Debt

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Debt

4. Debt

Summary

As of June 30, 2024 and December 31, 2023, the Company’s debt consisted of the following (in thousands):

	June 30, 2024		December 31, 2023
Revolving credit facility	$	169,000	$	-
Term loans and senior notes, net		1,089,900		1,088,904
Mortgage debt, net		277,991		282,590
Debt, net	$	1,536,891	$	1,371,494

The aggregate amounts of principal payable under the Company’s total debt obligations as of June 30, 2024 (including the Revolving Credit Facility (if any) (as defined below), term loans, senior notes and mortgage debt), for the remainder of this fiscal year, each of the next four fiscal years and thereafter are as follows (in thousands):

2024 (July - December)	$	109,050
2025		295,140
2026		243,649
2027		278,602
2028		334,066
Thereafter		281,948
		1,542,455
Unamortized fair value adjustment of assumed debt		359
Unamortized debt issuance costs		(5,923	)
Total	$	1,536,891

The Company uses interest rate swaps to manage its interest rate risk on a portion of its variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the annual Secured Overnight Financing Rate (“SOFR”) for a one-month term (“one-month SOFR”) plus a 0.10% SOFR spread adjustment. The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. See Note 5 for more information on the interest rate swap agreements. The Company’s total fixed-rate and variable-rate debt, after giving effect to its interest rate swaps in effect as of June 30, 2024 and December 31, 2023, is set forth below. All dollar amounts are in thousands.

	June 30, 2024			Percentage			December 31, 2023			Percentage
Fixed-rate debt (1)	$	1,088,455			71	%	$	1,228,002			89	%
Variable-rate debt		454,000			29	%		150,000			11	%
Total	$	1,542,455					$	1,378,002
Weighted-average interest rate of debt		4.83	%					4.26	%

(1)Fixed-rate debt includes the portion of variable-rate debt where the interest payments have been effectively fixed by interest rate swaps as of the respective balance sheet date. See Note 5 for more information on the interest rate swap agreements.

Credit Facilities

$1.2 Billion Credit Facility

On July 25, 2022, the Company entered into a credit facility (the “$1.2 billion credit facility”) that is comprised of (i) a $650 million revolving credit facility with an initial maturity date of July 25, 2026 (the “Revolving Credit Facility”), (ii) a $275 million term loan with a maturity date of July 25, 2027, funded at closing, and (iii) a $300 million term loan with a maturity date of January 31, 2028 (including a $150 million delayed draw option until 180 days from closing), of which $200 million was funded at closing, $50 million was funded on October 24, 2022 and the remaining $50 million was funded on January 17, 2023 (the term loans described in clauses (ii) and (iii) are referred to together as the “$575 million term loan facility”).

Subject to certain conditions, including covenant compliance and additional fees, the Revolving Credit Facility maturity date may be extended up to one year. The credit agreement for the $1.2 billion credit facility contains mandatory prepayment requirements, customary affirmative and negative covenants (as described below), restrictions on certain investments and events of default. The Company may make voluntary prepayments, in whole or in part, at any time. Interest payments on the $1.2 billion credit facility are due monthly, and the interest rate, subject to certain exceptions, is equal to the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.35% to 2.25%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. As of June 30, 2024, the Company had availability of approximately $481 million under the Revolving Credit Facility. The Company is also required to pay quarterly an unused facility fee at an annual rate of 0.20% or 0.25% on the unused portion of the Revolving Credit Facility, based on the amount of borrowings outstanding during the quarter.

$225 Million Term Loan Facility

The Company also has an unsecured $225 million term loan facility that is comprised of (i) a $50 million term loan with an initial maturity date of August 2, 2023, which was funded on August 2, 2018, and (ii) a $175 million term loan with a maturity date of August 2, 2025, of which $100 million was funded on August 2, 2018, and the remaining $75 million was funded on January 29, 2019 (the term loans described in clauses (i) and (ii) are referred to together as the “$225 million term loan facility”). On July 19, 2023, the Company entered into an amendment of its $225 million term loan facility, which extended the maturity date of the existing $50 million term loan by two years to August 2, 2025. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions. Interest payments on the $225 million term loan facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.35% to 2.50%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement.

2017 $85 Million Term Loan Facility

On July 25, 2017, the Company entered into an unsecured $85 million term loan facility with a maturity date of July 25, 2024, consisting of one term loan (the “2017 $85 million term loan facility”) that was funded at closing. Interest payments on the 2017 $85 million term loan facility are due monthly, and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.30% to 2.10%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. On July 17, 2024, the Company amended the 2017 $85 million term loan facility, which increased the amount of the term loan facility to $130 million, with the additional $45 million funded at closing (the "$130 million term loan facility"), extended the maturity date to July 25, 2026 and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.35% to 2.20%, depending on the Company's leverage ratio, as calculated under the terms of the amended credit agreement. Subject to certain conditions, including covenant compliance and additional fees, the maturity date of the $130 million term loan facility may be extended by the Company to July 25, 2027. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions.

2019 $85 Million Term Loan Facility

On December 31, 2019, the Company entered into an unsecured $85 million term loan facility with a maturity date of December 31, 2029, consisting of one term loan funded at closing (the “2019 $85 million term loan facility”). Net proceeds from the 2019 $85 million term loan facility were used to pay down borrowings under the Company’s then-existing $425 million revolving credit facility. The Company may make voluntary prepayments, in whole or in part, subject to certain conditions. Interest payments on the 2019 $85 million term loan facility are due monthly, and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.70% to 2.55%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement.

$50 Million Senior Notes Facility

On March 16, 2020, the Company entered into an unsecured $50 million senior notes facility with a maturity date of March 31, 2030, consisting of senior notes totaling $50 million funded at closing (the “$50 million senior notes facility”). Net proceeds from the $50 million senior notes facility were available to provide funding for general corporate purposes. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions, including make-whole provisions. Interest payments on the $50 million senior notes facility are due quarterly, and the interest rate, subject to certain exceptions, ranges from an annual rate of 3.60% to 4.35% depending on the Company’s leverage ratio, as calculated under the terms of the note agreement.

$75 Million Senior Notes Facility

On June 2, 2022, the Company entered into an unsecured $75 million senior notes facility with a maturity date of June 2, 2029, consisting of senior notes totaling $75 million funded at closing (the “$75 million senior notes facility”, and collectively with the $1.2 billion credit facility, the $225 million term loan facility, the 2017 $85 million term loan facility, the 2019 $85 million term loan

facility and the $50 million senior notes facility, the “unsecured credit facilities”). Net proceeds from the $75 million senior notes facility were available to provide funding for general corporate purposes, including the repayment of borrowings under the Company’s then-existing $425 million revolving credit facility and repayment of mortgage debt. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions, including make-whole provisions. Interest payments on the $75 million senior notes facility are due quarterly, and the interest rate, subject to certain exceptions, ranges from an annual rate of 4.88% to 5.63% depending on the Company’s leverage ratio, as calculated under the terms of the note agreement.

As of June 30, 2024 and December 31, 2023, the details of the Company’s unsecured credit facilities were as set forth in the table below. All dollar amounts are in thousands.

				Outstanding Balance
	Interest Rate	Maturity Date		June 30, 2024			December 31, 2023
Revolving credit facility (1)	SOFR + 0.10% + 1.40% - 2.25%	7/25/2026		$	169,000		$	-
Term loans and senior notes
$275 million term loan	SOFR + 0.10% + 1.35% - 2.20%	7/25/2027			275,000			275,000
$300 million term loan	SOFR + 0.10% + 1.35% - 2.20%	1/31/2028			300,000			300,000
$50 million term loan	SOFR + 0.10% + 1.35% - 2.20%	8/2/2025			50,000			50,000
$175 million term loan	SOFR + 0.10% + 1.65% - 2.50%	8/2/2025			175,000			175,000
2017 $85 million term loan	SOFR + 0.10% + 1.30% - 2.10%	7/25/2024	(3)		85,000			85,000
2019 $85 million term loan	SOFR + 0.10% + 1.70% - 2.55%	12/31/2029			85,000			85,000
$50 million senior notes	3.60% - 4.35%	3/31/2030			50,000			50,000
$75 million senior notes	4.88% - 5.63%	6/2/2029			75,000			75,000
Term loans and senior notes at stated value					1,095,000			1,095,000
Unamortized debt issuance costs					(5,100	)		(6,096	)
Term loans and senior notes, net					1,089,900			1,088,904
Credit facilities, net (1)				$	1,258,900		$	1,088,904
Weighted-average interest rate (2)					5.02	%		4.35	%

(1)Excludes unamortized debt issuance costs related to the Revolving Credit Facility totaling approximately $2.8 million and $3.5 million as of June 30, 2024 and December 31, 2023, respectively, which are included in other assets, net in the Company’s consolidated balance sheets.

(2)Interest rate represents the weighted-average effective annual interest rate at the balance sheet date which includes the effect of interest rate swaps in effect on $685.0 million and $820.0 million of the outstanding variable-rate debt as of June 30, 2024 and December 31, 2023, respectively. See Note 5 for more information on the interest rate swap agreements. The one-month SOFR on June 30, 2024 and December 31, 2023 was 5.34% and 5.35%, respectively.

(3)On July 17, 2024, the Company amended the 2017 $85 million term loan facility, which increased the amount of the term loan facility to $130 million, with the additional $45 million funded at closing, extended the maturity date to July 25, 2026 and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.35% to 2.20%, depending on the Company's leverage ratio, as calculated under the terms of the amended credit agreement. Subject to certain conditions, including covenant compliance and additional fees, the maturity date of the $130 million term loan facility may be extended by the Company to July 25, 2027.

Credit Facilities Covenants

The credit agreements governing the unsecured credit facilities (collectively, the “credit agreements”) contain mandatory prepayment requirements, customary affirmative and negative covenants, restrictions on certain investments and events of default, including the following financial and restrictive covenants (capitalized terms not defined below are defined in the credit agreements):

•A ratio of Consolidated Total Indebtedness to Consolidated EBITDA (“Maximum Consolidated Leverage Ratio”) of not more than 7.25 to 1.00;

•A ratio of Consolidated Secured Indebtedness to Consolidated Total Assets (“Maximum Secured Leverage Ratio”) of not more than 45%;

•A minimum Consolidated Tangible Net Worth of approximately $3.4 billion plus an amount equal to 75% of the Net Cash Proceeds from issuances and sales of Equity Interests occurring after the Closing Date, July 25, 2022, subject to adjustment;

•A ratio of Adjusted Consolidated EBITDA to Consolidated Fixed Charges (“Minimum Fixed Charge Coverage Ratio”) of not less than 1.50 to 1.00 for the trailing four full quarters;

•A ratio of Unencumbered Adjusted NOI to Consolidated Implied Interest Expense for Consolidated Unsecured Indebtedness (“Minimum Unsecured Interest Coverage Ratio”) of not less than 2.00 to 1.00 for the trailing four full quarters;

•A ratio of Consolidated Unsecured Indebtedness to Unencumbered Asset Value (“Maximum Unsecured Leverage Ratio”) of not more than 60% (subject to a higher level in certain circumstances); and

•A ratio of Consolidated Secured Recourse Indebtedness to Consolidated Total Assets (“Maximum Secured Recourse Indebtedness”) of not more than 10%.

The Company was in compliance with the applicable covenants as of June 30, 2024.

Mortgage Debt

As of June 30, 2024, the Company had approximately $278.5 million in outstanding mortgage debt secured by 15 properties with maturity dates ranging from August 2024 to May 2038, stated interest rates ranging from 3.40% to 4.46% and effective interest rates ranging from 3.40% to 4.37%. The loans generally provide for monthly payments of principal and interest on an amortized basis and defeasance or prepayment penalties if prepaid. The following table sets forth the hotel properties securing each loan, the interest rate, loan assumption or origination date, maturity date, the principal amount assumed or originated, and the outstanding balance prior to any fair value adjustments or debt issuance costs as of June 30, 2024 and December 31, 2023 for each of the Company’s mortgage debt obligations. All dollar amounts are in thousands.

Location	Brand	Interest Rate (1)			Loan Assumption or Origination Date	Maturity Date		Principal Assumed or Originated		Outstanding balance as of June 30, 2024			Outstanding balance as of December 31, 2023
New Orleans, LA	Homewood Suites		4.36	%	7/17/2014	8/11/2024	(2)		27,000	$	19,862		$	20,304
Westford, MA	Residence Inn		4.28	%	3/18/2015	4/11/2025			10,000		7,554			7,713
Denver, CO	Hilton Garden Inn		4.46	%	9/1/2016	6/11/2025			34,118		26,789			27,337
Oceanside, CA	Courtyard		4.28	%	9/1/2016	10/1/2025			13,655		11,546			11,707
Omaha, NE	Hilton Garden Inn		4.28	%	9/1/2016	10/1/2025			22,681		19,177			19,445
Boise, ID	Hampton		4.37	%	5/26/2016	6/11/2026			24,000		20,424			20,685
Burbank, CA	Courtyard		3.55	%	11/3/2016	12/1/2026			25,564		20,116			20,526
San Diego, CA	Courtyard		3.55	%	11/3/2016	12/1/2026			25,473		20,044			20,453
San Diego, CA	Hampton		3.55	%	11/3/2016	12/1/2026			18,963		14,921			15,226
Burbank, CA	SpringHill Suites		3.94	%	3/9/2018	4/1/2028			28,470		23,815			24,237
Santa Ana, CA	Courtyard		3.94	%	3/9/2018	4/1/2028			15,530		12,991			13,221
Richmond, VA	Courtyard		3.40	%	2/12/2020	3/11/2030			14,950		13,672			13,832
Richmond, VA	Residence Inn		3.40	%	2/12/2020	3/11/2030			14,950		13,672			13,832
Portland, ME	Residence Inn		3.43	%	3/2/2020	3/1/2032			33,500		30,500			30,500
San Jose, CA	Homewood Suites		4.22	%	12/22/2017	5/1/2038			30,000		23,372			23,984
								$	338,854		278,455			283,002
Unamortized fair value adjustment of assumed debt											359			526
Unamortized debt issuance costs											(823	)		(938	)
Total										$	277,991		$	282,590

(1)Interest rates are the rates per the loan agreement. For loans assumed, the Company adjusted the interest rates per the loan agreement to market rates and is amortizing the adjustments to interest expense over the life of the loan.

(2)The Company plans to pay the outstanding amount and service payments due upon the upcoming debt maturity date using funds from operations, borrowings under its Revolving Credit Facility and/or proceeds from new financing.