What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2024-11-07 · 108 added, 130 removed, 145 unchanged (62% 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 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).

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).

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.

These factors include, but are not limited to, the following:

• world events impacting the ability or desire of people to travel may lead to a decline in demand for hotels;

• risks associated with the hotel industry, including competition, changes in visa and other travel policies by the U.S.

government making it less convenient, more difficult or less desirable for international travelers to enter the U.S., increases in employment costs, energy costs and other operating costs, or decreases in demand caused by events beyond our control, including, without limitation, actual or threatened terrorist attacks, natural disasters, cyber attacks, any type of flu or disease-related pandemic, or downturns in general and local economic conditions;

• world events impacting the ability or desire of people to travel may lead to a decline in demand for hotels;

• the availability and terms of financing and capital and the general volatility of securities markets;

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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.

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:

Our first quarter operating results showed continuing gains in occupancy and ancillary revenue at our resorts and recently redeveloped properties.

Our urban properties experienced a decline in total revenue per available room primarily as a result of the reduced travel to Los Angeles due to the wildfires and the renovation and brand conversion of Hyatt Centric Delfina Santa Monica.

Our Washington D.C.

properties benefited from the inauguration and San Francisco generated strong results driven by a positive convention calendar and rising business demand.

With uncertainty around the impact of trade policy and broader economic conditions on business and international inbound travel, near-term forecasting has become more challenging.

We remain focused on proactive revenue generation efforts and expense management.

During the three months ended March 31, 2025, we had the following transactions and events:

• We repurchased 1,186,797 common shares for an aggregate purchase price of $13.3 million, or an average of $11.23 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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funds from operations ("FFO");

Adjusted FFO;

earnings before interest, income taxes, depreciation and amortization ("EBITDA");

and EBITDA for real estate ("EBITDA re " );

Adjusted EBITDA re ;

and hotel-level EBITDA ("Hotel EBITDA").

We evaluate individual hotel and company-wide performance with comparisons to budgets, prior periods and competing properties.

ADR, occupancy and RevPAR may be impacted by macroeconomic factors as well as regional and local economies and events.

See Non-GAAP Financial Measures for further discussion of FFO, EBITDA and EBIDTA re .

See Non-GAAP Financial Measures for further discussion of FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA re and Hotel EBITDA.

Hotel Operating Statistics

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

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

2024 2023 2024 2023

The following table represents the key same-property hotel operating statistics for our hotels for the three months ended March 31, 2025 and 2024:

For the three months ended March 31,

Same-Property Occupancy 61.9 % 61.1 %

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Same-Property Total RevPAR $ 301.22 $ 295.04

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.

For the three months ended March 31, 2025 and 2024, the above table of hotel operating statistics includes information from all hotels owned as of March 31, 2025, except for Newport Harbor Island Resort due to its redevelopment.

Non-GAAP Financial Measures

Non-GAAP financial measures are measures of our historical or future financial performance that are different from measures calculated and presented in accordance with U.S.

We report FFO, EBITDA and EBITDA re , which are non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance.

We report FFO, Adjusted FFO, EBITDA, EBITDA re , Adjusted EBITDA re and Hotel EBITDA, which are non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance.

We calculate FFO in accordance with standards established by Nareit, formerly known as the National Association of Real Estate Investment Trusts, which defines FFO as net income (calculated in accordance with U.S.

GAAP), excluding real estate related depreciation and amortization, gains (losses) from sales of real estate, impairments of real estate assets (including impairment of real estate related joint ventures), the cumulative effect of changes in accounting principles and adjustments for unconsolidated partnerships and joint ventures.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.

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

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

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

2024 2023 2024 2023

Adjusted FFO is defined as FFO, as adjusted for transaction costs, non-cash ground rent on operating and capital leases, management/franchise contract transition costs, interest expense adjustment for acquired liabilities, finance lease adjustment, non-cash amortization of acquired intangibles, gain on insurance settlement, early extinguishment of debt, amortization of share-based compensation expense, issuance costs of redeemed preferred shares, hurricane-related costs, non-cash interest expense and deferred tax asset provision (benefit).

We believe Adjusted FFO provides useful supplemental information regarding our ongoing operating performance.

The following table reconciles net income (loss) to FFO, FFO available to common share and unit holders and Adjusted FFO available to common share and unit holders for the three months ended March 31, 2025 and 2024 (in thousands):

For the three months ended March 31,

Net income (loss) $ (32,180) $ (27,520)

Real estate depreciation and amortization 57,487 57,126

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

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

FFO $ 25,307 $ 29,606

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FFO available to common share and unit holders $ 13,512 $ 17,811

Transaction costs 2 4

Non-cash ground rent on operating and capital leases 1,839 1,873

Management/franchise contract transition costs 5 44

Interest expense adjustment for acquired liabilities 324 263

Finance lease adjustment 755 745

Non-cash amortization of acquired intangibles (472) (482)

Early extinguishment of debt — 1,534

Amortization of share-based compensation expense 3,219 3,060

Hurricane-related costs — 150

Deferred tax provision (benefit) (3,105) —

Unrealized loss on investment 2,662 —

Adjusted FFO available to common share and unit holders $ 18,741 $ 25,002

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization.

The white paper issued by Nareit entitled “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate” defines EBITDA re as net income or loss (computed in accordance with U.S.

GAAP), excluding interest expense, income tax, depreciation and amortization, gains or losses on the disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and after comparable adjustments for our portion of these items related to unconsolidated affiliates.

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

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

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

2024 2023 2024 2023

We calculate EBITDA re in accordance with standards established by Nareit.

EBITDA re is defined as EBITDA as adjusted for gain on sale of hotel properties and impairment loss.

Adjusted EBITDA re is defined as EBITDA re , as adjusted for transaction costs, non-cash ground rent on operating and capital leases, management/franchise contract transition costs, non-cash amortization of acquired intangibles, gain on insurance settlement, amortization of share-based compensation expense and hurricane-related costs.

Hotel EBITDA is defined as Adjusted EBITDA re plus corporate general and administrative expenses less interest income, business interruption insurance income and other.

We believe that EBITDA, EBITDA re , Adjusted EBITDA re and Hotel EBITDA 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, EBITDA re , Adjusted EBITDA re and Hotel EBITDA for the three months ended March 31, 2025 and 2024 (in thousands):

For the three months ended March 31,

Net income (loss) $ (32,180) $ (27,520)

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Depreciation and amortization 57,543 57,209

EBITDA $ 105,403 $ 38,632 $ 280,043 $ 236,101

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

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

EBITDA and EBITDA re

$ 49,334 $ 56,156

FFO, EBITDA and EBITDA re do not represent cash generated from operating activities as determined by U.S.

Transaction costs 2 4

Non-cash ground rent on operating and capital leases 1,839 1,873

Management/franchise contract transition costs 5 44

Non-cash amortization of acquired intangibles (472) (482)

Amortization of share-based compensation expense 3,219 3,060

Hurricane-related costs — 150

Unrealized loss on investment 2,662 —

Adjusted EBITDA re

$ 56,589 $ 60,805

Business interruption insurance income

(4,303) (3,980)

Corporate general and administrative and other 8,541 9,279

Hotel EBITDA $ 60,827 $ 66,104

FFO, Adjusted FFO, EBITDA, EBITDA re , Adjusted EBITDA re and Hotel EBITDA do not represent cash generated from operating activities as determined by U.S.

GAAP and should not be considered as alternatives to U.S.

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GAAP cash flow from operating activities, as measures of liquidity.

In addition, FFO, EBITDA and EBITDA re are not indicative of funds available to fund cash needs, including the ability to make cash distributions.

In addition, FFO, Adjusted FFO, EBITDA, EBITDA re , Adjusted EBITDA re and Hotel EBITDA are not indicative of funds available to fund cash needs, including the ability to make cash distributions.

Results of Operations

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 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":

Property Location Disposition Date

The Heathman Hotel Portland, OR February 22, 2023

Retail at The Westin Michigan Avenue Chicago

Chicago, IL March 17, 2023

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

Hotel Monaco Seattle Seattle, WA May 9, 2023

Hotel Vintage Seattle Seattle, WA May 24, 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 $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.

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.

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 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 $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 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.

At March 31, 2025 and 2024, our consolidated financial statements included the operations of 46 hotel properties, which have been included in our results of operations during the respective periods since their dates of acquisition or through their dates of disposition.

Based on when a property was acquired or disposed of, operating results for certain properties are not comparable for the three months ended March 31, 2025 and 2024.

As there were no properties acquired or disposed in 2025 or 2024, there were no "non-comparable properties" for the periods indicated.

Comparison of the three months ended March 31, 2025 to the three months ended March 31, 2024

Revenues — Total revenues increased by $6.2 million primarily due to an increase at LaPlaya Beach Resort & Club, where the Beach House was closed in 2024 due to hurricane damage and substantially reopened in 2025, at Estancia La Jolla Hotel & Spa which was under renovation in 2024 and at Newport Harbor Island Resort which was closed for renovation in 2024.

This increase was partially offset by lower revenue at Hyatt Centric Delfina Santa Monica which continued to ramp up from the brand conversion to Hyatt as well as the rooms renovation which was a part of this conversion.

Hotel operating expenses — Total hotel operating expenses increased by $11.2 million primarily due to increased operations at LaPlaya Beach Resort & Club, Estancia La Jolla Hotel & Spa and Newport Harbor Island Resort, as well as an increase in wage rates and benefits at many of the properties.

Depreciation and amortization — Depreciation and amortization expense increased by $0.3 million which is consistent with 2024.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $0.9 million due to slightly higher property insurance premiums.

General and administrative — General and administrative expenses increased by $1.0 million primarily due to an increase in legal costs in 2025.

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.

Business interruption insurance income — We recognized business interruption insurance income in 2025 and 2024 related to partial settlements with our insurance carriers for lost income at LaPlaya Beach Resort & Club.

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.

Other operating expenses — Other operating expenses decreased by $1.0 million primarily due to lower preopening and management transition costs.

Interest expense — Interest expense increased by $0.7 million due to interest being capitalized related to our Newport Harbor Island Resort renovation in 2024 and no interest capitalized in 2025 which was offset by lower interest rates in 2025.

Other — Other changed from income of $0.3 million in the first quarter of 2024 to a loss of $1.0 million as a result of the partial write-down of the Company's investment in Fifth Wall Late-Stage Climate Technology Fund, L.P., offset by higher interest income in 2025 due to higher excess cash balances.

Income tax (expense) benefit — The income tax benefit in 2025 was a result of a loss on Pebblebrook Hotel Lessee, Inc.

in the first quarter of 2025.

In the first quarter of 2024, the Company recorded a valuation allowance offsetting the income tax benefit.

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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 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.

Our primary cash requirements in the short term (i.e., those requiring cash on or before March 31, 2026) 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 $860.8 million as of March 31, 2025, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements.

As of March 31, 2025, 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 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 September 30, 2024, as summarized below:

September 30, 2024

Our total debt had an aggregate face value of $2.3 billion as of March 31, 2025, as summarized below:

March 31, 2025

(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.

Table of Conte nts

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 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.

Assuming we exercise all extension options available in our debt agreements, we expect that future principal and interest payments associated with our remaining debt obligations outstanding as of March 31, 2025 will be $2.6 billion through their maturity, with $19.4 million of principal and $98.7 million of interest payable on or before March 31, 2026.

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.

We are in compliance with all covenants governed by our existing credit facilities, term loan and senior note facilities.

We are in compliance with all covenants governing our existing credit facilities, term loans, senior note facilities and mortgage loans.

Our mortgage loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions.

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

Hotel, ground and finance lease obligations

Our properties that are subject to hotel, ground or finance leases, as noted in Note 11.

Commitment and Contingencies to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent.

As of March 31, 2025, none of the mortgage loans were in a cash trap.

Long-term operating and finance lease obligations

Our properties that are subject to long-term operating or finance leases, as noted in Note 11.

Commitments and Contingencies to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent.

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

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.

Future fixed minimum payments associated with our long-term operating and finance leases total $1.8 billion as of March 31, 2025, with $23.5 million payable on or before March 31, 2026.

Purchase commitments

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.

As of March 31, 2025, we had $5.0 million of outstanding purchase commitments, all of which will be paid on or before March 31, 2026.

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

See Capital Investments for discussion on planned capital investments.

Preferred dividends 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 September 30, 2025 and in future years until the shares/units are redeemed.

Preferred dividends and Series Z preferred 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 March 31, 2026 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 $205.8 million for the nine months ended September 30, 2024, and $202.3 million for the nine months ended September 30, 2023.

Our net cash provided by operating activities was $50.3 million for the three months ended March 31, 2025 and $46.0 million for the three months ended March 31, 2024.

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.

Investing Activities.

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 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.

Our net cash used in investing activities was $20.9 million for the three months ended March 31, 2025 and $38.5 million for the three months ended March 31, 2024.

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

• During the three months ended March 31, 2025, we invested $20.7 million in improvements to our hotel properties.

• During the three months ended March 31, 2024, we invested $49.5 million in improvements to our hotel properties and received $11.5 million in property insurance proceeds.

Financing Activities.

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.

Our net cash used in financing activities was $28.9 million for the three months ended March 31, 2025 and $136.2 million for the three months ended March 31, 2024.

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

• During the nine months ended September 30, 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.

• During the three months ended March 31, 2025, we repaid $0.5 million in debt, repurchased $14.6 million of common shares through our common share repurchase program and for tax withholding purposes in connection with vestings of share-based equity awards and paid $13.0 million in preferred and common distributions.

Table of Conte nts

• During the three months ended March 31, 2024, we repaid $110.3 million in 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 $13.0 million in preferred and common distributions.

Capital Investments

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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.

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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 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.

For the three months ended March 31, 2025, we invested $20.7 million in capital investments (or $16.7 million excluding the repair and remediation of LaPlaya Beach Resort & Club) to reposition and improve our properties, including the renovations of Hyatt Centric Delfina Santa Monica, Skamania Lodge, Argonaut Hotel and Paradise Point Resort & Spa.

Depending on market conditions, and in some instances subject to approval from governmental authorities, we expect to invest a total of $65.0 million to $75.0 million in capital investments in 2025, which includes normal hotel capital refurbishments and repositioning projects at Hyatt Centric Delfina Santa Monica, Paradise Point Resort & Spa, Chaminade Resort & Spa and Argonaut Hotel and excludes capital expenditures related to the repair and remediation of LaPlaya Beach Resort & Club.

Common Share Repurchase Programs and Preferred Share Repurchase Program

Common Share Repurchase Programs

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

Under this program, we could repurchase 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, our Board of Trustees authorized a share repurchase program of up to $150.0 million of common shares.

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We may suspend or discontinue this program at any time.

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

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.

Repurchased common shares cease to be outstanding and become authorized but unissued common shares.

During the three months ended March 31, 2025, we repurchased 1,186,797 common shares for an aggregate purchase price of $13.3 million, or an average of approximately $11.23 per share.

As of March 31, 2025, $117.6 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.

On February 17, 2023, our Board of Trustees authorized a share 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 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.

During the three months ended March 31, 2025, no preferred shares were repurchased under this program.

As of March 31, 2025, $84.2 million of preferred shares remained available for repurchase under this program.

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

Table of Conte nts

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

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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.

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Derivative Instruments

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

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.

As of March 31, 2025, 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