Greetings, and welcome to the Apple Hospitality REIT First Quarter 2016 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Kelly Clarke, Vice President, Investor Relations. Thank you. You may begin.

Thank you. Good morning, and welcome to Apple Hospitality REIT's first quarter 2016 earnings call on this, the 6th day of May 2016. Today's call will be based on the first quarter 2016 earnings release, which was distributed yesterday afternoon. I would like to remind everyone that today's call will contain forward-looking statements as defined by federal securities laws, including statements regarding future operating results. These statements involve known and unknown risks and other factors which may cause actual results, performance or achievements of Apple Hospitality to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Participants should carefully review our financial statements and the notes thereto, as well as the risk factors described in Apple Hospitality's 2015 Form 10-K, first quarter 2016 Form 10-Q and other filings with the SEC. Any forward-looking statement that Apple Hospitality makes speaks only as of today, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, certain non-GAAP measures of performance, such as EBITDA, adjusted EBITDA, FFO and modified FFO, will be discussed during this call. We encourage participants to review reconciliations of those measures to GAAP measures as included in yesterday's earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the Company, please visit AppleHospitallityREIT.com. This morning, Justin Knight, our President and Chief Executive Officer; Krissy Gathright, our Chief Operating Officer; and Bryan Peery, our Chief Financial Officer, will provide an overview of our results for the first quarter of 2016 and an outlook for the sector and for the Company. Following the overview, we will have a question-and-answer session. It is now my pleasure to turn the call over to Justin.

Thank you, Kelly. Good morning, and welcome to Apple Hospitality REIT's first quarter 2016 earnings call. We are pleased to report comparable hotels RevPAR for our portfolio grew 4%, despite a calendar shift and weaker national economic growth in the first three months of the year. Comparable hotel’s adjusted hotel EBITDA margin increased 60 basis points, and adjusted EBITDA and modified FFO per share grew 11% and 18% respectively. Based on preliminary results, US GDP growth although positive slowed during the first quarter of this year. Unemployment remained fairly stable at approximately 5%, and while opinions vary, analysts generally estimate that the economy will gain momentum as we move into the second quarter producing moderate macroeconomic growth for the balance of the year. Looking at the performance of the hotel industry specifically, national averages obscure the fact the dynamics vary widely from market to market. As we progress through this real estate cycle, we continue to anticipate that individual portfolios of hotels will perform differently based on the unique geographic makeup and concentration. With 179 hotels located in more than 80 MSAs across 32 states, our portfolio of primarily upscale select service and extended stay hotels is one of the largest most geographically diverse hospitality portfolios in the United States. Our geographic footprint provides exposure to a myriad of businesses, geographic regions, events and attractions, minimizing the overall impact of volatility within a single market or industry. We intentionally assembled and continue to monitor and adjust the makeup of our portfolio to drive operating results for our shareholders, while mitigating risk and volatility associated with heavy concentration in individual metropolitan areas or unbalanced reliance on particular industries or demand generators. The geographic makeup of our portfolio has also mitigated to a large extent the impact of new supply, which has…

Thank you, Justin. We are pleased with the first quarter performance of our geographically diversified portfolio, achieving comparable RevPAR growth of 4% with only a slight decline in occupancy of 0.3% and average rate growth of 4.3%. As has been the trend in recent months, the West Coast hotels lead the way with strong growth in Los Angeles, [Indiscernible] and San Jose, offset by some supply and renovation driven underperformance in Seattle. An already strong Los Angeles market received an additional boost from the unfortunate displacement of families associated with the Florida ranch gas leak. Outside of the Pacific region, our Texas hotels have a slight decrease in RevPAR due to continued energy softness in Houston and some supply and weather driven weakness in Austin. We anticipate second-quarter improvement in Austin, but continued weakness in Houston. In Florida, our Orlando and Tampa hotels outperformed industry averages, while Miami underperformed due to multiple factors, including the stronger dollar and new supply. In segmentation trends, we continue to see increases in our highest rated retail segment, which represented about one third of our total mix [Indiscernible] as 14% of our mix remained stable. With slower GDP growth beginning in the fourth quarter of 2015 and continuing into the first quarter of 2016, overall business transient demand remained muted but stable. Outside of some energy markets we are not hearing feedback from our corporate accounts that would suggest further deceleration. Corporate negotiated business accounted for around 24% of our room nights on target with our expectation. During corporate pricing season in late 2015 our strategy was to reduce lower value corporate accounts in favor of higher rated retail business. We constantly monitor market trends, which vary widely depending on the different demand generators in the market. In a few markets, where the demand…

Thanks, Krissy, and good morning. To recap a couple of numbers Justin and Krissy touched on, our comparable hotels RevPAR grew to almost $99 for the quarter, an increase of 4% from 2015. The growth led to an increase of 11% in adjusted EBITDA to $79 million and an increase of 18% in modified FFO per share to $0.40 per share. General and administrative expense for the three months ended March 31, 2016 was 4.8 million compared to 5.5 million in the same period of 2015. The improvement from 2015 was primarily a result increased fees from the Apple Ten advisory agreement we have and reduced legal costs associated with previously completed litigation. The fees from Apple Ten are based on three tiers of performance and Apple Ten has consistently achieved the top tier level of performance since the second quarter of 2015. At the end of March, the company had approximately 1 billion of outstanding debt with a current combined weighted average interest rate of 3.5% for the remainder of 2016. Excluding debt issuance cost and fair value adjustments on acquired debt, our debt is comprised of 429 million in property level debt, and 597 million outstanding on our 965 million unsecured credit facility. Our outstanding debt is approximately 3.1x trailing 12 month adjusted EBITDA and 23% of our enterprise value at the end of the quarter. We have continued to work towards shifting our debt profile by reducing secured mortgage debt, which in general was assumed with the acquisition of hotels as we built the portfolio, and increasing unsecured debt. Since the beginning of 2015, we have extinguished 19 mortgage loans with an average rate of 5.9%. Over the next 12 months, we anticipate extinguishing another 12 secured loans with an average rate of approximately 5.7%. Mindful of…

Thank you. [Operator Instructions] Our first question comes from the line of Ryan Meliker with Canaccord Genuity, please proceed with your question.

Hey good morning guys. I just had a couple of things first of all, the four assets that you are acquiring looked to be underdevelopment over the course of 2016 and 2017 for $81 million, can you give us an idea of when we should expect those to close? It's going to be weighted towards 3Q, 4Q late 2017 etcetera that obviously would be helpful?

Sure. Good morning, Ryan. It’s the asset we anticipate to close mid to late summer of this year, the asset in Fort Worth should close fourth quarter and then the other two assets in Birmingham will close next year.

We are talking like early next year, mid, late any idea any idea?

Mid late, mid next year. There are early in development right now.

Okay that's helpful. And then the second question I had was you guys, I am curious you guys beat the expectations and I think most of the consensus on the quarter you didn't raise guidance for the full year I am wondering if you beat your internal expectations for the quarter or this was in line or if you just if you are seeing anything that leads you to be a little more conservative throughout the rest of the year or if this is just conservative in terms of guidance standpoint?

It's a good question Ryan, we are extremely pleased with the performance portfolio in the first quarter. Given what a number of analysts were speaking about earlier we feel our portfolio performed as expected and very well. Krissy mentioned in her remarks we continue to see very positive performance portfolio through April. Given the nature of our assets and the short booking window we feel it's early in the year to be making revisions to our guidance but that should be interpreted as a lack of confidence in the future performance of our portfolio. And given performance to date and prospects in the near term we are far more focused on the high end of our guidance and the low end of our guidance at this point.

Great that's really helpful color. Thanks and one last thing and I know Krissy gave some good color regarding transient trends and how things looking heading into April and the lack of any concerns outside of some energy markets how are things looking in business versus leisure across your portfolio. I know it's always hard to gauge, but we have heard concerns that business has slowed and maybe that's going to start to pick back up but leisure has offset that to a large degree. Any color on what you guys are seeing in that regard?

Going back, again good morning Ryan. And going back to the earlier comments that I gave on my commentary we are still feeling at this point that our business trends is stable and the majority of our market the trends are as we would expect. In leisure we are not seeing a slowdown in leisure and in fact when we are looking at even though group is a smaller percentage of our business 14% - 15% when you look at, if we head into the higher occupancy market in summer months we are seeing some nice pick up in some of those smaller group type leisure oriented group bookings for example, Fords group, family, family groups and things like that. So we feel very good based on the commentary that we are getting back from our properties that on both business and leisure that trends are in the mid single digit range in terms of booking pace.

Alright. That's really helpful. I will jump back in queue if there is anything else. Thanks a lot.

Thank you Ryan

Thank you. Our next question is coming from the line of Jeff Donnelly with Wells Fargo. Please proceed with your question.

Good morning folks. Just not to sound like what you have done lately question but I am just curious how do you look at the landscape for further portfolio acquisitions beyond Apple Ten, do you think there is maybe not in the same scale but do you see clusters of assets out there that would be of interest to you if it comes to market or might be coming to market?

Good morning. Good question. We are continually exploring additional opportunity. Interestingly over the past decade or so there has been significant consolidation within the hospitality industry. Now I look that consolidation has happened in the public market and there are a number of smaller to mid size and even large portfolio that exist outside of the public market. What happens with those, I think has yet to be decided in many instances. We have been consistent I think since listing and messaging related to grow through acquisitions in that we are fortunate to have listed the portfolio of scale that sufficiently large to be meaningful and to be operated efficiently and as we explore additional opportunities that exploration is governed by really two principals one consistently with our existing strategy and portfolio which is a limited factors, we explore or look at some of the portfolios that exist. And then, two the opportunity needs to be accretive for our shareholders we found in Apple Ten, a very good fit that met both of those criteria as we explore other opportunities we will be looking to structure deals to the extent they’re available similar to the way that we structured the deal on Apple Ten.

Do you have a strong preference to the extent different opportunities come to light, do you have strong preference for select service versus maybe more of a full-service orientation are you agnostic there?

We are far from agnostic. So we have for some time been positioned as a strong player in the select service phase and really believe whole hardheartedly that that is the space that we want to continue to operate in earlier calls we mentioned that while full-service makes up a very small percentage of our existing portfolio overtime it's our intent to liquidate our positions in those assets through sale as opportunity present themselves and to further concentrate our efforts in the select-service phase. Really looking at our strategy which is to drive stable returns for our shareholders we feel that that's much easier to accomplish in the upscales like service on extended space where you have less volatility higher margins and really the ability to diversify the portfolio in a meaningful way to mitigate the individual risk.

And just one last question from your seat, because you get to work with a handful of different brands when we look across the select-service brands there seems to be at least my perception is, there seems to be increasing variation of their performance in terms of market share gain and losses. And I was wondering if there was something that's maybe that's not unique to this time period maybe in your view it I was just curious you thought that there might be little some trends going on and maybe what’s driving them as we look across everything whether it choice or looking to help and marry out families it just feels like performance is becoming a little more uneven among there select-service brands and I wanted your thoughts?

It’s interesting that is a very good question. We have had this conversation with a number of investors on the road. The difficulty with RevPAR yield numbers is that they are extremely valuable on an individual asset basis, but significantly less valuable when used to look at the performance of the total portfolio. And looking at the individual brand the makeup distribution of those brands has shifted fairly dramatically really across the entire landscape over the past several years and with each new asset added to the brand that asset come with a unique concept and really because that concept is much more depended on the individual region and the brands specifically, averages RevPAR yield have the potential to distort kind of or to lead individual looking at them to draw a conclusion that aren't necessarily fully valid.

And I can add to that Jeff, if you look at well both merry out of in what we reported the product that we are invested and their selectors sent same product really does have broad consumer appeal and both of them did report with their market share numbers that their select-service and same product did grow market share if you look at the first quarter that segment that upscale that upper mid scale segment really out performs the economy segment so we would expect with the product that we are invested in that performance to continue we focus about that.

Okay great. Thanks a lot.

Thank you.

Thank you. Our next question is coming from the line of Daniel Donlan with Ladenberg Thalman, please proceed with your question.

Thank you and good morning. I was just hoping you could comment on the other revenue line items it looks like it declined year-over-year and just kind of curious what was driving that was it swam particular hotel or maybe it related to New York asset just –

It is related to the New York asset, I think we mentioned on the last call that we had one time payout of $1.4 million, I believe it was the approximately related to the turnover of one of our large tenant, so that is I think piece of that. We did have some decline in the first quarter in F&B revenue as well that was primarily attributed to one large full-service assets Hilton and Marriott changeover, our business has large convention that was held in January this year that didn't recur so we had left F&B from that particular –

So, looking at the at some of your markets 8 of them had a RevPAR decline of 6% or more and we are just curious should we assume that those were the hotels that were probably the most impacted by renovation because it looks like your occupancy was down it was occupancy driven?

Yes, we did have quite few markets that were down related to renovation and it has to look at the specific markets to be able to let me go back and double check so you would have had in looking at the market, Alaska sort have been [indiscernible] hotel would have driven that you would have had we would have had multiple hotels. We had the Pittsburgh asset drove that in particular market down we didn't go – we don't give details on market so most of the double digit decline were related to renovation hotels.

Okay that's what I thought. And then, as far as directionally on Rev progress would you expect kind of the second and third quarters to be your strongest and in fourth quarter somewhere in line with the first quarter or how should we think about that directionally if you could give that?

We would say consistent with our previous history and we don't see any reason out in the trends that we are seeing to go away from that yet but the second and third quarter are traditionally the strongest quarters for us.

Okay and then as far as sub-urban and your airport hotels they have been consistently out performing your urban hotels and might be completely related to location but we are just kind of curious what you are seeing there and the question kind of relates to are you seeing folks book with more folks book in your sub-urban hotels and then traveling to the urban core because your hotels are so much, rates are so much cheaper there than maybe the urban core and are you seeing that trend at all or is there any way you can tell that trend actually happening?

I think the sub-urban hotel the reason that we are doing better and it's not just unique to us, it’s also you can see the industry numbers be at the – they originally came first to the urban location so we are seeing less impact from the supply standpoint in the sub-urban market so I think that’s the main reason. And then also there is less impact from AirBNB and the international exchange rates and things like that.

Okay and then just kind of curious you have mentioned flex flow and I think you explained this to me before when I met with you but could you maybe explain that one more time exactly what that metric is, not something –

Absolutely. In that and one of the reasons that in the management, the new management contract terms we assigned quite a bit of value to that particular metric. So if you exceed your budget revenue, flow is you how much of that you bring to the bottom line. So we are, your target for the majority of the hotels in our rates driven market is 70%, we like to see at least 70% of that revenue variance flow to the bottom line. On the other side if your market is not doing as well and you are running behind budget or trending behind budget, we would like to see at least 30% of those, say 30% of the deposit and bring that back so and then that vary full-service versus select-service side. Incentivize their managers even at the market is now performing well to really maximize and we are very pleased to see that our managers work very much on top of that and then ultimately that flows through to where we had, where I reported that we had 50% EBITDA flow for the quarter which was solid given 4% progress.

Okay. Appreciate that and just last question maybe for Bryan as we look out 3-4 years is it Apple's goal to become an investment graded, I think once you if you are able to close the Apple Ten deal you will be the second largest hotel [indiscernible] market cap so we are just kind of curious what your ambitions and maybe what your goals are there?

Definitely, on our list to consider I mean at this point pricing differential is not that great so we had high objectives, we think given the slow leverage we should be in good position to achieve that like you mentioned with Apple Ten if that goes through so it's on our list but it's not an eminent priority for us.

Okay thanks you, that's it from me.

Thank you. Our next question is coming from the line of Bryan Maher with FBR, please proceed with your question.

Yes, good morning. Most of my questions have already been asked. But as it relates to some of the newer brands that have been coming out to market whether it's true by Hilton or even if we look at some of the Starwood brands like Element and Loft with Starwood merging into Marriott how do you think about some of these new brands when it comes to growing Apple overtime?

That's a good question. So and I guess I can speak to those three specifically and then we can talk more generally. True, we think represents an exceptional opportunity for Hilton but it's currently positioned at a price point, below the price point we target as we add assets to our portfolio. So we don't have any immediate plans to add to our portfolio that we will watch the development of that brand and its performance once hotels are operational. And explore potentially at some point in the future as we have other Hilton and Marriott brands. looking at the Starwood brand specifically, we have not historically considered this brand actually because of distribution and in part because of the relative performance of those brands to the Marriott and Hilton brands that we already own. As part of the Marriott family, we would look at the performance post transaction and potentially at the changes that the Marriott might make with the brands and look to add them as they become comparable from profit standpoint of the assets that we currently own. Really as we look at adding new brands to our portfolio, we consider a number of things. First, we look for products that have broad consumer appeal and ability to drive rate and competitive market, but also an ability to play well in markets that are more difficult. And as we enter new brand we look to take sizeable positions that we can deploy our assets management team and other resources effectively against those asset. We highlighted in a number of our calls and leading the fact that we rely very heavily on data driven benchmarking to drive performance and our individual assets that benchmarking depends on scale ownership within individual brand. And so, we are very thoughtful about adding new brands on our portfolio and as we take positions in those brands we look to take position sizable enough and to enable us that to have the data necessary to really facilitate our operations in a way that’s been informed for those assets.

Thanks. That's helpful insight.

Thank you. [Operator Instructions] our next question is coming from the line of Blair Brantley with BB&T, please proceed with your question.

Good morning everyone.

Good morning.

Most of my questions have been asked I didn't have a question have you seen any impact yet from the brands trying to push booking through their website [indiscernible] have you seen any impact there with the discount pricing and stuff?

I will be happy to take that question. Actually we are 150% supportive of the brand initiative to basically slow the rapid growth of the LTA business we feel that it's strengthen to loyalty proposition of our gas and driving the increase bookings into the higher profit channel where we have the greatest control is what we want to do. So in the first quarter still little earlier because Hilton was the first one to really get big with the direct booking campaign and then introduce a member rate. But we did see in the first quarter actually what we would want to see, we saw increase in direct bookings going to the going to our retail rated channel and we also did see a moderation in our OTA business, as a result we saw a moderation in our travel agent commission in the first quarter. And so we are looking forward to now Marriott has also launched a member rate and we think that over time that's going to be a huge win for the industry.

Okay that's very helpful. And then, on the separate note can you maybe give us an update on what you are seeing in the New York pricing I know that you talked about the Renaissance hotel not really fitting in just kind of any kind of update would be helpful?

Hi to clarify, are you speaking about pricing power with consumers or pricing –

Just pricing with transaction and then what’s out there?

That's a good question. There are a large number of assets currently on the market for sale in New York and we think that has potential to impact pricing for those assets, to-date the assets that have transacted have transacted at very attractive pricing from the cap rate standpoint and there exist the possibility that they will continue to be sufficient demand for those assets despite the increase in supply meaning properties for sale in that market those values will be sustained. But it certainly is becoming more competitive for groups looking to sell assets in New York. We have been clear from the beginning as we look at potential disposition from poor our full service asset we will be opportunistic in pursuing those transactions and really only do so to the extent, a) we feel that the pricing on the transaction is attractive and b) that we have the ability to redeploy the capital in a meaningful way for our shareholders that applies both to that property specifically and to other full-service hotels and really to larger extent flex service hotels that we might consider selling in one point of the future.

Okay great. Thank you.

Thank you. thanks for joining us.

Thank you. Our next question is a follow up calling from the line of Ryan Meliker with Canaccord Genuity, please proceed with your question.

Hey hello again just wanted to talk a little bit about M&A in the space, I know you guys have obviously been pretty active with Apple Ten, and you just announced this for us portfolio that's under development today I am just wondering as you think about other public companies and not specific to anybody in particular but if you saw portfolio that was in the public realm that treated the material discount in net asset value is that something that you would try to pursue or engage in or would you wait for that portfolio to may become the market publicly?

I appreciate the question Ryan. We are in continued dialogue with anybody and everybody who owns assets in our particular space and we would look to pursue any opportunity that results either from those conversations or is brought to us through the ordinary course of business. Because you aren’t specific about an individual portfolio I probably don't need to be telling specifically in my response but we are continually looking for opportunities to enhance our shareholder value again being fortunate not to have a need to pursue those opportunities in order to drive success in our business.

I think that's really helpful, I guess just how do you think about those types of opportunities in terms of trying to drive pricing are you focused on kind of the G&A synergies maybe properties levels synergies as you are able to complex assets in given markets how much do you care about scale trying to get to an $8 billion or $10 billion market cap level from the liquidity standpoint or any of those driving factors that would help make a deal work for you or is it really just doing fine in asset at discount to what you think that has really worked?

That's a very fair question. Ultimately any transaction whether with the public companies or private group is at its root and asset transaction and we would deal that way. I mentioned before we do not feel we have a mandate nor a need to grow to our particular size, we operate extremely efficiently from a corporate G&A standpoint. And have a portfolio we feel that’s sized full enough to be very well and I think someone highlighted earlier on this call that we are already or will be post transaction the second or third largest hospitality in the space and so that's not a driver. The challenge from a G&A saving standpoint is that typically that savings would be offset at least in the short term by transaction related cost specifically our cost related to termination of existing or severance for existing, in place management and so ultimately as we value individual transaction where we look at the value and the value of the real estate and whether or not that real estate would be added to our existing portfolio.

That's really good color. Thanks Justin. I understand kind of that gives us good framework around surrounding the appetite for future growth what about capacity with Apple retain on horizon it seems like that's a pretty easy plug and play since you guys already externally advise Apple retain would that transaction inhibit you in any way from doing another large deal in the near term or no?

So, I highlighted our remarks that because we are currently managing the portfolio we anticipate that combination of the two companies would be seamless. We are organizing it in such a way that the assets fit very nicely in our current structure and in fact post transaction there would be some reduction in workload from accounting standpoint as we move from two companies to one company. The advantage is that that particular transaction are more -- but one of the primary advantage is that the transaction maintains and in fact strengthen our balance sheet as it increase the scale of that balance sheet really enabling us to continue to be flexible and then to have sufficient and significant capacity to pursue other transactions to the extent of those transactions are due to be beneficial for our existing shareholders. There are some limitations from a timing standpoint baked into the current contract that we have with Apple Ten, but assuming the transaction closed in the third quarter as it currently contemplated, we would be in a position fairly quickly to pursue other transaction should there be a transaction that materialize that we felt was potentially meaningful for our shareholders.

Alright. That's what I was looking for. Thanks Justin.

Hey thank you Ryan. Appreciate it.

Thank you. It appears we have no further questions at this time. So I would like to turn floor back to over to Mr. Knight for any additional concluding comments.

Thank you. I would like to thank everybody for joining us this morning. We are pleased with the way our portfolio has performed in the first quarter and we anticipate the strength and stability will continue for the remainder of the year. As we mentioned in our prepared remarks fundamentals remain generally variable and most of our markets and while we do not anticipate significant deteriorations in the economic indicators between now and our next call. We have intentionally structured our portfolio to produce strong results during periods of prosperity and to be resilient during periods of economic difficulty. Now we hope that as you travel you will take opportunity to stay with us in our hotels and hope you have a great day.

Thank you. Ladies and gentlemen, this does conclude today’s teleconference, again we thank you for your participation and you may disconnect your lines at this time.