What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-29 compared with 2026-04-28 · 89 added, 54 removed, 202 unchanged (41% of the section changed)

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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.

Operating results for the first quarter were strong and significantly exceeded expectations.

Strength came from continued recovery in San Francisco and Los Angeles and the ramp-up of recently redeveloped resorts.

San Diego urban hotels and Chicago also delivered healthy RevPAR growth.

A continued focus on expense management also resulted in positive earnings growth.

While the quarter results were positive, we remain cautious towards the remainder of the year given an increasingly uncertain macroeconomic environment.

During the three months ended March 31, 2026, we had the following transactions and events:

Second quarter operating results built on the strength we saw in the first quarter.

Both business and leisure demand continued to grow.

Our resort properties led the portfolio growth, particularly LaPlaya Beach Resort & Club, Estancia La Jolla Hotel & Spa, Paradise Point Resort & Spa, and Newport Harbor Island Resort.

San Francisco's recovery continued to gain momentum, with a significant increase in RevPAR as corporate and leisure demand broadened alongside an active citywide convention calendar.

Chicago, Los Angeles, and Boston also benefited from healthy ADR increases.

Pricing power strengthened across our portfolio and our continued focus on operating efficiencies initiatives have resulted in higher earnings growth.

While the quarter was positive, we remain cautious towards the remainder of the year given an uncertain macroeconomic environment.

During the six months ended June 30, 2026, we had the following transactions and events:

• We amended our senior unsecured revolving credit facility and unsecured term loan facilities to extend the $360.0 million Term Loan 2027 to mature in February 2031 and to provide for a delayed draw option to borrow an additional $90.0 million by December 15, 2026 (which we now refer to the extended loan as Term Loan 2031).

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• We repaid the remaining $40.0 million mortgage loan on Margaritaville Hollywood Beach Resort.

• We repurchased 405,821 common shares for an aggregate purchase price of $4.9 million, or an average of $12.12 per share, under our common share repurchase program.

• We repurchased 944,452 common shares for an aggregate purchase price of $12.9 million, or an average of approximately $13.63 per share, under our common share repurchase program.

• We repurchased 1,487,038 preferred shares for an aggregate purchase price of $28.6 million, or an average of approximately $19.22 per share, under our preferred share repurchase program.

• We sold the Chamberlain West Hollywood Hotel for $43.5 million.

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 months ended March 31, 2026 and 2025:

The following table represents the key same-property hotel operating statistics for our hotels for the three and six months ended June 30, 2026 and 2025:

For the three months ended

June 30, For the six months ended

2026 2025 2026 2025

Same-Property Occupancy 79.4 % 78.1 % 73.9 % 70.6 %

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Same-Property Total RevPAR $ 405.24 $ 386.93 $ 375.55 $ 350.49

For the three months ended March 31, 2026 and 2025, the above table of hotel operating statistics includes information from all hotels owned as of March 31, 2026.

For the three and six months ended June 30, 2026 and 2025, the above table of hotel operating statistics includes information from all hotels owned as of June 30, 2026 and includes Chamberlain West Hollywood Hotel for the first quarter only due to its sale in May 2026.

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, 2026 and 2025 (in thousands):

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, 2026 and 2025 (in thousands):

For the three months ended

June 30, For the six months ended

2026 2025 2026 2025

Net income (loss) $ 24,913 $ 19,285 $ 6,477 $ (12,895)

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Distribution to preferred shareholders and unit holders (11,083) (11,796) (22,674) (23,591)

Repurchase of preferred shares 6,999 — 6,999 —

FFO available to common share and unit holders $ 73,984 $ 65,073 $ 103,568 $ 78,585

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Amortization of share-based compensation expense 2,563 3,522 4,869 6,741

Repurchase of preferred shares (6,999) — (6,999) —

Deferred tax provision (benefit) 5,241 6,439 5,224 3,334

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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, 2026 and 2025 (in thousands):

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, 2026 and 2025 (in thousands):

For the three months ended

June 30, For the six months ended

2026 2025 2026 2025

Net income (loss) $ 24,913 $ 19,285 $ 6,477 $ (12,895)

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Business interruption insurance income

— (3,242) — (7,545)

Corporate general and administrative and other 7,636 7,262 16,569 15,803

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Results of Operations

At March 31, 2026 and 2025, our consolidated financial statements included the operations of 44 and 46 hotel properties, respectively, 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, 2026 and 2025 .

At June 30, 2026 and 2025, our consolidated financial statements included the operations of 43 and 46 hotel properties, respectively, 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, 2026 and 2025 .

The properties listed in the table below are hereinafter referred to as "non-comparable properties" and all other properties are referred to as "comparable properties".

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The Westin Michigan Avenue Chicago Chicago, IL December 3, 2025

Comparison of the three months ended March 31, 2026 to the three months ended March 31, 2025

Revenues — Total revenues increased by $25.4 million primarily due to an increase in revenues at our Los Angeles properties which were negatively impacted in 2025 by the wildfires, and an increase in revenue at our San Francisco properties due to partial recovery of business travel as well as the Super Bowl.

These increases were partially offset by decreases in revenue from non-comparable properties, a decline in revenue at the Washington, D.C.

properties resulting from the presidential inauguration occurring only in 2025 and a decrease in revenue at Revere Hotel Boston Common as a result of a room refreshment.

Hotel operating expenses — Total hotel operating expenses increased by $4.9 million primarily as a result of higher revenues in Los Angeles and San Francisco, which was offset by a decrease in hotel operating expenses associated with non-comparable properties.

Depreciation and amortization — Depreciation and amortization expense decreased by $5.5 million primarily due to the sale of the non-comparable properties in 2025.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $0.5 million primarily due to a decrease in real estate tax on non-comparable properties, partially offset by higher percentage ground rent as a result of higher revenues at properties subject to ground leases.

Chamberlain West Hollywood Hotel Los Angeles, CA May 27, 2026

Comparison of the three months ended June 30, 2026 to the three months ended June 30, 2025

Revenues — Total revenues decreased by $0.4 million primarily due to the loss of $19.7 million in revenues from the sales of the non-comparable properties, offset by an increase in revenues at many of the resort properties, including Paradise Point Resort & Spa, Estancia La Jolla Hotel & Spa, LaPlaya Beach Resort & Club and Newport Harbor Island Resort, as well as an increase in revenues at our Los Angeles and San Francisco properties due to their continued recovery.

Hotel operating expenses — Total hotel operating expenses decreased by $1.2 million primarily as a result of the sales of non-comparable properties, partially offset by an increase in costs at our comparable properties associated with higher revenues.

Depreciation and amortization — Depreciation and amortization expense decreased by $5.5 million primarily due to the sales of non-comparable properties and lower capital expenditures in 2025 and 2026.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $1.7 million primarily due to a decrease in real estate taxes at the non-comparable properties and reductions resulting from assessment appeals and a decrease in property insurance costs, partially offset by higher percentage ground rent resulting from higher revenues at properties subject to ground leases.

Impairment — We recognized an impairment loss of $1.1 million in 2026 related to one hotel.

No impairment loss was recognized in the second quarter of 2025.

Business interruption insurance income and gain on insurance settlement — We recognized business interruption insurance income in 2025 related to partial settlements with our insurance carriers for lost income at LaPlaya Beach Resort & Club resulting from Hurricanes Helene and Milton.

There was no business interruption insurance income in 2026.

Interest expense — Interest expense decreased by $1.2 million primarily as a result of lower borrowings in 2026.

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

Repurchase of preferred shares — Repurchase of preferred shares represents the preferred share issuance costs offset by the repurchase discount.

In 2026, we repurchased 1,487,038 preferred shares under our preferred share repurchase program at a discount to the redemption value.

The discount, net of the issuance costs associated with the preferred shares repurchased, is included in the determination of net income (loss) attributable to common shareholders.

Comparison of the six months ended June 30, 2026 to the six months ended June 30, 2025

Revenues — Total revenues increased by $25.0 million primarily due to an increase in revenues at our Los Angeles properties, which were negatively impacted in 2025 by the wildfires, and an increase in revenues at our San Francisco properties due to the continued recovery of business travel as well as the Super Bowl.

In addition, many of the resort properties had increases in revenues, primarily Paradise Point Resort & Spa, Estancia La Jolla Hotel & Spa and LaPlaya Beach Resort & Club.

These increases were partially offset by decreases in revenues from non-comparable properties, a decline in revenues at the Washington, D.C.

properties resulting from the presidential inauguration occurring only in 2025 and a decrease in revenues at Revere Hotel Boston Common as a result of a room refreshment.

Hotel operating expenses — Total hotel operating expenses increased by $3.6 million primarily as a result of higher revenues as described above, which was offset by a decrease in hotel operating expenses associated with non-comparable properties.

Depreciation and amortization — Depreciation and amortization expense decreased by $11.1 million primarily due to the sales of the non-comparable properties and lower capital expenditures in 2025 and 2026.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $2.2 million primarily due to a decrease in real estate taxes at non-comparable properties, partially offset by higher percentage ground rent resulting from higher revenues at properties subject to ground leases.

General and administrative — General and administrative expenses decreased by $1.8 million primarily due to a decrease in non-cash compensation expense.

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Impairment — We recognized an impairment loss of $8.8 million in 2026 related to one hotel.

No impairment loss was recognized in the first quarter of 2025.

No impairment loss was recognized in 2025.

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

There was no business interruption insurance income in 2026.

Interest expense — Interest expense decreased slightly by $0.8 million primarily as a result of lower borrowings in 2026.

Income tax (expense) benefit — Income tax benefit decreased by $3.1 million due primarily to a decrease in the taxable loss of our TRS during the quarter compared to the same period in the prior year.

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.

Interest expense — Interest expense decreased by $2.0 million primarily as a result of lower borrowings in 2026.

Income tax (expense) benefit — Income tax expense increased by $3.0 million primarily due to an increase in the taxable income of our TRS compared to the same period in the prior year.

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

Repurchase of preferred shares — Repurchase of preferred shares represents the preferred share issuance costs offset by the repurchase discount.

In 2026, we repurchased 1,487,038 preferred shares under our preferred share repurchase program at a discount to the redemption value.

The discount, net of the issuance costs associated with the preferred shares repurchased, is included in the determination of net income (loss) attributable to common shareholders.

Critical Accounting Policies

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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, 2027) 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 $845.8 million as of March 31, 2026, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements.

As of March 31, 2026, 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, 2027) 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 $911.6 million as of June 30, 2026, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements.

As of June 30, 2026, 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, unsecured senior notes and a mortgage loan with varying maturities.

Our total debt had an aggregate face value of $2.1 billion as of March 31, 2026, as summarized below:

March 31, 2026

Our total debt had an aggregate face value of $2.1 billion as of June 30, 2026, as summarized below:

June 30, 2026

(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.

We expect that future principal and interest payments associated with our remaining debt obligations outstanding as of March 31, 2026 will be $2.4 billion through their maturity, with $352.2 million of principal and $88.1 million of interest payable on or before March 31, 2027.

We expect that future principal and interest payments associated with our remaining debt obligations outstanding as of June 30, 2026 will be $2.4 billion through their maturity, with $352.2 million of principal and $85.4 million of interest payable on or before June 30, 2027.

We intend to pay amounts due with available cash, borrowings under our revolving credit facility or proceeds from property sales 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, 2026, the mortgage loan was not in a cash trap.

As of June 30, 2026, the mortgage loan was not 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 $1.9 billion as of March 31, 2026, with $25.0 million payable on or before March 31, 2027.

Future fixed minimum payments associated with our hotel, ground and finance leases total $1.9 billion as of June 30, 2026, with $24.8 million payable on or before June 30, 2027.

Purchase commitments

As of March 31, 2026, we had $0.7 million of outstanding purchase commitments, all of which will be paid on or before March 31, 2027.

As of June 30, 2026, we had $3.4 million of outstanding purchase commitments, all of which will be paid on or before June 30, 2027.

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

See Capital Investments (below) for discussion on planned capital investments.

Preferred dividends and Series Z preferred operating partnership units

We expect to pay aggregate annual dividends and distributions of approximately $46.4 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, 2027 and in future years until the shares/units are redeemed.

Preferred share dividends and Series Z distributions

We expect to pay aggregate annual dividends and distributions of approximately $44.1 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, 2027 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 $84.1 million for the three months ended March 31, 2026 and $50.3 million for the three months ended March 31, 2025.

Our net cash provided by operating activities was $170.4 million for the six months ended June 30, 2026 and $140.9 million for the six months ended June 30, 2025.

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 $9.0 million for the three months ended March 31, 2026 and $20.9 million for the three months ended March 31, 2025.

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, 2026, we invested $11.9 million in improvements to our hotel properties and received $3.2 million in property insurance proceeds.

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

Our net cash used in investing activities was $5.4 million for the six months ended June 30, 2026 and $47.5 million for the six months ended June 30, 2025.

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

• During the six months ended June 30, 2026, we invested $24.4 million in improvements to our hotel properties, received $16.1 million from the sale of Chamberlain West Hollywood Hotel and received $3.2 million in property insurance proceeds.

• During the six months ended June 30, 2025, we invested $49.5 million in improvements to our hotel properties and received $2.4 million in property insurance proceeds.

Financing Activities.

Our net cash used in financing activities was $66.7 million for the three months ended March 31, 2026 and $28.9 million for the three months ended March 31, 2025.

Our net cash used in financing activities was $90.8 million for the six months ended June 30, 2026 and $43.8 million for the six months ended June 30, 2025.

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, 2026, we borrowed $360.0 million and repaid $400.8 million of debt, repurchased $5.9 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 $6.6 million in deferred financing costs and paid $12.7 million in preferred and common distributions.

• During the three months ended March 31, 2025, we repaid $0.5 million of 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.

• During the six months ended June 30, 2026, we borrowed $360.0 million and repaid $401.3 million of debt, repurchased $13.9 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 $6.6 million in deferred financing costs and paid $25.5 million in preferred and common distributions.

• During the six months ended June 30, 2025, we repaid $1.1 million of debt, 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.

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, 2026, we invested $11.9 million in capital investments to reposition and/or improve our properties, including the capital maintenance projects and renovations of Chaminade Resort & Spa.

For the six months ended June 30, 2026, we invested $24.4 million in capital investments to reposition and/or improve our properties, including the capital maintenance projects and renovations of Chaminade 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 2026, which includes normal hotel capital refurbishments and repositioning projects at Paradise Point Resort & Spa and Chaminade Resort & Spa.

Common Share Repurchase Program and Preferred Share Repurchase Program

Common Share Repurchase Program and Preferred Share Repurchase Programs

Common Share Repurchase Program

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

During the three months ended March 31, 2026, we repurchased 405,821 common shares for an aggregate purchase price of $4.9 million, or an average of approximately $12.12 per share.

As of March 31, 2026, $145.1 million of common shares remained available for repurchase under this program.

During the six months ended June 30, 2026, we repurchased 944,452 common shares for an aggregate purchase price of $12.9 million, or an average of approximately $13.63 per share.

As of June 30, 2026, $137.1 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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The program does not have an expiration date and may be suspended, modified or discontinued at any time.

Preferred Share Repurchase Program

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

Preferred Share Repurchase Programs

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

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, 2026, no preferred shares were repurchased.

As of March 31, 2026, $74.1 million of preferred shares remained available for repurchase under this program.

During the six months ended June 30, 2026, we repurchased and retired 1,487,038 preferred shares for an aggregate purchase price of $28.6 million, or an average of approximately $19.22 per share.

This includes 1,347,614 preferred shares received as partial consideration for the sale of Chamberlain West Hollywood Hotel and 139,424 preferred shares repurchased in the market.

As of June 30, 2026, $45.6 million remained available for repurchase of preferred shares under this program.

On July 24, 2026, our Board of Trustees authorized a new share repurchase program of up to $50.0 million of preferred shares (the "2026 Preferred Share Repurchase Program"), which will commence upon the completion of the 2023 Preferred Share Repurchase Program.

Under the 2026 Preferred Share Repurchase Program, we may repurchase up to an aggregate of $50.0 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.

The program does not require us to repurchase any specific number of preferred shares.

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

The programs do not require us to repurchase any specific number of preferred shares.

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

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, 2026, we have interest rate swap agreements with an aggregate notional amount of $865.0 million to hedge variable interest rates on our unsecured term loans.

As of June 30, 2026, we have interest rate swap agreements with an aggregate notional amount of $865.0 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