Debt

6 Months Ended

Jun. 30, 2011

Note 5. Debt

Senior Credit Facility

On June 3, 2011, the Company amended and restated in its entirety the credit agreement that it had entered into in July 2010. The Company’s credit facility is now unsecured and its borrowing capacity is now $200.0 million, an increase of $50.0 million as compared to the prior credit facility’s capacity. The credit facility matures on June 3, 2014, and the Company has a one-year extension option. The Company has the ability to increase the credit facility borrowings up to $400.0 million with lender approval. Borrowings on the credit facility bear interest at LIBOR plus 2.5% to 3.5%, depending on the Company’s leverage ratio. Additionally, the Company is required to pay an unused commitment fee at an annual rate of 0.35% or 0.50% of the unused portion of the senior credit facility, depending on the amount of borrowings outstanding. The credit facility contains certain financial covenants including a maximum leverage ratio, a maximum debt service coverage ratio, a minimum fixed charge coverage ratio, and minimum net worth. The Company incurred approximately $1.3 million in fees in connection with this amendment which are amortized over the term of the credit facility. As of June 30, 2011 and December 31, 2010, the Company had no outstanding borrowings under the credit facility. As of June 30, 2011, the Company was in compliance with the credit facility debt covenants. For the three and six months ended June 30, 2011, the Company incurred unused commitment fees of $0.2 million and $0.4 million, respectively. The Company incurred no unused commitment fees for the three and six months ended June 30, 2010.

Mortgage Debt

Each of the Company’s mortgage loans is secured by a first-mortgage lien on the underlying property. The mortgages are non-recourse to the Company except for fraud or misapplication of funds.

On January 6, 2011, the Company entered into a first-mortgage loan on the Skamania Lodge. The debt has a principal balance of $31.0 million, a term of five years, bears interest at 5.44% and requires monthly principal and interest payments of $174,898.

On January 21, 2011, the Company entered into a first-mortgage loan on the DoubleTree by Hilton Bethesda-Washington DC. The debt has a principal balance of $36.0 million, a term of five years, bears interest at 5.28% and requires interest-only payments for the first twelve months and, beginning in March 2012, will require monthly principal and interest payments of $199,407 through February 2016, the maturity date.

In conjunction with the Company’s acquisition of the Argonaut Hotel, the Company assumed a $42.0 million interest-only first mortgage loan. The debt matures in March 2012 and has a fixed annual interest rate of 5.67%.

Mortgage debt as of June 30, 2011 and December 31, 2010 consisted of the following (in thousands):


					Balance Outstanding as of
	Interest Rate			Maturity Date	June 30, 2011		December 31, 2010
Sofitel Philadelphia	Floating⁽¹⁾			February 2012	$	56,070	$	56,070
Monaco Washington DC		5.68	%	March 2012		35,000		35,000
Argonaut Hotel		5.67	%	March 2012		42,000		—
InterContinental Buckhead		4.88	%	January 2016		52,182		52,500
Skamania Lodge		5.44	%	February 2016		30,862		—
DoubleTree by Hilton Bethesda-Washington DC		5.28	%	February 2016		36,000		—

					$	252,114	$	143,570


⁽¹⁾		Mortgage debt bears interest at LIBOR plus 1.3%. The interest rates as of June 30, 2011 and December 31, 2010 were 1.49% and 1.57%, respectively.

The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity. The estimated fair value of the Company’s debt as of June 30, 2011 and December 31, 2010 was $251.4 million and $143.9 million, respectively.

The Company is in compliance with all debt covenants as of June 30, 2011.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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