Debt

Senior Unsecured Revolving Credit Facility

On May 19, 2015, the Company exercised the accordion feature under its amended and restated credit agreement that governs the Company's senior unsecured revolving credit facility and the Company's unsecured term loan facility to increase the aggregate borrowing capacity by $150.0 million to $750.0 million. The Company's $750.0 million unsecured credit facility provides for a $450.0 million unsecured revolving credit facility and a $300.0 million unsecured term loan (the "First Term Loan"). The revolving credit facility matures in January 2019 with options to extend the maturity date to January 2020. The First Term Loan matures in January 2020. The Company has the ability to increase the aggregate borrowing capacity under the credit agreement to up to $1.0 billion, subject to lender approval. Borrowings on the revolving credit facility bear interest at LIBOR plus 1.55% to 2.30%, depending on the Company’s leverage ratio. Additionally, the Company is required to pay an unused commitment fee at an annual rate of 0.20% or 0.30% of the unused portion of the revolving credit facility, depending on the amount of borrowings outstanding. The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a maximum percentage of secured debt to total asset value. As of December 31, 2015 and December 31, 2014, the Company had $165.0 million and $50.0 million, respectively, in outstanding borrowings under the revolving credit facility. As of December 31, 2015, the Company had $285.0 million borrowing capacity remaining under its unsecured revolving credit facility. As of December 31, 2015, the Company was in compliance with the credit agreement debt covenants. For the years ended December 31, 2015, 2014 and 2013, the Company incurred unused commitment fees of $0.6 million, $0.7 million and $0.7 million, respectively.

Unsecured Term Loan Facilities

As of December 31, 2014, the Company had $300.0 million outstanding under the First Term Loan which matures in January 2020. This term loan facility bears interest at a variable rate of LIBOR plus 1.50% to 2.25%, depending on the Company's leverage ratio.

On April 13, 2015, the Company entered into a second unsecured term loan facility (the "Second Term Loan"). The Second Term Loan has a $100.0 million capacity and matures in April 2022. The Company drew the full $100.0 million under this facility. The Second Term Loan bears interest at a variable rate of LIBOR plus 1.70% to 2.55%, depending on the Company's leverage ratio.

On June 10, 2015, the Company entered into a third unsecured term loan facility (the "Third Term Loan"). The Third Term Loan has a $125.0 million capacity, which may be increased up to $250.0 million, subject to lender approval, and matures in January 2021. This term loan bears interest at a variable rate of LIBOR plus 1.45% to 2.20%, depending on the Company's leverage ratio. On July 10, 2015, the Company borrowed $125.0 million under the Third Term Loan.

As of December 31, 2015 and December 31, 2014, the Company had $525.0 million and $300.0 million, respectively, in outstanding borrowings under the unsecured term loan facilities. Each of the term loan facilities is subject to debt covenants substantially similar to the covenants under the amended and restated credit agreement. As of December 31, 2015, the Company was in compliance with all debt covenants. The Company has entered into interest rate swaps to effectively fix the LIBOR rates for all of its unsecured term loan facilities (see “Derivative and Hedging Activities” below).

Senior Unsecured Notes

On November 12, 2015, the Company issued $60.0 million of senior unsecured notes (the "Series A Notes") bearing a fixed interest rate of 4.70% per annum and maturing in December 2023. On November 12, 2015, the Company issued $40.0 million of senior unsecured notes (the "Series B Notes") bearing a fixed interest rate of 4.93% per annum and maturing in December 2025. Each of these notes is subject to debt covenants substantially similar to the covenants under the amended and restated credit agreement.

Derivative and Hedging Activities

The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. Unrealized gains and losses on the effective portion of hedging instruments are reported in other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Ineffective portions of changes in the fair value of a cash flow hedge are recognized as interest expense.

As of December 31, 2015, the Company had interest rate swaps with an aggregate notional amount of $300.0 million to hedge the variable interest rate on the First Term Loan and, as a result, the First Term Loan had a weighted-average effective interest rate of 2.93% through July 13, 2017 and a weighted-average effective interest rate of 3.51% from July 13, 2017 through January 15, 2020, based on the Company’s leverage ratio at December 31, 2015.

The Company entered into interest rate swap agreements to effectively fix the LIBOR rate for the entire duration of the Second Term Loan, and, as a result, the Second Term Loan had a weighted-average effective interest rate of 3.46%, based on the Company’s leverage ratio at December 31, 2015.

The Company entered into interest rate swap agreements to effectively fix the LIBOR rate for the entire duration of the Third Term Loan, and, as a result, the Third Term Loan had a weighted-average effective interest rate of 3.29%, based on the Company’s leverage ratio at December 31, 2015.

The Company records all derivative instruments at fair value in the consolidated balance sheets. Fair values of interest rate swaps are determined using the standard market methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (level 2 inputs). Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company incorporates these counterparty credit risks in its fair value measurements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.

As of December 31, 2015, the Company's derivative instruments were in both asset and liability positions, with aggregate asset and liability fair values of $0.4 million and $5.1 million, respectively, in the accompanying consolidated balance sheets. For the years ended December 31, 2015 and 2014, there was $4.4 million and $1.4 million in unrealized loss, respectively, recorded in accumulated other comprehensive income. During the years ended December 31, 2015, 2014 and 2013, the Company reclassified $5.4 million, $0.6 million and $0.5 million, respectively, from accumulated other comprehensive income (loss) to interest expense. The Company expects approximately $4.7 million will be reclassified from accumulated other comprehensive income (loss) to interest expense in the next 12 months.

Mortgage Debt

Each of the Company’s mortgage loans is secured by a first mortgage lien or by leasehold interests under the ground lease on the underlying property. The mortgages are non-recourse to the Company except for customary carve-outs such as fraud or misapplication of funds.

On March 5, 2015, the Company repaid the $50.7 million mortgage loan on The Nines, a Luxury Collection Hotel, Portland.

On October 6, 2015 , the Company repaid the $48.6 million mortgage loan on the InterContinental Buckhead Atlanta.

On November 6, 2015, the Company repaid the $28.9 million mortgage loan on the Skamania Lodge and the $34.1 million mortgage loan on the DoubleTree by Hilton Hotel Bethesda -Washington DC.

Debt Summary

Debt as of December 31, 2015 and December 31, 2014 consisted of the following (dollars in thousands):



			Balance Outstanding as of
	Interest Rate	Maturity Date	December 31, 2015		December 31, 2014
Senior unsecured revolving credit facility	Floating ⁽¹⁾	January 2019	$	165,000	$	50,000

Term loans
First Term Loan	Floating⁽²⁾	January 2020	300,000		300,000
Second Term Loan	Floating⁽²⁾	April 2022	100,000		—
Third Term Loan	Floating⁽²⁾	January 2021	125,000		—
Total term loans			525,000		300,000

Senior unsecured notes
Series A Notes	4.70%	December 2023	60,000		—
Series B Notes	4.93%	December 2025	40,000		—
Total senior unsecured notes			100,000		—

Mortgage loans
The Nines, a Luxury Collection Hotel, Portland ⁽³⁾	7.39%	March 2015	—		50,725
InterContinental Buckhead Atlanta	4.88%	January 2016	—		49,320
Skamania Lodge	5.44%	February 2016	—		29,308
DoubleTree by Hilton Hotel Bethesda -Washington DC	5.28%	February 2016	—		34,575
Embassy Suites San Diego Bay - Downtown	6.28%	June 2016	63,116		64,462
Hotel Modera	5.26%	July 2016	22,833		23,225
Hotel Monaco Washington DC	4.36%	February 2017	42,895		43,756
Argonaut Hotel	4.25%	March 2017	42,823		44,006
Sofitel Philadelphia	3.90%	June 2017	45,668		46,968
Hotel Zelos (formerly Hotel Palomar San Francisco)	5.94%	September 2017	26,098		26,461
The Westin San Diego Gaslamp Quarter	3.69%	January 2020	75,040		77,155
Mortgage loans at stated value			318,473		489,961
Mortgage loan premiums ⁽⁴⁾			1,581		4,026
Total mortgage loans			$	320,054	$	493,987
Total debt			$	1,110,054	$	843,987

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⁽¹⁾Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an Adjusted Base Rate (as defined in the senior unsecured credit agreement) plus an applicable margin. The Company has two six-month extension options.

⁽²⁾Borrowings under the term loan facilities bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin. The Company entered into interest rate swaps to effectively fix the interest rate for the First Term Loan, the Second Term Loan and the Third Term Loan. At December 31, 2015 and December 31, 2014, the Company had interest rate swaps on the full amounts outstanding. See "Derivative and Hedging Activities" above.

⁽³⁾The interest rate of 7.39% represents a weighted-average interest rate of the three non-recourse mortgage loans assumed in conjunction with the acquisition of The Nines, a Luxury Collection Hotel, Portland.

⁽⁴⁾Loan premiums on assumed mortgages recorded in purchase accounting for the Hotel Zelos (formerly Hotel Palomar San Francisco); Embassy Suites San Diego Bay - Downtown; Hotel Modera; and The Nines, a Luxury Collection Hotel, Portland.

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 of the debt with similar credit terms and is classified within level 2 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt as of December 31, 2015 and December 31, 2014 was $465.4 million and $503.9 million, respectively.

The Company was in compliance with all debt covenants as of December 31, 2015.

Future scheduled debt principal payments for the Company's debt as of December 31, 2015 are as follows (in thousands):



2016	$	91,993
2017	155,908
2018	2,366
2019	167,456
2020	365,750
Thereafter	325,000
Total debt principal payments	1,108,473
Premium on mortgage debt	1,581
Total debt	$	1,110,054