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Item 7. Management’s Discussion and Analysis

2023-02-21 compared with 2022-02-22 · 95 added, 120 removed, 160 unchanged (57% of the section changed)

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In this report, we use the terms "the Company", "we" or "our", to refer to Pebblebrook Hotel Trust and its subsidiaries, unless the context indicates otherwise.

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, we implemented significant cost controls, salary reductions and temporarily suspended operations at 47 of our hotels and resorts in 2020.

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

As demand improved as a result of an increase in vaccinations and corresponding lifting of governmental restrictions and recommendations, we gradually reopened our hotels and resorts.

As of December 31, 2021, all of our 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 we expect to occur in the second quarter of 2022.

The COVID-19 pandemic had a significant negative impact on our operations and financial results throughout 2021.

Although results improved relative to 2020, we cannot estimate with certainty when travel demand will fully recover.

However, we anticipate further recovery in 2022.

Leisure travel in 2021 exceeded expectations, particularly at our warmer-weather and resort properties and we expect this trend to continue in 2022.

However, business travel continues to be substantially lower.

During 2021, we amended the agreements governing our existing credit facilities, term loan facilities and unsecured senior notes to, among other changes:

• waive quarterly financial covenants until the second quarter of 2022, with substantially less-restrictive covenants through the end of the first quarter of 2023;

• extend or provide the option for us to extend more than $1.0 billion of debt maturities including our revolving credit facility;

• increase pricing until the end of the covenant waiver period;

• impose certain restrictions during the covenant waiver period on share repurchases, dividends, capital improvements, and hotel property acquisitions.

Based on the amendments to our credit agreements, actions noted above, and assumptions regarding the recovery of demand, we believe we have sufficient liquidity to meet our obligations for the next 12 months.

For further discussion on our liquidity, see Liquidity and Capital Resources included in Part II, Item 7 of this Annual Report on Form 10-K.

During the year ended December 31, 2021, other significant transactions included:

• On February 9, 2021, we 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 April 1, 2021, we sold the Sir Francis Drake for $157.6 million.

• On May 13, 2021, we 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, we sold The Roger New York for $19.0 million.

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

• On July 27, 2021, we 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, we redeemed all outstanding 6.375% Series D Cumulative Redeemable Preferred Shares.

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

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

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

• On October 20, 2021, we acquired Avalon Bed & Breakfast and Duval Gardens for $20.0 million, with both properties consolidating into our Southernmost Beach Resort.

• On December 1, 2021, we acquired the leasehold interest in Estancia La Jolla Hotel & Spa for $108.0 million, including the assumption of a $61.7 million mortgage loan.

• We repaid $431.9 million of debt, consisting of $341.9 million of term loans, $50.0 million of senior unsecured notes and $40.0 million on the senior unsecured credit facility.

As a result of this pandemic and subsequent government mandates, health official recommendations, corporate policy changes and individual responses, hotel demand dramatically declined and we implemented significant cost controls, salary reductions and the temporary suspension of operations at 47 of our properties in 2020, along with other actions to improve liquidity.

All of our properties reopened in 2021 with the exception of 1 Hotel San Francisco (formerly Hotel Vitale), whose operations remained suspended until the completion of its renovations and repositioning in June 2022.

Demand has significantly improved throughout 2022 led by strong leisure travel demand with a significant improvement in business travel compared to 2021.

Recent inflation and the expectation of future inflation have caused labor, capital and other costs to increase and the reaction by the Federal Reserve to rapidly and substantially increase interest rates has created economic uncertainty and significant concerns and risk of an economic downturn, softening or recession.

During 2022, we acquired Inn on Fifth in Naples, Florida and Newport Harbor Island Resort (formerly Gurney's Newport Resort & Marina) in Newport, Rhode Island for a gross purchase price of $330.0 million and we sold four hotels in separate transactions for aggregate sales prices of $260.9 million.

In addition, as of December 31, 2022 we have entered into an agreement to sell The Heathman Hotel in Portland, Oregon for $45.0 million, however, no assurances can be given that the sale will be completed on these terms or at all.

On October 13, 2022, we refinanced our senior unsecured revolving credit facility and all of the term loans.

Our new $2.0 billion credit facility provides for a $650.0 million senior unsecured revolving credit facility and three $460.0 million unsecured term loan facilities totaling $1.38 billion.

During the fourth quarter of 2022, we repurchased 4,559,839 common shares for an aggregate purchase price of $69.6 million under our existing common share repurchase programs.

In addition, following an unsolicited private inquiry, we repurchased 1,000,000 shares of outstanding 5.70% Series H Cumulative Redeemable Preferred Shares for $16.0 million which was a discount to their $25.0 million liquidation value.

In September 2022, our LaPlaya Beach Resort & Club sustained damage as a result of Hurricane Ian and closed.

We have continued to make progress completing significant repairs and rebuilding at the property.

The resort will be reopened in stages through the middle of 2023.

The first building reopened for guests in January 2023.

While we do not operate our hotel properties, both our asset management team and our executive management team monitor and work cooperatively with our hotel managers by advising and making recommendations in all aspects of our hotels’ operations, including property positioning and repositioning, revenue and expense management, operations analysis, physical design, renovation and capital improvements, guest experience and overall strategic direction.

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Same-Property Total RevPAR $ 294.49 $ 178.40

While the operations of many of our hotels were temporarily suspended beginning in March 2020, the above table of hotel operating statistics includes information from all hotels owned as of December 31, 2021 except for the following:

Hotel Zena Washington DC for the first and second quarters of 2021 and 2020, as it was closed for renovation during the first and second quarters of 2020;

Hotel Vitale for the third and fourth quarters of 2021 and 2020, as it was closed for renovation during the third and fourth quarters of 2021;

Jekyll Island Club Resort for the first and second quarters of 2021 and 2020;

Margaritaville Hollywood Beach Resort for the first, second and third quarters of 2021 and 2020;

Southernmost Beach Resort's 31 additional rooms following the acquisition of Avalon Bed & Breakfast and Duval Gardens for the first, second and third quarters of 2021 and 2020;

and Estancia La Jolla Hotel & Spa for all of 2021 and 2020.

Also included in the above table is information for Sir Francis Drake and The Roger New York for the first quarter of 2021 and 2020 as well as Villa Florence San Francisco on Union Square for the first and second quarters of 2021 and 2020.

The above table of hotel operating statistics includes information from all hotels owned as of December 31, 2022 except for 1 Hotel San Francisco (formerly Hotel Vitale) for 2022 and 2021 due to its closure for renovation from the third quarter of 2021 to the second quarter of 2022, Inn on Fifth for the first quarter of 2022 and 2021 due to its acquisition on May 11, 2022, Newport Harbor Island Resort (formerly Gurney's Newport Resort & Marina) for the first and the second quarters of 2022 and 2021 due to its acquisition on June 23, 2022 and LaPlaya Beach Resort & Club for the fourth quarter of 2022 and 2021 due to its closure following Hurricane Ian.

Additionally, the schedule excludes The Marker San Francisco for the second, third and fourth quarters of 2022 and 2021 due to its sale on June 28, 2022, Sofitel Philadelphia at Rittenhouse Square for the third and fourth quarters of 2022 and 2021 due to its sale on August 2, 2022, Hotel Spero for the third and fourth quarters of 2022 and 2021 due to its sale on August 25, 2022 and Hotel Vintage Portland for the third and fourth quarters of 2022 and 2021 due to its sale on September 14, 2022.

Results of Operations

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Year-to-year comparisons of the 2021 financial information to the same information for 2020 are contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 22, 2022.

At December 31, 2021 and 2020, we had 53 wholly-owned properties and leasehold interests.

All properties owned during these periods have been included in our results of operations during the respective periods since their dates of acquisition or through the dates of disposition.

Based on when a property was acquired or disposed, operating results for certain properties are not comparable.

The properties listed below are hereinafter referred to collectively as "non-comparable properties" for the years ended December 31, 2021 and 2020.

All other properties are referred to collectively as "comparable properties":

At December 31, 2022 and 2021, our consolidated financial statements included the operations of 51 and 53 hotel properties, respectively, which have been included in our results of operations during the respective periods since their dates of acquisition or through their dates of disposition.

Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the years ended December 31, 2022 and 2021.

The properties listed in the table below are hereinafter referred to as "non-comparable properties" for the periods indicated and all other properties are referred to as "comparable properties":

Property Location Disposition Date

InterContinental Buckhead Atlanta Buckhead, GA March 6, 2020

Sofitel Washington DC Lafayette Square Washington, D.C.

March 6, 2020

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

Sir Francis Drake San Francisco, CA April 1, 2021

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

The Marker San Francisco San Francisco, CA June 28, 2022

Sofitel Philadelphia at Rittenhouse Square Philadelphia, PA August 2, 2022

Hotel Spero San Francisco, CA August 25, 2022

Hotel Vintage Portland Portland, OR September 14, 2022

Property Location Acquisition Date

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Estancia La Jolla Hotel & Spa La Jolla, CA December 1, 2021

Inn on Fifth Naples, FL May 11, 2022

Newport Harbor Island Resort (formerly Gurney's Newport Resort & Marina) Newport, RI June 23, 2022

Comparison of the year ended December 31, 2022 to the year ended December 31, 2021

Revenues — Total revenues increased by $290.2 million, of which $2.9 million was due to the non-comparable properties and the remaining increase was attributable to the comparable properties as a result of an increase in demand from a rebound in leisure travel and easing of governmental restrictions throughout 2021.

Hotel operating expenses — Total hotel operating expenses increased by $117.2 million, primarily due to resuming operations at the comparable properties and returning demand.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $2.7 million primarily due to a decline in property taxes as a result of successful appeals.

The decrease was partially offset by an increase in ground rent on ground leases that have percentage rent and the acquisition of three properties subject to ground leases.

General and administrative — General and administrative expenses consist of employee compensation costs, legal and professional fees, insurance and other expenses.

General and administrative expenses decreased by $7.0 million primarily due to a decrease in share-based compensation costs relating to the cancellation of the retention LTIP unit awards and time-based service condition awards in 2020.

Transaction costs — Transaction costs incurred during 2020 were the result of additional transfer taxes paid in connection with the LaSalle merger.

Transactions costs incurred during 2021 were immaterial.

Impairment loss — We recognized an impairment loss of $14.9 million in 2021 related to one hotel and an impairment loss of $74.6 million in 2020 related to two hotels and the retail component of a hotel.

(Gain) loss on sale of hotel properties — We recognized a net gain on sale of $64.7 million in 2021 primarily due to the sale of Sir Francis Drake and a net gain on sale of $117.4 million in 2020 primarily due to the sale of InterContinental Buckhead Atlanta.

Other operating expenses — Other operating expenses decreased by $2.5 million primarily due to reductions in pre-opening, hotel management transition and franchise tax expenses.

Interest expense — Interest expense decreased by $7.5 million primarily due to decreased borrowings, as certain term loans, senior unsecured notes and amounts under our senior unsecured credit facility were paid down in 2021.

This was partially offset by increased interest on the convertible senior notes and amortization and write-off of deferred financing fees as a result of the partial repayment of certain of the term loans during 2021.

Income tax (expense) benefit — Income tax (expense) benefit was a benefit of $3.7 million in 2020 primarily due to the deferred tax asset recognized in 2020 on the taxable REIT subsidiary's estimated loss.

In 2021, we recognized a valuation allowance offsetting the deferred tax asset on the current year taxable REIT subsidiary's loss due to the uncertainty of utilizing the deferred tax asset in the future.

Distributions to preferred shareholders — Distributions to preferred shareholders increased as a result of the issuance of the Series G and Series H Cumulative Redeemable Preferred Shares in May 2021 and July 2021, respectively.

This was partially offset by the redemption of the Series C and Series D Cumulative Redeemable Preferred Shares in August 2021.

Issuance costs of redeemed preferred shares — Issuance costs of redeemed preferred shares increased due to the redemption of the Series C and Series D Cumulative Redeemable Preferred Shares in August 2021.

Revenues — Total revenues increased by $658.8 million, of which $157.9 million was due to non-comparable properties, and the balance was primarily due to an increase in leisure and business travel in 2022.

In addition, several of our hotels remained temporarily suspended throughout the first quarter of 2021.

Hotel operating expenses — Total hotel operating expenses increased by $386.9 million, of which $93.9 million was due to non-comparable properties, and the balance was primarily due to resuming operations at our comparable properties and returning demand in 2022.

Depreciation and amortization — Depreciation and amortization expense increased by $15.3 million primarily due to our property acquisitions in 2021 and 2022, offset by a decrease in depreciation from the properties sold in 2021 and 2022.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $14.5 million primarily due to an increase at our three non-comparable properties acquired in 2021.

General and administrative — General and administrative expense increased by $1.0 million due to compensation expense, offset by a decrease in legal fees.

General and administrative expense consists of employee compensation costs, legal and professional fees, insurance and other expenses.

Impairment and other losses — We recognized impairment and other losses of $89.9 million in 2022 related to three properties as well as an impairment related to damage caused by Hurricane Ian at LaPlaya Beach Resort & Club in Naples, Florida and Southernmost Beach Resort in Key West, Florida.

We recognized an impairment loss of $14.9 million in 2021 related to one hotel.

Gain on sale of hotel properties — We recognized a gain on sale of $6.2 million related to the sales of Sofitel Philadelphia Rittenhouse Square and Hotel Vintage Portland in 2022.

We recognized a gain on sale of $64.7 million in 2021 primarily due to the sale of Sir Francis Drake.

Other operating expenses — Other operating expenses increased by $3.1 million primarily due to an increase in pre-opening expenses and hotel management transition costs.

Interest expense — Interest expense increased by $3.4 million due to the refinancing costs incurred in conjunction with the refinancing of our senior unsecured credit facility on October 13, 2022.

Non-controlling interests — Non-controlling interests represent the allocation of income or loss of the Operating Partnership to third-party common OP unit holders and to the preferred OP unit holders.

In 2022, this amount includes $3.0 million in preferred distributions to the holders of Series Z Preferred Units which were issued in May 2022.

Distributions to preferred shareholders — Distributions to preferred shareholders increased as a result of the issuance of the Series G Preferred Shares and Series H Preferred Shares in May 2021 and July 2021, respectively, being outstanding for all of 2022.

Redemption of preferred shares — Redemption of preferred shares in 2022 relates to the repurchase of one million Series H Preferred Shares for a repurchase amount below the carrying value, net of issuance costs of the shares redeemed.

The Company redeemed the Series C and Series D Cumulative Redeemable Preferred Shares in August 2021 at the carrying value and therefore the redemption of preferred shares in 2021 represented the issuance costs associated with the shares redeemed.

These costs are included in the determination of net income (loss) attributable to common shareholders.

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FFO $ 237,689 $ (12,432) $ (211,314)

Distribution to preferred shareholders (42,105) (32,556) (32,556)

Issuance costs of redeemed preferred shares (8,055) — —

Distribution to preferred shareholders and unit holders (48,049) (42,105) (32,556)

Redemption of preferred shares 8,186 (8,055) —

FFO available to common share and unit holders $ 197,826 $ (62,592) $ (243,870)

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New Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for recently issued accounting pronouncements that may affect us.

Summary of Significant Accounting Policies to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for recently issued accounting pronouncements that may affect us.

Liquidity and Capital Resources

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As such, we expect to continue to raise capital through equity and debt offerings to fund our growth.

For a discussion on the impact of COVID-19 on our liquidity, see Overview .

Our material cash requirements include the following contractual and other obligations.

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Total debt at face value $ 2,400,985

For further discussion on the components of our debt, see Note 5, Debt , to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

For further discussion on the components of our debt, see Note 5.

Debt to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

We have the option to extend certain of our current debt maturities with the payment of extension fees.

Assuming we exercise all extension options available in our debt agreements, we expect that future principal and interest payments associated with our debt obligations outstanding as of December 31, 2021 will be $2.7 billion through their maturity, with $136.8 million payable before January 1, 2023.

Assuming we exercise all extension options available in our debt agreements, we expect that future principal and interest payments associated with our debt obligations outstanding as of December 31, 2022 will be $2.7 billion through their maturity, with $49.6 million of principal and $93.0 million of interest payable on or before January 1, 2024.

We intend to pay amounts due with available cash, borrowings under our revolving credit facility, or refinance with long term debt.

In February 2021 and December 2021, we amended the agreements governing our 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.

For a further discussion of these amendments, see Note 5, Debt , to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

We are in compliance with all covenants governed by our existing credit facilities, term loan and senior note facilities.

Our mortgage loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions.

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

Cash trap provisions may be triggered if the hotel's performance 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.

The mortgage loans associated with Margaritaville Hollywood Beach Resort and Estancia La Jolla Hotel & Spa both triggered the cash trap provisions prior to our acquisition of those hotel properties, and therefore cash from hotel operations is being held by the lender in the cash management accounts and reflected as restricted cash in our 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.

These loans may remain subject to cash trap provisions for a substantial period of time which could limit our liquidity and ability to pay dividends or reduce debt balances.

We expect that we will exceed the thresholds necessary to exit the cash trap provisions of these agreements in 2022.

As of December 31, 2022, none of the mortgage loans were in a cash trap.

Hotel, ground and finance lease obligations

Our properties that are subject to hotel, ground or finance leases, as noted in Note 11 , Commitment and Contingencies , to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent.

Our properties that are subject to hotel, ground or finance leases, as noted in Note 11.

Commitment and Contingencies to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent.

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

Future fixed minimum payments associated with our hotel, ground and finance leases total $1.8 billion as of December 31, 2021, with $20.4 million payable within the next 12 months.

Future fixed minimum payments associated with our hotel, ground and finance leases total $1.8 billion as of December 31, 2022, with $20.8 million payable on or before December 31, 2023.

Purchase commitments

As of December 31, 2021, we had $7.3 million of outstanding purchase commitments, all of which will be paid within the next 12 months.

As of December 31, 2022, we had $5.5 million of outstanding purchase commitments, all of which will be paid on or before December 31, 2023.

These purchase commitments represent outstanding purchase orders and contracts that have been executed for capital and renovation projects at our properties.

See Capital Investments for discussion on planned capital investments.

Preferred dividends

We expect to pay aggregate annual dividends of approximately $45.4 million on our outstanding Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares within the next 12 months and in future years until the shares are redeemed.

For further discussion on our preferred shares, see Note 7, Equity , to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Preferred dividends and Series Z operating partnership units

We expect to pay aggregate annual dividends and distributions of approximately $48.6 million on our outstanding Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares and Series Z Cumulative Perpetual Preferred Units on or before December 31, 2023 and in future years until the shares/units are redeemed.

For further discussion on our preferred shares and preferred units, see Note 7.

Equity to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Sources and Uses of Cash

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Operating Activities.

Our net cash provided by (used in) operating activities was $70.8 million for the year ended December 31, 2021 and $(201.8) million for the year ended December 31, 2020.

Fluctuations in our net cash provided by or (used in) operating activities are primarily the result of changes in hotel revenues, operating cash requirements and corporate expenses.

The increase in cash provided by (used in) operations in 2021 as compared to 2020 is due to the resumption of operations at our hotels, as we temporarily suspended operations at 47 of our hotels and resorts in 2020.

Our net cash provided by operating activities was $278.7 million for the year ended December 31, 2022 and $70.8 million for the year ended December 31, 2021.

Fluctuations in our net cash provided by operating activities are primarily the result of changes in hotel revenues, operating cash requirements and corporate expenses.

The increase in cash provided by operations in 2022 as compared to 2021 is due to the resumption of operations at our hotels and continued improvement in travel demand.

In addition, the operations at several of our hotels were temporarily suspended throughout the first quarter of 2021 but were operating in 2022.

Investing Activities.

Our net cash provided by (used in) investing activities was $(81.6) million for the year ended December 31, 2021 and $250.1 million for the year ended December 31, 2020.

Fluctuations in our net cash provided by or (used in) investing activities are primarily the result of acquisition and disposition activities, as well as capital improvements and additions to our properties.

• During the year ended December 31, 2021, we invested $83.8 million in improvements to our hotel properties, received $255.9 million from the sales of three hotel properties and purchased three hotel properties using cash of $253.5 million.

• During the year ended December 31, 2020, we invested $125.0 million in improvements to our hotel properties and received $375.1 million from the sales of three hotel properties.

Our net cash used in investing activities was $109.4 million for the year ended December 31, 2022 and $81.6 million for the year ended December 31, 2021.

Fluctuations in our net cash used in investing activities are primarily the result of acquisition and disposition activities, as well as capital improvements and additions to our properties.

• During the year ended December 31, 2022, we invested $116.7 million in improvements to our hotel properties, received $248.9 million from the sale of four hotel properties and purchased two hotel properties using cash of $247.2 million.

• During the year ended December 31, 2021, we invested $83.8 million in improvements to our hotel properties, received $255.9 million from the sale of three hotel properties and purchased three hotel properties using cash of $253.5 million.

Financing Activities.

Our net cash provided by (used in) financing activities was $(33.3) million for the year ended December 31, 2021 and $31.1 million for the year ended December 31, 2020.

Fluctuations in our net cash provided by or (used in) financing activities are primarily the result of our issuance and repurchase of debt and equity securities and distributions paid on our preferred and common shares.

received proceeds from the issuance of convertible notes and other debt of $268.6 million;

repaid $392.2 million in other debt and $40.0 million of revolving credit facilities borrowings;

used $250.0 million to redeem all our Series C and Series D Preferred Shares;

paid $44.7 million in preferred and common distributions;

purchased $21.0 million in Capped Call Transactions;

and paid $14.5 million in financing fees.

• During the year ended December 31, 2020, we borrowed $760.1 million under the revolving credit facilities and $513.0 million in other debt;

repaid $885.1 million of revolving credit facilities borrowings and $213.0 million in other debt;

paid $86.5 million in preferred and common distributions;

purchased $38.3 million in Capped Call Transactions;

and paid $16.4 million in financing fees.

Our net cash used in financing activities was $209.3 million for the year ended December 31, 2022 and $33.3 million for the year ended December 31, 2021.

Fluctuations in our net cash used in financing activities are primarily the result of our issuance and repurchase of debt and equity securities and distributions paid on our preferred and common shares.

• During the year ended December 31, 2022, we borrowed and repaid $190.2 million of revolving credit facility borrowings, repaid and borrowed $1.4 billion in other debt, repurchased $70.7 million of common shares through our common share repurchase program, paid $52.7 million in preferred and common distributions, used $16.0 million to redeem one million Series H Preferred Shares and paid $12.4 million in financing fees.

• During the year ended December 31, 2021, we received gross proceeds of $480.0 million from the issuance of our Series G and Series H Preferred Shares, which was partially offset by the payment $15.9 million in offering costs, received proceeds from the issuance of convertible notes and other debt of $268.6 million, repaid $392.2 million in other debt and $40.0 million of revolving credit facilities borrowings, used $250.0 million to redeem all our Series C and Series D Preferred Shares, paid $44.7 million in preferred and common distributions, purchased $21.0 million in Capped Call Transactions and paid $14.5 million in financing fees.

Capital Investments

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Generally, we expect to fund renovations and improvements with available cash, restricted cash, borrowings under our credit facility or proceeds from new debt or equity offerings.

For the year ended December 31, 2021, we invested $83.8 million in capital investments to reposition and improve our properties, primarily the renovations of Hotel Vitale, Southernmost Beach Resort and L'Auberge Del Mar.

For the year ended December 31, 2022, we invested $116.7 million in capital investments to reposition and improve our properties, including the renovations of 1 Hotel San Francisco (formerly Hotel Vitale), Hotel Ziggy (formerly Grafton on Sunset) and Skamania Lodge.

Depending on market conditions, and in some instances subject to approval from governmental authorities, we expect to invest an additional $145.0 million to $155.0 million in capital investments in 2023, which includes normal hotel capital refurbishments, return of investment projects and major capital projects.

In 2022 we intend to complete or commence the following capital projects:

• $40.0 million redevelopment of Paradise Point Resort & Spa into Paradise Point, a Margaritaville Island Resort San Diego, which will commence upon the approval of governmental authorities;

• $28.0 million transformation of Hotel Vitale into 1 Hotel San Francisco, which commenced in 2021 and is expected to reopen in the second quarter of 2022;

• $20.0 million to $22.0 million renovation of Hilton San Diego Gaslamp Quarter, which will commence in 2022 and is expected to be completed in the first quarter of 2023;

• $20.0 million to $22.0 million renovation of Jekyll Island Club Resort, which will commence in 2022 and is expected to be completed in the third quarter of 2023;

• $20.0 million redevelopment of Solamar Hotel into Margaritaville Hotel San Diego Gaslamp Quarter, which will commence in 2022 and is expected to be completed in the first quarter of 2023;

• $18.0 million to $21.0 million renovation of Estancia La Jolla Hotel & Spa, which will commence in 2022 and is expected to be completed in 2024.

Common Share Repurchase Program and ATM Program

We have the following significant capital projects that are expected to be completed in 2023 or 2024:

• $25.0 million comprehensive redevelopment and renovation of Hilton San Diego Gaslamp Quarter, which commenced in 2022 and is expected to be completed in the second quarter of 2023;

• $27.0 million comprehensive redevelopment and repositioning of Solamar Hotel into Margaritaville Hotel San Diego Gaslamp Quarter, which commenced in 2022 and is expected to be completed in the second quarter of 2023;

• $20.0 million to $22.0 million comprehensive renovation at Jekyll Island Club Resort, which commenced in 2022 and is expected to be completed in the second quarter of 2023;

• $20.0 million to $25.0 million comprehensive renovation of Estancia La Jolla Hotel & Spa, which commenced in 2022 and is expected to be completed in the second quarter of 2024;

• $11.0 million first phase of a multi-phase master plan at Skamania Lodge, which commenced in 2022 and is expected to be completed in the third quarter of 2023.

Common Share Repurchase Programs, Preferred Share Repurchase Program and ATM Program

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

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We may suspend or discontinue this program at any time.

No common shares were repurchased by the Company under the share repurchase program during the year ended December 31, 2021.

As of December 31, 2021, $56.6 million of common shares remained available for repurchase under this program.

The credit agreements governing our existing indebtedness prohibit us from repurchasing common shares until we have certified compliance with certain financial covenants through June 30, 2022.

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

For the year ended December 31, 2022, the Company made $56.6 million in repurchases under this program and, as of December 31, 2022, no common shares remained available for repurchase under this program.

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

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We may suspend or discontinue this program at any time.

This $100.0 million share repurchase program will commence upon the completion of our $150.0 million share repurchase program.

For the year ended December 31, 2022, the Company made $13.0 million in repurchases under this program and, as of December 31, 2022, $87.0 million of common shares remained available for repurchase under this program.

On February 21, 2023, we announced that our Board of Trustees authorized a new share repurchase program of up to $150.0 million of the Company's outstanding common shares.

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

This $150.0 million common share repurchase program will commence upon the completion of the Company's $100.0 million common share repurchase program, under which approximately $74.0 million of common shares remained available for repurchase as of February 21, 2023.

The timing, manner, price and amount of any repurchases under the program will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions.

The program does not require us to repurchase any specific number of common shares.

The program does not have an expiration date and may be suspended, modified or discontinued at any time.

On February 21, 2023, we announced that our Board of Trustees approved a repurchase program of up to $100.0 million of our outstanding preferred shares (the “Preferred Share Repurchase Program”).

Under the terms of the program, we may repurchase up to an aggregate of $100.0 million of our 6.375% Series E Cumulative Redeemable Preferred Shares, 6.30%

Series F Cumulative Redeemable Preferred Shares, 6.375% Series G Cumulative Redeemable Preferred Shares and 5.70% Series H Cumulative Redeemable Preferred Shares from time to time in transactions on the open market or by private agreement.

The aggregate liquidation value of our preferred shares that may be repurchased pursuant to the Preferred Shares Repurchase Program, as of February 21, 2023, was $715.0 million.

The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions.

The program does not require us to repurchase any specific number of preferred shares.

The program does not have an expiration date and may be suspended, modified or discontinued at any time.

On April 29, 2021, we 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").

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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 7. Management’s Discussion and Analysis