What changed in this filing

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Item 1A. Risk Factors

2023-02-21 compared with 2022-02-22 · 13 added, 37 removed, 707 unchanged (7% of the section changed)

23 unchanged sentences

• Risks related to acquiring outstanding debt

• Risks related to London Interbank Offered Rate ("LIBOR") and potential replacements

Risks Related to the Lodging Industry

• Risks related to COVID-19 and other viruses, diseases or future pandemics

• Risks related to COVID-19 or other pandemics

• Risks related to hotel profitability

7 unchanged sentences

• Risks related to terrorist attacks

• Risks related to climate change and other environmental factors and regulations

• Risks related to natural disasters, climate change and other environmental factors and regulations

• Risks related to underinsurance or lack of insurance

30 unchanged sentences

We depend on the efforts and expertise of our executive officers and would be adversely affected by the loss of their services.

We depend on the efforts and expertise of our Chairman, President and Chief Executive Officer, and our other executive officers, to execute our business strategy.

We depend on the efforts and expertise of Jon E.

Bortz, our Chairman, President and Chief Executive Officer, and our two other executive officers, to execute our business strategy.

The loss of their services, and our inability to quickly identify and hire suitable replacements could adversely affect our business activities, including, without limitation, relationships with shareholders, lenders, management companies and other industry personnel.

116 unchanged sentences

This could adversely affect our liquidity and our ability to make distributions to our shareholders.

The cash trap provisions of both of our existing mortgage loan agreements were triggered prior to our assumption of the loans in connection with our acquisition of the related hotel properties in 2021.

There is refinancing risk associated with our debt.

17 unchanged sentences

In addition, we may not earn a current return on such investments particularly if the loan that we acquire is in default.

Changes in the method of determining the LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect our financial results.

As of December 31, 2021, all of the debt outstanding under our unsecured term loans and our senior unsecured revolving credit facilities was indexed to LIBOR.

On March 5, 2021, both the United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, and the ICE Benchmark Administration Limited (“IBA”), which is LIBOR’s administrator, announced that all LIBOR tenors will cease to be published or will no longer be representative after June 30, 2023.

These announcements mean that any LIBOR-based borrowings that mature beyond June 30, 2023 need to be converted to alternative interest rates.

In addition, based on guidance from U.S.

banking regulators, U.S.

financial institutions are not expected to enter into new U.S.

Dollar LIBOR ("USD-LIBOR") contracts after December 31, 2021, which means that any of our new borrowings after December 31, 2021, will be done at alternative rates.

The Alternative Reference Rates Committee, a committee of private sector entities with ex-officio official sector members convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended the Secured Overnight Financing Rate (“SOFR”) plus a recommended spread adjustment as the replacement for LIBOR.

There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.

If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available.

The transition away from LIBOR may adversely impact our ability to manage and hedge exposures to fluctuations in interest rates using derivative instruments.

There is no guarantee that a transition from LIBOR to an alternative reference rate will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have an adverse effect on our business, results of operations or financial condition.

Risks Related to the Lodging Industry

3 unchanged sentences

As a result of this pandemic and subsequent government mandates and health official recommendations and restrictions, hotel demand was nearly eliminated during the second quarter of 2020 and occupancy levels reached historic lows.

While our operations have improved, they are still well below pre-pandemic levels, and there can be no assurance that our operations will continue to improve or that our operations will not deteriorate again in response to surges in the pandemic.

Certain states and cities, including those where our hotels are located, have reacted to the pandemic by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on the types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue.

In response to the COVID-19 pandemic, we temporarily suspended operations at the vast majority of our hotels.

However, by July 1, 2021, all of the hotels whose operations had been suspended due to the pandemic had been re-opened, with the exception of Hotel Vitale, whose operations remain suspended until the completion of its renovation and repositioning, which we expect to occur in the second quarter of 2022.

While our operations have improved, they are still below pre-pandemic levels overall, and there can be no assurance that our operations will continue to improve or that our operations will not deteriorate again as a result of surges in the pandemic and government, business and individual responses.

Certain states and cities, including those where our hotels are located, reacted to the pandemic by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on the types of business that may continue to operate, and/or restrictions on the types of construction projects that may be reinstated.

In response to the COVID-19 pandemic in 2020, we temporarily suspended operations at the vast majority of our hotels.

However, by July 1, 2021, all of the hotels whose operations had been suspended due to the pandemic had been re-opened, with the exception of 1 Hotel San Francisco (formerly Hotel Vitale), whose operations remained suspended until the completion of its renovation and repositioning in 2022.

The majority of our hotels are running in a more limited capacity as compared to pre-pandemic levels.

2 unchanged sentences

While we have taken steps to increase our cash position and preserve our financial flexibility, given the unprecedented impact of COVID-19 on the global market and our hotel operations, we cannot assure you that these steps will prove to be sufficient or that our forecast or the assumptions we used to estimate our liquidity requirements will be correct.

We are unable to predict whether we will need again to suspend operations temporarily at any of our hotels as a result of the outbreak of new variants of COVID-19.

We are unable to predict whether we will need again to suspend operations temporarily at any of our hotels as a result of the outbreak of new variants of COVID-19 and government, business and individual responses to such outbreaks.

Travel advisories and restrictions may be continued or reinstituted due to the continued outbreak or a resurgent outbreak of COVID-19.

1 unchanged sentence

We are unable to predict if and when occupancy and the average daily rates at our hotels will return to pre-pandemic levels.

Additionally, our hotels may be negatively impacted by adverse changes in the economy, including higher unemployment rates, declines in income levels, loss of personal wealth and possibly a national and/or global recession resulting from the impact of COVID-19.

Declines in demand trends, occupancy and the average daily rates at our hotels may indicate that one or more of our hotels is impaired, which would adversely affect our financial condition and results of operations.

We are subject to various financial covenants under our credit facilities, term loan facilities and senior notes.

In December 2021, we completed amendments to the agreements governing our credit facilities, term loan facilities and senior notes, which, among other things, waived all of its financial covenants until the second quarter of 2022 (with substantially less-restrictive covenants through the end of the first quarter of 2023).

Due to COVID-19’s negative impact on our operations throughout 2021, it is possible that we may not meet the terms of the financial covenants once they become effective in 2022.

Our future liquidity will depend on the gradual return of leisure, business and group business, to our hotels and the stabilization of demand throughout our portfolio.

If we are unable to satisfy the amended financial covenants following the end of the existing waiver period, the lenders of such debt may require us to repay the loans.

Failure to meet any financial covenants of our debt would adversely affect our financial conditions and results from operations, and may raise doubt about our ability to continue as a going concern.

The COVID-19 pandemic may exacerbate many of the risks described in this Annual Report on Form 10-K and expose us to the following risks, among others:

185 unchanged sentences

The delay in approving a budget and continuing appropriation legislation to fund the federal government's operations caused many federal agencies to cease or curtail some activities during the fourth quarter of 2013 and for an even longer period of time beginning in the fourth quarter of 2018.

In April 2013, the Federal Aviation Administration announced the implementation of furloughs of air traffic controllers, resulting in flight delays throughout the United States until the U.S.

Congress passed a bill suspending such furloughs.

There can be no assurance that similar action or inaction by federal or state government agencies, or other efforts to reduce government expenditures or growth, will not occur again in future periods, resulting in difficulties and discouraging travel or meetings and conferences.

91 unchanged sentences

These requirements prevent shareholders from removing trustees except for cause and with a substantial affirmative vote and from replacing trustees with their own nominees and may prevent a change in control of our company that is in the best interests of our shareholders.

The ability of our board of trustees to change our major policies without the consent of shareholders may not be in shareholders' interest.

The ability of our board of trustees to change our major policies without the consent of shareholders may not be in our shareholders' interest.

Our board of trustees determines our major policies, including policies and guidelines relating to our acquisitions, leverage, financing, growth, operations and distributions to shareholders.

93 unchanged sentences

Under IRS Revenue Procedure 2017-45, as a publicly offered REIT, as long as at least 20 percent of the total dividend is available in cash and certain other requirements are satisfied, the IRS will treat the share distribution as a dividend (to the extent applicable rules treat such distribution as being made out of our earnings and profits).

Pursuant to recently released IRS guidance, this threshold is reduced from 20 percent to 10 percent for distributions declared by a publicly offered REIT on or after November 1, 2021 and on or before June 30, 2022.

This threshold has been temporarily reduced in the past and may be reduced in the future by IRS guidance.

Although we have no current intention of paying dividends in the form of our own shares, if in the future we choose to pay dividends in our own shares, our shareholders may be required to pay tax in excess of the cash that they receive.

111 unchanged sentences

federal income tax law, regulation or administrative or judicial interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively.

Several recent proposals have been made that would make substantial changes to the U.S.

federal income tax laws generally.

We cannot predict whether any of these proposed changes will become law, or the long-term effect of any future law changes on REITs and their shareholders generally.

We cannot predict the long-term effect of any future law changes on REITs and their shareholders generally.

We and our shareholders could be adversely affected by any such change in, or any new, U.S.

2 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors