DEBT

At December 31, 2017, our indebtedness is comprised of borrowings under a $450.0 million senior unsecured credit and term loan facility, the 2015 Term Loan (as defined below), the 2017 Term Loan (as defined below), and indebtedness secured by first priority mortgage liens on various hotel properties. At December 31, 2016, our indebtedness was comprised of borrowings under a $450.0 million senior unsecured credit and term loan facility, the 2015 Term Loan (as defined below), and indebtedness secured by first priority mortgage liens on various hotel properties. The weighted average interest rate, after giving affect to our interest rate derivative, for all borrowings was 3.89% and 3.69% at December 31, 2017 and 2016, respectively.

$450 Million Senior Unsecured Credit and Term Loan Facility

On January 15, 2016, the Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the loan documentation as a subsidiary guarantor, entered into a $450.0 million senior unsecured facility (the “2016 Unsecured Credit Facility”). The 2016 Unsecured Credit Facility is comprised of a $300.0 million revolving credit facility (the “$300 million Revolver”) and a $150.0 million term loan (the “$150 million Term Loan”). At December 31, 2017, the maximum amount of borrowing provided by the 2016 Unsecured Credit Facility was $450.0 million, of which we had $165.0 million borrowed and $285.0 million available to borrow.

The 2016 Unsecured Credit Facility has an accordion feature which will allow the Company to increase the total commitments by an aggregate of up to $150.0 million. The $300 million Revolver will mature on March 31, 2020 and can be extended to March 31, 2021 at the Company’s option, subject to certain conditions. The $150 million Term Loan will mature on March 31, 2021.

The Company pays interest on revolving credit advances at varying rates based upon, at the Company’s option, either (i) 1, 2, 3, or 6-month LIBOR, plus a LIBOR margin between 1.50% and 2.25%, depending upon the Company’s leverage ratio (as defined in the 2016 Unsecured Credit Facility agreement), or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, the federal funds rate plus 0.50%, and 1-month LIBOR plus 1.00%, plus a base rate margin between 0.50% and 1.25%, depending upon the Company’s leverage ratio. The interest rate at December 31, 2017 was 3.21%.

Unencumbered Assets. The 2016 Unsecured Credit Facility is unsecured. However, borrowings under the 2016 Unsecured Credit Facility are limited by the value of hotel assets that qualify as unencumbered assets. At December 31, 2017, the Company had 50 unencumbered hotel properties (the "Unencumbered Properties") supporting the 2016 Unsecured Credit Facility.

An interest rate swap entered into on September 5, 2013 with a notional value of $75.0 million, an effective date of January 2, 2014 and a maturity date of October 1, 2018 remains outstanding. This interest rate swap was designated as a cash flow hedge and effectively fixes LIBOR at 2.04% for a portion of the $150 million Term Loan.

Unsecured Term Loans

2015 Term Loan

On April 7, 2015, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan documentation as a subsidiary guarantor, entered into a $125.0 million unsecured term loan (the “2015 Term Loan”). The 2015 Term Loan matures on April 7, 2022 and has an accordion feature which allows us to increase the total commitments by an aggregate of $75.0 million prior to the maturity date, subject to certain conditions. On April 21, 2015, the Company exercised $15.0 million of the accordion and added American Bank, N.A. as a lender under the facility.

At closing, we were advanced the full $125.0 million amount of the 2015 Term Loan and on April 21, 2015, we were advanced the $15.0 million exercised on the accordion. All proceeds were used to pay down the principal balance of our $225 million revolver provided under the former $300.0 million senior unsecured credit and term loan facility. We pay interest on advances equal to the sum of LIBOR or the administrative agent’s prime rate and the applicable margin. We are currently paying interest at 3.51% based on LIBOR at December 31, 2017.

Borrowings under the 2015 Term Loan are limited by the value of hotel assets that qualify as unencumbered assets. As of December 31, 2017, the Unencumbered Properties also supported the 2015 Term Loan.

2017 Term Loan

On September 26, 2017, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan documentation as a subsidiary guarantor, entered into a $225.0 million unsecured term loan (the "2017 Term Loan") with KeyBank National Association, as administrative agent, Deutsche Bank AG New York Branch and Bank of America, N.A., as co-syndication agents, KeyBanc Capital Markets, Inc., Deutsche Bank Securities, Inc., and Merrill Lynch Pierce Fenner & Smith, as joint bookrunners and joint lead arrangers, and a syndicate of lenders including KeyBank National Association, Deutsche Bank AG New York Branch, Bank of America, N.A., Capital One, National Association, PNC Bank, National Association, Regions Bank, Raymond James Bank, N.A., Royal Bank of Canada, Branch Banking and Trust Company, and U.S. Bank National Association.

The 2017 Term Loan has an accordion feature which allows us to increase the total commitments by an aggregate of $175.0 million prior to the maturity date, subject to certain conditions. The 2017 Term Loan matures on November 25, 2022.

We pay interest on advances at varying rates, based upon, at our option, either (i) 1, 2, 3, or 6-month LIBOR, plus a LIBOR margin between 1.45% and 2.20%, depending upon our leverage ratio (as defined in the loan documents), or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, the federal funds rate plus 0.50%, and 1-month LIBOR plus 1.00%, plus a base rate margin between 0.45% and 1.20%, depending upon our leverage ratio. We are required to pay other fees, including customary arrangement and administrative fees.

Financial and Other Covenants. In addition, we are required to comply with a series of financial and other covenants in order to borrow and maintain borrowings under the 2017 Term Loan. At December 31, 2017 we are in compliance with all financial covenants.

Unencumbered Assets. The 2017 Term Loan is unsecured. However, borrowings under the term loan are limited by the value of hotel assets that qualify as unencumbered assets. As of December 31, 2017, the Unencumbered Properties also supported the 2017 Term Loan.

The 2017 Term Loan gave us the option to delay draws of the principal amount of the term loan. On September 26, 2017, we drew $125.0 million of the $225.0 million available under the 2017 Term Loan and used the proceeds to pay down the principal balance of our $300 million Revolver. On December 11, 2017, we drew the remaining $100.0 million of the $225.0 million available under the 2017 Term Loan and used the proceeds to pay down the principal balance of our $300 million Revolver. The interest rate at December 31, 2017 was 3.11%.

MetaBank Loan

On June 30, 2017, we entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). The MetaBank Loan includes a delayed draw feature, at no additional cost. At September 30, 2017, we had drawn $25.0 million on the MetaBank Loan. On December 28, 2017, we drew the remaining $22.6 million available under the MetaBank Loan and used the proceeds to pay down the principal balance of our $300 million Revolver. The MetaBank Loan provides for a fixed interest rate of 4.44% and interest only payments for 18 months following the closing date. After this 18 month period, the loan is amortized on a 25-year amortization schedule through the maturity date of July 1, 2027. The MetaBank Loan is secured by the Residence Inn in Salt Lake City, UT, the Four Points by Sheraton Hotel & Suites in South San Francisco, CA, and the Hyatt Place in Mesa, AZ. The MetaBank Loan is subject to a prepayment penalty if prepaid prior to April 1, 2027.

At December 31, 2017 and 2016 our outstanding indebtedness was as follows (in thousands):



Lender	Reference	Interest Rate	Amortization Period (Years)	Maturity Date	Number of Properties Encumbered	Balance at
					Number of Properties Encumbered	December 31,
					12/31/2017	2017			2016
$450 Million Senior Unsecured Credit and Term Loan Facility
Deutsche Bank AG New York Branch
$300 Million Revolver		3.21% Variable	n/a	March 31, 2020	n/a	$	15,000		$	50,000
$150 Million Term Loan	(1)	3.40% Variable	n/a	March 31, 2021	n/a	150,000			150,000
Total Senior Unsecured Credit and Term Loan Facility						165,000			200,000

Unsecured Term Loan
KeyBank National Association, as Administrative Agent
Term Loan		3.51% Variable	n/a	April 7, 2022	n/a	140,000			140,000
KeyBank National Association, as Administrative Agent
Term Loan		3.11% Variable	n/a	November 25, 2022	n/a	225,000			—

Secured Mortgage Indebtedness
Voya	(2)	5.18% Fixed	20	March 1, 2019	2	40,015			41,328
	(2)	5.18% Fixed	20	March 1, 2019	4	35,865			37,042
	(2)	5.18% Fixed	20	March 1, 2019	2	23,130			23,889
	(2)	5.18% Fixed	20	March 1, 2019	1	16,431			16,970
KeyBank National Association	(3)	4.46% Fixed	30	February 1, 2023	4	26,928			27,473
	(4)	4.52% Fixed	30	April 1, 2023	3	20,877			21,291
	(5)	4.30% Fixed	30	April 1, 2023	3	20,211			20,626
	(6)	4.95% Fixed	30	August 1, 2023	2	36,093			36,741
Bank of America Commercial Mortgage	(7)	6.41% Fixed	25	September 1, 2017	—	—			7,661
Western Alliance Bank	(8)	5.39% Fixed	25	April 1, 2020	1	8,701			8,912
	(8)	5.39% Fixed	25	April 1, 2020	1	4,685			4,798
MetaBank	(9)	4.25% Fixed	20	August 1, 2018	—	—			6,588
	(10)	4.44% Fixed	25	July 1, 2027	3	47,640			—
Bank of Cascades	(11)	3.56% Variable	25	December 19, 2024	1	9,023			9,289
	(11)	4.30% Fixed	25	December 19, 2024	—	9,023			9,289
Compass Bank	(12)	3.96% Variable	25	May 6, 2020	3	22,773			23,394
Western Alliance Bank	(13)	5.39% Fixed	25	April 1, 2020	1	5,769			5,910
	(13)	5.39% Fixed	25	April 1, 2020	1	4,926			5,046
U.S. Bank, NA	(14)	6.13% Fixed	25	November 11, 2021	1	11,019			11,303
Total Mortgage Loans					33	343,109			317,550
Total Debt						873,109			657,550
Unamortized debt issuance costs						(4,873		)	(5,136		)
Debt, net of issuance costs						$	868,236		$	652,414

(1) An interest rate swap fixed a portion of the interest rate on this loan. See "Note 6 - Derivative Financial Instruments and Hedging."

(2) On September 24, 2015, we modified an existing term loan collateralized by properties sold in 2015 to substitute collateral with properties not included in the sale in order to avoid significant yield maintenance costs associated with an early pay-off. We now have four term loans with Voya with an aggregate principal amount of $115.4 million, fixed interest rates of 5.18%, and a first call date of March 1, 2019. The nine hotel properties encumbered by the Voya mortgage loans are cross-collateralized, and the four mortgage loans are cross-defaulted.

(3) On January 25, 2013, we closed on a $29.4 million loan with a fixed rate of 4.46% and a maturity of February 1, 2023. This loan 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. This loan is subject to defeasance if prepaid.

(4) On March 7, 2013, we closed on a $22.7 million loan with a fixed rate of 4.52% and a maturity of April 1, 2023. This loan 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. This loan is subject to defeasance if prepaid.

(5) On March 8, 2013, we closed on a $22.0 million loan with a fixed rate of 4.30% and a maturity of April 1, 2023. This loan 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. This loan is subject to defeasance if prepaid.

(6) On July 22, 2013, we closed on a $38.7 million loan with a fixed rate of 4.95% and a maturity of August 1, 2023. This loan is secured by two Marriott hotels we acquired in May 2013. These hotels include a Fairfield Inn & Suites and SpringHill Suites in Louisville, KY. This loan is subject to defeasance if prepaid.

(7) On May 16, 2012, we assumed a loan in our acquisition of the Hilton Garden Inn in Smyrna, TN. This loan was repaid in 2017. There were no prepayment penalties incurred in this transaction.

(8) On March 28, 2014, we amended the loans with Western Alliance Bank, which are cross-collateralized by the Courtyard by Marriott and the SpringHill Suites by Marriott, both located in Scottsdale, AZ. The loans were amended to bear interest at a fixed rate of 5.39% and the maturity dates were extended to April 1, 2020.

(9) On July 26, 2013, we closed on a $7.4 million loan with a fixed rate of 4.25% and a maturity of August 1, 2018. This loan is secured by the Hyatt Place in Atlanta, GA. This loan has a prepayment penalty of: (i) 3% until July 26, 2015, (ii) 2% until July 26, 2017, and (iii) 1% until February 1, 2018. This loan was repaid in 2017. There were prepayment penalties of $0.1 million related to the early repayment of this loan.

(10) On June 30, 2017, we entered into the MetaBank Loan. The MetaBank Loan provides for a fixed interest rate of 4.44% and interest only payments for 18 months following the closing date. After this 18 month period, the loan is amortized on a 25-year amortization schedule through the maturity date of July 1, 2027. The MetaBank Loan is secured by the Residence Inn in Salt Lake City, UT, the Four Points by Sheraton Hotel & Suites in South San Francisco, CA, and the Hyatt Place in Mesa, AZ. The MetaBank Loan is subject to a prepayment penalty if prepaid prior to April 1, 2027.

(11) On December 19, 2014, we refinanced our loan with Bank of the Cascades and increased the amount financed by $7.9 million. As part of the refinance the loan was split into two notes. Note A carries a variable interest rate of 30-day LIBOR plus 200 basis points and Note B carries a fixed interest rate of 4.3%. Both notes have amortization periods of 25 years and maturity dates of December 19, 2024. The Bank of Cascades mortgage loans are secured by the same collateral and cross-defaulted.

(12) On May 6, 2014, we closed on a $25.0 million loan with Compass Bank. The loan carries a variable rate of 30-day LIBOR plus 240 basis points, amortizes over 25 years, and has a May 6, 2020 maturity date. The loan is secured by first mortgage liens on the Hampton Inn & Suites hotels located in San Diego (Poway), CA and Ventura (Camarillo), CA and the Courtyard by Marriott located in Arlington, TX.

(13) On March 28, 2014, we amended two loans with Western Alliance Bank, which are cross-collateralized by the Hilton Garden Inn (Lakeshore) and the Hilton Garden Inn (Liberty Park), both located in Birmingham, AL. Both loans were amended to bear interest at a fixed rate of 5.39% and the maturity dates were extended to April 1, 2020.

(14) On January 10, 2014, as part of our acquisition of the 98-guestroom Hampton Inn in Santa Barbara (Goleta), CA, we assumed a $12.0 million mortgage loan with a fixed interest rate of 6.133%, an amortization period of 25 years, and a maturity date of November 11, 2021.

Our outstanding indebtedness requires us to comply with a series of financial and other covenants. At December 31, 2017, we were in compliance with all required covenants.

Our total fixed-rate and variable-rate debt at December 31, 2017 and 2016, after giving effect to our $75.0 million interest rate derivative, is as follows (in thousands):



	2017		2016
Fixed-rate debt	$	386,313	$	359,867
Variable-rate debt	486,796		297,683
	$	873,109	$	657,550

Principal payments for each of the next five years are as follows (in thousands):



2018	$	8,154
2019	116,978
2020	63,489
2021	164,155
2022	369,269
Thereafter	151,064
	$	873,109

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



	2017				2016
	Carrying Value		Fair Value		Carrying Value		Fair Value		Valuation Technique
Fixed-rate debt	$	311,313	$	310,535	$	284,867	$	283,416	Level 2 - Market approach

At both December 31, 2017 and 2016, we had $75.0 million of debt with variable interest rates that had 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 as a result of changes in the current market rate of interest on the valuation date. For additional information on our use of derivatives as interest rate hedges, refer to “Note 6 –– Derivative Financial Instruments and Hedging.”