Apple REIT Seven, Inc.

CIK:0001329011|SEC Filings

Discontinued Operations

9 Months Ended

Sep. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

8. Discontinued Operations

During December 2012, the Company identified three properties, the Fairfield Inn’s in Dothan, Alabama, Columbus, Georgia and Tallahassee, Florida, that it would consider selling in 2013 due to anticipated returns for needed capital investment being below returns for other investment opportunities. Due to the change in anticipated hold period of the assets, the estimated undiscounted cash flow for these properties was estimated to be less than their carrying value; therefore the Company recognized a loss of $6.6 million in the fourth quarter of 2012 to adjust the basis of the properties to their estimated fair market value. In January 2013, the Company committed to sell these properties and began the process of marketing efforts. These hotels have been classified on the consolidated balance sheets as “Hotels held for sale” as of September 30, 2013, and are recorded at the estimated sales proceeds less cost to sell. During the third quarter of 2013, the Company reduced its estimate of sale proceeds, less cost to sell by approximately $700,000 based on current market estimates. The results of operations for these properties for the three and nine months ended September 30, 2013 and 2012 are classified on the consolidated statements of operations in the line item “Income from discontinued operations”.

The following table sets forth the components of income from discontinued operations for the three and nine months ended September 30, 2013 and 2012 (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013		2012

Total revenue	$	950		$	923		$	3,223	$	3,047
Hotel operating expenses		690			689			2,150		2,082
Property taxes, insurance and other		2			56			211		139
Depreciation expense		0			159			0		474
Loss on hotels held for sale		700			0			700		0
Interest expense, net		0			46			0		140
Income from discontinued operations	$	(442	)	$	(27	)	$	162	$	212

Consolidated Statements of Cash Flows (USD $)	9 Months Ended
Consolidated Statements of Cash Flows (USD $)	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net income	$ 23,963,000	$ 20,968,000
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, including discontinued operations	25,689,000	25,848,000
Loss on hotels held for sale	700,000	0
Amortization of deferred financing costs, fair value adjustments and other non-cash expenses, net	107,000	297,000
Changes in operating assets and liabilities:
Increase in due from third party managers, net	(2,526,000)	(2,698,000)
Increase in other assets	(665,000)	(650,000)
Increase in accounts payable and accrued expenses	1,748,000	1,927,000
Net cash provided by operating activities	49,016,000	45,692,000
Cash flows from investing activities:
Capital improvements	(7,532,000)	(6,255,000)
Increase in capital improvement reserves	(262,000)	(3,270,000)
Net cash used in investing activities	(7,794,000)	(9,525,000)
Cash flows from financing activities:
Net proceeds related to issuance of Units	6,559,000	12,180,000
Redemptions of Units	(10,162,000)	(13,835,000)
Distributions paid to common shareholders	(47,382,000)	(52,484,000)
Payments on extinguished credit facility	0	(64,700,000)
Proceeds from (payments on) existing credit facility	(11,100,000)	22,600,000
Proceeds from mortgage debt	51,250,000	63,000,000
Payments on mortgage debt	(29,863,000)	(2,300,000)
Deferred financing costs	(524,000)	(628,000)
Net cash used in financing activities	(41,222,000)	(36,167,000)
Net change in cash and cash equivalents	0	0
Cash and cash equivalents, beginning of period	0	0
Cash and cash equivalents, end of period	$ 0	$ 0

Discontinued Operations (Details) - Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Abstract]
Total revenue	$ 950,000		$ 923,000	$ 3,223,000	$ 3,047,000
Hotel operating expenses	690,000		689,000	2,150,000	2,082,000
Property taxes, insurance and other	2,000		56,000	211,000	139,000
Depreciation expense	0		159,000	0	474,000
Loss on hotels held for sale	700,000	6,600,000	0	700,000	0
Interest expense, net	0		46,000	0	140,000
Income from discontinued operations	$ (442,000)		$ (27,000)	$ 162,000	$ 212,000