What changed in this filing

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Item 1. Financial Statements

2023-07-27 compared with 2023-04-26 · 184 added, 115 removed, 531 unchanged (36% of the section changed)

3 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Investment in hotel properties, net $ 5,714,316 $ 5,874,876

17 unchanged sentences

Shareholders’ equity:

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

Preferred shares of beneficial interest, $ .01 par value (liquidation preference $ 715,000 at June 30, 2023 and December 31, 2022), 100,000,000 shares authorized;

28,600,000 shares issued and outstanding at June 30, 2023 and December 31, 2022

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

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

120,057,744 shares issued and outstanding at June 30, 2023 and 126,345,293 shares issued and outstanding at December 31, 2022

Additional paid-in capital 4,094,680 4,182,359

9 unchanged sentences

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

For the three months ended March 31,

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

2023 2022 2023 2022

Room $ 250,934 $ 261,394 $ 447,308 $ 430,026

17 unchanged sentences

Interest expense ( 29,544 ) ( 23,161 ) ( 56,974 ) ( 45,733 )

Other 952 14 1,135 33

Income (loss) before income taxes 46,214 28,797 24,169 ( 71,419 )

12 unchanged sentences

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

For the three months ended March 31,

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

2023 2022 2023 2022

Comprehensive Income:

10 unchanged sentences

(in thousands, except share data)

For the three months ended March 31, 2023

For the three months ended June 30, 2023

Preferred Shares Common Shares Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Distributions in Excess of Retained Earnings Total Shareholders' Equity Non-Controlling Interests Total Equity

Shares Amount Shares Amount

Balance at March 31, 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

Repurchase of common shares — — ( 3,574,923 ) ( 35 ) ( 49,973 ) — — ( 50,008 ) — ( 50,008 )

Share-based compensation — — — — 2,162 — — 2,162 870 3,032

Distributions on common shares/units — — — — — — ( 1,211 ) ( 1,211 ) ( 26 ) ( 1,237 )

Distributions on preferred shares/units — — — — — — ( 10,987 ) ( 10,987 ) ( 1,164 ) ( 12,151 )

Other comprehensive income (loss):

Change in fair value of derivative instruments — — — — — 21,003 — 21,003 117 21,120

Amounts reclassified from other comprehensive income — — — — — ( 6,938 ) — ( 6,938 ) — ( 6,938 )

Net income (loss) — — — — — — 44,725 44,725 1,458 46,183

Balance at June 30, 2023

28,600,000 $ 286 120,057,744 $ 1,201 $ 4,094,680 $ 43,956 $ ( 1,225,748 ) $ 2,914,375 $ 89,737 $ 3,004,112

Pebblebrook Hotel Trust

Consolidated Statements of Equity - Continued

(in thousands, except share data)

For the three months ended June 30, 2022

Shares Amount Shares Amount

Balance at March 31, 2022

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

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

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

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

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

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

Other comprehensive income (loss):

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

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

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

Balance at June 30, 2022

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

Pebblebrook Hotel Trust

Consolidated Statements of Equity - Continued

(in thousands, except share data)

For the six months ended June 30, 2023

Shares Amount Shares Amount

Balance at December 31, 2022

9 unchanged sentences

Net income (loss) — — — — — — 21,797 21,797 2,341 24,138

Balance at March 31, 2023

Balance at June 30, 2023

28,600,000 $ 286 120,057,744 $ 1,201 $ 4,094,680 $ 43,956 $ ( 1,225,748 ) $ 2,914,375 $ 89,737 $ 3,004,112

2 unchanged sentences

(in thousands, except share data)

For the three months ended March 31, 2022

For the six months ended June 30, 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

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

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

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

2 unchanged sentences

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

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

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

Other comprehensive income (loss):

2 unchanged sentences

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

Balance at March 31, 2022

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

3 unchanged sentences

(in thousands)

For the three months ended March 31,

For the six months ended June 30,

Operating activities:

17 unchanged sentences

Proceeds from sales of hotel properties 224,384 72,969

Acquisition of hotel properties — ( 247,163 )

Property insurance proceeds 11,388 —

2 unchanged sentences

Financing activities:

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

Payment of deferred financing costs ( 298 ) ( 96 )

Borrowings under revolving credit facilities — 180,000

Repayments under revolving credit facilities — ( 80,000 )

Repayments of debt ( 994 ) ( 27,111 )

12 unchanged sentences

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 .

As of June 30, 2023, the Company owned interests in 47 hotels with a total of 12,142 g uest rooms .

The hotel properties are located in:

11 unchanged sentences

Santa Cruz, California;

Seattle, Washington;

Stevenson, Washington;

3 unchanged sentences

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

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

As of June 30, 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.

29 unchanged sentences

New Accounting Pronouncements

Business Combinations

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and to payment terms and their effect on subsequent revenue recognized by the acquirer.

The amendments in ASU 2021-08 require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

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.

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.

There were no new accounting pronouncements issued during the six months ended June 30, 2023 that the Company believes will have a material impact on its consolidated financial statements and disclosures.

Acquisition and Disposition of Hotel Properties

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):

There were no acquisitions of hotel properties during the six months ended June 30, 2023.

The following table summarizes disposition transactions during the six months ended June 30, 2023 and 2022 (in thousands):

Hotel Property Name Location Sale Date Sale Price

3 unchanged sentences

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

Hotel Monaco Seattle Seattle, WA May 9, 2023 63,250

Hotel Vintage Seattle Seattle, WA May 24, 2023 33,700

2023 Total $ 232,250

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

2022 Total $ 77,000

For the three and six months ended June 30, 2023, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $( 0.4 ) million and $( 0.7 ) million, respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold.

For the three and six months ended June 30, 2022, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $ 1.2 million and $( 3.7 ) 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 March 31, 2023 and December 31, 2022 consisted of the following (in thousands):

March 31, 2023 December 31, 2022

Investment in hotel properties as of June 30, 2023 and December 31, 2022 consisted of the following (in thousands):

June 30, 2023 December 31, 2022

Land $ 860,270 $ 897,756

9 unchanged sentences

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.

On September 27, 2022, LaPlaya Beach Resort & 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 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.

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 substantially reopen 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.

During the six months ended June 30, 2023, the Company incurred $ 4.1 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 June 30, 2023, the Company has received $ 38.8 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.

1 unchanged sentence

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.

During the six months ended June 30, 2023, no impairment losses were incurred.

During the six months ended June 30, 2022, the Company recognized an impairment loss of $ 73.3 million related to two hotels as a result of their fair 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.

5 unchanged sentences

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

As of March 31, 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 June 30, 2023, the Company's lease liabilities consisted of operating lease liabilities of $ 320.5 million and financing lease liabilities of $ 43.0 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.

1 unchanged sentence

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 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):

The Company's debt consisted of the following as of June 30, 2023 and December 31, 2022 (dollars in thousands):

Balance Outstanding as of

Interest Rate at March 31, 2023

Maturity Date March 31, 2023 December 31, 2022

Interest Rate at June 30, 2023

Maturity Date June 30, 2023 December 31, 2022

Revolving credit facilities

28 unchanged sentences

(1) Borrowings bear interest at floating rates.

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

Interest rate at June 30, 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.

1 unchanged sentence

(4) The loan bears interest at a floating rate equal to one-month LIBOR plus a weighted-average spread of 2.57 %.

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

The reference rate on this loan was converted from LIBOR to Term SOFR in July 2023.

The Company expects to refinance this loan prior to its maturity.

Unsecured Revolving Credit Facilities

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.

All borrowings under the senior unsecured revolving credit facility bear interest at a rate per annum equal to, at the option of the Company, (i) the Secured Overnight Financing Rate ("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.

As of June 30, 2023, the Company had no outstanding borrowings, $ 12.6 million of outstanding letters of credit and a borrowing capacity of $ 637.4 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.

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.

Under the terms of the Credit Agreement, 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 senior unsecured revolving facility.

The Company pays a fee for outstanding standby letters of credit 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 $ 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.

Standby letters of credit of $ 12.6 million were outstanding as of June 30, 2023 and December 31, 2022.

As of June 30, 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.

2 unchanged sentences

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.

As of June 30, 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 June 30, 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

3 unchanged sentences

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.

As of June 30, 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.

2 unchanged sentences

In December 2020, the Company issued $ 500.0 million aggregate principal amount of 1.75 % Convertible Senior Notes due December 2026 (the "Convertible Notes").

The net proceeds from this offering of the Convertible Notes were approximately $ 487.3 million after deducting the underwriting fees and other expenses paid by the Company.

The net proceeds from the offering of the Convertible Notes were approximately $ 487.3 million after deducting the underwriting fees and other expenses paid by the Company.

In February 2021, the Company issued an additional $ 250.0 million aggregate principal amount of Convertible Notes.

7 unchanged sentences

The conversion rate is subject to adjustment in certain circumstances.

As of March 31, 2023 and December 31, 2022, the if-converted value of the Convertible Notes did not exceed the principal amount.

As of June 30, 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.

8 unchanged sentences

The debt covenants of the Series A Notes and the Series B Notes are substantially similar to those of the Company's senior unsecured revolving credit facility.

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

As of June 30, 2023, the Company was in compliance with all such debt covenants.

Mortgage Loans

On September 23, 2021, the Company assumed a $ 161.5 million loan secured by a first-lien mortgage on the leasehold interest of Margaritaville Hollywood Beach Resort ("Margaritaville").

The loan requires interest-only payments based on a floating interest rate of one-month LIBOR plus a weighted-average spread of 2.37 %.

The loan matures on May 9, 2023 and may be extended by one-year .

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, refinance, or use the proceeds from the revolving credit facility to prepay this loan at maturity.

The loan requires interest-only payments based on a floating interest rate of one-month LIBOR plus a weighted-average spread.

During the second quarter of 2023, the weighted-average spread increased from 2.37 % to 2.57 % as the loan's one-year extension option was exercised.

As a result of the extension, the loan will mature on May 9, 2024.

The Company expects to refinance this loan prior to its maturity.

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

8 unchanged sentences

Interest Expense

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,

The components of the Company's interest expense consisted of the following for the three and six months ended June 30, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

Unsecured revolving credit facilities $ 498 $ 786 $ 1,066 $ 1,279

7 unchanged sentences

The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within Level 2 of the fair value hierarchy.

The estimated fair value of the Company’s fixed rate debt (unsecured senior notes, convertible senior notes and the Estancia mortgage loan) as of March 31, 2023 and December 31, 2022 was $ 695.9 million and $ 700.5 million, respectively.

The estimated fair value of the Company’s fixed rate debt (unsecured senior notes, convertible senior notes and the Estancia mortgage loan) as of June 30, 2023 and December 31, 2022 was $ 712.9 million and $ 700.5 million, respectively.

Derivative and Hedging Activities

2 unchanged sentences

All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

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

The Company's interest rate swaps at June 30, 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 (SOFR) Maturity March 31, 2023 December 31, 2022

Hedge Type Interest Rate Range (SOFR) Maturity June 30, 2023 December 31, 2022

Swap-cash flow 0.05 % - 0.07 %

6 unchanged sentences

February 2026 290,000 290,000

Swap-cash flow 3.20 % - 3.38 %

October 2027 165,000 —

Total $ 1,005,000 $ 1,040,000

5 unchanged sentences

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

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.

As of June 30, 2023, the Company's derivative instruments were in an asset position with an aggregate fair value of $ 44.3 million.

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

1 unchanged sentence

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 months ended March 31, 2023 and 2022 (in thousands):

For the three months ended March 31,

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

The following table presents revenues by geographic location for the three and six months ended June 30, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

San Diego, CA $ 76,921 $ 84,580 $ 143,768 $ 137,459

Los Angeles, CA 43,359 36,221

Southern Florida/Georgia 58,980 80,284 130,009 165,525

Boston, MA 76,587 73,717 119,258 107,653

Los Angeles, CA 49,783 44,892 93,142 81,113

San Francisco, CA 37,515 32,250 69,329 46,317

1 unchanged sentence

Washington, D.C.

21,109 16,971 34,804 23,247

Chicago, IL 24,246 20,344 34,803 27,012

Seattle, WA 2,131 4,916 5,551 6,889

14,739 15,158 22,426 22,441

Total Revenues $ 384,343 $ 397,524 $ 690,062 $ 655,592

9 unchanged sentences

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.

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

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

As of June 30, 2023, no common shares remained available for repurchase under this program.

On February 17, 2023, the Company's 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.

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.

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 three months ended March 31, 2023.

On February 21, 2023, the ATM program expired.

Common shares repurchased by the Company cease to be outstanding and become authorized but unissued common shares.

As of June 30, 2023, $ 146.0 million of common shares remained available for repurchase under this program.

During the six months ended June 30, 2023, the Company repurchased 6,498,901 common shares under the 2017 and 2023 repurchase programs, for an aggregate purchase price of $ 91.0 million, or an average of approximately $ 14.01 per share.

Common Dividends

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

The Company declared the following dividends on common shares/units for the six months ended June 30, 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, 2023 June 30, 2023 July 17, 2023

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”).

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

Security Type March 31, 2023 December 31, 2022

The following preferred shares were outstanding as of June 30, 2023 and December 31, 2022:

Security Type June 30, 2023 December 31, 2022

6.375 % Series E

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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.

On February 17, 2023, the Company's Board of Trustees authorized 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.

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

During the six months ended June 30, 2023, no Preferred Shares were repurchased under this program.

Preferred Dividends

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

The Company declared the following dividends on preferred shares for the six months ended June 30, 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, 2023 June 30, 2023 July 17, 2023

6.30 % Series F

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

6.30 % Series F

$ 0.39 June 30, 2023 June 30, 2023 July 17, 2023

6.375 % Series G

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

6.375 % Series G

$ 0.40 June 30, 2023 June 30, 2023 July 17, 2023

5.70 % Series H

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

5.70 % Series H

$ 0.36 June 30, 2023 June 30, 2023 July 17, 2023

Non-controlling Interest of Common Units in Operating Partnership

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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.

As of June 30, 2023 and December 31, 2022, the Operating Partnership had 149,896 OP units held by third parties, excluding LTIP units.

As of June 30, 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.

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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 June 30, 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.

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

As of June 30, 2023, the Operating Partnership had 3,104,400 Series Z Preferred Units outstanding.

Share-Based Compensation Plan

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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.

As of June 30, 2023, there were 1,498,820 common shares available for issuance under the Plan.

Service Condition Share Awards

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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:

The following table provides a summary of service condition restricted share activity as of six months ended June 30, 2023:

Shares Weighted-Average

4 unchanged sentences

Forfeited ( 52,563 ) $ 16.74

Unvested at March 31, 2023

Unvested at June 30, 2023

444,117 $ 19.87

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.

For the three and six months ended June 30, 2023, the Company recognized approximately $ 0.7 million and $ 1.6 million, respectively, of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.

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

Performance-Based Equity Awards

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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 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.

For the three and six months ended June 30, 2023, the Company recognized approximately $ 1.4 million and $ 2.6 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.

For the three and six months ended June 30, 2022, the Company recognized approximately $ 1.1 million and $ 2.0 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.

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.

As of June 30, 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.

2 unchanged sentences

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 June 30, 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.

For the three and six months ended June 30, 2023, the Company recognized approximately $ 0.9 million and $ 1.7 million, respectively, in expense related to these LTIP units.

For the three and six months ended June 30, 2022, the Company recognized approximately $ 0.7 million and $ 1.4 million, respectively, in expense related to these LTIP units.

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

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

Given the continued negative impact of the COVID-19 pandemic on the Company's financial results and uncertainties about the Company's ability to utilize its net operating loss in future years, the Company has recorded a valuation allowance on its income tax benefit for the three months ended March 31, 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 March 31, 2023 and December 31, 2022, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2019.

As of June 30, 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 March 31,

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

2023 2022 2023 2022

Net income (loss) attributable to common shareholders $ 33,738 $ 16,646 $ ( 178 ) $ ( 94,228 )

Dividends paid on unvested share-based compensation ( 10 ) ( 12 ) ( 21 ) ( 22 )

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

Undistributed earnings attributable to share-based compensation ( 276 ) ( 133 ) — —

Net income (loss) available to common shareholders — basic $ 33,452 $ 16,501 $ ( 199 ) $ ( 94,250 )

Interest expense on convertible notes 3,281 3,281 — —

Net income (loss) available to common shareholders — diluted $ 36,733 $ 19,782 $ ( 199 ) $ ( 94,250 )

Weighted-average number of common shares — basic 121,696,400 130,904,876 123,581,926 130,904,589

Effect of dilutive share-based compensation 101,380 374,188 — —

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

Weighted-average number of common shares — diluted 151,238,955 160,720,239 123,581,926 130,904,589

Net income (loss) per share available to common shareholders — basic $ 0.27 $ 0.13 $ — $ ( 0.72 )

Net income (loss) per share available to common shareholders — diluted $ 0.24 $ 0.12 $ — $ ( 0.72 )

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.

For the three and six months ended June 30, 2023, 893,194 and 1,110,184 , 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 and six months ended June 30, 2022, zero and 1,056,949 , 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 and six months ended June 30, 2023, zero and 29,441,175 , respectively, of common shares underlying the Convertible Notes have been excluded from diluted shares as their effect would have been anti-dilutive.

For the three and six months ended June 30, 2022, zero and 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.

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The incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel.

For the three months ended March 31, 2023 and 2022, com bined base and incentive management fees were $ 8.0 million and $ 7.7 million, respectively.

For the three and six months ended June 30, 2023, com bined b ase and incentive management fees were $ 10.8 million and $ 18.8 million, respectively.

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

Base and incentive management fees are included in other direct and indirect expenses in the Company's accompanying consolidated statements of operations and comprehensive income.

2 unchanged sentences

Restricted Cash

At March 31, 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.

At June 30, 2023 and December 31, 2022, the Company had $ 10.7 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 March 31, 2023, the following hotels were subject to leases as follows:

As of June 30, 2023, the following hotels were subject to leases as follows:

Lease Properties Lease Type Lease Expiration Date

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Ground rent expense is included in real estate taxes, personal property taxes, property insurance and ground rent in the Company's accompanying consolidated statements of operations and comprehensive income.

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

For the three months ended March 31,

The components of ground rent expense for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands):

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

2023 2022 2023 2022

Fixed ground rent $ 4,782 $ 4,561 $ 9,564 $ 9,017

5 unchanged sentences

Supplemental Information to Statements of Cash Flows (in thousands)

For the three months ended March 31,

For the six months ended June 30,

Interest paid, net of capitalized interest $ 48,852 $ 41,161

5 unchanged sentences

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

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 $ 8,695 $ 6,762

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

Write-off of fully amortized deferred financing costs $ 64 $ 5,723

Subsequent Events

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