What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-26 compared with 2022-10-27 · 94 added, 136 removed, 160 unchanged (59% of the section changed)

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Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

The COVID-19 pandemic, which began in early 2020, has had a significant negative impact on our operations and financial results and may continue to have a negative impact on the hotel industry and our 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.

We exited the debt covenant waiver period under our credit facilities as of the end of the second quarter of 2022, and we are 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.

Overall performance has been led by the recovery of leisure travel which has driven revenue at our resorts to pre-pandemic levels.

Corporate and group business has been slower to recover, but has substantially increased compared to 2021.

Operating performance during this recovery period has been led by strong leisure travel which has driven revenue at our resorts to pre-pandemic levels.

Corporate and group business has been slower to recover, but have increased substantially throughout 2022 and into 2023.

There has been improving demand in all of our urban markets, which were slower to recover.

We expect these trends to continue if the overall economic recovery continues.

Recent inflation and the expectation of future inflation have caused labor and other costs to increase and have added additional uncertainty in consumer confidence and the continued growth in the economy.

During the nine months ended September 30, 2022, we had the following transactions:

• On May 11, 2022, we acquired Inn on Fifth in Naples, Florida for $156.0 million.

• On June 23, 2022, we acquired Newport Harbor Island Resort (formerly Gurney's Newport Resort & Marina) in Newport, Rhode Island for $174.0 million.

• On June 28, 2022, we sold The Marker San Francisco in San Francisco, California for $77.0 million.

• On August 2, 2022, we sold Sofitel Philadelphia at Rittenhouse Square in Philadelphia, Pennsylvania for $80.0 million.

• On August 25, 2022, we sold Hotel Spero in San Francisco, California for $71.0 million.

• On September 14, 2022, we sold Hotel Vintage Portland in Portland, Oregon for $32.9 million.

The Company continues to complete repairs and rebuilding at the LaPlaya Beach Resort & Club with the property's Bay Tower opening in the first quarter, and the Gulf Tower reopening in April but with limited resort amenities.

Additional resort amenities will reopen through the year.

The property's Beach House remains on track to reopen in the fourth quarter of 2023, however, delays in receiving equipment, material, and inspections may further impact this timeline.

During the three months ended March 31, 2023, we had the following transactions:

• On February 22, 2023, we sold The Heathman Hotel in Portland, Oregon for $45.0 million.

• On March 17, 2023, we sold the retail component of The Westin Michigan Avenue Chicago in Chicago, Illinois for $27.3 million.

• On March 28, 2023, we sold Hotel Colonnade Coral Gables in Coral Gables, Florida for $63.0 million.

• We repurchased 2,923,978 common shares under our common share repurchase program at an average price of $14.04 per share.

During April 2023, we repurchased an additional 1,007,134 common shares at an average price of $13.92 per share.

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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Hotel Operating Statistics

The following table represents the key same-property hotel operating statistics for our hotels for the three and nine months ended September 30, 2022 and 2021:

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

2022 2021 2022 2021

The following table represents the key same-property hotel operating statistics for our hotels for the three months ended March 31, 2023 and 2022:

For the three months ended March 31,

Same-Property Occupancy 58.0 % 48.5 %

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Same-Property Total RevPAR $ 266.92 $ 215.69

The above table of hotel operating statistics includes information from all hotels owned as of September 30, 2022 for the three months ended September 30, 2022 and 2021, except for 1 Hotel San Francisco which was closed for renovations.

Additionally, the table excludes Sofitel Philadelphia at Rittenhouse Square due to its sale on August 2, 2022, Hotel Spero due to its sale on August 25, 2022 and Hotel Vintage Portland due to its sale on September 14, 2022.

The above table of hotel operating statistics includes information from all hotels owned as of September 30, 2022 for the nine months ended September 30, 2022 and 2021, except for 1 Hotel San Francisco which was closed for renovations, Inn on Fifth for the first quarter due to its acquisition on May 11, 2022 and Newport Island Harbor Resort (formerly Gurney's Newport Resort & Marina) for the first and second quarters due to its acquisition on June 23, 2022.

Additionally, The Marker San Francisco was excluded in the second and third quarters due to its sale on June 28, 2022.

Sofitel Philadelphia at Rittenhouse Square was excluded in the third quarter due to its sale on August 2, 2022.

Hotel Spero was excluded in the third quarter due to its sale on August 25, 2022, and Hotel Vintage Portland was excluded in the third quarter due to its sale on September 14, 2022.

The above table of hotel operating statistics includes information from all hotels owned as of March 31, 2023 for the three months ended March 31, 2023 and 2022, except for 1 Hotel San Francisco, which was closed for renovations in the first quarter of 2022 and LaPlaya Beach Resort & Club due to its closure following Hurricane Ian.

Non-GAAP Financial Measures

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By excluding the effect of real estate related depreciation and amortization including our share of the joint venture depreciation and amortization, gains (losses) from sales of real estate and impairments of real estate assets (including impairment of real estate related joint ventures), all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that FFO provides investors a useful financial measure to evaluate our operating performance.

The following table reconciles net income (loss) to FFO and FFO available to common share and unit holders 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 following table reconciles net income (loss) to FFO and FFO available to common share and unit holders for the three months ended March 31, 2023 and 2022 (in thousands):

For the three months ended March 31,

Net income (loss) $ (22,045) $ (100,216)

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Distribution to preferred shareholders and unit holders (12,152) (11,344)

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

FFO available to common share and unit holders $ 17,452 $ 8,433

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We believe that EBITDA and EBITDA re provide investors useful financial measures to evaluate our operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

The following table reconciles net income (loss) to EBITDA and EBITDA re 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 following table reconciles net income (loss) to EBITDA and EBITDA re for the three months ended March 31, 2023 and 2022 (in thousands):

For the three months ended March 31,

Net income (loss) $ (22,045) $ (100,216)

Interest expense 27,430 22,572

Income tax expense (benefit) 1,015 5 1,015 60

Depreciation and amortization 58,369 59,100

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Results of Operations

At September 30, 2022 and 2021, we had 51 and 52, respectively, 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 and through the dates of disposition, as applicable.

Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the three and nine months ended September 30, 2022 and 2021.

At March 31, 2023 and 2022, we had 49 and 53, respectively, 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 their dates of disposition, as applicable.

Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the three months ended March 31, 2023 and 2022.

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

Sir Francis Drake San Francisco, CA April 1, 2021

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

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

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

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Hotel Vintage Portland Portland, OR September 14, 2022

The Heathman Hotel Portland, OR February 22, 2023

Retail at The Westin Michigan Avenue Chicago

Chicago, IL March 17, 2023

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

Property Location Acquisition Date

Jekyll Island Club Resort Jekyll Island, GA July 22, 2021

Margaritaville Hollywood Beach Resort Hollywood, FL September 23, 2021

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 three months ended September 30, 2022 to the three months ended September 30, 2021

Revenues — Total hotel revenues increased by $177.9 million, of which $48.3 million was due to non-comparable properties, and the balance was primarily due to an increase in leisure travel demand, as well as some recoveries in business and group bookings.

Hotel operating expenses — Total hotel operating expenses increased by $103.5 million, of which $28.8 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 $4.9 million primarily due to our acquisitions of three properties in 2021 and two properties in 2022.

An increase in depreciation from these five properties was offset by a decrease in depreciation from the properties sold.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $8.4 million primarily due to an increase in ground rent at our three non-comparable properties acquired in 2021.

Impairment loss — We recognized an impairment loss of $12.9 million in 2022 related to damage caused by Hurricane Ian at LaPlaya Beach Resort and Club in Naples, Florida and Southernmost Beach Resort in Key West, Florida.

No impairment loss was incurred during in 2021.

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 $0.2 million in 2021 primarily due to the sale of Sir Francis Drake.

Other operating expenses — Other operating expenses increased by $0.6 million primarily due to an increase in pre-opening expenses.

Newport Harbor Island Resort Newport, RI June 23, 2022

Comparison of the three months ended March 31, 2023 to the three months ended March 31, 2022

Revenues — Total revenues increased by $47.7 million, of which $4.8 million was due to non-comparable properties, and the balance was primarily due to an increase in leisure travel, as well as some recoveries in business and group bookings.

Hotel operating expenses — Total hotel operating expenses increased by $40.0 million due to an increase in demand and operations at our comparable properties.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $1.6 million primarily due to a decrease in real estate taxes as a result of lower tax assessments in certain markets offset by a $1.1 million increase in ground rent at our comparable properties.

Impairment — We recognized an impairment loss of $61.0 million in 2022 related to two hotels.

Gain on sale of hotel properties — We recognized a gain on sale of $6.6 million related to the sales of The Heathman Hotel, the retail component of The Westin Michigan Avenue Chicago and Hotel Colonnade Coral Gables in 2023.

Business interruption insurance income — We recognized business interruption insurance income of $8.1 million in 2023 related to a partial settlement with the insurance carriers for lost income at LaPlaya Beach Resort & Club.

Other operating expenses — Other operating expenses increased by $2.5 million primarily due to payroll and claims administration costs at LaPlaya Beach Resort & Club for which reimbursement from insurance policies is uncertain.

Interest expense — Interest expense increased by $4.9 million as a result of higher interest rates on floating rate debt.

Non-controlling interests — Non-controlling interests represents 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 $1.2 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 decreased as a result of 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 decreased due to the redemption of the Series C and Series D Cumulative Redeemable Preferred Shares in August 2021, and no preferred shares were redeemed in 2022.

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

Comparison of the nine months ended September 30, 2022 to the nine months ended September 30, 2021

Revenues — Total hotel revenues increased by $586.5 million, of which $147.0 million was due to non-comparable properties, and the balance was primarily due to an increase in leisure travel, as well as some recoveries in business and group bookings.

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

Hotel operating expenses — Total hotel operating expenses increased by $326.3 million, of which $85.4 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 $14.1 million primarily due to our acquisitions of three properties in 2021 and two properties in 2022.

An increase in depreciation from these five properties was offset by a decrease in depreciation from the properties sold.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $13.9 million primarily due to an increase in ground rent and property insurance at our three non-comparable properties acquired in 2021.

General and administrative — General and administrative expenses increased by $2.9 million primarily due to compensation expense.

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

Impairment loss — We recognized an impairment loss of $86.1 million in 2022 related to two hotels sold and related to damage caused by Hurricane Ian at the LaPlaya Beach Resort and 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 at 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 $2.5 million primarily due to an increase in pre-opening expenses and hotel management transition costs.

Interest expense — Interest expense decreased by $2.3 million primarily due to lower borrowings, interest capitalized on renovation projects in 2022 and the maturity of certain higher fixed interest rate swap agreements, offset by an increase in interest expense in the third quarter as a result of higher interest rates on floating rate debt.

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 $1.8 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 Series G and Series H Cumulative Redeemable Preferred Shares, which were issued in May 2021 and July 2021, respectively, being outstanding for all of 2022.

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

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

Critical Accounting Policies

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Summary of Significant Accounting Policies to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently issued accounting pronouncements that may affect us.

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Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by our operations, borrowings under our credit facilities, net proceeds from equity and debt offerings, and net proceeds from hotel property sales.

Our primary cash requirements in the short term (i.e., those requiring cash on or before September 30, 2023) will be to fund property lease obligations, interest and current principal on debt, capital improvements, dividends on common and preferred shares, and working capital of our hotel property operations.

We believe our cash and cash equivalents, restricted cash and the amount available on our senior unsecured revolving credit facility, which totaled $808.5 million as of September 30, 2022, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements.

As of September 30, 2022, we had no off-balance sheet arrangements.

Our primary sources of liquidity are cash provided by our operations, borrowings under our credit facilities, net proceeds from equity and debt offerings, and net proceeds from property sales.

Our primary cash requirements in the short term (i.e., those requiring cash on or before March 31, 2024) will be to fund property lease obligations, interest and current principal on debt, capital improvements, dividends on common and preferred shares, and working capital of our property operations.

We believe our cash and cash equivalents, restricted cash and the amount available on our senior unsecured revolving credit facility, which totaled $783.4 million as of March 31, 2023, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements.

As of March 31, 2023, we had no off-balance sheet arrangements.

In order to maintain our qualification as a REIT, we must pay dividends to our shareholders of at least 90% of our taxable income.

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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 the COVID-19 pandemic on our liquidity, see Overview .

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

Our outstanding debt consisted of floating- and fixed-rate unsecured term loans, convertible senior notes, senior unsecured notes and mortgage loans with varying maturities.

Our total debt had an aggregate face value of $2.4 billion as of September 30, 2022, as summarized in the following table:

September 30, 2022

Our total debt had an aggregate face value of $2.4 billion as of March 31, 2023, as summarized below:

March 31, 2023

(in thousands)

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Total debt at face value $ 2,400,487

For further discussion on the components of our debt as of September 30, 2022, see Note 5.

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

Debt to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of September 30, 2022 we had the option to extend certain of our current debt maturities with the payment of extension fees.

If we had exercised all extension options available in our debt agreements, future principal and interest payments associated with our debt obligations outstanding as of September 30, 2022 would have been $2.6 billion through their maturity, with $61.7 million of principal and $87.9 million of interest payable on or before September 30, 2023.

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As previously disclosed and as discussed in Note 13.

Subsequent Events to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, on October 13, 2022, the Company refinanced its senior unsecured revolving credit facility and term loans.

The interest rates on the new senior unsecured revolving credit facility and term loans are based on pricing grids similar to those of the prior facility and term loans and the financial covenants are substantially the same as those of the credit agreements that governed the prior facility and term loans.

We are in compliance with all covenants governed by the unsecured credit facilities as of September 30 2022, as well as our amended and restated senior credit facilities.

We are also in compliance with all covenants governed by our senior note facilities.

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 March 31, 2023 will be $2.7 billion through their maturity, with $49.4 million of principal and $104.8 million of interest payable on or before March 31, 2024.

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

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 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.

As of March 31, 2023, none of the mortgage loans was in a cash trap.

Hotel, ground and finance lease obligations

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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 September 30, 2022, with $20.7 million payable on or before September 30, 2023.

Future fixed minimum payments associated with our hotel, ground and finance leases total $1.8 billion as of March 31, 2023, with $20.9 million payable on or before March 31, 2024.

Purchase commitments

As of September 30, 2022, we had $7.0 million of outstanding purchase commitments, all of which will be paid on or before September 30, 2023.

As of March 31, 2023, we had $2.8 million of outstanding purchase commitments, all of which will be paid on or before March 31, 2024.

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 $50.0 million on our outstanding Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares and our Series Z Cumulative Perpetual Preferred Units within the next 12 months and in each future year until the shares are redeemed.

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

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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 March 31, 2024 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 I, Item 1 of this Quarterly Report on Form 10-Q.

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Operating Activities.

Our net cash provided by (used in) operating activities was $254.4 million for the nine months ended September 30, 2022, and $44.3 million for the nine months ended September 30, 2021.

Our net cash provided by (used in) operating activities was $46.2 million for the three months ended March 31, 2023, and $38.8 million for the three months ended March 31, 2022.

Fluctuations in our net cash provided by (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 2022 as compared to 2021 is due to the resumption of operations at our hotels, an i ncrease in leisure travel demand during the spring and summer travel seasons, as well as continued recovery in business and group bookings.

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

The increase in cash provided by (used in) operations in 2023 as compared to 2022 is due to continued improvement in leisure travel demand, as well as continued recovery in business and group bookings.

Investing Activities.

Our net cash provided by (used in) investing activities was $(66.6) million for the nine months ended September 30, 2022, and $11.1 million for the nine months ended September 30, 2021.

Our net cash provided by (used in) investing activities was $105.2 million for the three months ended March 31, 2023, and $(20.0) million for the three months ended March 31, 2022.

Fluctuations in our net cash provided by (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 nine months ended September 30, 2022, we invested $68.3 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.

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• During the nine months ended September 30, 2021, we invested $52.8 million in improvements to our hotel properties;

received $255.9 million from the sale of three hotel properties, purchased two hotel properties using cash of $191.0 million and paid a deposit for the acquisition of one hotel property using cash of $1.0 million.

• During the three months ended March 31, 2023, we invested $34.5 million in improvements to our hotel properties;

received $131.9 million from the sale of two hotel properties and one retail component of a hotel property;

and received $8.4 million in property insurance proceeds.

• During the three months ended March 31, 2022, we invested $19.9 million in improvements to our hotel properties.

Financing Activities.

Our net cash provided by (used in) financing activities was $(69.9) million for the nine months ended September 30, 2022, and $(9.0) million for the nine months ended September 30, 2021.

Our net cash provided by (used in) financing activities was $(57.1) million for the three months ended March 31, 2023, and $(15.2) million for the three months ended March 31, 2022.

Fluctuations in our net cash provided by (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 nine months ended September 30, 2022, we borrowed and repaid $180.0 million of revolving credit facility borrowings;

repaid $27.7 million in other debt;

• During the three months ended March 31, 2023, we repurchased $42.7 million of common shares through our common share repurchase program and for tax withholding purposes in connection with vestings of share-based equity awards;

and paid $13.4 million in preferred and common distributions.

• During the nine months ended September 30, 2021, we borrowed and repaid $268.6 million and $388.0 million, respectively, in other debt;

received $480.0 million in gross proceeds from the issuances of preferred shares;

repaid $40.0 million of revolving credit facilities borrowings;

paid $30.0 million in preferred and common distributions;

purchased $21.0 million in capped call transactions;

paid $15.9 million in offering costs;

and paid $10.1 million in financing fees.

• During the three months ended March 31, 2022, we paid $12.7 million in preferred and common distributions.

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 nine months ended September 30, 2022, we invested $68.3 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, we expect to invest a total of $100.0 million to $110.0 million in capital investments in 2022, which includes approximately $50.0 million in redevelopment and repositioning projects at 1 Hotel San Francisco (formerly Hotel Vitale), Skamania Lodge, Solamar Hotel, Hilton San Diego Gaslamp Quarter, Viceroy Santa Monica Hotel and Jekyll Island Club Resort and excludes capital expenditures related to the repair and remediation of LaPlaya Beach Resort and Southernmost Beach Resort damaged in Hurricane Ian.

Common 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 common shares.

For the three months ended March 31, 2023, we invested $34.5 million in capital investments to reposition and improve our properties, including the renovations of Hilton San Diego Gaslamp Quarter, Jekyll Island Club Resort, Newport Harbor Island Resort, Viceroy Santa Monica Hotel, Skamania Lodge and Solamar Hotel, as well as capital expenditures related to the repair and remediation of LaPlaya Beach Resort & Club and Southernmost Beach Resort damaged in Hurricane Ian.

Depending on market conditions, and in some instances subject to approval from governmental authorities, we expect to invest a total of $145.0 million to $155.0 million in capital investments in 2023, which includes approximately $50.0 million in redevelopment and repositioning projects at Solamar Hotel, Hilton San Diego Gaslamp Quarter, Jekyll Island Club Resort, Estancia La Jolla Hotel & Spa and Skamania Lodge, and excludes capital expenditures related to the repair and remediation of LaPlaya Beach Resort & Club and Southernmost Beach Resort damaged in Hurricane Ian.

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

Common Share Repurchase Programs

On July 27, 2017, we announced that our Board of Trustees authorized a share repurchase program of up to $100.0 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.

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 nine months ended September 30, 2022.

As of September 30, 2022, $56.6 million of 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 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, 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.

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

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.

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

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.

Preferred Share Repurchase Program

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 is $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").

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.

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No common shares were issued or sold under the ATM program during the three months ended March 31, 2023.

As of February 21, 2023, the ATM program expired.

We rely on the performance of the hotels to increase revenues to keep pace with inflation.

Generally, our hotel operators possess the ability to adjust room rates daily, except for group or corporate rates contractually committed to in advance, although competitive pressures may limit the ability of our operators to raise rates faster than inflation or even at the same rate.

Inflation may also affect our expenses and costs of capital investments by increasing, among other things, the costs of labor, employee related benefits, food, commodities, and other materials, taxes, insurance and utilities.

Demand in the lodging industry is affected by recurring seasonal patterns which are greatly influenced by overall economic cycles, geographic locations, weather and customer mix at the hotels.

Generally, our hotels have lower revenue, operating income and cash flow in the first quarter of each year and higher revenue, operating income and cash flow in the third quarter of each year.

The historical trend was disrupted in 2020 and 2021 as a result of COVID-19 and, as a result, demand, revenue, and operating income was directly affected by the number of COVID-19 cases and government and individual responses to the pandemic.

Many of the properties in our portfolio have returned to normal historical seasonality trends in 2022.

The historical trend was disrupted in 2020 and 2021 as a result of COVID-19, which directly adversely impacted demand, revenue, and operating income.

However, most of the properties in our portfolio have returned to normal historical seasonality trends.

Derivative Instruments

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Derivative instruments are subject to fair value reporting at each reporting date and the increase or decrease in fair value is recorded in net income (loss) or accumulated other comprehensive income (loss), based on the applicable hedge accounting guidance.

Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements.

Derivatives expose the Company to credit risk in the event of non-performance by the counter parties under the terms of the interest rate hedge agreements.

We believe we minimize the credit risk by transacting with major credit-worthy financial institutions.

As of September 30, 2022, we have interest rate swap agreements with an aggregate notional amount of $1.0 billion to hedge variable interest rates on our unsecured term loans.

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As of March 31, 2023, we have interest rate swap agreements with an aggregate notional amount of $840.0 million to hedge variable interest rates on our unsecured term loans.

We have designated these pay-fixed, receive-floating interest rate swap derivatives as cash flow hedges.

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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-Q

Item 2. Management’s Discussion and Analysis