What changed in this filing

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Item 1. Financial Statements

2021-07-29 compared with 2021-04-29 · 200 added, 261 removed, 586 unchanged (44% of the section changed)

3 unchanged sentences

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

2021 December 31, 2020

June 30, 2021 December 31, 2020

Investment in hotel properties, net $ 5,667,707 $ 5,882,022

Hotel held for sale 90,384 —

Cash and cash equivalents 312,064 124,274

10 unchanged sentences

Accrued interest 4,246 4,653

Liabilities related to hotel held for sale 2,293 —

Distribution payable 11,040 9,307

2 unchanged sentences

Shareholders’ equity:

Preferred shares of beneficial interest, $ .01 par value (liquidation preference $ 510,000 at March 31, 2021 and December 31, 2020), 100,000,000 shares authorized;

20,400,000 shares issued and outstanding at March 31, 2021 and December 31, 2020

Preferred shares of beneficial interest, $ .01 par value (liquidation preference $ 740,000 and $ 510,000 at June 30, 2021 and December 31, 2020, respectively), 100,000,000 shares authorized;

29,600,000 shares issued and outstanding at June 30, 2021 and 20,400,000 shares issued and outstanding at December 31, 2020

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

130,812,917 shares issued and outstanding at March 31, 2021 and 130,673,300 shares issued and outstanding at December 31, 2020

130,813,750 shares issued and outstanding at June 30, 2021 and 130,673,300 shares issued and outstanding at December 31, 2020

Additional paid-in capital 4,263,473 4,169,870

9 unchanged sentences

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

For the three months ended March 31,

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

2021 2020 2021 2020

Room $ 108,603 $ 10,801 $ 162,066 $ 187,942

17 unchanged sentences

Interest expense ( 24,804 ) ( 24,091 ) ( 50,135 ) ( 47,682 )

Other 29 303 58 327

Income (loss) before income taxes 1,480 ( 134,479 ) ( 119,957 ) ( 103,155 )

12 unchanged sentences

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

For the three months ended March 31,

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

2021 2020 2021 2020

Comprehensive Income:

10 unchanged sentences

(In thousands, except share data)

For the three months ended June 30, 2021

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, 2019 20,400,000 $ 204 130,484,956 $ 1,305 $ 4,069,410 $ ( 24,715 ) $ ( 424,996 ) $ 3,621,208 $ 10,728 $ 3,631,936

Balance at March 31, 2021 20,400,000 $ 204 130,812,917 $ 1,308 $ 4,038,860 $ ( 43,917 ) $ ( 983,771 ) $ 3,012,684 $ 6,472 $ 3,019,156

Issuance of shares, net of offering costs 9,200,000 92 — — 222,248 — — 222,340 — 222,340

Issuance of common shares for Board of Trustees compensation — — 23,528 1 636 — — 637 — 637

Repurchase of common shares — — ( 47,507 ) ( 1 ) ( 1,254 ) — — ( 1,255 ) — ( 1,255 )

Share-based compensation — — 833 — 2,365 — — 2,365 698 3,063

5 unchanged sentences

Net income (loss) — — — — — — 1,530 1,530 ( 102 ) 1,428

Balance at June 30, 2021 29,600,000 $ 296 130,813,750 $ 1,308 $ 4,263,473 $ ( 39,820 ) $ ( 993,654 ) $ 3,231,603 $ 7,043 $ 3,238,646

For the three months ended June 30, 2020

Shares Amount Shares Amount

Balance at March 31, 2020 20,400,000 $ 204 130,563,226 $ 1,306 $ 4,075,727 $ ( 78,980 ) $ ( 391,950 ) $ 3,606,307 $ 21,459 $ 3,627,766

Issuance of shares, net of offering costs — — — — ( 9 ) — — ( 9 ) — ( 9 )

Share-based compensation — — 834 — 1,779 — — 1,779 — 1,779

Distributions on common shares/units — — — — — — ( 1,312 ) ( 1,312 ) ( 20 ) ( 1,332 )

Distributions on preferred shares — — — — — — ( 8,139 ) ( 8,139 ) — ( 8,139 )

Other comprehensive income (loss):

Change in fair value of derivative instruments — — — — — ( 7,945 ) — ( 7,945 ) — ( 7,945 )

Amounts reclassified from other comprehensive income — — — — — 7,540 — 7,540 — 7,540

Net income (loss) — — — — — — ( 130,513 ) ( 130,513 ) ( 401 ) ( 130,914 )

Balance at June 30, 2020 20,400,000 $ 204 130,564,060 $ 1,306 $ 4,077,497 $ ( 79,385 ) $ ( 531,914 ) $ 3,467,708 $ 21,038 $ 3,488,746

For the six months ended June 30, 2021

13 unchanged sentences

Net income (loss) — — — — — — ( 119,052 ) ( 119,052 ) ( 960 ) ( 120,012 )

Balance at March 31, 2021 20,400,000 $ 204 130,812,917 $ 1,308 $ 4,038,860 $ ( 43,917 ) $ ( 983,771 ) $ 3,012,684 $ 6,472 $ 3,019,156

Balance at June 30, 2021 29,600,000 $ 296 130,813,750 $ 1,308 $ 4,263,473 $ ( 39,820 ) $ ( 993,654 ) $ 3,231,603 $ 7,043 $ 3,238,646

For the six months ended June 30, 2020

Shares Amount Shares Amount

Balance at December 31, 2019 20,400,000 $ 204 130,484,956 $ 1,305 $ 4,069,410 $ ( 24,715 ) $ ( 424,996 ) $ 3,621,208 $ 10,728 $ 3,631,936

Issuance of shares, net of offering costs — — — — ( 94 ) — — ( 94 ) — ( 94 )

Issuance of common shares for Board of Trustees compensation — — 23,528 1 636 — — 637 — 637

Repurchase of common shares — — ( 47,507 ) ( 1 ) ( 1,254 ) — — ( 1,255 ) — ( 1,255 )

Share-based compensation — — 103,083 1 8,799 — — 8,800 10,616 19,416

Distributions on common shares/units — — — — — — ( 2,076 ) ( 2,076 ) ( 24 ) ( 2,100 )

Distributions on preferred shares — — — — — — ( 16,278 ) ( 16,278 ) — ( 16,278 )

Change in fair value of derivative instruments — — — — — ( 65,419 ) — ( 65,419 ) — ( 65,419 )

Amounts reclassified from other comprehensive income — — — — — 10,749 — 10,749 — 10,749

Net income (loss) — — — — — — ( 88,564 ) ( 88,564 ) ( 282 ) ( 88,846 )

Balance at June 30, 2020 20,400,000 $ 204 130,564,060 $ 1,306 $ 4,077,497 $ ( 79,385 ) $ ( 531,914 ) $ 3,467,708 $ 21,038 $ 3,488,746

The accompanying notes are an integral part of these financial statements.

2 unchanged sentences

(In thousands)

For the three months ended March 31,

For the six months ended June 30,

Operating activities:

7 unchanged sentences

Non-cash ground rent 3,041 3,129

Other ( 52 ) 92

Changes in assets and liabilities:

7 unchanged sentences

Proceeds from sales of hotel properties 171,988 320,036

Deposits on hotel properties ( 17,148 ) —

Purchase of corporate office equipment, software, and furniture ( 64 ) —

1 unchanged sentence

Financing activities:

Gross proceeds from issuance of preferred shares 230,000 —

Payment of offering costs — common and preferred shares ( 7,670 ) ( 94 )

17 unchanged sentences

Pebblebrook Hotel Trust (the "Company") was formed as a Maryland real estate investment trust in October 2009 to opportunistically acquire and invest in hotel properties located primarily in major United States cities, with an emphasis on major gateway coastal markets.

As of March 31, 2021, the Company owned 53 hotels with a total of 13,236 guest rooms.

As of June 30, 2021, the Company owned 51 hotels with a total of 12,626 guest rooms.

The hotels are located in the following markets:

5 unchanged sentences

Naples, Florida;

New York, New York;

Philadelphia, Pennsylvania;

8 unchanged sentences

The Company is the sole general partner of the Operating Partnership.

At March 31, 2021, the Company owned 99.3 % of the common limited partnership units issued by the Operating Partnership ("common units").

At June 30, 2021, the Company owned 99.3 % of the common limited partnership units issued by the Operating Partnership ("common units").

The remaining 0.7 % of the common units are owned by the other limited partners of the Operating Partnership.

4 unchanged sentences

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.

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be a global pandemic and the virus 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.

In response, the Company implemented significant cost controls, salary reductions and temporarily suspended operations at 47 of its hotels and resorts.

As demand has returned over the past year, the Company reopened the majority of its hotels and resorts.

As of March 31, 2021, 40 of the Company's hotels and resorts were open, with operations at the remaining 13 hotels listed below still temporarily suspended.

The Company anticipates reopening additional hotels as demand returns.

Property Location

Argonaut Hotel (1)

San Francisco, CA

Harbor Court Hotel San Francisco (1)

San Francisco, CA

Hotel Vitale San Francisco, CA

Hotel Zelos San Francisco (1)

San Francisco, CA

Hotel Zephyr Fisherman's Wharf (1)

San Francisco, CA

Hotel Zeppelin San Francisco (1)

San Francisco, CA

Hotel Zoe Fisherman's Wharf (1)

San Francisco, CA

The Marker San Francisco (1)

San Francisco, CA

Sir Francis Drake (2)

San Francisco, CA

Villa Florence San Francisco on Union Square San Francisco, CA

Revere Hotel Boston Common (1)

The Westin Michigan Avenue Chicago Chicago, IL

The Roger New York New York, NY

(1) Hotel reopened in April 2021.

(2) Hotel was sold in April 2021.

In addition, to improve liquidity, the Company raised capital by issuing convertible notes and additional preferred shares.

As demand returned over the past several months, the result of an increase in vaccinations and corresponding lifting of governmental restrictions and recommendations, the Company reopened its hotels and resorts.

As of June 30, 2021, 49 of the Company's hotels and resorts were open, with operations remaining suspended at Villa Florence San Francisco on Union Square and Hotel Vitale.

Subsequent to June 30, 2021, the Company reopened Villa Florence San Francisco on Union Square and commenced a renovation of Hotel Vitale with the intent to reopen the property at the completion of the renovation in the fourth quarter of 2021.

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 fully recover.

In February 2021, the Company issued, at a 5.5 % premium to par, an additional $ 250.0 million aggregate principal amount of its convertible notes originally issued in December 2020.

However, leisure travel as a result of pent-up leisure demand has exceeded expectations, particularly at the Company's warmer weather and resort properties.

In February 2021, the Company issued, at a 5.5 % premium to par, an additional $ 250.0 million aggregate principal amount of the convertible notes originally issued in December 2020.

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 and unsecured term loans, and for general corporate purposes.

The net proceeds were used 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 amended the agreements governing its 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 the convertible notes.

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 Company adopted a staggered return-to-work policy and other physical distancing policies at its corporate office and does not anticipate these policies to have any adverse impact on its ability to continue to operate its business.

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

For additional information regarding these amendments and the convertible notes, see Note 5, Debt.

In May 2021, the Company issued 9,200,000 6.375 % Series G Cumulative Redeemable Preferred Shares (the “Shares”) at a public offering price of $ 25.00 per share for net proceeds of $ 222.6 million.

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

Based on the amendments described above, expense and cash burn rate reductions, and the ability to raise additional liquidity through equity issuances, the Company believes it has sufficient liquidity to meet its obligations for the next twelve months.

Summary of Significant Accounting Policies

27 unchanged sentences

Due to their short maturities, the carrying amounts of these assets and liabilities approximate fair value.

See Note 5 to the accompanying consolidated financial statements for disclosures on the fair value of debt and derivative instruments.

See Note 5, Debt, to the accompanying consolidated financial statements for disclosures on the fair value of debt and derivative instruments.

Investment in Hotel Properties

3 unchanged sentences

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.

Transaction costs related to business combinations are expensed as incurred and included on the consolidated statements of operations and comprehensive income.

Transaction costs are expensed for acquisitions that are considered business combinations and capitalized for asset acquisitions.

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.

20 unchanged sentences

Room revenue is recognized over the length of a customer's hotel stay.

Revenue from food and beverage and other ancillary services is generated when a customer chooses to purchase goods or services separately from a hotel room and revenue is recognized on these distinct goods and services at the point in time or over the time period that goods or services are

provided to the customer.

Certain ancillary services are provided by third parties and the Company assesses whether it is the principal or agent in these arrangements.

33 unchanged sentences

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

During the first quarter of 2020, the Company has elected to apply the hedge accounting

expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

During the first quarter of 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

10 unchanged sentences

Acquisition and Disposition of Hotel Properties

There were no acquisitions of hotel properties during the three months ended March 31, 2021 and 2020.

As of March 31, 2021, the Company had entered into an agreement to sell the Sir Francis Drake for $ 157.6 million.

This hotel was designated as held for sale as it met all of the Company's held for sale criteria.

Accordingly, the Company classified all of the assets and liabilities related to this hotel as assets and liabilities held for sale in the accompanying consolidated balance sheets and ceased depreciating the assets.

On April 1, 2021, the Company completed the sale of the Sir Francis Drake.

There were no dispositions of hotel properties during the three months ended March 31, 2021.

During the three months ended March 31, 2020, the Company sold two hotel properties in a single transaction for an aggregate sales price of $ 331.0 million.

For the three months ended March 31, 2020, the Company recognized a gain on its dispositions of $ 117.4 million, which is included in (gain) loss on sale of hotel properties in the accompanying consolidated statements of operations and comprehensive income.

For the three months ended March 31, 2020, the accompanying consolidated statements of operations and comprehensive income included operating income of $ 4.3 million related to the hotel properties sold.

There were no acquisitions of hotel properties during the three and six months ended June 30, 2021 and 2020.

The following table sets forth information regarding the Company's disposition transactions during the six months ended June 30, 2021 and 2020 (in thousands):

Hotel Property Name Location Sale Date Sale Price

Sir Francis Drake San Francisco, CA April 1, 2021 $ 157,625

The Roger New York New York, NY June 10, 2021 19,000

2021 Total $ 176,625

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

2020 Total $ 331,000

For the three and six months ended June 30, 2021, the Company recognized a gain on its dispositions of $ 64.6 million, which is included in (gain) loss on sale of hotel properties in the accompanying consolidated statements of operations and comprehensive income.

For the three and six months ended June 30, 2020, the Company recognized a gain on its dispositions of zero and $ 117.4 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 three and six months ended June 30, 2021 the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $ 0.2 million and $( 1.3 ) million, respectively, related to the hotel properties sold.

For the three and six months ended June 30, 2020, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $( 1.0 ) million and $ 5.7 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.

Investment in Hotel Properties

Investment in hotel properties as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands):

2021 December 31,

Investment in hotel properties as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

June 30, 2021 December 31, 2020

Land $ 947,275 $ 973,848

10 unchanged sentences

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

Based on the analyses performed, for the three months ended March 31, 2021, the Company recognized an impairment loss of $ 14.9 million related to one hotel as a result of the fair value being lower than its carrying value.

Based on the analyses performed, for the six months ended June 30, 2021, the Company recognized an impairment loss of $ 14.9 million related to one hotel as a result of the fair value being lower than its carrying value.

The impairment loss was determined using Level 2 inputs under authoritative guidance for fair value measurements using information from current marketing efforts for this property.

For the three months ended March 31, 2020, the Company recognized an impairment loss of $ 20.6 million related to a retail

component of a hotel as a result of the fair value being lower than its carrying value.

For the six months ended June 30, 2020, the Company recognized an impairment loss of $ 20.6 million related to a retail component of a hotel as a result of the fair value being lower than its carrying value.

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

2 unchanged sentences

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.

See Note 11, Commitments and Contingencies, 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 March 31, 2021, the Company's lease liabilities consisted of operating lease liabilities of $ 254.8 million and financing lease liabilities of $ 46.5 million.

As of June 30, 2021, the Company's lease liabilities consisted of operating lease liabilities of $ 254.6 million and financing lease liabilities of $ 41.7 million.

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.

7 unchanged sentences

• extended other terms through the waiver period.

The Company's debt consisted of the following as of March 31, 2021 and December 31, 2020 (dollars in thousands):

The Company's debt consisted of the following as of June 30, 2021 and December 31, 2020 (dollars in thousands):

Balance Outstanding as of

Interest Rate Maturity Date March 31, 2021 December 31, 2020

Interest Rate Maturity Date June 30, 2021 December 31, 2020

Revolving credit facilities

42 unchanged sentences

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

(2) The Company has the option to extend the maturity date to January 2023, pursuant to certain terms and conditions and payment of an extension fee.

(3) Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an Eurocurrency Rate (as defined in the applicable credit agreement) plus an applicable margin.

(4) 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 March 31, 2021, $ 1.4 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.13 %, after taking into account interest rate swap agreements, and $ 168.0 million bore an effective weighted-average floating interest rate of 2.62 %.

As of June 30, 2021, $ 1.4 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.12 %, after taking into account interest rate swap agreements, and $ 57.0 million bore an effective weighted-average floating interest rate of 2.67 %.

As of December 31, 2020, $ 1.4 billion of the borrowings under the term loan facilities bore a 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 %.

(4 ) In February 2021, the majority of the remaining balance was extended to November 2022.

(5) In February 2021, the interest rate increased from 4.70 % to 5.15 %.

4 unchanged sentences

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 March 31, 2021, the Company had no outstanding borrowings, $ 6.8 million of outstanding letters of credit and borrowing capacity of $ 643.2 million remaining on its senior unsecured credit facility.

As of June 30, 2021, the Company had no outstanding borrowings, $ 5.8 million of outstanding letters of credit and borrowing capacity of $ 644.2 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.

9 unchanged sentences

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 March 31, 2021, the Company had no borrowings under the PHL Credit Facility and had $ 25.0 million borrowing capacity remaining available under the PHL Credit Facility.

As of June 30, 2021, 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 $ 6.8 million were outstanding as of March 31, 2021 and December 31, 2020.

As of March 31, 2021, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.

Standby letters of credit of $ 5.8 million and $ 6.8 million were outstanding as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.

Unsecured Term Loan Facilities

3 unchanged sentences

Upon completion of the convertible notes offering in February 2021, the Company repaid $ 177.0 million of the Company's second and sixth term loans.

As of March 31, 2021, the Company was in compliance with all debt covenants of its term loan facilities.

Upon completion of the preferred equity offering in May 2021, the Company repaid $ 111.0 million of the Company's second and sixth term loans.

As of June 30, 2021, 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.

7 unchanged sentences

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 $ 2.8 million for the three months ended March 31, 2021.

The Convertible Notes will mature on December 15, 2026.

The Company recorded coupon interest expense of $ 3.3 million and $ 6.1 million for the three and six months ended June 30, 2021.

The Company separated the Convertible Notes issued in December 2020 into liability and equity components.

11 unchanged sentences

The conversion rate is subject to adjustment in certain circumstances.

As of March 31, 2021 and December 31, 2020, the if-converted value of the Convertible Notes did not exceed the principal amount.

As of June 30, 2021 and 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.

10 unchanged sentences

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 March 31, 2021, the Company was in compliance with all such debt covenants.

As of June 30, 2021, the Company was in compliance with all such debt covenants.

Interest Expense

The components of the Company's interest expense consisted of the following (in thousands):

For the three months ended March 31,

The components of the Company's interest expense consisted of the following for the three and six months ended June 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

Unsecured revolving credit facilities $ 507 $ 3,364 $ 1,068 $ 5,669

5 unchanged sentences

Total interest expense $ 24,804 $ 24,091 $ 50,135 $ 47,682

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 convertible senior notes) as of March 31, 2021 and December 31, 2020 was $ 684.3 million and $ 491.8 million, respectively.

The estimated fair value of the Company’s fixed rate debt (unsecured senior notes and convertible senior notes) as of June 30, 2021 and December 31, 2020 was $ 642.4 million and $ 491.8 million, respectively.

Derivative and Hedging Activities

2 unchanged sentences

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 March 31, 2021 and December 31, 2020 consisted of the following (dollars in thousands):

Notional Value as of

Hedge Type Interest Rate Maturity March 31, 2021 December 31, 2020

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

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

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

Swap - cash flow 1.46 % January 2021 — 100,000

Swap - cash flow 1.47 % January 2021 — 47,500

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

Swap - cash flow 1.78 % January 2022 100,000 100,000

Swap - cash flow 1.78 % January 2022 50,000 50,000

Swap - cash flow 1.79 % 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 0.17 % January 2023 100,000 —

Swap - cash flow 0.17 % January 2023 50,000 —

Swap - cash flow 0.17 % January 2023 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 75,000

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

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

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

Swap - cash flow 1.43 % February 2026 150,000 —

Swap - cash flow 1.44 % February 2026 50,000 —

Swap - cash flow 1.44 % February 2026 40,000 —

The Company's interest rate swaps at June 30, 2021 and December 31, 2020 consisted of the following, by maturity date (dollars in thousands):

Aggregate Notional Value as of

Hedge Type Interest Rate Range Maturity June 30, 2021 December 31, 2020

Swap-cash flow 1.46 % - 1.75 %

January 2021 $ — $ 490,000

Swap-cash flow 2.60 %

October 2021 110,000 110,000

Swap-cash flow 1.78 % - 1.79 %

January 2022 180,000 180,000

Swap-cash flow 1.64 % - 1.68 %

April 2022 100,000 100,000

Swap-cash flow 0.17 %

January 2023 200,000 —

Swap-cash flow 1.99 %

November 2023 250,000 250,000

Swap-cash flow 2.60 %

January 2024 300,000 300,000

Swap-cash flow 1.43 % - 1.44 %

February 2026 290,000 —

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

During the three months ended March 31, 2021, the Company had interest rates swaps for an aggregate notional amount of $ 490.0 million that became effective as other interest rate swaps matured.

As of March 31, 2021, there are no additional interest rate swaps outstanding that will become effective in the future.

During the six months ended June 30, 2021, the Company had interest rate swaps for an aggregate notional amount of $ 490.0 million that became effective as other interest rate swaps matured.

As of June 30, 2021, there are no additional interest rate swaps outstanding that will become effective in the future.

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

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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.

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 March 31, 2021, the Company's derivative instruments were in both asset and liability positions, with aggregate asset and liability fair values of $ 0.1 million and $ 42.6 million, which are included in prepaid expenses and other assets and accounts payable, accrued expenses and other liabilities, respectively, in the accompanying consolidated balance sheets.

As of June 30, 2021, the Company's derivative instruments were in both asset and liability positions, with aggregate asset and liability fair values of $ 0.1 million and $ 38.9 million, respectively, which are included in prepaid expenses and other assets and accounts payable, accrued expenses and other liabilities, respectively, in the accompanying consolidated balance sheets.

The Company expects approximately $ 20.6 million will be reclassified from accumulated other comprehensive income (loss) to interest expense within the next 12 months.

The Company presents revenue on a disaggregated basis in the accompanying consolidated statements of operations and comprehensive income.

The following table presents revenues by geographic location for the three months ended March 31, 2021 and 2020 (in thousands):

For the three months ended March 31,

The following table presents revenues by geographic location for the three and six months ended June 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

Southern FL $ 38,729 $ 6,744 $ 73,973 $ 41,935

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Portland, OR 12,142 1,086 17,924 16,734

Other(1) 2,975 20,311

San Francisco, CA 9,176 2,963 12,129 63,003

Other(1) 6,629 389 9,604 20,700

Washington, D.C.

4,264 94 6,166 11,003

Chicago, IL 4,274 2,000 6,098 12,273

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Common Shares

The Company is authorized to issue up to 500,000,000 common shares of beneficial interest, $ 0.01 par value per share (“common shares”).

The Company is authorized to issue up to 500,000,000 common shares.

Each outstanding common share entitles the holder to one vote on each matter submitted to a vote of shareholders.

Holders of the Company’s common shares are entitled to receive dividends when authorized by the Company's Board of Trustees.

On February 22, 2016, the Company announced that the Board of Trustees authorized a share repurchase program of up to $ 150.0 million of the Company's outstanding common shares.

Under this program, the Company may repurchase its common shares from time to time in transactions on the open market or by private agreement.

Holders of common shares are entitled to receive dividends when authorized by the Board of Trustees.

On February 22, 2016, the Company announced that the Board of Trustees authorized a share repurchase program of up to $ 150.0 million of common shares.

Under this program, the Company may repurchase common shares from time to time in transactions on the open market or by private agreement.

The Company may suspend or discontinue this program at any time.

Upon repurchase by the Company, common shares cease to be outstanding and become authorized but unissued common shares.

For the three months ended March 31, 2021, the Company had no repurchases under this program and as of March 31, 2021, $ 56.6 million of common shares remained available for repurchase under this program.

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

Under this program, the Company may repurchase its common shares from time to time in transactions on the open market or by private agreement.

For the six months ended June 30, 2021, the Company had no repurchases under this program and as of June 30, 2021, $ 56.6 million of common shares remained available for repurchase under this program.

On July 27, 2017, the Company announced that the Board of Trustees authorized a new share repurchase program of up to $ 100.0 million of common shares.

Under this program, the Company may repurchase common shares from time to time in transactions on the open market or by private agreement.

The Company may suspend or discontinue this program at any time.

This $ 100.0 million share repurchase program will commence upon completion of the Company's $ 150.0 million share repurchase program.

On April 29, 2021, the Company filed a prospectus supplement with the SEC to sell up to $ 200.0 million of common shares under an "at the market" offering program (the "ATM program").

No common shares were issued or sold under the ATM program during the six months ended June 30, 2021.

As of June 30, 2021, $ 200.0 million of common shares remained available for issuance under the ATM program.

Common Dividends

The Company declared the following dividends on common shares/units for the three months ended March 31, 2021:

Share/Unit For the Quarter

Ended Record Date Payable Date

The Company declared the following dividends on common shares/units for the six months ended June 30, 2021:

Dividend per Share/Unit For the Quarter Ended Record Date Payable Date

$ 0.01 March 31, 2021 March 31, 2021 April 15, 2021

$ 0.01 June 30, 2021 June 30, 2021 July 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”).

The following Preferred Shares were outstanding as of March 31, 2021 and December 31, 2020:

Security Type March 31, 2021 December 31, 2020

In May 2021, we issued 9,200,000 6.375 % Series G Cumulative Redeemable Preferred Shares at a public offering price of $ 25.00 per share for net proceeds of $ 222.6 million.

The following Preferred Shares were outstanding as of June 30, 2021 and December 31, 2020:

Security Type June 30, 2021 December 31, 2020

6.50 % Series C

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6,000,000 6,000,000

6.375 % Series G

29,600,000 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.

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

The Preferred Shares are cumulative redeemable preferred shares, do not have any maturity date and are not subject to mandatory redemption.

The Company could not redeem the Series C Preferred Shares prior to March 18, 2018, may not redeem the Series D Preferred Shares prior to June 9, 2021, could not redeem the Series E Preferred Shares prior to March 4, 2018 and may not redeem the Series F Preferred Shares prior to May 25, 2021, except in limited circumstances relating to the Company’s continuing qualification as a REIT or as discussed below.

On or after May 25, 2021 and June 9, 2021, the Company may, at its option, redeem the Series F Preferred Shares and Series D Preferred Shares, respectively, and at any time the Company may, at its option, redeem the Series C Preferred Shares or the Series E Preferred Shares, or both, in each case in whole or from time to time in part, by payment of $ 25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption.

Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the Company’s common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE MKT or NASDAQ, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within 120 days following the change of control by paying $ 25.00 per share, plus any accrued and unpaid distributions through the date of redemption.

If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of the Company’s common shares based on defined formulas subject to share caps.

The share cap on each Series C Preferred Share is 2.0325 common shares, on each Series D Preferred Share is 1.9794 common shares, on each Series E Preferred Share is 1.9372 common shares and on each Series F Preferred Share is 2.0649 common shares.

The Company could not redeem the Series C Preferred Shares prior to March 18, 2018, could not redeem the Series D Preferred Shares prior to June 9, 2021, could not redeem the Series E Preferred Shares prior to March 4, 2018, could not redeem the Series F Preferred Shares prior to May 25, 2021, and may not redeem the Series G Preferred Shares prior to May 13, 2026, except in limited circumstances relating to the Company’s continuing qualification as a REIT or as discussed below.

On or after May 13, 2026, the Company may, at its option, redeem the Series G Preferred Shares, and at any time the Company may, at its option, redeem the Series C Preferred Shares, the Series D Preferred Shares, the Series E Preferred Shares and the Series F Preferred Shares, in each case in whole or from time to time in part, by payment of $ 25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption.

Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE MKT or NASDAQ, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within 120 days following the change of control by paying $ 25.00 per share, plus any accrued and unpaid distributions through the date of redemption.

If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of common shares based on defined formulas subject to share caps.

The share cap on each Series C Preferred Share is 2.0325 common shares, on each Series D Preferred Share is 1.9794 common shares, on each Series E Preferred Share is 1.9372 common shares, on each Series F Preferred Share is 2.0649 common shares, and on each Series G Preferred Share is 2.1231 common shares.

Preferred Dividends

The Company declared the following dividends on preferred shares for the three months ended March 31, 2021:

Security Type Dividend per

Share/Unit For the Quarter

Ended Record Date Payable Date

The Company declared the following dividends on preferred shares for the six months ended June 30, 2021:

Security Type Dividend per Share/Unit For the Quarter Ended Record Date Payable Date

6.50 % Series C

$ 0.41 March 31, 2021 March 31, 2021 April 15, 2021

6.50 % Series C

$ 0.41 June 30, 2021 June 30, 2021 July 15, 2021

6.375 % Series D

$ 0.40 March 31, 2021 March 31, 2021 April 15, 2021

6.375 % Series D

$ 0.40 June 30, 2021 June 30, 2021 July 15, 2021

6.375 % Series E

$ 0.40 March 31, 2021 March 31, 2021 April 15, 2021

6.375 % Series E

$ 0.40 June 30, 2021 June 30, 2021 July 15, 2021

6.30 % Series F

$ 0.39 March 31, 2021 March 31, 2021 April 15, 2021

6.30 % Series F

$ 0.39 June 30, 2021 June 30, 2021 July 15, 2021

The initial dividend for the 6.375 % Series G Preferred Shares will be paid in October 2021.

Non-controlling Interest of Common Units in Operating Partnership

Holders of Operating Partnership units have certain redemption rights that enable the unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company’s option, cash per unit equal to the market price of the Company’s common shares at the time of redemption or the Company’s common shares on a one-for-one basis.

Holders of Operating Partnership units have certain redemption rights that enable the unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company’s option, cash per unit equal to the market price of common shares at the time of redemption or common shares on a one-for-one basis.

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 March 31, 2021, the Operating Partnership had two classes of long-term incentive partnership units ("LTIP") units, LTIP Class A units and LTIP Class B units.

As of June 30, 2021, 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.

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These LTIP units will vest ratably on January 1, 2023, 2024, 2025 and 2026 contingent upon continued employment with the Company.

As of March 31, 2021 and December 31, 2020, the Operating Partnership had 727,208 and 127,111 LTIP units outstanding, respectively.

Of the 727,208 LTIP units outstanding at March 31, 2021, 127,111 LTIP units have vested.

As of June 30, 2021 and December 31, 2020, the Operating Partnership had 727,208 and 127,111 LTIP units outstanding, respectively.

Of the 727,208 LTIP units outstanding at June 30, 2021, 127,111 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 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 March 31, 2021 and December 31, 2020, the Operating Partnership had 133,605 OP units held by third parties, excluding LTIP units.

As of June 30, 2021 and December 31, 2020, the Operating Partnership had 133,605 OP units held by third parties, excluding LTIP units.

Share-Based Compensation Plan

Available Shares

The Company maintains the 2009 Equity Incentive Plan, as amended and restated (as amended, the "Plan"), to attract and retain independent trustees, executive officers and other key employees and service providers.

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 .

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 March 31, 2021, there were 130,439 common shares available for issuance under the Plan.

On May 19, 2021, the Company’s shareholders approved an amendment to the Plan which increased the aggregate number of common shares that may be issued under the Plan as share awards, performance units, options, share appreciation rights and other equity-based awards by 1,675,000 .

As of June 30, 2021, there were 1,812,875 common shares available for issuance under the Plan.

Service Condition Share Awards

From time to time, the Company awards restricted common shares under the Plan to members of the Board of Trustees, officers and employees.

These shares generally vest over three to five years based on continued service or employment.

The following table provides a summary of service condition restricted share activity as of March 31, 2021:

The following table provides a summary of service condition restricted share activity as of June 30, 2021:

Shares Weighted-Average

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Forfeited ( 7,902 ) $ 23.33

Unvested at March 31, 2021 572,341 $ 22.55

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 three months ended March 31, 2021 and 2020, the Company recognized approximately $ 0.8 million and $ 6.1 million, respectively, of share-based compensation expense related to these service condition restricted shares in the accompanying consolidated statements of operations and comprehensive income.

As of March 31, 2021, there was $ 12.1 million of total unrecognized share-based compensation expense related to unvested restricted shares.

The unrecognized share-based compensation expense is expected to be recognized over the weighted-average remaining vesting period of 3.6 years.

Unvested at June 30, 2021 564,072 $ 22.53

For the three and six months ended June 30, 2021, the Company recognized approximately $ 1.1 million and $ 1.9 million, respectively, of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.

Performance-Based Equity Awards

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 that were eligible for vesting in January 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.

Based upon the extent to which the performance criteria had been met, the Company issued 25,134 , 12,285 , 72,236 , 35,471 and 27,881 common shares in January 2016, 2017, 2018, 2019 and 2020, respectively.

On February 18, 2021, the Board of Trustees approved a target award of 189,348 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.

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.

In January 2021, none of these awards vested and the Company issued no common shares to officers or employees.

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, 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 2024.

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 be from 0 % to 200 % of the target award and will be determined in 2024 based on the performance criteria defined in the award agreements for the period of performance from January 1, 2021 through December 31, 2023.

On February 18, 2021, the Board of Trustees approved a target award of 189,348 performance-based equity awards to officers and employees of the Company.

These awards will vest, if at all, in 2024.

The actual number of common shares that

ultimately vest will be from 0 % to 200 % of the target award and will be determined in 2024 based on the performance criteria defined in the award agreements for the period of performance from January 1, 2021 through December 31, 2023.

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 Volatility Interest Rate Dividend Yield

December 13, 2013

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

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

February 10, 2016

Relative Total Shareholder Return 70.00 % $ 1.6 25.00 % 0.71 % 3.00 %

Absolute Total Shareholder Return 15.00 % $ 0.2 25.00 % 0.71 % 3.00 %

EBITDA Comparison 15.00 % $ 0.4 25.00 % 0.71 % 3.00 %

February 15, 2017

Relative and Absolute Total Shareholder Return 65.00 % / 35.00 %

$ 2.7 28.00 % 1.27 % 5.60 %

February 14, 2018

Relative and Absolute Total Shareholder Return 65.00 % / 35.00 %

$ 3.5 28.00 % 2.37 % 4.70 %

February 13, 2019

Relative and Absolute Total Shareholder Return 65.00 % / 35.00 %

$ 4.5 26.00 % 2.52 % 4.20 %

February 12, 2020

Relative Total Shareholder Return 100.00 % $ 4.9 23.40 % 1.41 % — %

February 18, 2021

Relative Total Shareholder Return 100.00 % $ 6.0 56.00 % 0.19 % — %

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.

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.

As of March 31, 2021, there was approximately $ 9.7 million of unrecognized compensation expense related to these performance-based equity awards which will be recognized over the weighted-average remaining vesting period of 2.2 years.

For the three months ended March 31, 2021 and 2020, the Company recognized approximately $ 1.0 million and $ 0.9 million, respectively, in expense related to these awards.

Long-Term Incentive Partnership Units

LTIP units, which are also referred to as profits interest units, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership.

LTIP units are a class of partnership unit in the Operating Partnership and receive, whether vested or not, the same per-unit profit distributions as the other outstanding units in the Operating

Partnership, which equal per-share distributions on common shares.

LTIP units are allocated their pro-rata share of the Company's net income (loss).

Vested LTIP units may be converted by the holder, at any time, into an equal number of common Operating Partnership units and thereafter will possess all of the rights and interests of a common Operating Partnership unit, including the right to redeem the common Operating Partnership unit for a common share in the Company or cash, at the option of the Operating Partnership.

As of March 31, 2021, the Operating Partnership had two classes of LTIP units, LTIP Class A units and LTIP Class B units.

For the three and six months ended June 30, 2021, the Company recognized approximately $ 1.3 million and $ 2.3 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.

Long-Term Incentive Partnership (LTIP) Units

As of June 30, 2021, the Operating Partnership had two classes of 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 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 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.

On February 18, 2021, the Board of Trustees granted 600,097 LTIP Class B units to executive officers of the Company.

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The aggregate grant date fair value of the LTIP Class B units was $ 13.6 million.

As of March 31, 2021 and December 31, 2020, the Operating Partnership had 727,208 and 127,111 LTIP units outstanding, respectively.

Of the 727,208 LTIP units outstanding at March 31, 2021, 127,111 LTIP units have vested.

As of June 30, 2021 and December 31, 2020, the Operating Partnership had 727,208 and 127,111 LTIP units outstanding, respectively.

Of the 727,208 LTIP units outstanding at June 30, 2021, 127,111 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.

For the three months ended March 31, 2021 and 2020, the Company recognized approximately $ 0.3 million and $ 10.6 million, respectively, in expense related to these LTIP units.

As of March 31, 2021, there was $ 13.3 million of unrecognized share-based compensation expense related to LTIP units.

For the three and six months ended June 30, 2021, the Company recognized approximately $ 0.7 million and $ 1.0 million, respectively, in expense related to these LTIP units.

The aggregate expense related to the LTIP unit grants is presented as non-controlling interest in the Company’s accompanying consolidated balance sheets.

PHL is subject to federal and state corporate income taxes at statutory tax rates.

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 has recorded a valuation allowance on its income tax benefit for the three months ended March 31, 2021 and has recorded a valuation allowance on all deferred tax assets.

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 has recorded a valuation allowance on its income tax benefit for the three and six months ended June 30, 2021, and has recorded a valuation allowance on all deferred tax assets.

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 March 31, 2021 and December 31, 2020, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2016.

As of June 30, 2021 and December 31, 2020, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2016.

Earnings Per Share

The following is a reconciliation of basic and diluted earnings per common share (in thousands, except share and per-share data):

For the three months ended March 31,

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

2021 2020 2021 2020

Net income (loss) attributable to common shareholders $ ( 8,564 ) $ ( 138,652 ) $ ( 137,285 ) $ ( 104,842 )

dividends paid on unvested share-based compensation ( 12 ) ( 2 ) ( 23 ) ( 4 )

Undistributed earnings attributable to share-based compensation — ( 48 )

Net income (loss) available to common shareholders $ ( 8,576 ) $ ( 138,654 ) $ ( 137,308 ) $ ( 104,846 )

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Net income (loss) per share available to common shareholders — diluted $ ( 0.07 ) $ ( 1.06 ) $ ( 1.05 ) $ ( 0.80 )

For the three months ended March 31, 2021 and 2020, 1,041,130 and 203,152 , 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 three months ended March 31, 2021, 29,441,175 shares underlying the Convertible Notes have been excluded from diluted shares as their effect would have been anti-dilutive.

For the three and six months ended June 30, 2021, 1,030,676 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 three and six months ended June 30, 2020, 558,769 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 three and six months ended June 30, 2021, 29,441,175 common shares underlying the Convertible Notes 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 incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel.

For the three months ended March 31, 2021 and 2020, com bined base and incentive management fees were $ 2.3 million and $ 6.9 million, respectively.

For the three and six months ended June 30, 2021, com bined base and incentive management fees were $ 4.4 million and $ 6.7 million, respectively.

For the three and six months ended June 30, 2020, com bined base and incentive management fees were $( 0.4 ) million and $ 6.5 million, respectively.

Base and incentive management fees are included in other direct and indirect expenses in the Company's accompanying consolidated statements of operations and comprehensive income.

On April 30, 2021, the Company provided a notice of default to sbe concerning the hotel management agreement of the Mondrian Los Angeles.

Sbe is refuting the Company’s notice of default and has requested arbitration to cure the alleged default.

Reserve Funds

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Restricted Cash

At March 31, 2021 and December 31, 2020, the Company had $ 11.3 million and $ 12.0 million, respectively, in restricted cash, which consisted of reserves for replacement of furniture and fixtures or reserves to pay for real estate taxes or property insurance under certain hotel management agreements or loan agreements.

At June 30, 2021 and December 31, 2020, the Company had $ 10.9 million and $ 12.0 million, respectively, in restricted cash, which consisted of reserves for replacement of furniture and fixtures or reserves to pay for real estate taxes or property insurance under certain hotel management agreements or loan agreements.

Ground and Hotel Leases

As of March 31, 2021, the following hotels were subject to leases as follows:

As of June 30, 2021, the following hotels were subject to leases as follows:

Lease Properties Lease Type Lease Expiration Date

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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.

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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.

Minimum fixed rent may be adjusted annually by increases in consumer price index ("CPI") and may be subject to minimum and maximum increases.

Minimum fixed rent may be adjusted annually by increases in the consumer price index and may be subject to minimum and maximum increases.

Some leases also contain certain restrictions on modifications that can be made to the hotel structures due to their status as national historic landmarks.

1 unchanged sentence

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 three months ended March 31, 2021 and 2020 are as follows (in thousands):

For the three months ended March 31,

The components of ground rent expense for the three and six months ended June 30, 2021 and 2020 are as follows (in thousands):

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

2021 2020 2021 2020

Fixed ground rent $ 4,290 $ 4,304 $ 8,603 $ 8,593

1 unchanged sentence

Total ground lease rent $ 6,152 $ 5,000 $ 11,961 $ 11,337

Future maturities of lease liabilities for the Company's operating leases at March 31, 2021 were as follows (in thousands):

2021 $ 13,903

Future maturities of lease liabilities for the Company's operating leases at June 30, 2021 were as follows (in thousands):

Thereafter 1,127,864

6 unchanged sentences

Supplemental Information to Statements of Cash Flows

For the three months ended March 31,

For the six months ended June 30,

(in thousands)

10 unchanged sentences

Write-off of deferred financing costs $ 4,516 $ —

Subsequent Events

On July 22, 2021, the Company acquired the 200 -room Jekyll Island Club Resort located in Jekyll Island, Georgia for $ 94.0 million.

On July 27, 2021, the Company issued 10,000,000 of 5.70 % Series H Cumulative Redeemable Preferred Shares at a public offering price of $ 25.00 per share for net proceeds of approximately $ 242.0 million after underwriting discounts and other offering-related costs.

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

What changed 10-Q

Item 1. Financial Statements