Debt

3 Months Ended

Mar. 31, 2020

The following table sets forth information regarding the Company’s debt as of March 31, 2020 and December 31, 2019 (dollars in thousands):



			Principal Balance as of
Loan	Interest Rate as of March 31, 2020	Maturity Date	March 31, 2020			December 31, 2019
Salt Lake City Marriott Downtown mortgage loan	4.25%	November 2020 (1)	$	52,968		$	53,273
Westin Washington D.C. City Center mortgage loan	3.99%	January 2023	59,988			60,550
The Lodge at Sonoma, a Renaissance Resort & Spa mortgage loan	3.96%	April 2023	26,846			26,963
Westin San Diego mortgage loan	3.94%	April 2023	61,456			61,851
Courtyard Manhattan / Midtown East mortgage loan	4.40%	August 2024	80,716			81,107
Renaissance Worthington mortgage loan	3.66%	May 2025	80,483			80,904
JW Marriott Denver at Cherry Creek mortgage loan	4.33%	July 2025	60,954			61,253
Boston Westin mortgage loan	4.36%	November 2025	189,759			190,725
New Market Tax Credit loan (2)	5.17%	December 2020	2,943			2,943
Unamortized debt issuance costs			(3,046		)	(3,240		)
Total mortgage and other debt, net of unamortized debt issuance costs			613,067			616,329

Unsecured term loan	LIBOR + 1.35% (3)	October 2023	50,000			50,000
Unsecured term loan	LIBOR + 1.35% (4)	July 2024	350,000			350,000
Unamortized debt issuance costs			(1,159		)	(1,230		)
Unsecured term loans, net of unamortized debt issuance costs			398,841			398,770

Senior unsecured credit facility	LIBOR + 1.40%	July 2023 (5)	400,000			75,000

Total debt, net of unamortized debt issuance costs			$	1,411,908		$	1,090,099
Weighted-Average Interest Rate	3.24%

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(1)	We have agreed to a term sheet to extend the maturity of the mortgage loan secured by the Salt Lake City Marriott Downtown to January 2022, subject to due diligence and other customary conditions.


(2)	Assumed in connection with the acquisition of the Hotel Palomar Phoenix on March 1, 2018.


(3)	We entered into an interest rate swap agreement on January 7, 2019 to fix LIBOR at 2.41% through October 2023.


(4)	We entered into an interest rate swap agreement on July 25, 2019 to fix LIBOR at 1.70% through July 2024 for $175 million of the loan.


(4)	The credit facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.

Mortgage and Other Debt

We have incurred limited recourse, property specific mortgage debt secured by certain of our hotels. In the event of default, the lender may only foreclose on the secured assets; however, in the event of fraud, misapplication of funds or other customary recourse provisions, the lender may seek payment from us. As of March 31, 2020, eight of our 31 hotels were secured by mortgage debt.

Our mortgage debt contains certain property specific covenants and restrictions, including minimum debt service coverage ratios or debt yields that trigger “cash trap” provisions, as well as restrictions on incurring additional debt without lender consent. Such cash trap provisions are triggered when the hotel’s operating results fall below a certain debt service coverage ratio or debt yield. When these provisions are triggered, all of the excess cash flow generated by the hotel is deposited directly into cash management accounts for the benefit of our lenders until a specified debt service coverage ratio or debt yield is reached and

maintained for a certain period of time. Such provisions do not provide the lender the right to accelerate repayment of the underlying debt. As of March 31, 2020, the debt service coverage ratio for the Courtyard Manhattan Midtown East and the debt yield for the JW Marriott Denver at Cherry Creek were below the minimum thresholds such that the cash trap provision on each of the loans were triggered. We expect that the cash trap provisions on the remaining loans will be triggered during 2020 as a result of the continuing negative impact of the COVID-19 pandemic on our hotel operations. There are no cash balances held in cash trap reserves as of March 31, 2020.

Senior Unsecured Credit Facility and Unsecured Term Loans

We are party to a $400 million senior unsecured credit facility (the “Revolving Credit Facility”), which matures in July 2023. The maturity date may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. The interest rate on the Revolving Credit Facility is based upon LIBOR, plus an applicable margin based upon the Company’s leverage ratio, as follows:



Leverage Ratio	Applicable Margin
Less than 30%	1.40	%
Greater than or equal to 30% but less than 35%	1.45	%
Greater than or equal to 35% but less than 40%	1.50	%
Greater than or equal to 40% but less than 45%	1.55	%
Greater than or equal to 45% but less than 50%	1.70	%
Greater than or equal to 50% but less than 55%	1.90	%
Greater than or equal to 55%	2.05	%

In addition to the interest payable on amounts outstanding under the Revolving Credit Facility, we are required to pay an amount equal to 0.20% of the unused portion of the Revolving Credit Facility if the average usage is greater than 50% or 0.30% of the unused portion of the Revolving Credit Facility if the average usage is less than or equal to 50%. As of March 31, 2020, we had $400 million in borrowings outstanding under the Revolving Credit Facility and the Company's leverage ratio was 34.5%. Accordingly, interest on our borrowings under the Revolving Credit Facility will be based on LIBOR plus 145 basis points for the following quarter. We incurred interest and unused fees on the applicable facility of $0.7 million for each of the three months ended March 31, 2020 and 2019.

We are party to two five-year unsecured term loans totaling $400 million. The interest rate on each of the unsecured term loans is based on LIBOR plus an applicable margin based upon the Company’s leverage ratio, as follows:



Leverage Ratio	Applicable Margin
Less than 30%	1.35	%
Greater than or equal to 30% but less than 35%	1.40	%
Greater than or equal to 35% but less than 40%	1.45	%
Greater than or equal to 40% but less than 45%	1.50	%
Greater than or equal to 45% but less than 50%	1.65	%
Greater than or equal to 50% but less than 55%	1.85	%
Greater than or equal to 55%	2.00	%

As of March 31, 2020, the Company's leverage ratio was 34.5%. Accordingly, interest on our borrowings under the unsecured term loans will be based on LIBOR plus 140 basis points for the following quarter. We incurred interest on the unsecured term loans of $3.2 million and $3.4 million for the three months ended March 31, 2020 and 2019, respectively.

The Revolving Credit Facility and unsecured term loan agreements contain various corporate financial covenants. A summary of the most restrictive covenants is as follows:



		Actual at
	Covenant	March 31, 2020
Maximum leverage ratio (1)	60%	34.5%
Minimum fixed charge coverage ratio (2)	1.50x	2.92x
Secured recourse indebtedness	Less than 45% of Total Asset Value	20.9%
Unencumbered leverage ratio	60.0%	50.3%
Unencumbered implied debt service coverage ratio	1.2x	1.49x

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(1)	Leverage ratio is net indebtedness, as defined in the Credit Agreement, divided by total asset value, defined in the credit agreement as the value of our owned hotels based on hotel net operating income divided by a defined capitalization rate.


(2)	Fixed charge coverage ratio is Adjusted EBITDA, generally defined in the Credit Agreement as EBITDA less FF&E reserves, for the most recently ending 12 months, to fixed charges, which is defined in the Credit Agreement as interest expense, all regularly scheduled principal payments and payments on capitalized lease obligations, for the same most recently ending 12-month period.

Although we were in compliance with the financial covenants of our Revolving Credit Facility and unsecured term loan agreements as of March 31, 2020, we have determined that it is probable the continuing effect of the COVID-19 pandemic on our hotel operating results will lead to our inability to satisfy certain financial covenants beginning with the quarter ending June 30, 2020. See Note 1 for a description of the Company's recent actions in seeking waivers prior to the violations of such covenants.