What changed in this filing

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Item 1. Financial Statements

2023-04-26 compared with 2022-10-27 · 198 added, 344 removed, 448 unchanged (55% of the section changed)

3 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Investment in hotel properties, net $ 5,703,446 $ 5,874,876

Hotels held for sale 70,859 44,861

Cash and cash equivalents 138,515 41,040

10 unchanged sentences

Accrued interest 9,359 4,535

Liabilities related to hotels held for sale 2,214 428

Distribution payable 12,181 12,218

2 unchanged sentences

Shareholders’ equity:

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

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

Preferred shares of beneficial interest, $ .01 par value (liquidation preference $ 715,000 at March 31, 2023 and December 31, 2022), 100,000,000 shares authorized;

28,600,000 shares issued and outstanding at March 31, 2023 and December 31, 2022

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

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

123,632,667 shares issued and outstanding at March 31, 2023 and 126,345,293 shares issued and outstanding at December 31, 2022

Additional paid-in capital 4,142,491 4,182,359

9 unchanged sentences

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

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

2022 2021 2022 2021

For the three months ended March 31,

Room $ 196,374 $ 168,632

10 unchanged sentences

General and administrative 9,988 9,708

Impairment loss 12,865 — 86,119 14,856

Impairment — 60,983

Gain on sale of hotel properties ( 6,635 ) —

Business interruption insurance income ( 8,089 ) —

Other operating expenses 3,670 1,123

2 unchanged sentences

Interest expense ( 27,430 ) ( 22,572 )

Other 123 27 156 85

Income (loss) before income taxes ( 22,045 ) ( 100,216 )

4 unchanged sentences

Distributions to preferred shareholders ( 10,988 ) ( 11,344 )

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

Net income (loss) attributable to common shareholders $ ( 33,916 ) $ ( 110,874 )

6 unchanged sentences

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

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

2022 2021 2022 2021

For the three months ended March 31,

Comprehensive Income:

10 unchanged sentences

(in thousands, except share data)

For the three months ended September 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 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

Issuance of shares, net of offering costs — — — — ( 48 ) — — ( 48 ) — ( 48 )

Issuance of operating partnership units — — — — — — — — — —

Share-based compensation — — — — 2,482 — — 2,482 699 3,181

Distributions on common shares/units — — — — — — ( 1,320 ) ( 1,320 ) ( 11 ) ( 1,331 )

Distributions on preferred shares/units — — — — — — ( 11,344 ) ( 11,344 ) ( 1,164 ) ( 12,508 )

Other comprehensive income (loss):

Change in fair value of derivative instruments — — — — — 16,385 — 16,385 102 16,487

Amounts reclassified from other comprehensive income — — — — — ( 1,337 ) — ( 1,337 ) — ( 1,337 )

Net income (loss) — — — — — — 25,068 25,068 1,237 26,305

Balance at September 30, 2022

29,600,000 $ 296 130,905,132 $ 1,309 $ 4,273,603 $ 38,796 $ ( 1,178,289 ) $ 3,135,715 $ 87,710 $ 3,223,425

Pebblebrook Hotel Trust

Consolidated Statements of Equity - Continued

(in thousands, except share data)

For the three months ended September 30, 2021

Shares Amount Shares Amount

Balance at June 30, 2021

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

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

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

Share-based compensation — — — — 2,403 — — 2,403 697 3,100

Distributions on common shares/units — — — — — — ( 1,317 ) ( 1,317 ) ( 8 ) ( 1,325 )

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

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

Other comprehensive income (loss):

Change in fair value of derivative instruments — — — — — ( 496 ) — ( 496 ) 173 ( 323 )

Amounts reclassified from other comprehensive income — — — — — 6,494 — 6,494 — 6,494

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

Balance at September 30, 2021

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

Pebblebrook Hotel Trust

Consolidated Statements of Equity - Continued

(in thousands, except share data)

For the nine months ended September 30, 2022

For the three months ended March 31, 2023

2 unchanged sentences

28,600,000 $ 286 126,345,293 $ 1,263 $ 4,182,359 $ 35,724 $ ( 1,223,117 ) $ 2,996,515 $ 88,028 $ 3,084,543

Issuance of shares, net of offering costs — — — — ( 123 ) — — ( 123 ) — ( 123 )

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

Issuance of common shares for Board of Trustees compensation — — 55,480 1 753 — — 754 — 754

7 unchanged sentences

Net income (loss) — — — — — — ( 22,928 ) ( 22,928 ) 883 ( 22,045 )

Balance at September 30, 2022

Balance at March 31, 2023

28,600,000 $ 286 123,632,667 $ 1,236 $ 4,142,491 $ 29,891 $ ( 1,258,275 ) $ 2,915,629 $ 88,482 $ 3,004,111

2 unchanged sentences

(in thousands, except share data)

For the nine months ended September 30, 2021

For the three months ended March 31, 2022

2 unchanged sentences

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

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

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

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

3 unchanged sentences

Distributions on preferred shares — — — — — — ( 11,344 ) ( 11,344 ) — ( 11,344 )

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

Other comprehensive income (loss):

2 unchanged sentences

Net income (loss) — — — — — — ( 99,530 ) ( 99,530 ) ( 686 ) ( 100,216 )

Balance at September 30, 2021

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

3 unchanged sentences

(in thousands)

For the nine months ended September 30,

For the three months ended March 31,

Operating activities:

5 unchanged sentences

Gain on sale of hotel properties ( 6,635 ) —

Impairment loss 86,119 14,856

Impairment — 60,983

Non-cash ground rent 2,476 2,489

9 unchanged sentences

Proceeds from sales of hotel properties 131,881 —

Acquisition of hotel properties ( 247,163 ) ( 190,968 )

Deposits on hotel properties — ( 1,020 )

Property insurance proceeds 8,357 —

Other investing activities ( 548 ) ( 47 )

1 unchanged sentence

Financing activities:

Gross proceeds from issuance of preferred shares — 480,000

Payment of offering costs — common and preferred shares ( 123 ) ( 15,894 )

Payment of deferred financing costs ( 154 ) ( 32 )

Borrowings under revolving credit facilities 180,000 —

Repayments under revolving credit facilities ( 180,000 ) ( 40,000 )

Proceeds from debt — 268,599

Repayments of debt ( 498 ) ( 324 )

Purchases of capped calls for convertible senior notes — ( 20,975 )

Repurchases of common shares ( 42,745 ) ( 1,113 )

Redemption of preferred shares — ( 250,000 )

Distributions — common shares/units ( 1,289 ) ( 1,322 )

8 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 and resort properties located near our primary target urban markets and select destination resort markets, with an emphasis on major gateway coastal markets.

As of September 30, 2022, the Company owned 51 hotels with a total of 12,756 guest rooms .

cities and resort properties located near our primary target urban markets and select destination resort markets, with an emphasis on major gateway coastal markets.

As of March 31, 2023, the Company owned interests in 49 hotels with a total of 12,451 guest rooms .

The hotel properties are located in:

4 unchanged sentences

Key West, Florida;

Miami (Coral Gables), Florida;

Los Angeles, California (Beverly Hills, Santa Monica, and West Hollywood);

11 unchanged sentences

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

As of September 30, 2022, the Company owned 99.3 % of the common limited partnership units issued by the Operating Partnership ("common units").

As of March 31, 2023, the Company owned 99.2 % of the common limited partnership units issued by the Operating Partnership ("common units").

The remaining 0.8 % 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 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 nine 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, 2022.

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

The Company and its subsidiaries are separate legal entities and maintain records and books of account 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.

All significant intercompany balances and transactions have been eliminated in consolidation.

Investments in entities that the Company does not control, but over which the Company has the ability to exercise significant influence regarding operating and financial policies, are accounted for under the equity method.

Certain reclassifications have been made to the prior period's financial statements to conform to the current year presentation.

5 unchanged sentences

Risks and Uncertainties

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.

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

It is uncertain what the future affects of the COVID-19 pandemic will have on the overall economy or travel.

In addition, the rise in inflation and corresponding increase in interest rates may also impact the overall economy.

A decline in travel or a significant increase in costs may impact the Company's cash flow and ability to service debt or meet other financial obligations.

New Accounting Pronouncements

Reference Rate Reform

In March 2020 and January 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , and ASU 2021-01, Reference Rate Reform (Topic 848) , respectively.

ASU 2020-04 and ASU 2021-01 provide optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met.

The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022.

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

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

The Company will continue to evaluate the impact of the adoption of ASU 2020-04 and ASU 2021-01 on its consolidated financial statements and disclosures.

Business Combinations

2 unchanged sentences

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted.

While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, it does not expect ASU 2021-08 to have a material effect on its consolidated financial statements and disclosures.

The Company adopted ASU 2021-08 effective January 1, 2023, and the adoption did not have a material impact on the Company's consolidated financial statements and disclosure s.

Acquisition and Disposition of Hotel Properties

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 Newport Harbor Island Resort (formerly 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):

There were no acquisitions of hotel properties during the three months ended March 31, 2023 and 2022.

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

The following table summarizes disposition transactions during the three months ended March 31, 2023 (in thousands):

Hotel Property Name Location Sale Date Sale Price

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

Sofitel Philadelphia at Rittenhouse Square Philadelphia, PA August 2, 2022 80,000

Hotel Spero San Francisco, CA August 25, 2022 71,000

Hotel Vintage Portland Portland, OR September 14, 2022 32,900

2022 Total $ 260,900

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

The Heathman Hotel Portland, OR February 22, 2023 $ 45,000

Retail at The Westin Michigan Avenue Chicago

Chicago, IL March 17, 2023 27,300

Hotel Colonnade Coral Gables Coral Gables, FL March 28, 2023 63,000

2023 Total $ 135,300

For the three and nine months ended September 30, 2022, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $ 0.6 million and $( 3.4 ) million, respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold.

For the three and nine months ended September 30, 2021, the accompanying consolidated statements of operations and comprehensive income included operating (loss) of $( 3.6 ) million and $( 19.0 ) million , respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold.

For the three months ended March 31, 2023 and March 31, 2022, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $ 1.1 million and $( 3.4 ) million, respectively, excluding impairment loss and gain 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 March 31, 2023, the Company had entered into agreements to sell two hotel properties in separate transactions for an aggregate sales price of approximately $ 97.0 million.

These hotels were classified as held for sale and as a result, 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 in the second quarter of 2023.

However, no assurances can be given that the sales will be completed on these terms or at all.

Investment in Hotel Properties

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

September 30, 2022 December 31, 2021

Investment in hotel properties as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):

March 31, 2023 December 31, 2022

Land $ 860,206 $ 897,756

8 unchanged sentences

Investment in hotel properties, net $ 5,703,446 $ 5,874,876

Hurricane Ian

On September 27, 2022, LaPlaya Beach Resort and LaPlaya Beach Club ("LaPlaya") and Inn on Fifth, both located in Naples, Florida, and Southernmost Beach Resort located in Key West, Florida were impacted by the effects of Hurricane Ian.

Inn on Fifth and Southernmost Beach Resort did not suffer significant damage and have been reopened.

LaPlaya was closed in anticipation of the storm and remains closed as a result of the damage sustained from Hurricane Ian.

The Company expects LaPlaya to re-open in stages beginning in the fourth quarter of 2022.

The Company’s insurance policies provide coverage for property damage, business interruption and reimbursement for other costs that were incurred relating to damages sustained during Hurricane Ian.

Insurance proceeds are subject to deductibles.

As of September 30, 2022, the Company recognized an impairment for the damage to LaPlaya and Southernmost Beach Resort, which resulted in an aggregate impairment loss of $ 12.9 million, which is included in impairment loss in the Company’s consolidated statement of operations and comprehensive income.

The Company expects to incur additional costs related to the cleanup of the property and preparation of the property for reopening which are expected to be recovered through insurance proceeds.

The Company is continuing to evaluate the financial impact of Hurricane Ian and its ability to recover, through insurance policies, any loss due to business interruption or damage to the hotel properties.

Inn on Fifth and Southernmost Beach Resort did not suffer significant damage or disruption.

LaPlaya was closed in anticipation of the storm and required remediation and repairs from the damage and remained closed, however, LaPlaya has begun to reopen in stages as the buildings and facilities are repaired.

The Company anticipates LaPlaya to reopen fully by the end of 2023.

The Company’s insurance policies provide coverage for property damage, business interruption and reimbursement for other costs that were incurred relating to damages sustained during Hurricane Ian and the Company has recorded a receivable for the expenditures to date which it anticipates to collect from the insurance providers in excess of the deductibles.

In 2022, the Company recognized an aggregate impairment loss of $ 7.9 million for the damage to LaPlaya and Southernmost Beach Resort.

During the three months ended March 31, 2023, the Company incurred $ 2.8 million of costs related to payroll, repair and claims administration for which reimbursement from insurance policies is uncertain and therefore is included in other operating expenses in the Company's consolidated statements of operations and comprehensive income.

Through March 31, 2023, the Company has received $ 29.3 million in preliminary advances from the insurance providers and continues to work with the insurance providers on the settlement of the property and business interruption claims.

The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment.

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 nine months ended September 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 nine months ended September 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.

The Company periodically adjusts its estimate of future operating cash flows and estimated hold periods for certain properties.

As a result of this review, the Company may identify an impairment trigger has occurred and assess its investment in hotel properties for recoverability.

For the three months ended March 31, 2023, no impairment losses were incurred.

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 value being lower than their carrying value.

The impairment losses were determined using Level 2 inputs under authoritative guidance for fair value measurements using purchase and sale agreements and information from marketing efforts for these properties.

Right-of-use Assets and Lease Liabilities

1 unchanged sentence

When the rate implicit in the lease could not be determined, the Company used incremental borrowing rates, which ranged from 4.7 % to 7.6 %.

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

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

Commitments and Contingencies for additional information about the ground leases.

The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements.

As of September 30, 2022, the Company's lease liabilities consisted of operating lease liabilities of $ 320.3 million and financing lease liabilities of $ 42.5 million.

As of March 31, 2023, the Company's lease liabilities consisted of operating lease liabilities of $ 320.5 million and financing lease liabilities of $ 42.9 million.

As of December 31, 2022, the Company's lease liabilities consisted of operating lease liabilities of $ 320.4 million and financing lease liabilities of $ 42.7 million.

The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.

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 September 30, 2022 and December 31, 2021 (dollars in thousands):

On October 13, 2022, the Company entered into the Fifth Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent and certain other agents and lenders ("Credit Agreement").

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

The Company may request additional lender commitments to increase the aggregate borrowing capacity under the Credit Agreement up to an additional $ 970.0 million.

The Company's debt consisted of the following as of March 31, 2023 and December 31, 2022 (dollars in thousands):

Balance Outstanding as of

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

Interest Rate at March 31, 2023

Maturity Date March 31, 2023 December 31, 2022

Revolving credit facilities

Senior unsecured credit facility Floating (1)(2)

March 2023 $ — $ —

PHL unsecured credit facility Floating (3)

March 2023 — —

Senior unsecured credit facility — (1)(2)

October 2026 $ — $ —

PHL unsecured credit facility — (1)

October 2026 — —

Total revolving credit facilities $ — $ —

Unsecured term loans

First Term Loan Floating (4)

January 2023 26,000 26,000

First Term Loan Extended Floating (4)

March 2024 274,000 274,000

Second Term Loan Floating (4)

April 2022 — 26,327

Fourth Term Loan Floating (4)

Term Loan 2024 6.80 % (1)

October 2024 460,000 460,000

Sixth Term Loan

Tranche 2021 Extended Floating (4)(6)

November 2022 82,071 82,071

Tranche 2022 Floating (4)(7)

November 2022 114,670 114,670

Tranche 2023 Floating (4)

November 2023 400,000 400,000

Tranche 2024 Floating (4)

January 2024 400,000 400,000

Total Sixth Term Loan 996,741 996,741

Total term loans at stated value 1,406,741 1,433,068

Deferred financing costs, net ( 3,083 ) ( 5,812 )

Total term loans $ 1,403,658 $ 1,427,256

Convertible senior notes

Convertible senior notes 1.75 % December 2026 750,000 750,000

Debt premium (discount), net 9,849 11,605

Deferred financing costs, net ( 13,746 ) ( 16,204 )

Total convertible senior notes $ 746,103 $ 745,401

Term Loan 2025 4.73 % (1)

October 2025 460,000 460,000

Term Loan 2027 3.49 % (1)

October 2027 460,000 460,000

Term loan principal $ 1,380,000 $ 1,380,000

Convertible senior notes principal 1.75 % December 2026 $ 750,000 $ 750,000

Senior unsecured notes

Series A Notes 5.15 % December 2023 47,600 47,600

Series A Notes 4.70 % (3)

December 2023 47,600 47,600

Series B Notes 4.93 % December 2025 2,400 2,400

Total senior unsecured notes at stated value 50,000 50,000

Deferred financing costs, net ( 101 ) ( 162 )

Total senior unsecured notes $ 49,899 $ 49,838

Senior unsecured notes principal $ 50,000 $ 50,000

Mortgage loans

Margaritaville Hollywood Beach Resort Floating (5)

Margaritaville Hollywood Beach Resort 7.06 % (4)

May 2023 161,500 161,500

Estancia La Jolla Hotel & Spa 5.07 % September 2028 58,987 59,485

Total mortgage loans at stated value 221,460 222,873

Debt premium (discount), net ( 1,872 ) ( 2,735 )

Deferred financing costs, net ( 478 ) ( 745 )

Total mortgage loans $ 219,110 $ 219,393

Total debt $ 2,418,770 $ 2,441,888

Mortgage loans principal $ 220,487 $ 220,985

Total debt principal $ 2,400,487 $ 2,400,985

Unamortized debt premiums, discount and deferred financing costs, net ( 12,470 ) ( 13,692 )

Debt, Net $ 2,388,017 $ 2,387,293

______________________

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

(2) $ 39.0 million of the total borrowing capacity matured in January 2022.

The Company has the option to extend the maturity date of March 2023 for the remaining $ 611.0 million for up to two six-month periods, pursuant to certain terms and conditions and payment of an extension fee.

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

(4) Borrowings under the term loan facilities bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin.

As of September 30, 2022, approximately $ 1.0 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 3.86 %, after taking into account interest rate swap agreements, and approximately $ 366.7 million bore an effective weighted-average floating interest rate of 5.46 %.

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 April 2022, the Company exercised the option to extend the maturity date to May 2023.

(1) Borrowings bear interest at floating rates.

Interest rate at March 31, 2023 gives effect to interest rate hedges.

(2) The Company has the option to extend the maturity date of October 13, 2026 for up to two six-month periods, pursuant to certain terms and conditions and payment of an extension fee, for a maximum maturity date of October 13, 2027.

(3) The Company intends to pay off the Series A Notes using available cash or borrowings under the revolving credit facility at maturity.

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

The Company has the option to extend the maturity date to May 2024.

(6) The Company has the option to extend the maturity date for $ 69.8 million of the principal balance by up to one year , subject to certain terms and conditions and payment of an extension fee.

(7) The Company has the option to extend the maturity date for $ 93.0 million of the principal balance by up to one year , subject to certain terms and conditions and payment of an extension fee.

As discussed in Note 13.

Subsequent Events, on October 13, 2022, the Company refinanced its senior unsecured revolving credit facility and all of its term loans.

As a result, the Company has no significant debt maturities due within one year.

Unsecured Revolving Credit Facilities

As of September 30, 2022, the Company had a $ 611.0 million senior unsecured revolving credit facility with a maturity of 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 September 30, 2022, the Company had no outstanding borrowings, $ 12.6 million of outstanding letters of credit and a 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 LIBOR or the alternate base rate, plus an additional margin amount, or spread.

The Company had the ability to further increase the aggregate borrowing capacity under the credit agreement up to $ 1.3 billion, subject to lender approval.

Borrowings on the revolving credit facility bore interest at LIBOR plus 1.45 % to 2.25 %, depending on the Company’s leverage ratio.

As a result of the amendments to the credit agreements, the spread on the borrowings was fixed at 2.40 % during the waiver period.

Additionally, the Company was required to pay an unused commitment fee at an annual rate of 0.20 % or 0.30 % of the unused portion of the revolving credit facility, depending on the amount of borrowings outstanding.

The $ 650.0 million senior unsecured revolving credit facility provided for in the Credit Agreement matures in October 2026 and provides for two six-month extension options, subject to certain terms and conditions and payment of an extension fee.

All borrowings under the $ 650.0 million senior unsecured revolving credit facility bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus 0.10 % (the “SOFR Adjustment”) plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio.

The margins for revolving credit facility loans range in amount from 1.45 % to 2.50 % for SOFR-based loans and 0.45 % to 1.50 % for Base Rate-based loans, depending on the Company’s leverage ratio.

As of March 31, 2023, the Company had no outstanding borrowings, $ 13.1 million of outstanding letters of credit and a borrowing capacity of $ 636.9 million remaining on the senior unsecured revolving credit facility.

The Company is required to pay an unused commitment fee at an annual rate of 0.20 % or 0.30 % of the unused portion of the senior unsecured revolving credit facility, depending on the amount of borrowings outstanding.

The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio and a maximum percentage of secured debt to total asset value.

As of September 30, 2022, the Company also had a $ 20.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes.

This credit facility had substantially similar terms as the Company's senior unsecured revolving credit facility with a maturity of March 2023.

Borrowings on the PHL Credit Facility bore interest at LIBOR plus 1.45 % to 2.25 %, depending on the Company's leverage ratio.

As a result of the amendments described above, the spread of the borrowings was fixed at 2.40 % during the waiver period.

The PHL Credit Facility was 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 September 30, 2022, the Company had no borrowings under the PHL Credit Facility and had a $ 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.

The Company will incur a fee that shall be agreed upon with the issuing bank.

Under the terms of the credit agreement for the senior 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 facility.

The Company pays a fee at a rate per annum equal to the applicable margin based upon the Company's leverage ratio.

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 September 30, 2022 and December 31, 2021, respectively.

As of September 30, 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 $ 13.1 million and $ 12.6 million were outstanding as of March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023, the Company also has a $ 20.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes.

On October 13, 2022, PHL amended and restated the agreement governing the PHL Credit Facility to extend the maturity to October 2026.

The PHL Credit Facility has substantially similar terms as the Company's senior unsecured revolving credit facility.

Borrowings on the PHL Credit Facility bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio.

The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Credit Agreement, which governs the Company's senior unsecured revolving credit facility.

As of March 31, 2023, 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 March 31, 2023, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.

Unsecured Term Loan Facilities

As of September 30, 2022, the Company had senior unsecured term loans with different maturities.

Each unsecured term loan bore interest at a variable rate of a benchmark interest rate plus an applicable margin, depending on the Company's leverage ratio.

Each of the term loan facilities was subject to debt covenants substantially similar to the covenants under the credit agreement that governs the revolving credit facility.

As of September 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.

The three $ 460.0 million term loans provided for in the Credit Agreement mature in October 2024, October 2025 and October 2027, respectively.

The term loans bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio.

The margins for term loans range in amount from 1.40 % to 2.45 % for SOFR-based loans and 0.40 % to 1.45 % for Base Rate-based loans, depending on the Company's leverage ratio.

The term loans are subject to the debt covenants in the Credit Agreement.

As of March 31, 2023, the Company was in compliance with all debt covenants of its term loans.

The Company entered into interest rate swap agreements to fix the SOFR rate on a portion of these unsecured term loan facilities.

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

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The Convertible Notes will mature on December 15, 2026.

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

The initial carrying amount of the liability component was $ 386.1 million and was calculated using a discount rate of 6.25 %.

The discount rate was based on the terms of debt instruments that were similar to the Convertible Notes.

The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the principal amount of such Convertible Notes, or $ 113.9 million.

The amount recorded in equity was not subject to remeasurement or amortization.

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

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

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

Prior to June 15, 2026, the Convertible Notes will be convertible upon certain circumstances.

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The conversion rate is subject to adjustment in certain circumstances.

As of September 30, 2022 and December 31, 2021, the if-converted value of the Convertible Notes did not exceed the principal amount.

As of March 31, 2023 and December 31, 2022, 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.

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The upper strike price of the Capped Call Transactions is $ 33.0225 per share.

The cost of the Capped Call Transactions entered into in December 2020 and February 2021 was $ 38.3 million and $ 21.0 million, respectively, and was recorded within additional paid-in capital.

Senior Unsecured Notes

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").

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 September 30, 2022, the Company was in compliance with all such debt covenants.

As of March 31, 2023, the Company was in compliance with all such debt covenants.

Mortgage Loans

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If the loan is extended, the interest rate spread will increase by 20 basis points for the extension period only.

The Company expects to exercise this extension.

The Company expects to exercise this extension, refinance, or use the proceeds from the revolving credit facility to prepay this loan at maturity.

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

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

No event of default has occurred under the loan documents.

Both mortgage loans triggered the cash trap provisions prior to their acquisition, but both properties reached profitability levels in 2022 that permitted the termination of the cash traps and all cash in the lockboxes has been released.

These properties are not in a cash trap and no event of default has occurred under the loan documents.

Interest Expense

The components of the Company's interest expense consisted of the following for the three and nine months ended September 30, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

The components of the Company's interest expense consisted of the following for the three months ended March 31, 2023 and 2022 (in thousands):

For the three months ended March 31,

Unsecured revolving credit facilities $ 568 $ 493

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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 September 30, 2022 and December 31, 2021 was $ 676.5 million and $ 747.8 million, respectively.

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

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, 2023 and December 31, 2022 was $ 695.9 million and $ 700.5 million, respectively.

Derivative and Hedging Activities

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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 September 30, 2022 and December 31, 2021 consisted of the following, by maturity date (dollars in thousands):

The Company's interest rate swaps at March 31, 2023 and December 31, 2022 consisted of the following, by maturity date (dollars in thousands):

Aggregate Notional Value as of

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

Swap-cash flow 1.78 % - 1.79 %

January 2022 $ — $ 180,000

Swap-cash flow 1.64 % - 1.68 %

April 2022 — 100,000

Hedge Type Interest Rate Range (SOFR) Maturity March 31, 2023 December 31, 2022

Swap-cash flow 0.05 % - 0.07 %

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

As of September 30, 2022, the Company's derivative instruments were in an asset position with an aggregate fair value of $ 39.1 million.

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

As of March 31, 2023, the Company's derivative instruments were in an asset position with an aggregate fair value of $ 30.1 million.

None of the Company's derivative instruments were in a liability position as of March 31, 2023.

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

The Company expects approximately $ 20.9 million will be reclassified from accumulated other comprehensive income (loss) to interest expense within the next 12 months.

In January 2023, the Company entered into interest rate swap agreements with an aggregate notional amount of $ 400.0 million, which will be effective in November 2023.

In April 2023, the Company entered into an interest rate swap agreement with an aggregate notional amount of $ 82.5 million, which will be effective in May 2023.

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

The following table presents revenues by geographic location for the three and nine months ended September 30, 2022 and 2021 (in thousands):

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

2022 2021 2022 2021

San Diego, CA $ 99,552 $ 63,524 $ 237,011 $ 119,668

The following table presents revenues by geographic location for the three months ended March 31, 2023 and 2022 (in thousands):

For the three months ended March 31,

Southern Florida/Georgia $ 71,029 $ 85,241

Boston, MA 73,229 45,213 180,882 78,425

San Diego, CA 66,847 52,879

Los Angeles, CA 43,359 36,221

Boston, MA 42,671 33,936

San Francisco, CA 31,814 14,067

Portland, OR 14,640 13,524

28,727 9,731 51,168 19,335

Chicago, IL 22,954 10,598 49,966 16,696

Washington, D.C.

13,901 6,275 37,148 12,441

Chicago, IL 10,557 6,668

Seattle, WA 3,420 1,973

$ 416,693 $ 238,810 $ 1,072,285 $ 485,767

Total Revenues $ 305,719 $ 258,068

______________________

(1) Other includes:

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

Philadelphia, PA, Newport, RI, and Santa Cruz, CA.

Payments from customers are primarily made when services are provided.

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

Share Repurchase Program

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

Common Share Repurchase Programs

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

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

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

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

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

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

During the three months ended March 31, 2023, the Company repurchased 2,923,978 common shares for an aggregate purchase price of $ 41.0 million, or an average of approximately $ 14.04 per share.

Upon repurchase by the Company, these common shares ceased to be outstanding and became authorized but unissued common shares.

As of March 31, 2023, $ 46.0 million of common shares remained available for repurchase under this program.

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

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

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

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

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

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

No common shares were issued or sold under the ATM program during the nine months ended September 30, 2022.

As of September 30, 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 three months ended March 31, 2023.

On February 21, 2023, the ATM program expired.

Common Dividends

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

The Company declared the following dividends on common shares/units for the three months ended March 31, 2023:

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

$ 0.01 March 31, 2023 March 31, 2023 April 17, 2023

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

$ 0.01 September 30, 2022 September 30, 2022 October 17, 2022

Preferred Shares

The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $ 0.01 par value per share (“preferred shares”).

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

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

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

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

Security Type September 30, 2022 December 31, 2021

The following preferred shares were outstanding as of March 31, 2023 and December 31, 2022:

Security Type March 31, 2023 December 31, 2022

6.375 % Series E

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On or after such dates, the Company may, at its option, redeem the Preferred Shares, in each case in whole or from time to time in part, by payment of $ 25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption.

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

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

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

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

Preferred Share Repurchase Program

On February 21, 2023, the Company announced that the Board of Trustees approved a repurchase program of up to $ 100.0 million of the Preferred Shares.

Under the terms of the program, the Company may repurchase up to an aggregate of $ 100.0 million of the Preferred Shares.

The timing, manner, price and amount of any repurchases will be determined by the Company in its 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 the Company to repurchase any specific number of shares.

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

Preferred Dividends

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

The Company declared the following dividends on preferred shares for the three months ended March 31, 2023:

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

1 unchanged sentence

$ 0.40 March 31, 2023 March 31, 2023 April 17, 2023

6.375 % Series E

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

6.375 % Series E

$ 0.40 September 30, 2022 September 30, 2022 October 17, 2022

6.30 % Series F

$ 0.39 March 31, 2023 March 31, 2023 April 17, 2023

6.30 % Series F

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

6.30 % Series F

$ 0.39 September 30, 2022 September 30, 2022 October 17, 2022

6.375 % Series G

$ 0.40 March 31, 2023 March 31, 2023 April 17, 2023

6.375 % Series G

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

6.375 % Series G

$ 0.40 September 30, 2022 September 30, 2022 October 17, 2022

5.70 % Series H

$ 0.36 March 31, 2023 March 31, 2023 April 17, 2023

5.70 % Series H

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

5.70 % Series H

$ 0.36 September 30, 2022 September 30, 2022 October 17, 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.

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

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

As of March 31, 2023 and December 31, 2022, the Operating Partnership had 149,896 OP units held by third parties, excluding LTIP units.

As of March 31, 2023, the Operating Partnership had two classes of long-term incentive partnership units ("LTIP units"), LTIP Class A units and LTIP Class B units.

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

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

Of the 727,208 LTIP units outstanding at September 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.

On February 17, 2023, the Board of Trustees granted 131,276 LTIP Class B units to its executive officers.

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

The fair value of each award was determined based on the closing price of the Company’s common shares on the grant date of $ 15.04 per unit with an aggregate grant date fair value of $ 2.0 million.

As of March 31, 2023, the Operating Partnership had 858,484 LTIP units outstanding, of which 277,136 LTIP units have vested.

As of December 31, 2022, the Operating Partnership had 727,208 LTIP units outstanding, of which 127,111 LTIP units have vested.

Only vested LTIP units may be converted to 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.

On May 11, 2022, in connection with the acquisition of Inn on Fifth, 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 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 $ 25.00 per share.

3 unchanged sentences

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

As of March 31, 2023, the Operating Partnership had 3,104,400 Series Z Preferred Units outstanding.

Share-Based Compensation Plan

1 unchanged sentence

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

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 September 30, 2022, there were 1,725,000 common shares available for issuance under the Plan.

The Plan provides for the grant of options to purchase common shares, share awards, share appreciation rights, performance units and other equity-based awards.

Share awards under the Plan vest over a period determined by the Board of Trustees, generally over three to five years .

The Company pays or accrues for dividends on share-based awards.

All outstanding share awards are subject to full or partial accelerated vesting upon a change in control and upon death or disability or certain other employment termination events as set forth in the award agreements.

As of March 31, 2023, there were 1,454,457 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 September 30, 2022:

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

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

The following table provides a summary of service condition restricted share activity as of March 31, 2023:

Shares Weighted-Average

4 unchanged sentences

Forfeited ( 8,200 ) $ 22.67

Unvested at September 30, 2022

Unvested at March 31, 2023

488,480 $ 19.49

For the three and nine months ended September 30, 2022 the Company recognized approximately $ 1.1 million and $ 2.7 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 nine months ended September 30, 2021 the Company recognized approximately $ 1.1 million and $ 3.0 million, respectively, of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.

For the three months ended March 31, 2023 and 2022, the Company recognized approximately $ 0.9 million and $ 0.8 million, respectively, of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.

Performance-Based Equity Awards

On 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.

On February 17, 2023, the Board of Trustees approved a target award of 314,235 performance-based equity awards to officers and employees of the Company.

These awards will vest, if at all, in 2026.

The actual number of common shares that ultimately vest will be from 0 % to 200 % of the target award and will be determined in 2026 based on the performance criteria defined in the award agreements for the period of performance from January 1, 2023 through December 31, 2025.

For the three and nine months ended September 30, 2022, the Company recognized approximately $ 1.4 million and $ 3.4 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.

For the three and nine months ended September 30, 2021, the Company recognized approximately $ 1.3 million and $ 3.6 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.

Long-Term Incentive Partnership ("LTIP") Units

As of September 30, 2022, the Operating Partnership had two classes of LTIP units, LTIP Class A units and LTIP Class B units.

For the three months ended March 31, 2023 and 2022, the Company recognized approximately $ 1.2 million and $ 0.9 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 Units

As of March 31, 2023, 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 September 30, 2022 and December 31, 2021, the Operating Partnership had 727,208 LTIP units outstanding.

Of the 727,208 LTIP units outstanding at September 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 and nine months ended September 30, 2022, the Company recognized approximately $ 0.7 million and $ 2.1 million, respectively, in expense related to these LTIP units.

For the three and nine months ended September 30, 2021, the Company recognized approximately $ 0.7 million and $ 1.7 million, respectively, in expense related to these LTIP units.

On February 17, 2023, the Board of Trustees granted 131,276 LTIP Class B units to its executive officers.

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

The fair value of each award was determined based on the closing price of the Company’s common shares on the grant date of $ 15.04 per unit with an aggregate grant date fair value of $ 2.0 million.

As of March 31, 2023, the Operating Partnership had 858,484 LTIP units outstanding, of which 277,136 LTIP units have vested.

As of December 31, 2022, the Operating Partnership had 727,208 LTIP units outstanding, of which 127,111 LTIP units have vested.

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

For the three months ended March 31, 2023 and 2022, the Company recognized approximately $ 0.8 million and $ 0.7 million, respectively, in expense related to these LTIP units.

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

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

Given the continued negative impact of the COVID-19 pandemic on the Company's financial results and uncertainties about the Company's ability to utilize its net operating loss in future years, the Company has recorded a valuation allowance on its income tax benefit for the three and nine months ended September 30, 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 months ended March 31, 2023, 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 September 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.

As of March 31, 2023 and December 31, 2022, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2019.

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 September 30, For the nine months ended September 30,

2022 2021 2022 2021

For the three months ended March 31,

Net income (loss) attributable to common shareholders $ ( 33,916 ) $ ( 110,874 )

Dividends paid on unvested share-based compensation ( 11 ) ( 10 )

Undistributed earnings attributable to share-based compensation ( 109 ) — — —

Net income (loss) available to common shareholders — basic $ 13,603 $ ( 43,996 ) $ ( 80,538 ) $ ( 181,304 )

Interest expense on convertible notes — — — —

Net income (loss) available to common shareholders — diluted $ 13,603 $ ( 43,996 ) $ ( 80,538 ) $ ( 181,304 )

Weighted-average number of common shares — basic 130,905,132 130,813,750 130,904,772 130,801,187

Effect of dilutive share-based compensation 244,651 — — —

Effect of dilutive convertible notes — — — —

Weighted-average number of common shares — diluted 131,149,783 130,813,750 130,904,772 130,801,187

Net income (loss) available to common shareholders — basic and diluted $ ( 33,927 ) $ ( 110,884 )

Weighted-average number of common shares — basic and diluted 125,488,415 130,904,299

Net income (loss) per share available to common shareholders — basic $ ( 0.27 ) $ ( 0.85 )

Net income (loss) per share available to common shareholders — diluted $ ( 0.27 ) $ ( 0.85 )

For the three and nine months ended September 30, 2022, 300,261 and 1,072,803 , 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 nine months ended September 30, 2021, 1,035,369 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 nine months ended September 30, 2022, 29,441,175 common shares underlying the convertible notes have been excluded from diluted shares as their effect would have been anti-dilutive.

For the three and nine months ended September 30, 2021, 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.

For the three months ended March 31, 2023 and 2022, 1,158,282 and 787,871 , respectively, of unvested service condition restricted shares and performance-based equity awards were excluded from diluted weighted-average number of common shares, as their effect would have been anti-dilutive.

For the three months ended March 31, 2023 and 2022, 29,441,175 of common shares underlying the Convertible Notes have been excluded from diluted shares as their effect would have been anti-dilutive.

The LTIP units 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.

Commitments and Contingencies

4 unchanged sentences

Most of the agreements also provide the Company the ability to terminate based on failure to achieve defined operating performance thresholds.

Termination fees range from zero to up to six times the annual base management and incentive management fees, depending on the agreement and the reason for termination.

Termination fees range from zero to up to four times the annual base management and incentive management fees, depending on the agreement and the reason for termination.

Certain of the Company’s management agreements are non-terminable except upon the manager’s breach of a material representation or the manager’s failure to meet performance thresholds as defined in the management agreement.

2 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 and nine months ended September 30, 2022, com bined base and incentive management fees were $ 11.8 million and $ 31.6 million, respectively.

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

For the three months ended March 31, 2023 and 2022, com bined base and incentive management fees were $ 8.0 million and $ 7.7 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 September 30, 2022 and December 31, 2021, the Company had $ 19.4 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 March 31, 2023 and December 31, 2022, the Company had $ 8.0 million and $ 11.2 million, respectively, in restricted cash, which consisted of funds held in cash management 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 September 30, 2022, the following hotels were subject to leases as follows:

As of March 31, 2023, 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

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

1 Hotel San Francisco 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 and nine months ended September 30, 2022 and 2021 are as follows (in thousands):

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

2022 2021 2022 2021

The components of ground rent expense for the three months ended March 31, 2023 and 2022 are as follows (in thousands):

For the three months ended March 31,

Fixed ground rent $ 4,782 $ 4,456

5 unchanged sentences

Supplemental Information to Statements of Cash Flows (in thousands)

For the nine months ended September 30,

For the three months ended March 31,

Interest paid, net of capitalized interest $ 20,338 $ 16,613

2 unchanged sentences

Non-Cash Investing and Financing Activities:

Convertible debt discount adjustment $ — $ 113,099

Distributions payable on common shares/units $ 1,279 $ 1,345

1 unchanged sentence

Issuance of common shares for Board of Trustees compensation $ 754 $ 738

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 $ 14,492 $ 2,848

Right of use assets obtained in exchange for lease liabilities $ 1,005 $ 48,302

Write-off of fully amortized deferred financing costs $ — $ 5,466

Mortgage loans assumed in connection with acquisition of hotel properties $ — $ 161,500

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

Subsequent Events

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

The $ 2.0 billion amended and restated senior unsecured credit agreement includes a $ 650.0 million senior unsecured revolving credit facility and three term loan facilities totaling $ 1.38 billion.

The $ 650.0 million revolving credit facility matures in October 2026 and provides for two , six-month extension options.

The three $ 460.0 million term loans mature in October 2024, October 2025 and October 2027, respectively.

The Company used the proceeds of the new term loans and $ 26.7 million of cash on hand to repay the outstanding balances on the prior term loans.

The Company repurchased an aggregate of 1,007,134 of its common shares at an average price of $ 13.92 per share subsequent to March 31, 2023.

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