What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-29 compared with 2025-05-01 · 79 added, 60 removed, 193 unchanged (42% of the section changed)

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

• 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;

• 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;

and 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;

• 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 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 second quarter operating results exceeded our outlook, led by a strong rebound in San Francisco.

In addition, our recently redeveloped properties are gaining momentum and market share, with Newport Harbor Island Resort delivering results well above our expectations in its first full year of operations following the comprehensive transformation completed last spring.

Our Los Angeles properties continued to be challenged as the city recovered from the wildfires in early 2025 and the ramp-up of Hyatt Centric Delfina Santa Monica following its renovation and brand conversion.

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:

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

We remain cautious given the broader economic backdrop and evolving trade and policy risks.

We will continue to operate with discipline, and we remain focused on proactive revenue-generation efforts and expense management.

During the six months ended June 30, 2025, we had the following transactions and events:

• We repurchased 1,298,396 common shares for an aggregate purchase price of $14.3 million, or an average of $11.04 per share, under our existing common share repurchase program.

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Hotel Operating Statistics

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,

The following table represents the key same-property hotel operating statistics for our hotels for the three and six months ended June 30, 2025 and 2024:

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

2025 2024 2025 2024

Same-Property Occupancy 78.2 % 76.3 % 70.1 % 68.7 %

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Same-Property Total RevPAR $ 370.93 $ 366.10 $ 336.27 $ 330.58

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.

For the three and six months ended June 30, 2025 and 2024, the above table of hotel operating statistics includes information from all hotels owned as of June 30, 2025, except for Newport Harbor Island Resort due to its redevelopment.

Non-GAAP Financial Measures

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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,

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 and six months ended June 30, 2025 and 2024 (in thousands):

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

2025 2024 2025 2024

Net income (loss) $ 19,285 $ 32,239 $ (12,895) $ 4,719

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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,

The following table reconciles net income (loss) to EBITDA, EBITDA re , Adjusted EBITDA re and Hotel EBITDA for the three and six months ended June 30, 2025 and 2024 (in thousands):

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

2025 2024 2025 2024

Net income (loss) $ 19,285 $ 32,239 $ (12,895) $ 4,719

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Results of Operations

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.

At June 30, 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 and six months ended June 30, 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.

Comparison of the three months ended June 30, 2025 to the three months ended June 30, 2024

Revenues — Total revenues increased by $10.4 million primarily due to an increase at Newport Harbor Island Resort which was closed for renovation in 2024, and demand increases at Hotel Zelos San Francisco, 1 Hotel San Francisco, and Jekyll Island Club Resort.

This increase was partially offset by lower revenue at Hyatt Centric Delfina Santa Monica, which continued to ramp up from its room renovation and conversion to the Hyatt brand.

Hotel operating expenses — Total hotel operating expenses increased by $6.1 million primarily due to increased operations at Newport Harbor Island Resort, and an increase in wage rates and benefits at many of our properties.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $9.0 million primarily due to an increase in real estate tax assessments in 2025.

In 2024, several California properties had lower property taxes as a result of the settlement of appeals from previous years.

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 $1.1 million primarily due to a decrease in preopening expenses.

Other, net — Other, net increased by $1.8 million due to interest income earned on excess cash balances.

Income tax (expense) benefit — Income tax (expense) benefit increased by $6.8 million in 2025 as a result of taxable income of Pebblebrook Hotel Lessee, Inc.

in the second quarter of 2025.

In the second quarter of 2024, the deferred income tax of Pebblebrook Hotel Lessee, Inc.

partially reduced the valuation allowance.

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, 2025 to the six months ended June 30, 2024

Revenues — Total revenues increased by $16.6 million primarily due to increases at Newport Harbor Island Resort, which was closed for renovation for part of 2024;

LaPlaya Beach Resort & Club, where the Beach House was closed in 2024 due to hurricane damage and substantially reopened in 2025;

Estancia La Jolla Hotel & Spa, which was under renovation in 2024;

and demand increases at 1 Hotel San Francisco and The Westin Copley Place, Boston.

This increase was partially offset by lower revenue at Hyatt Centric Delfina Santa Monica, which continued to ramp up from its room renovation and conversion to the Hyatt brand.

Hotel operating expenses — Total hotel operating expenses increased by $17.3 million primarily due to increased operations at Newport Harbor Island Resort, The Westin Copley Place, Boston, and LaPlaya Beach Resort & Club, as well as an increase in wage rates and benefits at many of our properties.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $9.8 million primarily due to an increase in real estate tax assessments in 2025.

In 2024, several California properties had lower property taxes as a result of the settlement of appeals from previous years.

General and administrative — General and administrative expenses increased by $1.6 million primarily due to an increase in legal costs in 2025.

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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.

Other operating expenses — Other operating expenses decreased by $2.1 million primarily due to a decrease in preopening expenses.

Income tax (expense) benefit — Income tax (expense) benefit increased by $3.6 million due to an increase in taxable income of Pebblebrook Hotel Lessee, Inc.

In the second quarter of 2024, the deferred income tax of Pebblebrook Hotel Lessee, Inc.

partially reduced the valuation allowance.

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

Our primary cash requirements in the short term (i.e., those requiring cash on or before March 31, 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.

Our primary cash requirements in the short term (i.e., those requiring cash on or before June 30, 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 $909.2 million as of June 30, 2025, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements.

As of June 30, 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 material cash requirements include the following contractual and other obligations.

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

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

March 31, 2025

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

Our total debt had an aggregate face value of $2.3 billion as of June 30, 2025, as summarized below:

June 30, 2025

(in thousands)

Revolving credit facilities $ —

Term loans 916,652

Unsecured revolving credit facilities $ —

Unsecured term loans 916,652

Convertible senior notes 750,000

Senior unsecured notes 402,400

Unsecured senior notes 402,400

Mortgage loans 194,315

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

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, 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.

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 June 30, 2025 will be $2.6 billion through their maturity, with $19.2 million of principal and $99.3 million of interest payable on or before June 30, 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.

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

As of June 30, 2025, none of the mortgage loans were in a cash trap.

Long-term operating 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 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.

Future fixed minimum payments associated with our long-term operating and finance leases total $1.8 billion as of June 30, 2025, with $23.5 million payable on or before June 30, 2026.

Purchase commitments

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.

As of June 30, 2025, we had $1.3 million of outstanding purchase commitments, all of which will be paid on or before June 30, 2026.

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 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.

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, 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 $50.3 million for the three months ended March 31, 2025 and $46.0 million for the three months ended March 31, 2024.

Our net cash provided by operating activities was $140.9 million for the six months ended June 30, 2025 and $129.7 million for the six months ended June 30, 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 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.

Our net cash used in investing activities was $47.5 million for the six months ended June 30, 2025 and $61.7 million for the six months ended June 30, 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.

• During the six months ended June 30, 2025, we invested $49.5 million in improvements to our hotel 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.

Financing Activities.

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.

Our net cash used in financing activities was $43.8 million for the six months ended June 30, 2025 and $150.4 million for the six months ended June 30, 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 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.

• During the six months ended June 30, 2025, we repurchased $15.6 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 $26.0 million in preferred and common distributions.

• During the six months ended June 30, 2024, we repaid $110.9 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 $26.0 million in preferred and common distributions.

Capital Investments

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

For the 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.

For the six months ended June 30, 2025, we invested $49.5 million in capital investments (or $41.1 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, The Westin Copley Place, Boston 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.

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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.

During the six months ended June 30, 2025, we repurchased 1,298,396 common shares for an aggregate purchase price of $14.3 million, or an average of approximately $11.04 per share.

As of June 30, 2025, $116.6 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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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 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.

During the six months ended June 30, 2025, no preferred shares were repurchased under this program.

As of June 30, 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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We believe we minimize the credit risk by transacting with major credit-worthy financial institutions.

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.

As of June 30, 2025, we have interest rate swap agreements with an aggregate notional amount of $955.0 million to hedge variable interest rates on our unsecured term loans and Margaritaville Hollywood Beach Resort's mortgage loan.

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