NOTE 7 - DEBT

Our debt is comprised of a $150.0 million senior secured revolving credit facility and term loans secured by various hotel properties. The weighted average interest rate, after giving effect to our interest rate derivatives, for all borrowings was 5.27% at September 30, 2013 and 5.15% at December 31, 2012. Our total fixed-rate and variable-rate debt, after giving effect to our interest rate derivatives, follows (in thousands):

	September 30,		December 31,
	2013		2012

Fixed-rate debt	$	398,225	$	229,587
Variable-rate debt	2,030		83,026

	$	400,255	$	312,613

Information about the fair value of our fixed-rate debt that is not recorded at fair value follows (in thousands):

September 30, 2013

December 31, 2012

Carrying
Value

Fair Value

Carrying
Value

Fair Value

Valuation Technique

Fixed-rate debt not recorded at fair value

358,496

349,691

188,565

193,448

Level 2 - Market approach

At September 30, 2013 and December 31, 2012, we had variable rate debt of $39.7 million and $41.0 million, respectively, which had effectively been converted to fixed interest rates through derivative financial instruments which are carried at fair value. Differences between carrying value and fair value of our fixed-rate debt are primarily due to changes in interest rates. Inherently, fixed-rate debt is subject to fluctuations in fair value.

$92 Million Senior Secured Interim Loan

On May 23, 2013, we closed on a $92.0 million variable rate senior secured interim loan with KeyBank National Association (KeyBank) and Regions Bank, which matures on November 23, 2013. This loan was secured by a pledge of the equity interest in the subsidiaries that own the Fairfield Inn & Suites and SpringHill Suites in Louisville, KY and the Courtyard by Marriott and SpringHill Suites in Indianapolis, IN, and was cross-defaulted with our $150 million senior secured revolving credit facility.

In the third quarter of 2013, we paid off our $92 million senior secured interim loan using proceeds from a new term loan with KeyBank, discussed in Term Loans below, and proceeds from a common stock offering, discussed in Note 9 — Equity.

$150 Million Senior Secured Revolving Credit Facility

In January of 2013, we removed the AmericInn and Fairfield Inn in Golden, CO from the borrowing base of our senior secured revolving credit facility.

In May of 2013, we amended our senior secured revolving credit facility to increase the allowed collateral concentration in any given metropolitan statistical area from 20% to 30%. We also added the Courtyard by Marriott and Springhill Suites in New Orleans, LA to the borrowing base. The addition of these hotel properties increased availability on the senior secured revolving credit facility by $36.7 million.

At September 30, 2013, the maximum amount of borrowing permitted under the terms of this facility was $150.0 million, of which we had no borrowings, $0.7 million in standby letters of credit and $149.3 million available to borrow.

Term Loans

On January 14, 2013, we paid off two variable rate term loans with First National Bank of Omaha that were secured by three hotel properties. These loans totaled $22.8 million and had maturity dates of July 2013 and February 2014. There were no associated prepayment penalties.

On January 25, 2013, we closed on a $29.4 million term loan with KeyBank with a fixed rate of 4.46%. This term loan matures on February 1, 2023, amortizes over 30 years, and is secured by four of the Hyatt Place hotels we acquired in October 2012. These hotels are located in Chicago (Lombard), IL; Denver (Lone Tree), CO; Denver (Englewood), CO; and Dallas (Arlington), TX.

On February 11, 2013, as a part of our acquisition (through a joint venture) of the Holiday Inn Express & Suites in San Francisco, CA, we assumed a $23.4 million term loan with Greenwich Capital Financial Products, Inc. This loan has a fixed interest rate of 6.2%, matures on January 6, 2016, and amortizes over 30 years.

On March 7 and 8, 2013, we closed on two additional term loans with KeyBank, which mature on April 1, 2023, and amortize over 30 years. A $22.7 million term loan with a fixed rate of 4.52% is secured by three of the Hyatt hotels we acquired in October 2012. These hotels include a Hyatt House in Denver (Englewood), CO and Hyatt Place hotels in Baltimore (Owings Mills), MD and Scottsdale, AZ. A $22.0 million term loan with a fixed rate of 4.3% is secured by the three Hyatt Place hotels we acquired in January 2013. These hotels are located in Chicago (Hoffman Estates), IL; Orlando (Convention), FL; and Orlando (Universal), FL.

On May 1, 2013, we paid off a 4.95% fixed rate loan with MetaBank that was secured by two hotel properties. This loan totaled $6.7 million and had a maturity date of February 1, 2017. There was no associated prepayment penalty.

On May 21, 2013, as a part of our acquisition of the Holiday Inn Express & Suites in Minneapolis (Minnetonka), MN, we assumed a $3.7 million term loan with Wells Fargo Bank, National Association (Wells Fargo). This loan has a fixed rate of 5.53%, matures on October 1, 2015, and amortizes over 25 years.

Also on May 21, 2013, as a part of our acquisition of the Hilton Garden Inn in Minneapolis (Eden Prairie), MN, we assumed a $6.4 million term loan with Wells Fargo. This loan has a fixed rate of 5.57%, matures on January 1, 2016, and amortizes over 25 years.

On July 22, 2013, we closed on a $38.7 million term loan with KeyBank with a fixed rate of 4.95%. This term loan matures on August 1, 2023, amortizes over 30 years, and is secured by the Fairfield Inn & Suites and SpringHill Suites in Louisville, KY. The proceeds from this new borrowing were used to pay down our $92 million senior secured interim loan.

On July 26, 2013, we closed on a $7.4 million term loan with MetaBank with a fixed rate of 4.25%. This term loan matures on August 1, 2018, amortizes over 20 years, and is secured by the Hyatt Place in Atlanta, GA. We expect to receive additional proceeds of $1.3 million after the Hyatt Place attains a required performance level post renovation. The proceeds from this new borrowing were used to pay down our $150 million senior secured revolving credit facility.

On August 1, 2013, we entered into a new $34.0 million term loan with ING with a fixed rate of 4.55%. This loan matures on August 1, 2038 and amortizes over 25 years. ING has the right to call the loan in full on March 1, 2019, 2024, 2029 and 2034. Simultaneously, we amended our existing loan with ING to (i) remove the Fairfield Inn & Suites and the Residence Inn, Germantown, TN; the Hampton Inn, Fort Smith, AR; and the Fairfield Inn, Lewisville, TX from the collateral and (ii) remove $3.9 million in letters of credit from the collateral. We also added the Courtyard by Marriott, Ridgeland, MS; the Hampton Inn & Suites, Ybor, FL; and the Courtyard by Marriott and the Residence Inn, Metairie, LA as collateral to the two notes, such that both ING loans are secured by the same 14 hotel properties and are cross-defaulted. The proceeds from this new borrowing were used to pay down our $150 million senior secured revolving credit facility.

On September 24, 2013, we paid off a 6.5% fixed rate loan with Chambers Bank that was secured by one hotel property. This loan totaled $1.3 million and had a maturity date of June 24, 2014. There was no associated prepayment penalty.

On September 27, 2013, we paid off a 5.01% fixed rate loan with BNC Capital that was secured by one hotel property. This loan totaled $5.1 million and had a maturity date of November 1, 2013. There was no associated prepayment penalty.