ 225 million term loan facility and entered into a new term loan facility with a principal amount of $ 385 million and a maturity date of July 31, 2030 . See the "$ 385 Million Term Loan Facility" section above for details.
This loan matures on July 25, 2026, but it can be extended up to one year, subject to certain conditions including covenant compliance and payment of additional fees. The Company presently has the ability to exercise this extension , however, it plans to pursue refinancing of the maturing debt .
Interest rate represents the weighted-average effective annual interest rate at the balance sheet date which includes the effect of interest rate swaps in effect on $ 685.0 million and $ 735.0 million of the outstanding variable-rate debt as of December 31, 2025 and 2024 , respectively. See Note 5 for more information on the interest rate swap agreements. The one-month SOFR at December 31, 2025 and December 31, 2024 was 3.69 % and 4.33 %, respectively.
Credit Facilities Covenants
The credit agreements governing the unsecured credit facilities (collectively, the “credit agreements”) contain customary affirmative and negative covenants, restrictions on certain investments and events of default, including the following financial and restrictive covenants (capitalized terms not defined below are defined in the credit agreements):
A ratio of Consolidated Total Indebtedness to Consolidated EBITDA (“Maximum Consolidated Leverage Ratio”) of not more than 7.25 to 1.00;
A ratio of Consolidated Secured Indebtedness to Consolidated Total Assets (“Maximum Secured Leverage Ratio”) of not more than 45 %;
A minimum Consolidated Tangible Net Worth of approximately $ 3.4 billion plus an amount equal to 75 % of the Net Cash Proceeds from issuances and sales of Equity Interests occurring after the Closing Date, July 25, 2022, subject to adjustment;
A ratio of Adjusted Consolidated EBITDA to Consolidated Fixed Charges (“Minimum Fixed Charge Coverage Ratio”) of not less than 1.50 to 1.00 for the trailing four full quarters;
A ratio of Unencumbered Adjusted NOI to Consolidated Implied Interest Expense for Consolidated Unsecured Indebtedness (“Minimum Unsecured Interest Coverage Ratio”) of not less than 2.00 to 1.00 for the trailing four full quarters;
A ratio of Consolidated Unsecured Indebtedness to Unencumbered Asset Value (“Maximum Unsecured Leverage Ratio”) of not more than 60 % (subject to a higher level in certain circumstances); and
A ratio of Consolidated Secured Recourse Indebtedness to Consolidated Total Assets (“Maximum Secured Recourse Indebtedness”) of not more than 10 %.
The Company was in compliance with the applicable covenants at December 31, 2025 .
Mortgage Debt
As of December 31, 2025, the Company had approximately $ 184.3 million in outstanding mortgage debt secured by 10 properties with maturity dates ranging from June 2026 to May 2038 , and both stated interest rates and effective interest rates ranging from 3.40 % to 4.37 %. The loans generally provide for monthly payments of principal and interest on an amortized basis and defeasance or prepayment penalties if prepaid. The following table sets forth the hotel properties securing each loan, the interest rate, loan assumption or origination date, maturity date, the principal amount assumed or originated, and the outstanding balance prior to any fair value adjustments or debt issuance costs as of December 31, 2025 and 2024 for each of the Company’s mortgage debt obligations. All dollar amounts are in thousands.
Location
Brand
Interest
Rate (1)
Loan
Assumption
Origination
Date
Maturity
Date
Principal
Assumed
Originated
Outstanding
balance
December 31,
Outstanding
balance
December 31,
Westford, MA
Residence Inn
Denver, CO
Hilton Garden Inn
Oceanside, CA
Courtyard
Omaha, NE
Hilton Garden Inn
Boise, ID
Hampton
Burbank, CA
Courtyard
San Diego, CA
Courtyard
San Diego, CA
Hampton
Burbank, CA
SpringHill Suites
Santa Ana, CA
Courtyard
Richmond, VA
Courtyard
Richmond, VA
Residence Inn
Portland, ME
Residence Inn
San Jose, CA
Homewood Suites
Unamortized fair value adjustment
of assumed debt
Unamortized debt issuance costs
Total
Interest rates are the rates per the loan agreement. For loans assumed, the Company adjusted the interest rates per the loan agreement to market rates and amortized the adjustments to interest expense over the life of the loan.
Represents date loan was repaid in full .
The Company plans to pay the outstanding amount and service payments due upon the upcoming debt maturity date using funds from operations, borrowings under its Revolving Credit Facility and/or proceeds from new financing.
The total fair value, net premium adjustment for all of the Company’s debt assumptions were amortized as a reduction to interest expense over the remaining term of the respective mortgages using a method approximating the effective interest rate method, and totaled approximately $ 0.2 million, $ 0.3 million and $ 0.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. The fair value net premium adjustment of assumed debt was fully amortized as of December 31, 2025.
Debt issuance costs related to the assumption or origination of debt are amortized over the period to maturity of the applicable debt instrument, as an addition to interest expense, and totaled approximately $ 3.9 million, $ 3.8 million and $ 3.6 million for the three years ended December 31, 2025, 2024 and 2023, respectively.
The Company’s interest expense in 2025, 2024 and 2023 is net of interest capitalized in conjunction with hotel renovations totaling approximately $ 1.6 million, $ 1.4 million and $ 1.5 million, respectively.
Note 5
Fair Value of Financial Instruments
Except as described below, the carrying value of the Company’s financial instruments approximates fair value due to the short-term nature of these financial instruments.
Debt
The Company estimates the fair value of its debt by discounting the future cash flows of each instrument at estimated market rates consistent with the maturity of a debt obligation with similar credit terms and credit characteristics, which are Level 3 inputs under the fair value hierarchy. Market rates take into consideration general market conditions and maturity. As of December 31, 2025, both the carrying value and estimated fair value of the Company’s debt were approximately $ 1.5 billion . As of December 31, 2024 , the carrying value and estimated fair value of the Company’s debt were approximately $ 1.5 billion and $ 1.4 billion, respectively. Both the carrying value and the estimated fair value of the Company’s debt (as discussed above) are net of unamortized debt issuance costs related to term loans, senior notes and mortgage debt for each specific year.
Derivative Instruments
Currently, the Company uses interest rate swaps to manage its interest rate risk on variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the one-month SOFR with nine out of the eleven swaps also including an additional 0.10 % SOFR spread adjustment . The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. These swap instruments are recorded at fair value and, if in an asset position, are included in other assets, net, and, if in a liability position, are included in accounts payable and other liabilities in the Company’s consolidated balance sheets. The fair values of the Company’s interest rate swap agreements are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts, which is considered a Level 2 measurement under the fair value hierarchy. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The following table sets forth information for each of the Company’s interest rate swap agreements outstanding as of December 31, 2025 and 2024. All dollar amounts are in thousands.
Fair Value Asset (Liability)
Notional Amount at December 31, 2025
Origination
Date
Effective
Date
Maturity
Date
Swap Fixed
Interest
Rate
December 31,
December 31,
Active interest rate swaps designated as cash flow hedges at December 31, 2025:
Matured interest rate swaps at December 31, 2025:
The Company assesses, both at inception and on an ongoing basis, the effectiveness of its qualifying cash flow hedges. As of December 31, 2025, all 11 active interest rate swap agreements listed above were designated as cash flow hedges. The change in the fair value of the Company’s designated cash flow hedges is recorded to accumulated other comprehensive income, a component of shareholders’ equity in the Company’s consolidated balance sheets.
Amounts reported in accumulated other comprehensive income will be reclassified to interest and other expense, net as interest payments are made or received on the Company’s variable-rate derivatives. The Company estimates that approximately $ 0.5 million of net unrealized gains included in accumulated other comprehensive income at December 31, 2025 will be reclassified as a decrease to interest and other expense, net within the next 12 months.
The following tables present the effect of derivative instruments in cash flow hedging relationships in the Company’s consolidated statements of operations and comprehensive income for the years ended December 31, 2025, 2024 and 2023 (in thousands):
Net Unrealized Gain (Loss) Recognized in Other Comprehensive Loss
Interest rate derivatives in cash flow hedging
relationships
Net Unrealized Gain Reclassified from Accumulated Other Comprehensive Income to Interest and Other Expense, net
Interest rate derivatives in cash flow hedging
relationships
Note 6
Related Parties
The Company has engaged in, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed as being at arm’s length, and the results of the Company’s operations may have been different if these transactions were conducted with non-related parties. The Company’s independent members of the Board of Directors oversee and annually review the Company’s related party relationships (including the relationships discussed in this section) and are required to approve any significant modifications to the existing relationships, as well as any new significant related party transactions. The Board of Directors is not required to approve each individual transaction that falls under the related party relationships. However, under the direction of the Board of Directors, at least one member of the Company’s senior management team approves each related party transaction. Below is a summary of the significant related party relationships in effect and transactions that occurred during each of the three years ended December 31, 2025, 2024 and 2023, respectively.
Glade M. Knight, Executive Chairman of the Company, owns Apple Realty Group, Inc. (“ARG”), which receives support services from the Company and reimburses the Company for the cost of these services as discussed below. Mr. Knight is also currently a partner and Chief Executive Officer of Energy 11 GP, LLC and Energy Resources 12 GP, LLC, which are the respective general partners of Energy 11, L.P. and Energy Resources 12, L.P., each of which receives support services from ARG.
The Company provides support services, including the use of the Company’s employees and corporate office, to ARG and is reimbursed by ARG for the cost of these services. Under this cost sharing structure, amounts reimbursed to the Company include both compensation for personnel and office-related costs (including office rent, utilities, office supplies, etc.) used by ARG. The amounts reimbursed to the Company are based on the actual costs of the services and a good faith estimate of the proportionate amount of time incurred by the Company’s employees on behalf of ARG. Total reimbursed costs allocated by the Company to ARG for the years ended December 31, 2025, 2024 and 2023 totaled approximately $ 1.4 million, $ 1.5 million and $ 1.2 million, respectively, and are recorded as a reduction to general and administrative expenses in the Company’s consolidated statements of operations.
As part of the cost sharing arrangement, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under this cash management process, each company may advance or defer up to $ 1 million at any time. Each quarter, any outstanding amounts are
settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies. As of December 31, 2025 and 2024 , total amounts due from ARG for reimbursements under the cost sharing structure totaled approximately $ 0.5 million for each year, and are included in other assets, net in the Company’s consolidated balance sheets.
The Company, through its wholly-owned subsidiary, Apple Air Holding, LLC, owns an aircraft used primarily for acquisition, asset management, renovation, investor, corporate and public relations and other business purposes. The aircraft may from time to time be leased to affiliates of the Company based on third-party rates. Lease activity was not significant during the reporting periods.
From time to time, the Company utilizes aircraft, owned by an entity that is owned by the Company’s Executive Chairman, for acquisition, asset management, renovation, investor, corporate and public relations and other business purposes, and reimburses this entity at third-party rates. Total costs incurred for the use of the aircraft during 2025, 2024 and 2023 were less than $ 0.1 million in each respective year and are included in general and administrative expenses in the Company’s consolidated statements of operations.
Note 7
Shareholders’ Equity
Distributions
For the three years ended December 31, 2025, 2024 and 2023 , the Company paid distributions of $ 1.01 , $ 1.01 and $ 1.04 per common share, respectively, for a total of approximately $ 240.4 million, $ 243.7 million and $ 238.3 million, respectively . Additionally, in December 2025, the Company declared a monthly cash distribution of $ 0.08 per common share, totaling $ 18.9 million, which was recorded as a payable as of December 31, 2025 and paid on January 15, 2026 . For the year ended December 31, 2024, in addition to the regular monthly cash distribution of $ 0.08 per common share approved by the Board of Directors in December 2024, the Board of Directors approved a special one-time distribution of $ 0.05 per common share for a combined distribution of $ 0.13 per common share, totaling $ 31.2 million, which was recorded as a payable as of December 31, 2024 and paid in January 2025 . These accrued distributions were included in accounts payable and other liabilities in the Company’s consolidated balance sheets at December 31, 2025 and 2024, respectively.
Issuance of Shares
On February 23, 2024, the Company entered into an equity distribution agreement pursuant to which the Company may sell, from time to time, up to an aggregate of $ 500 million of its common shares under an at-the-market offering program (the “ATM Program”) under the Company’s current shelf registration statement. During the years ended December 31, 2025 and 2024, the Company did no t sell any common shares under the ATM Program, and no common shares were sold during the year ended December 31, 2024 under the previous $ 300 million at-the-market offering program, which was terminated in February 2024 in connection with the commencement of the current ATM Program. As of December 31, 2025, approximately $ 500 million remained available for issuance under the ATM Program. The Company plans to use future net proceeds from the sale of shares under the ATM Program, or a similar successor program, for general corporate purposes, which may include, among other things, acquisitions of additional properties, the repayment of outstanding indebtedness, capital expenditures, improvement of properties in its portfolio and working capital. The Company may also use the future net proceeds to acquire another REIT or other company that invests in income-producing properties.
Share Repurchases
In May 2025, the Company’s Board of Directors approved a one-year extension of its existing share repurchase program, authorizing share repurchases up to an aggregate of $ 262.6 million (the “Share Repurchase Program”). The Share Repurchase Program may be suspended or terminated at any time by the Company and will end in July 2026 if not terminated or extended earlier. The Company previously entered into and expects to continue to enter into written trading plans as part of the Share Repurchase Program that provide for share repurchases in open market transactions that are intended to comply with Rule 10b5-1 under the Exchange Act. During the year ended December 31, 2025, the Company purchased, under its Share Repurchase Program, approximately 4.6 million of its common shares at a weighted-average market purchase price of approximately $ 12.55 per common share for an aggregate purchase price, including commissions, of approximately $ 58.3 million. Purchases under the Share Repurchase Program have been funded, and the Company intends to fund future share repurchases, with cash on hand, proceeds from dispositions or availability under its unsecured credit facilities, subject to applicable restrictions under the Company’s unsecured credit facilities (if any). The timing of share repurchases and the number of common shares to be purchased under the Share Repurchase Program will also depend upon prevailing market conditions, regulatory requirements and other factors. As of December 31, 2025, approximately $ 242.5 million remained available for purchase under the Share Repurchase Program.
Preferred Shares
No preferred shares of the Company are issued and outstanding. The Company’s amended and restated articles of incorporation authorize issuance of up to 30 million preferred shares.
Note 8
Compensation Plans
In March 2024, the Board of Directors adopted the Company’s 2024 Omnibus Incentive Plan (the “2024 Omnibus Plan”), and in May 2024, the Company’s shareholders approved the 2024 Omnibus Plan, terminating the 2014 Omnibus Incentive Plan (the “2014 Omnibus Plan”) with respect to any common shares that were not subject to any outstanding awards under the plan. Following its termination, no additional awards can be made under the 2014 Omnibus Plan, but the terms and conditions of any outstanding awards granted under the 2014 Omnibus Plan (which, as of December 31, 2025, consists of a remaining 75,962 fully vested deferred stock units from the Non-Employee Director Deferral Program) were not affected. Upon termination of the 2014 Omnibus Plan on May 23, 2024, approximately 1.1 million shares were subject to outstanding awards (which included an estimated number of common shares based on “target” performance with respect to February 2024 awards authorized under the 2014 Omnibus Plan in February 2024, which were outstanding but not yet earned under the 2014 Omnibus Plan).
The 2024 Omnibus Plan permits the grant of awards of stock options, stock appreciation rights, restricted stock, stock units, deferred stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards to any employee, officer, or director of the Company or an affiliate of the Company, a consultant or adviser currently providing services to the Company or an affiliate of the Company, or any other person whose participation in the 2024 Omnibus Plan is determined by the Compensation Committee of the Board of Directors (the “Compensation Committee”) to be in the best interests of the Company. The maximum number of the Company’s common shares available for issuance under the 2024 Omnibus Plan is 7.25 million. As of December 31, 2025 , there were approximately 7.19 million common shares available for issuance under the 2024 Omnibus Plan.
The Company annually establishes an incentive plan for its executive management team, which is approved by the Compensation Committee. Under the incentive plan for 2025 (the “2025 Incentive Plan”), participants are eligible to receive incentive compensation based on the achievement of certain 2025 performance measures, with one-half ( 50 %) of incentive compensation based on operational metrics and performance goals and one-half ( 50 %) of incentive compensation based on shareholder return metrics. With respect to the shareholder return metrics, 75 % of the target was based on shareholder return relative to a peer group and 25 % was based on total shareholder return metrics over one-year, two-year, and three-year periods. With respect to the operational metrics and performance goals, 75 % of the operational performance target was based on the following metrics: Comparable Hotels RevPAR growth, Comparable Hotels Adjusted Hotel EBITDA margin, Adjusted EBITDAre and Modified Funds from Operations per share, equally weighted at 18.75 % (non-GAAP financial measures are defined elsewhere within this Annual Report on Form 10-K). T he remaining 25 % of the operational performance target was based on an operational performance goal focused on the management of balance sheet maturities and allocation of capital to drive shareholder returns. As of December 31, 2025, the range of potential aggregate payouts under the 2025 Incentive Plan was $ 0 - $ 29.8 million. Based on performance during 2025 , the Company accrued approximately $ 6.7 million as a liability for executive incentive compensation payments under the 2025 Incentive Plan, which is included in accounts payable and other liabilities in the Company’s consolidated balance sheet as of December 31, 2025 and in general and administrative expenses in the Company’s consolidated statement of operations for the year ended December 31, 2025 . Additionally, approximately $ 1.2 million, which is subject to vesting on December 11, 2026, will be recognized proportionally throughout 2026. Approximately 25 % of target awards under the 2025 Incentive Plan will be paid in cash, and 75 % will be issued in common shares under the Company’s 2024 Omnibus Plan. The portion of awards under the 2025 Incentive Plan payable in common shares will be issued under the Company’s 2024 Omnibus Plan during the first quarter of 2026, approximately two-thirds of which will be unrestricted and one-third of which will be restricted and is subject to vesting on December 11, 2026.
Under the incentive plan for 2024 (the “2024 Incentive Plan”), the Company accrued approximately $ 15.0 million including $ 9.3 million in share-based compensation as noted below, as a liability for executive incentive compensation payments, which was included in accounts payable and other liabilities in the Company’s consolidated balance sheet as of December 31, 2024 and in general and administrative expenses in the Company’s consolidated statement of operations for the year ended December 31, 2024. Under the incentive plan for 2023 (the “2023 Incentive Plan”), the Company accrued approximately $ 20.9 million, including $ 14.8 million in share-based compensation as noted below, as a liability for executive incentive compensation payments, which was included in general and administrative expenses in the Company’s consolidated statement of operations for the year ended December 31, 2023.
Share-Based Compensation Awards
The following table sets forth information pertaining to the share-based compensation issued under the 2024 Incentive Plan, the 2023 Incentive Plan and the incentive plan for 2022 (the “2022 Incentive Plan”):
2024 Incentive Plan
2023 Incentive Plan
2022 Incentive Plan
Period common shares issued
First Quarter 2025
First Quarter 2024
First Quarter 2023
Common shares earned under each incentive plan
Common shares surrendered on issuance date to satisfy tax
withholding obligations
Common shares earned and issued under each incentive plan, net of
common shares surrendered on issuance date to satisfy
tax withholding obligations
Average of the high and low stock price on issuance date
Total share-based compensation earned, including the
surrendered shares (in millions)
Of the total common shares earned and issued, total common shares
unrestricted at time of issuance
Of the total common shares earned and issued, total common shares
restricted at time of issuance
Restricted common shares vesting date
December 12, 2025
December 13, 2024
December 8, 2023
Common shares surrendered on vesting date to satisfy tax
withholding requirements resulting from vesting of restricted
common shares
Of the total 2024 share-based compensation, approximately $ 9.3 million was recognized as share-based compensation expense during the year ended December 31, 2024, and included in accounts payable and other liabilities in the Company’s consolidated balance sheet at December 31, 2024 , and the remaining $ 1.8 million, which vested on December 12, 2025 and excludes any restricted shares forfeited or vested prior to that date, was recognized as share-based compensation expense during the year ended December 31, 2025 .
Of the total 2023 share-based compensation, approximately $ 14.8 million was recognized as share-based compensation expense during the year ended December 31, 2023, and included in accounts payable and other liabilities in the Company's consolidated balance sheet at December 31, 2023 , and the remaining $ 3.3 million, which vested on December 13, 2024 and excludes any restricted shares forfeited or vested prior to that date, was recognized as share-based compensation expense during the year ended December 31, 2024 .
Of the total 2022 share-based compensation, approximately $ 2.6 million, which vested on December 8, 2023 and excludes any restricted shares forfeited or vested prior to that date, was recognized as share-based compensation expense during the year ended December 31, 2023 .
Additionally, in conjunction with the appointment of five new officers of the Company on April 1, 2020, the Company issued to the new officer group a total of approximately 200,000 restricted common shares with an aggregate grant date fair value of approximately $ 1.8 million. For each grantee, the restricted shares vested on March 31, 2023 . The expense associated with the awards was amortized over the 3 -year vesting period. For the year ended December 31, 2023, the Company recognized approximately $ 0.1 million of share-based compensation expense related to these awards. Upon vesting on March 31, 2023, approximately 83,000 shares were surrendered to satisfy tax withholding obligations.
Non-Employee Director Deferral Program
In 2018, the Board of Directors adopted the Non-Employee Director Deferral Program (the “Director Deferral Program”) under the Omnibus Plan for the purpose of providing non-employee members of the Board of Directors the opportunity to elect to defer receipt of all or a portion of the annual retainer payable to them for their service on the Board of Directors, including amounts payable in both cash and fully vested shares of the Company’s common shares, in the form of deferred cash fees (“DCFs”) and/or deferred stock units (“DSUs”). DCFs and DSUs that are issued to the Company’s non-employee directors are fully vested and non-forfeitable
on the grant date. The grant date fair values of DCFs are equal to the dollar value of the deferred fee on the grant date, while the grant date fair values of DSUs are equal to the fair market value of the Company’s common shares on the grant date. DCFs are settled for cash and DSUs are settled for shares of the Company’s common stock, which are deliverable upon either: i) termination of the director’s service from the Board of Directors, ii) a date previously elected by the director, or iii) the earlier of the two dates, as determined by the director at the time he or she makes the election. The deferred amounts will also be paid if prior to the date specified by the director, the Company experiences a change in control or upon the death of the director. During the years ended December 31, 2025, 2024 and 2023 , non-employee directors participating in the Director Deferral Program deferred approximately $ 0.2 million, $ 0.1 million and $ 0.2 million, respectively, which is recorded as deferred compensation expense in general and administrative expenses in the Company’s consolidated statements of operations for the years then ended. On each quarterly deferral date (the date that a portion of the annual retainer would be paid), dividends earned on DSUs are credited to the deferral account in the form of additional DSUs based on dividends declared by the Company on its outstanding common shares during the quarter and the fair value of the common shares on such date. Outstanding DSUs at December 31, 2025 and 2024 were approximately 92,000 and 81,000 , with weighted-average grant date fair value of $ 14.79 and $ 15.48 , respectively, valued at approximately $ 1.4 m illion and $ 1.3 million, respectively, which is included in common stock, a component of shareholders’ equity in the Company’s consolidated balance sheets as of December 31, 2025 and 2024.
In 2024, the Director Deferral Program was amended and restated for the purpose of continuing the plan with respect to awards under the 2024 Omnibus Plan.
Note 9
Management and Franchise Agreements
Each of the Company’s 217 hotels owned as of December 31, 2025 is operated and managed under a separate management agreement with one of the following management companies or one of their affiliates, none of which are affiliated with the Company:
Manager
Number of
Hotels
LBAM-Investor Group, LLC (“LBA”)
Dimension Hospitality, LLC (“Dimension”)
Crestline Hotels & Resorts, LLC (“Crestline”)
Raymond Management Company, Inc. (“Raymond”)
Hersha Hospitality Management L.P. (“HHM”)
Texas Western Management Partners, LP (“Western”)
North Central Hospitality, LLC (“North Central”)
MHH Management, LLC (“McKibbon”)
Newport Hospitality Group, Inc. (“Newport”)
InnVentures IVI, LP (“InnVentures”) (1)
Marriott International, Inc. (“Marriott”)
Chartwell Hospitality, LLC (“Chartwell”)
Concord Hospitality Enterprises Company, LLC (“Concord”)
White Lodging Services Corporation (“White Lodging”)
Highgate Hotels, L.P. ("Highgate")
Huntington Hotel Group, LP (“Huntington”)
Total
InnVentures is a subsidiary of Highgate.
The management agreements generally provide for initial terms of one to 30 years and are terminable by the Company for either failure to achieve performance thresholds, certain events of default, upon sale of the property or without cause. As of December 31, 2025, approximately 81 % of the Company’s hotels operated under a variable management fee agreement, with an average initial term of approximately one to two years , which the Company believes better aligns incentives for each hotel manager to maximize each property’s performance than a base-plus-incentive management fee structure , as described below, which is more common throughout the industry. Under the variable fee structure, the management fee earned for each hotel is generally within a range of 2.5 % to 3.5 % of gross revenues. The performance measures are based on various financial and quality performance metrics. The Company’s remaining hotels operate under a management fee structure which generally includes the payment of base management fees and an opportunity for incentive management fees. Under this structure, base management fees are calculated as a percentage of gross revenues and the incentive management fees are calculated as a percentage of operating profit in excess of a priority return to the Company, as defined in the management agreements. In addition to the above, management fees for all of the Company’s hotels generally include accounting fees and other fees for centralized services, which are allocated among all of the hotels that receive the benefit of such services. For the years ended December 31, 2025, 2024 and 2023, the Company incurred approximately $ 47.1 million , $ 46.7 million and $ 44.3 million , respectively, in management fees.
Nine of the Company’s hotels are managed by affiliates of Marriott as of December 31, 2025; however, all of these hotels subsequently transitioned, in January 2026, to management companies not affiliated with Marriott, Hilton or Hyatt. The remainder of the Company’s hotels are also managed by companies that are not affiliated with Marriott, Hilton or Hyatt, and as a result, the branded hotels are required to obtain and maintain separate franchise agreements with each respective franchisor. The franchise agreements generally provide for initial terms of approximately 10 to 30 years and the Company has historically been able to renew the franchise agreements upon the expiration of the terms. The Company pays various fees under these agreements, including the payment of royalty fees, marketing fees, reservation fees, a communications support fee, brand loyalty program fees and other similar fees based on room revenues. For the years ended December 31, 2025, 2024 and 2023, the Company incurred approximately $ 62.6 million , $ 64.0 million and $ 59.3 million , respectively, in franchise royalty fees.
Note 10
Lease Commitments
The Company is the lessee on certain ground leases, hotel equipment leases and office space leases. As of December 31, 2025 , the Company had 14 properties subject to ground leases and three parking lot ground leases with remaining terms ranging from approximately 13 to 93 years, excluding renewal options. Certain of its ground leases have options to extend beyond the initial lease term by periods ranging from five to 120 years .
Leases with durations greater than 12 months are recognized on the balance sheet as right-of-use (“ROU”) assets and lease liabilities. The Company’s leases are classified as operating or finance leases. For leases with terms greater than 12 months, at inception of the lease the Company recognizes an ROU asset and lease liability at the estimated present value of the minimum lease payments over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Many of the Company’s leases include rental escalation clauses (including fixed scheduled rent increases) and renewal options that are factored into the determination of lease payments, when appropriate, which adjusts the present value of the remaining lease payments. The Company determines the present value of the lease payments utilizing interest rates implicit in the lease if determinable or, if not, it estimates its incremental borrowing rate from information available at lease commencement, such as estimates of rates the Company would pay for senior collateralized loans with terms similar to each lease.
Operating Leases
Twelve of the Company’s hotel and parking lot ground leases as well as certain applicable hotel equipment leases and office space leases are classified as operating leases, for which the Company has recorded ROU assets and lease liabilities. The ROU assets are included in other assets, net and the lease liabilities are included in accounts payable and other liabilities in the Company’s consolidated balance sheet. In addition, the Company’s ROU asset balance includes intangible assets for below market ground leases and intangible liabilities for above market ground leases, as well as accrued straight-line lease liabilities related to these operating leases. Lease expense is recognized on a straight-line basis over the term of the respective lease and the value of each lease intangible is amortized over the term of the respective lease. Costs related to operating ground leases and hotel equipment leases are included in hotel operating expense and property taxes, insurance and other expense, and costs related to office space leases are included in general and administrative expense in the Company’s consolidated statements of operations.
Finance Leases
Five of the Company’s ground leases are classified as finance leases, for which the Company recorded ROU assets and lease liabilities. The ROU assets are recorded as finance ground lease assets within investment in real estate, net and the lease liabilities are recorded as finance lease liabilities in the Company’s consolidated balance sheet. In addition, the Company’s ROU asset balance includes intangible assets for below market ground leases and intangible liabilities for above market ground leases related to these finance leases. The ROU asset and value of each lease intangible are amortized over the term of the respective lease. Costs related to finance ground leases are included in depreciation and amortization expense and interest and other expense, net in the Company’s consolidated statement of operations.
Under the terms of the Company’s ground leases, certain minimum lease payments are subject to change based on criteria specified in the lease. Changes in minimum lease payments that are not fixed scheduled increases are reflected in the ROU asset and lease liability when the payments become fixed and determinable based on the actual criteria defined in the lease. Minimum lease payments may be estimated if the change date occurs and the new minimum lease payments are not yet determinable.
Lease Position as of December 31, 2025 and 2024
The following table sets forth the lease-related assets and liabilities included in the Company’s consolidated balance sheet as of December 31, 2025 and 2024. All dollar amounts are in thousands.
December 31,
Consolidated Balance Sheet
Classification
Assets
Operating lease assets, net
Other assets, net
Finance ground lease assets, net (1)
Investment in real estate, net
Total lease assets
Liabilities
Operating lease liabilities
Accounts payable and other liabilities
Finance lease liabilities
Finance lease liabilities
Total lease liabilities
Weighted-average remaining lease term
Operating leases
37 years
Finance leases
28 years
Weighted-average discount rate
Operating leases
Finance leases
Finance ground lease assets are net of accumulated amortization of approximately $ 21.2 million and $ 18.1 million as of December 31, 2025 and 2024, respectively.
Lease Costs for the Years Ended December 31, 2025, 2024 and 2023
The following table sets forth the lease costs related to the Company’s operating and finance ground leases included in the Company’s consolidated statement of operations for the years ended December 31, 2025, 2024 and 2023 (in thousands):
Year Ended December 31,
Consolidated Statement of
Operations Classification
Operating lease costs (1)
Property taxes, insurance and other
expense
Finance lease costs:
Amortization of lease assets
Depreciation and amortization expense
Interest on lease liabilities
Interest and other expense, net
Total lease costs
Represents costs related to ground leases, including variable lease costs. Excludes costs related to hotel equipment leases, which are included in hotel operating expense and property taxes, insurance and other expense, and costs related to office space leases, which are included in general and administrative expense in the Company’s consolidated statement of operations. These costs are not significant for disclosure.
Undiscounted Cash Flows
The following table reconciles the undiscounted cash flows for each of the next five years and total of the remaining years to the operating lease liabilities and finance lease liabilities included in the Company’s consolidated balance sheet as of December 31, 2025 (in thousands):
Operating Leases
Finance Leases
Thereafter
Total minimum lease payments
Less: amount of lease payments representing
interest
Present value of lease liabilities
Supplemental Cash Flow Information
The following table sets forth supplemental cash flow information related to the Company’s operating and finance leases for the years ended December 31, 2025, 2024 and 2023 (in thousands):
Year Ended December 31,
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows for operating leases
Operating cash flows for finance leases
Financing cash flows for finance leases
Note 11
Income Taxes
The Company is operated as, and has elected to be taxed as, a REIT under Sections 856 to 860 of the Code. As a REIT, the Company is generally not subject to corporate level income taxes on REIT taxable income that is distributed to its shareholders. Income related to the Lessee, as a taxable REIT subsidiary (“TRS”) of the Company, is subject to federal and state income taxes.
The components of income tax expense (benefit) are as follows (in thousands):
Year Ended December 31,
Current:
Federal
State
Deferred:
Federal
State
Income tax expense
Income tax expense for the years ended December 31, 2025, 2024 and 2023 was $ 1.0 million, $ 0.9 million and $ 1.1 million, respectively. Texas franchise tax comprises more than 50 % of the Company’s total state income tax expense. No other state or jurisdiction represented more than 20 % of the Company’s total income tax expense.
Below is a reconciliation between the provision for income taxes and the amounts computed by applying the federal statutory income tax rate to the income or loss before taxes (in thousands):
Year Ended December 31,
Percent of income before income taxes
Percent of income before income taxes
Percent of income before income taxes
Statutory federal tax expense
Federal tax impact of REIT election
Statutory federal tax expense
(benefit) at TRS
State income tax expense (benefit), net
of federal tax benefit
Change in valuation allowance
Income tax expense
Income taxes paid are as follows (in thousands):
Year Ended December 31,
Cash paid for income taxes:
Federal
Texas
Oregon
Ohio
Illinois
Other state and local jurisdictions
Total income taxes paid, net
* Indicates the amount of income taxes paid for this jurisdiction does not meet the 5 % disaggregation threshold for the period.
As of December 31, 2025 , the Company had deferred tax assets of approximately $ 43 million consisting primarily of net operating loss carryforwards. A portion of the federal loss carryforwards expire beginning in 2029; however, a portion of the federal loss carryforwards do not expire. The state loss carryforwards have various expiration dates; however, for certain states some loss carryforwards do not expire. The TRS had a net operating loss carryforward for U.S. federal income tax purposes of approximately $ 155 million as of December 31, 2025 , and $ 110 million as of December 31, 2024. The TRS has historical cumulative operating losses and is expected to be in a cumulative loss for the foreseeable future. As a result, the realizability of the Company’s deferred tax assets as of December 31, 2025 and 2024 is not reasonably assured. Therefore, the Company has recorded a valuation allowance equal to the full 100 % of the net deferred tax assets as of December 31, 2025 and 2024.
Characterization of Distributions
For income tax purposes, distributions paid consist of ordinary income, capital gains, return of capital or a combination thereof. For the years ended December 31, 2025, 2024 and 2023, distributions per share were characterized as follows (unaudited):
Year Ended December 31,
Amount of distributions per share
Characterized as:
Ordinary income
Capital gain distributions
Return of capital
Percentage is less than 1%.
Distributions of $ 0.13 per common share declared in December 2023 and paid in January 2024 were treated as 2023 distributions for tax purposes. Distributions of $ 0.13 per common share declared in December 2024 and paid in January 2025 were
treated as 2024 distributions for tax purposes. Distributions of $ 0.08 per common share declared in December 2025 and paid in January 2026 were treated as 2025 distributions for tax purposes.
No provision for U.S. federal income taxes has been included in the Company’s financial statements for the years ended December 31, 2025, 2024 and 2023 related to its REIT activities.
Note 12
Reportable Segments
The Company owns hotel properties throughout the U.S. that generate guest room rental, food and beverage, and other property-related income. There are no foreign operations from which the Company derives revenues and no assets are held in a foreign country. There are no material concentrations of 10% or more of total revenues allocated to a single customer for the reporting periods presented. The Chief Operating Decision Maker (“CODM”) separately evaluates the performance, allocates capital resources and manages the overall operating and investing strategy of each of its hotel properties individually; therefore, the Company considers each hotel to be an operating segment. However, because each hotel is not individually significant, serves a similar class and mix of business and leisure customers, has similar economic characteristics and risks, facilities, and services, utilizes similar methods to distribute their products and services through third-party management companies, and is subject to similar regulatory environments, the properties have been combined into a single operating segment for reporting purposes. The CODM, who is the Chief Executive Officer of the Company, assesses the performance of each operating segment on a monthly basis using adjusted hotel earnings (loss) before interest expense, income taxes and depreciation and amortization (“Adjusted Hotel EBITDA”), the measure by which the CODM makes day-to-day operating decisions, compares actual results with budgeted and prior year results, invests in capital improvements, and performs competitive analysis over the Company’s operating performance against industry peers.
Adjusted Hotel EBITDA, presented herein, is calculated as EBITDA from hotel operations with further exclusions as noted below. EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes, depreciation and amortization. The Company believes EBITDA is useful to investors because it helps the Company and its investors evaluate the ongoing operating performance of the Company by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). In addition, certain covenants included in the agreements governing the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance. The Company further excludes the following items that are not reflective of its ongoing operating performance or incurred in the normal course of business, and thus not utilized in the CODM’s analysis to allocate resources and assess operating performance of the Company’s business:
gains and losses from the sale of certain real estate assets (including gains and losses from change in control);
real estate related impairments;
non-cash straight-line operating ground lease expense;
actual corporate-level general and administrative expense for the Company; and
operating results from the non-hotel property.
The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and it is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels.
The following table reconciles the Company’s single reportable segment Adjusted Hotel EBITDA to GAAP net income for the years ended December 31, 2025, 2024 and 2023 (in thousands):
Year Ended December 31,
Total revenue
Less:
Significant hotel operating expenses
Operating
Hotel administrative
Sales and marketing
Utilities
Repair and maintenance
Franchise fees
Management fees
Total significant hotel operating expenses
Other expenses
Property taxes, insurance & other
Other (1)
Adjusted Hotel EBITDA
General and administrative
Impairment of depreciable real estate
Depreciation and amortization
Gain on sale of real estate
Other (1)
Interest expense, net
Income tax expense
Net income
Includes operating results of the New York Property when classified as a non-hotel property from May 2023 through March 2025. On April 4, 2025, the Company recovered possession of the New York Property and reinstated operations of the hotel’s 209 guest rooms through a third-party manager engaged by the Company. Additionally, for the twelve months ended December 31, 2025, 2024 and 2023, expenses relating to amortization of favorable and unfavorable operating leases and non-cash straight-line operating ground lease expense are included. These items have been included for the purpose of ensuring their exclusion from Adjusted Hotel EBITDA, as they do not reflect the underlying operating performance of the Company’s hotels .
Disclosure of the reportable segment’s revenue and profit or loss is included in the Company’s consolidated statements of operations and comprehensive income, disclosure of the reportable segment’s assets is presented in the Company’s consolidated balance sheets, and disclosure of the reportable segment’s significant noncash items is provided in the Company’s consolidated statements of cash flows, all within this Annual Report on Form 10-K. F or the years ended December 31, 2025, 2024 and 2023, the Company invested approximately $ 88.2 million, $ 78.3 million and $ 76.8 million in capital expenditures, respectively.
Note 13
Contract Commitments
Purchase Contract Commitments
As of December 31, 2025, the Company had one outstanding contract, which was entered into during the third quarter of 2025, for the potential purchase of a hotel in Anchorage, Alaska for an expected purchase price of approximately $ 65.5 million. The hotel is under development as a 160 -guest-room AC Hotel and is currently planned to be completed and opened for business in the fourth
quarter of 2027. As of December 31, 2025, a $ 2.0 million contract deposit (refundable if the seller does not meet its obligations under the contract) had been paid. If the closing occurs, the Company plans to utilize its available cash or borrowings, including borrowings under its unsecured credit facilities available at closing, to purchase the hotel under contract. Although the Company is working towards acquiring this hotel, there are a number of conditions to closing that have not yet been satisfied, and there can be no assurance that closing on this hotel will occur under the outstanding purchase contract. If the seller meets all of the conditions to closing, the Company is obligated to specifically perform under the purchase contract and acquire this hotel. As this hotel is under development, at this time, the seller has not met all of the conditions to closing.
Development Project
During the third quarter of 2025, the Company entered into a contract with a third party to develop a dual-branded property, consisting of an AC Hotel and a Residence Inn, on Company-owned land in Las Vegas, Nevada, adjacent to its existing SpringHill Suites. The Company expects to spend a total of approximately $ 143.7 million to develop the hotels, which are currently planned to be completed and opened for business in the second quarter of 2028. Upon completion, the AC Hotel and Residence Inn are expected to contain approximately 237 and 160 guest rooms, respectively. As of December 31, 2025 , the Company has paid $ 1.6 million in refundable (if contracted developer does not meet its obligation under the contract) deposits .
Note 14
Subsequent Events
On January 15, 2026, the Company paid approximately $ 18.9 million, or $ 0.08 per common share, in distributions to shareholders of record as of December 31, 2025 .
On January 20, 2026 , the Company declared a monthly cash distribution of $ 0.08 per common share. The distribution was paid on February 17, 2026 , to shareholders of record as of January 30, 2026 .
On February 17, 2026 , the Company declared a monthly cash distribution of $ 0.08 per common share. The distribution is payable on March 16, 2026 , to shareholders of record as of February 27, 2026 .
