What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-30 compared with 2020-05-07 · 137 added, 123 removed, 203 unchanged (56% of the section changed)

13 unchanged sentences

• the COVID-19 pandemic has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations.

The current and uncertain future, impact of the COVID-19 pandemic, including its effect on the ability or desire of people to travel, is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity, and stock price;

as a result of the COVID-19 pandemic, we have suspended operations at most of our hotels and resorts, and if we are unable to recommence normal operations in the near-term, we may become out of compliance with a maintenance covenant in certain of our debt facilities;

The current and uncertain future impact of the COVID-19 pandemic, including its effect on the ability or desire of people to travel, is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity, and share price;

• as a result of the COVID-19 pandemic, we have suspended operations at most of our hotels and resorts, and if we are unable to recommence operations in the near-term, we may become out of compliance with maintenance covenants in certain of our debt facilities;

• world events impacting the ability or desire of people to travel may lead to a decline in demand for hotels;

13 unchanged sentences

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be a global pandemic and the virus has continued to spread throughout the United States and the world.

As a result of this pandemic and subsequent government mandates and health official recommendations, hotel demand has been nearly eliminated.

Following the government mandates and health official recommendations, we temporarily suspended operations at 46 of our 54 hotels and resorts and dramatically reduced staffing and expenses at the eight hotels that remain operational.

Operations will remain suspended until state and local government restrictions and requirements are lifted and we can be confident that reopening the hotels will not jeopardize the health and safety of guests, employees and communities.

COVID-19 has had a negative impact on our operations and financial results to date, and yet the full financial impact of the reduction in hotel demand caused by the pandemic and suspension of operations at our hotels cannot be reasonably estimated at this time due to uncertainty as to its severity and duration.

We expect that the COVID-19 pandemic may ultimately have a significant impact on our results of operations, financial position and cash flow in 2020.

As a result, in March 2020, we fully drew down on our $650.0 million unsecured revolving credit facility, reduced the quarterly cash dividend on our common shares to one penny for the first quarter of 2020 and likely the remainder of 2020, reduced planned capital expenditures, reduced the compensation of our executive officers, board of trustees and employees, and, working closely with our hotel operating partners, significantly reduced its hotels' operating expenses.

In an effort to protect the health and safety of our employees, we adopted an optional remote-work policy and other physical distancing policies at our corporate office and we do not anticipate these policies to have any adverse impact on our ability to continue to operate our business.

Transitioning to a remote-work environment has not had a material adverse impact on our financial reporting system, internal controls or disclosure controls and procedures.

As of March 31, 2020 , we maintained unrestricted cash of $727.4 million , has no scheduled debt maturities until the fourth quarter of 2021 and all of our debt is unsecured.

We have evaluated the current business environment and its effect on our results of operations, the actions we have taken and the other options available to us and have determined that we have sufficient liquidity in the event of a prolonged decline in hotel demand without additional equity or debt financing or property sales.

Although we were in compliance with all of our debt covenants as of March 31, 2020 , we have determined it is probable we will violate certain financial covenants under our credit agreements within the next twelve months if covenant waivers are not obtained.

If we were to violate one or more financial covenants, the lenders could declare us in default and could accelerate the amounts due under a portion or all of our outstanding debt.

We are actively negotiating the terms for waivers with our lenders and we believe we will receive such waivers before any covenants are violated.

However, because any waivers would be granted at the sole discretion of the lenders, management has determined that there is substantial doubt about our ability to continue as a going concern for one year after the date the financial statements are issued.

GAAP requires that in making this determination we could not consider future fundraising activities, whether through equity or debt offerings or dispositions of hotel properties, or the likelihood of obtaining covenant waivers, all of which are outside of our control.

We believe that obtaining the waivers currently being negotiated will remove the reason for the determination of substantial doubt, however, there can be no assurance that we will be able to obtain waivers on acceptable terms or at all.

Any covenant waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other possible lender protections.

In addition to or in lieu of obtaining waivers as described above, we believe we could raise additional funds if needed through a combination of hotel dispositions or debt or equity financings.

During the three months ended March 31, 2020 , significant transactions included:

As a result of this pandemic and subsequent government mandates and health official recommendations, hotel demand was nearly eliminated.

Following the government mandates and health official recommendations, we temporarily suspended operations at a majority of our hotels and resorts and dramatically reduced staffing and expenses at the hotels that remain operational.

Travel restrictions have slowly eased in a few markets and leisure demand began to recover late in the second quarter.

As of June 30, 2020, 16 of our hotels were open with operations of the remaining 38 hotels still temporarily suspended.

COVID-19 has had a negative impact on our operations and financial results to date and we expect that the COVID-19 pandemic will continue to have a significant negative impact on our results of operations, financial position and cash flow for the remainder of 2020 and into 2021.

We cannot estimate when travel demand will recover.

As a result of this uncertainty, in March 2020, we fully drew down on our $650.0 million unsecured revolving credit facility, reduced the quarterly cash dividend on our common shares to one penny for the first quarter and second quarters of 2020 and likely the remainder of 2020, reduced planned capital expenditures, reduced the compensation of our executive officers, board of trustees and employees, and, working closely with our hotel operating partners, significantly reduced our hotels' operating expenses.

On June 29, 2020, we amended our existing credit facilities, term loan facilities and senior notes.

Among other things, the amendments extended the maturity of a significant portion of a $300.0 million term loan from November 2021 to November 2022, waived existing financial covenants through the end of the first quarter of 2021 and provided substantially less restrictive financial covenants through the end of the second quarter of 2022.

Refer to "Note 5.

Debt" for additional information regarding the amendments.

Based on these amendments and the expense and cash flow reductions, we believe that we will have sufficient liquidity to meet our obligations for the next twelve months.

During the six months ended June 30, 2020, other significant transactions included:

• Sold two hotel properties for an aggregate sales price of $331.0 million and recognized a gain of $117.4 million.

• Recognized an impairment loss of $20.6 million for a retail component of a hotel.

• Incurred approximately $5.0 million in connection with suspensions of operations at our hotels.

• Incurred expenses of approximately $8.9 million in connection with suspensions of operations at our hotels.

• Cancelled LTIP Class B units and time-based service condition awards granted in February 2020 and incurred full compensation expense of $16.0 million.

While we do not operate our hotel properties, both our asset management team and our executive management team monitor and work cooperatively with our hotel managers by advising and making recommendations in all aspects of our hotels’ operations, including property positioning and repositioning, revenue and expense management, operations analysis, physical design, renovation and capital improvements, guest experience and overall strategic direction.

Through these efforts, we seek to

improve property efficiencies, lower costs, maximize revenues and enhance property operating margins, which we expect will enhance returns to our shareholders.

Through these efforts, we seek to improve property efficiencies, lower costs, maximize revenues and enhance property operating margins, which we expect will enhance returns to our shareholders.

Key Indicators of Financial Condition and Operating Performance

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Hotel Operating Statistics

The following table represents the key same-property hotel operating statistics for our hotels for the three months ended March 31, 2020 and 2019 .

For the three months ended March 31,

The following table represents the key same-property hotel operating statistics for our hotels for the three and six months ended June 30, 2020 and 2019.

For the three months ended June 30, For the six months ended June 30,

2020 2019 2020 2019

Same-Property Occupancy 3.3 % 86.9 % 30.0 % 81.2 %

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Same-Property Total RevPAR $ 18.62 $ 339.05 $ 116.10 $ 310.12

While the operations of many of our hotels were temporarily suspended throughout the month of March 2020, the above schedule includes information from all hotels owned as of March 31, 2020 , except, for the first quarter in both 2020 and 2019, Donovan Hotel because it was closed during the first quarter of 2020 for renovation and both InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square because they were sold in the first quarter of 2020.

While the operations of many of our hotels were temporarily suspended beginning in March 2020, the above schedule of hotel results for the three and six months ended June 30 includes information from all hotels owned as of June 30, 2020, except, for the first and second quarters in both 2020 and 2019, Hotel Zena Washington DC, formerly known as Donovan Hotel, because it was closed during the first and second quarters of 2020 for renovation.

Non-GAAP Financial Measures

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By excluding the effect of real estate related depreciation and amortization including our share of the joint venture depreciation and amortization, gains (losses) from sales of real estate and impairments of real estate assets (including impairment of real estate related joint ventures), all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that FFO provides investors a useful financial measure to evaluate our operating performance.

The following table reconciles net income (loss) to FFO and FFO available to common share and unit holders for the three months ended March 31, 2020 and 2019 (in thousands):

For the three months ended March 31,

The following table reconciles net income (loss) to FFO and FFO available to common share and unit holders for the three and six months ended June 30, 2020 and 2019 (in thousands):

For the three months ended June 30, For the six months ended June 30,

2020 2019 2020 2019

Net income (loss) $ (130,914) $ 60,518 $ (88,846) $ 66,173

2 unchanged sentences

Impairment loss — — 20,570 —

FFO $ (75,502) $ 113,757 $ (74,595) $ 173,656

Distribution to preferred shareholders (8,139) (8,139) (16,278) (16,278)

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We believe that EBITDA and EBITDA re provide investors useful financial measures to evaluate our operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

The following table reconciles net income (loss) to EBITDA and EBITDA re for the three months ended March 31, 2020 and 2019 (in thousands):

For the three months ended March 31,

The following table reconciles net income (loss) to EBITDA and EBITDA re for the three and six months ended June 30, 2020 and 2019 (in thousands):

For the three months ended June 30, For the six months ended June 30,

2020 2019 2020 2019

Net income (loss) $ (130,914) $ 60,518 $ (88,846) $ 66,173

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Depreciation and amortization 55,520 53,299 111,348 107,601

EBITDA $ (54,868) $ 149,115 $ 55,875 $ 233,363

(Gain) loss on sale of hotel properties — — (117,448) —

Impairment loss — — 20,570 —

$ (54,868) $ 149,115 $ (41,003) $ 233,363

FFO, EBITDA and EBITDA re do not represent cash generated from operating activities as determined by U.S.

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Results of Operations

At March 31, 2020 and 2019 , we had 54 and 61 , respectively, wholly owned properties and leasehold interests.

At June 30, 2020 and 2019, we had 54 and 60, respectively, wholly owned properties and leasehold interests.

All properties owned during these periods have been included in our results of operations during the respective periods since their dates of acquisition and through the dates of disposition, as applicable.

Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the three months ended March 31, 2020 and 2019 .

Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the three months ended June 30, 2020 and 2019.

The properties listed in the table below are hereinafter referred to as "non-comparable properties" for the periods indicated and all other properties are referred to as "comparable properties":

Acquisition/Disposition Date

The Liaison Capitol Hill

Washington, D.C.

Property Location Disposition Date

The Liaison Capitol Hill Washington, D.C.

February 14, 2019

Hotel Palomar Washington DC

Washington, D.C.

Hotel Palomar Washington DC Washington, D.C.

February 22, 2019

Hotel Amarano Burbank

July 16, 2019

Washington, D.C.

Onyx Hotel Boston, MA May 29, 2019

Hotel Amarano Burbank Burbank, CA July 16, 2019

Rouge Hotel Washington, D.C.

September 12, 2019

Washington, D.C.

Hotel Madera Washington, D.C.

September 26, 2019

Washington, D.C.

Topaz Hotel Washington, D.C.

November 22, 2019

InterContinental Buckhead Atlanta

March 6, 2020

Sofitel Washington DC Lafayette Square

Washington, D.C.

InterContinental Buckhead Atlanta Buckhead, GA March 6, 2020

Sofitel Washington DC Lafayette Square Washington, D.C.

March 6, 2020

Comparison of the three months ended March 31, 2020 to the three months ended March 31, 2019

Revenues — Total hotel revenues decreased by $98.1 million , of which $18.6 million was contributed by the non-comparable properties and the remaining decline was due to suspension of operations at our hotels in March 2020 as a result of the COVID-19 pandemic.

Hotel operating expenses — Total hotel operating expenses decreased by $35.4 million , of which $12.7 million was contributed by the non-comparable properties and the remaining decline was due to suspension of operations at our hotels in March 2020 as a result of the COVID-19 pandemic offset by an increase of $5.0 million in expenses related to the suspended operations at the hotels.

Comparison of the three months ended June 30, 2020 to the three months ended June 30, 2019

Revenues — Total hotel revenues decreased by $419.5 million, of which was $32.0 million was due to the non-comparable properties and the remaining decline was due to the decline in demand and suspension of operations since March 2020 as a result of the COVID-19 pandemic.

Hotel operating expenses — Total hotel operating expenses decreased by $210.4 million, of which $18.1 million was due to the non-comparable properties and the remaining decline was due to the decline in demand and suspension of operations since March 2020 as a result of the COVID-19 pandemic.

Depreciation and amortization — Depreciation and amortization expense increased by $2.2 million, due to additional assets added from renovations and offset by sold hotels.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $3.5 million due to a decline in percentage ground rent which is based on a percentage of revenues.

General and administrative — General and administrative expenses decreased by $1.5 million primarily due to a decline in share-based compensation costs and reduction in compensation and other administrative costs as a result of the cost cutting program put in place in response to the COVID-19 pandemic.

General and administrative expenses consist of employee compensation costs, legal and professional fees, costs related to strategic transactions, insurance and other expenses.

(Gain) loss and other operating expenses — (Gain) loss and other operating expenses increased $0.3 million due to increases in franchise tax expenses in 2020.

In 2019, the Company incurred $0.8 million in hotel management transition expenses and had $0.5 million of business interruption insurance income.

Interest expense — Interest expense decreased by $4.6 million as a result of using proceeds from property sales to reduce outstanding debt since June 30, 2019 and a decrease in interest rates during the second quarter of 2020.

Other — Other income increased by $0.3 million due to interest income from higher cash balances from the drawdown on the unsecured revolving credit facility to enhance liquidity.

Income tax (expense) benefit — Income tax expense (benefit) changed from an expense of $(6.6) million to a benefit of $3.6 million due primarily to a decrease in taxable income of our TRS during the quarter resulting from the COVID-19 hotel suspensions compared to the same period in the prior year.

Non-controlling interests — Non-controlling interests represent the allocation of income or loss of our Operating Partnership to the common units held by the LTIP unit holders.

Comparison of the six months ended June 30, 2020 to the six months ended June 30, 2019

Revenues — Total hotel revenues decreased by $517.6 million, of which $50.6 million was due to the non-comparable properties and the remaining decline was due to the decline in demand and suspension of operations since March 2020 as a result of the COVID-19 pandemic.

Hotel operating expenses — Total hotel operating expenses decreased by $245.8 million, of which $30.8 million was due to the non-comparable properties and the remaining decline was due to the decline in demand and suspension of operations since March 2020 as a result of the COVID-19 pandemic offset by an increase of $8.9 million in expenses related to the suspended operations at the hotels.

Depreciation and amortization — Depreciation and amortization expense increased by $3.7 million, due to additional assets added from renovations and offset by sold hotels.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $5.2 million due to a decline in percentage ground rent which is based on a percentage of revenues.

General and administrative — General and administrative expenses increased by $9.9 million primarily due to $16.0 million in share-based compensation costs relating to the cancellation of the retention LTIP unit awards and time-based service condition awards.

This was partially offset by transaction costs incurred in 2019 related to the LaSalle merger.

General and administrative expenses consist of employee compensation costs, legal and professional fees, costs related to strategic transactions, insurance, state franchise taxes and other expenses.

General and administrative expenses consist of employee compensation costs, legal and professional fees, costs related to strategic transactions, insurance and other expenses.

Impairment loss — We recognized an impairment loss of $20.6 million related to a retail component of a hotel.

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(Gain) loss and other operating expenses — (Gain) loss and other operating expenses decreased by $1.9 million due primarily to the $4.0 million in hotel management transition expense incurred in 2019.

Interest expense — Interest expense decreased by $5.7 million as a result of the pay-down of unsecured term loans since March 31, 2019 .

In March 2020, to enhance liquidity as a result of the actual and anticipated impacts of the COVID-19 pandemic, we fully drew down the $650.0 million unsecured revolving credit facility.

Income tax (expense) benefit — Income tax benefit increased by $5.7 million due primarily to an increase in taxable loss of our TRS as a result of suspended operations at our hotels during the three months ended March 31, 2020 compared to the same period in the prior year.

Interest expense — Interest expense decreased by $10.4 million as a result of using proceeds from property sales to reduce outstanding debt since June 30, 2019 and a decrease in interest rates during the second quarter of 2020.

Other — Other income increased by $0.3 million due to interest income from higher cash balances from the drawdown on the unsecured revolving credit facility to enhance liquidity.

Income tax (expense) benefit — Income tax (expense) benefit changed from an expense of $(1.5) million to a benefit of $14.3 million due primarily to an increase in taxable loss of our TRS as a result of suspended operations at our hotels during the six months ended June 30, 2020 compared to the same period in the prior year.

Non-controlling interests — Non-controlling interests represent the allocation of income or loss of our Operating Partnership to the common units held by the LTIP unit holders.

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In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be a global pandemic and the virus has continued to spread throughout the United States and the world.

As a result of this pandemic and subsequent government mandates and health official recommendations, hotel demand has been nearly eliminated.

We expect that the COVID-19 pandemic may ultimately have a significant impact on our results of operations, financial position and cash flow in 2020.

Transitioning to a remote-work environment has not had a material adverse impact on our financial reporting system, internal controls or disclosure controls and procedures.

As of March 31, 2020 , we maintained unrestricted cash of $727.4 million .

We have no scheduled debt maturities until the fourth quarter of 2021 and all of our debt is unsecured.

If we were to violate one or more financial covenants, the lenders could declare us in default and could accelerate the amounts due under a portion or all of our outstanding debt.

We are actively negotiating the terms for waivers with our lenders and we believe we will receive such waivers before any covenants are violated.

Any covenant waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other possible lender protections.

In addition to or in lieu of obtaining waivers as described above, we believe we could raise additional funds if needed through a combination of hotel dispositions or debt or equity financings.

Our debt consisted of the following as of March 31, 2020 and December 31, 2019 (dollars in thousands):

As a result of this pandemic and subsequent government mandates and health official recommendations, hotel demand was nearly eliminated.

As travel demand slowly recovered during the second quarter, as of June 30, 2020, 16 of our hotels were open, while oeprations at the remaining 38 hotels were still temporarily suspended.

COVID-19 has had a negative impact on our operations and financial results to date and we expect that the COVID-19 pandemic may ultimately have a significant impact on our results of operations, financial position and cash flow for the remainder of 2020.

As a result, in March 2020, we fully drew down on our $650.0 million unsecured revolving credit facility, reduced the quarterly cash dividend on our common shares to one penny for the first and second quarters of 2020 and likely the remainder of 2020, reduced planned capital expenditures, reduced the compensation of our executive officers, board of trustees and employees, and, working closely with our hotel operating partners, significantly reduced our hotels' operating expenses.

On June 29, 2020, we amended our existing credit facilities, term loan facilities and senior notes.

Refer to "Note 5.

Debt" for additional information regarding the amendments.

Based on these amendments and the expense and cash flow reductions, we believe that we will have sufficient liquidity to meet our obligations for the next twelve months.

Our debt consisted of the following as of June 30, 2020 and December 31, 2019 (dollars in thousands):

Balance Outstanding as of

Interest Rate

Maturity Date

March 31, 2020

December 31, 2019

Interest Rate Maturity Date June 30, 2020 December 31, 2019

Revolving credit facilities

Senior unsecured credit facility

PHL unsecured credit facility

Senior unsecured credit facility Floating (1)

January 2022 $ 390,000 $ 165,000

PHL unsecured credit facility Floating (2)

Janurary 2022 — —

Total revolving credit facilities $ 390,000 $ 165,000

Unsecured term loans

First Term Loan

Second Term Loan

Fourth Term Loan

First Term Loan Floating (3)

January 2023 300,000 300,000

Second Term Loan Floating (3)

April 2022 65,000 65,000

Fourth Term Loan Floating (3)

October 2024 110,000 110,000

Sixth Term Loan:

Tranche 2021 Floating (3)

November 2021 57,400 300,000

Tranche 2021 Extended Floating (3)

November 2022 242,600 —

Tranche 2022 Floating (3)

November 2022 400,000 400,000

Tranche 2023 Floating (3)

November 2023 400,000 400,000

Tranche 2024 Floating (3)

January 2024 400,000 400,000

Total Sixth Term Loan 1,500,000 1,500,000

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Senior unsecured notes

Series A Notes

December 2023

Series B Notes

December 2025

Series A Notes 4.70% December 2023 60,000 60,000

Series B Notes 4.93% December 2025 40,000 40,000

Total senior unsecured notes at stated value 100,000 100,000

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Total senior unsecured notes $ 99,537 $ 99,563

Total debt $ 2,452,970 $ 2,229,220

(1) Borrowings bear interest at floating rates equal to, at our option, either (i) LIBOR plus an applicable margin or (ii) an Adjusted Base Rate (as defined in the applicable credit agreement) plus an applicable margin.

1 unchanged sentence

(3) Borrowings under the term loan facilities bear interest at floating rates equal to, at our option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin.

As of March 31, 2020 , approximately $1.6 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 3.56% , after taking into account interest rate swap agreements, and approximately $345.0 million bore a weighted-average floating interest rate of 2.55% .

As of June 30, 2020, approximately $1.6 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.21%, after taking into account interest rate swap agreements, and approximately $345.0 million bore a weighted-average floating interest rate of 2.46%.

As of December 31, 2019, approximately $1.6 billion of the borrowings under the term loan facilities bore a weighted-average fixed interest rate of 3.43%, after taking into account interest rate swap agreements, and approximately $345.0 million bore a weighted-average floating interest rate of 3.32%.

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In March 2020, as part of our plans to enhance liquidity due to the actual and anticipated impact of the COVID-19 pandemic, we fully drew down on this revolving credit facility.

As of March 31, 2020 , we had $643.2 million of outstanding borrowings and no borrowing capacity remaining on our senior unsecured revolving credit facility.

As of June 30, 2020, we had $390.0 million of outstanding borrowings and borrowing capacity of $253.2 million remaining on our senior unsecured revolving credit facility.

Interest is paid on the periodic advances under the senior unsecured revolving credit facility at varying rates, based upon either LIBOR or the alternate base rate, plus an additional margin amount.

The interest rate depends upon our leverage ratio pursuant to the provisions of the credit facility

The interest rate depends upon our leverage ratio pursuant to the provisions of the credit facility agreement.

As a result of the amendments described in "Note 5.

Debt", the spread of the borrowings is fixed at

2.25% during the waiver period.

We have the ability to increase the aggregate borrowing capacity of our senior unsecured revolving credit facility to up to $1.3 billion, subject to lender approval.

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Borrowings under the PHL Credit Facility bear interest at LIBOR plus an applicable margin, depending on our leverage ratio.

As of March 31, 2020 , we had no borrowings under the PHL Credit Facility.

As a result of the amendments described in "Note 5.

Debt", the spread of the borrowings is fixed at 2.25% during the waiver period.

As of June 30, 2020, we had no borrowings under the PHL Credit Facility.

Unsecured Term Loan Facilities

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We may suspend or discontinue this program at any time.

No common shares were repurchased by the Company under the share repurchase program during the three months ended March 31, 2020 .

As of March 31, 2020 , $56.6 million of common shares remained available for repurchase under this program.

No common shares were repurchased by the Company under the share repurchase program during the six months ended June 30, 2020.

As of June 30, 2020, $56.6 million of common shares remained available for repurchase under this program.

On July 27, 2017, we announced that our board of trustees authorized a new share repurchase program of up to $100.0 million of the Company's outstanding common shares.

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Our principal uses of cash are asset acquisitions, debt service, capital investments, operating costs, corporate expenses and dividends.

Cash Provided by Operations.

Our cash provided by operating activities was $1.5 million for the three months ended March 31, 2020 .

Our cash from operations includes the operating activities of the 54 hotels we owned as of March 31, 2020 , offset by corporate expenses.

Our cash provided by operating activities was $56.3 million for the three months ended March 31, 2019 .

Our cash from operations includes the operating activities of the 61 hotels we wholly owned as of March 31, 2019 .

Cash Provided by and Used in Investing Activities.

Our cash provided by investing activities was $269.9 million for the three months ended March 31, 2020 .

During the three months ended March 31, 2020 , we invested $50.1 million in improvements to our hotel properties and received $320.0 million from sales of hotel properties.

Our cash provided by investing activities was $201.7 million for the three months ended March 31, 2019 .

During the three months ended March 31, 2019 , we invested $43.3 million in improvements to our hotel properties and received $245.1 million from sales of hotel properties.

Cash (Used in) and Provided by Operations.

Our cash used in operating activities was $(86.6) million for the six months ended June 30, 2020.

Our cash from operations includes the operating activities of the 54 hotels we owned as of June 30, 2020, offset by corporate expenses.

Our cash provided by operating activities was $194.1 million for the six months ended June 30, 2019.

Our cash from operations includes the operating activities of the 60 hotels we owned as of June 30, 2019.

Cash Provided by Investing Activities.

Our cash provided by investing activities was $230.4 million for the six months ended June 30, 2020.

During the six months ended June 30, 2020, we invested $89.6 million in improvements to our hotel properties and received $320.0 million from sales of hotel properties.

Our cash provided by investing activities was $226.0 million for the six months ended June 30, 2019.

During the six months ended June 30, 2019, we invested $75.9 million in improvements to our hotel properties and received $302.3 million from sales of hotel properties.

Cash Provided by and Used In Financing Activities.

Our cash provided by financing activities was $418.5 million for the three months ended March 31, 2020 .

During the three months ended March 31, 2020 , we borrowed $760.1 million under the revolving credit facilities, repaid $281.9 million under the revolving credit facilities, repurchased $1.3 million of common shares for tax withholding purposes in connection with vested share-based equity awards, paid $58.2 million in distributions and paid $0.2 million in other transactions.

For the three months ended March 31, 2019 , cash used in financing activities was $288.8 million .

During the three months ended March 31, 2019 , we borrowed $1.9 million under the revolving credit facilities,

repaid $171.9 million under the revolving credit facilities, repaid $70.6 million of debt, repurchased $4.0 million of common shares for tax withholding purposes in connection with vested share-based equity awards, paid $43.6 million in distributions and paid $0.7 million in other transactions.

Our cash provided by financing activities was $152.1 million for the six months ended June 30, 2020.

During the six months ended June 30, 2020, we borrowed $760.1 million under the revolving credit facilities, repaid $535.1 million under the revolving credit facilities, borrowed and repaid $13.0 million in other debt, repurchased $1.3 million of common shares for tax withholding purposes in connection with vested share-based equity awards, paid $67.6 million in distributions, paid $3.6 million in financing fees related to the debt amendments, and paid $0.4 million in other transactions.

For the six months ended June 30, 2019, cash used in financing activities was $457.7 million.

During the six

months ended June 30, 2019, we borrowed $56.9 million under the revolving credit facilities, repaid $226.9 million under the revolving credit facilities, repaid $181.2 million of debt, repurchased $4.0 million of common shares for tax withholding purposes in connection with vested share-based equity awards, paid $101.6 million in distributions and paid $0.9 million in other transactions.

Capital Investments

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Generally, we expect to fund renovations and improvements with available cash, restricted cash, borrowings under our credit facility, or proceeds from new mortgage debt or equity offerings.

For the three months ended March 31, 2020 , we invested $50.1 million in capital investments to reposition and improve our properties.

In response to the COVID-19 pandemic, we postponed all major non-essential capital investments other than those necessary to complete our 2020 major projects that were already under construction when the pandemic began.

The projects we intend to complete in 2020 include:

For the six months ended June 30, 2020, we invested $89.6 million in capital investments to reposition and improve our properties, which included the completed renovations of The Westin San Diego Gaslamp Quarter and Embassy Suites San Diego Bay - Downtown.

The projects we completed in the second quarter of 2020 or shortly thereafter include:

• a $25.0 million renovation and repositioning at Donovan Hotel.

This renovation is expected to be completed near the end of the second quarter of 2020 at which time the hotel will be relaunched as Hotel Zena Washington D.C., a member of our "Unofficial Z Collection" proprietary brand;

an $18.0 million renovation at Embassy Suites San Diego Bay - Downtown which is expected to be completed in the second quarter of 2020;

a $16.0 million renovation at The Westin San Diego Gaslamp Quarter which is expected to be completed in the second quarter of 2020;

a $12.5 million comprehensive renovation at the Le Parc Suite Hotel to be completed by the end of the second quarter of 2020;

an $11.0 million final phase renovation at the San Diego Mission Bay Resort to be completed near the end of the second quarter of 2020;

an $11.0 million comprehensive transformation of the Villa Florence San Francisco on Union Square to be completed by the end of 2020 at which time the hotel will be relaunched as The Lydon Hotel.

This renovation is substantially complete and the hotel will be relaunched as Hotel Zena Washington D.C., a member of our "Unofficial Z Collection" proprietary brand;

• a $10.5 million renovation of the Viceroy Santa Monica Hotel that is substantially complete.

We expect total capital investments to be approximately $35.0 million to $40.0 million for the remainder of 2020.

We will re-evaluate all deferred 2020 and 2021 capital projects later in the year as we obtain more clarity on the impact of the COVID-19 pandemic on hotel demand, our liquidity and the overall economic environment.

Contractual Obligations and Off-Balance Sheet Arrangements

The table below summarizes our contractual obligations as of March 31, 2020 and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

The table below summarizes our contractual obligations as of June 30, 2020 and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

Payments due by period

Term loans (2)

$ 2,166,530 $ 73,247 $ 1,168,633 $ 924,650 $ —

Unsecured notes (1)

120,716 4,792 9,584 65,354 40,986

Borrowings under credit facilities (3)

405,275 9,885 395,390 — —

Hotel and ground leases (4)

1,225,982 16,894 33,945 34,178 1,140,965

Capital lease obligation 65,136 1,289 2,668 2,748 58,431

Refundable membership initiation deposits (5)

30,340 223 — — 30,117

Purchase commitments (6)

6,899 6,899 — — —

Corporate office leases 16,359 1,817 3,637 2,528 8,377

Total $ 4,037,237 $ 115,046 $ 1,613,857 $ 1,029,458 $ 1,278,876

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(3) Amounts include principal and interest under the two revolving credit facilities.

Interest expense is calculated based on the weighted-average interest rate for all outstanding credit facility borrowings as of March 31, 2020 .

Interest expense is calculated based on the weighted-average interest rate for all outstanding credit facility borrowings as of June 30, 2020.

It is assumed that the outstanding borrowings will be repaid upon maturity with fixed interest-only payments until then.

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Off-Balance Sheet Arrangements

As of March 31, 2020 , we had no off-balance sheet arrangements.

As of June 30, 2020, we had no off-balance sheet arrangements.

We rely on the performance of the hotels to increase revenues to keep pace with inflation.

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The Company has interest rate swap agreements with an aggregate notional amount of $1.6 billion to hedge variable interest rates on our unsecured term loans.

In addition, as of March 31, 2020 , the Company had interest rates swaps for an aggregate notional amount of $290.0 million which will become effective in the future as current swaps mature.

In addition, as of June 30, 2020, the Company had interest rates swaps for an aggregate notional amount of $290.0 million which will become effective in the future as current swaps mature.

We have designated these pay-fixed, receive-floating interest rate swap derivatives as cash flow hedges.

For the three months ended March 31, 2020 and 2019 , there was $(54.3) million and $(9.0) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss).

For the three and six months ended June 30, 2020, there was $(0.4) million and $(54.7) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss).

For the three and six months ended June 30, 2019, there was $(21.1) million and $(30.1) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss).

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis