What changed in this filing

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Item 1. Financial Statements

2021-10-28 compared with 2021-07-29 · 209 added, 148 removed, 638 unchanged (36% of the section changed)

3 unchanged sentences

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Investment in hotel properties, net $ 5,962,878 $ 5,882,022

15 unchanged sentences

Shareholders’ equity:

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

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

29,600,000 shares issued and outstanding at September 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;

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

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

Additional paid-in capital 4,265,695 4,169,870

9 unchanged sentences

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

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

For the three months ended September 30, For the nine months ended September 30,

2021 2020 2021 2020

25 unchanged sentences

Distributions to preferred shareholders ( 12,528 ) ( 8,139 ) ( 30,761 ) ( 24,417 )

Issuance costs of redeemed preferred shares ( 8,043 ) — ( 8,043 ) —

Net income (loss) attributable to common shareholders $ ( 43,984 ) $ ( 138,446 ) $ ( 181,269 ) $ ( 243,288 )

6 unchanged sentences

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

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

For the three months ended September 30, For the nine months ended September 30,

2021 2020 2021 2020

11 unchanged sentences

(In thousands, except share data)

For the three months ended June 30, 2021

For the three months ended September 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 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

Redemption of preferred shares ( 10,000,000 ) ( 100 ) — — ( 241,857 ) — ( 8,043 ) ( 250,000 ) — ( 250,000 )

Issuance of shares, net of offering costs 10,000,000 100 — — 241,676 — — 241,776 — 241,776

2 unchanged sentences

Distributions on preferred shares — — — — — — ( 12,528 ) ( 12,528 ) — ( 12,528 )

Other adjustment — — — — — 393 — 393 ( 393 ) —

Other comprehensive income (loss):

2 unchanged sentences

Net income (loss) — — — — — — ( 23,413 ) ( 23,413 ) ( 125 ) ( 23,538 )

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

Balance at September 30, 2021 29,600,000 $ 296 130,813,750 $ 1,308 $ 4,265,695 $ ( 33,429 ) $ ( 1,038,955 ) $ 3,194,915 $ 7,387 $ 3,202,302

For the three months ended September 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 )

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

Share-based compensation — — — — 1,660 — — 1,660 — 1,660

1 unchanged sentence

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

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

Other comprehensive income (loss):

2 unchanged sentences

Net income (loss) — — — — — — ( 130,307 ) ( 130,307 ) ( 253 ) ( 130,560 )

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

Balance at September 30, 2020 20,400,000 $ 204 130,673,300 $ 1,307 $ 4,092,602 $ ( 69,663 ) $ ( 671,667 ) $ 3,352,783 $ 7,336 $ 3,360,119

For the nine months ended September 30, 2021

1 unchanged sentence

Balance at December 31, 2020 20,400,000 $ 204 130,673,300 $ 1,307 $ 4,169,870 $ ( 60,071 ) $ ( 853,973 ) $ 3,257,337 $ 6,989 $ 3,264,326

Redemption of preferred shares ( 10,000,000 ) ( 100 ) — — ( 241,857 ) — ( 8,043 ) ( 250,000 ) — ( 250,000 )

Issuance of shares, net of offering costs 19,200,000 192 — — 463,914 — — 464,106 — 464,106

6 unchanged sentences

Purchases of capped calls in connection with convertible senior notes — — — — ( 20,975 ) — — ( 20,975 ) — ( 20,975 )

Other adjustment — — — — — 393 — 393 ( 393 ) —

Other comprehensive income (loss):

2 unchanged sentences

Net income (loss) — — — — — — ( 142,465 ) ( 142,465 ) ( 1,085 ) ( 143,550 )

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

Balance at September 30, 2021 29,600,000 $ 296 130,813,750 $ 1,308 $ 4,265,695 $ ( 33,429 ) $ ( 1,038,955 ) $ 3,194,915 $ 7,387 $ 3,202,302

For the nine months ended September 30, 2020

7 unchanged sentences

Distributions on preferred shares — — — — — — ( 24,417 ) ( 24,417 ) — ( 24,417 )

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

Other comprehensive income (loss):

Change in fair value of derivative instruments — — — — — ( 64,629 ) — ( 64,629 ) — ( 64,629 )

1 unchanged sentence

Net income (loss) — — — — — — ( 218,871 ) ( 218,871 ) ( 535 ) ( 219,406 )

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

Balance at September 30, 2020 20,400,000 $ 204 130,673,300 $ 1,307 $ 4,092,602 $ ( 69,663 ) $ ( 671,667 ) $ 3,352,783 $ 7,336 $ 3,360,119

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

2 unchanged sentences

(In thousands)

For the six months ended June 30,

For the nine months ended September 30,

Operating activities:

3 unchanged sentences

Share-based compensation 8,345 21,076

Amortization of deferred financing costs, non-cash interest and mortgage loan premiums 9,068 7,178

Amortization of deferred financing costs, non-cash interest and other amortization 12,668 11,199

(Gain) loss on sale of hotel properties ( 64,729 ) ( 117,401 )

11 unchanged sentences

Proceeds from sales of hotel properties 255,927 375,131

Acquisition of hotel properties ( 190,968 ) —

Deposits on hotel properties ( 1,020 ) —

11 unchanged sentences

Repurchases of common shares ( 720 ) ( 1,255 )

Redemption of preferred shares ( 250,000 ) —

Distributions — common shares/units ( 3,957 ) ( 52,649 )

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

As of September 30, 2021, the Company owned 52 hotels with a total of 13,006 guest rooms.

The hotels are located in the following markets:

1 unchanged sentence

Chicago, Illinois;

Hollywood, Florida;

Jekyll Island, Georgia;

Key West, Florida;

6 unchanged sentences

San Francisco, California;

Santa Cruz, California;

Seattle, Washington;

4 unchanged sentences

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

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

As of September 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.

3 unchanged sentences

PHL is consolidated into the Company’s financial statements.

COVID-19 Operations and Liquidity Update

COVID-19 and Liquidity Update

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.

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.

As a result of this pandemic and subsequent government mandates, health official recommendations, corporate policy changes and individual responses, hotel demand dramatically declined.

In response, the Company implemented significant cost controls, salary reductions and temporarily suspended operations at 47 of its hotels and resorts in 2020.

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

As demand has since improved as a result of an increase in vaccinations and corresponding lifting of governmental restrictions and recommendations, the Company gradually reopened its hotels and resorts.

As of September 30, 2021, all of the Company's hotels and resorts were open, with the exception of Hotel Vitale, whose operations will remain suspended until the expected completion of renovations in the first quarter of 2022.

The COVID-19 pandemic has had a significant negative impact on the Company's operations and financial results and is expected to continue to have a significant negative impact on the Company's results of operations, financial position and cash flow for the remainder of 2021.

The Company cannot estimate when travel demand will fully recover.

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 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.

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.

However, the Company anticipates further recovery in 2022.

Leisure travel in the second and third quarters of 2021 exceeded expectations, particularly at the Company's warmer weather and resort properties.

However, business travel continues to be substantially lower.

During the nine months ended September 30, 2021, the Company conducted the following transactions:

• On February 9, 2021, 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.

• On February 18, 2021, amended the agreements governing existing credit facilities, term loan facilities and unsecured 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 ratios, which were extended through December 31, 2021.

• On April 1, 2021, sold the Sir Francis Drake for $ 157.6 million.

• On May 13, 2021, raised $ 222.6 million of net proceeds from the issuance of 9,200,000 6.375 % Series G Cumulative Redeemable Preferred Shares.

• On June 10, 2021 sold The Roger New York for $ 19.0 million.

• On July 22, 2021, acquired the leasehold interest in Jekyll Island Club Resort for $ 94.0 million.

• On July 27, 2021, raised $ 242.1 million of net proceeds from the issuance of 10,000,000 5.70 % Series H Cumulative Redeemable Preferred Shares.

• On August 21, 2021, redeemed all outstanding 6.375 % Series D Cumulative Redeemable Preferred Shares.

• On August 22, 2021, redeemed all outstanding 6.50 % Series C Cumulative Redeemable Preferred Shares.

• On September 9, 2021, sold Villa Florence San Francisco on Union Square for $ 87.5 million.

• On September 23, 2021, acquired the leasehold interest in Margaritaville Hollywood Beach Resort for $ 270.0 million, including the assumption of a $ 161.5 million mortgage loan.

• Paid down $ 428.0 million of debt, consisting of $ 338.0 million of term loans, $ 50.0 million of senior unsecured notes and $ 40.0 million on the senior unsecured credit facility.

Based on the amendments to the Company's credit agreements, 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, Debt, to the accompanying consolidated financial statements for disclosures on the fair value of debt and derivative instruments.

See Note 5, Debt , for disclosures on the fair value of debt and derivative instruments.

Investment in Hotel Properties

75 unchanged sentences

Acquisition and Disposition of Hotel Properties

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):

On July 22, 2021, the Company acquired the leasehold interest in the 200 -room Jekyll Island Club Resort in Jekyll Island, Georgia for $ 94.0 million, excluding prorations and transaction costs, using cash on hand.

On September 23, 2021, the Company acquired the leasehold interest in the 369 -room Margaritaville Hollywood Beach Resort in Hollywood, Florida for $ 270.0 million, excluding prorations and transaction costs, using cash on hand and the assumption of a $ 161.5 million mortgage loan.

See Note 5, Debt, for additional information about the mortgage loan and Note 11, Commitments and Contingencies , for additional information about the leasehold interest.

The following table summarizes disposition transactions during the nine months ended September 30, 2021 and 2020 (in thousands):

Hotel Property Name Location Sale Date Sale Price

1 unchanged sentence

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

Villa Florence San Francisco on Union Square San Francisco, CA September 9, 2021 87,500

2021 Total $ 264,125

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

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.

For the three and nine months ended September 30, 2021 the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $( 0.6 ) million and $( 6.4 ) million, respectively, excluding impairment loss and (gain) loss on sale of hotel properties, related to the hotel properties sold.

For the three and nine months ended September 30, 2020, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $( 5.7 ) million and $( 9.6 ) million, respectively, excluding impairment loss and (gain) loss on sale of hotel properties, 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 June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

June 30, 2021 December 31, 2020

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

September 30, 2021 December 31, 2020

Land $ 921,957 $ 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 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.

Based on the analyses performed, for the nine months ended September 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 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.

For the nine months ended September 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.

Right-of-use Assets and Lease Liabilities

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 4.7 % to 7.6 %.

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.

In addition, the term used includes any options to exercise extensions when it is reasonably certain the Company will exercise such option.

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 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 September 30, 2021, the Company's lease liabilities consisted of operating lease liabilities of $ 302.1 million and financing lease liabilities of $ 41.8 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 June 30, 2021 and December 31, 2020 (dollars in thousands):

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

Balance Outstanding as of

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

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

Revolving credit facilities

39 unchanged sentences

Total senior unsecured notes $ 49,818 $ 99,593

Mortgage loan

Margaritaville Hollywood Beach Resort Floating (7)

May 2022 161,500 —

Debt premium (discount), net ( 3,023 ) —

Deferred financing costs, net ( 464 ) —

Total mortgage loan $ 158,013 $ —

Total debt $ 2,384,230 $ 2,280,471

4 unchanged sentences

(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 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 %.

As of September 30, 2021, approximately $ 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 approximately $ 7.0 million bore an effective weighted-average floating interest rate of 3.0 %.

As of December 31, 2020, approximately $ 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 approximately $ 345.0 million bore a weighted-average floating interest rate of 2.46 %.

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

2 unchanged sentences

The increased interest rate is effective through the end of the waiver period.

(7) The loan bears interest at a floating rate equal to one-month LIBOR plus a weighted-average spread of 2.37 %.

The Company has the option to extend the maturity date for up to two one-year periods.

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 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.

As of September 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 the London Inter-bank Offered Rate ("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 up to $ 1.3 billion, subject to lender approval.

8 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 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.

As of September 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 $ 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.

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

As of September 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

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.

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.

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.

During the nine months ended September 30, 2021, the Company repaid $ 338.0 million aggregate principal balance of the Company's second and sixth term loans.

As of September 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.

See Derivative and Hedging Activities below.

See Derivative and Hedging Activities for further discussion on the interest rate swaps.

Convertible Senior Notes

6 unchanged sentences

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 recorded coupon interest expense of $ 3.3 million and $ 9.4 million for the three and nine months ended September 30, 2021, respectively.

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

4 unchanged sentences

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

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

As a result, the Convertible Notes are now recorded as a single liability with no portion recorded in equity.

As a result of the Company's early adoption of ASU 2020-06 on January 1, 2021, the Convertible Notes are now recorded as a single liability with no portion recorded in equity.

The Company also ceased recording non-cash interest expense associated with amortization of the debt discount.

3 unchanged sentences

The conversion rate is subject to adjustment in certain circumstances.

As of June 30, 2021 and December 31, 2020, the if-converted value of the Convertible Notes did not exceed the principal amount.

As of September 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.

1 unchanged sentence

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

In connection with the Convertible Notes issuances, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters of the offerings 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.

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

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

Mortgage Loan

On September 23, 2021, the Company assumed a $ 161.5 million loan secured by a first-lien mortgage on the leasehold interest of the Margaritaville Hollywood Beach Resort ("Margaritaville").

The loan requires interest-only payments based on a floating interest rate of one-month LIBOR plus a weighted-average spread of 2.37 %.

The loan matures on May 9, 2022 and may be extended for up to two one-year periods.

If the loan is extended for the second of the two one-year periods, the interest rate spread will increase by 20 basis points for the second year only.

The loan is also subject to an interest rate cap agreement.

The loan is non-recourse to the Company except for customary carve-outs to the general non-recourse liability.

The loan contains customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions.

Cash trap provisions are triggered if performance of the hotel is below a certain threshold.

Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our lender.

No event of default has occurred under the loan documents.

Margaritaville triggered the cash trap provisions prior to the acquisition, and therefore cash from hotel operations is being held by the lender in the cash management accounts and reflected as restricted cash in the accompanying consolidated balance sheets.

Cash will be released from the lockbox once the hotel reaches profitability levels that terminate the cash trap or the loan is paid off.

Interest Expense

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,

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

For the three months ended September 30, For the nine months ended September 30,

2021 2020 2021 2020

3 unchanged sentences

Senior unsecured notes 645 1,198 2,917 3,594

Mortgage debt 88 — 88 —

Amortization of deferred financing fees 2,046 1,518 7,414 3,898

2 unchanged sentences

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 June 30, 2021 and December 31, 2020 was $ 642.4 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 September 30, 2021 and December 31, 2020 was $ 642.5 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 June 30, 2021 and December 31, 2020 consisted of the following, by maturity date (dollars in thousands):

The Company's interest rate swaps at September 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

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

Swap-cash flow 1.46 % - 1.75 %

15 unchanged sentences

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

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.

During the nine months ended September 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 September 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.

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.

Fair values of interest rate swaps and caps 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).

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

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.

As of September 30, 2021, the Company's derivative instruments were in a liability position, with an aggregate fair value of $ 33.2 million.

There were no derivative instruments in an asset position.

Derivative assets are included in prepaid expenses and other assets and derivative liabilities are included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets.

The Company expects approximately $ 18.4 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 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,

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

For the three months ended September 30, For the nine months ended September 30,

2021 2020 2021 2020

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

San Diego, CA $ 63,524 $ 31,641 $ 119,668 $ 79,135

Southern Florida/Georgia 30,928 13,801 104,901 65,272

Boston, MA 45,213 10,714 78,425 48,621

2 unchanged sentences

San Francisco, CA 16,524 1,591 28,653 64,594

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

Washington, D.C.

9,731 3,363 19,335 14,527

Chicago, IL 10,598 1,950 16,696 14,223

Washington, D.C.

6,275 598 12,441 11,601

Seattle, WA 3,437 212 5,363 4,573

$ 238,810 $ 76,980 $ 485,767 $ 368,679

______________________

(1) Other includes:

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

Nashville, TN, New York, NY, Philadelphia, PA and Santa Cruz, CA.

Payments from customers are primarily made when services are provided.

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

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.

For the nine months ended September 30, 2021, the Company had no repurchases under this program and as of September 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.

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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.

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

As of September 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 six months ended June 30, 2021:

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

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

1 unchanged sentence

$ 0.01 June 30, 2021 June 30, 2021 July 15, 2021

$ 0.01 September 30, 2021 September 30, 2021 October 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”).

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

In May 2021, the Company 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.

In July 2021, the Company issued 10,000,000 5.70 % Series H Cumulative Redeemable Preferred Shares at a public offering price of $ 25.00 per share for net proceeds of $ 242.1 million.

In August 2021, the Company redeemed all outstanding shares of 6.50 % Series C Cumulative Redeemable Preferred Shares and 6.375 % Series D Cumulative Redeemable Preferred Shares at the redemption amount of $ 25.00 per share plus accrued and unpaid dividends of $ 0.17 and $ 0.16 per share, respectively.

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

Security Type September 30, 2021 December 31, 2020

6.50 % Series C

5,000,000 5,000,000

6.375 % Series D

5,000,000 5,000,000

6.375 % Series E

3 unchanged sentences

6.375 % Series G

5.70 % Series H

29,600,000 20,400,000

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, 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.

The Series C, Series D, Series E, Series F, Series G and Series H Cumulative Redeemable 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 do not have any maturity date and are not subject to mandatory redemption.

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

The Series G and Series H Preferred Shares may not be redeemed prior to May 13, 2026 and July 27, 2026, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or as discussed below.

On or after such dates, the Company may, at its option, redeem the 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.

The share cap on each Series E Preferred Share is 1.9372 common shares, on each Series F Preferred Share is 2.0649 common shares, on each Series G Preferred Share is 2.1231 common shares, and on each Series H Preferred Share is 2.2311 common shares.

Preferred Dividends

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

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

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

11 unchanged sentences

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

6.375 % Series E

$ 0.40 September 30, 2021 September 30, 2021 October 15, 2021

6.30 % Series F

2 unchanged sentences

$ 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.

6.30 % Series F

$ 0.39 September 30, 2021 September 30, 2021 October 15, 2021

6.375 % Series G

$ 0.67 September 30, 2021 September 30, 2021 October 15, 2021

5.70 % Series H

$ 0.31 September 30, 2021 September 30, 2021 October 15, 2021

______________________

(1) The initial long-period dividend for the 6.375 % Series G Preferred Shares will be paid in October 2021.

(2) The initial short-period dividend for the 5.700 % Series H 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 common shares at the time of redemption or common shares on a one-for-one basis.

Holders of Operating Partnership units ("OP Units") have certain redemption rights that enable OP 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 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.

As of September 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.

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

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.

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

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

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.

See Note 8, Share-Based Compensation Plan, for further discussion on LTIP units.

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

As of September 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

2 unchanged sentences

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.

As of September 30, 2021, there were 1,808,182 common shares available for issuance under the Plan.

Service Condition Share Awards

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

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

Shares Weighted-Average

3 unchanged sentences

Forfeited ( 7,902 ) $ 23.33

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.

Unvested at September 30, 2021 568,765 $ 22.53

For the three and nine months ended September 30, 2021, the Company recognized approximately $ 1.1 million and $ 3.0 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

2 unchanged sentences

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.

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.

For the three and nine months ended September 30, 2021, the Company recognized approximately $ 1.3 million and $ 3.6 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.

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

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

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.

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

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

The fair value of each award was determined based on the closing price of the Company’s common shares on the grant date of $ 22.69 per unit.

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

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 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.

As of September 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 September 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 in Note 7, Equity .

For the three and nine months ended September 30, 2021, the Company recognized approximately $ 0.7 million and $ 1.7 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 and six months ended June 30, 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 nine months ended September 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 June 30, 2021 and December 31, 2020, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2016.

As of September 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 June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

2021 2020 2021 2020

7 unchanged sentences

Net income (loss) per share available to common shareholders — diluted $ ( 0.34 ) $ ( 1.06 ) $ ( 1.39 ) $ ( 1.86 )

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.

For the three and nine months ended September 30, 2021, 1,035,369 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 nine months ended September 30, 2020, 547,203 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 nine months ended September 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 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.

For the three and nine months ended September 30, 2021, com bined base and incentive management fees were $ 5.1 million and $ 11.8 million, respectively.

For the three and nine months ended September 30, 2020, com bined base and incentive management fees were $ 1.5 million and $ 8.0 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.

4 unchanged sentences

Restricted Cash

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.

At September 30, 2021 and December 31, 2020, the Company had $ 25.1 million and $ 12.0 million, respectively, in restricted cash, which consisted of funds held in cash management and lockbox accounts held by a lender, reserves for replacement of furniture and fixtures and reserves to pay for real estate taxes, ground rent or property insurance under certain hotel management agreements or loan agreements.

Ground and Hotel Leases

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

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

Lease Properties Lease Type Lease Expiration Date

Restaurant at Southernmost Beach Resort Operating lease April 2029

Paradise Point Resort & Spa Operating lease May 2050

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

Viceroy Santa Monica Hotel Operating lease September 2065

San Diego Mission Bay Resort Operating lease July 2068

Paradise Point Resort & Spa Operating lease May 2050

Hotel Vitale Operating lease March 2070 (1)

Viceroy Santa Monica Hotel Operating lease September 2065

Hyatt Regency Boston Harbor Operating lease April 2077

The Westin Copley Place, Boston Operating lease December 2077 (2)

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

Jekyll Island Club Resort and Restaurant Operating lease January 2089

Hotel Zelos San Francisco Operating lease June 2097

Hotel Palomar Los Angeles Beverly Hills Operating lease January 2107 (3)

Margaritaville Hollywood Beach Resort Operating lease July 2112

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

Harbor Court Hotel San Francisco Finance lease August 2052

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

______________________

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

(2) No payments are required through maturity.

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

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

4 unchanged sentences

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 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,

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

For the three months ended September 30, For the nine months ended September 30,

2021 2020 2021 2020

1 unchanged sentence

Variable ground rent 2,917 1,072 6,275 3,816

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

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

Total ground rent $ 6,846 $ 5,386 $ 18,807 $ 16,723

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

Thereafter 1,587,326

6 unchanged sentences

Supplemental Information to Statements of Cash Flows

For the six months ended June 30,

For the nine months ended September 30,

(in thousands)

8 unchanged sentences

Issuance of common shares for executive and employee bonuses $ 1,446 $ —

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

Accrued additions and improvements to hotel properties $ 2,292 $ 7,842

Right of use assets obtained in exchange for lease liabilities $ 48,302 $ —

Write-off of deferred financing costs $ 5,043 $ —

Mortgage loan assumed in connection with acquisition $ 161,500 $ —

Below (above) market rate contracts assumed in connection with acquisition $ 3,071 $ —

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.

On October 20, 2021, the Company acquired the 19 -room Avalon Bed & Breakfast and the 12 -room Duval Gardens, both located in Key West, Florida, for $ 20.0 million.

The two properties will be consolidated and operated as part of the Company's Southernmost Beach Resort.

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