Debt

12 Months Ended

Dec. 31, 2019

The Company's debt consisted of the following as of December 31, 2019 and 2018 (dollars in thousands):



			Balance Outstanding as of
	Interest Rate	Maturity Date	December 31, 2019			December 31, 2018
Revolving credit facilities
Senior unsecured credit facility	Floating ⁽¹⁾	January 2022	$	165,000		$	170,000
PHL unsecured credit facility	Floating ⁽²⁾	January 2022	—			—
Total revolving credit facilities			$	165,000		$	170,000

Unsecured term loans
First Term Loan	Floating ⁽³⁾	January 2023	300,000			300,000
Second Term Loan	Floating ⁽³⁾	April 2022	65,000			65,000
Third Term Loan	Floating ⁽³⁾	January 2021	—			200,000
Fourth Term Loan	Floating ⁽³⁾	October 2024	110,000			110,000
Sixth Term Loan
Tranche 2020	Floating ⁽³⁾	December 2020	—			250,000
Tranche 2021	Floating ⁽³⁾	November 2021	300,000			300,000
Tranche 2022	Floating ⁽³⁾	November 2022	400,000			400,000
Tranche 2023	Floating ⁽³⁾	November 2023	400,000			400,000
Tranche 2024	Floating ⁽³⁾	January 2024	400,000			400,000
Total Sixth Term Loan			1,500,000			1,750,000
Total term loans at stated value			1,975,000			2,425,000
Deferred financing costs, net			(10,343		)	(15,716		)
Total term loans			$	1,964,657		$	2,409,284

Senior unsecured notes
Series A Notes	4.70%	December 2023	60,000			60,000
Series B Notes	4.93%	December 2025	40,000			40,000
Total senior unsecured notes at stated value			100,000			100,000
Deferred financing costs, net			(437		)	(531		)
Total senior unsecured notes			$	99,563		$	99,469

Mortgage loans
The Westin San Diego Gaslamp Quarter	3.69%	January 2020	—			68,207
Deferred financing costs, net			—			(62		)
Total mortgage loans			$	—		$	68,145
Total debt			$	2,229,220		$	2,746,898

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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 applicable credit agreement) plus an applicable margin.

⁽²⁾Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an Eurocurrency Rate (as defined in the applicable credit agreement) plus an applicable margin.

⁽³⁾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.

As of December 31, 2019, approximately $1.6 billion of the borrowings under the term loan facilities was at a weighted-average fixed interest rate of 3.43%, after taking into account interest rate swap agreements, and approximately $345.0 million was at a weighted-average floating interest rate of 3.32%. As of December 31, 2018, approximately $1.2 billion of the borrowings under the term loan facilities was at a weighted-average fixed interest rate of 3.46%, after taking into account interest rate swap agreements, and approximately $1.2 billion was at a weighted-average floating interest rate of 4.26%.

Unsecured Revolving Credit Facilities

The Company has a $650.0 million senior unsecured revolving credit facility maturing in January 2022, with options to extend the maturity date to January 2023, pursuant to certain terms and conditions and payment of an extension fee. As of December 31, 2019, the Company had $165.0 million of outstanding borrowings and $482.2 million borrowing capacity remaining on its senior unsecured credit facility. Interest is paid on the periodic advances under the senior unsecured revolving credit facility at varying rates, based upon either LIBOR or the alternate base rate, plus an additional margin amount. The Company has the ability to further increase the aggregate borrowing capacity under the credit agreement to up to $1.3 billion, subject to lender approval. Borrowings on the revolving credit facility bear interest at LIBOR plus 1.45% to 2.25%, 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.

The Company also has a $25.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. This credit facility has substantially similar terms as the Company's senior unsecured revolving credit facility and matures in January 2022. Borrowings on the PHL Credit Facility bear interest at LIBOR plus 1.45% to 2.25%, depending on the Company's leverage ratio. The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Company's credit agreement that governs the Company's senior unsecured revolving credit facility. As of December 31, 2019, the Company had no borrowings under the PHL Credit Facility and had $25.0 million borrowing capacity remaining under the PHL Credit Facility.

Under the terms of the credit agreement for the unsecured revolving credit facility, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders under the unsecured revolving credit facility. The Company will incur a fee that shall be agreed upon with the issuing bank. Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount. Standby letters of credit of $2.8 million and zero were outstanding as of December 31, 2019 and 2018, respectively.

As of December 31, 2019, the Company was in compliance with the debt covenants of the credit agreements that govern the unsecured revolving credit facilities.

Unsecured Term Loan Facilities

The Company has senior unsecured term loans with different maturities. Each unsecured term loan bears interest at a variable rate of a benchmark interest rate plus an applicable margin, depending on the Company's leverage ratio. Each of the term loan facilities is subject to debt covenants substantially similar to the covenants under the credit agreement that governs the revolving credit facility. During the year ended December 31, 2019, the Company repaid $450.0 million of term loans, consisting of the full repayment of the Company's $200.0 million third term loan and a $250.0 million tranche maturing in 2020 of the Company's sixth term loan. As of December 31, 2019, the Company was in compliance with all debt covenants of its term loan facilities. The Company entered into interest rate swap agreements to fix the LIBOR rate on a portion of these unsecured term loan facilities, see Derivative and Hedging Activities below.

Senior Unsecured Notes

The Company has outstanding $60.0 million of senior unsecured notes bearing a fixed interest rate of 4.70% per annum and maturing in December 2023 (the "Series A Notes") and $40.0 million of senior unsecured notes bearing a fixed interest rate of 4.93% per annum and maturing in December 2025 (the "Series B Notes"). The debt covenants of the Series A Notes and the Series B Notes are substantially similar to those of the Company's senior unsecured revolving credit facility. As of December 31, 2019, the Company was in compliance with all such debt covenants.

Mortgage Debt

The Company’s sole mortgage loan was secured by a first mortgage lien on the underlying hotel property. The mortgage was non-recourse to the Company except for customary carve-outs such as fraud or misapplication of funds.

On November 29, 2019, the Company repaid the $65.4 million mortgage loan on The Westin San Diego Gaslamp Quarter, without penalty.

Interest Expense

The components of the Company's interest expense consisted of the following (in thousands):



	For the year ended December 31,
	2019		2018		2017
Unsecured revolving credit facilities	$	4,530	$	11,274	$	3,914
Unsecured term loan facilities	79,813		30,479		21,396
Senior unsecured notes	4,792		4,686		4,805
Mortgage debt	2,293		2,592		3,600
Amortization of deferred financing fees	7,115		2,565		2,397
Other	9,931		2,327		1,187
Total interest expense	$	108,474	$	53,923	$	37,299

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 (unsecured senior notes and mortgage loans) as of December 31, 2019 and 2018 was $101.2 million and $164.3 million, respectively.

Future Minimum Principal Payments

As of December 31, 2019, the future minimum principal payments for the Company's debt are as follows (in thousands):



2020	$	—
2021	300,000
2022	630,000
2023	760,000
2024	510,000
Thereafter	40,000
Total debt principal payments	2,240,000
Deferred financing costs	(10,780		)
Total debt	$	2,229,220

Derivative and Hedging Activities

The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are cash flow hedges. On January 1, 2018, the Company adopted ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The Company's interest rate swaps at December 31, 2019 and 2018 consisted of the following (in thousands):



				Notional Value as of
Hedge Type	Interest Rate		Maturity	December 31, 2019		December 31, 2018
Swap - cash flow	1.57%	⁽¹⁾	May 2019	$	—	$	100,000
Swap - cash flow	1.57%	⁽¹⁾	May 2019	—		62,500
Swap - cash flow	1.57%	⁽¹⁾	May 2019	—		15,000
Swap - cash flow	1.63%		January 2020	50,000		50,000
Swap - cash flow	1.63%		January 2020	50,000		50,000
Swap - cash flow	2.46%		January 2020	50,000		50,000
Swap - cash flow	2.46%		January 2020	50,000		50,000
Swap - cash flow	1.66%		January 2020	50,000		50,000
Swap - cash flow	1.66%		January 2020	50,000		50,000
Swap - cash flow	2.12%		December 2020	100,000		—
Swap - cash flow	2.12%		December 2020	100,000		—
Swap - cash flow	1.74%		January 2021	75,000		75,000
Swap - cash flow	1.75%		January 2021	50,000		50,000
Swap - cash flow	1.53%		January 2021	37,500		37,500
Swap - cash flow	1.53%		January 2021	37,500		37,500
Swap - cash flow	1.46%	⁽¹⁾	January 2021	100,000		100,000
Swap - cash flow	1.47%	⁽¹⁾	January 2021	47,500		47,500
Swap - cash flow	1.47%	⁽¹⁾	January 2021	47,500		47,500
Swap - cash flow	1.47%	⁽¹⁾	January 2021	47,500		47,500
Swap - cash flow	1.47%	⁽¹⁾	January 2021	47,500		47,500
Swap - cash flow	2.60%		October 2021	55,000		—
Swap - cash flow	2.60%		October 2021	55,000		—
Swap - cash flow	1.78%	⁽¹⁾	January 2022	100,000		100,000
Swap - cash flow	1.78%	⁽¹⁾	January 2022	50,000		50,000
Swap - cash flow	1.79%	⁽¹⁾	January 2022	30,000		30,000
Swap - cash flow	1.68%		April 2022	25,000		25,000
Swap - cash flow	1.68%		April 2022	25,000		25,000
Swap - cash flow	1.64%		April 2022	25,000		25,000
Swap - cash flow	1.64%		April 2022	25,000		25,000
Swap - cash flow	1.99%		November 2023	85,000		—
Swap - cash flow	1.99%		November 2023	85,000		—
Swap - cash flow	1.99%		November 2023	50,000		—
Swap - cash flow	1.99%		November 2023	30,000		—
Total				$	1,630,000	$	1,247,500

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⁽¹⁾ Swaps assumed in connection with the LaSalle merger on November 30, 2018.

In addition, as of December 31, 2019, the Company had interest rates swaps for an aggregate notional amount of $590.0 million which will become effective in the future as current swaps mature. The Company records all derivative instruments at fair value in the accompanying 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, 2019, the Company's derivative instruments were in both asset and liability positions, with aggregate asset and liability fair values of $3.4 million and $20.5 million, respectively, in the accompanying consolidated balance sheets. For the years ended December 31, 2019 and 2018, there was $(26.0) million and $(2.9) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss). For the years ended December 31, 2019, 2018 and 2017, the Company reclassified $6.4 million, $0.7 million and $3.4 million, respectively, from accumulated other comprehensive income (loss) to interest expense. The Company expects approximately $11.5 million will be reclassified from accumulated other comprehensive income (loss) to interest expense in the next 12 months.