Notes Payable (Tables)

9 Months Ended

Sep. 30, 2020

Notes Payable

Schedule of notes payable

Notes payable consisted of the following (in thousands):

	September 30,		December 31,
	2020		2019
	(unaudited)
Notes payable requiring payments of interest and principal, with fixed rates ranging from 4.12% to 5.95%; maturing at dates ranging from November 1, 2020 through January 6, 2025. The notes are collateralized by first deeds of trust on four hotel properties at both September 30, 2020 and December 31, 2019.	$	324,673	$	329,863
Note payable requiring payments of interest only, bearing a blended rate of one-month LIBOR plus 105 basis points; initial maturity on December 9, 2020 with notice provided to the lender of intent to exercise the first available one-year extension; two additional one-year options to extend remain, which the Company also intends to exercise. The note is collateralized by a first deed of trust on one hotel property.		220,000		220,000
Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 135 to 220 basis points, depending on the Company's leverage ratios, plus the greater of one-month LIBOR or 25 basis points. LIBOR has been swapped to a fixed rate of 1.591%, resulting in an effective interest rate of 3.791%. Matures on September 3, 2022. (1)		85,000		85,000
Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 135 to 220 basis points, depending on the Company's leverage ratios, plus the greater of one-month LIBOR or 25 basis points. LIBOR has been swapped to a fixed rate of 1.853%, resulting in an effective interest rate of 4.053%. Matures on January 31, 2023. (1)		100,000		100,000
Unsecured Series A Senior Notes requiring semi-annual payments of interest only, bearing interest at 5.69%. Matures on January 10, 2026. (2)		90,000		120,000
Unsecured Series B Senior Notes requiring semi-annual payments of interest only, bearing interest at 5.79%. Matures on January 10, 2028. (2)		115,000		120,000
Total notes payable	$	934,673	$	974,863
Current portion of notes payable	$	189,189	$	83,975
Less: current portion of deferred financing costs		(1,093)		(1,866)
Carrying value of current portion of notes payable	$	188,096	$	82,109
Notes payable, less current portion	$	745,484	$	890,888
Less: long-term portion of deferred financing costs		(1,939)		(1,934)
Carrying value of notes payable, less current portion	$	743,545	$	888,954

(1) As described below, the Company entered into the Unsecured Debt Amendments (as defined below) in July 2020. As part of the amendments, a 25-basis point LIBOR floor was added for the remaining term of the term loan facilities and interest was increased to 220 basis points, the high point of the agreed upon range. After the Covenant Relief Period (as defined below), interest will revert back to the original terms of the pricing grid with a range of 135 to 220 basis points, depending on the Company’s leverage ratios. The effective interest rate of the $85.0 million term loan increased from 2.941% to 3.791%, and the effective interest rate of the $100.0 million term loan increased from 3.203% to 4.053%, in each case at December 31, 2019 and September 30, 2020, respectively.

(2) As described below, the Company entered into the Unsecured Debt Amendments (as defined below) in July 2020. As part of the amendments, the annual interest rate on both of the senior notes increased by 1.00%. As a result, the interest rate of the Series A Senior Notes increased from 4.69% to 5.69%, and the interest rate of the Series B Senior Notes increased from 4.79% to 5.79%, in each case at December 31, 2019 and September 30, 2020, respectively. After the Covenant Relief Period (as defined below), the interest rates on the senior notes will decrease by 0.25% until the Company’s leverage ratio is below 5.0x.

Schedule of interest expense

Total interest incurred and expensed on the notes payable was as follows (unaudited and in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Interest expense on debt and finance lease obligations (1)	$	12,612	$	11,406	$	35,377	$	34,399
Noncash interest on derivatives and finance lease obligations, net		(762)		1,155		5,534		6,908
Amortization of deferred financing costs		892		698		2,288		2,094
Total interest expense	$	12,742	$	13,259	$	43,199	$	43,401

(1) Includes default interest and penalties of $0.9 million and $1.7 million for the three and nine months ended September 30, 2020, respectively, on the loan secured by the Hilton Times Square. As noted above, the Company does not intend to pay the default interest and penalties as part of the ultimate resolution with the lender.