What changed in this filing

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Item 1. Financial Statements

2023-10-26 compared with 2023-07-27 · 127 added, 109 removed, 606 unchanged (28% of the section changed)

3 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Investment in hotel properties, net $ 5,553,122 $ 5,874,876

17 unchanged sentences

Shareholders’ equity:

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

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

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

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

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

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

Additional paid-in capital 4,097,130 4,182,359

9 unchanged sentences

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

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

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

2023 2022 2023 2022

33 unchanged sentences

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

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

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

2023 2022 2023 2022

11 unchanged sentences

(in thousands, except share data)

For the three months ended June 30, 2023

For the three months ended September 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

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

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

Share-based compensation — — — — 2,450 — — 2,450 870 3,320

5 unchanged sentences

Net income (loss) — — — — — — ( 57,142 ) ( 57,142 ) 658 ( 56,484 )

Balance at June 30, 2023

Balance at September 30, 2023

28,600,000 $ 286 120,057,744 $ 1,201 $ 4,097,130 $ 45,834 $ ( 1,295,089 ) $ 2,849,362 $ 90,106 $ 2,939,468

2 unchanged sentences

(in thousands, except share data)

For the three months ended June 30, 2022

For the three months ended September 30, 2022

Shares Amount Shares Amount

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

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

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

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

5 unchanged sentences

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

Balance at June 30, 2022

Balance at September 30, 2022

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

2 unchanged sentences

(in thousands, except share data)

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

11 unchanged sentences

Net income (loss) — — — — — — ( 35,345 ) ( 35,345 ) 2,999 ( 32,346 )

Balance at June 30, 2023

Balance at September 30, 2023

28,600,000 $ 286 120,057,744 $ 1,201 $ 4,097,130 $ 45,834 $ ( 1,295,089 ) $ 2,849,362 $ 90,106 $ 2,939,468

2 unchanged sentences

(in thousands, except share data)

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

13 unchanged sentences

Net income (loss) — — — — — — ( 46,473 ) ( 46,473 ) 1,359 ( 45,114 )

Balance at June 30, 2022

Balance at September 30, 2022

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

3 unchanged sentences

(in thousands)

For the six months ended June 30,

For the nine months ended September 30,

Operating activities:

26 unchanged sentences

Repayments under revolving credit facilities — ( 180,000 )

Proceeds from debt 140,000 —

Repayments of debt ( 162,988 ) ( 27,740 )

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

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

The hotel properties are located in:

16 unchanged sentences

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

As of June 30, 2023, the Company owned 99.2 % of the common limited partnership units issued by the Operating Partnership ("common units").

As of September 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

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.

There were no new accounting pronouncements issued during the nine months ended September 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 six months ended June 30, 2023.

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

There were no acquisitions of hotel properties during the nine months ended September 30, 2023.

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

Hotel Property Name Location Sale Date Sale Price

7 unchanged sentences

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

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

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

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

2022 Total $ 260,900

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.

For the three and nine months ended September 30, 2023, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $ 0.9 million and $( 0.8 ) million, respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold and held for sale.

For the three and nine months ended September 30, 2022, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $ 1.9 million and $( 3.4 ) million, respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold and held for sale.

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 September 30, 2023, the Company had entered into an agreement to sell Hotel Zoe Fisherman's Wharf for a sale price of $ 68.5 million.

This hotel was classified as held for sale and, as a result, the Company classified all of the assets and liabilities related to this hotel as assets and liabilities held for sale in the accompanying consolidated balance sheets and ceased depreciating its assets.

The Company expects to complete the sale in the fourth quarter of 2023.

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

Investment in Hotel Properties

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

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

September 30, 2023 December 31, 2022

Land $ 824,872 $ 897,756

12 unchanged sentences

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.

In 2023, LaPlaya began to reopen in stages as the buildings and facilities were repaired.

The Company expects LaPlaya's remediation and repair to be substantially completed in the first quarter of 2024.

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 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.

During the nine months ended September 30, 2023, the Company incurred $ 5.1 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 September 30, 2023, the Company has cumulatively received $ 55.1 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.

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.

During the three and nine months ended September 30, 2023, the Company recognized an impairment loss of $ 71.4 million related to three hotels as a result of their fair values being lower than their carrying values.

During the three months ended September 30, 2022, no impairment loss was recognized.

During the nine months ended September 30, 2022, the Company recognized an impairment loss of $ 73.3 million related to two hotels as a result of their fair values being lower than their carrying values.

The impairment 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 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 September 30, 2023, the Company's lease liabilities consisted of operating lease liabilities of $ 320.6 million and financing lease liabilities of $ 43.2 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.

3 unchanged sentences

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 June 30, 2023 and December 31, 2022 (dollars in thousands):

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

Balance Outstanding as of

Interest Rate at June 30, 2023

Maturity Date June 30, 2023 December 31, 2022

Interest Rate at September 30, 2023

Maturity Date September 30, 2023 December 31, 2022

Revolving credit facilities

20 unchanged sentences

Margaritaville Hollywood Beach Resort 7.04 % (4)

May 2024 161,500 161,500

September 2026 140,000 161,500

Estancia La Jolla Hotel & Spa 5.07 % September 2028 57,997 59,485

5 unchanged sentences

(1) Borrowings bear interest at floating rates.

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.

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

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

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.

Interest rate at September 30, 2023 gives effect to interest rate hedges.

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

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

(4) This loan was refinanced during the third quarter of 2023 and now bears interest at a floating rate equal to daily SOFR plus a spread of 3.75 %.

The interest rate at September 30, 2023 gives effect to an interest rate swap.

The Company has the option to extend the maturity date for up to two one-year periods, pursuant to certain terms and conditions and payment of an extension fee.

(5) The Company intends to refinance or payoff this loan using available cash or borrowings under the revolving credit facility at maturity.

Unsecured Revolving Credit Facilities

2 unchanged sentences

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 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.

As of September 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.

3 unchanged sentences

Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount.

Standby letters of credit of $ 12.6 million 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.

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

As of September 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 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.

As of September 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 September 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 June 30, 2023, the Company was in compliance with all debt covenants of its term loans.

As of September 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.

12 unchanged sentences

The conversion rate is subject to adjustment in certain circumstances.

As of June 30, 2023 and December 31, 2022, the if-converted value of the Convertible Notes did not exceed the principal amount.

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

As of September 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.

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.

During the third quarter of 2023, the Company paid down $ 21.5 million of this loan and refinanced the remaining $ 140.0 million balance.

The new loan requires interest-only payments based on a floating rate equal to daily SOFR plus a spread of 3.75 %.

This loan matures on September 7, 2026 and may be extended for up to two one-year periods, subject to certain terms and conditions and payment of an extension fee.

On December 1, 2021, the Company assumed a $ 61.7 million loan secured by a first-lien mortgage on the leasehold interest of Estancia La Jolla Hotel & Spa ("Estancia").

4 unchanged sentences

Cash trap provisions are 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.

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 the lender.

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

Interest Expense

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

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

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

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

2023 2022 2023 2022

8 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 June 30, 2023 and December 31, 2022 was $ 712.9 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 September 30, 2023 and December 31, 2022 was $ 699.8 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 June 30, 2023 and December 31, 2022 consisted of the following, by maturity date (dollars in thousands):

The Company's interest rate swaps at September 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 June 30, 2023 December 31, 2022

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

Swap-cash flow 0.05 % - 0.07 %

15 unchanged sentences

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

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.

As of September 30, 2023, the Company's derivative instruments were in an asset position with an aggregate fair value of $ 46.2 million.

None of the Company's derivative instruments was in a liability position as of September 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.

2 unchanged sentences

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

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

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

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

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

2023 2022 2023 2022

San Diego, CA $ 95,885 $ 99,552 $ 239,653 $ 237,011

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

Boston, MA 75,650 73,229 194,908 180,882

Southern Florida/Georgia 43,174 53,543 173,183 219,068

Los Angeles, CA 51,303 47,251 144,445 128,364

1 unchanged sentence

Portland, OR 24,538 29,635 61,510 67,571

Chicago, IL 22,233 22,954 57,036 49,966

Washington, D.C.

16,522 13,901 51,326 37,148

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

Seattle, WA — 7,148 5,551 14,037

13 unchanged sentences

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.

As of September 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.

2 unchanged sentences

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.

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

During the nine months ended September 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 six months ended June 30, 2023:

The Company declared the following dividends on common shares/units for the nine months ended September 30, 2023:

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

1 unchanged sentence

$ 0.01 June 30, 2023 June 30, 2023 July 17, 2023

$ 0.01 September 30, 2023 September 29, 2023 October 16, 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 June 30, 2023 and December 31, 2022:

Security Type June 30, 2023 December 31, 2022

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

Security Type September 30, 2023 December 31, 2022

6.375 % Series E

21 unchanged sentences

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.

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

Preferred Dividends

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

The Company declared the following dividends on preferred shares for the nine months ended September 30, 2023:

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

3 unchanged sentences

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

6.375 % Series E

$ 0.40 September 30, 2023 September 29, 2023 October 16, 2023

6.30 % Series F

2 unchanged sentences

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

6.30 % Series F

$ 0.39 September 30, 2023 September 29, 2023 October 16, 2023

6.375 % Series G

2 unchanged sentences

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

6.375 % Series G

$ 0.40 September 30, 2023 September 29, 2023 October 16, 2023

5.70 % Series H

2 unchanged sentences

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

5.70 % Series H

$ 0.36 September 30, 2023 September 29, 2023 October 16, 2023

Non-controlling Interest of Common Units in Operating Partnership

3 unchanged sentences

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 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.

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

As of September 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.

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 June 30, 2023, the Operating Partnership had 858,484 LTIP units outstanding, of which 277,136 LTIP units have vested.

As of September 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.

8 unchanged sentences

At any time following a change of control of the Company, holders of Series Z Preferred Units may elect to redeem some or all of their units for, at the Company’s election, cash or common shares having an equivalent value.

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

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

Share-Based Compensation Plan

5 unchanged sentences

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

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

Service Condition Share Awards

1 unchanged sentence

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 six months ended June 30, 2023:

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

Shares Weighted-Average

4 unchanged sentences

Forfeited ( 52,563 ) $ 16.74

Unvested at June 30, 2023

Unvested at September 30, 2023

444,117 $ 19.87

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.

For the three and nine months ended September 30, 2023, the Company recognized approximately $ 0.9 million and $ 2.6 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 nine months ended September 30, 2022, the Company recognized approximately $ 1.1 million and $ 2.7 million, respectively, of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.

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 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.

For the three and nine months ended September 30, 2023, the Company recognized approximately $ 1.5 million and $ 4.1 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.

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

Long-Term Incentive Partnership Units

As of June 30, 2023, the Operating Partnership had two classes of LTIP units, LTIP Class A units and LTIP Class B units.

As of September 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.

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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 June 30, 2023, the Operating Partnership had 858,484 LTIP units outstanding, of which 277,136 LTIP units have vested.

As of September 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 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.

For the three and nine months ended September 30, 2023, the Company recognized approximately $ 0.9 million and $ 2.5 million, respectively, in expense related to these LTIP units.

For the three and nine months ended September 30, 2022, the Company recognized approximately $ 0.7 million and $ 2.1 million, respectively, in expense related to these LTIP units.

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

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In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable.

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.

As of September 30, 2023 and December 31, 2022, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2020 and 2019, respectively.

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 June 30, For the six months ended June 30,

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

2023 2022 2023 2022

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Net income (loss) per share available to common shareholders — diluted $ ( 0.57 ) $ 0.10 $ ( 0.56 ) $ ( 0.62 )

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.

For the three and nine months ended September 30, 2023, 1,110,184 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 nine months ended September 30, 2022, 300,261 and 1,072,803 , 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 nine months ended September 30, 2023, 29,441,175 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 nine months ended September 30, 2022, 29,441,175 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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Most of the agreements also provide the Company the ability to terminate based on failure to achieve defined operating performance thresholds.

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

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

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

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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 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.

For the three and nine months ended September 30, 2023, combined base and incentive management fees were $ 11.1 million and $ 29.9 million, respectively.

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

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.

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Restricted Cash

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.

At September 30, 2023 and December 31, 2022, the Company had $ 8.9 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 June 30, 2023, the following hotels were subject to leases as follows:

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

Lease Properties Lease Type Lease Expiration Date

Restaurant at Southernmost Beach Resort Operating lease April 2029

Restaurant at Southernmost Beach Resort

Operating lease April 2029

Paradise Point Resort & Spa Operating lease May 2050

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The Liberty, a Luxury Collection Hotel, Boston Operating lease May 2080

Jekyll Island Club Resort and Restaurant Operating lease January 2089

Jekyll Island Club Resort and Restaurant

Operating lease January 2089

Hotel Zelos San Francisco Operating lease June 2097

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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 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,

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

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

2023 2022 2023 2022

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Supplemental Information to Statements of Cash Flows (in thousands)

For the six months ended June 30,

For the nine months ended September 30,

Interest paid, net of capitalized interest $ 74,111 $ 58,043

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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 1. Financial Statements