Organization and Description of Business

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of Business

1. Organization and Description of Business

Chesapeake Lodging Trust (the “Trust”) is a self-advised real estate investment trust (“REIT”) that was organized in the state of Maryland. The Trust is focused on investments primarily in upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service hotels in urban settings or unique locations in the United States of America (“U.S.”). As of June 30, 2019, the Trust owned 20 hotels with an aggregate of 6,288 rooms in eight states and the District of Columbia.

Substantially all of the Trust’s assets are held by, and all of its operations are conducted through, Chesapeake Lodging, L.P., a Delaware limited partnership, which is wholly owned by the Trust (the “Operating Partnership”). For the Trust to qualify as a REIT, it cannot operate hotels. Therefore, the Operating Partnership leases its hotels to taxable REIT subsidiaries (each, a “TRS”), which are wholly owned subsidiaries of the Operating Partnership and are treated as TRSs for federal income tax purposes. The TRSs then engage hotel management companies to operate the hotels pursuant to management agreements.

On May 5, 2019, the Trust entered into the Agreement and Plan of Merger (the “Merger Agreement”) with Park Hotels & Resorts Inc. (“Park”), PK Domestic Property LLC, a Delaware limited liability company and an indirect subsidiary of Park

(“Domestic”), and PK Domestic Sub LLC, a Delaware limited liability company and a direct subsidiary of Domestic (“Merger

Sub,” and, together with Park and Domestic, the “Park Parties”). The Merger Agreement provides that, upon the terms and

subject to the conditions set forth therein and in accordance with applicable law, the Trust will merge with and into Merger Sub, with Merger Sub continuing as the surviving entity (the “Merger”).

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger:

• each of the Trust’s outstanding common shares (other than shares held by the Trust, any wholly-owned subsidiary of the Trust or by any of the Park Parties or any of their respective wholly-owned subsidiaries) will be converted into the right to receive 0.628 of a share of Park common stock, par value $0.01 per share (“Park Common Stock”), and $11.00 in cash (collectively, the “Merger Consideration”); and

• all unvested awards granted under the Trust’s Equity Plan will vest, entitling the holders to receive the Merger Consideration.

No fractional shares of Park Common Stock will be issued in the Merger. The value of any fractional interests of shares

of Park Common Stock to which a holder would otherwise be entitled will be paid in cash. The Merger will be treated as a taxable sale by the Trust of all of its assets to Domestic in exchange for the Merger Consideration and the assumption of all of the Trust’s liabilities, immediately followed by a distribution of the Merger Consideration to the holders of the outstanding common shares in liquidation of the Trust. The parties currently expect the Merger to be completed in mid-to-late September 2019.

In connection with the Merger, Park filed with the Securities and Exchange Commission (the “SEC”) and attained effectiveness of a registration statement on Form S-4 (File No. 333-232123). The definitive proxy statement/prospectus forming a part of that registration statement was first mailed to the Trust’s shareholders on or about August 1, 2019. The Merger is subject to risks and uncertainties, and the Trust cannot assure you that it will be able to complete the Merger on the expected timeline or at all. See Note 12, “Commitment and Contingencies” and “Part II, Item 1A. Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q for more information related to the Merger.