What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-07-24 · 83 added, 62 removed, 192 unchanged (43% of the section changed)

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Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may", "will", "should", "potential", "could", "seek", "assume", "forecast", "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions.

Forward-looking statements in this report include, among others, statements about our business strategy, including acquisition and development strategies, industry trends, estimated revenues and expenses, estimated costs and durations of renovation or restoration projects, timing and extent of debt refinancings, estimated insurance recoveries, our ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and our ability to obtain financing or raise capital).

Forward-looking statements in this report include, among others, statements about our business strategy, including acquisition and disposition strategies, industry trends, estimated revenues and expenses, estimated costs and durations of renovation or restoration projects, timing and extent of debt refinancings, estimated insurance recoveries, our ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and our ability to obtain financing or raise capital).

You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and which could materially affect actual results, performance or achievements.

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

The second-quarter operating results showed continued recovery of our urban hotels.

Business demand, both group and transient, continued to recover, driving increased occupancy in Washington D.C., San Diego, San Francisco, Los Angeles and Boston.

Leisure demand remained roughly in-line with the prior year and our properties have continued to maintain their significant ADR premiums to 2019.

We expect these trends to continue if the overall economic recovery continues and as international inbound travel continues to return.

We have continued to focus on cost controls.

Newport Harbor Island Resort reopened in April following its closure for several months for a comprehensive property-wide redevelopment and upgrading.

During the six months ended June 30, 2024, we had the following transactions:

Our third-quarter operating results showed continued recovery of business group, transient and leisure demand across our properties.

Strong performance in Chicago, San Diego, Boston and Portland drove increased occupancy for our urban hotels.

Higher weekday demand from business group and improving weekend leisure travel drove increase occupancy for our resort hotels.

We expect continued occupancy growth due to a sustained recovery in demand from both business and leisure travelers, despite concerns regarding the macroeconomic environment and the presidential election.

As occupancy recovered we continued to focus on cost controls.

During the nine months ended September 30, 2024, we had the following transactions and events:

• We repurchased 1,127,255 common shares for an aggregate purchase price of $15.0 million, or an average of $13.31 per share, under our existing common share repurchase program.

• We paid down $110.0 million of our term loans and extended the maturity of $356.7 million borrowed under Term Loan 2024 to January 2028.

On September 26, 2024, LaPlaya Beach Resort & Club sustained damage as a result of Hurricane Helene, and on October 9, 2024, sustained additional damage as a result of Hurricane Milton.

The damage primarily impacted the ground floor of the Beach House, the pool complex and landscaping.

The hotel closed following Hurricane Milton to undertake clean-up, repairs and a full assessment of damages.

The Bay Tower and Gulf Tower were reopened on November 1, 2024.

The Beach House is expected to be largely operational by the end of the first quarter of 2025.

Our property and flood insurance proceeds are expected to cover the physical damage and business interruption losses from the hurricanes, net of deductibles.

On October 3, 2024, we issued $400 million aggregate principal amount of its 6.375% senior notes due October 15, 2029.

The net proceeds were approximately $390.0 million after deducting discounts and offering expenses paid by the Company, of which $353.3 million was used to repay all $43.3 million of its borrowings under Term Loan 2024, $210.0 million of its borrowings under Term Loan 2025 and $100.0 million of its borrowings under Term Loan 2027.

On November 1, 2024, we extended the maturity date of $185.2 million borrowed under Term Loan 2025 to January 2029.

We also extended the maturity date of $602.0 million of our senior unsecured revolving credit facility from October 2026 to October 2028, with the option to extend the new maturity date for two six-month periods.

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

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Hotel Operating Statistics

The following table represents the key same-property hotel operating statistics for our hotels for the three and six months ended June 30, 2024 and 2023:

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

The following table represents the key same-property hotel operating statistics for our hotels for the three and nine months ended September 30, 2024 and 2023:

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

2024 2023 2024 2023

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Same-Property Total RevPAR $ 364.36 $ 354.87 $ 334.88 $ 327.81

For the three and six months ended June 30, 2024 and 2023, the above table of hotel operating statistics includes information from all hotels owned as of June 30, 2024, except for LaPlaya Beach Resort & Club due to its closure following Hurricane Ian and Newport Harbor Island Resort due to its redevelopment.

For the three months ended September 30, 2024 and 2023, the above table of hotel operating statistics includes information from all hotels owned as of September 30, 2024, except for LaPlaya Beach Resort & Club due to its closure following Hurricane Ian.

For the nine months ended September 30, 2024 and 2023, the above table of hotel operating statistics includes information from all hotels owned as of September 30, 2024, except for LaPlaya Beach Resort & Club due to its closure following Hurricane Ian and Newport Harbor Island Resort for the first and second quarters only due to its redevelopment.

Non-GAAP Financial Measures

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

The following table reconciles net income (loss) to FFO and FFO available to common share and unit holders for the three and six months ended June 30, 2024 and 2023 (in thousands):

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

The following table reconciles net income (loss) to FFO and FFO available to common share and unit holders for the three and nine months ended September 30, 2024 and 2023 (in thousands):

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

2024 2023 2024 2023

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Gain on sale of hotel properties — — — (30,219)

Impairment 1,908 71,416 1,908 71,416

FFO $ 104,519 $ 78,118 $ 223,579 $ 188,192

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

The following table reconciles net income (loss) to EBITDA and EBITDA re for the three and six months ended June 30, 2024 and 2023 (in thousands):

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

The following table reconciles net income (loss) to EBITDA and EBITDA re for the three and nine months ended September 30, 2024 and 2023 (in thousands):

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

2024 2023 2024 2023

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Gain on sale of hotel properties — — — (30,219)

Impairment 1,908 71,416 1,908 71,416

$ 107,311 $ 110,048 $ 281,951 $ 277,298

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Results of Operations

At June 30, 2024 and 2023, we had 46 and 47, respectively, properties and leasehold interests.

At September 30, 2024 and 2023, we had 46 and 47, respectively, properties and leasehold interests.

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

Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the three and six months ended June 30, 2024 and 2023.

Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the three and nine months ended September 30, 2024 and 2023.

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

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Hotel Vintage Seattle Seattle, WA May 24, 2023

Comparison of the three months ended June 30, 2024 to the three months ended June 30, 2023

Revenues — Total revenues increased by $12.8 million primarily due to increases at LaPlaya Beach Resort & Club, which was partially closed in 2023 due to Hurricane Ian, and at Margaritaville Hotel San Diego Gaslamp Quarter, which was under renovation in 2023.

Comparison of the three months ended September 30, 2024 to the three months ended September 30, 2023

Revenues — Total revenues increased by $8.7 million primarily due to increases at LaPlaya Beach Resort & Club, which was partially closed in 2023 due to Hurricane Ian, at Margaritaville Hotel San Diego Gaslamp Quarter, which was under renovation in 2023 and at The Westin Michigan Avenue Chicago.

This increase was partially offset by a $4.7 million decrease due to the sales of our non-comparable properties in 2023.

Hotel operating expenses — Total hotel operating expenses increased by $1.6 million primarily due to LaPlaya Beach Resort & Club's and Margaritaville Hotel San Diego Gaslamp Quarter's increased operations, as well as an increase in staffing, wage rates and benefits at our comparable properties due to risen demand levels.

Hotel operating expenses — Total hotel operating expenses increased by $7.3 million primarily due to increased operations at LaPlaya Beach Resort & Club, Margaritaville Hotel San Diego Gaslamp Quarter and The Westin Michigan Avenue Chicago, as well as an increase in staffing, wage rates and benefits at our comparable properties due to higher demand levels.

This increase was partially offset by a $2.7 million decrease due to the sales of our non-comparable properties in 2023.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $4.6 million primarily due to a $5.8 million decrease in real estate taxes due to lower tax assessments at several of our California properties, which partially settled multiple property tax years, offset by a $1.7 million increase in property insurance due to higher insurance premium assessments.

Gain on sale of hotel properties — We recognized a gain on sale of $23.6 million related to the sales of Hotel Monaco Seattle and Hotel Vintage Seattle in 2023.

Depreciation and amortization — Depreciation and amortization expense decreased by $5.7 million primarily due to Newport Harbor Island Resort's useful life reduction of its furniture, fixtures and equipment in 2023 due to its scheduled renovation in November 2023 as well as the sales of our non-comparable properties in 2023.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $2.4 million primarily due to an increase in real estate tax assessments.

Impairment — We recognized an impairment loss of $1.9 million in 2024 related to damage caused by Hurricane Helene at LaPlaya Beach Resort & Club.

We recognized an impairment loss of $71.4 million in 2023 related to three hotels.

Business interruption insurance income — We recognized business interruption insurance income in 2024 and 2023 related to partial settlements with our insurance carriers for lost income at LaPlaya Beach Resort & Club.

Interest expense — Interest expense decreased by $1.6 million due to interest being capitalized related to our Newport Harbor Island Resort renovation and our term loan pay-downs during the first quarter of 2024.

Other operating expenses — Other operating expenses decreased by $2.9 million primarily due to a decrease in hurricane related payroll costs and claims administration costs at LaPlaya Beach Resort & Club and a decrease in preopening expenses.

Interest expense — Interest expense decreased by $3.1 million due to pay-downs on our term loans during the first quarter of 2024 and our senior notes during the fourth quarter of 2023.

This decrease was partially offset by higher interest rates on our unhedged debt.

Income tax (expense) benefit - The income tax benefit in 2024 was a result of the release of $32.8 million valuation allowance offset by current year income tax expense of $7.6 million.

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

Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023

Revenues — Total revenues increased by $21.1 million primarily due to an increase at LaPlaya Beach Resort & Club, which was partially closed in 2023 due to Hurricane Ian, and at Margaritaville Hotel San Diego Gaslamp Quarter, which was under renovation in 2023.

This increase was partially offset by an $17.3 million decrease due to the sales of our our non-comparable properties in 2023 as well as a decrease at Newport Harbor Island Resort due to its closure for redevelopment during the first quarter and part of the second quarter of 2024.

Hotel operating expenses — Total hotel operating expenses increased by $3.4 million primarily due to LaPlaya Beach Resort & Club's and Margaritaville Hotel San Diego Gaslamp Quarter's increased operations, as well as an increase in staffing, wage rates and benefits at our comparable properties due to risen demand levels.

Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023

Revenues — Total revenues increased by $29.8 million primarily due to an increase at LaPlaya Beach Resort & Club, which was partially closed in 2023 due to Hurricane Ian, at Margaritaville Hotel San Diego Gaslamp Quarter and Hilton San Diego Gaslamp Quarter, which were under renovation in 2023, and at The Westin Michigan Avenue Chicago.

This increase was partially offset by a $22.0 million decrease due to the sales of our our non-comparable properties in 2023.

Hotel operating expenses — Total hotel operating expenses increased by $10.6 million primarily due to increased operations at LaPlaya Beach Resort & Club, Margaritaville Hotel San Diego Gaslamp Quarter, Hilton San Diego Gaslamp Quarter and The Westin Michigan Avenue Chicago, as well as an increase in staffing, wage rates and benefits at our comparable properties due to higher demand levels.

This increase was partially offset by a $16.6 million decrease due to the sales of our non-comparable properties in 2023 as well as a decrease at Newport Harbor Island Resort due to its closure for redevelopment during the first quarter and part of the second quarter of 2024.

Depreciation and amortization — Depreciation and amortization expense decreased by $1.8 million primarily due to the sales of our non-comparable properties in 2023.

Depreciation and amortization — Depreciation and amortization expense decreased by $7.5 million primarily due to the sales of our non-comparable properties in 2023 and Newport Harbor Island Resort's useful life reduction of its furniture, fixtures and equipment in 2023 due to its scheduled renovation in November 2023.

This decrease was partially offset by an increase at LaPlaya Beach Resort & Club.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $1.1 million primarily due to a $4.3 million decrease in real estate taxes due to lower tax assessments at several of our California properties, which partially settled multiple property tax years, offset by a $3.6 million increase in property insurance due to higher insurance premium assessments.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $1.3 million primarily due to a $3.7 million increase in property insurance due to higher insurance premiums, partially offset by a $2.1 million decrease in real estate taxes due to lower tax assessments.

General and administrative — General and administrative expenses increased by $3.2 million primarily due to an increase in employee compensation expense.

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

Impairment — We recognized an impairment loss of $1.9 million in 2024 related to damage caused by Hurricane Helene at LaPlaya Beach Resort & Club.

We recognized an impairment loss of $71.4 million in 2023 related to three hotels.

Gain on sale of hotel properties — We recognized a gain on sale of $30.2 million related to the sales of The Heathman Hotel, the retail component of The Westin Michigan Avenue Chicago, Hotel Colonnade Coral Gables, Hotel Monaco Seattle and Hotel Vintage Seattle in 2023.

Other operating expenses — Other operating expenses decreased by $2.9 million primarily due to a decrease in payroll and claims administration costs at LaPlaya Beach Resort & Club.

Interest expense — Interest expense decreased by $2.6 million due to interest being capitalized related to our Newport Harbor Island Resort renovation and our term loan pay-downs during the first quarter of 2024.

Other operating expenses — Other operating expenses decreased by $5.8 million primarily due to a decrease in hurricane related payroll costs and claims administration costs at LaPlaya Beach Resort & Club.

Interest expense — Interest expense decreased by $5.7 million due to interest being capitalized related to our Newport Harbor Island Resort renovation and due to pay-downs on our term loans during the first quarter of 2024 and our senior notes during the fourth quarter of 2023.

This decrease was partially offset by higher interest rates on our unhedged debt.

Other — Other decreased by $1.2 million due to a decrease in interest income earned on excess cash.

Income tax (expense) benefit - The income tax benefit in 2024 was a result of the release of $32.8 million valuation allowance offset by current year income tax expense of $8.7 million.

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

Table of Content

Liquidity and Capital Resources

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

Our primary cash requirements in the short term (i.e., those requiring cash on or before June 30, 2025) will be to fund property lease obligations, interest and current principal on debt, capital improvements, dividends on common and preferred shares, and working capital of our property operations.

We believe our cash and cash equivalents, restricted cash and the amount available on our senior unsecured revolving credit facility, which totaled $747.5 million as of June 30, 2024, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements.

As of June 30, 2024, we had no off-balance sheet arrangements.

Our primary cash requirements in the short term (i.e., those requiring cash on or before September 30, 2025) will be to fund property lease obligations, interest and current principal on debt, capital improvements, dividends on common and preferred shares, and working capital of our property operations.

We believe our cash and cash equivalents, restricted cash and the amount available on our senior unsecured revolving credit facility, which totaled $780.6 million as of September 30, 2024, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements.

As of September 30, 2024, we had no off-balance sheet arrangements.

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

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

Table of Content

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

Our total debt had an aggregate face value of $2.2 billion as of June 30, 2024, as summarized below:

June 30, 2024

Our total debt had an aggregate face value of $2.2 billion as of September 30, 2024, as summarized below:

September 30, 2024

(in thousands)

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

On October 3, 2024, the Operating Partnership issued $400.0 million aggregate principal amount of its 6.375% senior notes due October 15, 2029.

On November 1, 2024, we entered into the Third Amendment to the Credit Agreement which extended the maturity date of $185.2 million borrowed under Term Loan 2025 to January 2029 and extended the maturity date of $602.0 million of the $602.0 million senior unsecured revolving credit facility from October 2026 to October 2028.

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

Assuming we exercise all extension options available in our debt agreements, we expect that future principal and interest payments associated with our debt obligations outstanding as of June 30, 2024 will be $2.5 billion through their maturity, with $45.5 million of principal and $100.8 million of interest payable on or before June 30, 2025.

Assuming we exercise all extension options available in our debt agreements and after adjusting for the aforementioned term loan extension and repayments, we expect that future principal and interest payments associated with our remaining debt obligations outstanding as of September 30, 2024 will be $2.7 billion through their maturity, with $2.2 million of principal and $85.3 million of interest payable on or before September 30, 2025.

We intend to pay amounts due with available cash, borrowings under our revolving credit facility, proceeds from property sales and/or to refinance amounts due with long-term debt.

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

As of June 30, 2024, none of the mortgage loans was in a cash trap.

As of September 30, 2024, none of the mortgage loans was in a cash trap.

Hotel, ground and finance lease obligations

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

Future fixed minimum payments associated with our hotel, ground and finance leases total $1.8 billion as of June 30, 2024, with $22.8 million payable on or before June 30, 2025.

Table of Content

Future fixed minimum payments associated with our hotel, ground and finance leases total $1.8 billion as of September 30, 2024, with $22.9 million payable on or before September 30, 2025.

Purchase commitments

As of June 30, 2024, we had $3.2 million of outstanding purchase commitments, all of which will be paid on or before June 30, 2025.

As of September 30, 2024, we had $4.9 million of outstanding purchase commitments, all of which will be paid on or before September 30, 2025.

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

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Preferred dividends and Series Z operating partnership units

We expect to pay aggregate annual dividends and distributions of approximately $47.2 million on our outstanding Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares and Series Z Cumulative Perpetual Preferred Units on or before June 30, 2025 and in future years until the shares/units are redeemed.

We expect to pay aggregate annual dividends and distributions of approximately $47.2 million on our outstanding Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares and Series Z Cumulative Perpetual Preferred Units on or before September 30, 2025 and in future years until the shares/units are redeemed.

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

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Operating Activities.

Our net cash provided by operating activities was $129.7 million for the six months ended June 30, 2024, and $120.2 million for the six months ended June 30, 2023.

Our net cash provided by operating activities was $205.8 million for the nine months ended September 30, 2024, and $202.3 million for the nine months ended September 30, 2023.

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

Table of Content

Investing Activities.

Our net cash provided by (used in) investing activities was $(61.7) million for the six months ended June 30, 2024, and $135.3 million for the six months ended June 30, 2023.

Our net cash provided by (used in) investing activities was $(79.9) million for the nine months ended September 30, 2024, and $96.3 million for the nine months ended September 30, 2023.

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

• During the six months ended June 30, 2024, we invested $82.7 million in improvements to our hotel properties and received $21.5 million in property insurance proceeds.

• During the six months ended June 30, 2023, we invested $97.7 million in improvements to our hotel properties;

received $224.4 million from the sales of four hotel properties and one retail component of a hotel property;

and received $11.4 million in property insurance proceeds.

• During the nine months ended September 30, 2024, we invested $100.9 million in improvements to our hotel properties and received $21.7 million in property insurance proceeds.

• During the nine months ended September 30, 2023, we invested $140.1 million in improvements to our hotel properties, received $224.4 million from the sales of four hotel properties and one retail component of a hotel property and received $14.4 million in property insurance proceeds.

Financing Activities.

Our net cash used in financing activities was $150.4 million for the six months ended June 30, 2024, and $121.5 million for the six months ended June 30, 2023.

Our net cash used in financing activities was $175.3 million for the nine months ended September 30, 2024, and $159.2 million for the nine months ended September 30, 2023.

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

• During the six months ended June 30, 2024, we repaid $110.9 million in other debt;

repurchased $6.9 million of common shares through our common share repurchase program and for tax withholding purposes in connection with vestings of share-based equity awards;

paid $5.5 million in deferred financing costs and paid $26.0 million in preferred and common distributions.

• During the six months ended June 30, 2023, we repurchased $92.8 million of common shares through our common share repurchase program and for tax withholding purposes in connection with vestings of share-based equity awards;

• During the nine months ended September 30, 2024, we repaid $111.4 million in other debt, repurchased $16.9 million of common shares through our common share repurchase program and for tax withholding purposes in connection with vestings of share-based equity awards, paid $6.4 million in deferred financing costs and paid $39.0 million in preferred and common distributions.

• During the nine months ended September 30, 2023, we repurchased $92.8 million of common shares through our common share repurchase program and for tax withholding purposes in connection with vestings of share-based equity awards;

repaid $21.5 million of other debt, net of refinancing proceeds;

and paid $40.2 million in preferred and common distributions.

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However, we maintain approval rights over the capital investments as part of the annual budget process and as otherwise required from time to time.

Table of Content

Certain of our hotel properties may undergo renovations as a result of our decision to upgrade portions of the hotels, such as guest rooms, meeting space and restaurants, in order to better compete with other hotels in our markets.

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

For the six months ended June 30, 2024, we invested $82.7 million in capital investments (or $67.7 million in capital investments excluding LaPlaya Beach Resort & Club) to reposition and improve our properties, including the renovations of Newport Harbor Island Resort, Estancia La Jolla Hotel & Spa, Skamania Lodge, Southernmost Beach Resort and Jekyll Island Club Resort.

For the nine months ended September 30, 2024, we invested $100.9 million in capital investments (or $81.7 million excluding the repair and remediation of LaPlaya Beach Resort & Club) to reposition and improve our properties, including the renovations of Newport Harbor Island Resort, Estancia La Jolla Hotel & Spa, Skamania Lodge, Southernmost Beach Resort and Jekyll Island Club Resort.

Depending on market conditions, and in some instances subject to approval from governmental authorities, we expect to invest a total of $90.0 million to $95.0 million in capital investments in 2024, which includes normal hotel capital refurbishments as well as redevelopment and repositioning projects at Newport Harbor Island Resort, Estancia La Jolla Hotel & Spa and Skamania Lodge, and excludes capital expenditures related to the repair and remediation of LaPlaya Beach Resort & Club.

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

Table of Content

During the six months ended June 30, 2024, we repurchased 318,269 common shares for an aggregate purchase price of $5.0 million, or an average of approximately $15.71 per share.

As of June 30, 2024, $141.0 million of common shares remained available for repurchase under this program.

During the nine months ended September 30, 2024, we repurchased 1,127,255 common shares for an aggregate purchase price of $15.0 million, or an average of approximately $13.31 per share.

As of September 30, 2024, $131.0 million of common shares remained available for repurchase under this program.

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

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Preferred Share Repurchase Program

On February 17, 2023, our Board of Trustees authorized a repurchase program of up to $100.0 million of preferred shares (the “Preferred Share Repurchase Program”).

On February 17, 2023, our Board of Trustees authorized a repurchase program of up to $100.0 million of preferred shares.

Under the terms of the program, we may repurchase up to an aggregate of $100.0 million of our 6.375% Series E Cumulative Redeemable Preferred Shares, 6.30% Series F Cumulative Redeemable Preferred Shares, 6.375% Series G Cumulative Redeemable Preferred Shares and 5.70% Series H Cumulative Redeemable Preferred Shares from time to time in transactions on the open market or by private agreement.

During the six months ended June 30, 2024, no preferred shares were repurchased under this program.

As of June 30, 2024, $84.2 million of preferred shares remained available for repurchase under this program.

During the nine months ended September 30, 2024, no preferred shares were repurchased under this program.

As of September 30, 2024, $84.2 million of preferred shares remained available for repurchase under this program.

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

Table of Content

Derivative Instruments

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

As of June 30, 2024, we have interest rate swap agreements with an aggregate notional amount of $855.0 million to hedge variable interest rates on our unsecured term loans.

As of September 30, 2024, we have interest rate swap agreements with an aggregate notional amount of $855.0 million to hedge variable interest rates on our unsecured term loans.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis