What changed in this filing

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Item 1. Financial Statements

2022-07-26 compared with 2022-04-26 · 213 added, 100 removed, 562 unchanged (36% of the section changed)

3 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Investment in hotel properties, net $ 6,039,477 $ 6,079,333

Hotels held for sale 146,805 —

Cash and cash equivalents 32,046 58,518

10 unchanged sentences

Accrued interest 4,821 4,567

Liabilities related to hotels held for sale 4,636 —

Distribution payable 12,217 11,756

2 unchanged sentences

Shareholders’ equity:

Preferred shares of beneficial interest, $ .01 par value (liquidation preference $ 740,000 at March 31, 2022 and December 31, 2021), 100,000,000 shares authorized;

29,600,000 shares issued and outstanding at March 31, 2022 and December 31, 2021

Preferred shares of beneficial interest, $ .01 par value (liquidation preference $ 740,000 at June 30, 2022 and December 31, 2021), 100,000,000 shares authorized;

29,600,000 shares issued and outstanding at June 30, 2022 and December 31, 2021

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

130,904,299 shares issued and outstanding at March 31, 2022 and 130,813,750 shares issued and outstanding at December 31, 2021

130,905,132 shares issued and outstanding at June 30, 2022 and 130,813,750 shares issued and outstanding at December 31, 2021

Additional paid-in capital 4,271,169 4,268,042

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,

2022 2021 2022 2021

Room $ 261,394 $ 108,603 $ 430,026 $ 162,066

11 unchanged sentences

Impairment loss 12,271 — 73,254 14,856

Gain on sale of hotel properties — ( 64,558 ) — ( 64,558 )

Other operating expenses 1,933 521 3,056 1,083

2 unchanged sentences

Interest expense ( 23,161 ) ( 24,804 ) ( 45,733 ) ( 50,135 )

Other 14 29 33 58

Income (loss) before income taxes 28,797 1,480 ( 71,419 ) ( 119,957 )

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,

2022 2021 2022 2021

Comprehensive Income:

10 unchanged sentences

(in thousands, except share data)

For the three months ended March 31, 2021

For the three months ended June 30, 2022

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, 2022

29,600,000 $ 296 130,904,299 $ 1,309 $ 4,269,322 $ 12,092 $ ( 1,206,019 ) $ 3,077,000 $ 7,934 $ 3,084,934

Issuance of shares, net of offering costs — — — — ( 75 ) — — ( 75 ) — ( 75 )

Issuance of operating partnership units — — — — — — — — 78,000 78,000

Share-based compensation — — 833 — 1,922 — — 1,922 698 2,620

Distributions on common shares/units — — — — — — ( 1,320 ) ( 1,320 ) ( 24 ) ( 1,344 )

Distributions on preferred shares/units — — — — — — ( 11,343 ) ( 11,343 ) ( 647 ) ( 11,990 )

Other comprehensive income (loss):

Change in fair value of derivative instruments — — — — — 9,252 — 9,252 78 9,330

Amounts reclassified from other comprehensive income — — — — — 2,404 — 2,404 — 2,404

Net income (loss) — — — — — — 27,989 27,989 808 28,797

Balance at June 30, 2022

29,600,000 $ 296 130,905,132 $ 1,309 $ 4,271,169 $ 23,748 $ ( 1,190,693 ) $ 3,105,829 $ 86,847 $ 3,192,676

Pebblebrook Hotel Trust

Consolidated Statements of Equity - Continued

(in thousands, except share data)

For the three months ended June 30, 2021

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

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

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

Distributions on common shares/units — — — — — — ( 1,319 ) ( 1,319 ) ( 25 ) ( 1,344 )

Distributions on preferred shares — — — — — — ( 10,094 ) ( 10,094 ) — ( 10,094 )

Other comprehensive income (loss):

Change in fair value of derivative instruments — — — — — ( 2,310 ) — ( 2,310 ) — ( 2,310 )

Amounts reclassified from other comprehensive income — — — — — 6,407 — 6,407 — 6,407

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

Pebblebrook Hotel Trust

Consolidated Statements of Equity - Continued

(in thousands, except share data)

For the six months ended June 30, 2022

Shares Amount Shares Amount

Balance at December 31, 2021

29,600,000 $ 296 130,813,750 $ 1,308 $ 4,268,042 $ ( 19,442 ) $ ( 1,094,023 ) $ 3,156,181 $ 7,724 $ 3,163,905

Issuance of shares, net of offering costs — — — — ( 75 ) — — ( 75 ) — ( 75 )

Issuance of operating partnership units — — — — — — — — 78,000 78,000

Issuance of common shares for Board of Trustees compensation — — 33,866 1 737 — — 738 — 738

2 unchanged sentences

Distributions on common shares/units — — — — — — ( 2,442 ) ( 2,442 ) ( 33 ) ( 2,475 )

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

Cumulative effect adjustment from adoption of new accounting standard — — — — ( 113,099 ) — — ( 113,099 ) — ( 113,099 )

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

Distributions on preferred shares/units — — — — — — ( 22,687 ) ( 22,687 ) ( 647 ) ( 23,334 )

Other comprehensive income (loss):

2 unchanged sentences

Net income (loss) — — — — — — ( 71,541 ) ( 71,541 ) 122 ( 71,419 )

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, 2022

29,600,000 $ 296 130,905,132 $ 1,309 $ 4,271,169 $ 23,748 $ ( 1,190,693 ) $ 3,105,829 $ 86,847 $ 3,192,676

Pebblebrook Hotel Trust

1 unchanged sentence

(in thousands, except share data)

For the three months ended March 31, 2022

For the six months ended June 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

Issuance of shares, net of offering costs 9,200,000 92 — — 222,238 — — 222,330 — 222,330

Issuance of common shares for Board of Trustees compensation — — 27,711 1 515 — — 516 — 516

3 unchanged sentences

Distributions on preferred shares — — — — — — ( 18,233 ) ( 18,233 ) — ( 18,233 )

Cumulative effect adjustment from adoption of new accounting standard — — — — ( 113,099 ) — — ( 113,099 ) — ( 113,099 )

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

Other comprehensive income (loss):

2 unchanged sentences

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

Balance at March 31, 2022 29,600,000 $ 296 130,904,299 $ 1,309 $ 4,269,322 $ 12,092 $ ( 1,206,019 ) $ 3,077,000 $ 7,934 $ 3,084,934

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

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:

4 unchanged sentences

Amortization of deferred financing costs, non-cash interest and other amortization 6,852 9,068

Gain on sale of hotel properties — ( 64,558 )

Impairment loss 73,254 14,856

9 unchanged sentences

Improvements and additions to hotel properties ( 42,411 ) ( 26,984 )

Proceeds from sales of hotel properties 72,969 171,988

Acquisition of hotel properties ( 247,163 ) —

Deposits on hotel properties — ( 17,148 )

Other investing activities ( 86 ) ( 64 )

1 unchanged sentence

Financing activities:

Gross proceeds from issuance of preferred shares — 230,000

Payment of offering costs — common and preferred shares ( 75 ) ( 7,670 )

Payment of deferred financing costs ( 96 ) ( 9,611 )

Borrowings under revolving credit facilities 180,000 —

Repayments under revolving credit facilities ( 80,000 ) ( 40,000 )

14 unchanged sentences

Pebblebrook Hotel Trust (the "Company") is an internally managed hotel investment company, 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, 2022, the Company owned 53 hotels with a total of 13,247 guest rooms.

As of June 30, 2022, the Company owned 54 hotels with a total of 13,415 guest rooms.

The hotel properties are located in:

7 unchanged sentences

Naples, Florida;

Newport, Rhode Island;

Philadelphia, Pennsylvania;

9 unchanged sentences

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

As of March 31, 2022, the Company owned 99.3 % of the common limited partnership units issued by the Operating Partnership ("common units").

As of June 30, 2022, 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 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 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.

The Company also amended the agreements governing its existing credit facilities, term loan facilities and unsecured senior notes which, among other things, waived quarterly financial covenants until the second quarter of 2022, with substantially less-restrictive covenants through the end of the first quarter of 2023.

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 July 1, 2021, all of the Company's hotels and resorts were open, with the exception of Hotel Vitale, whose operations will remain suspended until the completion of its renovations and repositioning, which is expected to occur in the second 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 negative impact on the Company's results of operations, financial position and cash flows for the remainder of 2022.

However, results have improved in the first quarter of 2022 relative to 2021 and this trend is expected to continue throughout 2022.

The demand recovery has been led by strong leisure travel with a slower recovery in business and group travel.

As a result of the strength in leisure travel, the Company's resort properties are operating at or above pre-pandemic levels.

Based on the amendments to the Company's credit agreements, assumptions regarding the recovery of demand and the Company's liquidity of $ 694.4 million as of March 31, 2022, the Company believes it has sufficient liquidity to meet its obligations for the next 12 months.

COVID-19 Update

The COVID-19 pandemic, which began in early 2020, has had a significant negative impact on the Company's operations and financial results and is expected to continue to have a negative impact on the hotel industry and the Company's results of operations, financial position and cash flows for the remainder of 2022.

Results improved in 2021 and have continued to improve through the first six months of 2022.

The Company exited its debt covenant waiver period under its credit facilities as of the end of the second quarter of 2022, and is in compliance with the covenants in the credit facility agreements.

There remains significant uncertainty regarding the trends and outlook as a result of new variants and individual and government responses.

Summary of Significant Accounting Policies

8 unchanged sentences

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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

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

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

7 unchanged sentences

Risks and Uncertainties

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

As discussed in Note 1, Organization, the COVID-19 pandemic has significantly impacted the hotels' operational performance.

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

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

As discussed in Note 1.

Organization , the COVID-19 pandemic has significantly impacted the hotels' operational performance.

There has been a significant recovery in travel, however, the emergence of new variant strains or other factors that may impact travel demand may impact the Company's cash flow and ability to service debt or meet other financial obligations.

New Accounting Pronouncements

15 unchanged sentences

Acquisition and Disposition of Hotel Properties

There were no acquisitions or dispositions of hotel properties during the three months ended March 31, 2022 and 2021.

On May 11, 2022, the Company acquired the 119 -room Inn on Fifth in Naples, Florida for $ 156.0 million, excluding prorations and transactions costs.

This transaction was funded with cash on hand, the issuance of 16,291 common units of limited partnership interest in the Operating Partnership and 3,104,400 preferred units of the Operating Partnership designated as 6.0 % Series Z Preferred Units.

On June 23, 2022, the Company acquired the 257 -room Gurney's Newport Resort & Marina in Newport, Rhode Island for $ 174.0 million, using cash on hand and proceeds from its senior unsecured revolving credit facility.

The property was acquired as part of a reverse 1031 Exchange in which the Company engaged a qualified intermediary to establish a trust to hold the property pending completion of the sale of the subject property or properties related to the reverse 1031 Exchange.

The trust was deemed to be a variable interest entity (VIE) for which the Company is the primary beneficiary, and therefore, the Company has consolidated the trust and property.

The following table summarizes disposition transactions during 2022 and 2021 (in thousands):

Hotel Property Name Location Sale Date Sale Price

The Marker San Francisco San Francisco, CA June 28, 2022 $ 77,000

2022 Total $ 77,000

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

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

For the three and six months ended June 30, 2022, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $( 0.2 ) million and $( 1.4 ) million, respectively, excluding impairment loss and (gain) loss on sale of hotel properties related to the hotel property sold.

For the three and six months ended June 30, 2021, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $( 3.0 ) million and $( 9.1 ) 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.

Held for Sale

As of June 30, 2022, the Company had entered into agreements to sell two hotel properties in separate transactions for an aggregate sales price of approximately $ 151.0 million.

These hotels were designated as held for sale as they met all of the Company's held for sale criteria.

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

The Company expects to complete the sales of these properties in the third quarter of 2022.

Investment in Hotel Properties

Investment in hotel properties as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):

March 31, 2022 December 31, 2021

Investment in hotel properties as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

June 30, 2022 December 31, 2021

Land $ 918,165 $ 926,330

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, 2022, the Company recognized an impairment loss of $ 61.0 million related to two hotels as a result of their fair values being lower than their carrying values.

Based on the analyses performed, for the six months ended June 30, 2022, the Company recognized an impairment loss of $ 73.3 million related to two hotels as a result of their fair values being lower than their carrying values.

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

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 its fair value being lower than its carrying value.

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 its 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 marketing efforts for this property.

5 unchanged sentences

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, 2022, the Company's lease liabilities consisted of operating lease liabilities of $ 319.4 million and financing lease liabilities of $ 42.2 million.

As of June 30, 2022, the Company's lease liabilities consisted of operating lease liabilities of $ 320.3 million and financing lease liabilities of $ 42.4 million.

As of December 31, 2021, the Company's lease liabilities consisted of operating lease liabilities of $ 319.4 million and financing lease liabilities of $ 42.0 million.

1 unchanged sentence

In 2021, the Company amended the agreements governing its existing credit facilities, term loan facilities and senior notes to, among other things, waive financial covenants until the second quarter of 2022 (with substantially less-restrictive covenants through the end of the first quarter of 2023), extend certain debt maturity dates and increase the interest rate spread.

The Company's debt consisted of the following as of March 31, 2022 and December 31, 2021 (dollars in thousands):

The Company's debt consisted of the following as of June 30, 2022 and December 31, 2021 (dollars in thousands):

Balance Outstanding as of

Interest Rate Maturity Date March 31, 2022 December 31, 2021

Interest Rate Maturity Date June 30, 2022 December 31, 2021

Revolving credit facilities

54 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 March 31, 2022, approximately $ 1.1 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.05 %, after taking into account interest rate swap agreements, and approximately $ 293.1 million bore an effective weighted-average floating interest rate of 2.82 %.

As of June 30, 2022, approximately $ 1.0 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.01 %, after taking into account interest rate swap agreements, and approximately $ 366.7 million bore an effective weighted-average floating interest rate of 4.26 %.

As of December 31, 2021, approximately $ 1.3 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.06 %, after taking into account interest rate swap agreements, and approximately $ 113.1 million bore a weighted-average floating interest rate of 2.64 %.

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

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

(6) In February 2021, the interest rate increased from 4.93 % to 5.38 %.

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

(7) In April 2022, the Company exercised the option to extend the maturity date to May 2023.

4 unchanged sentences

(10) The Company used cash on hand to payoff this term loan upon maturity in April 2022.

Assuming all debt extension options are exercised, as of June 30, 2022 the Company will have $ 60.0 million in debt principal due within one year.

The Company intends to refinance or repay this principal using cash flow from operations, proceeds from property sales or borrowings on the revolving credit facility.

Unsecured Revolving Credit Facilities

The Company has a $ 611.0 million senior unsecured revolving credit facility which will mature in March 2023, with options to extend the maturity date for up to two six-month periods , subject to certain terms and conditions and payment of an extension fee.

As of March 31, 2022, the Company had no outstanding borrowings, $ 12.6 million of outstanding letters of credit and borrowing capacity of $ 598.4 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.

As of June 30, 2022, the Company had $ 100.0 million outstanding borrowings, $ 12.6 million of outstanding letters of credit and borrowing capacity of $ 498.4 million remaining on its senior unsecured credit facility.

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

The Company has the ability to further increase the aggregate borrowing capacity under the credit agreement 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 March 31, 2022, the Company had no borrowings under the PHL Credit Facility and had $ 20.0 million borrowing capacity remaining available under the PHL Credit Facility.

As of June 30, 2022, the Company had no borrowings under the PHL Credit Facility and had $ 20.0 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 $ 12.6 million and $ 12.1 million were outstanding as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, 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 $ 12.6 million and $ 12.1 million were outstanding as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022, 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.

As of March 31, 2022, the Company was in compliance with all debt covenants of its term loan facilities.

As of June 30, 2022, 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.

20 unchanged sentences

The conversion rate is subject to adjustment in certain circumstances.

As of March 31, 2022 and December 31, 2021, the if-converted value of the Convertible Notes did not exceed the principal amount.

As of June 30, 2022 and December 31, 2021, 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.

8 unchanged sentences

The Company has $ 47.6 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.70 % per annum and maturing in December 2023 (the "Series A Notes") and $ 2.4 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.93 % per annum and maturing in December 2025 (the "Series B Notes").

As a result of the amendments described above, the interest rates of the Series A Notes and the Series B Notes are fixed at 5.15 % and 5.38 %, respectively, for the duration of the waiver period.

In February 2021, as a result of the amendments described above, the interest rates of the Series A Notes and the Series B Notes increased to 5.15 % and 5.38 %, respectively.

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, 2022, the Company was in compliance with all such debt covenants.

As of June 30, 2022, the Company was in compliance with all such debt covenants.

Mortgage Loans

17 unchanged sentences

Interest Expense

The components of the Company's interest expense consisted of the following for the three months ended March 31, 2022 and 2021 (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, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

Unsecured revolving credit facilities $ 786 $ 507 $ 1,279 $ 1,068

7 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, convertible senior notes and the Estancia mortgage loan) as of March 31, 2022 and December 31, 2021 was $ 714.7 million and $ 747.8 million, respectively.

The estimated fair value of the Company’s fixed rate debt (unsecured senior notes, convertible senior notes and the Estancia mortgage loan) as of June 30, 2022 and December 31, 2021 was $ 706.1 million and $ 747.8 million, respectively.

The estimated fair value of the Company's variable rate debt approximates its book value.

3 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, 2022 and December 31, 2021 consisted of the following, by maturity date (dollars in thousands):

The Company's interest rate swaps at June 30, 2022 and December 31, 2021 consisted of the following, by maturity date (dollars in thousands):

Aggregate Notional Value as of

Hedge Type Interest Rate Range Maturity March 31, 2022 December 31, 2021

Hedge Type Interest Rate Range Maturity June 30, 2022 December 31, 2021

Swap-cash flow 1.78 % - 1.79 %

17 unchanged sentences

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

As of March 31, 2022, the Company's derivative instruments were in both asset and liability positions, with aggregate asset and liability fair values of $ 13.8 million and $ 1.6 million, respectively.

As of June 30, 2022, the Company's derivative instruments were in an asset position with an aggregate fair value of $ 23.9 million.

None of the Company's derivative instruments were in a liability position as of June 30, 2022.

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.

1 unchanged sentence

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, 2022 and 2021 (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, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

Southern Florida/Georgia $ 80,284 $ 38,729 $ 165,525 $ 73,973

San Diego, CA 84,580 41,466 137,459 56,144

Los Angeles, CA 36,221 8,040

Boston, MA 73,717 23,455 107,653 33,212

Los Angeles, CA 44,892 21,741 81,113 29,781

San Francisco, CA 32,250 9,176 46,317 12,129

2 unchanged sentences

Washington, D.C.

16,971 4,264 23,247 6,166

15,158 6,629 22,441 9,604

Seattle, WA 4,916 1,438 6,889 1,926

2 unchanged sentences

(1) Other includes:

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

New York, NY, Philadelphia, PA, Newport, RI, and Santa Cruz, CA.

Payments from customers are primarily made when services are provided.

9 unchanged sentences

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, 2022, the Company had no repurchases under this program and as of March 31, 2022, $ 56.6 million of common shares remained available for repurchase under this program.

For the six months ended June 30, 2022, the Company had no repurchases under this program, and as of June 30, 2022, $ 56.6 million of common shares remained available for repurchase under this program.

The credit agreements governing the Company's existing indebtedness prohibit the Company from repurchasing common shares until the Company has certified compliance with certain financial covenants through June 30, 2022.

4 unchanged sentences

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 three months ended March 31, 2022.

As of March 31, 2022, $ 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 six months ended June 30, 2022.

As of June 30, 2022, $ 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, 2022:

The Company declared the following dividends on common shares/units for the six months ended June 30, 2022:

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

$ 0.01 March 31, 2022 March 31, 2022 April 15, 2022

$ 0.01 June 30, 2022 June 30, 2022 July 15, 2022

Preferred Shares

3 unchanged sentences

In August 2021, the Company redeemed all outstanding 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 March 31, 2022 and December 31, 2021:

Security Type March 31, 2022 December 31, 2021

The following Preferred Shares were outstanding as of June 30, 2022 and December 31, 2021:

Security Type June 30, 2022 December 31, 2021

6.375 % Series E

16 unchanged sentences

Preferred Dividends

The Company declared the following dividends on preferred shares for the three months ended March 31, 2022:

The Company declared the following dividends on preferred shares for the six months ended June 30, 2022:

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

1 unchanged sentence

$ 0.40 March 31, 2022 March 31, 2022 April 15, 2022

6.375 % Series E

$ 0.40 June 30, 2022 June 30, 2022 July 15, 2022

6.30 % Series F

$ 0.39 March 31, 2022 March 31, 2022 April 15, 2022

6.30 % Series F

$ 0.39 June 30, 2022 June 30, 2022 July 15, 2022

6.375 % Series G

$ 0.40 March 31, 2022 March 31, 2022 April 15, 2022

6.375 % Series G

$ 0.40 June 30, 2022 June 30, 2022 July 15, 2022

5.70 % Series H

$ 0.36 March 31, 2022 March 31, 2022 April 15, 2022

5.70 % Series H

$ 0.36 June 30, 2022 June 30, 2022 July 15, 2022

Non-controlling Interest of Common Units in Operating Partnership

2 unchanged sentences

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, 2022 and December 31, 2021, the Operating Partnership had 133,605 OP units held by third parties, excluding LTIP units.

As of March 31, 2022, the Operating Partnership had two classes of long-term incentive partnership units ("LTIP") units, LTIP Class A units and LTIP Class B units.

On May 11, 2022, in connection with the acquisition of the Inn on Fifth in Naples, Florida, the Company issued 16,291 OP units in the Operating Partnership.

As of June 30, 2022 and December 31, 2021, the Operating Partnership had 149,896 and 133,605 OP units, respectively, held by third parties, excluding LTIP units.

As of June 30, 2022, the Operating Partnership had two classes of long-term incentive partnership ("LTIP") units, LTIP Class A units and LTIP Class B units.

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

As of March 31, 2022 and December 31, 2021, the Operating Partnership had 727,208 LTIP units outstanding.

Of the 727,208 LTIP units outstanding at March 31, 2022, 127,111 LTIP units have vested.

As of June 30, 2022 and December 31, 2021, the Operating Partnership had 727,208 LTIP units outstanding.

Of the 727,208 LTIP units outstanding at June 30, 2022, 127,111 LTIP units have vested.

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

Non-controlling Interest of Preferred Units in Operating Partnership

On May 11, 2022, in connection with the acquisition of the Inn on Fifth in Naples, Florida, the Company issued 3,104,400 preferred units in the Operating Partnership, designated as 6.0 % Series Z Cumulative Perpetual Preferred Units ("Series Z Preferred Units").

The Series Z Preferred Units rank senior to the common OP units and on parity with the Operating Partnership's Series E, Series, F, Series G and Series H Preferred Units.

Holders of Series Z Preferred Units are entitled to receive quarterly distributions at an annual rate of 6.0 % of the liquidation preference value of $ 25 per share.

At any time, holders of Series Z Preferred Units may elect to convert some or all of their units into any other series of the Operating Partnership’s preferred units outstanding at that time.

After the second anniversary of the issuance of the Series Z Preferred Units, holders may elect to redeem some or all of their units for, at the Company’s election, cash, common shares having an equivalent value or preferred shares on a one-for-one basis.

After the fifth anniversary of their issuance, the Company may redeem the Series Z Preferred Units for cash, common shares having an equivalent value or preferred shares on a one-for-one basis.

At any time following a change of control of the Company, holders of Series Z Preferred Units may elect to redeem some or all of their units for, at the Company’s election, cash or common shares having an equivalent value.

As of June 30, 2022, the Operating Partnership had 3,104,400 Series Z Preferred Units outstanding.

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 March 31, 2022, there were 1,839,323 common shares available for issuance under the Plan.

As of June 30, 2022, there were 1,740,854 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 March 31, 2022:

The following table provides a summary of service condition restricted share activity as of June 30, 2022:

Shares Weighted-Average

Unvested at December 31, 2021

567,431 $ 22.53

Granted 121,086 $ 22.49

Vested ( 107,303 ) $ 26.23

Forfeited ( 36,503 ) $ 22.80

Unvested at March 31, 2022 447,075 $ 21.65

For the three months ended March 31, 2022 and 2021, the Company recognized approximately $ 0.8 million of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.

Unvested at June 30, 2022

544,711 $ 21.77

For the three and six months ended June 30, 2022 the Company recognized approximately $ 0.8 million and $ 1.6 million, respectively, of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.

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

For the three months ended March 31, 2022 and 2021, the Company recognized approximately $ 0.9 million and $ 1.0 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.

On May 16, 2022, the Board of Trustees approved a target award of 175,898 performance-based equity awards to officers and employees of the Company.

These awards will vest, if at all, in 2025.

The actual number of common shares that ultimately vest will be from 0 % to 200 % of the target award and will be determined in 2025 based on the performance criteria defined in the award agreements for the period of performance from January 1, 2022 through December 31, 2024.

For the three and six months ended June 30, 2022, the Company recognized approximately $ 1.1 million and $ 2.0 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 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 March 31, 2022, the Operating Partnership had two classes of LTIP units, LTIP Class A units and LTIP Class B units.

As of June 30, 2022, 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.

As of March 31, 2022 and December 31, 2021, the Operating Partnership had 727,208 LTIP units outstanding.

Of the 727,208 LTIP units outstanding at March 31, 2022, 127,111 LTIP units have vested.

As of June 30, 2022 and December 31, 2021, the Operating Partnership had 727,208 LTIP units outstanding.

Of the 727,208 LTIP units outstanding at June 30, 2022, 127,111 LTIP units have vested.

Only vested LTIP units may be converted to common OP units, which in turn can be tendered for redemption as described in Note 7, Equity .

For the three months ended March 31, 2022 and 2021, the Company recognized approximately $ 0.7 million and $ 0.3 million, respectively, in expense related to these LTIP units.

For the three and six months ended June 30, 2022, the Company recognized approximately $ 0.7 million and $ 1.4 million, respectively, in expense related to these 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, 2022, 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, 2022, 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, 2022 and December 31, 2021, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2017.

As of June 30, 2022 and December 31, 2021, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2018 and 2017, respectively.

Earnings (Loss) Per Share

The following is a reconciliation of basic and diluted earnings (loss) 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,

2022 2021 2022 2021

Net income (loss) attributable to common shareholders $ 16,646 $ ( 8,564 ) $ ( 94,228 ) $ ( 137,285 )

Dividends paid on unvested share-based compensation ( 12 ) ( 12 ) ( 22 ) ( 23 )

Net income (loss) available to common shareholders $ ( 110,884 ) $ ( 128,733 )

Undistributed earnings attributable to share-based compensation ( 133 ) — — —

Net income (loss) available to common shareholders — basic $ 16,501 $ ( 8,576 ) $ ( 94,250 ) $ ( 137,308 )

Interest expense on convertible notes 3,281 — — —

Net income (loss) available to common shareholders — diluted $ 19,782 $ ( 8,576 ) $ ( 94,250 ) $ ( 137,308 )

Weighted-average number of common shares — basic 130,904,876 130,813,521 130,904,589 130,794,801

Effect of dilutive share-based compensation 374,188 — — —

Effect of dilutive convertible notes 29,441,175 — — —

Weighted-average number of common shares — diluted 160,720,239 130,813,521 130,904,589 130,794,801

1 unchanged sentence

Net income (loss) per share available to common shareholders — diluted $ 0.12 $ ( 0.07 ) $ ( 0.72 ) $ ( 1.05 )

For the three months ended March 31, 2022 and 2021, 787,871 and 1,041,130 , 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, 2022 and 2021, 29,441,175 of common 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, 2022, zero and 1,056,949 , respectively, shares 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, 1,030,676 shares 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, 2022, zero and 29,441,175 , respectively, common 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, 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.

10 unchanged sentences

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, 2022 and 2021, com bined base and incentive management fees were $ 7.7 million and $ 2.3 million, respectively.

For the three and six months ended June 30, 2022, com bined base and incentive management fees were $ 12.1 million and $ 19.8 million, respectively.

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

2 unchanged sentences

Restricted Cash

At March 31, 2022 and December 31, 2021, the Company had $ 26.5 million and $ 33.7 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.

At June 30, 2022 and December 31, 2021, the Company had $ 30.7 million and $ 33.7 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.

Hotel, Ground and Finance Leases

As of March 31, 2022, the following hotels were subject to leases as follows:

As of June 30, 2022, the following hotels were subject to leases as follows:

Lease Properties Lease Type Lease Expiration Date

7 unchanged sentences

San Diego Mission Bay Resort Operating lease July 2068

Hotel Vitale Operating lease March 2070 (1)

1 Hotel San Francisco (formerly Hotel Vitale) Operating lease March 2070 (1)

Hyatt Regency Boston Harbor Operating lease April 2077

17 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 months ended March 31, 2022 and 2021 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, 2022 and 2021 are as follows (in thousands):

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

2022 2021 2022 2021

Fixed ground rent $ 4,561 $ 4,290 $ 9,017 $ 8,603

5 unchanged sentences

Supplemental Information to Statements of Cash Flows (in thousands)

For the three months ended March 31,

For the six months ended June 30,

Interest paid, net of capitalized interest $ 41,161 $ 43,373

4 unchanged sentences

Distributions payable on common shares/units $ 1,351 $ 1,527

Distributions payable on preferred shares $ 10,219 $ 7,558

Distributions payable on preferred shares/units $ 10,866 $ 9,513

Issuance of common shares for Board of Trustees compensation $ 738 $ 516

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

Issuance of common units in connection with hotel acquisition $ 390 $ —

Issuance of preferred units in connection with hotel acquisition $ 77,610 $ —

Accrued additions and improvements to hotel properties $ 6,762 $ 1,206

Right of use assets obtained in exchange for lease liabilities $ 1,005 $ —

Write-off of fully amortized deferred financing costs $ 5,723 $ 4,516

Subsequent Events

On April 21, 2022, the Company announced that it executed a contract to acquire the Inn on Fifth in Naples, Florida.

The purchase is expected to be completed by the end of the second quarter of 2022 and is subject to customary closing conditions.

The Company offers no assurances that this acquisition will be completed on these terms or at all.

In July 2022, the Company entered into an agreement to sell a property for $ 32.9 million.

This is in addition to the two properties classified as held for sale as of June 30, 2022.

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