Real Estate Select Sector

Russell 2000

The Balanced Allocator

Comparable Companies - APLE

The report includes 13 discretionary insider purchases and no sales, with a total purchase value of $539,191.57. The latest short interest is 7.8% of float with 7.7 days to cover. BlackRock, Inc. is a significant institutional holder with a 15.8% stake.

EXECUTIVE CHAIRMAN

DIRECTOR

SVP & CHIEF FINANCIAL OFFICER

SVP & CHIEF ACCOUNTING OFFICER

The securities were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer.

Chief Executive Officer and Director

President of Real Estate & Investments

Senior VP & CFO

Senior VP & COO

Senior VP & Chief Accounting Officer

Executive Chairman

Director

Lead Independent Director

Senior Vice President and Chief Capital Investments Officer

Senior Vice President, Chief Legal Officer and Secretary

Vice President of Investor Relations

Justin G. Knight

Nelson G. Knight

Elizabeth S. Perkins

Karen C. Gallagher

Rachel S. Labrecque

Glade M. Knight

Jon A. Fosheim

Glenn W. Bunting

Carolyn B. Handlon

L. Hugh Redd

Justin G. Knight has been instrumental in the growth and strategic direction of Apple Hospitality REIT, Inc., serving as CEO since May 2014. His extensive experience in REITs and the hospitality sector, coupled with his MBA in Corporate Strategy and Finance, positions him to navigate complex market dynamics. His active involvement in industry associations and advisory boards suggests a commitment to industry best practices and a strong professional network.

Nelson G. Knight's role as President of Real Estate & Investments is critical to the company's strategic growth and asset management. His MBA from a top-tier business school and his active participation in industry-specific advisory councils demonstrate a strong foundation in real estate finance and a deep understanding of the hospitality market. His tenure and progression within the company suggest a consistent contribution to its investment strategies.

Elizabeth S. Perkins, as Senior VP & CFO, plays a pivotal role in managing Apple Hospitality REIT, Inc.'s financial health and reporting. Her CPA designation and extensive experience in accounting and financial reporting, including her previous roles at prominent organizations, underscore her capability in financial stewardship. Her leadership in accounting and financial reporting for the company since 2015 highlights her consistent contribution to financial integrity and strategic financial planning.

Karen C. Gallagher's role as Senior VP & COO is central to the operational success of Apple Hospitality REIT, Inc.'s portfolio. Her long-standing involvement in asset management and operations within the company, combined with her active participation in key industry brand advisory councils, signifies a comprehensive grasp of operational excellence and strategic asset oversight. Her leadership in asset management since 2012 has likely been crucial in optimizing property performance and maintaining strong relationships with hotel brands.

Rachel S. Labrecque's position as Senior VP & Chief Accounting Officer is vital for maintaining the financial integrity and compliance of Apple Hospitality REIT, Inc. Her extensive experience in accounting, financial reporting, and treasury operations, gained from diverse roles at public companies and a major accounting firm, provides a strong foundation for her responsibilities. Her oversight of accounting, financial reporting, treasury, and taxation since joining the company in 2015 highlights her consistent and critical role in financial governance.

Glade M. Knight, as Executive Chairman and founder, provides foundational leadership and strategic oversight for Apple Hospitality REIT, Inc. His extensive experience in establishing and guiding real estate investment trusts, particularly within the hospitality sector, is invaluable. His continued involvement, even after stepping down as CEO, underscores his commitment to the company's long-term success and strategic vision.

Jon A. Fosheim's role as Lead Independent Director is crucial for ensuring robust corporate governance and independent oversight at Apple Hospitality REIT, Inc. His extensive experience in real estate analytics and investment management, particularly his co-founding of Green Street, provides him with a unique perspective on market trends and company valuations. His prior board service, including on the Audit and Compensation committees of DigitalBridge Group, Inc., further equips him to provide valuable guidance on financial and strategic matters.

Glenn W. Bunting's extensive experience in real estate investment and management, gained from his leadership at Bunting & Company, Inc., provides valuable insight to the board of Apple Hospitality REIT, Inc. His long tenure on the board and his service on various committees demonstrate his active engagement in corporate governance. His background in real estate investment and management is a key asset in overseeing the company's portfolio.

Carolyn B. Handlon brings a wealth of financial and treasury expertise to the board of Apple Hospitality REIT, Inc., derived from her significant leadership role at Marriott International. Her understanding of global financial operations and capital markets is particularly relevant to a REIT with a substantial property portfolio. Her financial acumen and board experience are critical assets for guiding the company's financial strategy and risk management.

L. Hugh Redd's extensive financial and accounting experience, honed during his tenure as CFO of General Dynamics Corporation, provides critical oversight for Apple Hospitality REIT, Inc. His expertise in financial reporting, risk management, and public company operations is invaluable to the board. As Chair of the Audit Committee, he plays a key role in ensuring the integrity of the company's financial statements and internal controls.

Kristian M. Gathright

Blythe J. McGarvie

Howard E. Woolley

Host Hotels & Resorts is a self-managed and self-administered REIT that owns a geographically diverse portfolio of luxury and upper upscale hotels in the U.S. and internationally, operated by leading brands like Marriott and Hyatt.

The company's only reportable segment, comprising owned hotels and unconsolidated hotels.

Park Hotels & Resorts is a lodging-focused REIT that owns a portfolio of premium-branded hotels and resorts, primarily in the U.S., with a focus on luxury and upper upscale segments.

The company's only reportable segment, comprising owned hotels.

DiamondRock Hospitality Company is a lodging-focused Maryland corporation operating as a REIT, owning a portfolio of premium hotels and resorts in the U.S., operated by third-party managers.

Xenia Hotels & Resorts is a self-advised and self-administered REIT that invests primarily in uniquely positioned luxury and upper upscale hotels and resorts in the top 25 lodging markets and key leisure destinations in the U.S.

The Company owns fee simple interest in 235 hotels with more than 30,000 guest rooms located in 87 markets throughout 34 states. The portfolio is concentrated with industry-leading brands: 104 Marriott-branded hotels, 126 Hilton-branded hotels, three Hyatt-branded hotels, and two independent hotels. As of December 31, 2024, the Company had two hotels classified as held for sale.

Apple Hospitality REIT's management team demonstrates strong industry experience and robust board governance, but these strengths are undermined by poor capital allocation discipline. The current leadership, led by CEO Justin G. Knight, has navigated operational challenges effectively, maintaining margins in a decelerating growth environment. However, the reinvestment engine is broken: with an ROIC of 2.7% against a cost of capital of 9.5%, the company destroys value on its existing capital base. While the board is well-structured with deep financial and hospitality expertise, the compensation plan lacks the specificity required to drive asset efficiency, relying instead on discretionary goals. The team is experienced in the asset-heavy hotel sector, but their capital allocation decisions—specifically low-return acquisitions and insufficient share count reduction—have failed to generate per-share value creation.

The Company faces risks associated with the physical effects of climate change, including more frequent or severe storms, extreme temperatures, droughts, wildfires, hurricanes, flooding, and utility outages, which could have a material adverse effect on properties, operations, and business. The Company is subject to risks from increasing storm intensity and rising sea levels causing damage to properties. Climate change may increase the cost of property insurance, renovations, energy, and water. The Company is subject to various U.S. federal, state, and local environmental, health and safety laws and regulations, including those addressing storage tanks, air emissions, storm water and wastewater discharges, lead-based paint, mold and mildew, and waste management. The Company incurs costs to comply with these laws and could be subject to fines and penalties for non-compliance. Environmental contamination could result in liens, restrictions on property use, and substantial expenditures for cleanup. The Company anticipates incurring additional expenses to comply with disclosure mandates, including California's disclosure requirements and potential SEC ESG disclosure requirements.

The Company has 65 team members as of December 31, 2024. The Company offers competitive compensation and benefits, a flexible leave policy, fully paid parental leave for up to 12 weeks for primary caregivers and three weeks for secondary caregivers, financial assistance for adoption, a tuition reimbursement program, and two days paid leave each year for volunteer work.

The Company is subject to various claims and litigation from guests, tenants, occupants, visitors, contractors and other individuals as a result of the operation of the Company’s hotels. The Company is subject to various U.S. federal, state and local regulatory requirements, including state and local fire and life safety requirements, the Americans with Disabilities Act of 1990, and the Sarbanes-Oxley Act of 2002. The Company has incurred, and will continue to incur, expenses to comply with data protection standards and protocols imposed by law, regulation, industry standards and contractual obligations. Cybersecurity incidents could interrupt operations, damage reputations, and subject the Company to liability claims or regulatory penalties.

The Company is firmly committed to strengthening communities through charitable giving and by volunteering time and talents. In 2017, the Company formed Apple Gives, an employee-led charitable initiative, to expand its impact and further advance the achievement of its corporate philanthropic goals. Apple Gives collaborates with organizations that are important to the Company’s employees, its third-party management companies, its hotels and numerous industry organizations, including the American Hotel & Lodging Association (“AHLA”), and works to make a positive impact across the Company’s community and the communities its hotels serve. Apple Gives organizes company-wide community events with charitable organizations, deploys aid to markets and associates affected by natural disasters, and allocates funds and other resources to a variety of causes.

Revenue growth has decelerated to 6.5% in FY 2024, with comparable hotels RevPAR down 1.8% in Q3 2025, while fixed costs like real estate taxes and insurance remain elevated.

CapEx is strictly for maintenance, renovation, and brand compliance, not for new development. Management stated in the 10-K that the FY 2024 spend included comprehensive renovations for approximately 20 properties. The FY 2025 guidance of $80M-$90M continues this strategy of reinvesting in the existing asset base to maintain competitive advantage.

The 10-K explicitly states that the company recorded impairment losses on three properties in FY 2024 totaling approximately $3.1 million. The auditor identified 'Valuation of real estate properties, specifically the assessment of impairment indicators' as a Critical Audit Matter (CAM).

The company's reinvestment is focused on maintaining existing assets (CapEx) and selective acquisitions. The low ROIC of 2.7% reflects the capital-intensive nature of real estate ownership and the current earnings power relative to the invested capital base. The high Incremental ROIC suggests that recent marginal investments have been more efficient, but the base ROIC remains low.

P/Tangible Book Value

EV/EBITDA

Former President and CEO of Bunting & Company, Inc. Extensive experience in real estate investment, finance, and management. Served on various public and private company boards.

Co-founder of Green Street, a real estate analytics firm. Former CEO of Oak Hill REIT Management, LLC. Extensive investment management, finance, strategic planning, ESG, risk management, and REIT experience.

Former President of Derive Ventures. Extensive hotel industry and real estate experience with background in finance, investment, strategic planning, risk management, leadership, and management.

Former Executive Vice President, Finance and Global Treasurer of Marriott International, Inc. Extensive 40-year background in financial and global markets and real estate industries along with senior leadership, investment, strategic planning, risk management and hotel industry experience.

Founder of the Company and each of the Apple REIT Companies. Extensive executive experience in REIT industry, hotel industry, risk management, strategic planning, investment, finance, and management.

Chief Executive Officer of the Company. Extensive executive experience and REIT industry, hotel industry, risk management, strategic planning, investment, finance, and management experience.

Former CEO of Leadership for International Finance, LLC. Former faculty member of Harvard Business School. Extensive experience in financial reporting, controls, strategic reviews, and leadership seminars.

Former Senior Vice President and Chief Financial Officer of General Dynamics Corporation. Extensive financial and accounting experience, as well as strategic planning, risk management, and public company management experience.

Former Executive Vice President and General Counsel of BellSouth Corporation (now part of AT&T). Extensive experience in telecommunications, regulatory affairs, and corporate governance.

All directors and executive officers as a group (15 persons)

BlackRock, Inc.

The Vanguard Group, Inc.

State Street Corporation

Nelson G. Knight (via JAMN Limited Partnership, LLP)

Jon A. Fosheim (via Family Trust)

Blythe J. McGarvie (via Trust)

Directors are required to own securities of the Company with a value of at least 4 times their annual base cash retainer. The Chief Executive Officer is required to own securities with a value of at least 5 times his annual base salary. Other executive officers are required to own securities with a value of at least 3 times their annual base salary.

Jeanette A. Clarke

Matthew P. Rash

Kelly Campbell Clarke

Apple Hospitality REIT, Inc. is a self-advised real estate investment trust (REIT) formed in November 2007. The company invests in income-producing real estate, primarily in the lodging sector, within the United States. It has elected to be treated as a REIT for U.S. federal income tax purposes. The company's wholly-owned taxable REIT subsidiaries (TRSs) operate substantially all of its hotels pursuant to franchise or license agreements with nationally recognized hotel brands.

Held WACC constant at 9.5% and Terminal Multiple at 14.0x, solved for required FCF as % of Tangible Book Value.

Balance Sheet - Supplemental

Balance Sheet

Cash Flow Statement - Supplemental

Cash Flow Statement

Income Statement - Supplemental

Income Statement

Ratios

Valuation

Historical Ratios & Multiples - APLE

The industry is facing a 'Peak' capital cycle where CapEx growth (11.5%) is outpacing revenue growth (5.2%), pressuring future returns. While new supply remains muted in 55% of APLE's markets, the broader macroeconomic uncertainty and government travel pullbacks are significant headwinds.

APLE is relevant for analysis now due to the recent resolution of the government shutdown, which management expects to drive a recovery in its 5.5% government demand segment in 2026.

Asset Monetization and Portfolio Recycling.
Management is actively selling non-core assets (3 sold YTD for 37 million USD) to fund share repurchases. A significant sale-leaseback or a large-scale disposition at a premium to book value would validate the asset floor and unlock equity value.

Cyclical Demand Shock and Recession.
As an asset-heavy operator, APLE has high operating leverage. A moderate recession would lead to occupancy declines that quickly compress margins and impair the ability to service its 1.6 billion USD debt load.

The current asset base for Apple Hospitality REIT, Inc. (APLE) consists of 221 upscale, rooms-focused hotels with an aggregate of 29,764 guest rooms, as reported in the company's 10-K Annual Report as of December 31, 2024. This count includes two hotels classified as held for sale as of that date. While the company has forward commitments for new developments and acquisitions, these assets are not yet part of the owned and operational portfolio for the purpose of this current liquidation valuation.

Acquisition of Homewood Suites Tampa Brandon (126 rooms) by APLE for $18.8 million.

Acquisition of AC Hotel Washington DC Convention Center by APLE for $116.8 million (note: this asset includes rooftop and retail space, making it a less direct per-room comparable for the typical 'rooms-focused' portfolio).

APLE's disposition of six hotels for over $63 million, with an average implied value of over $10.5 million per hotel.

Cash & Equivalents

Accounts Receivable

Apple Hospitality REIT, Inc. (APLE) operates as a real estate investment trust primarily owning hotel properties. As such, its business model does not involve holding significant inventory on its balance sheet. Financial statements consistently report a zero balance for inventory, indicating that operational supplies, food and beverage, and other typical hotel inventory items are either managed and owned by the third-party hotel operators under franchise agreements or are considered immaterial to the REIT's asset base. [cite: 1.5 APLE - Balance Sheet - 2024-12-31.json] Therefore, in an orderly liquidation scenario, the recoverable value of inventory is assessed as zero across all cases (Base, High, and Low), reflecting the fundamental nature of APLE's operations and asset composition.

Inventory

Other Current Assets

**Primary Transaction Comps:**
- Acquisition of Homewood Suites Tampa Brandon (126 rooms) by APLE for $18.8 million. ($149,206/room)
- Acquisition of AC Hotel Washington DC Convention Center by APLE for $116.8 million (note: this asset includes rooftop and retail space, making it a less direct per-room comparable for the typical 'rooms-focused' portfolio). (N/A (not a direct per-room comparable due to mixed-use))
- APLE's disposition of six hotels for over $63 million, with an average implied value of over $10.5 million per hotel. (>$10.5M/hotel)

**Replacement/Scrap Data:**
Market data for upscale, select-service hotel transactions in the U.S. during late 2024 and early 2025 indicates a general price range of $135,000 to $200,000 per key for well-located, branded properties. Distressed sales for older or less desirable select-service hotels could fall to $90,000 - $110,000 per key. New construction costs for upscale hotels typically range from $100,000 to $500,000+ per room, but this is less relevant for liquidation of existing assets.

Net PP&E

Other Non-Current

Accounts Payable

Other Current Liabilities

Market/Sector Move -9.30%

Apple Hospitality REIT reported Q3 2023 results with Comparable Hotels RevPAR growth of 3% year-over-year.

Apple Hospitality REIT initiated with an Overweight at Barclays

Apple Hospitality REIT price target lowered to $13 from $14 at Baird

Apple Hospitality REIT initiated with an Overweight at Cantor Fitzgerald

Apple Hospitality is navigating a structural RevPAR deceleration phase, with comparable hotel RevPAR declining 1.8% in the most recent quarter, while facing 12% inflation in fixed costs like real estate taxes and insurance. The debate centers on whether the company's 13.53 USD tangible book value per share provides a reliable floor or if a 2.7% Return on Invested Capital (ROIC) indicates a broken reinvestment engine. We conclude that while insider alignment is high, the lack of a clear valuation gap and value-destructive reinvestment warrant a neutral posture.

Executive Summary

The primary value driver is the company's 235-hotel portfolio, which provides a tangible floor against cyclical volatility. We expect RevPAR to stabilize as government travel recovers, while the 15.5% insider ownership ensures management is incentivized to protect the asset base.<ul><li>Driver: Asset-based valuation floor supported by a high-quality, select-service hotel portfolio.</li><li>Catalyst: Stabilization of government and business transient demand leading to RevPAR normalization.</li><li>Protection: Net Liquidation Value (NLV) of 6.25 USD and significant insider ownership providing alignment.</li></ul>Our variant perception is that the market is obsessing over short-term rate volatility and the 1.8% RevPAR decline, missing the massive discount to Net Asset Value (NAV) inherent in the select-service model. We view this not as an earnings growth story, but as a capital return story where the liquidation value of the rooms-focused fleet provides a hard floor significantly above the current share price, provided management can pivot away from value-destructive acquisitions.This is an investment in a durable, cash-flowing asset portfolio, where the primary bet is on the stability of those cash flows and a potential re-rating to a more appropriate yield-based valuation as the lodging cycle normalizes.

Core Investment Rationale

Apple Hospitality REIT operates as a self-advised real estate investment trust focused on the upscale, rooms-focused segment of the U.S. lodging industry. The company generates revenue primarily through room rentals and ancillary services across 235 hotels. The strategy centers on owning a diversified portfolio of branded assets, primarily Marriott and Hilton, which benefit from national distribution systems and loyalty programs. Management utilizes Adjusted Hotel EBITDA as its primary operational metric, focusing on cost control to defend margins in a low-growth environment.Revenue quality is supported by a mix of business and leisure demand, though the company has recently seen increased price sensitivity in the leisure segment. The business model relies on third-party managers to operate the hotels, allowing the REIT to focus on capital allocation and portfolio optimization.The core asset base consists of 235 hotels with 29,764 guest rooms across 87 markets in 34 states. The portfolio is heavily concentrated in industry-leading brands, including 104 Marriott-branded hotels and 126 Hilton-branded hotels. Key assets include upscale select-service brands such as Courtyard by Marriott, Residence Inn, Hampton by Hilton, and Homewood Suites. These assets are characterized by high margins and lower labor intensity compared to full-service hotels, with PP&E representing 95.6% of total assets.The lodging REIT industry is fragmented at the ownership level but concentrated at the brand level. Apple Hospitality competes directly with other upscale lodging REITs such as Host Hotels & Resorts (HST), which is 4.36x larger by revenue, and Park Hotels & Resorts (PK). Competition is based on location, brand affiliation, and property condition. The industry is currently characterized by rational pricing but faces headwinds from alternative lodging options and a loosening supply discipline among peers.Apple Hospitality has evolved from an acquisition-heavy growth phase to a defensive, capital-return posture. Between 2023 and 2024, the company transitioned from issuing 213.7 million USD in stock via its ATM program to fund acquisitions to selling non-core assets to fund share repurchases. This shift was necessitated by a deceleration in RevPAR growth from 8.5% in 2023 to 6.5% in 2024, and a further decline to negative 1.8% in Q3 2025.The current situation is defined by a management team defending margins (35.2% in Q3 2025) through strict expense control, including reducing contract labor to 7% of total wages. However, the asset base has faced recurring impairments, with 3.1 million USD in losses recorded on three properties in 2024, questioning the reliability of historical cost accounting. Financing remains a key focus, with 1.62 billion USD in total debt and a Net Debt/EBITDA ratio of 3.4x, as the company manages a staggered maturity profile with 295 million USD maturing in 2025.

Business & Situation

<ul><li>Bull Case: Strong insider alignment with 15.5% ownership and consistent discretionary buying; resilient select-service model with lower labor costs than full-service peers; high-quality brand affiliations with Marriott and Hilton providing distribution advantages.</li><li>Bear Case: Value-destructive reinvestment with ROIC of 2.7% well below the 9.5% cost of capital; structural RevPAR deceleration and high fixed cost inflation (12% in taxes/insurance); high leverage of 3.4x Net Debt/EBITDA in a cyclical downturn.</li></ul>The consensus view is that lodging REITs are entering a period of sustained weakness as leisure demand normalizes and business travel remains below pre-pandemic levels. Investors are concerned that rising operating costs, particularly labor and insurance, will permanently compress margins, leading to a de-rating of the sector.This narrative is reflected in APLE's 36.3% underperformance relative to the market over the last year, as the market prices in a 'value trap' scenario where cash flows are consumed by maintenance CapEx and debt service.The industry is facing a 'Peak' capital cycle where CapEx growth (11.5%) is outpacing revenue growth (5.2%), pressuring future returns. While new supply remains muted in 55% of APLE's markets, the broader macroeconomic uncertainty and government travel pullbacks are significant headwinds.Our differentiated view is that the market is mispricing the quality and stability of the asset's cash flows due to an overblown concern regarding the government shutdown and temporary leisure price sensitivity. While the 2.7% ROIC is a valid concern, the company's ability to maintain 35%+ EBITDA margins through the trough of the cycle demonstrates superior operational efficiency. Furthermore, the 15.5% insider ownership and recent purchases by the Executive Chairman at 11.91 USD suggest a valuation floor that the market is currently ignoring. The governance friction of a separate Chair/CEO and high insider stakes prevents 'value drift' by ensuring that capital is eventually returned to shareholders if internal returns do not improve.The debate hinges on whether operational cost control can offset top-line deceleration. While management has proven adept at managing the P&L, the structural destruction of value (ROIC < WACC) makes the stock unattractive for new capital at current levels. We require a deeper discount to tangible asset value to justify a bullish stance.Our analytical edge is a more detailed understanding of the regulatory framework and the specific labor-efficiency advantages of the select-service model, which gives us higher confidence in the stability of the floor than the market's focus on short-term RevPAR volatility suggests.

Core Thesis

CEO Justin Knight has a 25-year history with the company, overseeing its growth into one of the largest rooms-focused REITs. However, his capital allocation track record is mixed; while he has successfully optimized the portfolio, the 2.7% ROIC during his tenure indicates that acquisitions have not consistently cleared the cost of capital. There is currently no contested transition, and the leadership team remains stable.Capital allocation skill is rated as Weak. M&A effectiveness is only 0.4x, and the company has destroyed value on its existing capital base. While management has pivoted to buybacks, they have failed to reduce the net share count due to prior dilutive equity issuances.Management maintains moderate credibility, though they have a pattern of over-optimism, requiring RevPAR guidance downward revisions in 4 of the last 8 quarters.<ul><li>Board Independence: 77.8% (7 of 9 directors)</li><li>Chairman/CEO Roles: Separate</li><li>Chairman Tenure: 18 Years</li><li>Insider Ownership: 7.1% (Directors/Officers)</li><li>Shareholder Rights: Declassified Board, Majority Voting, No Poison Pill</li></ul>Stewardship is adequate but constrained by poor reinvestment returns. The governance structure is robust with a separate Chair and CEO and a high percentage of independent directors. However, the lack of asset-efficiency metrics in the incentive plan (which relies on discretionary goals) limits the alignment with the Asset-Based Operator archetype.

Leadership & Governance

The valuation floor is anchored to the Low Case Net Liquidation Value (NLV) of 6.25 USD. This represents the most conservative estimate of the hotel portfolio's value in an orderly liquidation scenario, assuming a 110,000 USD per room valuation.The base case assumes 2.5% revenue growth and 19.1% operating margins, reflecting a slow recovery in business transient demand and successful cost control initiatives offsetting fixed cost inflation.The bull case assumes 5.0% revenue growth and 21.0% margins, driven by a rapid recovery in government travel and RevPAR acceleration. Blue-Sky Potential: 24.78 USD.The bear case is anchored to the Net Liquidation Value (NLV) of 6.25 USD. In a recessionary environment with sustained occupancy declines, the market will price the stock on its tangible asset value rather than earnings multiples.

Valuation Context

<ul><li>Asset Monetization and Portfolio Recycling.
Management is actively selling non-core assets (3 sold YTD for 37 million USD) to fund share repurchases. A significant sale-leaseback or a large-scale disposition at a premium to book value would validate the asset floor and unlock equity value.</li></ul>APLE is relevant for analysis now due to the recent resolution of the government shutdown, which management expects to drive a recovery in its 5.5% government demand segment in 2026.

Catalyst Path & Context

<ul><li>Cyclical Demand Shock and Recession.
As an asset-heavy operator, APLE has high operating leverage. A moderate recession would lead to occupancy declines that quickly compress margins and impair the ability to service its 1.6 billion USD debt load. RevPAR has already decelerated to negative 1.8% in Q3 2025, indicating limited pricing power.</li></ul>

Primary Risks

<ul><li>Entry Target: Calculated threshold price required to restore a 30% expected return based on internal valuation of 12.26 USD.</li><li>Stop Loss: Set the stop-loss at 9.47 USD, which implies a Price-to-Tangible-Book multiple of 0.7x. A break below this level suggests a permanent impairment of the asset base.</li><li>Position Size: Sizing reflects a 'Maintenance' or 'Starter' posture while awaiting a more attractive valuation-based entry point. The final size is constrained by the structural risks inherent to the Asset-Based Operator model, specifically the 2.7% ROIC which is below the cost of capital.</li><li>Time Horizon: A strategic horizon is required to allow for asset monetization and the normalization of the lodging cycle.</li></ul><ul><li>Comparable hotels RevPAR growth (Target: >2%)</li><li>Fixed cost inflation (Target: <5%)</li><li>Net share count reduction</li></ul>A permanent, negative change to the value of the core assets, such as a structural decline in business travel demand or an irreversible regulatory change affecting REIT status.

Actionable Parameters & Monitoring

Apple Hospitality REIT offers a high-quality portfolio of select-service assets with strong insider alignment, but the business is currently destroying value with an ROIC of 2.7% against a 9.5% cost of capital. While the 6.25 USD NLV provides a theoretical floor, the current market price offers no margin of safety relative to our fair value estimate. We recommend an Unclear rating with a Valuation Target of 12.26 USD.

Final Conclusion

Asset-based valuation floor supported by a high-quality, select-service hotel portfolio.

Driver

Stabilization of government and business transient demand leading to RevPAR normalization.

Catalyst

Net Liquidation Value (NLV) of 6.25 USD and significant insider ownership providing alignment.

Protection

Strong insider alignment with 15.5% ownership and consistent discretionary buying; resilient select-service model with lower labor costs than full-service peers; high-quality brand affiliations with Marriott and Hilton providing distribution advantages.

Bull Case

Value-destructive reinvestment with ROIC of 2.7% well below the 9.5% cost of capital; structural RevPAR deceleration and high fixed cost inflation (12% in taxes/insurance); high leverage of 3.4x Net Debt/EBITDA in a cyclical downturn.

Bear Case

Apple Hospitality is navigating a structural RevPAR deceleration phase, with comparable hotel RevPAR declining 1.8% in the most recent quarter, while facing 12% inflation in fixed costs like real estate taxes and insurance. The debate centers on whether the company's 13.53 USD tangible book value per share provides a reliable floor or if a 2.7% Return on Invested Capital (ROIC) indicates a broken reinvestment engine. We conclude that while insider alignment is high, the lack of a clear valuation gap and value-destructive reinvestment warrant a neutral posture.

The company has evolved from a growth-oriented strategy focused on aggressive acquisitions and equity issuance (FY2023-Q4 to FY2024-Q1) to a defensive, capital-return-focused strategy prioritizing share repurchases and asset dispositions (FY2024-Q2 to FY2025-Q3). The narrative shifted from capitalizing on market dislocation to navigating macroeconomic headwinds, expense inflation, and government shutdowns through strict cost control and portfolio optimization.

Method	Implied Value	Weight	Weighted Value
DCF	$20.35	35%	$7.12
Comps	$9.98	25%	$2.50
Historicals	$9.07	5%	$0.45
NLV	$6.25	35%	$2.19
Total Weighted			$12.26

APLE

Price History

Key Metrics

Recent Activity

Valuation Table