Apple Hospitality REIT, Inc. Fair Value Disclosure
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% 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.
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Fair Value Asset (Liability) |
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Notional Amount at December 31, 2025 |
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Origination |
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Effective |
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Maturity |
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Swap Fixed |
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December 31, |
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December 31, |
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Active interest rate swaps designated as cash flow hedges at December 31, 2025: |
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$ |
75,000 |
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8/21/2019 |
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5/18/2021 |
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5/18/2026 |
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1.29% |
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688 |
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2,924 |
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125,000 |
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11/3/2023 |
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11/3/2023 |
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11/18/2026 |
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4.51% |
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(1,061 |
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(860 |
) |
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50,000 |
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8/2/2024 |
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8/2/2024 |
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8/18/2027 |
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3.63% |
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(196 |
) |
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590 |
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50,000 |
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8/1/2024 |
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8/5/2024 |
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8/31/2027 |
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3.84% |
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(373 |
) |
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344 |
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50,000 |
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3/17/2023 |
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3/20/2023 |
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3/18/2028 |
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3.50% |
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(133 |
) |
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910 |
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50,000 |
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3/17/2023 |
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3/20/2023 |
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3/20/2028 |
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3.49% |
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(144 |
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900 |
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50,000 |
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8/1/2024 |
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8/5/2024 |
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8/18/2028 |
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3.75% |
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(491 |
) |
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554 |
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50,000 |
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8/1/2025 |
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8/1/2025 |
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8/31/2028 |
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3.38% |
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(114 |
) |
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- |
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50,000 |
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8/1/2025 |
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8/1/2025 |
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8/31/2028 |
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3.38% |
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(117 |
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- |
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50,000 |
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7/11/2024 |
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7/18/2024 |
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7/18/2029 |
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3.96% |
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(890 |
) |
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270 |
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85,000 |
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12/31/2019 |
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12/31/2019 |
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12/31/2029 |
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1.87% |
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5,082 |
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8,510 |
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685,000 |
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2,251 |
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14,142 |
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Matured interest rate swaps at December 31, 2025: |
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75,000 |
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8/21/2019 |
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5/18/2020 |
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5/18/2025 |
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1.26% |
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- |
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887 |
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50,000 |
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6/1/2018 |
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1/31/2019 |
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6/30/2025 |
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2.88% |
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- |
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361 |
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25,000 |
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12/6/2018 |
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1/31/2020 |
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6/30/2025 |
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2.74% |
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- |
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197 |
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$ |
150,000 |
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- |
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1,445 |
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$ |
2,251 |
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$ |
15,587 |
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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 $0.5 million of net unrealized gains included in accumulated other comprehensive income at December 31, 2025 will be reclassified as a decrease to interest and other expense, net within the next 12 months.
The following tables present the effect of derivative instruments in cash flow hedging relationships in the Company’s consolidated statements of operations and comprehensive income for the years ended December 31, 2025, 2024 and 2023 (in thousands):
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Net Unrealized Gain (Loss) Recognized in Other Comprehensive Loss |
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2025 |
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2024 |
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2023 |
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Interest rate derivatives in cash flow hedging |
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$ |
(5,318 |
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$ |
15,200 |
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$ |
5,870 |
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Net Unrealized Gain Reclassified from Accumulated Other Comprehensive Income to Interest and Other Expense, net |
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2025 |
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2024 |
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2023 |
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Interest rate derivatives in cash flow hedging |
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$ |
8,018 |
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$ |
20,017 |
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$ |
22,347 |
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 25, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.