What changed in this filing

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Item 9A. Controls and Procedures

2021-02-23 compared with 2020-02-20 · 624 added, 605 removed, 833 unchanged (60% of the section changed)

29 unchanged sentences

The following exhibits are filed or furnished, as the case may be, as part of this Annual Report on Form 10-K:

Description of Exhibit

Number Description of Exhibit

Declaration of Trust, as amended and supplemented through November 30, 2018, of Pebblebrook Hotel Trust (incorporated by reference to Exhibit 3.1 to Pebblebrook Hotel Trust’s Annual Report on Form 10-K filed with the SEC on March 1, 2019 (File No.

6 unchanged sentences

Description of the Registrant's Securities

(incorporated by reference to Exhibit 4.1 to Pebblebrook Hotel Trust's Annual Report on Form 10-K filed with the SEC on February 20, 2020 (File No.

Indenture, dated December 15, 2020, between the Company and The Bank of New York Mellon Trust Company, N.A.

(incorporated by reference to Exhibit 4.1 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on December 16, 2020 (File No.

First Supplemental Indenture, dated December 15, 2020, between the Company and The Bank of New York Mellon Trust Company, N.A.

(incorporated by reference to Exhibit 4.2 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on December 16, 2020 (File No.

Pebblebrook Hotel Trust 2009 Equity Incentive Plan, as amended and restated effective July 10, 2012 (incorporated by reference to Exhibit 10.1 to Pebblebrook Hotel Trust's Quarterly Report on Form 10-Q filed with the SEC on August 2, 2012 (File No.

36 unchanged sentences

Fourth Amended and Restated Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to Exhibit 10.22 to Pebblebrook Hotel Trust's Annual Report on Form 10-K filed with the SEC on February 22, 2018 (File No.

Bank National Association, as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.23 to Pebblebrook Hotel Trust's Annual Report on Form 10-K filed with the SEC on February 22, 2018 (File No.

Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Capital One, National Association, as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.24 to Pebblebrook Hotel Trust's Annual Report on Form 10-K filed with the SEC on February 22, 2018 (File No.

First Amendment to Fourth Amended and Restated Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to Exhibit 10.6 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on July 2, 2020 (File No.

Second Amendment to Fourth Amended and Restated Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on July 2, 2020 (File No.

Third Amendment to Fourth Amended and Restated Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on December 16, 2020 (File No.

Amended and Restated Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, PNC Bank, National Association, as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.25 to Pebblebrook Hotel Trust's Annual Report on Form 10-K filed with the SEC on February 22, 2018 (File No.

First Amendment to Amended and Restated Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, U.S.

Bank National Association, as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on July 2, 2020 (File No.

Second Amendment to Amended and Restated Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, U.S.

First Amendment to Credit Agreement, dated as of November 12, 2015, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Capital One, National Association, as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.3 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on July 2, 2020 (File No.

Second Amendment to Credit Agreement, dated as of November 12, 2015, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Capital One, National Association, as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.3 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on December 16, 2020 (File No.

Note Purchase and Guarantee Agreement, dated November 12, 2015, by and among Pebblebrook Hotel Trust, Pebblebrook Hotel, L.P., Massachusetts Mutual Life Insurance Company, MassMutual Asia Limited, Allianz Life Insurance Company of North America and The Guardian Life Insurance Company of America (incorporated by reference to Exhibit 10.33 to Pebblebrook Hotel Trust’s Annual Report on Form 10-K filed with the SEC on February 22, 2016 (File No.

First Amendment to Note Purchase Agreement, dated as of October 13, 2017, among Pebblebrook Hotel Trust, Pebblebrook Hotel, L.P., Massachusetts Mutual Life Insurance Company, MassMutual Asia Limited, Allianz Life Insurance Company of North America and The Guardian Life Insurance Company of America (incorporated by reference to Exhibit 10.27 to Pebblebrook Hotel Trust's Annual Report on Form 10-K filed with the SEC on February 22, 2018 (File No.

Second Amendment to Note Purchase Agreement, dated as of October 13, 2017, among Pebblebrook Hotel Trust, Pebblebrook Hotel, L.P., Massachusetts Mutual Life Insurance Company, MassMutual Asia Limited, Allianz Life Insurance Company of North America and The Guardian Life Insurance Company of America (incorporated by reference to Exhibit 10.5 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on July 2, 2020 (File No.

Third Amendment to Note Purchase Agreement, dated as of October 13, 2017, among Pebblebrook Hotel Trust, Pebblebrook Hotel, L.P., Massachusetts Mutual Life Insurance Company, MassMutual Asia Limited, Allianz Life Insurance Company of North America and The Guardian Life Insurance Company of America (incorporated by reference to Exhibit 10.5 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on December 16, 2020 (File No.

Form of Share Award Agreement (time-based vesting) for Executive Officers (incorporated by reference to Exhibit 10.1 to Pebblebrook Hotel Trust’s Current Report on Form 8-K filed with the SEC on February 16, 2018).

Form of Performance Unit Award Agreement for Executive Officers (incorporated by reference to (incorporated by reference to Exhibit 10.2 to Pebblebrook Hotel Trust’s Current Report on Form 8-K filed with the SEC on February 16, 2018).

Credit Agreement, dated as of September 5, 2018, among Pebblebrook Hotel L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to Pebblebrook Hotel Trust’s Quarterly Report on Form 10-Q filed with the SEC on November 1, 2018).

Waiver Agreement, dated September 5, 2018, between Pebblebrook Hotel Trust and Jon E.

Bortz (incorporated by reference to Exhibit 10.1 to Pebblebrook Hotel Trust’s Current Report on Form 8-K filed with the SEC on September 7, 2018 (File No.

Waiver Agreement, dated September 5, 2018, between Pebblebrook Hotel Trust and Raymond D.

Martz (incorporated by reference to Exhibit 10.2 to Pebblebrook Hotel Trust’s Current Report on Form 8-K filed with the SEC on September 7, 2018 (File No.

Waiver Agreement, dated September 5, 2018, between Pebblebrook Hotel Trust and Thomas C.

Fisher (incorporated by reference to Exhibit 10.3 to Pebblebrook Hotel Trust’s Current Report on Form 8-K filed with the SEC on September 7, 2018 (File No.

Credit Agreement, dated as of October 31, 2018, among Pebblebrook Hotel L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.34 to Pebblebrook Hotel Trust’s Annual Report on Form 10-K filed with the SEC on March 1, 2019 (File No.

First Amendment to Credit Agreement, dated as of October 31, 2018, among Pebblebrook Hotel L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.4 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on July 2, 2020 (File No.

Second Amendment to Credit Agreement, dated as of October 31, 2018, among Pebblebrook Hotel L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.4 to Pebblebrook Hotel Trust's Current Report on Form 8-K filed with the SEC on December 10, 2020 (File No.

List of Subsidiaries of Pebblebrook Hotel Trust.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.SCH Inline XBRL Taxonomy Extension Schema Document (1)

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document(1)

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document (1)

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)

104 Cover Page Interactive Data File (embedded within the Inline XBRL document) (1)

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†† Furnished herewith.

(1) Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (eXtensible Business Reporting Language):

(i) Consolidated Balance Sheets;

(ii) Consolidated Statements of Operations and Comprehensive Income;

(iii) Consolidated Statements of Equity;

(iv) Consolidated Statements of Cash Flows;

(v) Notes to Consolidated Financial Statements;

and (vi) Cover Page (in connection with Exhibit 104).

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PEBBLEBROOK HOTEL TRUST

February 20, 2020

February 23, 2021 /s/ J ON E.

Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Chairman of the Board, President and Chief Executive Officer (principal executive officer)

February 20, 2020

Name Title Date

BORTZ Chairman of the Board, President and Chief Executive Officer (principal executive officer) February 23, 2021

/s/ RAYMOND D.

Executive Vice President, Chief Financial Officer, Treasurer and Secretary (principal financial officer and principal accounting officer)

February 20, 2020

MARTZ Executive Vice President, Chief Financial Officer, Treasurer and Secretary (principal financial officer and principal accounting officer) February 23, 2021

/s/ CYDNEY C.

February 20, 2020

DONNELL Trustee February 23, 2021

JACKSON Trustee February 23, 2021

/s/ PHILLIP M.

February 20, 2020

MILLER Trustee February 23, 2021

/s/ MICHAEL J.

February 20, 2020

SCHALL Trustee February 23, 2021

SIMI Trustee February 23, 2021

WEBB Trustee February 23, 2021

PEBBLEBROOK HOTEL TRUST

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Schedule III - Real Estate and Accumulated Depreciation

Reports of Independent Registered Public Accounting Firm F- 2

Consolidated Balance Sheets F- 5

Consolidated Statements of Operations and Comprehensive Income F- 6

Consolidated Statements of Equity F- 8

Consolidated Statements of Cash Flows F- 10

Notes to Consolidated Financial Statements F- 12

Schedule III - Real Estate and Accumulated Depreciation F- 40

Report of Independent Registered Public Accounting Firm

7 unchanged sentences

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for its leases as of January 1, 2019 due to the adoption of FASB ASC Topic 842, Leases .

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of the fair value of investment in hotel properties acquired in the LaSalle Hotel Properties business combination

As discussed in Notes 2 and 3 to the consolidated financial statements, upon acquisition of a business, the Company will recognize and measure at fair value the acquired land, land improvements, building, furniture, fixtures, and equipment, identifiable intangible assets or liabilities, other assets, and assumed liabilities.

On November 30, 2018, the Company acquired LaSalle Hotel Properties in a business combination for total consideration of $4.1 billion.

During 2019, using a combination of the market, cost, and income methods, the Company finalized its measurement and recognition of the land and improvements, buildings and improvements, and furniture, fixtures, and equipment, which represents substantially all of the fair value of LaSalle Hotel Properties.

We identified the evaluation of the fair value of investment in hotel properties acquired in the LaSalle Hotel Properties business combination as a critical audit matter.

Subjective auditor judgment and specialized skills and knowledge were required to evaluate the method used to determine the fair value of the investment in hotel properties acquired.

Evaluation of the methodology and resulting estimate required a high degree of subjectivity, specifically as it related to the assessment of available information and certain assumptions.

For the market method, transaction adjustments may be needed to the observable market transactions to make them comparable to the hotel acquired.

For the income approach, the estimated hotel revenues and net operating income were based on historical hotel results adjusted for the current economic environment in order to be indicative of future results.

In addition, the estimated discount rates and terminal capitalization rates used required significant auditor judgment as there is high estimation uncertainty related to these assumptions.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s process to estimate the fair value of investment in hotel properties acquired in a business combination, including controls related to the identification of the population of market comparable transactions, and the development of adjustments to the market comparable transactions.

In addition, we tested controls over the selection of the projected net operating income, projected revenue, estimated discount rates and estimated terminal capitalization rates.

We assessed the projected revenue and net operating income estimates for the hotel properties in relation to historical and current year actuals.

We involved valuation professionals with specialized skills and knowledge, who assisted in the following:

Comparing the methodologies used by the Company to value the investment in hotel properties acquired to industry standards;

Evaluating the Company’s discount rate, by comparing it against a discount rate range that was independently developed using publicly available third-party market data for comparable entities;

Evaluating estimated terminal capitalization rates by comparing to independent market comparable transactions from industry sources, including information about features of the comparable assets;

Evaluating the adjusted market comparable transactions, by comparing to independent comparable sales transactions from industry sources.

Evaluation of the company’s assessment of hotel properties for impairment

As discussed in Note 2 to the consolidated financial statements, the Company reviews its investments in hotel properties for impairment whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable.

When such conditions exist, the Company performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel exceed its carrying value.

In the evaluation of impairment of its hotel properties, the Company makes many assumptions and estimates including projected cash flows both from operations and eventual disposition;

expected useful life and holding period;

and capitalization rates.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The assessment of hotel properties for impairment

As discussed in Note 2 and 4 to the consolidated financial statements, the Company reviews its investments in hotel properties for impairment whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable.

For hotel properties that have an indication that its carrying value may not be recoverable, an undiscounted cash flow analysis is prepared using various inputs and assumptions, including estimated holding period and expected terminal capitalization rate.

To the extent that the carrying value of a hotel property exceeds the estimated undiscounted cash flows, an impairment loss is recognized equal to the excess of carrying value over its fair value.

The novel coronavirus (COVID-19) has reduced travel significantly and adversely affected the hospitality industry and resulted in recoverability analyses being performed on all of the Company’s hotel properties.

In addition, COVID-19 has increased uncertainty in future cash flow projections and hold periods.

The Company determined that the carrying

value of certain hotel properties exceeded its fair value, and recognized an impairment loss of $74.6 million.

Investment in hotel properties was $5.9 billion, or 97% of total assets as of December 31, 2020.

We identified the evaluation of the Company’s assessment of hotel properties for impairment as a critical audit matter.

Evaluation of the events or changes in circumstances that indicate the carrying value of a hotel property may not be recoverable involved a high degree of auditor judgment.

In particular, as part of its evaluation of indicators of potential hotel property impairment, judgments include 1) the likelihood that a hotel property will be sold before the end of its previously estimated useful life, and 2) changes in market conditions or other factors.

In addition, when there was an indication of a potential hotel property impairment, it was challenging to obtain evidence and subjective auditor judgment was required to evaluate certain assumptions used in the Company’s undiscounted cash flow analysis.

Specific assumptions included the probability assessment related to the Company’s holding period and expected terminal capitalization rate.

There is high estimation uncertainty related to both of these assumptions.

Changes in these judgments could have a significant impact on the determination of the recoverability of the carrying amount of the Company’s investments in hotel properties.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s process to identify and evaluate events or changes in circumstances that indicate the carrying amount of a hotel property may not be recoverable.

We also tested internal controls related to the estimated holding period and the expected terminal capitalization rate.

We inquired of Company officials and inspected documents, such as meeting minutes of the board of directors, to identify Company strategies that may indicate it was more-likely-than not that a property will be sold before the end of its previously estimated useful life.

We assessed financial information and read minutes of the board of directors for indicators of decreases in current and projected operating performance of the hotel properties to identify other factors that could result in identification of a potentially impaired hotel property.

We evaluated the Company’s expected terminal capitalization rates by comparing to published third-party industry reports as well as the Company’s historical property sales.

We also performed sensitivity analysis over the hold period of certain of the Company’s hotel properties by changing the Company’s estimates to assess the impact on the analysis.

We inquired and obtained documentation from the Company regarding the status and evaluation of any potential disposal of properties, which we corroborated with others in the organization who are responsible for, and have authority over, disposition activities.

We identified the assessment of hotel properties for impairment as a critical audit matter.

Significant auditor judgment was required to evaluate certain key assumptions, specifically, the judgments related to the Company’s estimated holding period, expected terminal capitalization rate, discount rate, and projected cash flows from operations and eventual disposition, including the effects of COVID-19 and the resulting duration of the economic downturn.

Changes in the key assumptions could have a significant impact on the determination of recoverability of the carrying value and determination of fair value in hotel properties.

Furthermore, in determining the fair value of certain hotel properties, involvement of valuation professionals with specialized skills and knowledge was required to evaluate discount rates and expected terminal capitalization rates used in the determination of the fair value.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to evaluate hotel properties for impairment, including the specific assumptions described above.

We inquired of Company officials and inspected documents, such as meeting minutes of the board of trustees, to identify Company strategies that may indicate it was more-likely-than not that a property will be sold significantly before the end of its previously estimated useful life.

We read publicly available information in order to identify information regarding potential sales of the Company’s properties.

We also performed sensitivity analyses over the estimated holding period of certain of the Company’s hotel properties by changing the Company’s estimates to assess the impact on the analysis.

We evaluated the Company’s expected terminal capitalization rates by comparing to published third-party industry reports as well as the Company’s historical hotel property sales.

For certain of the hotel properties, we performed sensitivity analyses over the estimated terminal capitalization rate by considering points within the ranges we obtained from published third-party industry reports.

We evaluated the Company’s projected cash flows from operations, by comparing to published third-party industry reports evaluating the impact of COVID-19 on the hotel industry.

We inquired and obtained representations from the Company regarding the status and evaluation of any potential disposal of properties and read minutes of the board of trustees.

We corroborated that information with others in the organization who are responsible for, and have authority over, disposition activities.

We also involved valuation professionals with specialized skills and knowledge who assisted in:

• assessing the projected future cash flows from operations of each hotel property by comparing the expected duration and financial impact of the economic downturn to publicly available market data, and

• evaluating the discount rates and expected terminal capitalization rates used in the determination of the fair value of certain hotel properties, by comparing against ranges that were independently developed using publicly available market data for comparable properties.

We have served as the Company's auditor since 2009.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 20, 2020 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 23, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

19 unchanged sentences

Consolidated Balance Sheets

(In thousands, except share data)

(In thousands, except share and per-share data)

2020 December 31, 2019

Investment in hotel properties, net $ 5,882,022 $ 6,332,587

Ground lease asset, net

Cash and cash equivalents 124,274 30,098

1 unchanged sentence

Hotel receivables (net of allowance for doubtful accounts of $ 183 and $ 738 , respectively)

10,225 49,619

Prepaid expenses and other assets 47,819 59,474

Total assets $ 6,076,366 $ 6,498,555

LIABILITIES AND EQUITY

Accounts payable and accrued expenses

Debt $ 2,280,471 $ 2,229,220

Accounts payable, accrued expenses and other liabilities 226,446 260,166

Lease liabilities - operating leases 255,106 256,271

Deferred revenues 36,057 57,704

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Shareholders’ equity:

Preferred shares of beneficial interest, $.01 par value (liquidation preference $510,000 at December 31, 2019 and at December 31, 2018), 100,000,000 shares authorized;

Preferred shares of beneficial interest, $ .01 par value (liquidation preference $ 510,000 at December 31, 2020 and December 31, 2019), 100,000,000 shares authorized;

20,400,000 shares issued and outstanding at December 31, 2020 and December 31, 2019

Common shares of beneficial interest, $ .01 par value, 500,000,000 shares authorized;

130,484,956 issued and outstanding at December 31, 2019 and 130,311,289 issued and outstanding at December 31, 2018

130,673,300 shares issued and outstanding at December 31, 2020 and 130,484,956 shares issued and outstanding at December 31, 2019

Additional paid-in capital 4,169,870 4,069,410

3 unchanged sentences

Non-controlling interests 6,989 10,728

Total equity 3,264,326 3,631,936

Total liabilities and equity $ 6,076,366 $ 6,498,555

4 unchanged sentences

For the year ended December 31,

2020 2019 2018

Room $ 287,439 $ 1,103,947 $ 565,107

Food and beverage 95,892 370,584 199,089

2 unchanged sentences

Hotel operating expenses:

Room 91,771 275,855 143,171

Food and beverage 77,698 260,278 136,845

5 unchanged sentences

Transaction costs 10,544 8,679 75,049

Impairment loss 74,556 — —

(Gain) loss on sale of hotel properties ( 117,401 ) ( 2,819 ) 2,147

3 unchanged sentences

Interest expense ( 104,098 ) ( 108,474 ) ( 53,923 )

Other 517 29 2,078

Income (loss) before income taxes ( 396,290 ) 120,897 15,127

13 unchanged sentences

For the year ended December 31,

2020 2019 2018

Comprehensive Income:

1 unchanged sentence

Other comprehensive income (loss):

Unrealized gain (loss) on derivative instruments

Change in fair value of derivative instruments ( 63,861 ) ( 25,785 ) ( 1,929 )

Amounts reclassified from other comprehensive income 28,505 ( 260 ) ( 978 )

Comprehensive income (loss) ( 427,949 ) 89,680 10,478

5 unchanged sentences

(In thousands, except share data)

Preferred Shares

Common Shares

Additional Paid-In Capital

Accumulated Other Comprehensive Income (Loss)

Distributions in Excess of Retained Earnings

Total Shareholders' Equity

Non-Controlling Interests

Preferred Shares Common Shares Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Distributions in Excess of Retained Earnings Total Shareholders' Equity Non-Controlling Interests Total Equity

Shares Amount Shares Amount

Balance at December 31, 2017 10,000,000 $ 100 68,812,575 $ 688 $ 1,685,437 $ 3,689 $ ( 191,013 ) $ 1,498,901 $ 4,625 $ 1,503,526

Issuance of shares, net of offering costs 10,400,000 104 61,399,104 614 2,377,089 — — 2,377,807 — 2,377,807

Issuance of operating partnership units — — — — — — — — 4,665 4,665

Issuance of common shares for Board of Trustees compensation — — 17,410 1 661 — — 662 — 662

3 unchanged sentences

Distributions on preferred shares — — — — — — ( 17,466 ) ( 17,466 ) ( 39 ) ( 17,505 )

Redemption of non-controlling interests

Net contribution from non-controlling interests — — — — — — — — 125 125

Other comprehensive income (loss):

Unrealized gain (loss) on derivative instruments

Change in fair value of derivative instruments — — — — — ( 1,929 ) — ( 1,929 ) — ( 1,929 )

Amounts reclassified from other comprehensive income — — — — — ( 978 ) — ( 978 ) — ( 978 )

Cumulative effect adjustment

from adoption of new accounting

standard — — — — — 548 ( 548 ) — — —

Net income (loss) — — — — — — 13,393 13,393 ( 8 ) 13,385

1 unchanged sentence

Issuance of shares, net of offering costs — — — — ( 275 ) — — ( 275 ) — ( 275 )

Issuance of operating partnership units

Issuance of common shares for Board of Trustees compensation — — 25,282 1 739 — — 740 — 740

3 unchanged sentences

Distributions on preferred shares — — — — — — ( 32,556 ) ( 32,556 ) ( 50 ) ( 32,606 )

Net contribution from non-controlling interests

Redemption of non-controlling interests — — — — ( 30 ) — — ( 30 ) ( 95 ) ( 125 )

Other comprehensive income (loss):

Unrealized gain (loss) on derivative instruments

Cumulative effect adjustment from adoption of new accounting standard

Change in fair value of derivative instruments — — — — — ( 25,785 ) — ( 25,785 ) — ( 25,785 )

Amounts reclassified from other comprehensive income — — — — — ( 260 ) — ( 260 ) — ( 260 )

Net income (loss) — — — — — — 115,442 115,442 283 115,725

6 unchanged sentences

Distributions on preferred shares — — — — — — ( 32,556 ) ( 32,556 ) — ( 32,556 )

Redemption of non-controlling interests

Redemption of non-controlling interest LTIP units — — 109,240 1 13,445 — — 13,446 ( 13,446 ) —

Equity component of convertible senior notes — — — — 113,890 — — 113,890 — 113,890

Purchases of capped calls in connection with convertible senior notes — — — — ( 38,300 ) — — ( 38,300 ) — ( 38,300 )

Other comprehensive income (loss):

Unrealized gain (loss) on derivative instruments

Change in fair value of derivative instruments — — — — — ( 63,861 ) — ( 63,861 ) — ( 63,861 )

Amounts reclassified from other comprehensive income — — — — — 28,505 — 28,505 — 28,505

Net income (loss) — — — — — — ( 391,729 ) ( 391,729 ) ( 864 ) ( 392,593 )

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For the year ended December 31,

2020 2019 2018

Operating activities:

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Share-based compensation 22,779 8,239 6,228

(Gain) loss on derivative instruments

(Gain) loss on marketable securities — — 2,978

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(Gain) loss on sale of hotel properties ( 117,401 ) ( 2,819 ) 2,147

Impairment and other losses

Impairment loss 74,556 — —

Non-cash ground rent 6,198 6,395 3,062

Other 347 2,365 2,939

Changes in assets and liabilities:

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Improvements and additions to hotel properties ( 125,014 ) ( 169,632 ) ( 89,605 )

Deposit received on hotel properties

Proceeds from sales of hotel properties 375,131 470,352 28,551

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Repayments of debt ( 212,965 ) ( 518,207 ) ( 102,366 )

Purchases of capped calls for convertible senior notes ( 38,300 ) — —

Repurchases of common shares ( 1,255 ) ( 4,009 ) ( 2,507 )

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The hotels are located in the following markets:

Atlanta (Buckhead), Georgia;

Boston, Massachusetts;

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Naples, Florida;

Nashville, Tennessee;

New York, New York;

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The remaining 0.2 % of the common units are owned by the other limited partners of the Operating Partnership.

For the Company to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), it cannot operate the hotels it owns.

For the Company to maintain its qualification as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), it cannot operate the hotels it owns.

Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to subsidiaries of Pebblebrook Hotel Lessee, Inc.

(collectively with its subsidiaries, "PHL") and LaSalle Hotel Lessee Inc.

(collectively with its subsidiaries, "LHL"), the Company’s taxable REIT subsidiaries ("TRSs"), which in turn engage third-party eligible independent contractors to manage the hotels.

PHL and LHL are consolidated into the Company’s financial statements.

(collectively with its subsidiaries, "PHL"), a taxable REIT subsidiary ("TRS"), which in turn engage third-party eligible independent contractors to manage the hotels.

PHL is consolidated into the Company’s financial statements.

COVID-19 Operations and Liquidity Update

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, health official recommendations, corporate policy changes and individual responses, hotel demand was dramatically reduced.

Following government mandates and health official recommendations, the Company temporarily suspended operations at 47 of its hotels and resorts and working with its operators, dramatically reduced staffing and expenses at the hotels that remained operational.

Throughout the summer months, hotel industry demand improved from its historical lows seen in the second quarter, particularly as leisure customers sought to travel to drive-to hotels and resorts that could offer more space and outdoor experiences.

The monthly revenue increased slowly through October as the Company reopened several of its hotels and resorts between May and October.

November and December had declining revenue at most of its opened hotels, except its South Florida properties, as leisure demand declined and business travel did not return in a meaningful manner.

The South Florida properties experienced slightly increasing revenue late in the year which is consistent with the seasonal pattern for these warm weather resort properties.

The Company anticipates leisure travel will return as vaccine distribution becomes more widely available, followed by business travel.

The Company still anticipates group demand will be the slowest to return until there is more certainty around health and immunity solution for the country.

As of December 31, 2020, 37 of the Company's hotels and resorts listed below were open, with operations at the remaining 16 hotels still temporarily suspended.

The Company anticipates reopening additional hotels as demand returns and it determines that the Company would lose less money with the hotels open versus remaining closed.

Property Location

L'Auberge Del Mar Del Mar, CA

Hotel Palomar Los Angeles Beverly Hills Los Angeles, CA

W Los Angeles - West Beverly Hills Los Angeles, CA

Mondrian Los Angeles West Hollywood, CA

Le Meridien Delfina Santa Monica Santa Monica, CA

Viceroy Santa Monica Hotel Santa Monica, CA

Le Parc Suite Hotel West Hollywood, CA

Montrose West Hollywood West Hollywood, CA

Chamberlain West Hollywood Hotel West Hollywood, CA

Grafton on Sunset West Hollywood, CA

Embassy Suites San Diego Bay - Downtown San Diego, CA

Paradise Point Resort & Spa San Diego, CA

San Diego Mission Bay Resort (formerly Hilton San Diego Mission Bay Resort) San Diego, CA

The Westin San Diego Gaslamp Quarter San Diego, CA

Hilton San Diego Gaslamp Quarter San Diego, CA

Solamar Hotel San Diego, CA

Hotel Spero San Francisco, CA

Hotel Zetta San Francisco San Francisco, CA

Chaminade Resort & Spa Santa Cruz, CA

Southernmost Beach Resort Key West, FL

The Marker Key West Harbor Resort Key West, FL

LaPlaya Beach Resort and Club Naples, FL

Hotel Colonnade Coral Gables, Autograph Collection Miami, FL

The Liberty, A Luxury Collection Hotel, Boston Boston, MA

Hyatt Regency Boston Harbor Boston, MA

W Boston Boston, MA

The Westin Copley Place, Boston Boston, MA

George Hotel Washington, DC

Hotel Zena Washington DC (formerly Donovan Hotel) Washington, DC

Viceroy Washington DC (formerly Mason & Rook Hotel) Washington, DC

Skamania Lodge Stevenson, WA

Hotel Monaco Seattle Seattle, WA

Hotel Vintage Seattle Seattle, WA

Hotel Vintage Portland Portland, OR

The Heathman Hotel Portland, OR

The Nines, a Luxury Collection Hotel, Portland Portland, OR

Sofitel Philadelphia at Rittenhouse Square Philadelphia, PA

The COVID-19 pandemic has had a significant negative impact on the Company's operations and financial results to date and the Company expects that it will continue to have a significant negative impact on the Company's results of operations, financial position and cash flow in 2021.

The Company cannot estimate when travel demand will recover.

As a result of uncertainty at the beginning of the pandemic, in March 2020, the Company fully drew down on its $ 650.0 million unsecured revolving credit facility, reduced the quarterly cash dividend on its common shares to one penny per share, reduced planned capital expenditures, reduced the compensation of its executive officers, trustees and employees, and, working closely with its hotel operating partners, significantly reduced its hotels' operating expenses.

On June 29, 2020, the Company amended its

existing credit facilities, term loan facilities and senior notes.

Among other things, the amendments extended the maturity of a significant portion of the term loan due in 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.

In addition, the Company repaid approximately $ 250.0 million on its unsecured revolving credit facility.

In December 2020, the Company issued $ 500.0 million of convertible notes and used the proceeds to repay an additional $ 250.0 million of its unsecured revolving credit facility and $ 200.0 million of its unsecured term loans.

As of December 31, 2020, the Company had a balance of $ 40.0 million on its unsecured revolving credit facility.

In February 2021, the Company issued an additional $ 250.0 million of convertible notes under the same terms as the December 2020 offering, at a 5.5 % premium to par.

In connection with the pricing of the convertible notes, the Company entered into privately negotiated capped call transactions with certain of the underwriters, their respective affiliates and/or other counterparties.

The Company used the net proceeds to reduce amounts outstanding under the Company’s senior unsecured revolving credit facility, unsecured term loans, and for general corporate purposes.

In February 2021, the Company further amended the agreements governing the existing credit facilities, term loan facilities and senior notes to, among other items, waive financial covenants through the end of the first quarter of 2022 except for the minimum fixed charge coverage and minimum unsecured interest coverage ratio which were extended through December 31, 2021 and to increase the interest rate spread.

Refer to "Note 5.

Debt" for additional information regarding these amendments and convertible debt.

Based on these amendments and expense and cash burn rate reductions, the Company believes that it has sufficient liquidity to meet its obligations for the next twelve months.

The negative impact of the demand loss caused by COVID-19 will result in a significant income tax loss in PHL.

Given the continued negative impact of the COVID-19 pandemic on the Company's financial results and uncertainties about the Company's ability to utilize its net operating loss in future years, the Company had a valuation allowance of $ 20.9 million as of December 31, 2020.

As of December 31, 2020, the Company had an income tax receivable of $ 6.9 million attributable to the net operating loss carry-back, which is included in prepaid expenses and other assets in the accompanying consolidated balance sheets.

The Company also adopted an optional remote-work policy and other physical distancing policies at its corporate office and the Company does not anticipate these policies to have any adverse impact on its ability to continue to operate its business.

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

Summary of Significant Accounting Policies

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The Company and its subsidiaries are separate legal entities and maintain records and books of account separate and apart from each other.

The consolidated financial statements include all of the accounts of the Company and its subsidiaries and are presented in accordance with U.S.

The consolidated financial statements include all of the accounts of the Company and its subsidiaries and are presented in accordance with accounting principles generally accepted in the United States of America, ("U.S.

All significant intercompany balances and transactions have been eliminated in consolidation.

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The state of the overall economy can significantly impact hotel operational performance and thus, impact the Company's financial position.

Should any of the hotels experience a significant decline in operational performance, it may affect the Company's ability to make distributions to our shareholders and service debt or meet other financial obligations.

As discussed above, the impact of COVID-19 has significantly impacted the hotels' operational performance and therefore the Company has significantly reduced distributions to our shareholders in addition to taking other measures in order to reduce operating expenses.

A continued reduction in travel may impact the Company's ability to service debt or meet other financial obligations.

Fair Value Measurements

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Hotel renovations and replacements of assets that improve or extend the life of the asset are recorded at cost and depreciated over their estimated useful lives.

Furniture, fixtures and equipment under capital leases are recorded at the present value of the minimum lease payments.

Furniture, fixtures and equipment under finance leases are recorded at the present value of the minimum lease payments.

Repair and maintenance costs are expensed as incurred.

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If the estimated undiscounted future cash flows are less than the carrying value of the asset, an adjustment to reduce the carrying value to the related hotel’s estimated fair market value is recorded and an impairment loss is recognized.

In the evaluation of impairment of its hotel properties, the Company makes many assumptions and estimates including projected cash flows both from operations and eventual disposition, expected useful life and holding period, future required capital expenditures, and fair values, including consideration of capitalization rates, discount rates, and comparable selling prices.

In the evaluation of impairment of its hotel properties, the Company makes many assumptions and estimates including projected cash flows both from operations and eventual disposition, expected useful life and estimated holding period, future required capital expenditures, and fair values, including consideration of expected terminal capitalization rates, discount rates, and comparable selling prices.

The Company will adjust its assumptions with respect to the remaining useful life of the hotel property when circumstances change or it is more likely than not that the hotel property will be sold prior to its previously expected useful life.

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Intangible assets or liabilities are recorded on non-market contracts assumed as part of the acquisition of certain hotels.

The Company reviews the terms of agreements assumed in conjunction with the purchase of a hotel to determine if the terms are

over or under market compared to an estimated market agreement at the acquisition date.

The Company reviews the terms of agreements assumed in conjunction with the purchase of a hotel to determine if the terms are over or under market compared to an estimated market agreement at the acquisition date.

Under market lease assets or over market contract liabilities are recorded at the acquisition date and amortized using the straight-line method over the term of the agreement.

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The Company maintains an allowance for doubtful accounts sufficient to cover estimated potential credit losses.

without regard to the deduction for dividends paid and excluding net capital gains) to its shareholders.

To qualify as a REIT for federal income tax purposes, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90 percent of its REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains) to its shareholders.

As a REIT, the Company generally is not subject to federal corporate income tax on that portion of its taxable income that is currently distributed to shareholders.

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Segment Information

The Company separately evaluates the performance of each of its hotels properties.

The Company separately evaluates the performance of each of its hotel properties.

However, because each of the hotels has similar economic characteristics, facilities, and services, the hotel properties have been aggregated into a single operating segment.

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See Notes 4 and 11 below for additional disclosures of the adoption of this standard.

Business Combinations and Acquisition and Disposition of Hotel Properties

Merger with LaSalle Hotel Properties

On November 30, 2018, the Company completed its merger with LaSalle Hotel Properties (“LaSalle”) pursuant to the Agreement and Plan of Merger, dated as of September 6, 2018, as amended on September 18, 2018 (the “Merger Agreement”), by and among the Company, the Operating Partnership, Ping Merger Sub, LLC (“Merger Sub”), Ping Merger OP, LP (“Merger OP”), LaSalle and LaSalle Hotel Operating Partnership, L.P.

(“LaSalle OP”).

Pursuant to the Merger Agreement, on November 30, 2018, Merger OP merged with and into LaSalle OP (the “Partnership Merger”) with LaSalle OP surviving as a subsidiary of the Operating Partnership.

Immediately following the Partnership Merger, LaSalle merged with and into Merger Sub (the “Company Merger” and, together with the Partnership Merger, the “Mergers”) with Merger Sub surviving as a wholly owned subsidiary of the Company.

On December 3, 2018, Merger Sub assigned all of its rights and obligations to the Company and was liquidated and dissolved.

Upon completion of the Company Merger and pursuant to the Merger Agreement, each issued and outstanding LaSalle common share of beneficial interest, $ 0.01 par value per share ("LaSalle common shares") (other than the 10.8 million LaSalle common shares held by the Company) was converted into the right to receive either (i) 0.92 of the Company's common shares and cash in lieu of fractional shares, if any;

or (ii) $ 37.80 in cash, subject to certain adjustments and to any applicable withholding tax (the “Cash Consideration”).

The maximum number of LaSalle common shares that were eligible to be converted into the right to receive the Cash Consideration was equal to 30 % of the aggregate number of LaSalle common shares issued and outstanding immediately prior to completion of the Company Merger.

The LaSalle common shares held by the Company were excluded from the cash election in the Company Merger and were cancelled.

In addition, each issued and outstanding LaSalle 6.375 % Series I cumulative redeemable preferred share was converted into the right to receive one of the Company's 6.375 % Series E cumulative redeemable preferred shares and each issued and outstanding LaSalle 6.3 % Series J cumulative redeemable preferred share was converted into the right to receive one of the Company's 6.3 % Series F cumulative redeemable preferred shares.

Upon completion of the Partnership Merger and pursuant to the Merger Agreement, each common unit of LaSalle OP (a “LaSalle OP Common Unit”) that was issued and outstanding immediately prior to completion of the Partnership Merger, other than LaSalle OP Common Units held by LaSalle and its subsidiaries, was cancelled and converted into the right to receive 0.92 common units of the Operating Partnership, without interest.

No fractional common shares or OP units were issued in the Mergers, and the value of any fractional interests was paid in cash.

The Company accounted for the Mergers under the acquisition method of accounting in ASC 805, Business Combinations .

As a result of the Mergers, the Company acquired an ownership interest in the following 36 hotel properties:

Ownership Interest

Villa Florence San Francisco on Union Square

San Francisco, CA

The Marker San Francisco

San Francisco, CA

Chaminade Resort & Spa

Santa Cruz, CA

Harbor Court Hotel San Francisco

San Francisco, CA

Viceroy Santa Monica Hotel

Santa Monica, CA

Le Parc Suite Hotel

West Hollywood, CA

Montrose West Hollywood

West Hollywood, CA

Chamberlain West Hollywood Hotel

West Hollywood, CA

Grafton on Sunset

West Hollywood, CA

The Westin Copley Place, Boston

The Liberty, A Luxury Collection Hotel, Boston

Hyatt Regency Boston Harbor

Sofitel Washington DC Lafayette Square

Washington, DC

Mason & Rook Hotel

Washington, DC

Donovan Hotel

Washington, DC

Paradise Point Resort & Spa

San Diego, CA

Hilton San Diego Gaslamp Quarter

San Diego, CA

Solamar Hotel

San Diego, CA

L'Auberge Del Mar

Hilton San Diego Mission Bay Resort

San Diego, CA

The Heathman Hotel

Southernmost Beach Resort

The Marker Key West

The Roger New York

Hotel Chicago Downtown, Autograph Collection

The Westin Michigan Avenue Chicago

Hotel Palomar Washington DC

Washington, DC

The Liaison Capitol Hill

Washington, DC

Hotel Amarano Burbank

Washington, DC

(1) In February 2019, the Company sold this hotel property for $ 141.5 million .

(2) In February 2019, the Company sold this hotel property for $ 111.0 million .

(3) In May 2019, the Company sold this hotel property for $ 58.3 million .

(4) In July 2019, the Company sold this hotel property for $ 72.9 million .

(5) In September 2019, the Company sold this hotel property for $ 42.0 million .

(6) In September 2019, the Company sold this hotel property for $ 23.3 million .

(7) In November 2019, the Company sold this hotel property for $ 33.1 million .

(8) This hotel property was closed in November 2019 for renovation and is expected to re-open in the second quarter of 2020 as Hotel Zena.

The total consideration for the Mergers was approximately $ 4.1 billion , which included the Company's issuance of approximately 61.4 million common shares valued at $ 34.92 per share to LaSalle common shareholders, the Company's issuance of 4.4 million Series E Preferred Shares valued at $ 23.10 per share to former LaSalle Series I preferred shareholders and 6.0 million Series F Preferred Shares valued at $ 22.10 per share to former LaSalle Series J preferred shareholders, the Operating Partnership's issuance of approximately 0.1 million OP units valued at $ 34.92 per unit to former LaSalle limited partners, and cash.

Additionally, the Company's investment of 10.8 million of LaSalle common shares valued at $ 346.5 million is included in the total consideration.

The total consideration, excluding the net working capital assumed, consisted of the following (in thousands):

Total Consideration

Common shares

Series E preferred shares

Series F preferred shares

Total consideration

The Company determined the acquisition date fair values as follows (in thousands):

November 30, 2018

Investment in hotel properties

Restricted cash reserves

Hotel and other receivables

Intangible assets

Prepaid expenses and other assets

Accounts payable and accrued expenses

Deferred revenues

Accrued interest

Distributions payable

Total consideration

During the year ended December 31, 2019 , the Company finalized the purchase price accounting and recorded an adjustment to decrease the preliminary fair value of investment in hotel properties by $ 24.6 million , decrease intangible assets by $ 12.7 million , increase prepaid expenses and other assets by $ 7.0 million and decrease accounts payable and accrued expenses by $ 30.3 million .

The Company used the following valuation methodologies, inputs, and assumptions to estimate the fair value of the assets acquired, the liabilities assumed, and the equity interests acquired:

Investment in hotel properties — The Company estimated the fair values of the land and improvements, buildings and improvements, and furniture, fixtures, and equipment at the hotel properties by using a combination of the market, cost, and income approaches.

These valuation methodologies are based on significant Level 2 and Level 3 inputs in the fair value hierarchy, such as estimates of future income growth, capitalization rates, discount rates, capital expenditures, and cash flow projections, including hotel revenues and net operating income, at the respective hotel properties.

Intangible assets — The Company estimated the fair value of its lease intangible assets by calculating the present value of the difference between the contractual rental amounts paid according to the in-place lease agreements and the market rental rates for similar leased space, measured over a period equal to the remaining non-cancellable term of the lease.

This valuation methodology is based on Level 2 and Level 3 inputs in the fair value hierarchy.

The below market lease intangible assets are amortized as adjustments to ground rent expense over the remaining terms of the respective leases.

Above market lease liabilities — The Company estimated the fair value of its above market lease liabilities by calculating the present value of the difference between the contractual rental amounts paid according to the in-place lease agreements and the market rental rates for similar leased space, measured over a period equal to the remaining non-cancellable term of the lease.

This valuation methodology is based on Level 2 and Level 3 inputs in the fair value hierarchy.

The above market lease liabilities were included in accounts payable and other liabilities in the accompanying consolidated balance sheet prior to the adoption of ASC 842, Leases .

The above market lease liabilities are amortized as adjustments to ground rent expense over the remaining terms of the respective leases.

Restricted cash reserves, hotel and other receivables, prepaid expenses and other assets, accounts payable and other liabilities, deferred revenues, accrued interest, and distributions payable — the carrying amounts of the assets acquired, the liabilities assumed, and the equity interests acquired approximate fair value because of their short term maturities.

For the hotel properties acquired during the Mergers, total revenues of $ 56.7 million and operating income of $ 15.9 million for the year ended December 31, 2018 are included in the accompanying consolidated statements of operations and comprehensive income.

There were no acquisitions of hotel properties during the year ended December 31, 2019 .

For the year ended December 31, 2019 , the Company incurred $ 0.6 million in transaction costs and $ 7.7 million in integration costs in connection with the Mergers.

For the year ended December 31, 2018 , the Company incurred $ 72.7 million in transaction costs and $ 2.0 million in integration costs in connection with the Mergers.

The transaction costs are primarily related to transfer taxes, financial advisory fees, loan commitment fees, legal, and other professional service fees in connection with the Mergers.

The integration costs are primarily related to professional fees and employee-related costs.

The merger-related costs noted above are included in transaction costs in the accompanying consolidated statements of operations and comprehensive income.

The following unaudited condensed pro forma financial information presents the results of operations as if the Mergers, excluding all dispositions after the Mergers, had taken place on January 1, 2017.

The unaudited condensed pro forma financial information is not necessarily indicative of what the actual results of operations of the Company would have been assuming the Mergers had taken place on January 1, 2017, nor is it indicative of the results of operations for future periods.

The unaudited condensed pro forma financial information is as follows (in thousands):

For the year ended December 31,

Total revenues

Operating income (loss)

Net income (loss) attributable to common shareholders

Net income (loss) per share available to common shareholders — basic

Net income (loss) per share available to common shareholders — diluted

Disposition of Hotel Properties

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40), which, among other things, simplifies the accounting for convertible instruments by eliminating the requirement to separate conversion features from the host contract.

Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost.

Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods.

The Company early adopted ASU 2020-06 on January 1, 2021.

As such, beginning January 1, 2021, the convertible debt will be recorded entirely as a single liability with no portion of the proceeds from the issuance of the convertible debt instrument recorded as attributable to the conversion feature.

In addition, the Company will cease recording non-cash interest expense associated with amortization of the debt discount and will calculate earnings per share using the if-converted method.

The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments.

As a result, in more cases, convertible debt will be accounted for as a single instrument.

The guidance also removes certain conditions for equity classification related to contracts in an entity’s own equity and requires the application of the if-converted method for calculating diluted earnings per share.

Acquisition and Disposition of Hotel Properties

There were no acquisitions of hotel properties during the years ended December 31, 2020 and 2019.

The Company will report a disposed or held for sale hotel property or group of hotel properties in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on its operations and financial results.

All other disposed hotel properties will have their operating results reflected within continuing operations on the Company's consolidated statements of operations and comprehensive income for all periods presented.

During the year ended December 31, 2019 , the Company sold seven hotel properties for an aggregate sales price of $ 481.9 million .

In connection with these transactions, the Company recorded an aggregate of $ 2.8 million net gain on sales, which is included in (gain) loss on sale of hotel properties, net, in the accompanying consolidated statements of operations and comprehensive income.

The following table discloses the hotel properties that were sold during the year ended December 31, 2019 (in thousands):

Hotel Property Name

The Liaison Capitol Hill

Washington, DC

The following table sets forth information regarding the Company's disposition transactions during the years ended December 31, 2020 and 2019 (in thousands):

Hotel Property Name Location Sale Date Sale Price

Sofitel Washington DC Lafayette Square and InterContinental Buckhead Atlanta Washington, DC / Buckhead, GA March 6, 2020 $ 331,000

Union Station Hotel Nashville, Autograph Collection Nashville, TN July 29, 2020 56,000

2020 Total $ 387,000

The Liaison Capitol Hill Washington, D.C.

February 14, 2019 $ 111,000

Hotel Palomar Washington DC

Washington, DC

Hotel Palomar Washington DC Washington, D.C.

February 22, 2019 141,450

Hotel Amarano Burbank

July 16, 2019

Washington, DC

September 12, 2019

Washington, DC

September 26, 2019

Washington, DC

November 22, 2019

During the year ended December 31, 2018 , the Company sold The Grand Hotel Minneapolis for $ 30.0 million and recognized a loss of $ 2.1 million related to this hotel property.

For the years ended December 31, 2019 , 2018 and 2017 , the Company's consolidated statements of operations and comprehensive income included operating (loss) income of $ 9.9 million , $ 5.5 million and $ 8.5 million , respectively, related to the hotel properties sold.

Onyx Hotel Boston, MA May 29, 2019 58,255

Hotel Amarano Burbank Burbank, CA July 16, 2019 72,866

Rouge Hotel Washington, DC September 12, 2019 42,000

Hotel Madera Washington, DC September 26, 2019 23,250

Topaz Hotel Washington, DC November 22, 2019 33,100

2019 Total $ 481,921

For the years ended December 31, 2020, 2019 and 2018, the Company recognized a (gain) loss on its dispositions of $( 117.4 ) million, $( 2.8 ) million and $ 2.1 million, respectively, which is included in (gain) loss on sale of hotel properties, in the accompanying consolidated statements of operations and comprehensive income.

For the years ended December 31, 2020, 2019 and 2018, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $ 4.9 million, $ 46.4 million and $ 30.1 million, respectively, related to the hotel properties sold.

The sales of the hotel properties described above did not represent a strategic shift that had a major effect on the Company’s operations and financial results, and therefore, did not qualify as discontinued operations.

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2020 December 31,

Land $ 973,848 $ 1,042,198

Buildings and improvements 4,849,644 4,998,108

Furniture, fixtures and equipment 515,975 522,631

Capital lease asset

Finance lease asset 114,835 134,063

Construction in progress 5,443 35,637

$ 6,459,745 $ 6,732,637

Right-of-use asset, operating leases 320,564 335,272

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Investment in hotel properties, net $ 5,882,022 $ 6,332,587

The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment.

As a result of the effects of the COVID-19 pandemic on our expected future operating cash flows and estimated hold periods for certain properties, we determined certain impairment triggers had occurred and as a result, the Company assessed its investment in hotel properties for recoverability.

Based on the analyses performed, for the year ended December 31, 2020, the Company recognized an impairment loss of $ 74.6 million related to two hotels and the retail component of a hotel as a result of the fair values being lower than their carrying values.

The impairment loss was determined using level 2 inputs under authoritative guidance for fair value measurements.

On January 1, 2019, the Company adopted ASC 842, Leases and applied it prospectively.

At adoption, the Company also elected the practical expedients which permitted it to not reassess its prior conclusions about lease identification, classification and initial direct costs.

Consequently on January 1, 2019, the Company recognized right-of-use assets and related liabilities related to its ground leases, all of which are operating leases.

Consequently on January 1, 2019, the Company recognized right-of-use assets and related liabilities

related to its ground leases, all of which are operating leases.

Since most of the Company's leases do not provide an implicit rate, the Company used incremental borrowing rates, which ranged from 5.5 % to 7.6 %.

All of of these ground leases have long terms, ranging from 10 years to 88 years and the Company included the exercise of options to extend when it is reasonably certain the Company will exercise such option.

All of these ground leases have long terms, ranging from 10 years to 88 years and the Company included the exercise of options to extend when it is reasonably certain the Company will exercise such option.

See Note 11 for additional information about the ground leases.

The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements.

As of December 31, 2019 , the Company's right-of-use assets of $ 335.3 million , which included favorable and unfavorable intangibles, are included in the investment in hotel properties and its related lease liabilities of $ 256.2 million are presented in accounts payable and accrued expenses in the Company's consolidated balance sheets.

As of December 31, 2020, the Company's lease liabilities consisted of operating lease liabilities of $ 255.1 million and financing lease liabilities of $ 46.4 million.

As of December 31, 2019, the Company's lease liabilities consisted of operating lease liabilities of $ 256.3 million and financing lease liabilities of $ 45.6 million.

The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.

The adoption of this standard had minimal impact on the Company's consolidated statements of operations and comprehensive income.

On September 10, 2017, Hotel Colonnade Coral Gables, Autograph Collection ("Hotel Colonnade") located in Coral Gables, Florida and LaPlaya Beach Resort and Club ("LaPlaya") located in Naples, Florida were impacted by Hurricane Irma.

Hotel Colonnade did not suffer any material damage and remained open.

LaPlaya was closed in anticipation of the storm and re-opened in stages beginning in the fourth quarter of 2017 and was fully reopened in January 2018.

The Company’s insurance policies provide coverage for property damage, business interruption, and reimbursement for other costs that were incurred relating to damages sustained during Hurricane Irma.

Insurance proceeds are subject to deductibles.

As of June 30, 2018, the Company reached a final agreement with the insurance carriers related to LaPlaya totaling $ 20.5 million , and the Company recognized gain of $ 13.1 million for the year ended December 31, 2018 .

On June 29, 2020, the Company amended its credit agreements and related documents governing the unsecured revolving credit facilities, term loan agreements and senior notes which:

• waived existing financial covenants through the end of the first quarter of 2021 and provided substantially less restrictive covenants through the end of the second quarter of 2022 ("waiver period");

• extended the maturity of $ 242.6 million of the Company’s Sixth Term Loan 2021 tranche of $ 300.0 million from November 2021 to November 2022;

• fixed the spread at the highest threshold through the end of the waiver period;

• increased the LIBOR floor from 0 % to 0.25 % for any debt not designated by the Company as being covered by an interest rate swap;

• requires assets to be pledged as security, in the future, under certain circumstances;

• preserved the Company's ability to pay quarterly preferred equity dividend payments and a $ 0.01 per share quarterly common dividend (or higher if required to maintain REIT status) during the waiver period so long as the Company is in compliance with all loan agreements;

• provided the Company flexibility to complete new acquisitions and other investments during the waiver period;

• permit the Company to complete up to $ 90.0 million of capital improvements and redevelopment projects through the end of the waiver period;

• provide limitations during the waiver period on common share repurchases and certain required prepayments following capital issuances or property dispositions.

On February 18, 2021, the Company further amended its credit agreements and related documents governing the unsecured revolving credit facilities, term loan agreements and senior notes, which:

• extended the waiver period for financial covenants through the end of the first quarter of 2022 except for the minimum fixed charge coverage and the minimum unsecured interest coverage ratio which are extended through December 31, 2021.

The covenants are substantially less restrictive through a phase-in period;

• extended the majority of the remaining balance of the Company's Sixth Term Loan 2021 tranche, from November 2021 to November 2022;

• increased the spread on the unsecured revolving credit facility to LIBOR plus 2.4 % and unsecured term loans to LIBOR plus 2.35 %;

• increased the fixed rate on the Senior Unsecured Notes by 0.45 % during the extended waiver period;

• extends other terms through the extended waiver period.

The Company's debt consisted of the following as of December 31, 2020 and 2019 (dollars in thousands):

Balance Outstanding as of

Interest Rate

Maturity Date

December 31, 2019

December 31, 2018

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

Revolving credit facilities

Senior unsecured credit facility

PHL unsecured credit facility

Senior unsecured credit facility Floating (1)

January 2022 $ 40,000 $ 165,000

PHL unsecured credit facility Floating (2)

January 2022 — —

Total revolving credit facilities $ 40,000 $ 165,000

Unsecured term loans

First Term Loan

Second Term Loan

Third 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

December 2020

Tranche 2021 Floating (3)

November 2021 (4)

40,966 300,000

Tranche 2021 Extended Floating (3)

November 2022 173,034 —

Tranche 2022 Floating (3)

November 2022 286,000 400,000

Tranche 2023 Floating (3)

November 2023 400,000 400,000

Tranche 2024 Floating (3)

January 2024 400,000 400,000

Total Sixth Term Loan 1,300,000 1,500,000

2 unchanged sentences

Total term loans $ 1,766,545 $ 1,964,657

Convertible senior notes

Convertible senior notes 1.75 % December 2026 500,000 —

Debt discount, net ( 113,099 ) —

Deferred financing costs, net ( 12,568 ) —

Total convertible senior notes $ 374,333 $ —

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

1 unchanged sentence

Total senior unsecured notes $ 99,593 $ 99,563

Mortgage loans

The Westin San Diego Gaslamp Quarter

Deferred financing costs, net

Total mortgage loans

Total debt $ 2,280,471 $ 2,229,220

________________________

2 unchanged sentences

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

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

As of December 31, 2018 , approximately $ 1.2 billion of the borrowings under the term loan facilities was at a weighted-average fixed interest rate of 3.46 % , after taking into account interest rate swap agreements, and approximately $ 1.2 billion was at a weighted-average floating interest rate of 4.26 % .

As of December 31, 2020, $ 1.4 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.19 %, after taking into account interest rate swap agreements, and $ 345.0 million bore a weighted-average floating interest rate of 2.46 %.

As of December 31, 2019, $ 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 $ 345.0 million bore a weighted-average floating interest rate of 3.32 %.

(4 ) In February 2021, we repaid $ 12.8 million of the Sixth Term Loan Tranche 2021 and extended the majority of the remaining balance to November 2022.

Unsecured Revolving Credit Facilities

The Company has a $ 650.0 million senior unsecured revolving credit facility maturing in January 2022, with options to extend the maturity date to January 2023, pursuant to certain terms and conditions and payment of an extension fee.

As of December 31, 2019 , the Company had $ 165.0 million of outstanding borrowings and $ 482.2 million borrowing capacity remaining on its senior unsecured 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.

As of December 31, 2020, the Company had $ 40.0 million of outstanding borrowings, $ 6.8 million of outstanding letters of credit and borrowing capacity of $ 603.2 million remaining on its senior unsecured 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, or spread.

The Company has the ability to further increase the aggregate borrowing capacity under the credit agreement to up to $ 1.3 billion, subject to lender approval.

Borrowings on the revolving credit facility bear interest at LIBOR plus 1.45 % to 2.25 %, depending on the Company’s leverage ratio.

As a result of the amendments to the credit agreements and related documentation described above, the spread on the borrowings is fixed at 2.25 % during the waiver period.

Additionally, the Company is required to pay an unused commitment fee at an annual rate of 0.20 % or 0.30 % of the unused portion of the revolving credit facility, depending on the amount of borrowings outstanding.

3 unchanged sentences

Borrowings on the PHL Credit Facility bear interest at LIBOR plus 1.45 % to 2.25 %, depending on the Company's leverage ratio.

As a result of the amendments described above, the spread of the borrowings is fixed at 2.25 % during the waiver period.

The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Company's credit agreement that governs the Company's senior unsecured revolving credit facility.

As of December 31, 2019 , the Company had no borrowings under the PHL Credit Facility and had $ 25.0 million borrowing capacity remaining under the PHL Credit Facility.

As of December 31, 2020, the Company had no borrowings under the PHL Credit Facility and had $ 25.0 million borrowing capacity remaining available under the PHL Credit Facility.

Under the terms of the credit agreement for the unsecured revolving credit facility, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $ 30.0 million, may be issued on behalf of the Company by the lenders under the unsecured revolving credit facility.

1 unchanged sentence

Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount.

Standby letters of credit of $ 2.8 million and zero were outstanding as of December 31, 2019 and 2018 , respectively.

As of December 31, 2019 , the Company was in compliance with the debt covenants of the credit agreements that govern the unsecured revolving credit facilities.

Standby letters of credit of $ 6.8 million and $ 2.8 million were outstanding as of December 31, 2020 and 2019, respectively.

As of December 31, 2020, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.

Unsecured Term Loan Facilities

2 unchanged sentences

Each of the term loan facilities is subject to debt covenants substantially similar to the covenants under the credit agreement that governs the revolving credit facility.

During the year ended December 31, 2019 , the Company repaid $ 450.0 million of term loans, consisting of the full repayment of the Company's $ 200.0 million third term loan and a $ 250.0 million tranche maturing in 2020 of the Company's sixth term loan.

Upon completion of the convertible notes offering in December, the Company repaid $ 200.0 million of the Company's sixth term loans.

As of December 31, 2020, the Company was in compliance with all debt covenants of its term loan facilities.

The Company entered into interest rate swap agreements to fix the LIBOR rate on a portion of these unsecured term loan facilities, see Derivative and Hedging Activities below.

Convertible Senior Notes

In December 2020, the Company issued $ 500.0 million aggregate principal amount of 1.75 % Convertible Senior Notes maturing in December 2026 (the "Convertible Notes").

The Convertible Notes are governed by an indenture (the “Base Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee.

The net proceeds from the offering of the Convertible Notes were approximately $ 487.3 million after deducting the underwriting fees and other expenses paid by the Company.

The Convertible Notes bear interest at a rate of 1.75 % per annum, payable semi-annually in arrears on June 15th and December 15th of each year, beginning on June 15, 2021.

The Convertible Notes will mature on December 15, 2026.

The Company recorded coupon interest expense of $ 0.4 million for the year ended December 31, 2020.

The Company separated the Convertible Notes into liability and equity components.

The initial carrying amount of the liability component was $ 386.1 million and was calculated using a discount rate of 6.25 %.

The discount rate was based on the terms of debt instruments that were similar to the Convertible Notes.

The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the principal amount of the

Convertible Notes, or $ 113.9 million.

The amount recorded in equity is not subject to remeasurement or amortization.

The $ 113.9 million also represents the initial discount recorded on the Convertible Notes.

The discount is accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Notes.

The Company recorded interest expense related to the accretion of the discount and the amortization of the debt issuance costs of $ 0.9 million for the year ended December 31, 2020.

Prior to June 15, 2026, the Convertible Notes will be convertible only upon certain circumstances.

On and after June 15, 2026, holders may convert any of their Convertible Notes into the Company’s common shares of beneficial interest (“common shares”), at the applicable conversion rate at any time at their election two days prior to the maturity date.

The initial conversion rate is 39.2549 common shares per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $ 25.47 per share.

The conversion rate is subject to adjustment in certain circumstances.

As of December 31, 2020, the if-converted value of the Convertible Notes did not exceed the principal amount.

The Company may redeem for cash all or a portion of the Convertible Notes, at its option, on or after December 20, 2023 upon certain circumstances.

The redemption price will be equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If certain make-whole fundamental changes occur, the conversion rate for the Convertible Notes may be increased.

In connection with the Convertible Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters of the offering of the Convertible Notes or their respective affiliates and other financial institutions (the “Capped Call Counterparties”).

The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of common shares underlying the Convertible Notes.

The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common shares upon conversion of the Convertible Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap.

The upper strike price of the Capped Call Transactions is $ 33.0225 per share.

The cost of the Capped Call Transactions was $ 38.3 million and was recorded within additional paid-in capital.

Senior Unsecured Notes

The Company has outstanding $ 60.0 million of senior unsecured notes bearing a fixed interest rate of 4.70 % per annum and maturing in December 2023 (the "Series A Notes") and $ 40.0 million of senior unsecured notes bearing a fixed interest rate of 4.93 % per annum and maturing in December 2025 (the "Series B Notes").

The Company has $ 60.0 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.70 % per annum and maturing in December 2023 (the "Series A Notes") and $ 40.0 million of senior unsecured notes bearing a fixed interest rate of 4.93 % per annum and maturing in December 2025 (the "Series B Notes").

The debt covenants of the Series A Notes and the Series B Notes are substantially similar to those of the Company's senior unsecured revolving credit facility.

As of December 31, 2020, the Company was in compliance with all such debt covenants.

Mortgage Debt

The Company’s sole mortgage loan was secured by a first mortgage lien on the underlying hotel property.

The mortgage was non-recourse to the Company except for customary carve-outs such as fraud or misapplication of funds.

On November 29, 2019 , the Company repaid the $ 65.4 million mortgage loan on The Westin San Diego Gaslamp Quarter , without penalty.

Interest Expense

1 unchanged sentence

For the year ended December 31,

2020 2019 2018

Unsecured revolving credit facilities $ 10,210 $ 4,530 $ 11,274

Unsecured term loan facilities 72,642 79,813 30,479

Convertible senior notes 365 — —

Senior unsecured notes 4,792 4,792 4,686

1 unchanged sentence

Amortization of deferred financing fees 7,296 7,115 2,565

Other 8,793 9,931 2,327

Total interest expense $ 104,098 $ 108,474 $ 53,923

The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within Level 2 of the fair value hierarchy.

The estimated fair value of the Company’s fixed rate debt (unsecured senior notes and mortgage loans) as of December 31, 2019 and 2018 was $ 101.2 million and $ 164.3 million , respectively.

The estimated fair value of the Company’s fixed rate debt (unsecured senior notes and convertible senior notes) as of December 31, 2020 and 2019 was $ 491.8 million and $ 101.2 million, respectively.

Future Minimum Principal Payments

As of December 31, 2020, the future minimum principal payments for the Company's debt are as follows (in thousands):

Total debt principal payments

2021 $ 40,966

Thereafter 500,000

Total debt principle payments $ 2,415,000

Deferred financing costs ( 134,529 )

Total debt $ 2,280,471

Derivative and Hedging Activities

1 unchanged sentence

All of the Company's interest rate swaps are cash flow hedges.

On January 1, 2018, the Company adopted ASU No.

2017-12, Derivatives and Hedging:

Targeted Improvements to Accounting for Hedging Activities.

All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The Company's interest rate swaps at December 31, 2019 and 2018 consisted of the following (in thousands):

The Company's interest rate swaps at December 31, 2020 and 2019 consisted of the following (dollars in thousands):

Notional Value as of

Interest Rate

December 31, 2019

December 31, 2018

Swap - cash flow

December 2020

Swap - cash flow

December 2020

Swap - cash flow

November 2023

Swap - cash flow

November 2023

Swap - cash flow

November 2023

Swap - cash flow

November 2023

Hedge Type Interest Rate Maturity December 31, 2020 December 31, 2019

Swap - cash flow 1.63 % January 2020 $ — $ 50,000

Swap - cash flow 1.63 % January 2020 — 50,000

Swap - cash flow 2.46 % January 2020 — 50,000

Swap - cash flow 1.66 % January 2020 — 50,000

Swap - cash flow 2.12 % December 2020 — 100,000

Swap - cash flow 1.74 % January 2021 75,000 75,000

Swap - cash flow 1.75 % January 2021 50,000 50,000

Swap - cash flow 1.53 % January 2021 37,500 37,500

Swap - cash flow 1.46 % (1) January 2021 100,000 100,000

Swap - cash flow 1.47 % (1) January 2021 47,500 47,500

Swap - cash flow 2.60 % October 2021 55,000 55,000

Swap - cash flow 1.78 % (1) January 2022 100,000 100,000

Swap - cash flow 1.78 % (1) January 2022 50,000 50,000

Swap - cash flow 1.79 % (1) January 2022 30,000 30,000

Swap - cash flow 1.68 % April 2022 25,000 25,000

Swap - cash flow 1.64 % April 2022 25,000 25,000

Swap - cash flow 1.99 % November 2023 85,000 85,000

Swap - cash flow 1.99 % November 2023 50,000 50,000

Swap - cash flow 1.99 % November 2023 30,000 30,000

Swap - cash flow 2.60 % January 2024 75,000 —

Swap - cash flow 2.60 % January 2024 50,000 —

Swap - cash flow 2.60 % January 2024 25,000 —

Swap - cash flow 2.60 % January 2024 75,000 —

Total $ 1,430,000 $ 1,630,000

________________________

(1) Swaps assumed in connection with the LaSalle merger on November 30, 2018.

In addition, as of December 31, 2019, the Company had interest rates swaps for an aggregate notional amount of $ 590.0 million which will become effective in the future as current swaps mature.

(1) Swaps assumed in connection with the Company's merger with LaSalle Hotel Properties on November 30, 2018.

In addition, as of December 31, 2020 and 2019, the Company had interest rates swaps for aggregate notional amounts of $ 490.0 million and $ 590.0 million, respectively, which will become effective in the future as current swaps mature.

The Company records all derivative instruments at fair value in the accompanying consolidated balance sheets.

Fair values of interest rate swaps are determined using the standard market methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts.

Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs).

Derivatives expose the Company to credit risk in the event of non-performance by the

counterparties under the terms of the interest rate hedge agreements.

Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable

market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs).

Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements.

The Company incorporates these counterparty credit risks in its fair value measurements.

The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.

As of December 31, 2019 , the Company's derivative instruments were in both asset and liability positions, with aggregate asset and liability fair values of $ 3.4 million and $ 20.5 million , respectively, in the accompanying consolidated balance sheets.

For the years ended December 31, 2019 and 2018 , there was $( 26.0 ) million and $( 2.9 ) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss).

For the years ended December 31, 2019 , 2018 and 2017 , the Company reclassified $ 6.4 million , $ 0.7 million and $ 3.4 million , respectively, from accumulated other comprehensive income (loss) to interest expense.

As of December 31, 2020, the Company's derivative instruments were in liability positions, with aggregate liability fair values of $ 58.0 million which are included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets.

The Company expects approximately $ 24.7 million will be reclassified from accumulated other comprehensive income (loss) to interest expense in the next 12 months.

2 unchanged sentences

For the year ended December 31,

San Francisco, CA

2020 2019 2018

San Diego, CA $ 96,071 $ 243,598 $ 78,965

Southern FL 76,971 115,600 63,824

San Francisco, CA 66,896 319,195 193,708

Boston, MA 63,356 273,669 85,676

Los Angeles, CA 51,664 200,398 128,016

Washington DC

Other(1) 27,453 128,627 108,583

Portland, OR 27,174 105,571 98,265

Chicago, IL 15,604 82,690 3,885

Washington, D.C.

12,739 111,552 34,731

Seattle, WA 4,960 31,313 33,025

$ 442,888 $ 1,612,213 $ 828,678

(1) Other includes:

Atlanta (Buckhead), GA, Minneapolis, MN, Nashville, TN, New York City, NY, Philadelphia, PA and Santa Cruz, CA.

Atlanta (Buckhead), GA, Minneapolis, MN, Nashville, TN, New York, NY, Philadelphia, PA and Santa Cruz, CA.

Payments from customers are primarily made when services are provided.

Due to the short-term nature of the Company's contracts and the almost simultaneous receipt of payment, almost all of the contract liability balance at the beginning of the year is expected to be recognized as revenue over the following 12 months.

Due to the short-term nature of the Company's contracts and the almost simultaneous receipt of payment, almost all of the contract liability balance at the beginning of the period is expected to be recognized as revenue over the following 12 months.

Common Shares

13 unchanged sentences

The Company declared the following dividends on common shares/units for the year ended December 31, 2020:

For the Quarter

March 31, 2019

March 29, 2019

April 15, 2019

June 30, 2019

June 28, 2019

July 15, 2019

September 30, 2019

October 15, 2019

December 31, 2019

January 15, 2020

Share/Unit For the Quarter

Ended Record Date Payable Date

$ 0.01 March 31, 2020 March 31, 2020 April 15, 2020

$ 0.01 June 30, 2020 June 30, 2020 July 15, 2020

$ 0.01 September 30, 2020 September 30, 2020 October 15, 2020

$ 0.01 December 31, 2020 December 31, 2020 January 15, 2021

Preferred Shares

The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $ 0.01 par value per share (“preferred shares”).

On November 30, 2018, in connection with the LaSalle merger, the Company issued 4,400,000 of its 6.375% Series E Cumulative Redeemable Preferred Shares ("Series E Preferred Shares") and 6,000,000 of its 6.30% Series F Cumulative Redeemable Preferred Shares ("Series F Preferred Shares").

The following Preferred Shares were outstanding as of December 31, 2020 and 2019:

2 unchanged sentences

6.50 % Series C

5,000,000 5,000,000

6.375 % Series D

5,000,000 5,000,000

6.375 % Series E

4,400,000 4,400,000

6.30 % Series F

6,000,000 6,000,000

20,400,000 20,400,000

The Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares (collectively, the “Preferred Shares”) rank senior to the common shares and on parity with each other with respect to payment of distributions.

7 unchanged sentences

The Company declared the following dividends on preferred shares for the year ended December 31, 2020:

Security Type

For the Quarter

Security Type Dividend per

Share/Unit For the Quarter

Ended Record Date Payable Date

6.50 % Series C

March 31, 2019

March 29, 2019

April 15, 2019

$ 0.41 March 31, 2020 March 31, 2020 April 15, 2020

6.50 % Series C

June 30, 2019

June 28, 2019

July 15, 2019

$ 0.41 June 30, 2020 June 30, 2020 July 15, 2020

6.50 % Series C

September 30, 2019

October 15, 2019

$ 0.41 September 30, 2020 September 30, 2020 October 15, 2020

6.50 % Series C

December 31, 2019

January 15, 2020

$ 0.41 December 31, 2020 December 31, 2020 January 15, 2021

6.375 % Series D

March 31, 2019

March 29, 2019

April 15, 2019

$ 0.40 March 31, 2020 March 31, 2020 April 15, 2020

6.375 % Series D

June 30, 2019

June 28, 2019

July 15, 2019

$ 0.40 June 30, 2020 June 30, 2020 July 15, 2020

6.375 % Series D

September 30, 2019

October 15, 2019

$ 0.40 September 30, 2020 September 30, 2020 October 15, 2020

6.375 % Series D

December 31, 2019

January 15, 2020

$ 0.40 December 31, 2020 December 31, 2020 January 15, 2021

6.375 % Series E

March 31, 2019

March 29, 2019

April 15, 2019

$ 0.40 March 31, 2020 March 31, 2020 April 15, 2020

6.375 % Series E

June 30, 2019

June 28, 2019

July 15, 2019

$ 0.40 June 30, 2020 June 30, 2020 July 15, 2020

6.375 % Series E

September 30, 2019

October 15, 2019

$ 0.40 September 30, 2020 September 30, 2020 October 15, 2020

6.375 % Series E

December 31, 2019

January 15, 2020

$ 0.40 December 31, 2020 December 31, 2020 January 15, 2021

6.30 % Series F

March 31, 2019

March 29, 2019

April 15, 2019

$ 0.39 March 31, 2020 March 31, 2020 April 15, 2020

6.30 % Series F

June 30, 2019

June 28, 2019

July 15, 2019

$ 0.39 June 30, 2020 June 30, 2020 July 15, 2020

6.30 % Series F

September 30, 2019

October 15, 2019

$ 0.39 September 30, 2020 September 30, 2020 October 15, 2020

6.30 % Series F

December 31, 2019

January 15, 2020

$ 0.39 December 31, 2020 December 31, 2020 January 15, 2021

Non-controlling Interest of Common Units in Operating Partnership

1 unchanged sentence

The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of the Operating Partnership's limited partners or the Company's shareholders.

As of December 31, 2019 and 2018 , the Operating Partnership had 236,351 long-term incentive partnership units (“LTIP units”) outstanding.

Of the 236,351 LTIP units outstanding at December 31, 2019 , 190,975 LTIP units have vested.

Only vested LTIP units may be converted to common units of the Operating Partnership, which in turn can be tendered for redemption as described above.

On November 30, 2018, in connection with the LaSalle merger, the Company issued 133,605 OP units in the Operating Partnership to third-party limited partners of LaSalle OP.

As of December 31, 2019 and 2018 , the Operating Partnership had 133,605 and 133,605 OP units held by third parties, respectively, excluding LTIP units.

As of December 31, 2020, the Operating Partnership had two classes of long-term incentive partnership units ("LTIP") units, LTIP Class A units and LTIP Class B units.

All of the outstanding LTIP units are held by officers of the Company.

On February 12, 2020, the Board of Trustees granted 415,818 LTIP Class B units to its executive officers.

These LTIP units were to vest ratably on January 1, 2023, 2024, 2025 and 2026.

In March 2020, the Company cancelled this grant and as a result accelerated and recognized the full expense of $ 10.5 million.

On July 24, 2020, 109,240 LTIP Class B units were converted to common shares.

As of December 31, 2020 and 2019, the Operating Partnership had 127,111 and 236,351 LTIP units outstanding, respectively.

As of December 31, 2020, all of such LTIP units outstanding have vested.

Vested LTIP units may be converted to common units of the Operating Partnership, which in turn can be redeemed for common shares or cash as described above.

On November 30, 2018, in connection with the merger with LaSalle Hotel Properties ("LaSalle"), the Company issued 133,605 OP units in the Operating Partnership to third-party limited partners of LaSalle's operating partnership.

As of December 31, 2020 and 2019, the Operating Partnership had 133,605 OP units held by third parties, excluding LTIP units.

Share-Based Compensation Plan

1 unchanged sentence

The Plan provides for the grant of options to purchase common shares, share awards, share appreciation rights, performance units and other equity-based awards.

Share awards under the Plan vest over a period determined by the Board of Trustees, generally over three to five years , with certain awards vesting over periods of up to six years .

Share awards under the Plan vest over a period determined by the Board of Trustees, generally over three to five years .

The Company pays or accrues for dividends on share-based awards.

All share awards are subject to full or partial accelerated vesting upon a change in control and upon death or disability or certain other employment termination events as set forth in the award agreements.

As of December 31, 2019 , there were 1,035,909 common shares available for issuance under the Plan, assuming performance-based equity awards vest at target.

As of December 31, 2020, there were 1,199,767 common shares available for issuance under the Plan.

Service Condition Share Awards

2 unchanged sentences

The following table provides a summary of service condition restricted share activity as of December 31, 2020:

Weighted-Average

Shares Weighted-Average

Unvested at January 1, 2018 137,105 $ 30.05

Granted 52,609 $ 36.86

Vested ( 61,982 ) $ 31.35

Forfeited — $ —

Unvested at December 31, 2018 127,732 $ 32.22

Granted 88,430 $ 32.64

Vested ( 66,276 ) $ 30.20

Forfeited ( 707 ) $ 32.70

Unvested at December 31, 2019 149,179 $ 33.37

Granted 390,242 $ 23.62

Vested ( 72,824 ) $ 33.13

Forfeited ( 6,787 ) $ 27.68

Cancelled ( 217,083 ) $ 25.53

Unvested at December 31, 2020 242,727 $ 24.94

The fair value of each of these service condition restricted share awards is determined based on the closing price of the Company’s common shares on the grant date and compensation expense is recognized on a straight-line basis over the vesting period.

In March 2020, the Company cancelled the February 2020 service condition share award (retention grant) and as a result accelerated and recognized an expense of $ 5.5 million.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately $ 8.1 million, $ 2.4 million, and $ 2.0 million respectively, of share-based compensation expense related to these service condition restricted shares in the accompanying consolidated statements of operations and comprehensive income.

3 unchanged sentences

On December 13, 2013, the Board of Trustees approved a target award of 252,088 performance-based equity awards to officers and employees of the Company.

The awards vest ratably, if at all, on January 1, 2016, 2017, 2018, 2019 and 2020.

The actual number of common shares that ultimately vest will range from 0 % to 200 % of the target award and will be determined on each vesting date based upon the two performance criteria defined in the award agreements for the period of performance beginning on the grant date and ending on the applicable vesting date.

The awards vested based on the extent to which the performance criteria had been met, on January 1, 2016, 2017, 2018, 2019 and 2020.

The actual number of common shares that vested was based on the two performance criteria defined in the award agreements for the period of performance beginning on the grant date and ending on the applicable vesting date.

In January 2016, the Company issued 25,134 of common shares which represented achieving 49 % of the 50,418 target number of shares for that measurement period.

2 unchanged sentences

In January 2019, the Company issued 35,471 of common shares which represented achieving 71 % of the 49,914 target number of shares for that measurement period.

On February 4, 2014, the Board of Trustees approved a target award of 66,483 performance-based equity awards to officers and employees of the Company.

In January 2017, these awards vested and the Company issued 112,782 and 25,619 common shares to officers and non-executive management employees, respectively.

The actual number of common shares that ultimately vested was based on the three performance criteria defined in the award agreements for the period of performance from January 1, 2014 through December 31, 2016.

In February 2020, the Company issued 27,881 of common shares which represented achieving 56 % of the 49,914 target number of shares for that measurement period.

On February 11, 2015, the Board of Trustees approved a target award of 44,962 performance-based equity awards to officers and employees of the Company.

In January 2018, these awards vested and the Company issued 14,089 and 2,501 common shares to officers and non-executive management employees, respectively.

The actual number of common shares that vested was based on the three performance criteria defined in the award agreements for the period of performance from January 1, 2015 through December 31, 2017.

On July 27, 2015, a target award of 771 performance-based equity awards was granted to an employee of the Company.

In January 2018, these awards vested and the Company issued 1,079 common shares to the employee.

The actual number of common shares that vested was based on the three performance criteria defined in the award agreement for the period of performance from January 1, 2016 through December 31, 2017.

On February 10, 2016, the Board of Trustees approved a target award of 100,919 performance-based equity awards to officers and employees of the Company.

In January 2019, these awards vested and the Company issued 142,173 and 31,146

common shares to officers and employees, respectively.

In January 2019, these awards vested and the Company issued 142,173 and 31,146 common shares to officers and employees, respectively.

The actual number of common shares that vested was based on the three performance criteria defined in the award agreements for the period of performance from January 1, 2016 through December 31, 2018.

On February 15, 2017, the Board of Trustees approved a target award of 81,939 performance-based equity awards to officers and employees of the Company.

In January 2020, these awards vested and the Company issued 1,972 and 405 common shares to officers and employees, respectively.

The actual number of common shares that vested was based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2017 through December 31, 2019.

On February 14, 2018, the Board of Trustees approved a target award of 78,918 performance-based equity awards to officers and employees of the Company.

These awards will vest, if at all, in 2021.

The actual number of common shares that ultimately vest will range from 0 % to 200 % of the target award and will be determined in 2020 based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2017 through December 31, 2019.

The actual number of common shares that ultimately vest will be from 0 % to 200 % of the target award and will be determined in 2021 based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2018 through December 31, 2020.

On February 13, 2019, the Board of Trustees approved a target award of 126,891 performance-based equity awards to officers and employees of the Company.

These awards will vest, if at all, in 2022.

The actual number of common shares that ultimately vest will range from 0 % to 200 % of the target award and will be determined in 2021 based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2018 through December 31, 2020.

The actual number of common shares that ultimately vest will be from 0 % to 200 % of the target award and will be determined in 2022 based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2019 through December 31, 2021.

On February 12, 2020, the Board of Trustees approved a target award of 161,777 performance-based equity awards to officers and employees of the Company.

These awards will vest, if at all, in 2023.

The actual number of common shares that ultimately vest will range from 0 % to 200 % of the target award and will be determined in 2022 based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2019 through December 31, 2021.

The grant date fair value of the performance awards, with market conditions, were determined using a Monte Carlo simulation method with the following assumptions:

Performance Award Grant Date

Percentage of Total Award

Grant Date Fair Value by Component ($ in millions)

Interest Rate

Dividend Yield

The actual number of common shares that ultimately vest will be from 0 % to 200 % of the target award and will be determined in 2023 based on the performance criteria defined in the award agreements for the period of performance from January 1, 2020 through December 31, 2022.

The grant date fair value of the performance awards, with market conditions, were determined using a Monte Carlo simulation method with the following assumptions (dollars in millions):

Performance Award Grant Date Percentage of Total Award Grant Date Fair Value by Component ($ in millions) Volatility Interest Rate Dividend Yield

December 13, 2013

Relative Total Shareholder Return 50.00 % $ 4.7 29.00 % 0.34 % - 2.25 %

0.34% - 2.25%

Absolute Total Shareholder Return 50.00 % $ 2.9 29.00 % 0.34 % - 2.25 %

0.34% - 2.25%

February 11, 2015

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EBITDA Comparison 30.00 % $ 0.7 22.00 % 1.02 % 2.50 %

February 11, 2015

Relative Total Shareholder Return

Absolute Total Shareholder Return

EBITDA Comparison

July 27, 2015

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$ 4.5 26.00 % 2.52 % 4.20 %

February 12, 2020

Relative Total Shareholder Return 100 % $ 4.9 23.40 % 1.41 % — %

(1) Amounts round to zero.

In the table above, the Relative Total Shareholder Return and Absolute Total Shareholder Return components are market conditions as defined by ASC 718.

The EBITDA Comparison component is a performance condition as defined by ASC 718, and, therefore, compensation expense related to this component will be reassessed at each reporting date based on the

Company's estimate of the probable level of achievement, and the accrual of compensation expense will be adjusted as appropriate.

The EBITDA Comparison component is a performance condition as defined by ASC 718, and, therefore, compensation expense related to this component will be reassessed at each reporting date based on the Company's estimate of the probable level of achievement, and the accrual of compensation expense will be adjusted as appropriate.

Dividends on unvested performance-based equity awards accrue over the vesting period and will be paid on the actual number of shares that vest at the end of the applicable period.

The Company recognizes compensation expense on a straight-line basis through the vesting date.

The Company recognizes compensation expense on a straight-

line basis through the vesting date.

As of December 31, 2020, there was approximately $ 4.8 million of unrecognized compensation expense related to these performance-based equity awards which will be recognized over the weighted-average remaining vesting period of 1.7 years.

For the years ended December 31, 2019 , 2018 and 2017 , the Company recognized $ 4.8 million , $ 3.2 million and $ 2.6 million , respectively, in expense related to these awards.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately $ 4.1 million, $ 4.8 million and $ 3.2 million, respectively, in expense related to these awards.

Long-Term Incentive Partnership Units

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On December 13, 2013, the Board of Trustees approved a grant of 226,882 LTIP Class B units to executive officers of the Company.

These LTIP units are subject to time-based vesting in five equal annual installments beginning January 1, 2016 and ending on January 1, 2020 .

These LTIP units were subject to time-based vesting in five equal annual installments beginning January 1, 2016 and ending on January 1, 2020.

The fair value of each award was determined based on the closing price of the Company’s common shares on the grant date of $ 29.19 per unit.

The aggregate grant date fair value of the LTIP Class B units was $ 6.6 million.

On February 12, 2020, the Board of Trustees granted 415,818 LTIP Class B units to executive officers.

These LTIP units were to vest ratably on January 1, 2023, 2024, 2025 and 2026.

In March 2020, the Company cancelled this grant and as a result accelerated and recognized the full expense of $ 10.5 million.

On July 24, 2020, 109,240 LTIP Class B units were redeemed for common shares.

As of December 31, 2020, the Company had 127,111 LTIP units outstanding.

All unvested LTIP units will vest upon a change in control.

As of December 31, 2019 , of the 236,351 units outstanding, 190,975 LTIP units have vested.

For the years ended December 31, 2019 , 2018 and 2017 the Company recognized $ 1.1 million , $ 1.1 million and $ 1.1 million respectively, in expense related to these LTIP units.

As of December 31, 2020, all of such LTIP units outstanding have vested.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately $ 10.6 million, $ 1.1 million, and $ 1.1 million respectively, in expense related to these LTIP units.

As of December 31, 2020, there was no unrecognized share-based compensation expense related to LTIP units.

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The following characterizes distributions paid per common share and preferred share on a tax basis for the years ended December 31, 2020, 2019 and 2018:

2020 2019 2018

Amount % Amount % Amount %

Common Shares:

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Qualified dividend — — % 0.0069 0.37 % 0.3482 22.43 %

Capital gain 0.0100 33.33 % 1.3000 69.60 % — — %

Return of capital 0.0200 66.67 % — — % — — %

Total $ 0.0300 100.00 % $ 1.8678 100.00 % $ 1.5522 100.00 %

Series C Preferred Shares:

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Qualified dividend — — % 0.0075 0.37 % 0.3645 22.43 %

Capital gain 0.4063 33.34 % 1.4138 69.60 % — — %

Return of capital 0.8125 66.66 % — — % — — %

Total $ 1.2188 100.00 % $ 2.0313 100.00 % $ 1.6250 100.00 %

Series D Preferred Shares:

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Qualified dividend — — % 0.0074 0.37 % 0.3575 22.43 %

Capital gain 0.3984 33.33 % 1.3866 69.60 % — — %

Return of capital 0.7969 66.67 % — — % — — %

Total $ 1.1953 100.00 % $ 1.9922 100.00 % $ 1.5938 100.00 %

Series E Preferred Shares:

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Qualified dividend — — % 0.0074 0.37 % — — %

Capital gain 0.3984 33.33 % 1.3866 69.60 % — — %

Return of capital 0.7969 66.67 % — — % — — %

Total $ 1.1953 100.00 % $ 1.9922 100.00 % $ — — %

Series F Preferred Shares:

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Qualified dividend — — % 0.0073 0.37 % — — %

Capital gain 0.3938 33.34 % 1.3703 69.60 % — — %

Return of capital 0.7875 66.66 % — — % — — %

Total $ 1.1813 100.00 % $ 1.9688 100.00 % $ — — %

(1) Issued upon completion of the Company's merger with LaSalle on November 30, 2018.

1 unchanged sentence

The preferred share distributions declared on December 15, 2017 and paid on January 12, 2018 were treated as 2018 distributions for tax purposes.

Of the common distribution declared on December 15, 2017 and paid on January 12, 2018, $ 0.3800 was treated as a 2018 distribution for tax purposes.

The preferred share distributions declared on December 15, 2017 and paid on January 12, 2018 were treated as 2018 distributions for tax purposes.

Of the common distributions declared on November 19, 2018 and December 14, 2018 and paid on January 15, 2019, $ 0.3478 was treated as a 2019 distribution for tax purposes.

The preferred share distributions declared on December 14, 2018

and paid on January 15, 2019, $ 0.4063 per Series C Preferred Share, $ 0.3984 per Series D Preferred Share, $ 0.3984 per Series E Preferred Share and $ 0.3938 per Series F Preferred Share, were treated as 2019 distributions for tax purposes.

The preferred share distributions declared on December 14, 2018 and paid on January 15, 2019, $ 0.4063 per Series C Preferred Share, $ 0.3984 per Series D Preferred Share, $ 0.3984 per Series E Preferred Share and $ 0.3938 per Series F Preferred Share, were treated as 2019 distributions for tax purposes.

Of the common distribution declared on December 16, 2019 and paid on January 15, 2020, $ 0.3800 was treated as a 2019 distribution for tax purposes.

The preferred share distributions declared on December 16, 2019 and paid on January 15, 2020 were treated as 2019 distributions for tax purposes.

Of the common distribution declared on December 15, 2020 and paid on January 15, 2021, $ 0.0100 will be treated as a 2021 distribution for tax purposes.

The preferred share distributions declared on December 15, 2020 and paid on January 15, 2021 were treated as 2021 distributions for tax purposes.

The Company's provision (benefit) for income taxes consists of the following (in thousands):

For the year ended December 31,

2020 2019 2018

Current $ ( 127 ) $ 3,061 $ 1,696

Deferred ( 6,266 ) ( 106 ) ( 248 )

State and local

Current 668 3,938 360

Deferred 2,028 ( 1,721 ) ( 66 )

Income tax expense (benefit) $ ( 3,697 ) $ 5,172 $ 1,742

1 unchanged sentence

For the year ended December 31,

2020 2019 2018

Statutory federal tax expense (benefit) $ ( 72,098 ) $ 25,388 $ 3,177

1 unchanged sentence

REIT income not subject to tax 53,311 ( 21,522 ) ( 1,828 )

Income tax expense (benefit)

Change in valuation allowance 20,056 — —

Other 80 363 93

Income tax expense (benefit), net $ ( 3,697 ) $ 5,172 $ 1,742

The Company has provided a valuation allowance against its federal and state deferred tax asset at December 31, 2020 and a valuation allowance against certain state deferred tax assets as of December 31, 2019.

The Company has recorded a receivable of $ 6.9 million representing the portion of the current year loss that will be carried back to prior years in which the Company had taxable income.

A valuation allowance has been recognized on the current year loss in excess of the amount that will be carried back and is due to the uncertainty of realizing the loss in future years.

The significant components of the Company's deferred tax assets as of December 31, 2020 and 2019 consisted of the following (in thousands):

December 31, 2020 December 31, 2019

Deferred Tax Assets:

Net operating loss carryover $ 18,309 $ 723

State taxes and other 1,631 1,158

Depreciation 980 1,668

Total deferred tax asset before valuation allowance $ 20,920 $ 3,549

Valuation allowance ( 20,920 ) ( 864 )

Deferred tax asset net of valuation allowance $ — $ 2,685

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates.

In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable.

As of December 31, 2019 and 2018 , the statute of limitations remains open for all major jurisdictions for tax years dating back to 2015.

As of December 31, 2020 and 2019, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2016 and 2015, respectively.

Earnings Per Share

1 unchanged sentence

For the year ended December 31,

2020 2019 2018

Net income (loss) attributable to common shareholders $ ( 424,285 ) $ 82,886 $ ( 4,073 )

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Net income (loss) per share available to common shareholders — diluted $ ( 3.25 ) $ 0.63 $ ( 0.06 )

For the years ended December 31, 2019 , 2018 and 2017 , zero , 343,941 and 6,319 , respectively, of unvested service condition restricted shares and performance-based equity awards were excluded from diluted weighted-average common shares, as their effect would have been anti-dilutive.

For the years ended December 31, 2020, 2019 and 2018, 600,436 , zero , 343,941 , respectively, of unvested service condition restricted shares and performance-based equity awards were excluded from diluted weighted-average common shares, as their effect would have been anti-dilutive.

For the year ended December 31, 2020, 19,627,450 shares underlying the convertible debt have been excluded from diluted shares as their effect would have been anti-dilutive.

The LTIP and OP units held by the non-controlling interest holders have been excluded from the denominator of the diluted earnings per share as there would be no effect on the amounts since the limited partners' share of income (loss) would also be added or subtracted to derive net income (loss) available to common shareholders.

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The terms of these management agreements range from 1 year to 22 years, not including renewals, and 1 year to 52 years, including renewals.

Many of the Company’s management agreements are terminable at will by the Company upon paying a termination fee and some are terminable by the Company upon sale of the property, with, in some cases, the payment of termination fees.

The majority of the Company’s management agreements are terminable at will by the Company upon paying a termination fee and some are terminable by the Company upon sale of the property, with, in some cases, the payment of termination fees.

Most of the agreements also provide the Company the ability to terminate based on failure to achieve defined operating performance thresholds.

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Reserve Funds

Certain of the Company’s agreements with its hotel managers, franchisors and lenders have provisions for the Company to provide funds, typically 4.0 % of hotel revenues, sufficient to cover the cost of (a) certain non-routine repairs and maintenance to the hotels and (b) replacements and renewals to the hotels’ furniture, fixtures and equipment.

Certain of the Company’s agreements with its hotel managers, franchisors, ground lessors and lenders have provisions for the Company to provide funds, typically 4.0 % of hotel revenues, sufficient to cover the cost of (a) certain non-routine repairs and maintenance to the hotels and (b) replacements and renewals to the hotels’ furniture, fixtures and equipment.

Restricted Cash

2 unchanged sentences

As of December 31, 2020, the following hotels were subject to leases as follows:

Lease Properties

Lease Expiration Date

Hotel Monaco Washington DC

Operating lease

November 2059

Argonaut Hotel

Operating lease

December 2059

Hotel Zelos San Francisco

Operating lease

Hotel Zephyr Fisherman's Wharf

Operating lease

February 2062

Hotel Palomar Los Angeles Beverly Hills

Operating lease

Union Station Hotel Nashville, Autograph Collection

Operating lease

December 2105

Southernmost Beach Resort

Operating lease

Hyatt Regency Boston Harbor

Operating lease

San Diego Mission Bay Resort

Operating lease

Paradise Point Resort & Spa

Operating lease

Viceroy Santa Monica Hotel

Operating lease

September 2065

The Westin Copley Place, Boston

Operating lease

December 2077

The Liberty, A Luxury Collection Hotel, Boston

Operating lease

Hotel Zeppelin San Francisco

Operating and capital lease

Harbor Court Hotel San Francisco

Capital lease

The Roger New York

Capital lease

December 2044

Lease Properties Lease Type Lease Expiration Date

Hotel Monaco Washington DC Operating lease November 2059

Argonaut Hotel Operating lease December 2059

Hotel Zelos San Francisco Operating lease June 2097

Hotel Zephyr Fisherman's Wharf Operating lease February 2062

Hotel Palomar Los Angeles Beverly Hills Operating lease January 2107 (1)

Restaurant at Southernmost Beach Resort Operating lease April 2029

Hyatt Regency Boston Harbor Operating lease April 2077

San Diego Mission Bay Resort (formerly Hilton San Diego Mission Bay Resort) Operating lease July 2068

Paradise Point Resort & Spa Operating lease May 2050

Hotel Vitale Operating lease March 2070 (2)

Viceroy Santa Monica Hotel Operating lease September 2065

The Westin Copley Place, Boston Operating lease December 2077 (3)

The Liberty, A Luxury Collection Hotel, Boston Operating lease May 2080

Hotel Zeppelin San Francisco Operating and finance lease June 2089 (4)

Harbor Court Hotel San Francisco Finance lease August 2052

The Roger New York Finance lease December 2044

(1) The expiration date assumes the exercise of all 19 five-year extension options.

(2) The Company has the option, subject to certain terms and conditions, to extend the ground lease for 14 years to 2070 .

(2) The expiration date assumes the exercise of a 14 year extension option.

(3) No payments are required through maturity.

(4) The Company has an option, subject to certain terms and conditions, to extend the ground lease for 30 years to 2089.

(4) The expiration date assumes the exercise of a 30 year extension option.

The Company's leases may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent.

2 unchanged sentences

The Company records expense on a straight-line basis for leases that provide for minimum rental payments that increase in pre-established amounts over the remaining terms of the leases.

For the years ended December 31, 2019 , 2018 and 2017 , ground rent expense was $ 31.7 million , $ 14.5 million and $ 13.5 million , respectively.

For the year ended December 31, 2019 , fixed ground rent expense was $ 17.0 million and variable ground rent expense was $ 14.7 million .

Ground rent expense is included in real estate taxes, personal property taxes, property insurance and ground rent in the Company's accompanying consolidated statements of operations and comprehensive income.

The components of ground rent expense for the years ended December 31, 2020, 2019 and 2018 are as follows (in thousands):

For the year ended December 31,

2020 2019 2018

Fixed ground rent $ 17,220 $ 17,042 $ 8,318

Variable ground rent 4,924 14,689 6,201

Total ground lease rent $ 22,144 $ 31,731 $ 14,519

In January 2019, the Company acquired the ground lease underlying the land of the Solamar Hotel for $ 6.9 million.

Maturity of lease liabilities for the Company's operating leases is as follows (in thousands):

Year ending December 31,

Future maturity of lease liabilities for the Company's operating leases at December 31, 2020 were as follows (in thousands):

2021 $ 18,541

Thereafter 1,127,864

Total lease payments $ 1,219,610

1 unchanged sentence

Present value of lease liabilities $ 255,106

Future minimum annual rental payments, including capital lease payments, assuming fixed rent for all periods and excluding percentage rent and CPI adjustments, prior to adoption of ASC 842 is as follows as of December 31, 2018 (in thousands):

Year ending December 31,

The nature of the operations of hotels exposes the Company's hotels, the Company and the Operating Partnership to the risk of claims and litigation in the normal course of their business.

3 unchanged sentences

For the year ended December 31,

2020 2019 2018

(in thousands)

6 unchanged sentences

Issuance of common shares for Board of Trustees compensation $ 637 $ 740 $ 662

Issuance of common shares for LTIP units redemption $ 2,831 $ — $ —

Accrued additions and improvements to hotel properties $ 9,164 $ 3,192 $ 8,620

8 unchanged sentences

Exchange of LaSalle shares as part of purchase price $ — $ — $ 346,544

(1) Refer to Note 3, Business Combinations and Acquisition and Disposition of Hotel Properties - Merger with LaSalle Hotel Properties, for information related to the non-cash investing and financing activities related to the acquisition of LaSalle.

Subsequent Events

On January 9, 2020 , the Company entered into an agreement to sell InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square for an aggregate sales price of $ 331.0 million to an unaffiliated third-party.

The Company expects the sale of these hotel properties to be completed during the first quarter of 2020, subject to customary closing conditions, although no assurances can be given that the sales will be completed on these terms, or at all.

In January 2021, the Company entered into an agreement to assign certain rooftop wireless leases and grant long-term easements at 11 of the Company's properties.

The Company received proceeds of approximately $ 12.0 million.

On February 3, 2021, the Company entered into an agreement to sell the Sir Francis Drake in San Francisco, California to an unaffiliated third-party.

The Company expects to generate approximately $ 157.6 million of proceeds after customary closing costs.

The Company expects the sale of the hotel to be completed in April 2021, subject to normal closing conditions, although no assurances can be given that the sales will be completed on these terms, or at all.

On February 9, 2021, the Company closed on a public offering of $ 250.0 million of 1.75 % convertible notes.

The convertible notes have terms identical to the Convertible Notes issued by the Company on December 15, 2020.

The notes were sold at a 5.5 % premium to par.

In connection with the pricing of the notes, the Company entered into privately negotiated capped call transactions with certain of the underwriters, their respective affiliates and/or other counterparties.

The Company used the net proceeds to reduce amounts outstanding under the Company’s senior unsecured revolving credit facility, unsecured term loans, and for general corporate purposes.

On February 18, 2021, the Company further amended its credit agreements and related documents governing the unsecured revolving credit facilities, term loan agreements and senior notes.

The amendment is further discussed in "Note 5.

On February 18, 2021, the Board of Trustees granted awards of an aggregate of 319,947 service condition restricted common shares and target performance-based equity to executive officers and employees of the Company.

8 unchanged sentences

Year Ended December 31, 2020

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

First Quarter Second Quarter Third Quarter Fourth Quarter

Total revenues $ 269,107 $ 22,592 $ 76,980 $ 74,209

5 unchanged sentences

Year Ended December 31, 2019

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

First Quarter Second Quarter Third Quarter Fourth Quarter

Total revenues $ 367,169 $ 442,083 $ 423,552 $ 379,409

8 unchanged sentences

(In thousands)

Initial Costs

Gross Amount at End of Year

Building and Improvements

Furniture, Fixtures and Equipment

Cost Capitalized Subsequent to Acquisition (1)

Building and Improvements

Furniture, Fixtures and Equipment

Accumulated Depreciation

Net Book Value

Year of Original Construction

Date of Acquisition

Depreciation Life

Sir Francis Drake

InterContinental Buckhead Atlanta

Hotel Monaco Washington DC

Skamania Lodge

Le Meridien Delfina Santa Monica

Sofitel Philadelphia at Rittenhouse Square

Argonaut Hotel

Westin San Diego Gaslamp Quarter

Hotel Monaco Seattle

Mondrian Los Angeles

Hotel Zetta San Francisco

Hotel Vintage Seattle

Hotel Vintage Portland

W Los Angeles - West Beverly Hills

Hotel Zelos San Francisco

Embassy Suites San Diego Bay - Downtown

The Hotel Zags (formerly Hotel Modera)

Initial Costs Gross Amount at End of Year

Description Land Building and Improvements Furniture, Fixtures and Equipment Cost Capitalized Subsequent to Acquisition (1)

Land Building and Improvements Furniture, Fixtures and Equipment Total Accumulated Depreciation Net Book Value Year of Original Construction Date of Acquisition Depreciation Life

Sir Francis Drake $ 22,500 $ 60,547 $ 6,953 $ 40,035 $ 22,500 $ 89,147 $ 18,388 $ 130,035 $ 39,823 $ 90,212 1928 6/22/2010 3 - 40 years

Hotel Monaco Washington DC — 60,630 2,441 21,445 — 77,026 7,490 84,516 26,579 57,937 1839 9/9/2010 3 - 40 years

Skamania Lodge 7,130 44,987 3,523 25,953 9,881 62,195 9,517 81,593 20,800 60,793 1993 11/3/2010 3 - 40 years

Le Meridien Delfina Santa Monica 18,784 81,580 2,295 18,654 18,784 92,417 10,112 121,313 34,357 86,956 1972 11/19/2010 3 - 40 years

Sofitel Philadelphia at Rittenhouse Square 18,000 64,256 4,639 20,331 18,000 75,964 13,262 107,226 29,348 77,878 2000 12/3/2010 3 - 40 years

Argonaut Hotel — 79,492 4,247 8,826 — 83,756 8,809 92,565 29,442 63,123 1907 2/16/2011 3 - 40 years

The Westin San Diego Gaslamp Quarter 25,537 86,089 6,850 38,843 25,537 115,866 15,916 157,319 39,151 118,168 1987 4/6/2011 1 - 40 years

Hotel Monaco Seattle 10,105 38,888 2,073 12,349 10,105 45,580 7,730 63,415 18,768 44,647 1969 4/7/2011 3 - 40 years

Mondrian Los Angeles 20,306 110,283 6,091 31,699 20,306 127,584 20,489 168,379 45,311 123,068 1959 5/3/2011 3 - 40 years

W Boston 19,453 63,893 5,887 16,747 19,453 76,383 10,144 105,980 24,287 81,693 2009 6/8/2011 2 - 40 years

Hotel Zetta San Francisco 7,294 22,166 290 17,623 7,294 35,337 4,742 47,373 12,945 34,428 1913 4/4/2012 3 - 40 years

Hotel Vintage Seattle 8,170 23,557 706 8,911 8,170 29,823 3,351 41,344 10,347 30,997 1922 7/9/2012 3 - 40 years

Hotel Vintage Portland 6,222 23,012 1,093 16,264 6,222 35,024 5,345 46,591 13,311 33,280 1894 7/9/2012 3 - 40 years

W Los Angeles - West Beverly Hills 24,403 93,203 3,600 31,169 24,403 118,907 9,065 152,375 34,591 117,784 1969 8/23/2012 3 - 40 years

Hotel Zelos San Francisco — 63,430 3,780 13,166 — 74,582 5,794 80,376 19,559 60,817 1907 10/25/2012 3 - 40 years

Embassy Suites San Diego Bay - Downtown 20,103 90,162 6,881 36,081 20,103 117,487 15,637 153,227 34,336 118,891 1988 1/29/2013 3 - 40 years

The Hotel Zags 8,215 37,874 1,500 7,379 8,215 43,605 3,148 54,968 10,466 44,502 1962 8/28/2013 3 - 40 years

Hotel Zephyr Fisherman's Wharf — 116,445 3,550 40,919 — 153,485 7,429 160,914 38,410 122,504 1964 12/9/2013 3 - 40 years

Hotel Zeppelin San Francisco 12,561 43,665 1,094 36,706 12,561 75,462 6,003 94,026 21,332 72,694 1913 5/22/2014 1 - 45 years

The Nines, a Luxury Collection Hotel, Portland 18,493 92,339 8,757 12,531 18,493 98,896 14,731 132,120 28,245 103,875 1909 7/17/2014 3 - 40 years

Pebblebrook Hotel Trust

2 unchanged sentences

(In thousands)

Hotel Zephyr Fisherman's Wharf

Hotel Zeppelin San Francisco

The Nines, a Luxury Collection Hotel, Portland

Hotel Colonnade Coral Gables, Autograph Collection

Hotel Palomar Los Angeles Beverly Hills

Union Station Hotel Nashville, Autograph Collection

Revere Hotel Boston Common

LaPLaya Beach Resort & Club

Hotel Zoe Fisherman's Wharf

Villa Florence San Francisco on Union Square

The Marker San Francisco

Chaminade Resort & Spa

Harbor Court Hotel San Francisco

Viceroy Santa Monica Hotel

Le Parc Suite Hotel

Montrose West Hollywood

Chamberlain West Hollywood Hotel

Grafton on Sunset

The Westin Copley Place, Boston

Hotel Colonnade Coral Gables, Autograph Collection 12,108 46,317 1,271 18,388 12,108 59,015 6,961 78,084 15,542 62,542 1989 11/12/2014 2 - 40 years

Hotel Palomar Los Angeles Beverly Hills — 90,675 1,500 14,494 — 100,429 6,240 106,669 20,296 86,373 1972 11/20/2014 3 - 40 years

Revere Hotel Boston Common 41,857 207,817 10,596 ( 43,700 ) 17,367 180,892 18,311 216,570 44,071 172,499 1972 12/18/2014 3 - 40 years

LaPLaya Beach Resort & Club 112,575 82,117 6,733 29,717 112,575 108,828 9,739 231,142 23,856 207,286 1968 5/21/2015 3 - 40 years

Hotel Zoe Fisherman's Wharf 29,125 90,323 2,500 16,626 29,125 105,003 4,446 138,574 18,537 120,037 1990 6/11/2015 2 - 40 years

Villa Florence San Francisco on Union Square 41,272 94,257 2,994 ( 29,935 ) 30,496 72,264 5,828 108,588 8,378 100,210 1908 11/30/2018 3 - 40 years

Hotel Vitale — 105,693 3,896 1,861 — 106,826 4,624 111,450 9,569 101,881 2005 11/30/2018 3 - 40 years

The Marker San Francisco 45,243 68,244 5,453 1,803 45,243 69,287 6,213 120,743 7,567 113,176 1910/1995 11/30/2018 3 - 40 years

Hotel Spero 39,363 64,804 11,235 709 39,363 65,134 11,614 116,111 6,836 109,275 1928/1999 11/30/2018 3 - 40 years

Chaminade Resort & Spa 22,590 37,114 6,009 13,056 22,590 48,444 7,735 78,769 5,503 73,266 1985 11/30/2018 3 - 40 years

Harbor Court Hotel San Francisco — 79,009 6,190 1,330 — 79,760 6,769 86,529 6,074 80,455 1926/1991 11/30/2018 3 - 40 years

Viceroy Santa Monica Hotel — 91,442 5,257 10,327 — 99,407 7,619 107,026 8,326 98,700 1967/2002 11/30/2018 3 - 40 years

Le Parc Suite Hotel 17,876 65,515 2,496 12,361 17,876 74,544 5,828 98,248 6,147 92,101 1970 11/30/2018 3 - 40 years

Montrose West Hollywood 16,842 58,729 6,499 1,491 16,842 59,045 7,674 83,561 5,137 78,424 1976 11/30/2018 3 - 40 years

Chamberlain West Hollywood Hotel 14,462 43,157 5,983 1,409 14,462 44,085 6,464 65,011 4,172 60,839 1970/2005 11/30/2018 3 - 40 years

Grafton on Sunset 12,440 36,932 3,951 588 12,440 37,274 4,197 53,911 4,076 49,835 1954 11/30/2018 3 - 40 years

The Westin Copley Place, Boston — 291,754 35,780 5,304 — 295,327 37,511 332,838 26,282 306,556 1983 11/30/2018 3 - 40 years

The Liberty, A Luxury Collection Hotel, Boston — 195,797 15,126 3,279 — 197,637 16,565 214,202 15,056 199,146 1851/2007 11/30/2018 3 - 40 years

Hyatt Regency Boston Harbor — 122,344 6,862 7,533 — 129,294 7,445 136,739 9,780 126,959 1993 11/30/2018 3 - 40 years

George Hotel 15,373 65,529 4,489 366 15,373 65,773 4,611 85,757 5,787 79,970 1928 11/30/2018 3 - 40 years

Viceroy Washington DC 18,686 60,927 2,838 8,579 18,686 66,469 5,875 91,030 5,124 85,906 1962 11/30/2018 3 - 40 years

Hotel Zena Washington DC 19,035 60,402 2,066 27,810 19,035 84,350 5,928 109,313 3,884 105,429 1972 11/30/2018 3 - 40 years

Pebblebrook Hotel Trust

2 unchanged sentences

(In thousands)

The Liberty, A Luxury Collection Hotel, Boston

Hyatt Regency Boston Harbor

Sofitel Washington DC Lafayette Square

Mason & Rook Hotel

Donovan Hotel

Paradise Point Resort & Spa

Hilton San Diego Gaslamp Quarter

Solamar Hotel

L'Auberge Del Mar

San Diego Mission Bay Resort

The Heathman Hotel

Southernmost Beach Resort

The Marker Resort Key West

The Roger New York

Hotel Chicago Downtown, Autograph Collection

The Westin Michigan Avenue Chicago

Paradise Point Resort & Spa — 199,304 22,032 8,556 21 204,573 25,298 229,892 17,977 211,915 1962 11/30/2018 3 - 40 years

Hilton San Diego Gaslamp Quarter 33,017 131,926 7,741 1,347 33,017 132,937 8,077 174,031 11,049 162,982 2000 11/30/2018 3 - 40 years

Solamar Hotel — 74,768 8,830 24,507 23,472 75,089 9,544 108,105 7,748 100,357 2005 11/30/2018 3 - 40 years

L'Auberge Del Mar 33,304 92,297 5,393 5,205 33,304 94,600 8,295 136,199 6,713 129,486 1989 11/30/2018 3 - 40 years

San Diego Mission Bay Resort — 80,733 9,458 26,388 30 99,545 17,004 116,579 10,465 106,114 1962 11/30/2018 3 - 40 years

The Heathman Hotel 14,243 38,694 7,062 1,284 14,243 39,636 7,404 61,283 4,298 56,985 1927 11/30/2018 3 - 40 years

Southernmost Beach Resort 86,131 238,470 8,366 6,744 86,131 243,723 9,857 339,711 17,470 322,241 1958-2008 11/30/2018 3 - 40 years

The Marker Resort Key West Harbor Resort 25,463 66,903 2,486 3,400 25,463 69,291 3,498 98,252 5,200 93,052 2014 11/30/2018 3 - 40 years

The Roger New York — 42,882 3,060 ( 16,946 ) — 25,775 3,221 28,996 3,999 24,997 1930/1998 11/30/2018 3 - 40 years

Hotel Chicago Downtown, Autograph Collection 39,576 114,014 7,608 ( 17,618 ) 39,576 95,727 8,277 143,580 8,996 134,584 1998 11/30/2018 3 - 40 years

The Westin Michigan Avenue Chicago 44,983 103,160 23,744 4,710 44,983 105,970 25,644 176,597 12,964 163,633 1963/1972 11/30/2018 3 - 40 years

$ 982,840 $ 4,538,547 $ 331,754 $ 606,604 $ 973,848 $ 4,964,479 $ 521,418 $ 6,459,745 $ 898,287 $ 5,561,458

(1) Disposals are reflected as reductions to cost capitalized subsequent to acquisition.

7 unchanged sentences

Balance at December 31, 2017 $ 2,904,072

Acquisitions 4,120,641

Capital expenditures 95,348

1 unchanged sentence

Balance at December 31, 2018 $ 7,077,623

Acquisitions 23,472

Capital expenditures 159,574

Disposal of Assets ( 503,383 )

Other ( 24,649 )

Balance at December 31, 2019 $ 6,732,637

1 unchanged sentence

Disposal of Assets ( 314,186 )

Other ( 74,556 )

Balance at December 31, 2020 $ 6,459,745

1 unchanged sentence

Balance at December 31, 2017 $ 447,622

Depreciation 107,496

Disposal of Assets ( 11,688 )

Balance at December 31, 2018 $ 543,430

Depreciation 226,953

Disposal of Assets ( 35,061 )

Balance at December 31, 2019 $ 735,322

Depreciation 223,286

Disposal of Assets ( 60,321 )

2 unchanged sentences

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-K

Item 9A. Controls and Procedures